Oversight board: IRS ’06 budget will curtail IT efforts

The president’s fiscal 2006 budget for the IRS would shortchange business systems modernization just as the agency has notched some successes after several problem years, a new independent report says.

Funding to modernize systems ought to be significantly higher next year if the goal is to cut costs and service delivery time, as well as avoid a catastrophic collapse of the tax agency’s archaic systems, the IRS Oversight Board concluded in a report released last week.

The board urged Congress to bump overall IRS funding for next year to $11.6 billion, up $0.9 billion from the $10.7 billion President Bush requested.

The board said the IRS needs $140 million more for business systems modernization and $78 million in additional funding for other initiatives that support modernization.

In his request, the president called for a boost in spending for enforcement but at the expense of customer service and modernization, the report said.

“Of greatest concern is the age of the IRS’ existing computer systems, which will eventually become impossible to maintain. As time passes, a catastrophic disruption in our nation’s tax system becomes more likely,” the report said.

The IRS met its computer modernization cost and schedule milestones last year and moved the first set of taxpayers’ records off the old tape-based Master File system to the new database, the Customer Account Data Engine.

“The IRS is now solidly on the right track and is making progress, but the IRS must be given the resources to achieve its strategic objectives,” oversight board chairman Raymond Wagner Jr. said.

If Congress approves the president’s proposal, funding for modernization will have shrunk by almost half over the past two years to the proposed $199 million next year. Tight resources will delay the program and drive up costs more than necessary, the board said.

But IRS commissioner Mark Everson disagreed with the board, calling the Bush administration’s budget proposal for the tax agency a balanced request that “allows us to move forward on the essential elements of modernization.”

The board said the new systems are key to the administration’s objectives. The IRS needs to accelerate systems modernization so that it can better enforce the tax law and improve customer service, the board said.

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