Our ongoing assessment has found that IRS has initiated a number of activities and made some progress in addressing our recommendations to improve management of information systems; enhance its software development capability; and better define, perform, and manage TSM’s technical activities. Consequently, IRS today is not in an appreciably better position than it was a year ago to ensure the Congress that it will spend its 1996 and future TSM appropriations judiciously and effectively. Since then, IRS has performed an electronic filing marketing analysis at local levels; developed a marketing plan to promote electronic filing; consolidated 21 electronic filing initiatives into its Electronic Filing Strategies portfolio; and initiated a reengineering project to begin this month with a goal to reduce paper tax return filings to 20 percent or less of the total volume by 2000. For example, IRS has created the executive-level Investment Review Board for selecting, controlling, and evaluating all information technology investments; developed initial and revised sets of decision criteria that it used last summer to rank and prioritize TSM projects and used it in November 1995 to recommend additional changes to information systems resource allocations, respectively; developed its Investment Evaluation Handbook and Business Case Handbook to strengthen management decision-making on systems investments; and is using the Investment Evaluation Handbook to review operational TSM projects. Specifically, Cyberfile is not being developed (1) using disciplined systems development processes and (2) to provide the security needed to protect taxpayer data.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) Tax Systems Modernization (TSM) plan, focusing on IRS efforts to correct: (1) management and technical weaknesses that have impeded TSM; and (2) analogous technical weaknesses in its Cyberfile initiative.

What GAO Found

GAO found that: (1) although IRS has enhanced its software development capability and better defined TSM performance and management activities, it is unable to assure Congress that it can spend its 1996 and future TSM appropriations judiciously and effectively; (2) IRS has performed an electronic filing marketing analysis at the local level, developed a marketing plan to promote electronic filing, consolidated 21 electronic filing initiatives into its Electronic Filing Strategies portfolio, and initiated a project to reduce paper tax return filings by 20 percent in 2000; (3) IRS has created an executive-level investment review board to select, control, and evaluate information technology investments, and developed an investment evaluation handbook and business case handbook to strengthen management's decisionmaking concerning system investments; (4) IRS has standardized new and existing contracts and initiated plans to acquire expertise in software capability evaluations; (5) Cyberfile does not use disciplined systems development processes or provide taxpayers with data confidentiality; and (6) because IRS Cyberfile project planning is schedule driven, security policies, security architecture, and testing plans cannot be made.