The Internal Revenue Service (IRS) was, for the second consecutive year, able to prepare financial statements that received an unqualified opinion. However, this achievement once again came through the use of substantial, costly, and time-consuming processes to compensate for serious systems and control deficiencies. IRS continues to make progress in its performance management system by using a strategic planning and budgeting process to reconcile competing priorities and initiatives with available resources. In the area of computer security, IRS corrected or mitigated many of the previously reported weaknesses, including those affecting its electronic filing systems. It also is implementing a computer security program that should help manage its risks in this area. Business Systems Modernization is IRS' ongoing program to leverage information technology and is integral to IRS achieving its customer-focused vision. To date, IRS has made progress in establishing the systems infrastructure, delivering system applications, and developing the management controls and capabilities necessary to effectively acquire and deploy modernized systems.

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