UPDATED: Oversight board: Proposed cut hurts IRS modernization

Editor's Note: This story was updated at 3 p.m. Feb. 23 to correct the spelling of W. Todd Grams' name. We apologize for the error.

The Internal Revenue Service Oversight Board called the fiscal 2007 budget proposal to cut funding for the agency’s modernization effort a setback, according to a press release. But the IRS' chief information officer disagreed.

President Bush’s budget proposes a $30 million cut to the Business Systems Modernization (BSM) program, a 15 percent drop from the $197 million appropriated in fiscal 2006. The Bush administration said the program achieved some success, but many projects suffered because of cost, scheduling and performance problems. The program’s overall progress has been slower than anticipated, according to a report released Feb. 9. The report, “Major Savings and Reforms in the President’s 2007 Budget,” details the 141 programs Bush wants to end or reform.

The oversight board, which is congressionally mandated and separate from the IRS, said the president’s proposal would impede the replacement of the Individual Master File with the Customer Account Data Engine, which is crucial to modernizing systems. BSM is necessary and should be given more money next year than it received this year, said Raymond Wagner, the board’s chairman.

"We agree with the oversight board that IRS business systems modernization is absolutely necessary for the future of our country's tax administration," said W. Todd Grams, CIO at the IRS. However, "the funding level for BSM reflects the appropriate balance in the president's budget between customer service, tax compliance and systems modernization."

The administration proposed a renewed emphasis on completing projects incrementally to get business value sooner and at lower risk. With the cuts, the budget would invest in electronic filing, tools to help the IRS manage private debt collectors, improvements in the agency’s own collection programs and modernization.

Richard Spires, associate CIO for BSM, said in December 2005 that the agency would introduce a new modernization strategy in March. The new strategy would reflect a handful of principles, including working on short-term projects with long-term goals.

“Cutting the BSM program after it has turned a corner and begun to produce tangible benefits for taxpayers will delay further the IRS’ ability to operate like a modern financial services organization,” Wagner said.

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