IRS copes with cuts

The agency will use up to $11 million of reserve funds to keep modernization tax administration projects on track.

Congressional appropriations of $80 million less than the Internal Revenue Service requested for its modernization effort is forcing the tax agency to dip into its management reserve fund and curtail the scope of work vendor Computer Sciences Corp. will perform in fiscal 2005.

The agency will use up to $11 million of reserve funds to keep modernization tax administration projects on track, said W. Todd Grams, IRS chief information officer.

Programwide activities such as architecture, integration and program management will be scaled down and become the responsibility of IRS staff, rather than contractors, Grams said. "We're trying to minimize the effect on any given project," he said.

The agency remains on track to deliver two semiannual updates of Customer Account Data Engine (CADE), Grams said. CADE is the database replacement for the decades-old magnetic tape system the IRS uses to process tax returns.

Still, the agency faces now higher levels of risk, Grams said. The tax agency requested $285 for the current fiscal year; lawmakers gave it $205 million.

"When you reduce the management reserve, that puts you at a little higher risk," he said. Also, "we've got the transition now that's going to take place by bringing work in house." Representatives from Computer Science Corp. were unavailable for comment.

The tax agency will also completely halt work on internal modernization. CADE is the top priority, Grams said. As a result, work on further releases of the Integrated Financial System, an internal financial accounting system, and Custodial Account Project, a data repository of taxpayer accounts, will cease for now, Grams said.

IRS officials are at work crafting a transition plan, Grams said, "We've got make sure we have our people identified by name and identified by skills so that as we go through this transition of bringing some of this stuff back in house, it's a smooth transition."

The past year has seen the agency achieve several successes, Grams said. Following a new approach toward modernization starting in winter of 2003, projects have been delivered on time and on budget, with only the exception of the Integrated Financial System, which was delivered six months late. Those accomplishments help create the reserve fund the agency is now tapping, he said.

"We are coming off the best year ever in modernization. My intent is to keep us focused so that [2005] builds upon that," he said.

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