Summary: Pursuant to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) Automated Examination System (AES), intended to automate the examination of income tax returns, focusing on: (1) IRS progress in developing and implementing AES; and (2) AES compatibility with the IRS Tax System Modernization effort, intended to streamline tax processing through increased automation.
GAO found that IRS: (1) projected a total cost of $77 million for AES development and implementation when it established the project in 1982; (2) significantly expanded the project in 1984 and 1985, projecting completion by 1989 at a total cost of $1 billion; (3) spent about $187 million on AES from its inception through fiscal year (FY) 1988; (4) due to management and direction problems, currently estimates project completion by 1995 at a total cost of $1.8 billion; (5) currently projects AES benefits at $16.2 billion over its 9-year life, down from a contractor estimate of $42.7 billion in 1987; (6) has not convincingly demonstrated or verified any dollar benefits from the single currently operational AES component; (7) cited software development problems as the primary cause of AES cost overruns and schedule slippages; (8) developed AES independently from its Tax Modernization System effort, although its plans to eventually integrate AES into the system may require costly system modifications; (9) concurred with the Office of Management and Budget's reduction of its 1990 AES budget request from $110 million for continued development and operations and maintenance to $19.5 million for operations and maintenance only; and (10) believes that AES should not be abolished and plans to restructure the project and seek increased funding in the FY 1991 budget.
