The Taxpayer Relief Act of 1997 (TRA 97) contained over 800 Internal Revenue Code amendments and nearly 300 new provisions, most of which went into effect prior to the 1999 Filing Season. As a result, the Internal Revenue Service (IRS) was required to prepare its systems and programs to properly process tax return information mandated by this new legislation for the 1999 Filing Season. The IRS had other initiatives for which programming resources were needed as well. These initiatives included consolidating computer operations of 10 service centers into 2 computer centers and preparing all IRS systems for Year 2000 compliance.

The overall objective of this audit was to evaluate the effectiveness of the IRS’ process for monitoring the programming changes necessary to implement the key legislative changes affecting the 1999 Filing Season. In addition, we focused on evaluating the quality and timeliness with which the required programming changes were completed and tested.

We determined that the IRS incorporated key legislative changes into programs, ensured unit testing² was completed, and promptly forwarded programs to the Product Assurance Division for System Acceptability Testing (SAT).³ However, the IRS needs to improve processes to ensure that the status of programming changes for the 2000 Filing Season is adequately monitored and accurately reported for a successful filing season.

The IRS was not adequately or effectively monitoring the status of programming changes, Requests for Information Services (RIS), for the 1999 Filing Season. The Filing Season Project Office, established to monitor and track the status of projects for the 1999 and 2000 Filing Seasons, was not tasked with analyzing or verifying the information it consolidated from the various Information Systems areas, including the status of SAT. IRS executives cannot effectively make decisions regarding the status of filing season changes without accurate status information. The need for accurate information is even greater for the 2000 Filing Season because the time period for making and releasing programming changes for production is shortened. If the progress of RIS implementation is not adequately and effectively monitored, the IRS may not timely identify programming delays. An unanticipated demand for limited programming resources could result and necessary 2000 Filing Season programming changes may not be completed.

The Product Assurance Division⁴ does not have a process to ensure that SAT progress is fully and accurately reported. In addition, Product Assurance is not always completely, timely, or consistently reporting the status of SAT for all projects nor problems affecting SAT critical milestone dates. The IRS may not have the time and resources available to ensure that programs are adequately tested before they are placed into production or prevent program implementation delays if SAT progress and problems are not accurately reported before the 2000 Filing Season.

To ensure that the IRS can effectively monitor and accurately report the status of programming changes for the 2000 Filing Season, we recommend that Information Systems management ensure that the Filing Season Project Office have controls in place to monitor and oversee the progress of all filing season changes. We also recommend that Product Assurance Division management ensure that the progress of testing for the 2000 Filing Season is consistently monitored and reported. Furthermore, we recommend that any testing delays are timely reported and discussed at the IRS Commissioner’s Executive Steering Committee (ESC) and weekly filing season progress meetings.

Management’s Response: For the 2000 Filing Season, Information Systems management evaluated and updated the Filing Season Project Office’s procedures related to information gathering and reporting to more effectively monitor and document milestone date changes and the resulting impact on the Product Assurance Division’s testing and filing season implementation. Product Assurance management also reviewed the Division’s procedures and determined that each Branch in the Division will create a matrix to consistently track the relevant milestone dates, within the respective Branch, for the filing season. Project milestones which affect test schedules will be reported through the Product Assurance Division’s various reporting mechanisms, such as weekly filing season meetings held at the Assistant Commissioner and Director level. For the 2000 Filing Season, Product Assurance management began monitoring compliance to the Division’s various reporting mechanisms through the filing season weekly status meetings, performance reviews with Division management, and review of the Division’s Weekly Exception Report. Product Assurance management, however, stated that none of the program testing delays cited in the report led to production delays. In addition, management did not believe it would be appropriate to raise all program problems to the ESC. Management’s complete response to the draft report is included as Appendix VII.

Office of Audit Comment: We do not believe monitoring the compliance to Product Assurance Division’s various reporting mechanisms alone will ensure that the ESC is timely informed of late legislative changes to programs that may affect SAT schedules or possible program implementation delays for the 2000 Filing Season. As reported, we found that program delays were not consistently or timely reported using these mechanisms during the 1999 Filing Season. Therefore, we believe that all program changes or problems that may have an impact on milestone completion dates need to be discussed with the customer and the ESC.

In a memorandum dated October 19, 1998, we recommended that Information Systems management assign responsibility for establishing a process to reduce the time to complete RIS responses and ensure responses are issued as quickly as possible to avoid delays. Excessive delays in completing responses increase the risk that program changes and testing will not be completed in the required time periods, causing a negative effect on the overall success of the 2000 Filing Season. The memorandum is included as Appendix IV to this report. The Filing Season Project Office agreed and implemented several processes to facilitate faster responses for Filing Season 2000 RISs. These processes included: meeting with the Assistant Commissioner (Program Management and Engineering), to ensure that RISs are forwarded to the application divisions within one to two days; incorporating milestone dates for the submission of fully coordinated RISs into Senior Executive Service expectations, for both the customer and Information Systems executives; establishing milestones for the Pre-Coordination and Clearance of RISs; and creating the Filing Season 2000 Baseline Change Procedures to provide guidelines and procedures for processing RISs for the 2000 Filing Season. Management’s response to the memorandum is included as Appendix V.