Grams balances budget scales

The Internal Revenue Service's fiscal 2006 budget shouldn’t be viewed as an internal competition for dollars between tax enforcement and tax processing modernization, said W. Todd Grams, IRS’ chief information officer.

"We’re always going to be evaluating year by year within whatever budget we get what the right balance is distributing those dollars," he told Federal Computer Week.

For the next fiscal year, IRS officials requested a 4.3 percent overall increase for a total of about $10.7 billion. Within that amount is an 8 percent increase for enforcement and a 2 percent decrease for efforts to modernize the agency’s four-decade old tax processing technology.

Grams said he believes the proposed 2006 budget is "the right balance between enforcement, customer service and modernization."

Tax agency officials want a repeat of last year’s performance, which modernization managers characterize as the best for IRS modernization. That would demonstrate “two years of good solid delivery on schedule and costs,” allowing the tax agency to “then look for growth in the future,” Grams said.

Congress approved $203 million for IRS modernization in fiscal 2005, $82 million less than agency officials had requested. IRS officials have now scaled down their 2006 request to $199 million in fiscal 2006.

"In a program this large, that ($203 million and $199 million) is pretty much the same amount of money," Grams said.

The fact that the modernization request does not keep up with White House officials’ projected 2.3 percent rate of inflation is beside the point, he added. Inflation adjustments are best applied to salaries and benefits programs, Grams said.

"A program like business systems modernization is really project driven," he said.

Grams said he plans to continue a policy instituted following the fiscal 2005 cuts to halt work on internal agency modernization projects and keep the emphasis on the Customer Account Data Engine, designed to replace the Kennedy-era magnetic tape technology used to process tax returns.

As in the current fiscal year, no new updates to the Integrated Financial System are planned for 2006, and the Custodial Account Project will remain in deep freeze for the foreseeable future.

Responsibility for the financial system, which is now functional, will be transferred in fiscal 2006 to officials on the legacy information technology side of the chief information officer’s operation, Grams said.

Two other modernization projects – Modernized e-File and e-Services – are also slated for transfer in fiscal 2006 to legacy IT services, Grams added.

And IT services will have a budget increase of 2.6 percent once cuts to its back office support for some IRS customer service efforts slated for elimination and savings from competitive sourcing are accounted for, Grams said. The 2006 amount should be about $1.6 billion, of which the IRS will spend around $65 million on supporting the three new completed modernization systems, he added.

Within that $1.6 billion, however, some money will be redirected to meeting the agency’s Federal Information Security Management Act (FISMA) responsibilities, Grams said.

What the final redirect amount will be is still being debated internally, Grams said. “We have to be sensitive to the fact that we’re covering this by redirecting resources. It can’t be a limitless source of funding.”

Some savings may be possible in existing programs, including in the Treasury’s Department’s efforts to put in place a new telecommunications contract, Grams added.

Meanwhile, only one third of the Custodial Account Project has been completed; the program needs an additional $100 million to finish. IRS employees who worked on the project have been transferred elsewhere, according to agency documents.

The project is designed to be a data warehouse that the chief financial officer’s office would use to track tax collections. A Government Accountability Office review of the tax agency’s fiscal 2004 financial statements found material weaknesses in IRS officials’ ability to track unpaid taxes and minimize improper refund payments.

The tax agency is examining alternative approaches besides the Custodial Account Project to rectify those deficiencies, Grams said. But the project cannot stay on hold forever, Grams said.

"It’s not so much the technology that can be an issue, it’s the people who were working on it who had the expertise" who are now committed to other projects, Grams said. "That certainly will represent a challenge if we decide in the future that the way were doing CAP is the way we will do it in the future."