Tax Systems Modernization:

Results of Review of IRS' Initial Expenditure Plan

AIMD/GGD-99-206: Published: Jun 15, 1999. Publicly Released: Jun 15, 1999.

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Pursuant to a legislative requirement, GAO reviewed the Internal Revenue Service's (IRS) initial Information Technology Investments Account (ITIA) expenditure plan, focusing on whether: (1) the plan satisfies the conditions specified in IRS' fiscal year 1998 and 1999 appropriations acts; (2) the plan is consistent with GAO's past recommendations on IRS' systems modernization; and (3) GAO's observations on the modernization efforts.

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 for Executive Action

  1. Status: Closed - Implemented

    Comments: IRS agreed to disclose in its second and subsequent expenditure plans its status and progress against previous expenditure requests. Since then, IRS has generally reported its incremental performance in each of its subsequent expenditure plans, making such reporting a matter of practice. For example, in its fourth and most recent expenditure plan (issued in March 2001), IRS disclosed that 12 projects had experienced cost increases and/or schedule delays against commitments in its third and other prior plans.

    Recommendation: The Commissioner of Internal Revenue should ensure that future expenditure plans fully disclose IRS' progress against incremental goals, deliverables, and benefit expectations.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Implemented

    Comments: IRS agreed to explain in a follow-on expenditure plan the nature of the Service's "partnership" with its contractors, including each parties' respective roles and responsibilities. In reviewing IRS' most recent expenditure plan (issued in March 2001), GAO found that IRS had now fully defined and implemented IRS', the Prime integration contractor's, and other modernization support contractors' roles and responsibilities.

    Recommendation: The Commissioner of Internal Revenue should ensure that the expenditure plan that IRS plans to submit in October 1999 fully explain the nature and functioning of IRS' partnership with its contractors, including the respective roles and responsibilities of IRS and its contractors.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

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