Half of '97 TSM budget won't get the job done

As IRS officials bitterly complained this month that the funding cuts proposed for its
Tax Systems Modernization would prove lethal, the General Accounting Office told a Senate
committee IRS would survive just fine.

GAO officials told Congress, in more than one report and at a Senate Governmental
Affairs Committee hearing, that the plan to halve TSM funding to roughly $400 million in
fiscal 1997 is not a death sentence for the agency or TSM.

At the Governmental Affairs hearing, IRS officials tooks the same positions they have
taken at more than a half-dozen hearings so far this year: Yes, there are problems; yes,
we plan to fix them; no, we can't absorb the proposed budget cuts.

"We are concerned with the extent of these reductions--both on our capacity to
support critical operating systems and to continue with Tax Systems Modernization,"
IRS deputy commissioner Michael P. Dolan said.

At this hearing, Dolan cited the need for year 2000 date-change work and for quality
assurance tests of newly developed systems. He said the cuts would result in program
disruptions and additional layoffs, "losses from an already limited cadre of talented
information systems staff."

IRS announced in May that it would start laying off systems staff at the start of the
fiscal year and would cut 1,500 IT staffers ultimately.

But GAO's Stillman countered that TSM needs to be disrupted. She said tight TSM funding
would not hurt tax processing this year. IRS can rely on its existing systems, she said,
because maintenance of those systems is not funded by TSM appropriations.

"The cuts will not hinder collections," Stillman said.

Congressional staff members suggested that IRS is balking because the agency does not
keep TSM funds separate from operations funds once it receives its annual appropriations.

"The issue is: What is Tax Systems Modernization?" one House staffer said.
"If you took the '97 budget as requested, there is a lot of stuff in there that is
called TSM" but should not be in that category, the staffer said--specifically the
IRS' toll-free phone number operations.

Both GAO and congressional staff said TSM funds must be used for modernization and
development only, never day-to-day operations.

But the debate over budgeting is only one of a host of problems facing IRS. Perhaps
equally devastating is the the announcement this month that Judy Van Alfen, associate
commissioner for modernization, will retire after 35 years with the IRS.

Van Alfen is third long-time IRM official to leave in the past year, including the
agency's first chief information officer, Henry "Hank" Philcox, and Van Alfen's
predecessor, Larry G. Westfall--both career IRS officials. Van Alfen's departure comes
just as IRS was implementing management changes and flattening its bureaucracy.

Van Alfen, 53, cited health concerns and a desire to spend time with her family as
reasons for her departure. In recent month, IRS officials had repeatedly put Van Alfen in
the spotlight and said she would lead the TSM program overhaul sought by Congress.

In light of her departure, IRS announced a further reorganization of IT management.
Rather than replace Van Alfen, it will give her responsibilities to CIO Arthur Gross, who
joined the agency six months ago after leading the overhaul of the New York state tax
systems.

IRS also was hit in recent weeks with new GAO criticism of TSM and its Cyberfile
program, a plan to test electronic filing of individual tax returns over the Internet.

In the wake of stiff GAO complaints about potential security weaknesses and questions
about employing the National Technical Information Service to operate the Cyberfile
service, IRS canceled the project. IRS officials said they still want to use the Internet
as an avenue for electronic filing but will come up with a new plan.

Dolan and deputy CIO Mark Cox said the agency has almost completed a report about
filing issues. Cox, who is leading the review, said the report will involve more than
electronic returns and will look at ways for taxpayers to deal with IRS generally.
"What we're looking at is not only the filing of information, but how (taxpayers) can
interact with us," Cox said.

The report, which IRS officials aim to send to Congress next month, will include a
five-year strategy for expanding electronic filing.

Between the funding fights, TSM delays and management debates, IRS has few friends left
on Capitol Hill. Sen. John Glenn (R-Ohio), ranking minority member of Senate Governmental
Affairs, joked that there have been so many critical GAO reports covering much the same
issues, "you could just tear off the cover and put on a new one."

But on a more serious note, Senate and House memebers complained that IRS never seems
to implement or finish any of the items recommended by GAO.

Sen. Ted Stevens (R-Alaska), Governmental Affairs chairman, lashed out at the agency at
the latest hearing. "We've been going at this for 12 years, and every year we get a
similar report," he said. "Do we have to wait another 12 years so the American
people and Congress have confidence in the IRS?"