Oversight board criticizes proposed IRS budget

The Bush administration's proposed budget for the Internal Revenue Service does not provide enough money to modernize technology, according to the IRS Oversight Board. In an interim report released by the oversight board Thursday, the group recommended an 8.9 percent increase over the administration's proposed figure of $9.4 billion for the IRS in fiscal 2002. "The administration's 2002 budget does not adequately support the IRS strategic plan and provides inadequate support for technology modernization," the report said. The report called for an overall IRS budget of $10.2 billion, including $450 million for information technology investments in 2002, compared with the administration's proposed $397 million. The IRS' Information Technology Investment Account (ITIA) was created in 1999 to provide a consistent level of funding to support long-term IT projects. Board members called on Congress to allocate a total of $1 billion for the account over the next two fiscal years, with $550 million earmarked for fiscal 2003. "The IRS Oversight Board is concerned that for the first time, the ITIA will have a zero balance by the end of fiscal 2001. This is a dangerous situation that could result in projects being inefficiently stopped and started or unnecessarily slowed down," said the report.

By law, the oversight board's report goes to Congress along with the administration's budget proposal. The nine-member board, which includes six members from the private sector, was established by the 1998 IRS Restructuring and Reform Act. The board oversees agency operations, recommends candidates to be IRS commissioners and advises the President when it feels a commissioner should be fired. The group is required to report annually to the President and Congress on its findings and recommendations. During its first public meeting in March, the board said the agency needs a fiscal 2002 budget of more than $10 billion to sustain its modernization effort, increase compliance rates and improve customer service. Witnesses and board members voiced concern over the agency's antiquated business systems, a decline in tax audits during fiscal 2000 and staff shortages. The report also recommended $54 million to upgrade desktop and laptop computers to support new software. The President's budget does not include any funding for this program. National Treasury Employees Union President Colleen M. Kelley said the administration's budget is damaging to IRS employees. "Just as we feared, the administration's proposal shortchanges both the IRS and its employees, at the same time that extraordinary and changing demands are being placed on both," said Kelley. During the 1990s, staffing levels at the IRS dropped by 17,000 employees, while the number of tax returns grew by 8 percent. The board proposed fully funding the Staffing Tax Administration for Balance and Equity program, which would enable the IRS to hire about 3,800 new employees to improve service and enforcement. Bush's budget slows the program down in 2002, providing for only 2,500 new employees. Kelley said the power to boost funding for the IRS now lies with Congress. "We will find out in the appropriations process how serious Congress is about remaking the IRS," said Kelley.

In December, leaders of appropriations committees on Capitol Hill agreed to release $200 million to help the agency complete its modernization program.