ADP Modernization

Pursuant to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) development of an electronic filing system, intended to streamline the tax processing system by using computers instead of the traditional paper forms for filing individual tax returns.

GAO found that IRS: (1) issued a task order to its automatic data processing (ADP) contractor to develop software for the electronic filing system; (2) implemented an interim system in several districts for the 1988 tax season, processing about 583,000 returns electronically; (3) believed that it processed the electronically filed returns faster and with fewer errors than paper returns; (4) was able to process the returns, although the software for a major system component did not work as intended; (5) replaced the defective software prior to the 1989 tax season, but continued to experience similar problems; and (6) expected installation of new software in time for the 1990 tax season and proposed to enhance the interim system, rather than replace it. GAO also found that IRS: (1) in the task order, failed to clearly define critical performance requirements or allow adequate time for approving deliverables; (2) paid the contractor for the defective software; (3) took 4 months to reject the software but eventually paid the contractor for its installation; and (4) has not yet clearly identified its needs or evaluated the costs, benefits, and technical feasibility of alternative approaches.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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