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1997-11-05 13:51:25


IRS Is Not Telling Congress the Full Story: Yardeni



Economist Ed Yardeni called attention to the discrepancy between the IRS's call for a complete refurbishing of its computer system and what it is telling Congress about its y2k-compliance.

This appeared in INSIGHT (Nov. 3).

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Yet a 116-page request for comment the IRS issued to vendors on May 15 on the Treasury Department World Wide Web page is raising questions about how much the agency believes it can do. Ed Yardeni, the chief economist of the Deutsche Morgan Grenfell-North America investment-banking firm who has written extensively on Y2K's economic impact, tells Insight that this document is "not consistent with what I've seen them telling Congress." Yardeni observes that "the document uses phrases like their main goal is to stay in business {and} they need to hire a private-sector systems integrator to help them modernize this system to achieve Y2K compliance. They explicitly state that they don't have the manpower or resources to fix all their systems. They point out they have 63 mainframes and 62 million lines of code that are not Y2K compliant. The language is borderline desperate."

The comment request states that the IRS modernization plan "represents the largest systems integration ever undertaken by the private or public sector. Success would be wholly dependent on partnering with the private sector." But Yardeni says the IRS admits it doesn't have the money to pay a private-sector contractor when it says it "seeks to create a business plan which shares risk with the private sector, {providing incentives to} the private sector to either share or assume front-end capital investment." Yardeni says the most shocking aspect of the document is that it states the IRS will award a contract for modernization no sooner than Oct. 1, 1998. "Most Y2K experts agree that any organization that doesn't begin to fix the problem by October of this year won't meet the unforgiving and un-moving Jan. 1, 2000, deadline."

Yardeni doubts that the IRS can manage its Y2K problems without drastic reform of its disarrayed computer systems. "You can't separate Y2K from the system failures they're having right now," he says, noting that the IRS has no central database. Yardeni quotes the IRS' comment as saying that "detailed tax and tax-case information is stored on stovepipe systems with stand-alone databases which, for the most part, are not integrated" with the main tax-processing systems. He adds that thousands of applications systems that perform specific functions are referred to as "undocumented," meaning the instruction manuals are missing.


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