IRS’ YEAR 2000 EFFORTS

Status and Remaining

Challenges

Statement of James R. White, Director

Tax Policy and Administration Issues

General Government Division

United States General Accounting Office

GAO Testimony

Before the Committee on Ways and Means, House of

Representatives

For Release

on Delivery

Expected at

9:00 a.m. EST

Wednesday

February 24, 1999

GAO/T-GGD-99-35

Statement

Page 1 GAO/T-GGD-99-35

Mr. Chairman and Members of the Committee:

We are pleased to be here today to discuss the status of the Internal

Revenue Service’s (IRS) Year 2000 efforts1

 and the remaining challenges

IRS faces in making its information systems Year 2000 compliant. If IRS’

Year 2000 efforts are unsuccessful, the impacts on taxpayers could include

millions of erroneous tax notices and delayed or erroneous refunds. IRS

had established a goal to complete most of its Year 2000 work by January

31, 1999. IRS established that goal to help ensure that it would (1) have a

Year 2000 compliant environment implemented for the 1999 filing season

and (2) provide time for working out problems that surfaced in the 1999

filing season and its Year 2000 testing.2

Our statement discusses four topics—(1) the extent to which IRS monitors

the Year 2000 status of its mission-critical systems in their entirety; (2)

whether IRS met the January 31, 1999, completion goal for the areas that it

monitors—application software, systems software, hardware, and

telecommunications networks; (3) the status of two remaining, critical

Year 2000 tasks—conducting Year 2000 testing and completing 36

contingency plans; and (4) the fact that other business initiatives are

creating competing demands on staff needed for Year 2000 efforts.

• First, we cannot provide a complete picture of the Year 2000 status of IRS’

133 mission-critical systems because IRS does not report Year 2000 status

for these systems in their entirety. Instead, IRS monitors the Year 2000

status of the components of an information system, such as the application

software,3

 systems software,4 and hardware, for each of its three types of

computers—mainframes, minicomputers/file servers, and personal

computers. IRS officials acknowledge that their monitoring reports do not

provide a complete picture on a system-by-system basis. However, these

 1

IRS’ Year 2000 efforts are necessary because IRS’ information systems, many of which are over 25

years old, were programmed to read two-digit date fields. Therefore, if unchanged, these systems

would interpret 2000 as 1900, seriously jeopardizing tax processing and collection operations. IRS’ Year

2000 efforts include (1) fixing existing systems by correcting application software and data and

upgrading hardware and systems software, if needed; (2) replacing systems if correcting them is not

cost-beneficial or technically feasible; and (3) retiring systems if they will not be corrected by 2000.

2

The Year 2000 end-to-end test is to ensure that most of IRS’ mission-critical systems can operate

collectively, with all systems date clocks set forward to simulate the Year 2000.

3

Application software is the collection of computer programs that allows a user to perform a specific

job task.

4

Systems software is the collection of computer programs that manage the computer’s system

hardware components (e.g., operating system, central processing unit, or disk drives) that allow the

application software to interact with the hardware.
Statement

Page 2 GAO/T-GGD-99-35

officials believe the costs of doing so outweigh the benefits, particularly

given the time remaining to complete IRS’ Year 2000 work.

• Second, IRS reports that it met the January 31, 1999, completion goal for

some of the areas that it monitors but not for others. IRS reports that it

met the January 1999 completion goal for (1) correcting application

software, (2) upgrading telecommunications networks, and (3) fully

implementing one of its two major system replacement projects. Despite

significant progress since our testimony last May,5

 IRS did not meet the

goal for (1) upgrading systems software and hardware for its three types of

computers and (2) fully implementing the other major system replacement

project. As a result of not meeting the goal for upgrading systems software

and hardware, some changes will not be tested until late in 1999, reducing

the time available to make corrections before January 2000. Also, for the

replacement project, some service center staffs will have no experience

before 2000 using the new system to process peak filing season volumes of

remittances.

• Third, in addition to completing work on upgrading systems software and

hardware, IRS faces two remaining, critical Year 2000 tasks. The first task,

and one most important for gauging IRS’ success in achieving Year 2000

compliance, is an unprecedented, Year 2000 end-to-end test of most of IRS’

mission-critical systems. The end-to-end test is to begin in April 1999. The

need to conduct this test has created an additional new challenge for

IRS—meeting a compressed schedule for developing and implementing tax

law changes for the 2000 filing season. The second critical task is to

develop 36 contingency plans that IRS has determined are needed to

address various failure scenarios for its core business processes. IRS is

developing these plans in response to our June 1998 report.6

 IRS has

delayed the completion dates so that the first set of plans are to be

completed by March 31, 1999, and the second set of plans by May 31, 1999.

To the extent that the plans require additional actions, such as those

associated with testing or preparatory activities needed to implement the

plans, these delays reduce the time available to complete these activities.

• Fourth, as IRS continues its Year 2000 efforts, it will face the challenge of

how to address the competing demands on its staff. These competing

 

5

IRS’ Year 2000 Efforts: Status and Risks (GAO/T-GGD-98-123, May 7, 1998).

6

IRS’ Year 2000 Efforts: Business Continuity Planning Needed for Potential Year 2000 System Failures

(GAO/GGD-98-138, June 15, 1998).
Statement

Page 3 GAO/T-GGD-99-35

demands are created by IRS’ other major business initiatives, such as

implementing tax law changes and completing the non-Year 2000 portions

of one of IRS’ major system replacement projects. To address these

competing demands, in the past several months, IRS has (1) transferred

staff from other areas, (2) hired additional staff, and (3) delayed some

activities.

Our statement today is based on our past and ongoing Year 2000 work for

this Committee’s Oversight Subcommittee. As a part of this work, we have

interviewed officials from the National Office and reviewed IRS’

contingency planning documents and IRS’ Year 2000 progress reports for

the week ending February 6, 1999. We did not verify the reliability of the

data included in the February 6, 1999, reports.

IRS’ Year 2000 status reports do not provide a complete picture of the

status of IRS’ mission-critical systems because IRS does not monitor Year

2000 status for its mission-critical systems in their entirety. Instead, IRS

monitors the Year 2000 status of the components of an information system,

such as the application software, systems software, and hardware for each

of its three types of computers—mainframes, minicomputers/file servers,

and personal computers. IRS also monitors its telecommunications

networks separately.

As part of IRS’ Year 2000 risk mitigation efforts,7

 IRS has hired a contractor

to conduct periodic risk assessments. The contractor’s December 1998

report recommended exploring the feasibility of tracking status on a

system-by-system basis to provide a clear view of IRS’ ability to achieve

Year 2000 compliance. The report stated that such a system view would

permit IRS to, among other things, help assess the need to target resources

to achieve Year 2000 compliance. IRS officials said that IRS’ approach to

monitoring Year 2000 compliance corresponds to how IRS’ Information

Systems organization is structured to carry out its work. Specifically, IRS

officials said that separate organizational units are responsible for

application software, systems software and hardware, and

telecommunications networks. Therefore, IRS monitors its Year 2000

status by these areas. They do not believe the benefits of monitoring status

on a system-by-system basis outweigh the costs, given the amount of time

remaining to complete IRS’ Year 2000 work.

 

7

IRS’ Century Date Change Project Office outlined a risk management process that is to (1) identify

risks to the successful completion of Year 2000 goals, (2) coordinate the development of risk mitigation

strategies, (3) oversee the execution of the strategies, and (4) elevate unmitigated risks to the

Commissioner’s Executive Steering Committee on the 1999 filing season and Year 2000 efforts.

IRS’ Reports Do Not

Provide a Complete

Picture of MissionCritical Systems’

Status
Statement

Page 4 GAO/T-GGD-99-35

IRS’ reports indicate that it met the January 1999 completion goal for some

areas but not for others. The reports indicate that IRS met the January

1999 goal for correcting the application software for its existing systems

and upgrading telecommunications networks. Since May 1998, when we

last testified on this topic, IRS has also made progress in an area that we

said was lagging—upgrading systems software and hardware. Despite this

progress, however, IRS did not achieve its January 1999 completion goal

for any of its three types of computer hardware. IRS fully implemented the

Year 2000 aspects for one of its major system replacement projects. For

the other system replacement project, 6 of the 10 service centers were

using the full suite of Year 2000 changes.

Since we testified in May 1998, IRS has continued to make progress in

correcting the application software for its mission-critical systems. As of

February 6, 1999, IRS reports indicate that IRS has corrected 88 percent of

these applications, thereby exceeding its 85 percent goal.8

 In addition to

completing this work, IRS has hired a contractor to review all of the

corrected application software to determine whether IRS made any errors.

This effort began in August 1998 and is scheduled to continue through May

1999.

In addition, IRS reports indicate that it met its goal for completing work on

its telecommunications networks. In May 1998, we said that, according to

IRS, telecommunications networks presented the most significant

correction challenge and were likely the highest risk for not being

completed by January 31, 1999. As of February 6, 1999, with the exception

of three areas, IRS reported that it met its goal for these networks.9

IRS’ reports indicate that IRS made significant progress in an area that in

May 1998 we said was lagging—upgrading systems software and hardware

for its three types of computers: mainframes, minicomputers/file servers,

and personal computers. Despite this progress, IRS did not meet the

January 31, 1999, completion goal for its three types of computers.

For IRS’ mainframe computers, IRS officials said IRS fell short in meeting

its goal because of delays in receiving the Year 2000 upgrades for one of its

 

8

In assessing progress, IRS determined that it needed to complete 85 percent of its application software

work by January 31, 1999. The work for the remaining 15 percent includes the steps needed to certify

that IRS has achieved Year 2000 compliance. IRS has deferred correcting about 2 percent of its

application software until July 1999 and January 2000 .

9

The three areas are (1) voice mail for some of IRS’ field locations; (2) telephone routing for IRS’

automated collection system; and (3) telecommunications networks for at least 8,000 terminals. Work

on these three areas is to be completed by July 31, 1999.

Reports Indicate That

IRS Met the January

1999 Completion Goal

for Some Areas but

Not for Others

Reports Indicate That IRS

Met its Goal for Application

Software for Existing

Systems and

Telecommunications

Networks

Reports Indicate That IRS

Did Not Meet the Goal for

Systems Software and

Hardware
Statement

Page 5 GAO/T-GGD-99-35

system replacement projects. IRS officials said those upgrades are to be

received and implemented by March 1, 1999.

For minicomputers/file servers, IRS reports indicate that as of February 6,

1999, IRS’ Information Systems organization had completed 60 percent of

the work for upgrading systems software and hardware—a significant

increase from 13 percent that was done in May 1998, when we last testified

on the IRS’ Year 2000 status.10 According to IRS, systems software and

hardware for 13 of the 27 mission-critical systems that use

minicomputers/file servers were not upgraded by January 31, 1999. The

systems software and hardware for 7 of the 13 systems are not scheduled

to be Year 2000 compliant until after March 1999. As a result of the delay,

some changes are not to be tested until October 1999, when the second

part of the Year 2000 end-to-end test is to begin. This delay reduces the

time available to make any needed corrections before January 1, 2000.

For personal computers, IRS officials said they plan to replace about

35,000 personal computers and the associated systems software between

February 1999 and July 1999 to achieve Year 2000 compliance. As a part of

this replacement effort, IRS plans to reduce the number of commercial

software and hardware products in its inventory from about 4,000 to 60

core standard products. According to IRS officials, thus far, IRS has

completed testing on 5 of the 60 core products. IRS plans to complete the

testing for the remaining 55 products by April 1999. IRS’ goal is to

eliminate all nonstandard products by July 1999.

For one of IRS’ two major system replacement projects, IRS implemented

the Year 2000 changes at all 10 service centers by January 31, 1999; for the

other system replacement project, 6 of the 10 service centers were using

the full suite of Year 2000 changes for the system by January 31, 1999. IRS’

two major system replacement projects are Service Center Mainframe

Consolidation (SCMC) and the Integrated Submission and Remittance

Processing (ISRP) System. SCMC is to consolidate the mainframe

computer tax processing activities from the 10 service centers to 2

computing centers—thereby reducing the total number of tax processing

mainframe computers from 67 to 12. Specifically, SCMC is to (1) replace

and/or upgrade mainframe hardware, systems software, and

telecommunications networks; (2) replace about 16,000 terminals that

support frontline customer service and compliance activities; and (3)

replace the system that provides security functions for on-line taxpayer

 

10IRS’ goal for systems software and hardware was to complete 80 percent of the work by January 31,

1999.

Full Implementation of Year

2000 Changes Achieved for

One of the Two

Replacement Projects; Less

Than Full Implementation

Achieved for the Other
Statement

Page 6 GAO/T-GGD-99-35

account databases with a new system known as the Security and

Communications System (SACS). Replacement of the terminals and the

implementation of SACS are critical to IRS’ achieving Year 2000

compliance. The other replacement project is ISRP. ISRP is a single,

integrated system that is to perform the functions of two systems that are

not Year 2000 compliant—the Distributed Input System that IRS uses to

process tax returns and the Remittance Processing System that IRS uses to

process tax payments.

IRS completed the Year 2000 critical portions of SCMC by January 31,

1999. Specifically, in early October 1998, IRS completed its implementation

of the 16,000 terminals that are needed for frontline customer service and

compliance activities. Also, as of January 31, 1999, all 10 service centers

were using SACS.

Originally, IRS had planned to have the other aspects of SCMC besides

SACS—that is, the tax processing activities of the 10 service centers—

moved to the 2 computing centers by December 1998. As of January 31,

1999, the tax processing activities for three service centers had been

moved to the computing centers. IRS is determining the number of

additional service centers that are to be moved in 1999. SCMC officials

have developed several different schedule options for moving the tax

processing activities of the remaining seven service centers. At the time we

prepared this statement, IRS officials had not yet selected a schedule

option.

According to IRS officials, the tax processing activities of all 10 service

centers do not need to be moved before 2000 because the existing

mainframes in each of the 10 service centers have been made Year 2000

compliant. Thus, in all likelihood, at the start of the 2000 filing season,

some service centers will be processing their data locally, whereas others

will have their data processed at the computing centers. IRS’ Year 2000

end-to-end test is designed to include both processing scenarios.

Both functions of ISRP—tax return processing and remittance

processing—were to be implemented in November 1998. However, as a

result of problems that occurred during the pilot test of ISRP and the

contingency option IRS implemented for the 1999 filing season to address

those problems, 4 of the 10 service centers are not to begin using the

remittance processing portion of ISRP until August 1999.

For the 1999 filing season, the contingency option for ISRP is to retain

enough of the old tax processing and remittance processing equipment in

SCMC

ISRP
Statement

Page 7 GAO/T-GGD-99-35

the service centers so that IRS could revert to the old systems if ISRP

experiences problems. However, four of the service centers did not have

enough floor space to accommodate both the old tax processing and

remittance processing systems and the ISRP equipment. As a result, these

four service centers are to continue using the old remittance processing

equipment during the 1999 filing season and convert to ISRP in August

1999. These four service centers were among the top five remittance

processing centers during the peak of the 1998 filing season. We recognize

that this contingency option may have been the only feasible one for IRS.

However, as we reported in December 1998, these four service centers are

to receive their equipment so late in 1999 that their staffs will have no

experience with the new equipment before the 2000 filing season in

processing the large volume of remittances that occur in the peak of the

filing season.11

In addition to fixing its existing systems, IRS still needs to complete two

critical activities for its Year 2000 efforts, and one of these activities is

behind schedule. The two critical activities are the completion of (1) an

unprecedented Year 2000 end-to-end test of 97 of IRS’ 133 mission-critical

systems and (2) 36 contingency plans for IRS’ core business processes.

Using thousands of test cases, IRS’ Year 2000 end-to-end test is to assess

the ability of IRS’ mission-critical systems to function collectively in a Year

2000 compliant environment. These cases are intended to replicate the

many different kinds of transactions that IRS’ information systems process

on any given day to help assess whether IRS’ systems can perform all date

computations using data and systems date clocks with January 1, 2000, or

later. The test will involve 97 of IRS’ 133 mission-critical systems.12 Most of

IRS’ mission-critical system application software has been tested

individually; however, the ability of the application software to operate

collectively, using Year 2000 compliant systems software and hardware,

with all systems date clocks set forward to simulate the Year 2000, has not

been fully tested.

In July 1998, IRS began the preliminary activities associated with

conducting the end-to-end test. These activities included, but were not

 

11Tax Administration: IRS’ 1998 Tax Filing Season (GAO/GGD-99-21, Dec. 31, 1998).

12According to IRS’ Product Assurance officials, 97 systems represent the maximum number of systems

Product Assurance could effectively manage. Testing for the remaining systems is to be done by those

organizations that have responsibility for maintaining them.

SCMC Two Remaining,

Critical Year 2000

Activities Still Remain;

One of Which Is

Behind Schedule

Unprecedented End-to-End

Test Is to Begin in April

1999
Statement

Page 8 GAO/T-GGD-99-35

limited to, establishing a dedicated test environment to replicate IRS’ tax

processing environment, developing test plans and procedures, and doing

some preliminary testing of some systems with the systems date clock set

forward to 2000. Currently, IRS is developing baseline data from the 1999

filing season that will be ultimately used for the Year 2000 end-to-end test.

The end-to-end test is to have two parts. The first part is scheduled to

begin in April and end in July 1999. The second part is to begin in October

and end in December 1999. The April test is to include the application

software that is currently being used for the 1999 filing season. The

October test is to include the application software changes that are needed

for the tax law changes that are to be implemented for the 2000 filing

season.

The need to conduct this test has in turn created an additional challenge in

completing the work necessary for the 2000 filing season. As shown in

table 1, to accommodate the Year 2000 end-to-end test, IRS revised its

traditional milestones for implementing tax law changes for the 2000 filing

season, thereby compressing the amount of time available to develop and

test these changes. Under this compressed schedule, instead of having

until January 2000, IRS must program and test all tax law changes that are

to take effect in the 2000 filing season before September 30, 1999.

Key activity Traditional milestone

Revised milestone as a

result of Year 2000 testing

requirements

Business requirements

developed

Summer to January Summer of 1998 to January

1999

Business requirements

transmitted to Information

Systems organization

February to June

February 1999

Development of application

software

March to October

March to Mid-June, 1999

Systems acceptance testinga Late August to mid-January Mid-June to September, 1999

Final phase of the Year 2000

end-to-end test

N/Ab October to December, 1999

Implementation January January 2000

a

IRS’ systems acceptance testing assesses whether an application meets the specified user

requirements.

b

Not applicable.

Source: IRS data.

Under the compressed schedule, business requirements are to be delivered

to IRS’ Information Systems organization by February 28, 1999; the

Information Systems organization is scheduled to complete the application

software changes by June 15, 1999; and testing of these application

software changes is be completed by September 30, 1999.

Table 1: Key Activities Associated With

Implementing Tax Law Changes,

Traditional Milestones, and Revised

Milestones as a Result of Year 2000 Test

Schedule
Statement

Page 9 GAO/T-GGD-99-35

In 1999, IRS is to complete the development of 36 contingency plans that

IRS determined are needed to address various Year 2000 failure scenarios

for its core business processes. IRS’ initial goal was to have these plans

completed by December 1998; however, IRS’ revised goal is to complete 18

submissions processing contingency plans, 2 customer service

contingency plans, and 3 key support services13 plans by no later than

March 31, 1999. One key support services contingency plan and 12

compliance contingency plans are to be completed by May 31, 1999.

In June 1998, we reported that IRS’ Year 2000 contingency planning efforts

fell short of meeting the guidelines included in our Year 2000 Business

Continuity and Contingency planning guide.14 Accordingly, we

recommended that the Commissioner of Internal Revenue take a series of

steps to broaden IRS’ contingency planning effort to help ensure that IRS

adequately assesses the vulnerabilities of its core business processes to

potential Year 2000 induced system failures. Specifically, we

recommended that the Commissioner take the following steps: (1) solicit

the input of business functional areas to identify core business processes

and identify those processes that must continue in the event of a Year 2000

failure; (2) map IRS’ mission-critical systems to those core business

processes; (3) determine the impact of information systems failures on

each core business process; (4) assess existing contingency plans for their

applicability to potential Year 2000 failures; and (5) develop and test

contingency plans for core business processes if existing plans are not

appropriate.

Since we issued our report, IRS has been taking actions to address our

recommendations. IRS has solicited the input of its business officials and

established working groups to identify failure scenarios and to develop the

contingency plans. The working groups determined IRS should develop 36

contingency plans that cover various aspects of its core business areas of

submissions processing, customer service, compliance, and key support

services. One factor influencing the staggered schedule for completing

contingency plans was that the staff assigned to develop plans have

competing responsibilities, such as the development of business

requirements to implement tax law changes as well as other business

improvement initiatives. Under the staggered schedule, with the exception

of the key support services area, earlier completion milestones were

 

13Key support services include internal business processes, such as maintaining buildings and

executing budget functions and payroll activities.

14IRS’ Year 2000 Efforts: Business Continuity Planning Needed for Potential Year 2000 System Failures

(GAO/GGD-98-138, June 15, 1998).

Staggered Milestones

Developed for Completing

IRS’ Contingency Plans
Statement

Page 10 GAO/T-GGD-99-35

established for those aspects of three other core business areas that,

according to IRS officials, were likely to experience a Year 2000 before the

other areas. To the extent that the plans require additional actions, such

as those associated with testing or preparatory activities, these delays

reduce the time available to complete these activities.

According to IRS officials, the completion milestones of March and May

1999 reflect when the technical work for the plans is to be completed.

Once that work is completed, the plans are to be approved by the official

responsible for the core business process and tested. According to IRS

officials, a contractor is still developing the testing approach. As a result,

these officials could not provide us with the completion milestones and

staff requirements for testing the contingency plans.

In addition to Year 2000 efforts, IRS has other ongoing business initiatives

that are placing competing demands on its information systems and

business staff. The Commissioner’s Executive Steering Committee (ESC)

and IRS’ risk mitigation efforts have provided a forum for addressing these

issues.

Concurrent with its Year 2000 efforts, IRS is continuing to make changes to

its information systems to accommodate changes resulting from various

business initiatives. These initiatives include the SCMC project that we

discussed previously, implementation of the IRS Restructuring and Reform

Act provisions, and of various taxpayer service initiatives.15 While we do

not question the importance of these initiatives, as we have said before,

the need to make a significant number of tax law changes for the 2000

filing season introduces an additional risk, albeit one that we could not

quantify, to IRS’ Year 2000 effort.16

In November 1997, the Commissioner established the ESC Steering

Committee (ESC) to identify risks to the 1999 filing season and the entire

Year 2000 effort and to take actions to mitigate those risks. In addition, IRS

hired a contractor to conduct periodic risk assessments. The contractor’s

most recent report was issued in December 1998.

 

15The Commissioner of Internal Revenue established the Taxpayer Treatment and Service Improvement

Program in November 1997 to plan, coordinate, and manage hundreds of commitments for

improvements in service to taxpayers that have emanated from various sources. These sources include

the National Performance Review, Senate Finance Committee hearings, and the IRS Restructuring and

Reform Act.

16Internal Revenue Service: Impact of the IRS Restructuring and Reform Act on Year 2000 Efforts

(GAO/GGD-98-158R, Aug. 4, 1998).

Other Business

Initiatives Are Creating

Competing Demands

on Certain Staff

Needed for Year 2000

Efforts
Statement

Page 11 GAO/T-GGD-99-35

Recent ESC documents, the contractor’s December 1998 risk assessment

report, and our interviews with SCMC officials have identified the

following examples of competing demands on staff in IRS’ Information

Systems organization and business organizations:

• Documents prepared for the September 1998 ESC meeting stated that IRS’

Information Systems organization that is responsible for systems software

issues was “overextended” because of Year 2000 demands, SCMC, and

support for the Year 2000 end-to-end test.

• The contractor’s December 1998 risk assessment report indicated that

some of IRS’ core business area staff face competing demands from the

need to (1) identify business requirements for the 2000 filing season and

(2) complete Year 2000 contingency plans. As we said previously, IRS’ goal

is to have business requirements completed by the end of February.

• According to the minutes from the January 1999 ESC meeting, IRS’

Internal Audit has also raised a concern about the availability of sufficient

staff to support the Year 2000 end-to-end test given the other Year 2000

demands. According to IRS officials, Internal Audit has not released a

formal report on this matter.

• IRS’ draft paper on the SCMC schedule options states that one of the risks

for each of the schedule options is the resource drain on IRS staff and

contractors from the filing season, the Year 2000 end-to-end test, and

critical staff being used to train any new SCMC staff. The draft option

paper notes that the extent of the drain varies somewhat depending on

how many service centers are to have their tax processing activities moved

to the computing centers in 1999.

Over the last several months, IRS has taken various actions to address

these competing demands. For example:

• To address the “overextension” of the Information Systems organization

that is responsible for systems software, the Chief of that organization said

that he obtained contractor support and transferred staff from other areas.

He said the additional staff, coupled with the delays in moving the tax

processing activities of the service centers to the computing centers,

helped alleviate this overextension.

• To address the competing demands on the business staff to develop Year

2000 contingency plans and finalize business requirements for the 2000

filing season, IRS officials decided to stagger the completion milestones
Statement

Page 12 GAO/T-GGD-99-35

for contingency plans.

• To help prioritize the work within the Information Systems organization

IRS officials told us they have established another executive steering

committee. In addition, the minutes from the January 1999 ESC meeting

said that the Commissioner has asked the cognizant staff to identify the

source of each of the 2000 filing season requirements—(i.e., IRS

Restructuring and Reform Act, Taxpayer Service Improvement Initiative,

etc.). This identification is the first step for providing the additional

information that would be useful for establishing priorities for IRS’

Information Systems staff.

Since our testimony in May 1998, IRS has made considerable progress in

completing its Year 2000 work. However, IRS did not complete all the

work that it had planned to do by January 1999. This unfinished work and

upcoming critical tasks are to be completed in the remainder of 1999. At

the same time IRS is addressing its Year 2000 challenge, it is undertaking

other important business initiatives, such as preparing for the 2000 filing

season and implementing SCMC. These various initiatives place competing

demands on IRS’ business and Information Systems staff. To date, IRS has

taken actions to address these competing demands, including delaying the

completion milestones for some Year 2000 activities.

In the next 5 months, IRS will pass several key milestones. As IRS passes

each one, it will have more information on the status of its Year 2000 effort

and the amount of remaining work. This information should help IRS and

Congress assess the level of risk to IRS’ core business processes in 2000.

For example:

• By the end of February 1999, the business organizations are to submit their

requirements to IRS’ Information Systems organization for the 2000 filing

season. In the event that business requirements for the 2000 filing season

are not submitted on time, IRS increases the risk that some tax law

changes may not be thoroughly tested before they are implemented.

• From April to July 1999, IRS is to conduct its Year 2000 end-to-end test.

The results of this test will be an indicator of the extent to which, for the

work completed thus far, IRS has been successful in making its systems

Year 2000 compliant. The results of this test should also provide

information on how many Information Systems staff will be needed for

correcting any problems that are identified.

Concluding

Observations
Statement

Page 13 GAO/T-GGD-99-35

• By the end May 1999, IRS is to complete its contingency plans. These plans

should provide information on any additional steps needed to implement

the plans.

We plan to continue to monitor IRS’ progress in meeting these key

milestones.

Mr. Chairman, this concludes my prepared statement. I welcome any

questions that you may have.

(268840)
Page 14 GAO/T-GGD-99-35
Page 15 GAO/T-GGD-99-35
Page 16 GAO/T-GGD-99-35
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