The Treasury Inspector General for Tax Administration (TIGTA) today publicly released its annual review of the Internal Revenue Service's (IRS) Business Systems Modernization Program. The Program involves integrating thousands of hardware and software components and replacing outdated technology. TIGTA is required by law to conduct annual reviews of the Modernization Program.

The report concludes that while the IRS is improving its management of the Modernization Program and continuing to develop and deploy modernized applications, cost overruns and schedule delays increased during 2009.

The IRS has recognized that it faces significant challenges in meeting the requirements of the next phase of project development and systems integration. The immediate challenge is the future of its Customer Account Data Engine, which is intended to replace the Individual Master File as the IRS's new tax account database. The IRS is considering using elements from the Individual Master File and the current Customer Account Data Engine to significantly reengineer the IRS tax account management process.

The past year's Modernization Program performance did not continue the trend of improvement it demonstrated in the prior three years by delivering projects within estimated ranges for development costs and schedule variance. A turnover of executives at the IRS also poses challenges to the Program's continued long-term success.

"Several weaknesses continue to exist in the IRS's Modernization Program," commented
J. Russell George, the Treasury Inspector General for Tax Administration. "We have identified continuing problems in requirements development, program management, contract management, and security controls," added Inspector General George.

The IRS plans to implement a process improvement strategy.