Summary

The Internal Revenue Services' (IRS) fiscal year 1998 budget request totals $7.4 billion and includes 102,385 full-time equivalent staff. This testimony reviews that budget request; discusses steps taken by IRS in response to its fiscal year 1997 appropriation, including its spending plans for information systems; and discusses earlier GAO work on IRS' operations and systems modernization efforts.

GAO noted that: (1) IRS' FY 1998 budget request is for about $7.4 billion and 102,385 full-time equivalent (FTE) staff compared to a proposed operating level in FY 1997 of about $7.2 billion and 102,926 FTEs; (2) IRS' FY 1998 budget request includes $131 million for developmental information systems, the same amount that was provided in FY 1997; (3) the administration also is proposing a $1 billion capital account for IRS information technology investments; (4) neither the $131 million or the $1 billion is supported by the kind of analysis required by the Clinger-Cohen Act, the Government Performance and Results Act, and the Office of Management and Budget; (5) therefore, Congress should consider not funding both the $131 million request and the capital account until management and technical weaknesses in IRS' modernization program are resolved and required analyses are completed; (6) the FY 1998 budget request also includes $84 million for IRS' turn of the century date change effort; (7) IRS has already determined that it will need $61.2 million more for this effort in FY 1997 than had been allocated; (8) given that and because IRS' overall conversion needs are still being determined, it seems reasonable to question whether the amount requested for this effort in FY 1998 will be sufficient; (9) GAO also has some concerns about certain FY 1997 budget allocations; (10) GAO's review of the 1996 debt collection pilot identified various problems that impeded the pilot's success; (11) until those problems are resolved, GAO believes that IRS and Treasury should be prohibited from spending the $26 million; (12) also, given that IRS has decided not to begin any new systems development projects until October 1998, GAO believes that Congress should consider rescinding $36 million that was designated for that purpose in FY 1997; (13) that amount represents the total allocated to systems development projects that IRS has cancelled for FY 1997; (14) by October 1998, IRS expects to have developed the internal capability to effectively manage systems development; (15) finally, IRS expects the funding limits it faces in FY 1997 and anticipates for FY 1998 to continue until at least 2002; and (16) fiscal constraints as well as longstanding concerns about the efficiency of IRS operations make consensus on IRS' strategic goals and the measures for assessing progress against those goals critically important.