Internal Revenue Service

The Internal Revenue Service (IRS) has experienced major problems in (1) fulfilling its business vision--reducing the volume of paper returns, better serving customers, and improving compliance; (2) overcoming management and technical weaknesses in its tax systems modernization effort; and (3) strengthening the reliability of its financial management and systems used to account for hundreds of billions of dollars and to measure IRS' performance. This report discusses pivotal actions that IRS should take to fully implement earlier GAO recommendations and improve its management practices. GAO summarized this report in testimony before Congress; see: IRS Operations: Critical Need to Continue Improving Core Business Practices, by Gene L. Dodaro, Assistant Comptroller General for Accounting and Information Management Issues, before the Senate Committee on Governmental Affairs. GAO/T-AIMD/GGD-96-188, Sept. 10 (13 pages).

GAO found that: (1) IRS has not made significant progress in correcting its TSM management and technical weaknesses, and Congress should consider limiting IRS funding for TSM to critical and cost-effective projects; (2) IRS needs to develop an effective implementation strategy for its business vision, particularly regarding electronic filing, paper return processing, customer service, data capture and retrieval, and its TSM and reengineering efforts; (3) IRS needs to develop the capacity to make sound information technology investments; (4) IRS needs to build a technical foundation for TSM information systems projects, improve its software development activities, and complete systems architecture and test planning; (5) IRS has not given control of all systems development activities to one responsible official; (6) IRS must strengthen its capability to manage contracts effectively before obtaining additional contractor support; (7) IRS has not improved its financial management systems, financial records, and accounting procedures; (8) IRS, the Department of the Treasury, and the Office of Budget and Management need to ensure that IRS information management initiatives are promptly and fully implemented; (9) legislation has provided a good framework for measuring IRS performance in meeting its business vision; and (10) the National Commission on Restructuring IRS will have a leading role in evaluating IRS operations and recommending IRS organizational, management, and operating changes.