The Context
A 27% workforce reduction. 28,000 employees lost between January and December 2025. The US Internal Revenue Service (IRS) workforce collapsed from 102,000 to 74,000. The hiring plan failed. Only 50 of 2,200 seasonal staff were onboarded. A 43-day government shutdown halted training. The result is a mathematical certainty. The backlog of paper returns awaiting processing surged from 52,293 in December 2024 to 294,052 in December 2025. Overall unprocessed inventory doubled to 2 million items. The Treasury Inspector General for Tax Administration (TIGTA) has documented the liability risk: delays and interest payments. The National Taxpayer Advocate warns of 28 vacant senior positions. Planning and execution are compromised.
The Risk
This is a governance failure with a clear audit trail. For a New Zealand director, the parallel is stark. A deliberate reduction in operational capacity, coupled with a documented failure to execute a contingency plan, creates a direct line to personal liability. The Health and Safety at Work Act 2015 (HSWA) requires a person conducting a business or undertaking (PCBU) to ensure, so far as is reasonably practicable, the health and safety of workers. A systemic failure to provide adequate resources, leading to operational collapse and financial harm to clients (taxpayers), may indicate a failure of that duty. Under the Companies Act 1993, directors must exercise the care, diligence, and skill that a reasonable director would exercise. Ignoring explicit warnings from oversight bodies like TIGTA could be viewed as a failure of that duty. The financial liability is calculable: erroneous penalties, statutory interest on delayed refunds, and the cost of remedial action. Your reputation is tied to the reliability of your service. When that service fails due to a quantifiable resource gap, the board is accountable.
The Control
Governance must be predictive, not reactive. The strategic control is a mandatory, board-level ‘Operational Resilience Audit’. This audit must model the financial and reputational impact of critical staffing shortfalls against your service-level obligations. It must pressure-test hiring timelines against worst-case scenarios, like a market shock or a cyber incident. The audit’s output is a binding, funded contingency plan that treats key personnel as critical infrastructure. The plan must have clear triggers for activation and be reviewed quarterly. The cost of this audit is a fixed line item. The cost of not having it is an open-ended liability.
The Challenge
These are the critical questions you should be raising at the board table:
| What is the exact dollar value of the liability we incur for every 10% shortfall in our critical operational staff, and where is this modelled in our risk register? | |
| Can you show me the audit trail that proves our current hiring plan’s timeline is resilient to a single-point failure, such as the loss of a key recruiter or a training delay? | |
| Which external warning—equivalent to the TIGTA memo—would we ignore before our duty of care under the Companies Act is breached? |