Tax Systems Modernization:

Results of Review of IRS' Third Expenditure Plan

GAO-01-227: Published: Jan 22, 2001. Publicly Released: Jan 22, 2001.

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This report reviews the Internal Revenue Service's (IRS) third expenditure plan for its systems modernization project. GAO found that the plan satisfied the conditions specified in Treasury's 1998 and 1999 appropriations acts and that IRS was making progress towards satisfying Congress' direction on the Custodial Accounting Project (CAP) and Security and Technology Infrastructure Release (STIR) Project. Although IRS has made significant progress in establishing effective modernization management capability, important and challenging work remains to ensure that the systems work as intended. GAO also found that five modernization initiatives experienced schedule delays or cost increases, each of which IRS disclosed in the third plan. However, the third plan did not address whether projects' prior commitments for delivery of promised systems capabilities and benefit/business value were being met. IRS used contractor-provided "rough order-of-magnitude" estimates in preparing its third expenditure plan. However, consistent with its established practice, IRS planned to validate the third plan's estimates as part of its negotiating and definitizing contract task orders. For IRS' second expenditure plan, this process resulted in finalized contract costs that were $9 million under the "rough order-of-magnitude" estimates in the plan.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In response to this recommendation, IRS reported to its appropriations subcommittees in January 2001, that it would report in the next, and all subsequent expenditure plans, the impact of cost increases and schedule delays on program and project-level commitments. In its subsequent March 2001 expenditure plan, GAO found that IRS had reported this information.

    Recommendation: To ensure that IRS fully responds to congressional direction and addresses modernization management weaknesses, the Commissioner of Internal Revenue should report immediately to IRS' appropriations subcommittees on any changes to commitments made in IRS' second plan concerning system requirements/capabilities to be delivered and the associated benefits to be realized, and continue to report such performance measures in future expenditure plans.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Implemented

    Comments: To prevent projects from beginning detailed design and development activities without needed architectural definition, IRS, in early 2001, developed an architecture certification control process requiring that before projects begin detailed design and development, they must demonstrate, and the Chief Information Officer must certify, that project requirements and designs are aligned with IRS' Enterprise Architecture. IRS reported that it started using this process in June 2001.

    Recommendation: To ensure that IRS fully responds to congressional direction and addresses modernization management weaknesses, the Commissioner of Internal Revenue should not approve and fund detailed design and developmental activities for any system before the requisite enterprise architecture definition is completed.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  3. Status: Closed - Implemented

    Comments: IRS completed definition of its Enterprise Architecture (EA) and has made important progress implementing other missing modernization management controls. Specifically, IRS completed its architectural definition with the release of EA version 2.0 in March 2002 and EA version 2.1 in June 2003. As a result of our reviews of IRS's FY 2003 and 2004 expenditure plans, GAO reported that IRS had implemented most of its commitments to address modernization management weaknesses and recommendations and was in the process of implementing the controls and capabilities needed to correct the remaining management weaknesses.

    Recommendation: To ensure that IRS fully responds to congressional direction and addresses modernization management weaknesses, the Commissioner of Internal Revenue should expedite the completion of IRS' Enterprise Architecture releases and implementation of other missing modernization management controls.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  4. Status: Closed - Implemented

    Comments: IRS followed through on its plans to satisfy IRS appropriations subcommittees' direction on CAP and STIR. Specifically, in September 2000, the subcommittees directed IRS to (1) develop a sufficient business case to justify future investment in CAP, (2) report on how IRS was mitigating risks associated with building CAP before program-level controls are fully implemented, and (3) perform a security risk assessment for STIR. In response, IRS developed and issued a revised CAP business case in November 2000, that demonstrated that the project had sufficient business value to be a near-term investment priority. In addition, IRS strengthened its management of the Business System Modernization (BSM) program and CAP project by, for example, incorporating CAP into the BSM master schedule and including CAP in monthly program reviews. IRS reported these actions to its Senate and House appropriations subcommittees in November 2001. Last, IRS completed a security risk assessment for STIR and reported that it validated STIR requirements against the risk assessment results.

    Recommendation: To ensure that IRS fully responds to congressional direction and addresses modernization management weaknesses, the Commissioner of Internal Revenue should follow through on plans to satisfy IRS appropriations subcommittees' direction on CAP and STIR.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  5. Status: Closed - Implemented

    Comments: In its fourth expenditure plan (issued in March 2001), IRS reported (1) the cost estimates for each program and project initiative provided in the third expenditure, (2) what IRS was currently estimating each to cost, and (3) any negative or positive variances. In January 2001, IRS reported to its Senate and House Appropriations subcommittees that it planned to report this cost variance information to them on a quarterly basis.

    Recommendation: To ensure that IRS fully responds to congressional direction and addresses modernization management weaknesses, the Commissioner of Internal Revenue should report to IRS' appropriations subcommittees on any variance from cost estimates in its third plan of 10 percent or more that result from definitization of contract task orders.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

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