times you never know. Let's say you are an individual quarterly that has to file and this quarter you suddenly have a drop in your business, so you don't have to do all that.

Mr. MUSICK. Right.

Mr. HORN. At the end of the year is the only time you are really going to know where you are.

Mr. MUSICK. Right, but it is my understanding the law requires us to transfer that amount. Like I said, if they didn't pay, then we would go back and collect it like an accounts receivable; it would go into the receivables queue.

Mr. HORN. Of the 59, or whatever it is what is it, 59 recommendations, of the GAO

Mr. MUSICK. Fifty-nine recommendations, yes, sir.

Mr. HORN [continuing]. Which are the ones that you feel you just cannot get done? Have you analyzed that? Or would you just say they are off the track?

Mr. MUSICK. Yes, we have analyzed all of them. Like I said, I would be glad at some other time to go through every one, but we have sat down and we feel that there are only four that we see that are going to go beyond, I believe, 1997.

Probably the one that is causing us one of the more significant problems, and I am not too sure if it is laid out as one recommendation, is the issue I just mentioned about trying to accommodate the revenue transactions into a standard general ledger and to be able to prepare financial statements from something like that. We are not really sure if that will work, but we think it will. Mr. HORN. One of the problems you find any time you deal with computers is computers are not the magic bullet. You have got to look at the system and change that.

Mr. MUSICK. That is right.

Mr. HORN. Most of the things in terms of the computing that needs to be done, have you got the type of equipment you need now, or the software that goes with it, or can this be off the shelf? Given your unique situation on the revenue side, you are going to have to face up to other ways to write that program, but what is your feeling on the hardware, the software, as to whether you get it off the shelf or are we into one of these crazy FAA-type boondoggles or military-type boondoggles where they don't solve the problem? They could have solved it if they took it off the shelf. Everybody has got their view of how the design should be, nobody has the guts to say no, and the next thing you know you are into $3 billion and nobody is doing anything.

I have had enough experience with those. They tire me. So what are you going to do about this stuff?

Mr. MUSICK. OK, let me go back and mention that the administrative system that we have, which is a corporate data base, is off the shelf. We purchased that off the shelf.

Now, go to the revenue system. We currently have a revenue system, as I mentioned, that ensures cash is deposited and that transactions get posted. What I would like to try to do is use the offthe-shelf standard general ledger in the administrative system to pick up the other data that is needed to meet the requirements of the CFO Act.

The issue I don't know, and I am not an I.S. person, is how I then take the system that controls the transactions going through the pipeline with the system that is going to provide me financial position and marry those together. I don't have an answer for that. I don't know if it would have to be built or if I would contract to have it built or you could take an off-the-shelf package and modify it to meet that. I don't have an answer for that. But that is the approach we are trying to take right now.

Mr. HORN. What is your timetable to resolve that as to what the answer would be?

Mr. MUSICK. Well, the short-term timetable, I hope, would be some time next year, 1997, I would hope, by the end of it or the beginning of the fiscal year, but I don't know if that is going to be realistic. The long-term approach, we would probably be looking at determining at that point over the next year as we try to implement the standard general ledger for the revenue pieces to determine what I would call a phase two, is how would we marry these two together. Again, that might take a few years down the road. I really don't have a timeframe set for that right now.

Mr. HORN. Well, apparently you are just absolutely not going to make the balance sheet requirement of the act.

Mr. MUSICK. Well, what we are trying to do, and that was the point that we met with GAO and I believe that GAO is going to have to see how well we did that this year, we can make the balance sheet requirements, and the way we are doing it is extracting all the detailed data out of the master file to build those financial statements on a transaction-by-transaction basis.

Then what we are trying to do is say if we have got all this detailed data out of the master file, on the one hand, we have the summary data in the revenue system, the issue is can we reconcile those two systems? And if we can reconcile those two systems, we can build the financial statements and GAO will have an audit trail that will go back to look at detailed transactions.

One of the other things that we have been wrestling with, because of the issue of source documentation, is that a lot of the way the data is filed in our service centers is how it was filed for tax administration, not how it was filed to provide support for a financial audit.

An example would be if somebody is under appeals or having an exam and they are looking at 3 years of tax returns, it might get all filed back with the final results, all 3 years, but the financial audit might want to come in and look at one of those pieces of data, and that is some of the problems we have been having, trying to wrestle with.

I would say, finally, the other issue we are trying to balance is that we have got to balance the requirements for the financial audit with the continuing requirements of tax administration, of collecting the money, and ensuring that the taxpayers' accounts are properly credited.

Mr. HORN. What is your reprogramming authority within IRS? Mr. MUSICK. I believe between appropriations we have 5 percent. Mr. HORN. On the debt collection law which I got through, the parallel is coming out of Congresswoman Johnson's subcommittee, which will apply to the IRS, since Ways and Means had jurisdiction

on that as you know, some of the collection money goes back to each agency so they can use it to improve the collection systems, and you could certainly, it seems to me, justify that to clean up some of the systems you are troubled with.

What I am wondering is, has any plan been submitted to the relevant appropriations subcommittees in either body as to what you are going to need to get into conformity under this act?

Mr. MUSICK. I don't believe so. What we have been trying to do is we get a separate I.S. budget and we have been laying out a plan to try to get funds out of that appropriation to take care of this. We have an investment review board which we just-that manages those projects and that was just started several months ago. I will be the chair of that board shortly and, therefore, I believe this will be one of my priorities, at least as the chair of that board.

Mr. HORN. Which are the recommendations in terms of human being help and cooperation that are the most difficult to implement of the remaining ones?

Mr. MUSICK. I think that—if it is the people issues, I don't think are that they are not qualified. One of the things that I believe that I have struggled with is that many of the folks that work for me and in the revenue accounting area grew up in the Government. As you are well aware, prior to 1990, the concern was making sure that you did not go anti-deficient and stayed within your appropriation.

Now all of a sudden we are being asked to identify-prepare financial statements, excuse me, develop financial statements and prepare financial statements. No one has ever gone through a discipline of a financial audit and what is required by the auditors.

I can give you one brief example on the administrative side. A couple of years ago, when we were trying to get data for the first time out of the new administrative system, the General Accounting Office came in and asked for a listing of accounts payable. Well, the people that interpreted that, our system tracks every payable from the day it went pit, they gave them a balance that tied back; the problem was, they gave them everything since 1991 or 1992. It balanced. What I have had difficulty with is explaining to people that that is an annual type of thing and that is the difficulty that we are working through with people, is to get them educated and to get them to understand that.

The same thing with our district people and our service center people. They have done things that they are doing as a basis for tax administration and the real control on them had been before that the obligations that they put on the books were appropriate. Now we are trying to make sure that they understand that there is going to be somebody coming back in and reviewing those obligations and they have to really sit down and ensure that they got the documentation and it is available, and it is available in a way that they can explain it to the auditors and not explain it to somebody else who is in tax administration.

Mr. HORN. Let me ask you one last question, and that would be on the 2000 conversion problem. Does IRS have any problems with that two-digit year bit?

Mr. MUSICK. We have got a big group looking into it. On the revenue side, our CIO, the chief information officer, has a group that

is looking to that to resolve it. And on the administrative side, since we purchased a package off the shelf, we believe that we can get it resolved by purchasing an enhancement or an upgrade to our existing package.

Mr. HORN. ŎK, I thank you for coming and you will be able to get a decent lunch today, because I have got to go vote on the floor. But before leaving, I want to thank the staff that helped prepare it, thank the witnesses, and your staffs, J. Russell George, our staff director, Anna Miller, who is to my immediate left, the professional staff member for the hearing, and Erik Anderson, our clerk, and Brook Musser, our faithful intern.

Minority staff-they don't have all the staff here-they have Liza Mientus, Matt Pinkus, and Mark Stephenson, we thank you all, and our reporter, Romelle Million. Thank you very much.

This hearing is adjourned.

[Whereupon, at 12:25 p.m., the subcommittee was adjourned.]

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