IRS criticized over modernization

Report on Business Systems Modernization

The Internal Revenue Service received bad marks in a new report that said the tax agency's modernization program has encountered cost overruns and delays.

The latest criticism of the multibillion-dollar effort to modernize the IRS' computers comes from the Treasury Department's inspector general for tax administration. The IG said that a review of four audits of systems modernization projects showed that the IRS and its prime contractor, Computer Sciences Corp., "have been overly optimistic about their timetable" for delivering changes, and changes are needed to make sure there are no problems.

"Further delays could erode confidence in the IRS' ability to deliver modernized systems that are needed to dramatically improve both internal operations and service to taxpayers," said Pamela Gardiner, deputy inspector general for audit in the IG's office.

The IRS uses a computer system developed in the 1960s, but it has begun implementing changes to make it easier for taxpayers to deal with the agency.

But the IG report said there have not been enough controls on costs. It said one project reviewed spent $3.9 million during a five-month period, but the task order was not finalized and eventually canceled. Another project that was intended to provide electronic services to taxpayers had a $4.9 million overrun and was delayed by eight months.

"Project monitoring processes did not adequately capture project cost information.... To enable better monitoring of project development, progress should be measured against the entire project budget rather than just the current development phase," the IG report said.

The report was released March 5 by Senate Finance Committee Chairman Max Baucus (D-Mont.) and the committee's ranking Republican, Sen. Charles Grassley of Iowa. They said in a joint written statement that the report "raises troubling questions about the agency's ability to manage this undertaking" and said the committee would hold hearings in the spring.

CSC said in a statement that it is reviewing the report, and the IRS is preparing an official response.

But Pete Sepp of the National Taxpayers Union, a frequent IRS critic, said that the problems have been going on for 20 years and that the current modernization effort is "not being managed with a cracking whip."

"It is moving at the speed of a tired mule," he said.