Reports cite progress, obstacles in IRS modernization efforts

Long-term efforts to create more efficient computer systems and a taxpayer records' database at the Internal Revenue Service are progressing, but need stronger oversight, according to new reports from the agency's inspector general.

Comment on this article in The Forum.Inadequate executive guidance on the IRS' major project to upgrade its information technology operations, known as the Enterprise System Management initiative, has contributed to the project's delays and funding shortfalls, said the report that focused on ESM.

Specifically, a lapse in funding in July 2007 for contractor support forced the IRS to put the project on hold, pending the award of a new contract. While the contract was awarded two months later to the same tech firm -- Greenbelt, Md.-based Presidio -- the IRS still had to spend $491,952 to bring the new team of contractors up to speed on previously completed work. The report recommended that the chief information officer ensure ESM projects receive timely and sufficient funding, or revise the tasks to guarantee efficient use of contractor support.

The IG also found internal confusion over which entity had jurisdiction over the initiative, and recommended that the agency's infrastructure executive steering committee provide oversight for ESM -- a suggestion with which IRS management agreed. The report criticized the IRS for failing to properly document significant decisions regarding the initiative, "which resulted in increased risks of miscommunication, responsible parties not being held accountable and actions not being implemented in a timely manner."

The second report evaluated progress on the IRS' efforts to create a central database, known as the Customer Account Data Engine, to replace the existing repositories of taxpayer information, The project is the centerpiece of the IRS modernization program. The IG noted progress with CADE's capabilities, including more efficient daily processing of tax return account information, and its timeliness in meeting benchmarks.

Several issues, however, could pose challenges to the project in the long term. For example, while the goal is for CADE to house all taxpayer information permanently, the system stores the data used to process returns only for the current year. Historical taxpayer account data, such as prior year tax assessments and outstanding tax liabilities, are maintained in a separate database not compatible with CADE's format.

In addition, CADE is approaching maximum capacity in terms of data storage. With the expectation that the taxpayer population will increase significantly, the IRS must decide whether to reduce CADE capabilities, or invest in new technology or alternative resources to satisfy demand, the IG recommended.

The report also noted that challenges associated with processing payments related to the 2008 Economic Stimulus Act required the IRS to invest in consulting services to assess potential impact and contribute to an appropriate strategy for handling the workload. While the result was successful -- more than 17 million taxpayers received stimulus checks -- the IRS did not have funds appropriated for managing the effort until it was already under way, and programming required for the unplanned efforts resulted in a delay of the overall project schedule by five weeks.

"Although we agree that a documented, standardized decision process should exist to determine the effect of unplanned initiatives on CADE, the decision to go forward with the recent stimulus changes was made at a very high level," said IRS CIO Arthur Gonzalez in a written response to the report.

The IG conducted both reports as part of its fiscal 2008 audit.