IRS making strides in modernization, report says

Despite its failure to meet four congressional requirements for continued funding to upgrade the nation's tax system, the Internal Revenue Service has made substantial progress, according to a new General Accounting Office report.

The report, "Tax System Modernization: Results of Review of IRS' August 2000 Interim Spending Plan" (GAO-01-91), is the latest GAO attempt to evaluate the IRS' effort to upgrade its information systems. In late September, Congress approved a $32.8 million stopgap spending plan to fund IRS information system modernization programs in response to a draft of the study. Earlier in the year, Congress had voted to withhold some funding and established four conditions the IRS needed to satisfy in managing the project.

In the report, GAO found that the IRS failed to meet the four conditions: the agency deviated from a March 2000 spending plan without seeking approval; failed to satisfy all the commitments it made in the March plan; missed project cost and schedule commitments; and failed to correct modernization management weaknesses.

Nevertheless, GAO praised the IRS' progress on key modernization projects since March. The report noted the agency applied its enterprise life cycle methodology to two key elements of the project, a step toward managing all modernization initiatives according to common criteria.

GAO found that the IRS' failure to comply with the conditions set by Congress was not a sign of mismanagement. Variances from approved spending levels, for example, "are to be expected given the projects' and initiatives' complexity and early stage in the life cycle," the report concluded.

Still, GAO highlighted management problems with two IRS initiatives: the Custodial Accounting Project and the Security and Technology Infrastructure Release. These projects have proceeded without adequate business case justification and are not properly integrated with other modernization efforts, GAO said. Congress elected to withhold funds for these two programs from its recent $32.8 million allocation.

In 1998, Congress reserved final approval for all future IRS modernization spending, requiring that the agency submit a specific spending plan for access to modernization funds. Since then, GAO has reviewed all IRS spending plans and often found that IRS failed to conform to "best practices" management guidelines. Nonetheless, GAO gave IRS high marks for its progress since March, noting that the agency "has moved aggressively and made important progress ... in advancing many projects and addressing modernization management weaknesses."

The IRS concurred with the report's findings and pledged to implement GAO's recommendations for the Custodial Accounting Project and the Security and Technology Infrastructure Release.