Summary

The Internal Revenue Service (IRS) is one of the largest users of computers in the federal government. The annual processing of millions of tax returns is highly dependent on automatic data processing (ADP). Almost a quarter of IRS total operating costs are ADP expenses. Proper management of the ADP resources of IRS is crucial for assuring that the nation's tax laws are administered in the most efficient and effective manner.

IRS has shown considerable initiative and concern in evaluating its ADP operations and moving to take corrective action. As a result, IRS is in a better position than it was several years ago to plan, develop, and implement new ADP systems. IRS plans to implement a cost accounting system that will measure how ADP staff resources are utilized to develop and implement new systems. Despite recent improvements, IRS needs to make further efforts to encourage adequate competition when procuring ADP equipment.