Tax Systems Modernization

Because of serious management and technical weaknesses, GAO has included the Internal Revenue Service's (IRS) tax systems modernization effort on its list of federal programs at high-risk for waste, fraud, abuse and mismanagement. Congress limited IRS' ability to spend funds on information technology until the agency submitted an expenditure plan. GAO reviewed this plan. This report discusses (1) whether the plan satisfies the conditions specified in IRS' fiscal year 1998 and 1999 appropriations act, (2) whether the plan is consistent with earlier GAO recommendations on IRS' systems modernization, and (3) other GAO observations on the modernization effort.

GAO noted that: (1) IRS' initial expenditure plan is the first in a series of incremental expenditure plans that IRS plans to prepare over the life of the modernization; (2) the initial plan specifies IRS' modernization initiatives through October 31, 1999, and it seeks approval to obligate about $35 million to complete these initiatives; (3) such an incremental approach to investing in systems modernization efforts is a recognized best practice that leading public and private sector organizations use to mitigate the risk of program failure on large, complex, multiyear modernization programs; (4) IRS' initial expenditure plan is an appropriate first step toward successful systems modernization and, with regard to the $35 million being requested for this increment, satisfies the conditions that Congress placed on the use of ITIA funds; (5) the plan is consistent with GAO's past recommendations; (6) the initial expenditure plan provides for additional blueprint precision and specificity; (7) it provides for definition of system infrastructure specifications and a revised plan for sequencing the introduction of the new technology needed to achieve the target systems architecture over the next 3 to 5 years; (8) these initiatives are consistent with GAO's past recommendations for completing the blueprint and collectively they represent the first steps needed to satisfy the legislative condition to implement the blueprint; (9) the initial expenditure plan provides for definition and targeted implementation of an Enterprise Life Cycle, which is consistent with GAO's past recommendations for instituting project management rigor, software process maturity, and investment management discipline; (10) if implemented properly, this effort should satisfy the legislative condition for an IRS system life cycle and investment management program that meets the Office of Management and Budget guidelines; (11) building on its initial expenditure plan, IRS plans to define in subsequent expenditure plans the follow-on efforts and funding requirements needed to incrementally: (a) add needed architectural precision and project-specific management discipline; and (b) implement its Enterprise Life Cycle, and its target systems architecture; and (12) if IRS effectively implements the initiatives described in its initial expenditure plan and fulfills its commitment to incrementally request and expend future modernization funds, IRS would be acting in a manner that is consistent with the legislative conditions and GAO's past recommendations.

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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