March 05,2002

Baucus and Grassley Statement on the TIGTA

As part of the Finance Committee’s ongoing efforts to ensure greater government accountability, we are releasing information pertaining to efforts by the Internal Revenue Service(IRS) to modernize its antiquated computer systems.

Today, the Treasury Inspector General for Tax Administration (TIGTA) issued a final audit report identifying numerous management and accountability weaknesses with the IRS’s computer modernization effort. The report entitled, “The Business Systems Modernization Office Needs to Strengthen Its Processes for Overseeing the Work of the PRIME Contractor,”March 2002, Reference Number 2002-20-059 can be found on TIGTA’s web site at

The IRS’s Business Systems Modernization Office (BSMO) working with PRIME Alliance, a group of contractors headed by Computer Science Corporation, are in charge of planning and implementing the multi-billion dollar effort to transition the outdated IRS computer systems to today’s business standards. The objective of TIGTA’s review was to determine whether the BSMO had established effective processes to ensure that the PRIME Alliance was delivering high-quality goods and services in a timely and cost-effective manner.

TIGTA analyzed the results from four audits previously conducted and identified significant cost overruns, delays and unnecessary expenditures. In one of the projects reviewed,TIGTA found that approximately $3.9 million was paid to the PRIME contractor over a 5-month period for hours worked on a task order that was never finalized and was eventually cancelled. In another example, TIGTA looked at IRS’s e-Services project designed to provide the means for tax practitioners and other authorized parties to conduct business electronically with the IRS.

TIGTA found the project was delayed for 9 months and had a cost overrun of $4.2 million, 32 percent over the original estimate. Further, the planning phase for the CRM-Exam project intended to provide the ability for IRS revenue agents to more efficiently and accurately compute complex corporate taxes was scheduled to take 10 months and cost $2.2 million. Instead, the planning phase took 7 months longer and the cost had increased over $2.5 million to nearly $4.8 million.

The TIGTA report concludes that the management processes developed by BSMO have not been effectively implemented contributing to lengthy delays and cost increases in the four projects it reviewed. Unless significant improvements made, TIGTA warns that major delays and future cost overruns are inevitable. TIGTA notes that delays could erode confidence in the IRS’s ability to deliver modernized systems that are needed to dramatically improve both internal operations and service to taxpayers.

The Finance Committee has been concerned for some time about problems continually encountered by the IRS in upgrading its computer systems. The TIGTA report raises troubling questions about the agency’s ability to manage this undertaking and to timely deliver modernized systems within budget. The Committee intends to explore these delays and cost overruns in hearings scheduled for this Spring.