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GAO discussed the Internal Revenue Service's (IRS) Tax Systems Modernization (TSM) program efforts to identify options for organizational and business changes at IRS. GAO noted that: (1) the IRS Design Master Plan did not provide a vision of how the new technology could enable IRS to transform its future organizational structures and business operations; (2) although the automation of current business processes should provide clear benefits, its current organizational structure and business will constrain IRS from using new systems to provide the best quality service to taxpayers; (3) the design of the new systems could constrain the consideration of such business options as consolidating or changing the functions of the 10 existing service centers before they have been adequately exposed and discussed; (4) a survey of 25 private companies showed that such modernization could result in major organizational change; and (5) IRS has made efforts to redefine several aspects of its business operations, but they were not linked to the new systems under the plan.

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Recommendations for Executive Action

Agency Affected Recommendation Status
Internal Revenue Service 1. IRS should begin a systematic effort to examine options for major changes in business processes to fully realize the significant opportunities offered by the modernization effort.
Closed - Implemented
IRS has completed reviews of the roles and responsibilities of the national office, regional and district offices, service centers, and call sites. Some potentially significant changes have been announced and IRS has steps under way to implement those changes. Although implementation will take several years, the actions intended by this recommendation have been completed.

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