ADP Modernization

IRS' Automated Examination System--Troubled Past, Uncertain Future Gao ID: IMTEC-89-54 June 22, 1989

Pursuant to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) Automated Examination System (AES), intended to automate the examination of income tax returns, focusing on: (1) IRS progress in developing and implementing AES; and (2) AES compatibility with the IRS Tax System Modernization effort, intended to streamline tax processing through increased automation.

GAO found that IRS: (1) projected a total cost of $77 million for AES development and implementation when it established the project in 1982; (2) significantly expanded the project in 1984 and 1985, projecting completion by 1989 at a total cost of $1 billion; (3) spent about $187 million on AES from its inception through fiscal year (FY) 1988; (4) due to management and direction problems, currently estimates project completion by 1995 at a total cost of $1.8 billion; (5) currently projects AES benefits at $16.2 billion over its 9-year life, down from a contractor estimate of $42.7 billion in 1987; (6) has not convincingly demonstrated or verified any dollar benefits from the single currently operational AES component; (7) cited software development problems as the primary cause of AES cost overruns and schedule slippages; (8) developed AES independently from its Tax Modernization System effort, although its plans to eventually integrate AES into the system may require costly system modifications; (9) concurred with the Office of Management and Budget's reduction of its 1990 AES budget request from $110 million for continued development and operations and maintenance to $19.5 million for operations and maintenance only; and (10) believes that AES should not be abolished and plans to restructure the project and seek increased funding in the FY 1991 budget.

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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