One of the most critical issues the Internal Revenue Service (IRS) faces during 1999 is the need to make its computer systems Year 2000 (Y2K) compliant. Automated systems enable the IRS to process over 200 million tax returns, issue an estimated 90 million refunds, and provide employee access to taxpayer account data. Failure to identify, renovate, and test IRS systems for Y2K compliance could result in significant disruption to taxpayers and the government. Personal computers are an integral part of many important IRS systems. Employees use these personal computers to interface with the IRS’ tax administration computer systems.

The objective of this review was to determine if the IRS had an effective process to ensure that its personal computers will operate properly in the year 2000.

The IRS has an extensive effort underway to ensure that its estimated 166,000 personal computers will function properly in the year 2000. The goal was to achieve Y2K compliance by July 31, 1999, by retiring obsolete personal computers and installing up-to-date personal computers with standardized software. This effort is designed not only to make the IRS Y2K compliant, but also to standardize systems throughout the IRS.

Although Y2K conversion efforts have been extensive, the IRS needs to improve overall Tier III (personal computers) project management to ensure completion before January 1, 2000. During the review, issues were communicated to IRS officials as they were identified. IRS management agreed with the issues and began to take corrective actions in the following areas:

The Y2K conversion progress of the Tier III portion of some mission critical systems could not be readily determined. A tracking tool needed to be re-established and include all mission critical systems with Tier III components.

No final decision had been made on the non-standard software (not part of the IRS standard software package) to be tested for Y2K compliance. A decision needed to be made so software that will be needed in the year 2000 is tested and upgraded.

Although laboratory testing of software was ongoing, there was no plan to field test workstations after new hardware and software is installed.

Management needed to ensure that the IRS computer inventory system, the Integrated Network and Operations Management System, was accurate because personal computer hardware and software purchasing decisions should be made based on that inventory.

A comprehensive plan would have helped to control critical issues, assign responsibility, monitor progress, and ensure deadlines are met.

We recommended to the Century Date Change (CDC) Project Office that the Tier III dashboard (a report that tracks Y2K conversion progress) should be re-established and include all mission critical systems. The list of non-standard software products should be finalized and testing results communicated to the users. Similarly configured workstations should be tested after software/hardware installations and Y2K conversions. Efforts to validate the Tier III inventory should be renewed. Also, a comprehensive project plan should be prepared and consideration given to forming or contracting for a consulting team to help with problem solving and overall project management.

Management’s Response: Management’s response was not available for inclusion in the report at the time this final report was issued. We provided the IRS with a draft of this report on November 12, 1999, with a 30-day calendar comment period.