IRS Management:

Formidable Challenges Confront IRS as It Attempts to Modernize

T-GGD/AIMD-99-255: Published: Jul 22, 1999. Publicly Released: Jul 22, 1999.

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Pursuant to a congressional request, GAO discussed the Internal Revenue Service's (IRS) efforts to implement the IRS Restructuring and Reform Act of 1998, focusing on IRS': (1) reorganization processes; (2) performance management system; and (3) systems modernization efforts.

GAO noted that: (1) the Commissioner and GAO agree that the various components of IRS' modernization must be implemented in an integrated fashion; (2) simply restructuring the organization, for example, without concurrent revisions to work processes and related information systems, will do little to improve the quality of service being provided to taxpayers; (3) however, successfully implementing such a comprehensive modernization strategy, while continuing the business of day-to-day tax administration, will push IRS managers and staff to their limits; (4) particularly important will be the capacity of middle managers to lead and manage comprehensive change; (5) no matter how much IRS changes its organization, work processes, and information systems, its ability to fundamentally change the way it interacts with taxpayers hinges on its ability to ensure that employees demonstrate the desired attitudes and behaviors; (6) a results-oriented approach to managing human capital has the potential to deliver such a result; (7) to fully realize this potential, IRS must finish developing key organizational performance measures, deal with an employee evaluation process that is not aligned with IRS' new mission, and develop and deliver a comprehensive training program for both frontline staff and middle managers; (8) IRS continues to face formidable system modernization challenges; (9) they include: (a) completing the modernization blueprint that IRS issued in May 1997 to define, direct, and control future modernization efforts; (b) establishing the management and engineering capability to build and acquire modernized systems; and (c) investing in small, low-risk, cost-effective modernization increments; (10) the key to effectively addressing these challenges is to ensure that long-standing modernization management and technical weaknesses are corrected before IRS invests large sums of modernization funds; and (11) IRS recently initiated appropriate first steps to address these weaknesses via its initial modernization expenditure plan that represents the first step in a long-term, multi-increment modernization.

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