Summary: GAO discussed the critical management challenges that the Internal Revenue Service (IRS) faces in ensuring high quality tax service. GAO found that: (1) IRS critically needs to modernize its outdated computer-based tax processing system; (2) IRS progress has been slow due to leadership changes and lack of effective management direction; (3) although IRS designated one of its deputy commissioners as an information resources manager, he had other significant responsibilities that precluded his giving the modernization his full-time attention; (4) weak internal controls over accounting processes and inaccurate processing systems have undermined IRS ability to satisfy its financial responsibilities; (5) the IRS financial structure has incompatible systems and labor-intensive operations; (6) although IRS has begun a major quality improvement effort, the transition from a production focus to a quality-oriented focus presents a long-term management challenge at the daily operating level; and (7) IRS initiated a strategic management process to help set agencywide goals, establish mission priorities, and measure its progress in meeting its objectives. GAO believes that IRS needs to: (1) create a separate deputy commissioner with extensive technical expertise to direct its system modernization; (2) strengthen manager training; (3) establish a chief financial officer to direct its financial management activities; (4) collect better information on work-force quality to formulate effective solutions; and (5) provide adequate oversight over its field operations.
