Amid criticism, Treasury Secretary defends IRS modernization program.

Treasury Secretary Robert E. Rubin told members of a House Appropriations Subcommittee that the Internal Revenue Service modernization program was essential to better serve taxpayers and improve revenue collection and compliance, but he said he shared public concern that the project had gone badly off track.

The General Accounting Office, the National Research Council (NRC) and Deputy Treasury Secretary Lawrence Summers among others have told Congress that the modernization initiative suffered serious long-term problems. The subcommittee's chairman, Jim Lightfoot (R-Iowa), gave the IRS an ultimatum that serious progress must be made or the subcommittee would more closely manage the program or cut its funding entirely.

In March, the GAO testified before the House subcommittee that the IRS lacked the strategic management practices, software development capability and effective organization structure to manage and control its systems modernization. Also in March, deputy secretary Summers told the subcommittee that the modernization program grew too complex and costly because it was too focused on technology independent of changes in its business processes. Summers added that the IRS lacked sufficient expertise in technical management.

"Because of my concern about this program, we have restructured our oversight process," said Rubin. He said he had asked deputy secretary Summers to manage the tax systems modernization program as if he were a board chairman overseeing a long-term corporate restructuring. "One could not perceive of this operation being pursued in the private sector without modern technology, and the IRS should have the same access to technology," said Rubin.

Rubin told the subcommittee that actions to correct the program's problems included

* Holding the IRS accountable for addressing major criticism in the GAO and NRC reports.

* Having the IRS develop a clear and concise systems architecture document as a part of a disciplined development process.

* Requiring solid business cases for key projects to ensure better investment choices.

* Hiring a well-qualified chief information officer to improve the IRS's technical capability.

* Expanding the role of the integration support contractor, including a commensurate increase in accountability.

* Setting a realistic timetable.

The secretary did say that the modernization program reported important successes. "Millions of Americans are now filing their taxes from computers and telephones," said Rubin. He said millions also now resolve their problems over the phone, adding that the IRS offers around-the-clock tax help and tax forms on the Internet. Rubin urged the subcommittee to "recognize that problems have taken a long time to develop, and similarly will take a long time to resolve."