IRS needs better IT investment prioritization system —report

The IRS needs to improve how it prioritizes IT investments and reports on the work completed, according to a watchdog report released Wednesday.

The Government Accountability Office found that IRS’ IT investment priorities for its operations and modernization activities in the current fiscal year are not well documented — and in the case of the latter, it doesn’t have a structured prioritization process in place.

IRS’ prioritized IT operations investments, GAO explains, are those like “critical business operations, infrastructure operations, and maintenance,” and “delivery of essential tax administration/taxpayer services.” Its prioritized modernization investments are those like new web applications.

“Until IRS documents its process for operations support activities and develops a process for modernization activities, the agency will lack the transparency needed by Congress and others to assist in carrying out their oversight responsibilities,” the report reads.

The watchdog reviewed six investments that make up about half — $1.4 billion — of the IRS’s fiscal year 2016 IT spending, expected to reach $2.7 billion before the year’s end. GAO conducted the audit from September 2015 to June 2016.

IRS officials said the agency failed to fully document its operations investment prioritization because the process is “relatively new and not yet stabilized.”

Plans are in the works to completely document the process, according to the report, but officials didn’t provide the GAO with a timeline. 

“We agree with your recommendations to better document our prioritization process for our operations support activities and to extend that process to our business systems modernization activities,” IRS Commissioner John Koskinen said in a letter responding to the report.

Additionally, auditors explained, “IRS does not have a structured process for its modernization activities, because, according to officials, there are fewer competing activities than for operations activities.”

Reporting on the status of investments is another trouble for the IRS, the audit found.

For instance, two of the six investments GAO reviewed gave “complete and timely performance information” and “performed under cost, with varying schedule performance, and delivered most planned scope.” 

However, the report recommends that the way work performance is reported for the two investments —the Foreign Account Tax Compliance Act and Return Review Program — be changed to measure actual work performed and focus less on level of effort.

The IRS disagreed with GAO’s recommendation to disregard level of effort. Changing the processes to the extent of the recommendations would “equate to an ANSI-certified Earned Value Management System (EVMS), which would add immense burden on our programs on various fronts, outweighing the value it provides,” the agency responded.

However, GAO stood by its recommendation. “We believe that it is a reasonable expectation for IRS to reliably determine the actual work completed, as opposed to assuming that work is always completed as planned,” the GAO report said. “Accordingly, we maintain our recommendation is still warranted.”