Tax Systems Modernization: Imaging System's Performance Improving but Still Falls Short of Expectations

U.S. Government Accountability Office

Tax Systems Modernization:

Imaging System's Performance Improving but Still Falls Short of Expectations

GGD-97-29: Published: Jan 16, 1997. Publicly Released: Jan 16, 1997.

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Pursuant to a congressional request, GAO reviewed the performance of the Internal Revenue Service's (IRS) Service Center Recognition/Image Processing System (SCRIPS) in 1996, focusing on: (1) the primary causes for performance problems that occurred in 1995; (2) whether SCRIPS performance improved in 1996 as of September 30, 1996; and (3) the status of IRS future plans for SCRIPS.

GAO found that: (1) SCRIPS experienced significant performance problems in 1995; (2) two problems were system downtime and slow processing rates; (3) because of performance problems, two of the five centers stopped processing Forms 1040EZ on SCRIPS and reverted to using manual data entry; (4) SCRIPS performance deficiencies in 1995 stemmed primarily from both hardware and software problems; (5) although IRS had expected that SCRIPS would be processing five document types, forms 1040EZ, 941, and 1040PC, federal tax deposit (FTD) coupons, and information returns, IRS postponed plans to process forms 941 and 1040PC on SCRIPS; (6) of the three remaining document types, the Cincinnati test certified the software application only for FTD coupons, therefore, the software applications for information returns and Form 1040EZ were not thoroughly tested before they were put into production, (7) to improve the performance of SCRIPS for 1996, IRS made hardware and software modifications, some of which were made before the start of the 1996 filing season; (8) as a result of some of these enhancements and more staff familiarity with SCRIPS, according to IRS officials in all five SCRIPS service centers, SCRIPS performed significantly better during the 1996 filing season than it did in 1995; (9) in addition to a slower processing rate for information returns, SCRIPS is not processing all the forms that it was expected to process in 1996, is expected to cost more than originally estimated, and is expected to provide lower labor cost savings than IRS originally anticipated; (10) the latest cost estimate for SCRIPS is $288 million, considerably more than previous cost estimates, which, according to IRS' post-implementation review report on SCRIPS, ranged from $133 million to $209 million; (11) July 1995, IRS decided to terminate all software programming for the 1040PC because of SCRIPS' instability, lack of system capacity, and a number of software application problems; (12) IRS has also decided not to use SCRIPS to process Forms 941 beyond fiscal year (FY) 1997; and (13) in addition to funding constraints, according to IRS officials, a decision on using SCRIPS for Forms 941 will depend on the results of a September 1996 capacity test of SCRIPS, which were not available when GAO completed its audit work, and decisions by IRS' Investment Review Board.

Recommendation for Executive Action

Status: Closed - Not Implemented

Comments: GAO is closing this recommendation because it is no longer applicable. SCRIPS is nearing the end of its system life. SCRIPS is being used to process IRP documents, 1040EZs, and FTDs. When GAO made its recommendation, FTDs accounted for most of the form volume processed on SCRIPS. Based on data for the 1997 and 1998 filing seasons, the total number of FTDs processed on SCRIPS is declining, and will continue to do so as more FTDs are received electronically.

Recommendation: Before deciding to increase the percentage of Forms 1040EZ or information returns that SCRIPS processes or using SCRIPS to process other tax forms, such as Forms 941, the Commissioner of Internal Revenue should: (1) do a cost-benefit analysis that includes examining the costs and benefits of alternative ways for processing those forms, such as those developed by the paper processing task team; and (2) if the analysis shows that it is cost-effective to have SCRIPS process Forms 941, ensure that IRS tests SCRIPS' ability to process the existing software applications along with any new software applications that may be added using peak volumes or volumes simulating peak workload conditions to ensure that SCRIPS can meet performance expectations.

Agency Affected: Department of the Treasury: Internal Revenue Service