Tax Systems Modernization:

Actions Underway But IRS Has Not Yet Corrected Management and Technical Weaknesses

AIMD-96-106: Published: Jun 7, 1996. Publicly Released: Jun 7, 1996.

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Pursuant to a legislative requirement, GAO reviewed the Internal Revenue Service's (IRS) actions to correct GAO-identified management and technical weaknesses that jeopardize its tax systems modernization (TSM) efforts.

GAO found that: (1) IRS does not have a comprehensive strategy to maximize electronic filing because the present strategy targets only a small portion of the taxpayers likely to file electronically; (2) IRS strategic information management practices remain ineffective because information systems are not managed as investments; (3) IRS reengineering efforts lag behind the development of TSM projects; (4) IRS is improving its software development activities, but these improvements are not complete or institutionalized; (5) the IRS technical infrastructure, including systems architecture, integration planning, and system testing and test planning, is incomplete; (6) IRS has not established an effective organizational structure to consistently manage and control TSM; and (7) IRS plans to increase its use of contractors to facilitate TSM, but it has not been successful in managing all of its contractors.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: In the fiscal year 1997 Omnibus Consolidated Appropriations Act, the Congress limited IRS' systems modernization funding to categories consistent with those GAO recommended.

    Matter: Because IRS still does not have effective strategic information management practices needed to manage TSM as an investment, mature and disciplined software development processes needed to ensure that systems built will perform as intended, a completed systems architecture that is detailed enough to guide and control systems development, or a schedule for accomplishing any of the above, Congress could consider limiting TSM spending to only cost-effective modernization efforts that: (1) support ongoing operations and maintenance; (2) correct IRS' pervasive management and technical weaknesses; (3) are small, represent low technical risk, and can be delivered in a relatively short time frame; and (4) involve deploying already-developed systems only if these systems have been fully tested, are not premature given the lack of a completed architecture, and produce a proven, verifiable business value.

  2. Status: Closed - Implemented

    Comments: As demonstrated in its response to GAO's first recommendation, the Congress has adopted this philosophy by limiting IRS' systems modernization funding in fiscal year 1997. Congress also required a final version of an RFP for a TSM prime contractor by July 31, 1997 or the funding for IRS' TSM Operational Systems would be suspended. Finally, the funding that Congress did provide to IRS was limited to smaller, shorter projects.

    Matter: As Congress gains confidence in IRS' ability to successfully develop these smaller, cheaper, quicker projects, it could consider approving larger, more complex, more expensive projects in future years.

  3. Status: Closed - Implemented

    Comments: While Congress has not explicitly required IRS to institute disciplined systems acquisitions processes, it has increased oversight of IRS' use of contractors to develop modernized systems. For example, in the fiscal year 1997 Omnibus Consolidated Appropriations Act, Congress required IRS to provide detailed plans and schedules for transferring the majority of the TSM development to contractors. The act also directed "the Department of Treasury to oversee the activities associated with the development of a Request for Proposal which would be used to solicit competitive bids to obtain a commercial sector company as a "Prime Contractor" for TSM, the contract solicitation, and the contract award."

    Matter: Because IRS does not manage all of its current contractual efforts effectively, and because its plans to use a prime contractor are not well defined, Congress could consider requiring that IRS institute disciplined systems acquisitions processes and develop detailed and schedules before permitting IRS to increase its reliance on contractors.

 

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