On May 7, IRS Commissioner Charles Rossotti testified before the House Ways & Means Committee. He pleaded with the Committee not to pass legislation governing the IRS. The IRS's resources are strained to the limit as it is, he said. Any new rules or changes will thwart the IRS's y2k efforts.
Meanwhile, across the Capitol lawn, the Senate was voting 97 to 0 to rein in the IRS.
The chairman of the Ways & Means Committee is Texan Bill Archer. He hates the income tax. He is pressing for a national sales tax. For Mr. Rossotti to threaten Mr. Archer with the possibility of a breakdown of the IRS is like threatening a bull with a red cape and no sword.
Rossotti also called for a complete consolidation of the IRS mainframes from 62 to ten. Yet in January, 1997, former Chief Information Officer Arthur Gross admitted to Congress that an 11-year, $4 billion effort to do this had failed. Shelly Davis, formerly the IRS historian, told me in a taped interview that this 11-year effort was actually a link in a chain of failed efforts going back three decades. Mr. Rossotti's latest proposal isn't just kicking a dead horse. It's kicking its dry bones.
Mr. Rossotti said: "We are on schedule to complete the systems conversion by January 1999." Congress should ask him to report back on February 1, 1999.
Then there are vendors who supply software. Vendor software is not yet compliant. He said: "Century date compliance for more than 1,400 minicomputers and 130,000 personal computers largely depends on obtaining vendor upgrades; many are only now being made available in the market place. We are currently evaluating and testing these components to ensure they are compliant." Question: What if they turn out not to be compliant?
Then there is telecommunications. The IRS doesn't control this; the Treasury Department does. The system isn't compliant, but, of course, they're working on it. "The critical IRS network backbone is supported through the Treasury Communications System (TCS) contract. A network component inventory was received from the contractor. We are reviewing and validating these data as well as the contractor's site specific plans to convert the network. Given the need to upgrade or replace thousands of components within the TCS network, as well as additional IRS proprietary networks which themselves comprise nearly 30,000 components, the network conversion represents a significant challenge. Integrated project management teams were formed with the TCS contractor, and we have engaged the services of other contractors to assist us in completing this critical effort."
I love his phrase, "significant challenge." It means: "We don't know what's going on; we aren't sure they know how to fix it; and if it doesn't get fixed, we're toast."
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The IRS is a huge enterprise, employing more than 100,000 individuals in service centers, regional offices, district offices and posts of duty across the United States and around the world. A $1.7 trillion financial services organization, the IRS depends on its automated systems to process tax returns, issue refunds, deposit payments, and provide employee access to timely and accurate taxpayer account data.
The IRS information technology organization faces major challenges associated with new tax law changes that require extensive reprogramming of legacy systems each filing season. For example, the Taxpayer Relief Act of 1997 requires the IRS to make more than 750 legacy systems changes for the 1999 filing season.
In addition, the scope and short time frames associated with our massive century date conversion project present tremendous challenges to our technical management of IRS systems. If not corrected, most existing application systems are programmed to display 00 in the year fields, and after January 1, 2000, would incorrectly use 1900 for the year in date-based calculations. Failure to identify, renovate and test each of these system calculations could result in catastrophic disruption to taxpayers and the government. For example, millions of erroneous tax notices, refunds, bills, taxpayer account adjustments, accounting transactions and financial reporting errors could be generated. Clearly, the IRS' role in collecting revenue supporting 95 percent of the federal government's operations could be jeopardized if the Century Date program is not completed in a timely fashion.
Adding to the challenge is our largely non-Year 2000 compliant technical infrastructure which includes more than 80 mainframes, 1,400 minicomputers, 130,000 personal computers and massive telecommunications networks comprised of more than 100,000 components. Because of the number, age, fragmentation, and variety of products associated with this infrastructure, successful implementation of these aspects of our Year 2000 program require strong central management and oversight. Plans for upgrading and/or replacing these components must be integrated into the overall program management plan, schedule, and budget. Lastly, to ensure century date compliance, it is essential that the IRS continues to work with its landlord, the General Services Administration, to ensure that IRS buildings and leased facilities and equipment, including elevators and physical security systems, are upgraded or replaced.
Major elements of the IRS Year 2000 program are as follows:
Application Systems Conversion
The IRS currently supports 127 mission-critical application systems comprising 85,000 modules and approximately 50 million lines of code. IRS has five phases for code conversion, each six months long, and has completed three phases to date. As of April 24, 1998, the IRS has renovated 83 of its 127 mission-critical systems and tested 62. Fifty-nine of these systems were placed back into production. These systems are working effectively and contributed to a successful filing season. We are on schedule to complete the systems conversion by January 1999.
Tier II (minicomputer) and Tier III (personal computer) Platforms
Tier II and Tier III computers and their associated systems software (operating systems, data bases, etc.) require replacement or upgrades. Century date compliance for more than 1,400 minicomputers and 130,000 personal computers largely depends on obtaining vendor upgrades; many are only now being made available in the market place. We are currently evaluating and testing these components to ensure they are compliant. This year we will replace/upgrade over 35,000 personal computers; over 100 minicomputers will be replaced and several hundred more will be upgraded.
The critical IRS network backbone is supported through the Treasury Communications System (TCS) contract. A network component inventory was received from the contractor. We are reviewing and validating these data as well as the contractor's site specific plans to convert the network. Given the need to upgrade or replace thousands of components within the TCS network, as well as additional IRS proprietary networks which themselves comprise nearly 30,000 components, the network conversion represents a significant challenge. Integrated project management teams were formed with the TCS contractor, and we have engaged the services of other contractors to assist us in completing this critical effort.
External Trading Partners
The IRS is but one of many data dependent public (e.g., Financial Management Service and Social Security Administration) and private sector organizations (e.g., banks and financial institutions) which both send and receive data from one another. At this time, IRS efforts are on schedule to validate the accuracy of both incoming century date compliant data from a variety of sources and outgoing IRS century date compliant data to its trading partners. Over 60 percent of our trading partner files have been made compliant, and the remainder are scheduled for conversion by January 1999. . . .
Even prior to identifying the Century Date Conversion testing requirements, the Information Systems Product Assurance Division, responsible for Systems Acceptance Testing, lacked sufficient resources to fulfill its mission. In 1996, the Division was able to test only 20 percent of the systems placed into production. While some progress has been made, the Division's current testing operation covers only 30 percent of the agency's production systems. . . .
Instead of investing more than $250 million to upgrade the agency's computer mainframes to ensure century date compliance, the IRS proposed and received Congressional approval for a mainframe consolidation program that consolidates 67 mainframes currently located at 10 service centers into 12 mainframes located at two computing centers. These mainframes support IRS returns processing, customer service and compliance operations. The consolidation program will provide for both century date compliance and savings of more than $250 million over 10 years. In addition, this initiative will position the IRS to take significant steps forward in its long-term information technology modernization efforts. The rollout of a century date compliant network of approximately 16,000 personal computers and related equipment will standardize a major component of the IRS telecommunications infrastructure, thus improving the ability to communicate among systems. In an effort to mitigate risks and incorporate additional business requirements for disaster recovery and increased systems capacity based on new customer service needs, we are extending the time frame for completing the mainframe consolidation effort; however, the components of the project required to achieve Year 2000 compliance are currently on schedule and will be completed by December 1998. . . .
Without exception, the Century Date Conversion is the Service's highest technology priority. . . .
Given the scope of the IRS program and its critical importance to both the nation's economy and its taxpayers, it is imperative that the Service's mission- critical systems continue to function properly in the new millennium. While the IRS has made substantial progress, the risks are still significant. Accordingly, the IRS must develop contingency plans to manage any adverse impacts of a less-than-fully successful century date program. These plans must address the needs of the IRS, as well as those of our data exchange partners. We intend to concentrate on those areas that have high business impact, significant Year 2000 complexity, and may not be completed on time or successfully. This will allow us to work on aspects that have the greatest risk, while leveraging the majority of limited resources on Year 2000 conversion and testing. . . .
In conclusion, the Year 2000 effort at the IRS, a $1 billion project, is one of the federal government's most formidable challenges. Although we are making sustained progress and are on schedule, risks remain in specific technical areas such as Tiers II and III hardware, Telecommunications, End-to-End Integration Testing and non-Information Technology equipment. Because of its many stakeholders and interfaces, the IRS' Year 2000 program is highly complex. The IRS is working with its vendors to obtain Year 2000 compliant versions of their products. In addition, an independent risk assessment was conducted of IRS' major trading partners' Year 2000 conversion efforts (e.g., Social Security Administration, Financial Management Service, as well as key providers of electronic payments, returns and third party documents) to identify problems and work through solutions. Because the risks are so significant, the IRS is developing contingency plans to manage any adverse impacts of a less than successful Century Date Program.
Finally, the Administration has serious concerns with provisions of the IRS restructuring legislation that require changes to IRS computer systems in 1998 and 1999. Mandating these changes according to the schedule currently in the bill would make it virtually impossible for the IRS to ensure that its computer systems are Year 2000 compliant by January 1, 2000, and would create a genuine risk of a catastrophic failure of the Nation's tax collection system in the year 2000. Both Secretary Rubin and I have written the Senate Finance Committee warning them of this risk and recommending that the effective dates be modified in accordance with the schedule set forth in my April 23, 1998 letter.