Recommendation: The Commissioner of Internal Revenue should direct the Budget Director, Modernization, Information Systems, and Security Services, to prepare IRS's fiscal year 2004 information systems budget request in accordance with leading organizations' best practices. At a minimum this should include (1) adopting these best practices as an explicit priority and (2) employing these practices in time for use in developing the fiscal year 2004 budget request.

Agency Affected: Department of the Treasury: Internal Revenue Service

Status: Closed - Implemented

Comments: To address this recommendation, IRS agreed to (1) develop a capital planning guide to implement a process for capital planning and investment control, budget formulation and execution, business case development, and project prioritization, and (2) develop an activity-based cost model to plan, project and report costs for business tasks/activities funded by the information systems budget. IRS published its Capital Planning and Investment Control Process Guide in August 2005 and used it in the preparation of the FY 2007 Information Systems (IS) budget. Specifically, the IS budget was approved by the IRS's executive level investment review board--the Modernization and Information Technology Services Executive Governance Committee--as part of the entire portfolio in accordance with the guide. During fiscal year 2005, IRS also implemented a cost module as part of its Integrated Financial System (IFS) that is potentially capable of allocating costs by activity.