Information Technology: Cost and Time Performance of Certain IRS Investments

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What GAO found

The Internal Revenue Service (IRS) reported that the five investments GAO reviewed met most of the performance targets set by the agency for fiscal 2019 and 2020. Specifically, the IRS reported that most of the three Development investments were within 10% of performance targets. , a discrepancy that the Bureau of Management and Budget considers to be insignificant. One exception was the Accounts Receivable Data Engine (CADE) 2, a program to modernize tax processing, which would have spent about 15% less than planned for 2020. For both investments in operations and maintenance, the ‘IRS reported that for FY 2019 and FY2020, one investment met the five operational performance targets set by the agency, while the other achieved three of the five targets in FY 2019 and four of the five in fiscal year 2020.

While CADE 2 had reported costs lower than forecast for 2020 and was within 10% of calendar targets for 2019 and 2020, its performance and long-term outlook is troubling. The IRS began developing CADE 2 in 2009 to replace its 60-year-old Individual Master File (IMF), the IRS’s authoritative data source for personal tax account data. Since 2009, the IRS has revised program cost, schedule, and scope targets numerous times, including seven times between 2016 and 2019. As a result, a key program milestone to replace some IMF functions, known to be under the name of transition state 2, slipped 9 years. – from 2014 to 2023. In addition, CADE 2 should now replace the core functions of the IMF, rather than the whole system. The delays in CADE 2 and the continued use of the IMF by the IRS are troubling given that the IMF (1) is one of the oldest systems in the federal government; (2) has software written in an archaic language that the IRS says is no longer taught in school; and (3) is supported by a workforce with specialized skills that are increasingly difficult to find. In June 2021, the IRS announced that it plans to replace and completely withdraw the IMF by 2030. As a result, the IRS will continue to face IMF challenges for several more years.

For its agency-wide modernization plan, the IRS said it completed most of its planned activities for fiscal 2019 and 2020 on-cost and on-time or ahead of schedule. The updated plan identified 59 activities to be completed in fiscal 2019 and 2020. The IRS reported that by the end of fiscal 2020, it had completed 54 of 59 activities on time or on schedule and on time. five remaining activities 3-7 months later than originally planned. Regarding costs, the IRS said it spent $ 9 million less than the $ 300 million planned for fiscal 2019 and 19.9 million less than the $ 271 million planned for fiscal year 2020.

To respond to the pandemic, the IRS has taken a number of information technology (IT) measures to maximize the teleworking capabilities of its employees, including deploying IT equipment, such as laptops, and by improving the bandwidth of its network infrastructure. For fiscal 2020, the IRS spent $ 104 million on these actions from emergency appropriations included in pandemic legislation. According to IRS officials, the long-term impact of maintaining an increased level of telecommuting on the budget had not been determined. In contrast, the IRS said actions to maximize telecommuting capabilities were delaying IT modernization and operations plans. For example, the IRS reported that the staff resources initially allocated for CADE 2 had been reallocated to support responsibilities related to COVID-19, resulting in a 7-month delay in the planned completion of key development activities. .

Why GAO did this study

The IRS relies heavily on IT investments to collect more than $ 3.5 trillion in taxes annually, distribute more than $ 450 billion in refunds, and carry out its mission of providing a service to U.S. taxpayers for s ” fulfill their tax obligations. For fiscal 2020, the agency said it spent around $ 2.8 billion on these investments.

The joint explanatory statement accompanying the Financial Services and General Public Appropriations Act of 2020 included a provision for GAO to annually review the status of IRS IT investments. GAO’s specific objectives were to (1) summarize the performance reported by the IRS for selected IT investments, including CADE 2; (2) identify the progress reported by the IRS in implementing its 2019 IT modernization plan; and (3) identify the IT-related actions the IRS has taken to maximize telecommuting and function during the COVID-19 pandemic, and any impact of those actions.

The GAO obtained the performance information reported by the IRS for a non-probability sample of five investments and compared the performance to the agency’s targets. The GAO also compared modernization activities that the IRS said it has completed to those identified in the agency’s 2019 IT modernization plan. In addition, GAO reviewed agency documentation to identify reported IT measures taken to continue operating during the pandemic and the reported associated impacts. The GAO also interviewed aware IRS officials.

For more information, contact David B. Hinchman at (214) 777-5719 or [email protected]


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