In late 1986, IRS produced plans for a new modernization effort, known today as Tax Systems Modernization (TSM). IRS has developed a business vision to guide its modernization efforts. Objective, Scope, and Methodology

Our objective was to review the business and technical practices IRS has established to develop, manage, and operate its information systems and, in particular, the TSM initiative. We examined IRS’s business strategy for reducing paper tax return submissions, strategic information management processes, software development capability, systems development accountability and responsibility. We also identified IRS efforts to upgrade skills and training. Information Technology Is Not Managed as an Investment

Currently, IRS does not have a process to manage TSM information systems projects as investments, even though IRS expects the government’s past and future investment in TSM to exceed $8 billion. However, these efforts are not yet complete, and IRS did not assess the actual steps needed to implement these efforts. Realizing that its software development capability needed improvement, IRS initiated process action teams to address software development weaknesses in key process areas. IRS said also that it is planning for its 1996 IRS Information System Architecture to reflect a total system view; is reviewing existing documentation to determine how best to incorporate our security architecture recommendation; is in the process of improving its configuration management process by implementing change control, as well as developing guidance; has initiated a series of assessments for major TSM systems to review and baseline existing requirements for each deliverable, including documented interfaces; will merge integration testing, systems testing, and other testing-related personnel in one facility, and is planning to establish an interim test and control capability; and has developed a release engineering approach to transition from its current environment to one meeting TSM-defined objectives and capabilities. However, below the Commissioner’s Office, the management authority and control needed to modernize tax processing has been fragmented.
Why GAO Did This Study

GAO reviewed the effectiveness of the Internal Revenue Service's (IRS) efforts to modernize tax processing, focusing on: (1) IRS business and technical practices in the areas of electronic forms, strategic information management, software development, technical infrastructures, and organizational controls; and (2) opportunities to improve IRS information systems management and software development capabilities.

What GAO Found

GAO found that: (1) despite IRS efforts to improve its tax processing, pervasive management and technical weaknesses still remain that could impede its modernization efforts; (2) IRS does not have a comprehensive business strategy to reduce paper submissions; (3) IRS has not yet fully developed the requisite software and technical infrastructures to successfully implement its modernization efforts; (4) other tax system modernization (TSM) weaknesses include IRS failure to fully implement strategic information management practices, an immature and weak software development capability, and incomplete systems architectures and integration and system planning; (5) IRS does not manage TSM as an investment, systems development is not driven by reengineering efforts, and IRS staff do not have the necessary skills to meet future IRS needs; and (6) IRS has not assigned responsibility, authority, and accountability for managing and controlling systems modernization to one individual or office.