Tax System Modernization: Attention to Critical Issues Can Bring Success

GAO discussed: (1) the Internal Revenue Service's (IRS) plans to modernize the automated tax processing system; and (2) two procurements related to the modernization. GAO noted that: (1) through fiscal year (FY) 1991, more than $500 million has been budgeted for tax system modernization (TSM), and IRS has requested $427 million more for FY 1992; (2) to ensure that IRS has personnel with the necessary technical expertise to carry out the program, IRS needs to strengthen both its procurement and systems development policies and practices; (3) the IRS modernization plan needs to clearly define the IRS fundamental missions, address such key planning components as traditional planning, provide measurable program objectives, specify the organizations accountable for various activities, and address taxpayer privacy and technology risks; (4) IRS needs to better manage its automated system for collecting delinquent taxes; (5) IRS noncompetitively awarded a contract for the preparation of the draft design master plan, since it claimed it did not have time to compete the contract, although it had 7 months to do so; and (6) continuous delays in awarding the $400-million DMAC-II contract have increased the urgency of IRS equipment needs. GAO believes that, overall, the IRS draft design master plan is a reasonable, useful, high-level guide for TSM development and implementation.