GAO: IRS Needs Modernization Program Strategy

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The Government Accounting Office (GAO) reported to Congress last week on the Internal Revenue Service's (IRS) progress in implementing its ongoing Business Systems Modernization (BSM) program. While the IRS has made advances in improving its modernization management controls, the GAO report said, two key projects experienced significant cost overruns and “more work remains to be done to fully develop a long-term vision and strategy for completing the BSM program.” The administration has proposed increasing BSM funding by 43 percent for 2008.

The IRS still needs to establish time frames for consolidating and retiring legacy systems says David Powner, director of GAO's information technology management issues, in his overview of GAO's review of the IRS 2007' expenditure plan. He also emphasized that the agency needs to improve its reporting of project scope expectations.

IRS Commissioner Mark Everson responded to GAO recommendations in a letter included in the report, “Business Systems Modernization – IRS Fiscal Year 2007 Expenditure Plan,” that the IRS will develop an interim approach to measure results against expectations by September. Everson acknowledged significant issues and risks to the IRS ability to deliver planned functionality within cost estimates and said that the agency had developed “mitigation strategies” to deal with them.

The two projects with large cost overruns in 2006 were the Modernized e-File, the new electronic filing platform, which exceeded costs by 36 percent and the Customer Account Data Engine project (CADE), the modernized taxpayer database, which exceeded costs by 15 percent, the report says. Other systems, including the Filing and Payment compliance first release, which separates cases that will be handled by the IRS from simpler cases that will be handled by private collection agencies, met cost estimates.

The CADE project should be up and running by 2012, when IRS expects to retire the Individual Master File database, a system that dates from the Kennedy era, government computer news reports.

Of the $409 million proposed increase to the IRS' infrastructure, modernization, enforcement and taxpayer service programs in the new budget, $143 million will go to the agency's IT infrastructure, computer security response center, network infrastructure security and BSM infrastructure, government computer news says. The total IRS budget request for 2008 is $11.1 billion, a 4.7 percent increase over 2007.

Commissioner Everson, in an appearance before the Senate Budget Committee, declined Chairman Kent Conrad's (D-N.D.) offer of an additional $250 million for the IRS. “If you grow a budget too quickly, you lose control,” he said, according to

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