IRS Computer Project Has ‘Very Serious Problems,’ Rubin Says

Treasury Secretary Robert Rubin acknowledged Thursday that the federal government lacks a comprehensive plan for a massive $20-billion modernization of the Internal Revenue Service’s badly outdated computer system.

The IRS computer project has “very serious problems,” Rubin told the House Appropriations subcommittee that controls the Treasury budget, marking the highest-level acknowledgment by the Clinton Administration that the computer project is in deep trouble.

Rubin’s remarks come as the IRS’ botched efforts have gained increased attention in Congress, which has held a series of hearings in recent weeks to examine what went wrong and how it can be fixed.

The project, intended to link IRS offices across the nation, ranks as one of the federal government’s largest and most important computerization projects. The IRS effort is now considered technically flawed and badly behind schedule, according to investigations conducted by the General Accounting Office and the National Research Council.

Rep. Jim Lightfoot, chairman of the appropriations panel, told Rubin that the project has become a “$4-billion fiasco that is floundering because of inadequate planning.”

Lightfoot warned Rubin that unless quick progress is made in creating the blueprint, outlining what the computer system is supposed to do and how it will work, the committee will withhold funding for the modernization, which is supposed to cost about $850 million in the 1997 fiscal year alone.

“The threat to jerk the funding . . . is very real and will stay in place until we get a workable blueprint,” Lightfoot said.

Rubin admitted that the Treasury Department does not have an overall master plan or blueprint for the new computer system, which is supposed to replace the agency’s 1960s-era computers and increase the IRS’ ability to recover uncollected taxes.

The only plan that exists for the project is a highly technical 6,000-page document that does not represent a master plan, Rubin said. “I myself have not read it,” Rubin acknowledged. “It is not what we need.”

Last year, Congress gave the IRS its full request for the computer system, but forbade it from spending $100 million of the funding until it produced the master plan that has still not been submitted.

Rubin said he is increasing top-level Treasury Department attention on the problem, pledging to handle the project much like a chief executive at a private corporation overseeing a major problem.

The agency, Rubin said, has also hired the former chief of New York state’s revenue department, who has led a successful computer modernization program for the state. And Rubin said the IRS will put more reliance on outside contractors, particularly TRW Inc., which is designing the overall system for the agency.

TRW is the overall systems integrator hired by the IRS, but until now it was not helping the IRS in defining what the computer system should do, but merely how it should operate. Rubin said he wants TRW more involved in the basic decisions about what the system should be doing.

TRW officials declined requests for interviews.

House committee staffers said they question whether the IRS is ready to accept that their system is badly flawed. After Deputy Treasury Secretary Lawrence Summers acknowledged earlier this month that the computer project was badly off track, IRS officials sought to downplay the problem, the staffers said. In addition, the IRS’ contractors have grown frustrated with the agency’s unwillingness to follow their guidance.

In an earlier interview, Lightfoot said he believes the project has gone off track in part because the IRS overestimated its ability to do much of the technical work in house. Despite IRS assertions that the agency is making progress in getting the program on track, Lightfoot said he does not see signs the agency is fixing its problems.

A recent GAO report, for example, found that the IRS’ automated telephone help system is in bad shape, giving the vast majority of taxpayers seeking assistance a busy signal.

In earlier hearings, Treasury officials have acknowledged that the project became too grand and was allowed to proceed without a proper plan. Still, IRS and Treasury officials deny that the $4 billion was wasted and said that the agency has been able to make important improvements in processing the more than 100 million tax returns it gets every year.

But the agency remains badly behind in its plan to conduct electronic tax filing. Once the agency gets an electronic filing, it then converts the data to paper, critics contend.