hopeful you will see in the reports that are forthcoming, is that we have some pretty good ideas how to turn that around, but Judy may want to spend a minute on your specific question.

Ms. VAN ALFEN. Yes. I was very interested in your comment when you related to the PERT chart. One of the things that I think you might be interested to know is that the National Research Council recommended to us that we visit NASA and take a look at how they manage projects and how they identify measures. Mr. Dolan and I did that when I first came into the position in early October and have found our visit very beneficial, and they were extremely helpful.

We have transition plans and schedules, and they break down to a very low level, which identifies the operational capabilities that we are trying to implement within each of these various segments, computing sites, submission processing, customer service activities. Based on the recommendations that we have gotten from GAO, NRC and others, we have tried to perfect those plans and schedules. And when we do have an opportunity to share with you and members of your staff the plans that the Deputy Secretary will submit to you, I think that you will see that we have pulled a lot of the information that you identified together.

You made a comment that you believe that it would be helpful if you understood some of these initiatives-which ones are primary, which ones are secondary, what are the interdependencies among these initiatives. We have done that. And you will get that in our plans that we will be submitting.

Senator GLENN. OK. Good. I think it would help me, and I do not know, you might want to talk to the Commissioner about that and see whether we need something like a giant spread sheet that helps Congress, which does not deal this with everyday, to understand it, and I think it is a good management tool for you to use anyway. You have got this all broken down in so many systems, subsystems, sub-sub-sub-systems, on down here, and I think it might be something for you to consider.

I do not have a whole lot more to ask. I have been supportive of TSM. I guess my basic bottom line on it is I do not see where we go if we do not make TSM work. And it may have 100 different parts to it. We have got to make them work. And if some of them are not working, then we can see that off of a chart or we can see it as they are not productive and eliminate those. But somehow we got to get going on these. Mr. Donelson, I wanted to ask you how you are coming on the $36.6 billion? Are we making progress in that area or did you agree with my comments awhile ago I presume you did-on the reductions that we put on your compliance initiative money last year. I thought that was very shortsighted. We cannot expect you to go out and get the $36.6 billion that is out there ready to be collected.

These are just people, many of them are scofflaws, just not filing and so on. We have to be able to go out and get people like that. I thought we were moving along pretty good on that. And this report that we have shows even in just that initial stage, it is about 22 to 1 return on the money invested. Do you agree with that approximate figure?

Mr. DONELSON. Yes, I do, Senator. As a matter of fact, the good news is half way through this fiscal year, even though we had our initiative cut in 1996, we are still reaping the benefits of that, and we are about $2 billion ahead of last year's pace in terms of our total collection. So there are still some benefits to be derived even though the agency was cut in that compliance initiative. And the problem that creates for us when we go out and hire 5,000 or 6,000 agents thinking that we have a 5-year investment in front of us, and then the second year the investment does not show up, then we are faced with having excess folks on the rolls without the money to pay for them, and we have to make very difficult decisions throughout the agency's budget. So having a 5-year deal is great as long as the deal follows through for all 5 years. When the rug is taken out from under after 1 year, it is real difficult to keep that momentum going.

I think that if we get the revenue protection initiative that we are looking for in this year's budget, we will be able to get back on track real fast, and realize some of those monies you were referring to.

Senator GLENN. Well, we made a real fight on that last year, and in the tidal wave that was going on last year around here, we just flat lost.

Mr. DONELSON. I understand that.

Senator GLENN. We had the vote and I did not have the votes, and I was disappointed we could not keep that going because I thought we were going to get back several times the money we spent, and I thought that was good.

Mr. DOLAN. Senator, I know the Commissioner has thanked you personally for your role, and as the career folks we are also very appreciative of the role you did play in trying to do that last year. Senator GLENN. I am going to end this, and we may want to give-in fact, we will submit additional list of questions to you. We would appreciate your early response so we can get them in the hearing record and I might want to talk to you more and talk to the Commissioner a little more about this idea of a PERT chart, and you said you had seen some of this stuff.

This is the way to manage some very, very complex things, things that are on a time base, where everything has to come together at a certain time or nothing happens. And there are so many hundreds and hundreds of sub-items here that this would help you-I am thinking out loud here-but it seems to me this would help you, too. One of the things that I had talked to her about before and I have talked to you and said it in open hearings before, I thought the plans that you people have and the Commissioner had all look very good. Now that is fine except what happens when you get another two or three levels down and nothing happens? And I have said this looks too often like you have grand plans, and it is like sailing a paper airplane off into the Grand Canyon. You just do not see it again. Nothing happens.

And so if you had something like the management tool of a big PERT chart that shows every individual down to each little individual office's part of this, what their part of it is, and how if they do not hit their time line, something does not happen here, and they are going to get called on the carpet if their time line does not hit

with something here that something else depends on. And so it is a way to manage your sub-level people that may have been too cavalier in just sort of dismissing, well, this is another plan for the people that are in here for 3 or 4 years, and we will not bother to change this too much right now. We will not get with it as much as we should.

So it gives you a good management tool, too, to get down there and dig out some of these people that are not implementing the things that you send downhill as directives from on high that never really get put into effect down there. So we may want to talk a little bit more about this and we will end the hearing now. We will have additional questions for you. Thank you all very much. Mr. DOLAN. Thank you.

Senator GLENN. The hearing stands in recess.

[Whereupon, at 11:55 a.m., the Committee was adjourned.]

OVERSIGHT OF THE INTERNAL REVENUE
SERVICE FINANCIAL MANAGEMENT

THURSDAY, JUNE 6, 1996

COMMITTEE ON GOVERNMENTAL AFFAIRS,

U.S. SENATE,

Washington, DC.

The Subcommittee met, pursuant to notice, at 10:10 a.m., in room 342, Dirksen Senate Office Building, Hon. Ted Stevens, Chairman of the Committee, presiding.

Present: Senator Stevens.

OPENING STATEMENT OF CHAIRMAN STEVENS

Chairman STEVENS. I am told that Senator Glenn has a breakfast meeting and has been slightly delayed, so let me start this off and he will be with us in a few minutes.

We are going to conduct the third in a series of oversight hearings to try to gain some understanding about the Internal Revenue Service's capability to modernize for the 21st Century and want to focus on the IRS financial management issues today. I understand that GAO has determined that the IRS does not have an auditable valid financial statement and we want to hear about that today.

We have spent now about $3 billion modernizing the computer systems of the Internal Revenue Service and we want to know if you can tell us how much has been collected in taxes and if we can account for what has been spent for that modernization endeavor. I do not think there is an agency that means as much to Americans. This agency insists that we keep our books straight, we keep our records, and we maintain auditable accounts so that they can come tell us whether we have been honest and fair with the government. I think that the IRS has to set the same example, as a matter of fact, even more so, by holding itself to even higher financial auditable standards than it applies to taxpayers.

The role of the branch audit is to identify if an agency is pushing off its problems to the future with the hope that there will be funds to fix the problems when those problems become unmanageable at a later date. That is just not acceptable. We want to hear from you whether there are significant unfunded requirements that exist in this computer and software problem, and I guess there is more than one problem, so these problems, I should say.

Also, I am interested in the overall problem associated with the year 2000, which there has been a lot written about. I had some advice from a very distinguished thinker who told me to forget about that, that the computers will go away before the year 2000 gets here. So the way technology is tumbling, maybe we are all (141)