IRS big winner in Treasury budget request

Bulk of budget is for modernization of IRS systems

The Treasury Department wants to cut two data centers and operational spending by $200 million by streamlining administrative costs according to the Fiscal Year 2012 budget proposal released today.

The Treasury budget is up 4 percent overall from fiscal  2010 spending, from $13.4 billion to $14 billion. The increase reflects investments in improvements to the collection processes of the IRS as well as implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act approved by Congress in July 2010.

"Overall it is increasing and it is increasing for contractors in a general net sense,” said Ray Bjoklund, senior vice president and chief knowledge officer of FedSources. “Areas like [the Financial Crimes Enforcement Network] are about flat. Bureau of Public Debt, the Mint, Engraving and Printing are all about flat. But, IRS is doing OK.”

Related coverage:

Obama looks to boost IT spending in 2012

Treasury plans to reduce its overall IT expenditures, mostly by trimming outsourcing to federal contractors. The budget proposal states that the Obama administration supports “Treasury’s continued efforts to reduce administrative expenses through streamlining acquisition and procurement operations and by reducing information technology, contracting and other administrative costs.”

IRS is insourcing a fair amount of its services, Bjorklund said, but the overall increase in the Treasury budget does create more increases for contractors. "So, it is a pretty good story for industry,” he said.

The trend for the Treasury Department and IRS has been to insource a lot of its projects, which decreases the spending bloat to contractors. In addition, Treasury plans on reducing its data centers by consolidating the Financial Management Service and Bureau of Public Debt. The streamlining of IT administration is proposed to cut $75 million from the IRS budget alone and $200 million departmentwide.

“FMS does a lot of things for taxpayers and consumers but it is also doing a lot of its work for the government, probably the lion's share of its work is helping agencies that have appropriations,” Bjorklund said. “Keeping the books, which is what they do, also has a relationship with keeping the books for debt or for other contributions between loans and debt. It makes some sense, operationally, functionally. I don't know what their implementation plan is. but on the surface it makes good sense to me.”

The IRS makes up 94.5 percent of the entire Treasury’s budget with the rest spread between its sub-departments such as the Bureau of Public Dept and Financial Crimes Enforcement Network. The largest non-IRS portions of the budget are the departmental offices ($325 million) and the FMS at $219 million.

The fiscal 2012 budget proposes $333.6 million for the IRS’s Business Systems Modernization Program to continue the development of data collections and processing system, the Customer Account Data Engine. The IRS has been upgrading from CADE to CADE 2 as well as beginning to implement the next generation system Modernized e-File MeF designed to make it easier for taxpayers to file electronically.

On the consumer-facing side, the IRS portal website,, would get $33 million to improve the IRS website infrastructure and redesign the site with the purpose of increasing ease-of-use for taxpayers to access information and to file payments. As such the IRS has a request for proposals out on the portal with the decision for contract expected to be made in early March.

“That is where you get beyond just the design problem when you get into the challenges of information security and privacy,” Bjorklund said. “How do I make them very presentable, very easy to use and all the instructions and guidance surrounding them easy to consume so the consumer, the taxpayer, will know exactly what to do under what circumstances and with which documents and to be able to fill them out and submit them electronically which means secure and private.”

About the Author

Dan Rowinski is a staff reporter covering communications technologies.

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