Summary: The Internal Revenue Service (IRS) submitted its fourth expenditure plan to Congress in March 2001. In the plan, IRS requested $128 million from its systems modernization appropriations account. This report (1) determines whether the plan satisfied the conditions specified in the acts, (2) determines IRS' progress in implementing modernization management controls and capabilities, and (3) provides other observations about the plan and IRS' Business Systems Modernization program. GAO found that IRS' March 2001 expenditure plan satisfies the conditions specified in the appropriations acts. IRS continues to make important progress in implementing modernization management controls and capabilities but has yet to implement a sufficiently defined version of the enterprise architecture to guide and constrain projects or employ rigorous configuration management practices. Acquiring modernized systems before having the requisite management capacity in place increases the risk of cost, schedule, and performance shortfalls.