IG sees flaws, and bright spots, in IRS modernization

Management weaknesses continue to dog the IRS’ Business Systems Modernization program, auditors said. But they also said management initiatives, a disciplined framework and recently hired senior staff should give the tax agency the means to deliver on modernization.

The IRS still has problems meeting long-term cost and schedule estimates and with managing its programs, despite having had its most successful year in deploying two advanced versions of its new taxpayer database, the Customer Account Data Engine, and other electronic services.

The Office of the Treasury Inspector General for Tax Administration, J. Russell George, released its annual progress report on IRS modernization last week.
“We will be in a posture in 12 to 18 months to see if they have accomplished what they set out to do with the senior management they have put in place. We are cautious. There is a lot under way,” said Peggy Begg, TIGTA assistant inspector general for IT systems.

In January 2007, the IRS plans to have CADE, the foundation of its modernization program, process the major 1040 forms for individual tax returns. Officials expect CADE to replace the old Master File in 2012.

Adding to modernization’s complexities, the IRS has assumed the role of systems integrator from its prime contractor, Computer Sciences Corp., because of reduced congressional funding and concerns about the contractor’s performance. Many of the program management issues are related to this transition, the TIGTA report said.
Weaknesses linger in critical program management and system development processes, such as requirements and contract management, software testing and security controls.

On the positive side, the IRS has developed the infrastructure to support its modernization projects, including an enterprise architecture that encompasses all the IRS’ business units, processes and programs. The tax agency has taken steps to improve program management, such as establishing separate offices for requirements and for release management. The offices are developing guidelines and processes to support their components.

“We are very confident that we have the management focus and discipline in place to ensure that we are doing things right as opposed to doing things fast, such as exiting milestones prematurely,” said IRS CIO Todd Grams in response to TIGTA’s findings.

The IRS processed an initial set of 1.4 million 1040EZ returns on a new computer system for the first time in 40 years. CADE also generated $424 million in refunds and shortened the turnaround for refunds on average from seven days to 3.5 days.

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