Some of the steps involved in converting existing systems include (1) converting applications; (2) upgrading hardware and/or systems software for mainframes, minicomputers/file servers, and personal computers; (3) upgrading telecommunications networks; and (4) ensuring that external data exchanges are Year 2000 compliant. The other parallel Year 2000 efforts are 2 major replacement efforts: (1) the replacement of the Distributed Input System (DIS) and the Remittance Processing System (RPS) with the Integrated Submission and Remittance Processing (ISRP) system and (2) the consolidation of the mainframe computer processing operations at 10 service centers to 2 computing centers. IRS’ Year 2000 Efforts Are Experiencing Some Delays

IRS is experiencing delays in completing conversion efforts for its existing systems and major systems replacement efforts. IRS has made the most progress in converting its applications for the systems it has deemed mission-critical. As of April 24, 1998, IRS reported that it had completed the first 12 steps of its 14-step conversion process on applications for about 46 percent (59 systems) of its 127 mission-critical systems. IRS’ schedule calls for completing the first 12 steps for the remaining 54 percent (68 systems) of the mission-critical systems by January 1999. IRS is still in the initial steps of its 14-step conversion process for most of its systems software, hardware, and telecommunications network components. IRS officials said they expect to complete the Year 2000 portions of mainframe consolidation (i.e., terminal replacement and the communication replacement system) by the original completion date of December 1998. According to our assessment guide, a master conversion and replacement schedule should be a part of an agency’s Year 2000 program plan. Thus, IRS faces the risk that resources may not be available when needed. One of the support activities that IRS identified in the statement of work was the development of an integrated schedule identifying (1) the interfaces and dependencies among Year 2000 projects and (2) efforts to implement legislative changes for the 1999 filing season. IRS expects to make its existing service center mainframe computers Year 2000 compliant by January 1999. Recommendations

We recommend that the Commissioner of Internal Revenue take the following steps to better ensure that IRS has adequately assessed the vulnerabilities of its core business processes in the event of Year 2000-induced system failures: solicit the input of business functional area officials to identify IRS’ core business processes and prioritize those processes that must continue in the event of Year 2000-induced failures; map IRS’ mission-critical systems to those core business processes; determine the impact of information system failures on each core business assess any existing business continuity and contingency plans that may have been developed for non-Year 2000 reasons to determine whether these plans are applicable to Year 2000-induced failures, and develop and test contingency plans for core business processes if existing plans are not appropriate. We recognize that IRS needs to leverage its resources, particularly its information systems resources, to ensure that it completes all of the required Year 2000 conversion work on schedule. Implementation. According to IRS documents, this risk assessment will also trigger the development of contingency plans for mission-critical systems that are found to be at risk for not being converted on time. IRS’ goal is to convert all personal computers by January 1999.
Why GAO Did This Study

GAO reviewed the Internal Revenue Service's (IRS) efforts to have its information systems function correctly when processing dates beyond December 31, 1999, focusing on: (1) IRS' progress in converting its systems according to the guidelines in GAO's year 2000 assessment guide; (2) the risks IRS faces to completing the year 2000 effort on time; and (3) risks to the continuity of IRS operations in the event of year 2000-induced system failures.

What GAO Found

GAO noted that: (1) according to IRS, before January 1999, it needs to complete 12 steps of its 14-step process for converting: (a) the applications for its existing systems; (b) the telecommunications networks; and (c) systems software and hardware for mainframes, minicomputers/file servers, and personal computers; (2) in addition, before January 1999, IRS needs to: (a) ensure that external data exchanges will be year 2000 compliant; (b) implement the Integrated Submission and Remittance Processing System and, at a minimum, the year 2000 portions of mainframe consolidation; and (c) modify application software to implement tax law changes for the 1999 and 2000 filing seasons; (3) if these efforts are not completed, IRS' tax processing and collection systems may fail to operate or may generate millions of erroneous tax notices, refunds, interest calculations, and account adjustments; (4) for the conversion of its existing systems, IRS has made more progress on its applications than on its information systems infrastructure; (5) specifically, as of April 24, 1998, IRS reported that it had completed the first 12 steps of its 14-step conversion process for applications for about 46 percent of the 127 systems it has deemed as mission-critical; (6) IRS expects to convert the applications for the remaining 54 percent of the mission-critical systems by January 1999; (7) the two major systems replacement efforts, which are also expected to follow IRS' 14-step conversion process, are experiencing some schedule slippages; (8) IRS officials said they expect to complete the year 2000 portions of the mainframe consolidation by the original completion date of December 1998; (9) GAO identified two risk areas for IRS' year 2000 effort: (a) the lack of an integrated master conversion and replacement schedule; and (b) a limited approach to contingency planning; (10) since GAO's briefing, IRS has decided to have a contractor develop an integrated schedule of its year 2000-related efforts, including making all of the necessary tax law changes for 1999; (11) IRS officials said they hope to have a baseline, master integrated schedule in June 1998; and (12) in part, due to IRS officials' concerns that the same resources that are doing year 2000 conversion work would be needed to do contingency planning, IRS officials decided to develop a process that would minimize the number of contingency plans that would have to be developed.