The Internal Revenue Service's (IRS) Cyberfile project was intended to enable taxpayers to prepare and electronically send their tax returns via their personal computers. IRS' selection of the Commerce Department's National Technical Information Service (NTIS) to develop Cyberfile was not based on sound analysis that considered various alternatives and assessed NTIS' ability to develop and operate an electronic filing system. NTIS had promised IRS that it could develop Cyberfile in less than six months and have it up and running by February 1996. To meet these self-imposed deadlines, however, NTIS hastily initiated the project. Development and acquisition were undisciplined, and Cyberfile was poorly managed and overseen. The end result was that Cyberfile was not delivered on time, and IRS, after advancing more than $17 million to NTIS, has suspended Cyberfile's development and is reevaluating the project. IRS and NTIS did not follow all applicable procurement laws in developing Cyberfile, and NTIS actually circumvented procurement laws in implementing Cyberfile. Moreover, Cyberfile obligations and costs were not accounted for properly. Finally, adequate financial program management controls were not implemented to ensure that Cyberfile was acquired cost effectively. GAO summarized this report and discussed other tax systems modernization issues in testimony before Congress; see: Tax Systems Modernization: Actions Underway, But Management and Technical Weaknesses Not Yet Corrected, by Dr. Rona B. Stillman, Chief Scientist, Computers and Telecommunications Issues, before the Senate Committee on Governmental Affairs. GAO/T-AIMD-96-165, Sept. 10 (21 pages).

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