Despite CSC failures, board says IRS modernization progressing

The IRS is finally making progress in implementing its Business Systems Modernization projects, the IRS Oversight Board said in its annual report released today. But it sharply criticized contractors Computer Sciences Corp. and the Prime alliance.

The new taxpayer database, the Customer Account Data Engine, which is the foundation of IRS modernization, successfully processed a small number of 1040EZ returns recently.

"It's a good start, but no one is breaking out the champagne," said Larry Levitan, the IRS Oversight Board's Business Transformation Committee Chairman. "There's much hard work ahead that holds great rewards but also great risk," he added.

For instance, the Integrated Financial System missed major milestones earlier in the year, so its release was pushed back from April to October. "That date may be in jeopardy," the board's report said.

The report said of CSC and the alliance, "At a more fundamental level, the Prime has yet to meet its primary responsibility of serving as a trusted adviser and partner to the IRS in managing the program. The board keeps looking for improvements in this area, but finds few if any to report."

Over the past year, the IRS modernization team and CSC still delayed programs and experienced cost overruns on projects. "However, new controls and management processes have been implemented, which we hope will remedy what ails modernization," Levitan said.

The board also found IRS is vulnerable and easy to exploit by those wishing to evade their taxes because its enforcement program is not adequately funded, said IRS Oversight Board Chair Nancy Killefer.

Projected hiring of new enforcement personnel will not occur because resources will have to be redirected to pay for unfunded mandates, such as congressionally approved federal pay raises. "The IRS will once again have to make up out of its own pockets what could easily amount to a $100 million difference," Killefer said, leaving IRS in a deep budgetary hole at the start of the new fiscal year.

The board cited improvements in IRS customer service through Web-based e-file applications and telephone service.