This  expenditure plan strategy is a by-product of the Commissioner’s overall  approach to the modernization, which is to incrementally invest in  modernized systems in accordance with (1) rigorous systems and software  life cycle management processes and (2) a revised sequencing plan for  migrating from IRS’ legacy systems and master file environment to the  target systems and relational database environment specified in the  blueprint. The initial plan requests $35 million for IRS modernization initiatives to be  delivered by October 31, 1999. Leading public and private sector organizations use an incremental  approach to investing in systems modernization efforts. Initial Expenditure Plan Is an Appropriate First Step and Meets Legislative Requirements

IRS’ initial expenditure plan is an appropriate first step to successful  systems modernization and, with regard to the $35 million being requested  for this increment, satisfies the conditions that the Congress placed on the  use of ITIA funds. The key to IRS’ success is now to effectively implement  the initiatives described in its initial expenditure plan and fulfill its  commitment to incrementally request and expend future modernization  funds. Additionally, IRS intends  for future expenditure plans to incrementally provide for architectural  specificity for future system initiatives. As described above, the initial  expenditure plan provides for implementing the ELC on ongoing projects,  and, according to IRS officials, future expenditure plans will provide for  implementing it on follow-on projects. Initial Expenditure Plan Is Consistent With GAO’s Past Recommendations

In 1995, we first made recommendations to correct serious and pervasive  modernization management and technical weaknesses. IRS’ initial expenditure plan is consistent with these recommendations. The  result is intended to be a revised, business risk-based sequencing plan that  defines the general timing, cost, and benefits of new modernization  projects over the next 3 to 5 years. Objectives, Scope, and Methodology

Pursuant to the Department of the Treasury’s fiscal year 1998 and 1999  appropriations acts, the Congress limited IRS’ ability to obligate ITIA funds  until the service and Treasury submitted to the Congress for approval an  expenditure plan that per the acts, (1) implements the IRS Modernization  Blueprint, (2) meets OMB’s investment guidelines for information systems,  (3) is reviewed and approved by IRS’ Investment Review Board, OMB, and  Treasury’s IRS Management Board and is reviewed by GAO, (4) meets the  requirements of IRS system life cycle management program, and (5) is in  compliance with acquisition rules, requirements, guidelines, and system  acquisition management practices of the federal government. We  reviewed the plan to determine whether (1) the plan satisfied the  conditions specified in the acts, (2) the plan was consistent with our past  modernization recommendations, and (3) we had any other observations  on IRS’ systems modernization efforts.
Why GAO Did This Study

Pursuant to a legislative requirement, GAO reviewed the Internal Revenue Service's (IRS) initial Information Technology Investments Account (ITIA) expenditure plan, focusing on whether: (1) the plan satisfies the conditions specified in IRS' fiscal year 1998 and 1999 appropriations acts; (2) the plan is consistent with GAO's past recommendations on IRS' systems modernization; and (3) GAO's observations on the modernization efforts.

What GAO Found

GAO noted that: (1) IRS' initial expenditure plan is the first in a series of incremental expenditure plans that IRS plans to prepare over the life of the modernization; (2) the initial plan specifies IRS' modernization initiatives through October 31, 1999, and it seeks approval to obligate about $35 million to complete these initiatives; (3) such an incremental approach to investing in systems modernization efforts is a recognized best practice that leading public and private sector organizations use to mitigate the risk of program failure on large, complex, multiyear modernization programs; (4) IRS' initial expenditure plan is an appropriate first step toward successful systems modernization and, with regard to the $35 million being requested for this increment, satisfies the conditions that Congress placed on the use of ITIA funds; (5) the plan is consistent with GAO's past recommendations; (6) the initial expenditure plan provides for additional blueprint precision and specificity; (7) it provides for definition of system infrastructure specifications and a revised plan for sequencing the introduction of the new technology needed to achieve the target systems architecture over the next 3 to 5 years; (8) these initiatives are consistent with GAO's past recommendations for completing the blueprint and collectively they represent the first steps needed to satisfy the legislative condition to implement the blueprint; (9) the initial expenditure plan provides for definition and targeted implementation of an Enterprise Life Cycle, which is consistent with GAO's past recommendations for instituting project management rigor, software process maturity, and investment management discipline; (10) if implemented properly, this effort should satisfy the legislative condition for an IRS system life cycle and investment management program that meets the Office of Management and Budget guidelines; (11) building on its initial expenditure plan, IRS plans to define in subsequent expenditure plans the follow-on efforts and funding requirements needed to incrementally: (a) add needed architectural precision and project-specific management discipline; and (b) implement its Enterprise Life Cycle, and its target systems architecture; and (12) if IRS effectively implements the initiatives described in its initial expenditure plan and fulfills its commitment to incrementally request and expend future modernization funds, IRS would be acting in a manner that is consistent with the legislative conditions and GAO's past recommendations.