Business Systems Modernization
Internal Revenue Service's Fiscal Year 2008 Expenditure Plan
Gao ID: GAO-08-420 March 7, 2008
The Internal Revenue Service's (IRS) Business Systems Modernization (BSM) program is a multibillion-dollar, high-risk, highly complex effort that involves the development and delivery of a number of modernized systems that are intended to replace the agency's aging business and tax processing systems. As required by law, IRS submitted its fiscal year 2008 expenditure plan in August 2007 to congressional appropriations committees, requesting $235.8 million from the BSM account. GAO's objectives in reviewing the plan were to (1) determine whether it satisfied the conditions specified in the law, (2) determine IRS's progress in implementing prior expenditure plan review recommendations, and (3) provide additional observations about the plan and the BSM program. To accomplish the objectives, GAO analyzed the plan, reviewed related documentation, and interviewed IRS officials.
IRS's expenditure plan satisfies the conditions specified in the law. These conditions include meeting the Office of Management and Budget's capital planning and investment control review requirements and complying with federal systems acquisition requirements and management practices. IRS has taken steps to address GAO's prior recommendations to improve modernization management controls and capabilities, including adding a new focus area to its Modernization Vision and Strategy and defining and beginning to implement an approach for developing a quantitative measure of progress in meeting project scope expectations. However, work remains to fully implement GAO's recommendations, including steps to complete the Modernization Vision and Strategy. GAO's observations about the expenditure plan and the BSM program include the following: (1) During 2007, IRS made progress in implementing BSM projects and in meeting cost and schedule commitments for most deliverables, but three project milestones experienced significant cost and schedule delays. Specifically, reported project costs and completion dates showed that 13 of the 14 associated project milestones that were scheduled for completion during this time were completed within 10 percent of cost estimates, and 11 of the 14 milestones were delivered within 10 percent of schedule estimates. However, a milestone for the Customer Account Data Engine (the new taxpayer information database) exceeded its planned schedule by 66 percent and experienced a 15 percent cost increase; another milestone for the same project incurred a 153 percent schedule delay, and a milestone for Modernized e-File (an electronic filing system) experienced a 41 percent schedule delay. (2) IRS continues to make progress in addressing high-priority BSM program improvement initiatives. This program improvement process continues to be an effective means of regularly assessing, prioritizing, and incrementally addressing BSM issues and challenges. Key focus areas for high-priority initiatives recently included IT human capital and information security. (3) Efforts are under way to address human capital challenges, but more work remains. IRS developed an IT human capital strategy that addresses hiring critical personnel, employee training, leadership development, and workforce retention, and stated that it plans to undertake a number of initiatives to support this strategy. However, a specific plan with time frames for implementing the initiatives has not been developed. Such a plan would help guide IRS's efforts in addressing IT human capital goals and would be useful in measuring progress in implementing the goals.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director:
Team:
Phone:
GAO-08-420, Business Systems Modernization: Internal Revenue Service's Fiscal Year 2008 Expenditure Plan
This is the accessible text file for GAO report number GAO-08-420
entitled 'Business Systems Modernization: Internal Revenue Service's
Fiscal Year 2008 Expenditure' which was released on March 11, 2008.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as part
of a longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
Report to Congressional Committees:
March 2008:
Business Systems Modernization:
Internal Revenue Service's Fiscal Year 2008 Expenditure Plan:
GAO-08-420:
GAO Highlights:
Highlights of GAO-08-420, a report to congressional committees.
Why GAO Did This Study:
The Internal Revenue Service‘s (IRS) Business Systems Modernization
(BSM) program is a multibillion-dollar, high-risk, highly complex
effort that involves the development and delivery of a number of
modernized systems that are intended to replace the agency‘s aging
business and tax processing systems. As required by law, IRS submitted
its fiscal year 2008 expenditure plan in August 2007 to congressional
appropriations committees, requesting $235.8 million from the BSM
account.
GAO‘s objectives in reviewing the plan were to (1) determine whether it
satisfied the conditions specified in the law, (2) determine IRS‘s
progress in implementing prior expenditure plan review recommendations,
and (3) provide additional observations about the plan and the BSM
program. To accomplish the objectives, GAO analyzed the plan, reviewed
related documentation, and interviewed IRS officials.
What GAO Found:
IRS‘s expenditure plan satisfies the conditions specified in the law.
These conditions include meeting the Office of Management and Budget‘s
capital planning and investment control review requirements and
complying with federal systems acquisition requirements and management
practices.
IRS has taken steps to address GAO‘s prior recommendations to improve
modernization management controls and capabilities, including adding a
new focus area to its Modernization Vision and Strategy and defining
and beginning to implement an approach for developing a quantitative
measure of progress in meeting project scope expectations. However,
work remains to fully implement GAO‘s recommendations, including steps
to complete the Modernization Vision and Strategy.
GAO‘s observations about the expenditure plan and the BSM program
include the following:
* During 2007, IRS made progress in implementing BSM projects and in
meeting cost and schedule commitments for most deliverables, but three
project milestones experienced significant cost and schedule delays.
Specifically, reported project costs and completion dates showed that
13 of the 14 associated project milestones that were scheduled for
completion during this time were completed within 10 percent of cost
estimates, and 11 of the 14 milestones were delivered within 10 percent
of schedule estimates. However, a milestone for the Customer Account
Data Engine (the new taxpayer information database) exceeded its
planned schedule by 66 percent and experienced a 15 percent cost
increase; another milestone for the same project incurred a 153 percent
schedule delay, and a milestone for Modernized e-File (an electronic
filing system) experienced a 41 percent schedule delay.
* IRS continues to make progress in addressing high-priority BSM
program improvement initiatives. This program improvement process
continues to be an effective means of regularly assessing,
prioritizing, and incrementally addressing BSM issues and challenges.
Key focus areas for high-priority initiatives recently included IT
human capital and information security.
* Efforts are under way to address human capital challenges, but more
work remains. IRS developed an IT human capital strategy that addresses
hiring critical personnel, employee training, leadership development,
and workforce retention, and stated that it plans to undertake a number
of initiatives to support this strategy. However, a specific plan with
time frames for implementing the initiatives has not been developed.
Such a plan would help guide IRS‘s efforts in addressing IT human
capital goals and would be useful in measuring progress in implementing
the goals.
What GAO Recommends:
GAO recommends that the Commissioner of Internal Revenue direct the
Chief Information Officer to complete a plan with specific time frames
for implementing the initiatives supporting its information technology
(IT) human capital strategy. In providing comments on a draft of this
report, the Acting Commissioner agreed with the recommendation and
outlined actions that IRS is planning to take to address it. IRS also
provided technical comments.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.GAO-08-420]. For more information, contact David
A. Powner at (202) 512-9286 or pownerd@gao.gov.
[End of section]
Contents:
Letter:
Recommendation for Executive Action:
Agency Comments:
Appendixes:
Appendix I: Briefing Slides from the January 8, 2008, Briefing to the
Senate and House Appropriations Subcommittee Staffs:
Appendix II: Comments from the Internal Revenue Service:
Appendix III: GAO Contact and Staff Acknowledgments:
Figure 1: Summary of Cost and Schedule Performance for Fiscal Year 2007
Project Milestones:
Abbreviations:
AD: Applications Development:
AMS: Accounts Management Services:
BSM: Business Systems Modernization:
CADE: Customer Account Data Engine:
EA: enterprise architecture:
ELC: enterprise life cycle:
F&PC: Filing and Payment Compliance:
IRS: Internal Revenue Service:
IT: information technology:
MeF: Modernized e-File:
MV&S: Modernization Vision and Strategy:
OMB: Office of Management and Budget:
[End of section]
March 7, 2008:
The Honorable Richard J. Durbin:
Chairman:
The Honorable Sam Brownback:
Ranking Minority Member:
Subcommittee on Financial Services and General Government:
Committee on Appropriations:
United States Senate:
The Honorable José E. Serrano:
Chairman:
The Honorable Ralph Regula:
Ranking Minority Member:
Subcommittee on Financial Services and General Government:
Committee on Appropriations House of Representatives:
As required by law, the Internal Revenue Service (IRS) submitted its
fiscal year 2008 expenditure plan in August 2007 to the congressional
appropriations committees, requesting $235.8 million from the Business
Systems Modernization (BSM) account.[Footnote 1] Our objectives in
reviewing the plan were to (1) determine whether the plan satisfied the
conditions specified in the law,[Footnote 2] (2) determine IRS's
progress in implementing our prior recommendations, and (3) provide any
other observations about the plan and IRS's BSM program.
On January 8, 2008, we briefed the cognizant congressional
appropriations subcommittee staffs on the results of our review. This
report transmits the materials we used at the briefing and provides the
recommendation that we made to the Commissioner of Internal Revenue.
The full briefing materials, including our scope and methodology, are
included as appendix I. At the request of IRS, we have removed
completion dates for project milestones planned for fiscal year 2008
from the briefing because these dates were determined before funding
was approved by Congress.
In summary, we made the following major points:
* IRS's fiscal year 2008 plan satisfies each of the six legislative
conditions. These conditions include meeting the Office of Management
and Budget's capital planning and investment control review
requirements and complying with federal systems acquisition
requirements and management practices.
* IRS has taken steps to address our prior recommendations to improve
its modernization management controls and capabilities, including
adding a new focus area to its Modernization Vision and Strategy and
defining and beginning to implement an approach for developing a
quantitative measure of progress in meeting project scope expectations.
However, work remains to fully implement our recommendations, including
steps to complete the Modernization Vision and Strategy.
* IRS has made progress in implementing BSM projects and in meeting
cost and schedule commitments for most deliverables, but three project
milestones[Footnote 3] experienced significant cost or schedule delays.
During 2007, IRS completed milestones of the Filing and Payment
Compliance (F&PC) (a tax collection case analysis support system),
Modernized e-File (MeF) (an electronic filing system), Customer Account
Data Engine (CADE) (the new taxpayer information database), and
Accounts Management Services (AMS) (a system intended to provide
applications for IRS employees and taxpayers to access, validate, and
update accounts on demand). Our analysis of reported project costs and
completion dates showed that 13 of the 14 associated project milestones
that were scheduled for completion during this time were completed
within 10 percent of cost estimates, and 11 of the 14 milestones were
delivered within 10 percent of schedule estimates. However, a milestone
for CADE exceeded its planned schedule by 66 percent and experienced a
15 percent cost increase; another milestone for the same project
incurred a 153 percent schedule delay; and a milestone for MeF
experienced a 41 percent schedule delay (see fig. 1).
Figure 1: Summary of Cost and Schedule Performance for Fiscal Year 2007
Project Milestones:
This figure is a bar graph showing summary of cost and schedule
performances for fiscal year 2007 project milestones.
[See PDF for image]
Source: GAO analysis of IRS data.
[End of figure]
* Future BSM project releases continue to face significant risks and
issues, which IRS is addressing. Specifically, the agency has
identified significant risks and issues with planned system deliveries
of CADE and AMS and reports that maintaining alignment between the two
systems will be a significant challenge and source of risk for the BSM
program. IRS recognizes the potential impact of identified risks and
issues on its ability to deliver projects within cost and schedule
estimates and has developed mitigation strategies to address them.
While mitigation strategies have been developed, the risks and
challenges confronting future releases of CADE and AMS are nevertheless
significant, and we will continue to monitor them and actions to
address them.
* IRS continues to make progress in addressing high-priority BSM
program improvement initiatives. This program improvement process
continues to be an effective means of regularly assessing,
prioritizing, and incrementally addressing BSM issues and challenges.
In September 2007, IRS completed another cycle of initiatives and
initiated a new cycle, which will be completed at the end of March
2008. Initiatives that were addressed in the 6-month cycle ending in
September 2007 included information technology (IT) human capital,
information security, and process improvements (e.g., developing and
implementing standardized earned value management[Footnote 4] practices
for major projects).
* Efforts to address human capital challenges continue, but more work
remains. IRS developed an IT human capital strategy that addresses
hiring critical personnel, employee training, leadership development,
and workforce retention, and agency officials stated that they plan to
undertake a number of human capital initiatives in support of their
human capital strategy, including conducting analyses of turnover rates
and continuing efforts to replace key leaders lost to retirement by
expanding the Succession Management Program. However, a specific plan
with time frames for implementing these initiatives has not been
developed. Such a plan would help guide IRS's efforts in addressing its
IT human capital gaps and be useful in measuring progress in
implementing them.
* Security weaknesses affect IRS's modernization environment. As we
reported in November 2007,[Footnote 5] the agency continues to have
weaknesses in its information security controls. In addition, IRS has
identified security weaknesses through its high-priority initiatives
program. While actions to address our report findings and the high-
priority initiatives help to improve IRS's security posture, the
modernization environment will continue to be at risk until the agency
fully implements its security program.
Recommendation for Executive Action:
To allow for more effective congressional oversight of the BSM program,
we recommend that the Commissioner of Internal Revenue direct the Chief
Information Officer to complete a plan with specific time frames for
implementing the initiatives supporting its IT human capital strategy.
Such a plan would help guide IRS's efforts and measure progress in
implementing them.
Agency Comments:
In providing written comments on a draft of this report, the Acting
Commissioner of Internal Revenue agreed with our recommendation and
outlined actions that IRS is planning to take to address it. IRS also
provided technical comments which we addressed, as appropriate. The
Acting Commissioner's written comments are reprinted in appendix II.
We are sending copies of this report to the Chairmen and Ranking
Minority Members of the Senate and House committees and subcommittees
that have appropriations, authorization, and oversight responsibilities
for the IRS. We are also sending copies to the Commissioner of Internal
Revenue, the Secretary of the Treasury, the Chairman of the IRS
Oversight Board, and the Director of OMB. We also will make copies
available to others upon request. In addition, the report will be
available at no charge on the GAO Web site at [hyperlink,
http://www.gao.gov].
Should you or your offices have questions on matters discussed in this
report, please contact me at (202) 512-9286 or at pownerd@gao.gov.
Contact points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this report. GAO staff who
made key contributions to this report are listed in appendix III.
Signed by:
David Powner:
Director, Information Technology Management Issues:
[End of section]
Appendixes:
Appendix I Briefing Slides from the January 8, 2008, Briefing to the
Senate and House Appropriations Subcommittee Staffs:
Review of IRS‘s Fiscal Year 2008 Business Systems Modernization
Expenditure Plan:
Briefing for the Staffs of the Subcommittee on Financial Services and
General Government Senate Committee on Appropriations and
Subcommittee on Financial Services and General Government House
Committee on Appropriations:
January 8, 2008:
This briefing has been modified to incorporate editorial changes on
pages 3, 4, 13, 18, 19, 22, and 37. At the request of IRS, we have also
removed completion dates for project milestones planned for fiscal year
2008 from the briefing because these dates were determined before
funding was approved by Congress.
Briefing Contents:
Introduction and Objectives;
Results in Brief;
Background;
Scope and Methodology;
Results;
Conclusions;
Recommendation for Executive Action;
Agency Comments;
Appendixes:
* I – Description of Business Systems Modernization Projects and
Program-level Initiatives;
* II – Additional Detail on IRS‘s Fiscal Year 2008 BSM Expenditure
Plan;
* III – IRS Reported Project Cost/Schedule Changes for Projects
Scheduled for Completion in Fiscal Year 2007;
Introduction and Objectives:
The Internal Revenue Service (IRS) has long relied on obsolete
automated systems for key operational and financial management
functions, and its attempts to modernize these computer systems span
several decades. IRS‘s multibillion-dollar Business Systems
Modernization (BSM) program, initiated in fiscal year 1999, is the
agency‘s latest attempt to modernize its systems. IRS contracted with
Computer Sciences Corporation as the PRIME systems integration support
contractor to assist with designing, developing, and integrating a new
set of information systems that are intended to replace IRS‘s aging
business and tax processing systems. BSM is a high-risk, highly complex
program that involves the development and delivery of a number of
modernized tax administration, internal management, and core
infrastructure projects that are intended to provide improved and
expanded service to taxpayers and internal business efficiencies for
IRS.
Under the Financial Services and General Government Appropriations Act,
2008,[Footnote 6] appropriations for the IRS BSM program for fiscal
year 2008 are not available for obligation (except for labor costs)
until IRS submits a modernization expenditure plan to the congressional
appropriations committees and obtains their approval. This plan must:
* meet the capital planning and investment control review requirements
established by the Office of Management and Budget (OMB);
* comply with IRS‘s enterprise architecture;[Footnote 7]
* conform with IRS‘s enterprise life cycle methodology;[Footnote 8]
* comply with federal acquisition rules, requirements, guidelines, and
systems acquisition management practices;
* be approved by IRS, the Department of the Treasury, and OMB; and:
* be reviewed by GAO.
Since mid-1999, IRS has submitted a series of expenditure plans
requesting release of BSM-appropriated funds. To date, about $2.3
billion has been appropriated and released for BSM.
On August 13, 2007, IRS submitted its fiscal year 2008 expenditure plan
to the relevant House and Senate appropriations subcommittees, seeking
release of $235.8 million from the BSM account.[Footnote 9]
As agreed with IRS‘s appropriations subcommittees, our objectives were
to:
* determine whether IRS‘s fiscal year 2008 expenditure plan satisfies the
legislative conditions specified in IRS‘s appropriations,
* determine IRS‘s progress in implementing our prior expenditure plan
review recommendations, and:
* provide any other observations about the plan and the BSM program.
Results in Brief:
IRS‘s fiscal year 2008 plan satisfies each of the six legislative
conditions.
IRS has taken steps to address our prior recommendations to improve its
modernization management controls and capabilities, including adding a
new focus area to its Modernization Vision and Strategy and defining
and beginning to implement an approach for developing a quantitative
measure of progress in meeting project scope expectations. However,
steps remain to fully implement our recommendations. Until our
recommendations are fully implemented, the risk that IRS‘s
modernization program will not be managed effectively will remain and
Congress may not have the information it needs to effectively assess
IRS‘s performance in implementing BSM.
We have five observations related to the BSM program and fiscal year
2008 expenditure plan:
IRS has made progress in implementing BSM projects and in meeting cost
and schedule commitments for most deliverables, but three project
milestones[Footnote 10] experienced significant cost and/or schedule
delays. During 2007, IRS completed milestones of Filing and Payment
Compliance (a tax collection case analysis support system), Modernized
e-File (MeF) (an electronic filing system), Customer Account Data
Engine (CADE) (the new taxpayer information database), and Accounts
Management Services (AMS) (a system intended to provide applications
for IRS employees and taxpayers to access, validate, and update
accounts on demand). Our analysis of IRS‘ reported project costs and
completion dates showed that 13 of the 14 associated project milestones
that were scheduled for completion during this time were completed
within 10% of cost estimates and 11 of the 14 milestones were delivered
within 10% of schedule estimates. However, a milestone for CADE
exceeded its planned schedule by 66% and experienced a 15% cost
increase; another milestone for the same project incurred a 153%
schedule delay, and a milestone for MeF experienced a 41% schedule
delay.
Future BSM project releases[Footnote 11] continue to face significant
risks and issues, which IRS is addressing. IRS has identified
significant risks and issues with planned system deliveries of CADE and
AMS. For example, IRS reported that integration testing and system
acceptance testing for the release of CADE intended to support taxpayer
returns processing for the 2008 filing season was in jeopardy partly
because of delays resulting from, among other things, defects and data
errors that required correction. IRS recognizes the potential impact of
identified risks and issues on its ability to deliver projects within
cost and schedule estimates, and has developed mitigation strategies to
address them. While IRS has developed mitigation strategies, the risks
and challenges confronting future releases of CADE and AMS are
nevertheless significant and we will continue to monitor them and IRS‘s
actions to address them.
IRS continues to make progress in addressing high-priority BSM program
improvement initiatives. IRS‘s program improvement process continues to
be an effective means of regularly assessing, prioritizing, and
incrementally addressing BSM issues and challenges. In September 2007,
IRS completed another cycle of initiatives and initiated a new cycle,
which will be completed at the end of March 2008. Initiatives that are
currently being addressed include standardizing the use of earned value
management[Footnote 12] across major projects.
Efforts to address human capital challenges continue, but more work
remains. IRS stated that it plans to undertake a number of human
capital initiatives during fiscal year 2008 and beyond in support of
its human capital strategy, including conducting analyses of turnover
rates and continuing efforts to replace key leaders lost to retirement
by expanding its Succession Management Program. However, a specific
plan with time frames for implementing these initiatives has not been
developed. Such a plan would help guide IRS‘s efforts in addressing its
information technology (IT) human capital gaps and be useful in
measuring progress in implementing them.
Security weaknesses affect IRS‘s modernization environment. As we
reported in November 2007, IRS continues to have weaknesses with its
information security controls.[footnote 13] In addition, IRS has
identified security weaknesses through its high priority initiatives
program. While actions to address our report findings and the high
priority initiatives help to improve IRS‘s security posture, the
modernization environment will continue to be at risk until the agency
fully implements its security program.
To allow for more effective congressional oversight of the BSM program,
we are recommending that the Commissioner of Internal Revenue direct
the Chief Information Officer to complete a plan with specific time
frames for implementing the initiatives supporting its human capital
strategy. Such a plan would help guide IRS‘s efforts and measure
progress in implementing them.
In e-mail comments on a draft of this briefing, the Associate Chief
Information Officer for Applications Development stated that it
addresses many of BSM‘s positive accomplishments from 2007. She also
provided clarifying and technical comments that we addressed, as
appropriate.
Background:
Since 1999, we have reviewed and reported on 14 BSM expenditure plans.
In particular, we have reported on program management capabilities and
controls that are critical to the effective management of the BSM
program. They include:
* cost and schedule estimates: we reported that IRS did not have
effective procedures for validating contractor-developed cost and
schedule estimates;[Footnote 14]
* contract management: we reported that IRS did not have effective
processes for determining the type of task order to be awarded in
acquiring modernized systems;[Footnote 15]
* requirements development and management: we reported that IRS did not
have adequate policies and procedures in place to guide its system
modernization projects in developing and managing
requirements;[Footnote 16] and:
* post implementation reviews: we reported that post implementation
reviews conducted were incomplete and did not follow IRS procedures.
[Footnote 17]
In our reports, we have made recommendations aimed at strengthening
IRS‘s program management controls and capabilities. Over the years, IRS
has addressed several of these recommendations. However, more work
remains for some capabilities and controls to be fully
institutionalized or implemented.
IRS‘s Applications Development (AD) organization has primary
responsibility for managing and delivering the BSM program. This group,
within the Office of the Chief Information Officer, was established in
2006 and integrates Business Systems Modernization”whose primary
mission was delivering IRS modernization”with the Business Systems
Development Division”whose primary focus was maintaining the current
production systems environment. It is headed by the Associate Chief
Information Officer for Applications Development.
The AD organization includes three core competency areas:
Domains: focus on a major functional mission area of the IRS that
provides IT legacy and modernized systems in support of the business
(e.g., Compliance and Customer Service).
Matrix domains: support functions for the primary operating domains and
are tasked with improving the effectiveness of AD operations (e.g., the
Test, Assurance, and Documentation Office and the Program Management
Office).
Front office teams: perform administrative, human resources, and
financial management functions for the entire organization (e.g.,
Resource Management).
IRS‘s fiscal year 2008 expenditure plan describes the agency‘s efforts
to:
* continue ongoing program-level initiatives (e.g., architecture and
integration and program management) and core infrastructure projects
(e.g., infrastructure shared services),
* fund internal management projects (i.e., common services),[Footnote 18]
* continue nine tax administration project releases to their next
milestones, and:
* begin five new tax administration project releases.
Key tax administration projects include:
* Modernized e-File, which is to provide a single standard for filing
electronic tax returns;
* Customer Account Data Engine, which is intended to provide the
modernized database foundation to replace the existing Individual
Master File processing system that contains the repository of
individual taxpayer information; and:
* Accounts Management Services, which is intended to enhance the Customer
Account Data Engine by providing applications for IRS employees and
taxpayers to access, validate, and update accounts on demand.
Details on these and other BSM projects and program-level initiatives
are provided in appendix 1.
Table 1 shows a financial summary of the plan.
Table 1: Summary of IRS‘s Fiscal Year 2008 BSM Expenditure Plan[A]
Tax administration projects: Modernized e-File;
Amount requested (in thousands): $55,802.
Tax administration projects: Customer Account Data Engine;
Amount requested (in thousands): $58,500.
Tax administration projects: Accounts Management Services;
Amount requested (in thousands): $28,983.
Subtotal-tax administration projects;
Amount requested (in thousands): $143,285.
Core infrastructure projects: Development, Integration, and Testing
Environments;
Amount requested (in thousands): $13,167.
Core infrastructure projects: Infrastructure Shared Services;
Amount requested (in thousands): $25,983.
Subtotal-core infrastructure projects;
Amount requested (in thousands): $39,150.
Architecture, integration, and management: Architecture and
integration;
Amount requested (in thousands): $13,784.
Architecture, integration, and management: Business integration;
Amount requested (in thousands): $4,753.
Architecture, integration, and management: Business rules;
Amount requested (in thousands): $3,169.
Architecture, integration, and management: Management processes;
Amount requested (in thousands): $3,549.
Architecture, integration, and management: Federally funded research
and development center;
Amount requested (in thousands): $6,883.
Architecture, integration, and management: Program management;
Amount requested (in thousands): $2,962.
Subtotal-architecture, integration, and management;
Amount requested (in thousands): $35,100.
Internal management projects;
Amount requested (in thousands): $16,000.
Management reserve;
Amount requested (in thousands): $2,310.
Total;
Amount requested (in thousands): $235,845.
Source: IRS.
[A] See appendix II for additional details on the plan.
[End of figure]
Scope and Methodology:
To accomplish our objectives, we:
* reviewed the fiscal year 2008 expenditure plan submitted by IRS in
August 2007;[Footnote 19]
* analyzed the plan for compliance with the legislative conditions;
* interviewed IRS program and project management officials to corroborate
our understanding of the plan and other BSM activities;
* analyzed available evidence on recent agency efforts to implement our
prior recommendations, including progress on improving its
modernization management controls and capabilities;
* reviewed and analyzed modernization program review and project
management briefings and related documentation to assess
program/project status and associated issues and risks; and:
* reviewed program management reports to assess the progress IRS has made
in completing actions and implementing program management improvements
related to the BSM highest priority initiatives.
To assess the reliability of the cost and schedule information
contained in this expenditure plan, we interviewed IRS officials in
order to gain an understanding of the data and discuss our use of the
data. In addition, we checked that information in the plan was
consistent with information contained in IRS internal briefings. We did
not, however, assess the accuracy and reliability of the information
reported in these briefings.
We performed our work between September and December 2007, in
Washington, D.C., in accordance with generally accepted government
auditing standards.
Results:
Legislative Conditions:
Objective 1: The plan satisfies the conditions applicable to IRS‘s
fiscal year 2008 appropriations.
Table 2: Fiscal Year 2008 Expenditure Plan Provisions for Satisfying
Legislative Conditions:
Legislative conditions: 1. Meets OMB capital planning and investment
control review requirements;
Expenditure plan provisions: IRS‘s fiscal year 2008 expenditure plan
identifies funding for managing IT investments as part of a single
portfolio through its capital planning and investment control process.
This includes conducting periodic reviews to select and control IT
investments. IRS also stated that it plans to conduct post
implementation reviews on CADE release 2.2 in mid-fiscal year 2008 and
on AMS release 1.1 at the end of fiscal year 2008. These planned
actions are consistent with OMB capital planning and investment control
review requirements.
Legislative conditions: 2. Complies with IRS‘s enterprise architecture;
Expenditure plan provisions: The plan identifies funding for complying
with IRS‘s enterprise architecture by providing for continued
definition and implementation of the EA. For example, it identifies
funding needed for:
* finalizing and publishing updates to the EA based on change requests,
* supporting the performance of EA compliance certification activities,
and:
* improving the IRS enterprise transition strategy and release
architecture.
Legislative conditions: 3. Conforms with IRS‘s enterprise life cycle
(ELC) methodology;
Expenditure plan provisions: The plan conforms with IRS‘s enterprise
life cycle methodology in that it calls for meeting the requirements in
IRS‘s ELC management program. For example, the plan calls for:
* maintaining responsibility for coordinating, tracking, and
integrating all programwide costs, schedules, releases, issues, and
risks and:
* maintaining and enhancing the ELC. For example, according to the
plan, IRS intends to update the ELC to reflect modifications to testing
policies, procedures, processes, plans, and schedule due to the
assumption of the integrator role.
Legislative conditions: 4. Complies with the acquisition rules,
requirements, guidelines, and systems acquisition management practices
of the federal government;
Expenditure plan provisions: As part of the ELC, IRS has defined
processes, roles, and responsibilities for implementing Carnegie Mellon
University‘s Software Engineering Institute Software Acquisition
Capability Maturity ModelTM practices for the key process areas within
the repeatable level (level 2) of the 5-stage model.a These practices
are consistent with federal acquisition requirements and management
practices, and the plan calls for implementation of the ELC on all
projects.
Legislative conditions: 5. Approved by IRS, the Department of the
Treasury, and OMB;
Expenditure plan provisions:
* IRS”July 30, 2007;
* Treasury”August 3, 2007;
* OMB”August 2, 2007.
Legislative conditions: 6. Reviewed by GAO;
Expenditure plan provisions:
* GAO”January 8, 2008, briefing to IRS‘s appropriations subcommittees.
Source: The Financial Services and General Government Appropriations
Act, 2008, appropriations for IRS‘s BSM program for fiscal years 2008-
2010, as provided in the Consolidated Appropriations Act, 2008, Pub. L.
No. 110-161, div. D, title 1, 121 Stat. 1844, 1972 (Dec. 26, 2007), and
IRS‘s fiscal year 2008 expenditure plan submitted to Congress in August
2007.
[A] These key process areas are acquisition planning, solicitation,
requirements development and management, project management, contract
tracking and oversight, evaluation, and transition to support. For this
condition, we did not determine whether the expenditure plan comports
with the Federal Acquisition Regulation or other federal requirements
beyond those encompassed by the Software Engineering Institute‘s
Capability Maturity Model.
[End of table]
Prior Recommendations Status:
Objective 2: IRS has made progress in addressing recommendations to
improve its modernization management controls and capabilities, but
steps remain to fully implement them.
During 2007, IRS made progress in addressing our recommendations to
improve its modernization management controls and capabilities from
prior expenditure plan reviews. For example, it has developed and begun
to implement an approach for developing a quantitative measure of scope
performance. However, steps remain to fully implement them.
Table 3: Status of IRS‘s Progress in Implementing Prior GAO
Recommendations Prior GAO recommendations:
Prior GAO Recommendations: Requirements development and
management”Ensure that BSM completes the delivery of policies and
procedures for requirements development and management as planned;
Implemented: [Empty];
In progress: Check;
Status as of fiscal year 2008 plan: See p. 15.
Prior GAO Recommendations: Post implementation reviews”Perform analyses
of investment data to determine whether completed projects have
achieved expected benefits;
Implemented: [Empty];
In progress: Check;
Status as of fiscal year 2008 plan: See p. 16.
Prior GAO Recommendations: Modernization vision and strategy”Fully
revisit the vision and strategy for the BSM program and develop a
new set of long-term goals, strategies, and plans that
are consistent with the budgetary outlook and IRS‘s
management capabilities;
Implemented: [Empty];
In progress: Check;
Status as of fiscal year 2008 plan: See pp. 17.
Prior GAO Recommendations: Quantitative measures of progress in
scope”Ensure that future expenditure plans include a quantitative
measure of progress in meeting project scope
expectations;
Implemented: [Empty];
In progress: Check;
Status as of fiscal year 2008 plan: See pp. 18-19.
Source: GAO analysis of IRS data.
[End of table]
Requirements Development and Management:
In March 2006, we recommended that IRS complete requirements
development and management policies and procedures.[Footnote 20] IRS
agreed with our recommendation, and in response, developed policies,
procedures, and tools for developing and managing project requirements
through its Business Rules and Requirements Management office.
Specifically, IRS developed (1) a standardized process for the
elicitation and documentation of requirements; (2) guidance on
establishing and maintaining full bidirectional requirements
traceability; (3) guidance on tracking cost and schedule impacts of
changes to requirements; and (4) a process for ensuring that formal
peer reviews are planned and completed for key requirements. IRS stated
that it started using these policies, procedures, and tools to manage
requirements for several projects, including CADE and AMS, and that it
plans to deploy the capabilities it has developed to a wider range of
projects and also develop programwide reusable requirements during
fiscal year 2008. We are currently reviewing the policies, procedures,
and tools that IRS has developed to determine the extent to which they
address our recommendations.
Post Implementation Reviews:
In November 2004, we recommended that post implementation reviews of
deployed BSM projects include an analysis of quantitative and
qualitative investment data to determine whether expected benefits were
achieved.[21] IRS agreed with our recommendation, and, in response
developed a new procedure for conducting PIRs and conducted a pilot PIR
which identified process improvement opportunities. IRS also recently
stated that, due to fiscal year 2007 constraints and other priorities,
it plans to conduct streamlined PIRs on CADE release 2.2 and AMS
release 1.1 12-18 months after those releases are deployed.
Specifically, for CADE release 2.2, IRS expects to conduct the PIR in
mid-fiscal year 2008, and for AMS release 1.1, it expects to start the
PIR at the end of the fiscal year. For other projects, IRS stated that
it would conduct lessons learned activities and implement changes based
on those activities. We believe that these are reasonable plans given
resource constraints and other priorities and will monitor IRS‘s
actions to implement them.
Modernization Vision and Strategy:
In July 2005, we recommended that IRS fully revisit the vision and
strategy for the BSM program and develop a new set of long-term goals,
strategies, and plans consistent with the budgetary outlook and IRS‘s
management capabilities.[Footnote 22] We also noted that the vision and
strategy should include time frames for consolidating and retiring
legacy systems. IRS agreed with our recommendation, and, in response,
developed an initial cycle of its Modernization Vision and Strategy
(MV&S) and 5-year enterprise transition strategy in fiscal year
2006[Footnote 23] to guide IT investment decisions during fiscal years
2007 through 2011. The MV&S framework was built on a functional
segmentation of IRS into core mission business functions (business
domains) supported by services necessary for their effective and secure
execution (service domains). The Enterprise Transition Strategy
described the overall IRS vision and strategy and how existing and
proposed investments align to it. It also documented the scope,
business challenges, current and transition architectures, redesign
opportunities, strategy, proposed projects and associated release
strategies, and the planned evolution (i.e., reuse, consolidation,
retirement) of related key current production environment systems for
each of the MV&S business domains. During 2007, IRS updated its 5-year
Enterprise Transition Strategy.[Footnote 24] The strategy includes
security and privacy (a new service domain), planned business domains,
and opportunities for retirement. IRS also developed an initial list of
systems for consolidation and retirement for fiscal year 2008 but
stated that it plans to develop a methodology for doing this on an
annual basis. IRS also stated that it is building on the current
retirement efforts by application development and efforts to address
OMB‘s directive for a segment architecture for each business domain in
2008 for the filing payment and compliance business domain. Lessons
learned from this activity are to be incorporated into the methodology
for retiring and consolidating systems. While these actions are
positive steps, actions remain for IRS to fully address our
recommendation, including developing long-term plans for completing BSM
and finalizing and implementing the methodology for consolidating and
retiring legacy systems.
Quantitative Measure of Progress in Meeting Scope Expectations:
In February 2007, we recommended that IRS ensure that future
expenditure plans include a quantitative measure of progress in meeting
scope expectations.[Footnote 25] We also recommended that, in
developing this measure, IRS consider using earned value management
[Footnote 26] since this is a proven technique required by
OMB for measuring cost, schedule, and functional performance (i.e.,
scope of work) against plans. While IRS agreed with our recommendation
to develop a quantitative measure of progress in meeting scope
expectations, it has stated that it does not believe earned value
management would provide this measure, given the manner in which the
technique is being used at the agency.[Footnote 27] Instead, IRS has
developed an incremental approach to address our recommendation.
Specifically, as an initial step, it has proposed a more detailed
qualitative measure than previously used that would consist in showing
the difference between a project release‘s planned and delivered
capabilities. This was implemented in the fiscal year 2008 expenditure
plan. As a next step, IRS stated that it plans to leverage its
requirements management tools to assign quantitative values to the
capabilities. IRS intends to implement this approach for the fiscal
year 2009 expenditure plan. While these are steps in the right
direction, until IRS fully implements them, Congress may not have the
information it needs to effectively assess IRS‘s performance in
implementing BSM. For the long-term, IRS should consider using earned
value management to measure progress in meeting scope expectations as
required by OMB policy as this is a proven technique for doing so.
Observations:
Objective 3: Observations about IRS‘s BSM Program and Expenditure Plan
Observation 1: IRS made additional progress in implementing BSM
projects and in meeting cost and schedule commitments for most
deliverables, but three project milestones experienced significant cost
and/ or schedule delays.
During 2007, IRS completed releases and milestones of its modernized
systems that have provided benefits to the taxpayers and the agency.
For example, according to IRS,
Release 1.1 of F&PC provides IRS with an automated standalone system
used to analyze tax collection cases and route selected cases to
private collection agencies and then tracks their success in resolving
the cases.
Release 1.2 of F&PC was completed and became the first modernized
application to use the enterprise application integration
broker[Footnote 28] for integration with the legacy systems in support
of assigning cases to private collection agencies. This release fully
implemented inventory management capabilities using the IRS
infrastructure and during fiscal year 2007, according to IRS officials,
gross revenue received as a result of the Private Debt Collection
program amounted to approximately $31 million.
Release 4 of MeF allows the processing of Form 1065 (U.S. Return of
Partnership Income), 1065-B (U.S. Return of Income for Electing Large
Partnerships) and associated forms and schedules for tax year 2006
submissions.
Release 1.2 of AMS includes a new inventory and workflow that automates
the assignment, research, resolution, and closure for internally
generated cases currently worked in a paper-based manual process.
Release 1.3 of AMS provides for the migration of current platform and
software products to the enterprise architecture standard products.
IRS continued to make progress in meeting cost and schedule commitments
for completing project milestones during 2007, but 3 of the 14 project
milestones that were scheduled to be completed experienced significant
cost and/or schedule delays. Specifically, our analysis of IRS‘s
reported project costs and completion dates shows that 13 of the 14
associated project milestones that were scheduled for completion during
this time were completed within 10% of cost estimates and 11 of the 14
milestones were delivered within 10% of schedule estimates. However, a
milestone for CADE release 2.2 exceeded its planned schedule by 66% and
experienced a15% cost increase; a milestone for MeF release 5
experienced a 41% schedule delay; and a milestone for CADE release 3
incurred a 153% schedule delay. Figure 1 shows the cost and schedule
variances of the project milestones that were scheduled to be delivered
during fiscal year 2007.
Figure 1: Summary of Cost and Schedule Performance for Fiscal Year 2007
Project Milestones:
This figure is a bar graph showing the summary of cost and schedule
performance for fiscal year 2007 project milestones.
[See PDF for image]
Source: GAO analysis of IRS data.
Note: Variances for projects through milestone 3 are based on rough
order of magnitude estimates. Post-milestone 3 variances are based on
more specific estimates.
[End of figure]
Following are details on the project milestones that experienced
significant cost and/or schedule delays:
* CADE: Release 2.2 of CADE began supporting the 2007 filing season in
March but completed milestone 4 (development) 123 days behind schedule.
This delay amounted to a 66% increase over the planned schedule for
completing milestone 4 and was accompanied by a final cost that was 15%
greater than budgeted. According to IRS, the overrun was caused by the
complexity of the requirements, which extended the requirements
elicitation process and delayed the physical design phase and resulted
in delays through the rest of the development life cycle. The delay in
full implementation impacted the number of returns that could be
processed through the speedier CADE system. IRS had originally intended
CADE to post 33 million taxpayer returns during the 2007 filing season
(more than four times the estimated 7.4 million posted by CADE during
2006), but as of September, the system had posted only about 11.2
million returns.
The demand on available resources to complete release 2.2 also impacted
the planned schedule for subsequent releases of CADE. As a result,
milestone 3 of release 3 of CADE was completed 214 days behind schedule.
* MeF: Milestone 3 of release 5 of MeF was completed 30 days behind
schedule.[Footnote 29] According to IRS, this was due primarily to
delays in getting started that occurred early in the design phase and
IRS is currently indicating no change in the projected completion date
for milestones 4 and 5. Details on the cost and schedule status of
project releases as reported by IRS are in appendix III.
Observation 2: Future BSM project releases continue to face significant
risks and issues, which IRS is addressing.
IRS has reported that challenges and risks continue to confront future
planned project releases. For example:
CADE: The August 2007 results of an independent assessment IRS
commissioned to examine its plans for completing the core functionality
of the release of CADE intended to support taxpayer returns processing
starting in January 2008 (release 3.2) noted the following concerns:
* the potential lack of resource availability with parallel testing
activities;
* the insufficient use of project management and control artifacts to
help identify where schedule risk exists and facilitate predicting the
outcome; and:
* the lack of a detailed, executable contingency plan in the event
significant difficulty is encountered in delivering the release.
In addition, as of September, IRS reported that integration testing for
the first build[Footnote 30] was in jeopardy due to delays resulting in
part from defects and data errors that required correction. Systems
acceptance testing for data conversion was also in jeopardy.
Future releases of AMS: IRS reports that future releases of AMS are
expected to increase in complexity. According to IRS, maintaining
alignment between the CADE and AMS programs will also be a significant
challenge and source of risk for the BSM program, and will require
careful monitoring and management of both programs.
IRS recognizes the potential impact of these project risks and issues
on its ability to deliver planned functionality within cost and
schedule estimates, and has developed mitigation strategies to address
them. For example, to address the risks and issues confronting CADE
release 3.2, IRS developed a task network for use in managing risk and
also began working with the PRIME contractor to develop detailed
contingency plans in the event that delivery of this release becomes
seriously threatened. Status meetings are also held weekly to ensure
early visibility of potential problems and to optimize the opportunity
to devise and implement effective mitigating strategies. ’Tiger teams“
were also established to help minimize schedule delays in both these
areas. The independent assessment of CADE release 3.2 noted that, as a
result of the mitigation steps being taken, there was no reason to
shift directions for the release, and IRS officials stated that they
expect to deploy the release on time for the filing season. To address
the challenge of maintaining alignment between CADE and AMS releases,
IRS developed a release content master plan that defines the
relationship between releases of CADE and AMS. According to IRS,
several factors, stemming largely from the delay in deployment of CADE
release 2.2, have led to a need to modify the plan. During our review,
IRS told us that this plan would be updated by November 2007. However,
as of December, officials reported that it was still undergoing review.
While IRS has developed mitigation strategies, the risks and challenges
facing future releases of CADE and AMS are nevertheless significant and
we will continue to monitor them and IRS‘s actions to address them.
Observation 3: IRS continues to make progress in addressing high-
priority BSM program improvement initiatives.
IRS‘s high-priority program improvement initiatives process[Footnote
31] continues to be an effective means of regularly assessing,
prioritizing, and incrementally addressing BSM issues and challenges.
In September 2007, IRS completed another cycle of high priority
initiatives and is currently working on a cycle that is scheduled to be
completed by the end of March 2008. The key focus areas for the most
recent cycle included:
* human capital improvements (developing succession and staffing plans
across organizational levels and reducing the hiring gap),
* security improvements (updating the ELC to embed security processes,
procedures, and tools throughout the entire life cycle), and:
* process improvements (developing and implementing standardized earned
value management practices for all major applications development
projects).
Observation 4: Efforts are under way to address human capital
challenges, but more work remains.
In March 2007, IRS developed the Applications Development Strategic
Plan 2007-2011[Footnote 32] to establish a road map to ensure that
applications development decisions are focused on delivering the
mission in a manner consistent with the organization‘s vision. This
document includes a human capital strategy that addresses hiring
critical personnel, employee training, leadership development, and
workforce retention.
To support this strategy, IRS undertook high priority initiatives,
including convening a tiger team to identify challenges to the hiring
process and establishing the Executive Hiring Council to coordinate
recruitment actions and strategies to address the hiring gap for the
Modernization Information Technology Services organization. In
addition, IRS stated that during fiscal year 2008, it plans to conduct
analyses of turnover rates, use a cost index model to determine the
cost and drivers of turnover, and increase the hiring base for mission
critical positions through automation, simplification of the
application process, and the use of hiring incentives and continue its
efforts to quickly replace key leaders lost to retirement by expanding
its Succession Management Program and expanding use of its Leadership
Succession Review tool to levels below senior executive.
While IRS has identified these initiatives, it has not developed a
specific plan, including time frames for addressing them across the AD
organization. During our review, officials told us that such a plan
would be completed by the end of fiscal year 2007. However, it was not
completed by that date, and IRS has not specified a new completion
date. Until IRS develops a plan for addressing its various human
capital initiatives, it may be challenged in having the staff resources
it needs to effectively support BSM.
Observation 5: Security weaknesses affect IRS‘s modernization
environment.
IRS has security weaknesses affecting its modernization environment.
Specifically, in November 2007, we reported that IRS continued to have
weaknesses with its information security controls.[Footnote 33,34] For
example, we noted that there were significant control weaknesses that
allowed unauthorized users to access sensitive information, including
user IDs, passwords, and software code for mission critical
applications without having to login to the network. We identified a
key reason for the presence of these and other weaknesses as the lack
of a fully implemented security program.
In written comments on a draft of our report, IRS‘s Deputy Commissioner
agreed that our report fairly represented IRS‘s challenges and noted
actions it has taken to address the issues we identified including
establishing the Office of Privacy, Information Protection, and Data
Security to provide direction and oversight of the security and
protection of sensitive information; developing an integrated IT
security schedule and plan and a comprehensive IRS security strategy;
and encrypting all laptop data and tapes used in electronic data
exchange, and implementing an enterprise anti-virus Internet gateway
solution to detect and quarantine malicious content from invading
systems.
IRS has also identified security weaknesses through its high priority
initiatives program, and, to its credit, it is working to address them.
For example, through this program, IRS recently updated its enterprise
life cycle methodology to incorporate processes, procedures, and tools
into the early stages of the enterprise life cycle.[Footnote 35]
Through its high priority initiatives program, IRS is also addressing
these three additional security practices across the enterprise life
cycle:
Implementing the first phase of a comprehensive audit trails program.
This effort will establish program- level requirements and create
release plans that apply to enterprise audit trail capture, storage,
and management for all IRS Federal Information Security Management Act
systems.
Realigning the Modernization Information Technology Services General
Support Systems boundaries to improve security accountability and
ensure that acceptable levels of security are maintained.
Establishing an enterprisewide strategy and phased implementation plan
to automate security posture monitoring for major systems and network
platforms. Develop security posture monitoring plans that address the
compliance of security configurations, vulnerability management, and
patch management.
While actions to address our report findings and the high priority
initiatives help to improve its security posture, IRS‘s modernization
environment will continue to be at risk until the agency fully
implements its security program.
Conclusions:
During 2007, IRS continued to make progress in delivering BSM projects
that provided benefits to both taxpayers and the agency. IRS also
continued to improve its management capabilities and controls by, among
other things, taking steps to address our recommendations from prior
expenditure plan reviews and addressing its high priority initiatives.
These actions will likely result in more effective management of BSM
and help mitigate the risks inherent in managing such a large and
complex program. However, IRS is still facing significant challenges in
consistently meeting its cost and schedule commitments, managing
project- specific risks, addressing high priority initiatives, and
securing its many systems. In addition, it has not yet fully
implemented recommendations we have made. To bolster its human capital
efforts, IRS has developed a strategy to address hiring critical
personnel, employee training, leadership development, and workforce
retention. However, a specific plan with time frames for implementing
initiatives supporting this strategy has not yet been developed.
Recommendation for Executive Action:
To allow for more effective congressional oversight of the BSM program,
we are recommending that the Commissioner of Internal Revenue direct
the Chief Information Officer to complete a plan with specific time
frames for implementing the initiatives supporting its human capital
strategy. Such a plan would help guide IRS‘s efforts and measure
progress in implementing them.
Agency Comments:
In e-mail comments on a draft of this briefing, the Associate Chief
Information Officer for Applications Development stated that it
addresses many of BSM‘s positive accomplishments from 2007. She also
provided clarifying and technical comments that we addressed, as
appropriate.
Appendix I:
Table: Description of BSM Projects and Program-level Initiatives:
Proposed modernization initiative: Tax administration projects:
Modernized e-File;
Description: Is to provide a single standard for filing electronic tax
returns. Initial releases will address large corporations, small
businesses, and tax-exempt organizations. Its ultimate goal is the
conversion of IRS‘s 1040 e-file program.
Proposed modernization initiative: Tax administration projects:
Customer Account Data Engine;
Description: Is to build the modernized database foundation to replace
the existing Individual Master File processing system that contains the
repository of individual taxpayer information. Accounts Management
Services Is to deliver improved customer support and functionality by
leveraging existing IRS applications (Desktop Integration and
Correspondence Imaging System) and new technologies to bridge the gap
between modernization initiatives, such as the Customer Account Data
Engine and legacy systems. Accounts Management Services is to enhance
the Customer Account Data Engine by providing applications for IRS
employees and taxpayers to access, validate, and update accounts on
demand.
Proposed modernization initiative: Tax administration projects:
Internal management projects;
Description: Is to provide a new portal infrastructure. The
infrastructure will replace the existing three vendor-hosted external
portals, whose contracts expired in May 2006.
Proposed modernization initiative: Internal management projects: Common
Services;
Description: Is to provide a new portal infrastructure. The
infrastructure will replace the existing three vendor-hosted external
portals, whose contracts expired in May 2006.
Proposed modernization initiative: Core infrastructure projects:
Development, Integration, and Testing and Environments;
Description: Is to provide oversight for laboratory environments that
support evaluation, development, Environments and testing of components
from multiple projects: (1) Virtual Development Environment provides a
software development environment and a standardized set of tools and
(2) Enterprise Integration and Test Environment provides an integration
and testing environment for all projects.
Proposed modernization initiative: Core infrastructure projects:
Infrastructure Shared Services;
Description: Is to deliver, in incremental releases over multiple
years, a fully integrated, shared IT infrastructure to include
hardware, software, shared applications, data, telecommunications,
security, and an enterprise approach to systems and operations
management.
Proposed modernization initiative: Architecture, integration, and
management: Architecture and integration;
Description: Is to ensure that systems solutions meet IRS business
needs and that the development projects are effectively integrated into
the business environment.
Proposed modernization initiative: Architecture, integration, and
management: Business integration;
Description: Is to ensure that IRS‘s BSM program is aligned with the
business units‘ vision and delivers the desired business results. It
provides support to key activities such as transition management,
business rules enterprise management, and requirements development and
management operations.
Proposed modernization initiative: Architecture, integration, and
management: Business rules;
Description: Is to support business process analysis and redesign,
business rules harvesting and management, and business requirements
definition.
Proposed modernization initiative: Architecture, integration, and
management: Management processes;
Description: Is to provide sustaining support for program-level
management processes, including quality assurance, risk management,
program control and process management, and enterprise life cycle
maintenance and enhancements.
Proposed modernization initiative: Architecture, integration, and
management: Federally funded research and development center;
Description: Is to provide program management and systems engineering
support.
Proposed modernization initiative: Architecture, integration, and
management: Program management;
Description: Is to ensure that projects achieve their objectives;
provide the management information and IT infrastructure that supports
risk management, project cost and schedule estimating, and financial
management; and provide procurement management for the PRIME contract
and associated task orders.
Appendix II:
Table: Additional Detail on IRS‘s Fiscal Year 2008 BSM Expenditure
Plan:
[See PDF for image]
Source: IRS.
[A] Releases are software versions that provide a subset of the total
planned project functionality.
[B] Milestones correspond to phases within IRS‘s enterprise life cycle
(0 – vision and strategy/enterprise architecture, 1 – project
initiation, 2 – domain architecture, 3 – preliminary design, 4a –
detailed design, 4b – system development, 5 – system deployment).
[C] Core infrastructure projects and management initiatives are funded
on a fiscal year basis rather than by milestone.
[D] If the fiscal year 2008 BSM request is approved, $4.2 million from
MeF release 6, milestone 2-3 will transfer to management reserve and
the balance will be reprogrammed.
[End of figure]
Appendix III:
IRS Reported Cost/Schedule for Projects Scheduled for Completion in
Fiscal Year 2007:
This table shows the projects completed in fiscal year 2007. The
highlighted rows indicate project segments where actual reported costs
and/or schedules differ from planned by more than 10%.
Note: Variances for projects through milestone 3 are based on rough
order of magnitude estimates. Post-milestone 3 variances are based on
more specific estimates.
Source: GAO analysis of IRS data.
[End of figure]
Appendix II Comments from the Internal Revenue Service:
Department Of The Treasury:
Internal Revenue Service:
Washington. D.C. 20224:
February 22, 2008:
Mr. David Powner:
Director, Information Security Issues:
U.S. General Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Dear Mr. Powner:
I have reviewed the Government Accountability Office (GAO) draft report
titled "Business Systems Modernization (BSM): Internal Revenue
Service's Fiscal Year 2008 Expenditure Plan," GAO-08-420 (Job Code No.
310871). We continue to appreciate the sound and balanced work of the
GAO and are pleased that the GAO:
* Confirmed that our fiscal year 2008 expenditure plan satisfies the
conditions specified in the law that includes meeting the Office of
Management and Budget's capital planning and investment control review
requirements and complying with the federal systems acquisition
requirements and management practices;
* Recognized that we have taken steps to address the GAO's prior
recommendations to improve modernization management controls and
capabilities that include adding a new focus area to our Modernization
Vision and Strategy and defining an approach for developing a
quantitative measure of progress in meeting project scope expectations,
which we have begun implementing;
* Acknowledged our progress in implementing BSM projects and in meeting
cost and schedule commitments for most deliverables;
* Validated our continued progress in addressing high-priority BSM
program improvement initiatives and that our high-priority improvement
initiatives continue to be an effective means of assessing,
prioritizing, and incrementally addressing BSM issues and challenges;
and:
* Reported our current efforts to address human capital challenges such
as the development of an IT human capital strategy that addresses
hiring critical personnel, employee training, leadership development,
and workforce retention.
We agree with your report's recommendation as described in the
enclosure, that we need to develop specific time frames for
implementing our human capital initiatives and have begun that process.
In FY 2007, the ACIO, Applications Development (AD), identified
workforce retention and development as one of our most significant
challenges. The ACIO, AD, developed a strategy to address this
challenge and has taken aggressive steps to define the gaps and to
minimize the impact.
We appreciate your continued support and the assistance and guidance
from your staff. If you have any questions, or if you would like to
discuss our response in more detail, please contact me or call Arthur
L. Gonzalez, Chief Information Officer, at (202) 622- 6800.
Sincerely,
Linda E. Stiff:
Acting Commissioner of Internal Revenue:
Enclosure:
Draft Report - Business Systems Modernization Internal Revenue
Service's Fiscal Year 2008 Expenditure Plan (Audit #310871, GAO-08-
420):
Recommendation #1: To allow for more effective congressional oversight
of the BSM program, we recommend that the Commissioner of Internal
Revenue direct the Chief Information Officer to complete a plan with
specific time frames for implementing the initiatives supporting its IT
human capital strategy. Such a plan would help guide IRS's efforts and
measure progress in implementing them.
Corrective Action: We agree with this recommendation. In FY 2007, the
ACIO, Applications Development (AD), identified workforce retention and
development as one of our most significant challenges. The ACIO, AD,
developed a strategy to address this challenge and has taken aggressive
steps to define the gaps and to minimize the impact.
The ACIO, Management, will coordinate with the ACIO, AD, to refine our
Human Resources plan to include specific timeframes for implementing
the human capital initiatives.
Implementation Date: October 1, 2008;
Responsible Official: ACIO, Management;
Corrective Action Monitoring Plan: We will monitor this corrective
action as part of our internal management control system. We will enter
accepted corrective actions into the Joint Audit Management Enterprise
System (JAMES) and monitor them monthly until completion.
[End of section]
Appendix III GAO Contact and Staff Acknowledgments:
GAO Contact:
David A. Powner, (202) 512-9286, or p [Hyperlink, pownerd@gao.gov]
ownerd@gao.gov:
Staff Acknowledgments:
In addition to the individual named above, Sabine R. Paul, Assistant
Director; Neil Doherty; Nancy Glover; Sairah R. Ijaz; Rebecca LaPaze;
and Paul B. Middleton made key contributions to this report.
[End of section]
Footnotes:
[1] See the Financial Services and General Government Appropriations
Act, 2008, contained in the Consolidated Appropriations Act, 2008, Pub.
L. No. 110-161, div. D. title I, 121 Stat. 1844, 1972 (Dec. 26, 2007),
which provides a new level of funding for BSM. (At the time of our
briefing, IRS reported that it was updating its plans to reflect this
new level of funding.)
[2] BSM funds (except labor costs) are unavailable until IRS submits a
modernization expenditure plan to the congressional appropriations
committees and obtains their approval. This plan must (1) meet the
Office of Management and Budget's (OMB) capital planning and investment
control review requirements; (2) comply with IRS's enterprise
architecture; (3) conform with IRS's enterprise life cycle methodology;
(4) comply with federal acquisition rules, requirements, guidelines,
and systems acquisition management practices; (5) be approved by IRS,
the Department of the Treasury, and OMB; and (6) be reviewed by GAO.
IRS's fiscal year 2008 funding is provided under the Consolidated
Appropriations Act, 2008, div. D, title I, Pub. L. No. 110-161, 121
Stat. 1844, 1972 (Dec. 26, 2007). These conditions for BSM funding
availability have been in effect for several years, including the
immediately preceding fiscal year.
[3] Milestones correspond to phases within IRS's enterprise life cycle
(0--vision and strategy/enterprise architecture, 1--project initiation,
2--domain architecture, 3--preliminary design, 4a-- detailed design,
4b--system development, 5--system deployment).
[4] Earned value management is a project management tool that
integrates the investment scope of work with schedule and cost elements
for investment planning and control. This method compares the value of
work accomplished during a given period with that of the work expected
in the period. Differences between accomplishments and expectations are
measured in both cost and schedule variances.
[5] GAO, Financial Audit: IRS's Fiscal Years 2007 and 2006 Financial
Statements, GAO-08-166 (Washington, D.C.: Nov. 9, 2007). Since we
briefed the congressional committees, GAO has issued a report focusing
on IRS's information security program (GAO, Information Security: IRS
Needs to Address Pervasive Weaknesses, GAO-08-211 (Washington, D.C.:
Jan. 8, 2008).
[End of section]
GAO's Mission:
The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting
its constitutional responsibilities and to help improve the performance
and accountability of the federal government for the American people.
GAO examines the use of public funds; evaluates federal programs and
policies; and provides analyses, recommendations, and other assistance
to help Congress make informed oversight, policy, and funding
decisions. GAO's commitment to good government is reflected in its core
values of accountability, integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each
weekday, GAO posts newly released reports, testimony, and
correspondence on its Web site. To have GAO e-mail you a list of newly
posted products every afternoon, go to [hyperlink, http://www.gao.gov]
and select "Subscribe to Updates."
Order by Mail or Phone:
The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or
more copies mailed to a single address are discounted 25 percent.
Orders should be sent to:
U.S. Government Accountability Office:
441 G Street NW, Room LM:
Washington, D.C. 20548:
To order by Phone:
Voice: (202) 512-6000:
TDD: (202) 512-2537:
Fax: (202) 512-6061:
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]:
E-mail: fraudnet@gao.gov:
Automated answering system: (800) 424-5454 or (202) 512-7470:
Congressional Relations:
Ralph Dawn, Managing Director, dawnr@gao.gov:
(202) 512-4400:
U.S. Government Accountability Office:
441 G Street NW, Room 7125:
Washington, D.C. 20548:
Public Affairs:
Chuck Young, Managing Director, youngc1@gao.gov:
(202) 512-4800:
U.S. Government Accountability Office:
441 G Street NW, Room 7149:
Washington, D.C. 20548: