GAO

United States General Accounting Office

Report to Congressional Requesters

August 2001 INTERNAL REVENUE 

SERVICE

Results of Review of 

IRS Spending for 

Business Systems 

Modernization

GAO-01-920

Page 1 GAO-01-920 IRS Spending for Business Systems Modernization

Contents

Letter 3

Scope and Methodology 5

Agency Comments 6

Appendixes Appendix I: Briefing to Senate and House Subcommittee Staffs 9

Appendix II: Comments From the Internal Revenue Service 41

Appendix III: GAO Contact and Staff Acknowledgments 45

Abbreviations

CSC Computer Sciences Corporation

IRS Internal Revenue Service

IS Information Systems

ITIA Information Technology Investment Account

TIGTA Treasury Inspector General for Tax Administration
Page 2 GAO-01-920 IRS Spending for Business Systems Modernization
Page 3 GAO-01-920 IRS Spending for Business Systems Modernization

United States General Accounting Office

Washington, D.C. 20548 Letr

August 17, 2001

The Honorable Byron L. Dorgan

Chairman

The Honorable Ben Nighthorse Campbell

Ranking Minority Member

Subcommittee on Treasury and General Government

Committee on Appropriations

United States Senate

The Honorable Ernest J. Istook, Jr.

Chairman, Subcommittee on Treasury,

Postal Service and General Government

Committee on Appropriations

House of Representatives

The Internal Revenue Service (IRS) received appropriations in fiscal years 

1998 and 1999 of about $506 million for information technology 

investments to pay for its business systems modernization costs. According 

to its fiscal year 1998 and 1999 appropriations, IRS may not obligate funds 

in the Information Technology Investment Account (ITIA) until it satisfies 

certain conditions, including submitting to Congress an expenditure plan 

that has been approved by Treasury and the Office of Management and 

Budget. In fiscal years 1999 and 2000, approved plans provided for 

expenditure of approximately $249 million of ITIA appropriations.1

 IRS also 

receives appropriations each year for Information Systems (IS) to pay for 

its expenses related to data processing and telecommunications support, 

including developmental information systems and operational information 

systems. The IS appropriation is also available for limited purposes related 

to IRS’ business systems modernization efforts.2

 In addition, IRS receives 

appropriations each year for Tax Law Enforcement and Processing, 

Assistance, and Management to pay for the cost of these programs, which 

includes the costs associated with IRS employees who may be involved in 

the business systems modernization effort.

1

In fiscal year 2001, an additional $328.1 million of ITIA funds received congressional 

approval for expenditure.

2

Conference and committee reports accompanying IRS’ appropriations acts support the 

availability of IS funds for limited purposes related to the business systems modernization 

effort, such as modernization management, modernization support, and modernization 

program infrastructure.
Page 4 GAO-01-920 IRS Spending for Business Systems Modernization

Pursuant to your requests, we reviewed IRS expenditures relating to its 

business systems modernization. Our objectives were to (1) determine 

whether IRS used ITIA appropriations only to fund its business systems 

modernization costs, (2) determine the extent to which IRS used 

appropriations other than ITIA to fund its business systems modernization 

costs, and (3) review internal controls over ITIA. To accomplish these 

objectives, we reviewed IRS’ expenditures for fiscal years 1999 and 2000 

from its ITIA and other appropriations. We also reviewed IRS’ internal 

controls over ITIA-related expenditures and reviewed related audit reports. 

We briefed your offices on May 31, 2001 (the Subcommittee on Treasury, 

Postal Service and General Government, House Committee on 

Appropriations), and June 12, 2001 (the Subcommittee on Treasury and 

General Government, Senate Committee on Appropriations), on the results 

of our review. This report transmits our briefing slides and summarizes the 

main points presented in the briefing. The full briefing is reprinted in 

appendix I. 

In summary, we found

• IRS obligated and expended available ITIA appropriations in fiscal years 

1999 and 2000 to pay for external3

 business systems modernization 

costs. In fiscal years 1999 and 2000, IRS expended about $12.8 million 

and $120.2 million, respectively, of ITIA appropriations and, as of 

September 30, 2000, had an additional $66 million of ITIA appropriations 

obligated for its external business systems modernization costs. IRS’ use 

of ITIA appropriations appears to be for purposes consistent with the 

fiscal year 1998 and 1999 appropriations acts4

 and within the 

$249 million in approved ITIA expenditure plans.

• IRS used its IS appropriations and other appropriations to fund both 

internal5

 and external business systems modernization costs. IRS paid 

its internal business systems modernization costs from the IS; Tax Law 

Enforcement; and Processing, Assistance, and Management 

appropriations. However, the amount of these costs is unknown 

3

External costs refer to amounts paid to IRS contractors for business systems 

modernization efforts.

4

Public Laws 105-61 and 105-277, respectively.

5

Internal costs include payroll costs for IRS employees and any related support costs (such 

as travel for IRS employees) associated with IRS’ business systems modernization efforts.
Page 5 GAO-01-920 IRS Spending for Business Systems Modernization

because IRS did not have a cost accounting system in place to track its 

internal costs for business systems modernization. IRS initiated actions 

in fiscal year 2000 to begin tracking its internal costs associated with 

specific projects through the use of project accounting codes in 

conjunction with its time and attendance reporting. However, these 

actions were not fully implemented during the time of our review.

• In addition, IRS used its IS appropriations to fund some external 

business systems modernization costs. In fiscal years 1999 and 2000, IRS 

expended $48.6 million of IS appropriations to pay for external business 

systems modernization costs. Also during this period, IRS expended an 

additional $9.3 million of IS appropriations for both modernization and 

nonmodernization costs but could not distinguish between the two.

• There were no instances that we identified in which IRS’ internal 

controls failed to assure that expenditures against ITIA appropriations 

were for business systems modernization. However, we recently 

reported6

 that, despite important progress, IRS has yet to fully 

implement the capabilities needed to effectively manage the business 

systems modernization program. In addition, the Treasury Inspector 

General for Tax Administration (TIGTA) reported that internal controls 

for managing IRS’ business systems modernization efforts were 

inadequate before the Business Systems Modernization Office began 

operations in July 2000 but have since been improved.

Scope and 

Methodology

To accomplish our objectives, we reviewed (1) all expenditures IRS 

charged in fiscal years 1999 and 2000 against its ITIA appropriations, (2) all 

expenditures in fiscal years 1999 and 2000 to Computer Sciences 

Corporation (CSC), MITRE Corporation, and TRW, and expenditures in the 

first 9 months of fiscal year 2000 to selected other vendors7

 that IRS 

charged to its IS appropriations, (3) all expenditures in fiscal year 1999 and 

expenditures in the first 9 months of fiscal year 2000 to CSC, MITRE, and 

TRW that IRS charged to its other appropriations, (4) internal controls over 

expenditures, and (5) reports issued by the TIGTA related to contract 

management controls. 

6

IRS Modernization: Continued Improvement in Management Capability Needed to Support 

Long-Term Transformation (GAO-01-700T, May 8, 2001).

7

We selected Booz, Allen and Hamilton; Grumman Data Systems; and Management Systems 

Designers because of their prior assistance to IRS in its organizational restructuring and 

modernization efforts.
Page 6 GAO-01-920 IRS Spending for Business Systems Modernization

We performed our work at IRS’ Administrative Services Center in Beckley, 

W.V., and at IRS offices in the Washington, D.C., area. We performed our 

work from August 2000 through May 2001 in accordance with U.S. 

generally accepted government auditing standards.

Agency Comments In commenting on a draft of our report, IRS generally agreed with our 

findings and stated that it is making steady progress in managing its 

business systems modernization program. This includes establishing a 

technical framework to guide all business systems modernization project 

developments, fully implementing rigorous configuration management 

practices, and establishing a key executive position to manage and control 

IRS’ technology investment spending. The complete text of IRS’ comments 

is reprinted in appendix II.

We are sending copies of this report to the Chairmen and Ranking Minority 

Members of the Senate Committee on Appropriations; Senate Committee 

on Finance; Senate Committee on Governmental Affairs; Senate Committee 

on the Budget; Subcommittee on Taxation and IRS Oversight, Senate 

Committee on Finance; and Subcommittee on Oversight of Government 

Management, Restructuring, and the District of Columbia, Senate 

Committee on Governmental Affairs. We are also sending copies of this 

report to the Chairmen and Ranking Minority Members of the House 

Committee on Appropriations; House Committee on Ways and Means; 

House Committee on Government Reform; House Committee on the 

Budget; Subcommittee on Government Efficiency, Financial Management, 

and Intergovernmental Relations, House Committee on Government 

Reform; and Subcommittee on Oversight, House Committee on Ways and 

Means, and to the Chairman of the Subcommittee on Foreign Operations, 

Export Financing and Related Programs, House Committee on 

Appropriations, and the Ranking Minority Member of the Subcommittee on 

Treasury, Postal Service and General Government, House Committee on 

Appropriations. In addition, we are sending copies of this report to the 

Chairman and Vice-Chairman of the Joint Committee on Taxation, the 

Commissioner of Internal Revenue, the Secretary of the Treasury, the 

Director of the Office of Management and Budget, the Chairman of the IRS 

Oversight Board, and other interested parties. Copies will be made 

available to others upon request. 

This report was prepared under the direction of Steven J. Sebastian, Acting 

Director, who can be reached at (202) 512-9521. He can also be reached at 
Page 7 GAO-01-920 IRS Spending for Business Systems Modernization

sebastians@gao.gov. If I can be of further assistance, please call me at (202) 

512-2600. Key contributors to this report are listed in appendix III.

Jeffrey C. Steinhoff

Managing Director

Financial Management and Assurance
Page 8 GAO-01-920 IRS Spending for Business Systems Modernization
Page 9 GAO-01-920 IRS Spending for Business Systems Modernization

Appendix I

Briefing to Senate and House Subcommittee 

Staffs ApendxiI

1

Review of IRS Expenditures for Business

Systems Modernization

Briefing to Staffs of

the Subcommittee on Treasury

and General Government,

Senate Committee on Appropriations

June 12, 2001

and

the Subcommittee on Treasury, Postal Service,

and General Government,

House Committee on Appropriations

May 31, 2001

Financial Management and

Assurance
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 10 GAO-01-920 IRS Spending for Business Systems Modernization

2

Briefing Overview

• Introduction

• Objectives

• Scope and Methodology

• Background

• Results in Brief

• Results

• Conclusions
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 11 GAO-01-920 IRS Spending for Business Systems Modernization

3

Introduction

• This is a briefing on the results of our review of IRS’

expenditures, in fiscal years 1999 and 2000, for its business

systems modernization efforts.

• IRS received, in fiscal years 1998 and 1999, appropriations

for information technology investments to pay for IRS’

business systems modernization costs. According to IRS’

fiscal years 1998 and 1999 appropriations, IRS may not

obligate funds in the Information Technology Investment

Account (ITIA) until certain conditions are satisfied, including

congressional approval of its expenditure plan.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 12 GAO-01-920 IRS Spending for Business Systems Modernization

4

Introduction

• IRS also receives annual appropriations each year for

Information Systems (IS) to pay for its expenses related to

data processing and telecommunications support, including

developmental information systems and operational

information systems. The appropriation is available for

limited purposes related to IRS’ business systems

modernization efforts.

• GAO was requested to review IRS expenditures relating to

business systems modernization.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 13 GAO-01-920 IRS Spending for Business Systems Modernization

5

Objectives

• Our objectives were to

• Determine whether IRS used ITIA appropriations only to

fund its business systems modernization costs;

• Determine the extent to which IRS used appropriations

other than ITIA to fund its business systems

modernization costs; and

• Review internal controls over ITIA.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 14 GAO-01-920 IRS Spending for Business Systems Modernization

6

Scope and Methodology

• To accomplish our objectives, we

• Reviewed all expenditures IRS charged in FY 1999 and

FY 2000 against its ITIA appropriations;

• Reviewed all expenditures in FY 1999 and FY 2000 to

Computer Sciences Corporation (CSC), MITRE

Corporation, and TRW, and expenditures in the first 9

months of FY 2000 to selected other vendors1

 that IRS

charged to its IS appropriations;

• Reviewed all expenditures in FY 1999 and expenditures

in the first 9 months of FY 2000 to CSC, MITRE, and

TRW that IRS charged to its other IRS appropriations;

1

We selected Booz, Allen and Hamilton, Grumman Data Systems, and Management Systems Designers

because of their prior assistance to IRS in its organizational restructuring and modernization efforts.

1
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 15 GAO-01-920 IRS Spending for Business Systems Modernization

7

Scope and Methodology

• Reviewed internal controls over expenditures; and

• Reviewed Treasury Inspector General for Tax

Administration (TIGTA) reports on contract management

controls.

• Performed our work at IRS’ Administrative Services

Center in Beckley, W.V., and at IRS offices in the

Washington, D.C. area.

• We performed our work from August 2000 through May

2001 in accordance with U.S. generally accepted

government auditing standards.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 16 GAO-01-920 IRS Spending for Business Systems Modernization

8

Background

• IRS’ external2 business systems modernization costs are

currently funded by two separate appropriations.

• Appropriations for ITIA

• Appropriations for IS

• IRS’ internal3

 business systems modernization costs are

funded by the IS, Tax Law Enforcement (TLE), and

Processing Assistance and Management (PAM)

appropriations.

2

External costs refer to amounts paid to IRS contractors for business systems modernization efforts.

3

Internal costs include payroll costs for IRS employees and any related support costs (such as travel for

IRS employees) associated with IRS’ business systems modernization efforts.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 17 GAO-01-920 IRS Spending for Business Systems Modernization

9

Background

• Funds in the ITIA are for necessary expenses for

business systems modernization as described in the

Modernization Blueprint.4

 The obligation of ITIA funds is

prohibited until certain statutory conditions are satisfied.

• Before ITIA funds are available for obligation, IRS

must submit to the Congress for approval a plan for

expenditure that, among other things, has been

reviewed and approved by Treasury and OMB, and

has been reviewed by GAO.

4 This blueprint is a target enterprise systems architecture that describes in general terms the future systems

environment needed to satisfy the business requirements, and a general sequencing plan for transitioning

from IRS’ current systems environment to its future systems environment.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 18 GAO-01-920 IRS Spending for Business Systems Modernization

10

Background

• ITIA authorized funding was as follows:

• ITIA Funds Appropriated - $505.7 million

• 1998 Appropriations Act – $325 million

(Available from 9-1-98 to 9-30-00)

• Of this amount, $30.3 million was rescinded by

Public Law 105-174.

• 1999 Appropriations Act – $211 million

(Available from 9-30-99 to 9-30-02)
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 19 GAO-01-920 IRS Spending for Business Systems Modernization

11

Background

• ITIA Funds Approved in Fiscal Years 1999 and 2000

for Expenditure - $249.3 million5

• Congressional Approvals Received in

FY 1999 – $35.1 million

• Congressional Approvals Received in

FY 2000 – $214.2 million

5

In FY 2001, an additional $328.1 million of ITIA funds received congressional approval for

expenditure.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 20 GAO-01-920 IRS Spending for Business Systems Modernization

12

Background

• Funds in the IS account are for necessary expenses for

data processing and telecommunications support for IRS

activities, including both developmental information

systems and operational information systems.

• The use of these funds is prohibited for the award of

or initiation of a Prime Systems Integration Services

(PRIME) contract to implement the Modernization

Blueprint. However, these funds are available for

developing the request for proposals (RFP) for the

PRIME contract and for limited purposes related to the

business systems modernization effort.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 21 GAO-01-920 IRS Spending for Business Systems Modernization

13

Background

• Various Conference and Committee Reports support

the availability of IS funds for limited purposes related

to the business systems modernization effort. For

example

• For fiscal year 1998, $32.1 million of IS funds were

available for modernization management and

modernization support through September 30,

1999. For example, IS funds were available for

modernization support to continue efforts to

implement the Modernization Blueprint and to

complete the necessary details.6

• In fiscal year 1999, $68.7 million of IS funds were

available for the modernization program

infrastructure through September 30, 2000.7

6

House of Representatives Conference Report 105-284, dated September 29, 1997. 7

House of Representatives Conference Report 105-825, dated October 19, 1998.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 22 GAO-01-920 IRS Spending for Business Systems Modernization

14

Background

• In December 1998, IRS awarded its PRIME contract to

Computer Sciences Corporation (CSC).

• Under the PRIME contract, CSC performs work and

coordinates and oversees the work of various

subcontractors that are involved in IRS’ business systems

modernization effort.

• IRS pays for costs incurred under the PRIME contract and

other contracts related to business systems modernization,

and any related equipment costs, from its ITIA funds.

• IRS’ practice is not to charge internal IRS costs to the ITIA

appropriation.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 23 GAO-01-920 IRS Spending for Business Systems Modernization

15

Results in Brief

• ITIA appropriations expended and obligated in FY 1999 and

FY 2000 to pay for IRS’ external business systems

modernization costs appear to be for purposes consistent

with

• FY 1998 and FY 1999 Appropriations Acts,8

and

• Approved ITIA expenditure plans.

8

Public Laws 105-61 and 105-277, respectively.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 24 GAO-01-920 IRS Spending for Business Systems Modernization

16

Results in Brief

• Information Systems (IS) and other appropriations were also

used to fund IRS’ business systems modernization costs.

• IS appropriations also funded external business systems

modernization costs.

• IRS paid its internal costs from IS and other

appropriations but the amount is unknown.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 25 GAO-01-920 IRS Spending for Business Systems Modernization

17

Results in Brief

• We found no instances where IRS’ internal controls failed to

assure that expenditures against ITIA appropriations were

for business systems modernization.

• We recently reported9

 that, despite important progress, IRS

has yet to fully implement the capabilities needed to

effectively manage the business systems modernization

program.

• The TIGTA reported that internal controls for managing IRS’

business systems modernization efforts were inadequate

before the Business Systems Modernization Office (BSMO)

began operations in July 2000 but have since been

improved.

9

IRS Modernization: Continued Improvement in Management Capability Needed to Support Long-Term

Transformation (GAO-01-700T, May 8, 2001).
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 26 GAO-01-920 IRS Spending for Business Systems Modernization

18

Results

• ITIA Appropriations Were Expended for

Business Systems Modernization

• IRS expended about $12.8 million of ITIA appropriations

in fiscal year 1999 and $120.2 million in fiscal year 2000

for its external business systems modernization costs.

• IRS also had another $66 million of ITIA appropriations

obligated as of 9/30/00.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 27 GAO-01-920 IRS Spending for Business Systems Modernization

19

Results

• IS and Other IRS Appropriations Were Also

Used to Fund Business Systems Modernization

• IRS used $48.6 million of IS appropriations to pay for its

external business systems modernization costs.

• IRS expended $33.9 million of IS appropriations in

fiscal years 1999 and 2000 for external business

systems modernization costs relating to its integrated

support contract (ISC) with TRW.

• IRS initially considered work under the ISC contract

not to be business systems modernization costs to

be funded from ITIA appropriations.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 28 GAO-01-920 IRS Spending for Business Systems Modernization

20

Results

• In March 2000 IRS determined that some ISC work

was business systems modernization-related and

began funding it under ITIA.

• IRS expended $14.7 million of IS appropriations in

fiscal years 1999 and 2000 for other external business

systems modernization costs.

• IRS expended an additional $9.3 million of IS

appropriations for both modernization and nonmodernization costs but could not clearly distinguish

between the two.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 29 GAO-01-920 IRS Spending for Business Systems Modernization

21

Results

• Obligations Changed From IS to ITIA Appropriation

• IRS initially charged $7.4 million of obligations to IS

appropriations for business systems modernization costs

and later changed them to ITIA appropriations. In

general:

• IRS obligated funds under IS appropriations in June

1999.

• IRS accepted services in July and August 1999.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 30 GAO-01-920 IRS Spending for Business Systems Modernization

22

Results

• IRS deobligated the funding under IS and reobligated

the funds under ITIA appropriations in September

1999.

• IRS expended funds from ITIA appropriations from

October through December 1999.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 31 GAO-01-920 IRS Spending for Business Systems Modernization

23

Results

• Some IS Appropriations Were Expended in Error

• According to IRS officials, IRS charged 4 payments

totaling about $963,000 to IS appropriations in error.

• Obligation information in IRS’ records identified IS

appropriations as the funding source instead of ITIA

appropriations.

• Accounting staff was unaware of the intent to use ITIA

appropriations instead of IS.

• IRS subsequently corrected the error for 2 of the

payments totaling $542,000.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 32 GAO-01-920 IRS Spending for Business Systems Modernization

24

Results

• IRS’ Internal Costs Were Paid From IS and Other IRS

Appropriations But the Amount Is Unknown

• IRS’ internal costs for business systems modernization

are paid from various appropriations but have not been

tracked.

• IRS did not have a cost accounting system in place to

track its internal costs for business systems

modernization.

• Consequently, the full cost of IRS’ business systems

modernization efforts cannot be reasonably

determined.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 33 GAO-01-920 IRS Spending for Business Systems Modernization

25

Results

• In FY 2000, IRS initiated actions to begin tracking its

internal costs associated with specific projects through

the use of project accounting codes in conjunction

with its time and attendance (T&A) reporting.

• In March 200010 the Business Systems

Modernization Executive issued guidelines for

tracking obligations and commitments that can be

directly linked to business systems modernization.

• In July 2000, the Deputy Chief Financial Officer for

Finance issued a memorandum requesting all staff

working on projects to charge their time to

appropriate project accounting codes when

preparing their T&A reports.

10A year later, in March 2001, the Associate Commissioner, Business Systems Modernization, and

Deputy CFO for Strategic Planning and Budgeting issued updated guidance.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 34 GAO-01-920 IRS Spending for Business Systems Modernization

26

Results

• Internal Controls

• IRS’ internal controls to manage and safeguard ITIA

expenditures are implemented through BSMO which

provides oversight, coordination, and approval for the

use of ITIA appropriations.

• BSMO began operations under an executive director in

July 2000.

• Prior to BSMO, the Enterprise Program Management

Office (EPMO) provided oversight of systems

modernization efforts and reported to the Chief

Information Officer who had final approval within IRS for

the use of both ITIA and IS appropriations.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 35 GAO-01-920 IRS Spending for Business Systems Modernization

27

Results

• GAO Tested Internal Controls

• GAO tested certain controls during its audit of IRS’ FY

2000 financial statements and its review of ITIA

transactions and found no instances where IRS’ controls

failed to assure that

• IRS had a valid obligation and had received goods or

services before making payment to vendors for ITIArelated expenses.

• Projects charged to ITIA appropriations matched

approved expenditure plans.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 36 GAO-01-920 IRS Spending for Business Systems Modernization

28

Results

• GAO Recently Reported on IRS Business Systems

Modernization Controls

• GAO has reported11 that IRS has made important progress in managing its business systems

modernization program.

• However, IRS has yet to fully implement the controls and

capabilities needed to effectively manage the business

systems modernization program.

• Work on certain key aspects of business systems

modernization was slower than anticipated.

• Modernization projects were proceeding past critical

milestones without certain essential management

controls.

11IRS Modernization: Continued Improvement in Management Capability Needed to Support LongTerm Transformation (GAO-01-700T, May 8, 2001).
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 37 GAO-01-920 IRS Spending for Business Systems Modernization

29

Results

• TIGTA Tested Modernization Management Controls

• TIGTA conducted audits of IRS’ systems modernization

efforts and found that management controls have

improved.

• During October 1999 through March 2000 (prior to the

emergence of BSMO), TIGTA reviewed IRS’ systems

modernization oversight and reported that related

management controls were inadequate.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 38 GAO-01-920 IRS Spending for Business Systems Modernization

30

Results

• During June through August 2000 (after the

emergence of BSMO), TIGTA again reviewed IRS’

systems modernization oversight and reported that

IRS was making progress in building program

management capabilities.
Appendix I

Briefing to Senate and House Subcommittee 

Staffs

Page 39 GAO-01-920 IRS Spending for Business Systems Modernization

31

Conclusions

• ITIA appropriations were used for external costs

associated with IRS’ business systems modernization

efforts.

• IS appropriations have also funded limited external costs

associated with IRS’ business systems modernization

efforts.

• There were no instances identified in which IRS’ controls

over expenditures from ITIA during fiscal years 1999 and

2000 failed to provide assurance that funds were

obligated and expended for business systems

modernization costs. However, GAO and TIGTA reports

continue to note the need for further improvement in

management controls over business systems

modernization.
Page 40 GAO-01-920 IRS Spending for Business Systems Modernization
Page 41 GAO-01-920 IRS Spending for Business Systems Modernization

Appendix II

Comments From the Internal Revenue ServiceApendxiI
Appendix II

Comments From the Internal Revenue 

Service

Page 42 GAO-01-920 IRS Spending for Business Systems Modernization
Appendix II

Comments From the Internal Revenue 

Service

Page 43 GAO-01-920 IRS Spending for Business Systems Modernization
Page 44 GAO-01-920 IRS Spending for Business Systems Modernization
Page 45 GAO-01-920 IRS Spending for Business Systems Modernization

Appendix III

GAO Contact and Staff Acknowledgments ApendxiI

GAO Contact Joan Hawkins, (202) 512-8433

Acknowledgments In addition to the person named above, other key contributors to this 

report were John Davis, David Fisher, Mickie Gray, and Julia Ziegler.

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