As a result, IRS has not made adequate progress in correcting its management and technical weaknesses. IRS plans to complete an electronic filing strategy by October 31, 1996. In addition, IRS faces several challenges in implementing its customer service vision. Finally, TSM projects and reengineering efforts must be integrated. Developing the Capacity to Make Sound Technology Investments

IRS information systems need to be better managed as investments, and strategic information management practices are not yet fully in place. While IRS has recognized the need to match the scope of TSM projects with its capabilities and is beginning to scale back its TSM investment to projects it is more capable of managing, IRS’ investment process is not yet complete. We have reported the following. IRS has not yet established an effective organizational structure to consistently manage and control systems modernization organizationwide. However, IRS has not yet set the time frames for several measures necessary to build a technical foundation for TSM. We found that IRS’ selection of the Department of Commerce’s National Technical Information Service (NTIS) to develop Cyberfile was not based on sound analysis. We are encouraged that Treasury is taking a more active role in overseeing IRS’ efforts to improve its business operations. It gave the Commission a broad, sweeping charter for reviewing: present IRS practices, especially its organizational structure, paper and return processing activities, infrastructure, and collection process; what is required for (1) making returns processing “paperless,” (2) modernizing IRS operations, (3) improving the collections process without major increases in personnel or funding, (4) improving taxpayer accounts management, (5) improving accuracy of information requested by taxpayers in order to file returns, and (6) changing the culture of IRS to make it more efficient, productive, and customer oriented; whether IRS could be replaced with a quasi-governmental organization with tangible incentives for managing programs and activities, and for modernizing its activities; and whether IRS could perform other collection, information, and financial service functions of the federal government.
Why GAO Did This Study

GAO discussed opportunities to improve the Internal Revenue Service's (IRS) business operations.

What GAO Found

GAO noted that: (1) because IRS has not fully corrected its management and technical weaknesses, Congress has limited funding for tax systems modernization (TSM) to critical systems; (2) IRS needs to develop an effective business vision implementation strategy that includes performance measures; (3) IRS plans to complete its electronic filing strategy by October 1996, but it has not fully addressed implementation of its customer service vision or integration of its TSM projects with its reengineering efforts; (4) IRS needs to develop the capacity to make sound information technology investments; (5) IRS needs to build a technical foundation for its TSM information systems projects, invest sole TSM management control in one official, and improve its contracting process; (6) IRS needs to address serious financial management problems, particularly those concerning its revenues, tax refunds, accounts receivables, nonpayroll operating expenses, and available appropriations; (7) IRS, the Department of the Treasury, the Office of Management and Budget, and Congress must ensure that IRS follows through on recommended management improvements; (8) Congress has provided a framework to monitor IRS progress in improving its management operations and modernizing its tax return processing system; and (9) the National Commission on Restructuring IRS will have a principle role in evaluating IRS operations and recommending organizational, management, and operating changes.