IRS Modernization:

Long-term Effort Under Way, but Significant Challenges Remain

T-GGD/AIMD-00-154: Published: May 3, 2000. Publicly Released: May 3, 2000.

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Pursuant to a congressional request, GAO discussed the Internal Revenue Service's (IRS) progress in implementing its modernization effort and the challenges that remain.

GAO noted that: (1) IRS is as challenged an agency today as it was almost 2 years ago when the IRS Restructuring and Reform Act of 1998 was passed; (2) IRS continues to face serious operational issues in its two key mission areas--enforcement and customer service; (3) for example, deficiencies in controls to properly manage billions of dollars in unpaid tax assessments have resulted in both taxpayer burden and potentially billions of dollars in lost revenue to the government; (4) also, taxpayers continue to be frustrated with their inability to reach IRS by telephone; (5) once they do get through, taxpayers are further frustrated by IRS employees' inability to quickly and accurately answer questions and resolve problems; (6) root causes underlying these problems are complex, interrelated, and long-standing and reflect weaknesses in fundamental IRS operations, such as its organizational structure, information systems, performance management system, and human capital management; (7) recognizing the complex and interdependent nature of its long-standing problems, IRS has developed a massive modernization effort--encompassing major changes to its organizational structure, performance management system, information systems, and business practices; (8) about 2 years into a process that will likely take more than a decade, IRS has begun to lay a foundation that should facilitate further changes to IRS' business practices; (9) however, substantial challenges remain in the areas of performance management and information systems modernization; (10) for example, some initial systems modernization work fell short of expectations, and IRS is trying to get it back on track; (11) as Congress recognized in the Clinger-Cohen Act, it is best practice to manage long-term modernization efforts incrementally and to measure progress against incremental goals; (12) IRS is following such an incremental approach in implementing its modernization effort and certain areas will be critical to monitor for progress over the next year; and (13) these areas include, among others, improvements in enforcement and customer service performance and fulfillment of systems modernization commitments.

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