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United States Government Accountability Office: 
GAO: 

Report to Congressional Committees: 

June 2012: 

IRS 2013 Budget: 

Continuing to Improve Information on Program Costs and Results Could 
Aid in Resource Decision Making: 

GAO-12-603: 

Contents: 

Letter: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Briefing Slides: 

Appendix II: Comments from the Internal Revenue Service: 

Appendix III: Reliability of Patient Protection and Affordable Care 
Act Cost Estimate: 

Appendix IV: Description of the Internal Revenue Service's Major 
Information Technology Investments: 

Appendix V: Major Information Technology Investments with Significant 
Cost and Schedule Variances: 

Appendix VI: GAO Products with Open Matters for Congress and 
Recommendations to the IRS Regarding Tax Administration: 

Appendix VII: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: How IRS's Fiscal Year 2013 PPACA Cost Estimate Aligns with 
Best Practices Outlined in the GAO Cost Guide: 

Table 2: The Internal Revenue Service's 20 Major Information 
Technology Investments: 

Table 3: Cost and Schedule Performance Information for Affordable Care 
Act Administration: 

Table 4: Cost and Schedule Performance Information for Current 
Customer Account Data Engine: 

Table 5: Cost and Schedule Performance Information for Integrated 
Customer Communication Environment: 

Table 6: Cost and Schedule Performance Information for Integrated 
Submission and Remittance Processing System: 

Table 7: Cost and Schedule Performance Information for IRS Main Frames 
and Servers Services and Support: 

Table 8: Cost and Schedule Performance Information for Modernized e-
File: 

Table 9: List of Open Matters for Congress and Recommendations to IRS 
That Could Result In Potential Savings or Increased Revenues: 

Figures: 

Figure 1: How IRS's Fiscal Year 2013 PPACA Cost Estimate Aligns with 
the Best Practices for Comprehensiveness: 

Figure 2: How IRS's Fiscal Year 2013 PPACA Cost Estimate Aligns with 
the Best Practices for Being Well Documented: 

Figure 3: How IRS's Fiscal Year 2013 PPACA Cost Estimate Aligns with 
the Best Practices for Accuracy: 

Figure 4: How IRS's Fiscal Year 2013 PPACA Cost Estimate Aligns with 
the Best Practices for Credibility: 

Abbreviations: 

ACA: Affordable Care Act: 

AMS: Account Management Services: 

AUR: Automated Underreporter Program: 

BSM: Business Systems Modernization: 

CADE: Customer Account Data Engine: 

CFO: Chief Financial Officer: 

CI: Criminal Investigation: 

CIO: Chief Information Officer: 

e-SVS: e-Services: 

EFDS: Electronic Fraud Detection System: 

EPO: Estimation Program Office: 

EUSS: IRS End User Systems and Services: 

EVM: earned value management: 

FATCA: Foreign Account Tax Compliance Act: 

FTE: full-time equivalent: 

HHS: Department of Health and Human Services: 

HIRIF: Health Insurance Reform Implementation Fund: 

HITCA: Health Insurance Tax Credit Administration: 

IMF: Individual Master File: 

ICCE: Integrated Customer Communication Environment: 

IDRS: Integrated Data Retrieval System: 

IFS: Integrated Financial System: 

IRDM: Information Reporting and Document Matching: 

IRS: Internal Revenue Service: 

ISRP: Integrated Submission and Remittance Processing: 

IT: information technology: 

MeF: Modernized e-File: 

MISSTU: Modernized Infrastructure Solaris 10 & Supporting Technologies 
Upgrade: 

MITS: Modernization and Information Technology Services: 

MSSS: IRS Main Frames and Servers Services and Support: 

OMB: Office of Management and Budget: 

PPACA: Patient Protection and Affordable Care Act: 

ROI: return on investment: 

RRP: Return Review Program: 

SAN: Storage Area Network: 

SCRIPS: Service Center Recognition/Image Processing System: 

Treasury: Department of the Treasury: 

TSSIRS: Telecommunications Systems and Support: 

WBS: work breakdown structure: 

United States Government Accountability Office: 
Washington, DC 20548: 

June 8, 2012: 

The Honorable Richard J. Durbin: 
Chairman: 
The Honorable Jerry Moran: 
Ranking Member: 
Subcommittee on Financial Services and General Government: 
Committee on Appropriations: 
United States Senate: 

The Honorable Charles W. Boustany, Jr. 
Chairman: 
The Honorable John Lewis: 
Ranking Member: 
Subcommittee on Oversight: 
Committee on Ways and Means: 
United States House of Representatives: 

This letter transmits several briefings we provided between February 
27, 2012 and May 16, 2012, as well as subsequent comments from the 
Internal Revenue Service (IRS). See appendix I for the final, updated 
briefing. 

The President requested $12.8 billion for IRS for fiscal year 2013. 
This is an 8 percent increase over the enacted appropriation for 
fiscal year 2012, and follows a 2.5 percent decrease between fiscal 
year 2011 and fiscal year 2012. Because of the size of IRS's budget 
and the importance of its service and compliance programs for all 
taxpayers, you asked us to review the fiscal year 2013 budget 
justification for IRS as well as how it absorbed the prior year's 
reductions. Based on discussions with your offices, our objectives 
were to: (1) describe how IRS managed funding reductions in fiscal 
year 2012; (2) describe the fiscal year 2013 budget request for IRS 
and budget and staffing trends from fiscal year 2009 through fiscal 
year 2013; (3) evaluate any new enforcement and infrastructure 
initiatives in the fiscal year 2013 budget request, including whether 
return on investment (ROI) estimates are provided; (4) evaluate the 
reliability of IRS's cost estimate for implementing its 
responsibilities under the Patient Protection and Affordable Care Act 
(PPACA);[Footnote 1] (5) evaluate the amount requested for hiring 
additional staff in fiscal year 2013; (6) evaluate the performance of 
IRS's major information technology (IT) investments; (7) list any 
analyses we have done related to legislative proposals included in the 
budget request for IRS; and (8) describe IRS's progress implementing 
our prior budget presentation recommendations and list our open 
matters for Congress and recommendations to IRS regarding tax 
administration with potential budget savings or revenue increases. 

To conduct this work, we addressed the first three objectives by 
reviewing IRS's plans to manage budget reductions and examining trends 
in selected performance measures since 2007, identifying prior GAO 
work that could increase efficiencies, and comparing and analyzing 
budget documentation from fiscal year 2008 through fiscal year 2013. 
We compared the reliability of the PPACA cost estimate with best 
practices outlined in the GAO Cost Estimating and Assessment Guide 
[Footnote 2] (Cost Guide) using documents, such as work breakdown 
structures (WBS), and interviewing IRS PPACA officials. We reviewed 
cost estimates for PPACA implementation based on your interest and 
because it represented the largest requested increase in the budget 
proposal. To evaluate the amount requested for hiring additional staff 
in fiscal year 2013, we compared Office of Management and Budget (OMB) 
Circular A-11 guidance with IRS's budgeting practices for funding the 
hiring of new staff. We reviewed IRS's recent hiring patterns and 
calculated the percentage of staff hired in each quarter for new 
initiatives in fiscal year 2009 and fiscal year 2010. We used a 
$100,000/full-time equivalent (FTE)[Footnote 3] value for salary and 
benefits, which IRS officials told us they commonly use as an 
approximate cost per FTE, and compared it with the budget request to 
determine differences. We reviewed reported cost and schedule 
information and Chief Information Officer (CIO) assessments for all 
IRS major IT investments and interviewed officials in the 
Modernization and Information Technology Services (MITS) office. We 
also reviewed legislative proposals in the budget justification and 
identified prior, related GAO work. Finally, we obtained information 
on prior-year budget recommendations from various IRS officials and 
reviewed relevant documentation, including the fiscal year 2013 
Congressional Budget Justification, to determine which recommendations 
were implemented and we relied on prior work and examined open matters 
and recommendations with a potential to increase savings or revenues. 
For each objective, we interviewed IRS officials in the offices of the 
Chief Financial Officer (CFO) and Corporate Budgeting. We conducted 
our work in Washington, D.C., where key IRS officials involved with 
the budget and IT systems are located. 

We conducted this performance audit from November 2011 to June 2012 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. We spoke with 
IRS officials and reviewed data collection procedures and determined 
that the data used in this report were sufficiently reliable for our 
purposes. 

The results of our work show: 

* IRS absorbed the 2.5 percent or $305 million fiscal year 2012 
reduction by decreasing FTEs and other costs, primarily in the 
Enforcement and Operations Support appropriations. Several of our 
recent reports show that other opportunities exist to increase 
efficiencies through, for example, automating some services, 
leveraging paid tax return preparers, and conducting more compliance 
checks before issuing refunds. 

* IRS's fiscal year 2013 budget request represents a $944.5 million 
(8.0 percent) and about a 4,500 FTEs (5.0 percent) increase over 
fiscal year 2012. 

* Seven of the 12 proposed new program initiatives ($603.1 million) 
are supported by ROI estimates; the others ($303.9 million) are not 
supported by ROI information or, for the 2 we reviewed, other similar 
economic assessments, such as cost effectiveness analyses. 

* IRS's PPACA cost estimate partially meets best practices for 
reliability, but it has not been updated since October 2010. 

* IRS budgets for hiring new staff based on the new staff being on-
board for the full fiscal year. But, in recent years, IRS hired most 
new staff late in the fiscal year, which could have resulted in 
funding being used for other purposes that are not described or 
substantiated in the budget justification. 

* Fourteen of 20 major IT investments were within 10 percent of cost 
and schedule estimates between October 2011 and March 2012, but we 
could not determine whether these investments delivered planned 
functionality because IRS does not have a quantitative measure of 
scope for major IT investments. 

* We have conducted analyses related to 6 of the 22 legislative 
proposals included in the budget request for IRS. 

* IRS at least partially implemented 5 of our 9 prior recommendations 
intended to improve information presented in the budget request; in 
addition, we have 106 other matters for Congress or recommendations to 
IRS regarding tax administration that remain open and could result in 
potential financial benefits, either budget savings or increases in 
tax revenue. 

Conclusions: 

We have identified several areas where budget decision makers lack 
information that would be helpful in making decisions about resource 
trade-offs at IRS. 

* Unlike most enforcement initiatives that IRS now justifies with ROI 
estimates, non-enforcement investment initiatives are not justified 
with similar economic analyses, such as cost-effectiveness analyses. 
When comparisons of alternative investments for accomplishing a goal 
do not consider costs, budget decision makers cannot be assured that 
alternatives were fully evaluated and that the best alternative was 
selected. 

* Without a timely, updated cost estimate for PPACA, budget decision 
makers will not know the fraction of the multi-year effort being 
funded in fiscal year 2013 or the subsequent remaining costs. 

* Because the budget request for hiring new staff is not based on 
expected hiring dates, but instead assumes hiring will occur at the 
beginning of the fiscal year, some funds will be available for other 
uses, which are not described or substantiated in the budget request. 

* Although IRS tracks the schedule and cost performance of IT 
investments, it does not have a quantitative measure to determine 
whether it is delivering planned functionality. Without this measure, 
budget decision makers lack complete information about IRS's 
performance in managing IT investment projects. 

Recommendations for Executive Action: 

To continue to improve information on program cost and results that 
could aid in resource decision making, we recommend that the 
Commissioner of Internal Revenue: 

* ensure cost-effectiveness analyses are conducted for future 
significant investments when there are alternative approaches for 
achieving a given benefit, such as for any new significant PPACA 
projects; 

* ensure that an updated PPACA cost estimate is completed by September 
2012 in accordance with best practices in the GAO Cost Guide; 

* prepare funding requests for new staff based on estimated hiring 
dates; and: 

* develop a quantitative measure of scope, at a minimum for its major 
IT investments, to have complete information on the performance of 
these investments. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to the Commissioner of Internal 
Revenue for his review and comment. The CFO provided written comments 
as an email attachment, which is reprinted in appendix II. IRS also 
provided us with technical comments, which we incorporated into the 
report as appropriate. 

In response to our draft report, the CFO stated that IRS agreed with 
three of our four recommendations. 

* For the two recommendations regarding PPACA, IRS agreed with them, 
but stated our report did not acknowledge that the majority of the 
funding is to support ongoing efforts and for staff already on board 
in fiscal year 2012. On the contrary, our report describes in detail 
(in the background, in the section on fiscal year 2012 funding 
reductions, and in the section on fiscal year 2013 budget data and 
trends) the funding IRS received from the Health Insurance Reform 
Implementation Fund in fiscal years 2010, 2011 and 2012, including 
FTEs funded in prior years. 

* IRS agreed with our recommendation to develop a quantitative measure 
of scope, but the CFO stated that IRS has other methods in place to 
document delivered functionality of a project throughout the life-
cycle. We agree that the methods identified address project 
functionality, but they do not provide a quantitative measure of 
performance. 

* IRS did not agree with our recommendation to prepare funding 
requests for new staff based on estimated hiring dates. The CFO stated 
that IRS is committed to transparency in spending though the 
submission of the annual Operating Plan and requests to reprogram 
funds as a result of the late enactment of the budget or delayed 
hiring of new staff. Our report emphasizes transparency in the budget 
request and discusses the issues raised in the CFO's letter. 
Transparency in the budget request is critical for Congressional 
oversight and decision making. IRS's current approach for budgeting 
for hiring new staff could result in substantial funding--about $300 
million in fiscal year 2013--that could be used for other purposes 
that are not substantiated or described in the budget justification. 
We therefore believe our recommendation remains valid. 

We plan to send copies of this report to the Chairman and Ranking 
Members of other Senate and House committees and subcommittees that 
have appropriation, authorization, and oversight responsibilities for 
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 the Office of Management and 
Budget. Copies are also available at no charge on the GAO web site at 
[hyperlink, http://www.gao.gov]. 

If you or your staffs have any questions or wish to discuss the 
material in this report further, please contact me at (202) 512-9110 
or whitej@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 members who made major contributions to this report 
are listed in appendix VII. 

Signed by: 

James R. White: 
Director, Tax Issues Strategic Issues: 

[End of section] 

Appendix I: Briefing Slides: 

IRS 2013 Budget: 
Continuing to Improve Information on Program Costs and Results Could 
Aid in Resource Decision Making: 

Prepared for the Subcommittee on Financial Services and General 
Government, Committee on Appropriations, U.S. Senate (May 15, 2012) 
and the Subcommittee on Oversight, Committee on Ways and Means, U.S. 
House of Representatives (May 16, 2012): 

Updated (June 6, 2012): 

Introduction: 

The President requested $12.8 billion for the Internal Revenue Service 
(IRS) for fiscal year 2013. This is an 8 percent increase over the 
enacted appropriation for fiscal year 2012, and follows a 2.5 percent 
decrease between fiscal year 2011 and fiscal year 2012. 

Because of the size of IRS’s budget and the importance of its service 
and compliance programs for all taxpayers, you asked us to review the 
fiscal year 2013 budget justification for IRS as well as how it 
absorbed fiscal year 2012 reductions. Other special areas of interest 
include an evaluation of the cost estimates for the Patient Protection 
and Affordable Care Act (PPACA)[Footnote 1] initiatives and budgeting 
practices for funding the hiring of new staff. 

Objectives: 

Based on your request, our objectives were to: 

(1) describe how IRS managed funding reductions in fiscal year 2012; 

(2) describe the fiscal year 2013 budget request for IRS and budget 
and staffing trends from fiscal year 2009 through fiscal year 2013; 

(3) evaluate any new enforcement and infrastructure initiatives in the 
fiscal year 2013 budget request, including whether return on 
investment (ROI) estimates are provided; 

(4) evaluate the reliability of IRS’s cost estimate for implementing 
its responsibilities under the PPACA; 

(5) evaluate the amount requested for hiring additional staff in 
fiscal year 2013; 

(6) evaluate the performance of IRS’s major information technology 
(IT) investments; 

(7) list any analyses we have done related to legislative proposals 
included in the budget request for IRS; and; 

(8) describe IRS’s progress implementing our prior budget presentation 
recommendations and list our open matters for Congress and 
recommendations to IRS regarding tax administration with potential 
budget savings or revenue increases. 

Scope and Methodology: 

To conduct our review, we: 

* addressed the first three objectives by reviewing IRS’s plans to 
manage budget reductions and examining trends in selected performance 
measures since 2007; identifying prior GAO work that could increase 
efficiencies; and comparing and analyzing budget documentation from 
fiscal year 2008 through fiscal year 2013; 

* compared the reliability of the cost estimates for PPACA with best 
practices outlined in the GAO Cost Guide[Footnote 2] using documents, 
such as work breakdown structures, and interviewing IRS PPACA 
officials; we reviewed cost estimates for PPACA implementation based 
on your interest and because it represented the largest requested 
increase in the budget request; 

* compared Office of Management and Budget (OMB) Circular A-11 
guidance with IRS’s budgeting practices for funding the hiring of new 
staff; reviewed recent hiring patterns and calculated the percent of 
staff hired in each quarter for new initiatives in fiscal year 2009 and 
fiscal year 2010; we used a $100,000/full-time equivalent[Footnote 3] 
(FTE) value for salary and benefits, which IRS officials told us they 
commonly use as an approximate cost per FTE, and compared with the 
budget request to determine differences; 

* reviewed reported cost and schedule information and Department of 
the Treasury (Treasury) Chief Information Officer (CIO) assessments 
for all IRS major IT systems and interviewed officials in the 
Modernization and Information Technology Services (MITS) office; 
[Footnote 4] 

* reviewed legislative proposals in the fiscal year 2013 Congressional 
Budget Justification and identified our prior related work; and; 

* obtained information on the status of prior year budget 
recommendations from various IRS officials and reviewed documentation, 
including the fiscal year 2013 Congressional Budget Justification, to 
determine which recommendations were implemented; and we relied on 
prior work and examined open matters and recommendations with a 
potential to increase savings or revenues. 

For each objective we interviewed officials in the IRS offices of 
Chief Financial Officer (CFO) and Corporate Budgeting. We conducted 
our work in Washington, D.C., where key IRS officials involved with 
the budget and IT systems are located. 

We conducted this performance audit from November 2011 to June 2012 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. We spoke with 
IRS officials and reviewed data collection procedures and determined 
that the data presented in this report were sufficiently reliable for 
our purposes. 

Results in Brief: 

IRS absorbed the 2.5 percent or $305 million fiscal year 2012 
reduction by decreasing FTEs and other costs, primarily in the 
Enforcement and Operations Support appropriations, but opportunities 
to increase efficiencies and more strategically manage operations 
exist. 

IRS’s fiscal year 2013 budget request represents a $944.5 million (8.0 
percent) and about a 4,500 FTE (5.0 percent) increase over fiscal year 
2012. 

Seven of the 12 proposed new program initiatives ($603.1 million) are 
supported by ROI estimates; the others ($303.9 million) are not 
supported by ROI information or, for the 2 we reviewed, other similar 
economic assessments, such as cost-effectiveness analyses. 

IRS’s PPACA cost estimate partially meets best practices for 
reliability, but it has not been updated since October 2010. 

IRS budgets for hiring new staff based on them being on-board for the 
full fiscal year. But, in recent years, it hired most new staff late 
in the fiscal year, which could have resulted in funding being used 
for other purposes that are not described or substantiated in the 
budget justification. 

Fourteen of 20 major IT investments were within 10 percent of cost and 
schedule estimates between October 2011 and March 2012, but we could 
not determine whether these investments delivered planned functionality 
because IRS does not have a quantitative measure of scope for major IT 
investments. 

We have conducted analyses related to 6 of the 22 legislative 
proposals included in the budget request for IRS. 

IRS at least partially implemented 5 of our 9 prior recommendations 
intended to improve information presented in the budget request; in 
addition, we have 106 other matters for Congress or recommendations to 
IRS regarding tax administration that remain open and could result in 
potential financial benefits, either budget savings or increases in 
tax revenue. 

Background: IRS’s Budget Presentation: 

IRS’s budget presentation has three levels-—appropriations, budget 
activities, and program activities. 

Requested funding increases for new program initiatives, such as 
implementing tax legislative changes, may be included within multiple 
appropriations or budget activities. The budget justification does 
not link new initiatives to program activities. 

Figure 1: Three Levels of IRS’s Budget Presentation: 

[Refer to PDF for image: illustration] 

Level 1: Appropriations: 
Taxpayer services; 
Enforcement; 
Operations support; 
Business Systems Modernization (BSM). 

Level 2: Budget Activities: 
Taxpayer services: 
Pre-filing taxpayer assistance and education; 
Filing and account services; 
Enforcement: 
Investigations; 
Exam and collection; 
Regulatory; 
Operations support: 
Infrastructure; 
Shared services and support; 
Information services; 
Business Systems Modernization (BSM): 
BSM[A]; 

Level 3: Number of program activities: 
Taxpayer services: 
Pre-filing taxpayer assistance and education: 8; 
Filing and account services: 9; 
Enforcement: 
Investigations: 5; 
Exam and collection: 17; 
Regulatory: 6; 
Operations support: 
Infrastructure: 4; 
Shared services and support: 15; 
Information services: 19; 
Business Systems Modernization (BSM): 
BSM[A]: N/A. 

Source: Fiscal year 2013 Congressional Budget Justification for IRS. 

[A] The BSM budget activity does not include any specific program 
activities. 

[End of figure] 

Background: Budget Process Timeline: 

IRS’s budget process begins about 18 months prior to the final 
submission and is guided by the IRS Commissioner, Deputy 
Commissioners, CFO, and Corporate Budget office. 

Figure 2: Timeline of IRS’s Fiscal Year 2013 Budget Process: 

[Refer to PDF for image: timeline] 

Changes, reductions, or additions are made at every stage of the 
budget process. 

August 2010: 
Identified fiscal year 2013 IT needs and approved projects. 

January 2011: 
Issued guidance from Deputy Commissioner and requested data from 
business funding units to justify program changes. 

January - March 2011: 
Determined base funding and approved program increases, decreases, and 
savings initiatives.  

April 16, 2011: 
Submitted budget request to IRS Oversight Board.  

May - June 2011: 
Incorporated IRS Oversight Board's recommendations and submitted 
revised request to Treasury. 

August - September 2011: 
Incorporated changes from Treasury and submitted revised request to 
OMB.  

January - February 2012: 
Incorporated final changes from Treasury and OMB and finalized fiscal 
year 2013 Congressional Budget Justification. 

February 13, 2012: 
Submitted fiscal year 2013 Congressional Budget Justification to 
Congress. 

Source: GAO analysis of IRS data. 
       
[End of figure] 

Background: IRS Funding for PPACA: 

Congress passed PPACA[Footnote 5] in March 2010 to reform the private 
insurance market and expand health coverage to the uninsured. IRS is 
responsible for implementing new provisions including new taxes, tax 
credits, and information reporting requirements. 

Subsequently, Congress established the Health Insurance Reform 
Implementation Fund (HIRIF)[Footnote 6] within the Department of 
Health and Human Services (HHS) for federal administrative expenses in 
carrying out PPACA. 

Congress appropriated $1 billion to the HIRIF. IRS was one of the 
agencies eligible to use this appropriation to fund PPACA 
implementation. 

* HHS provided $188.9 million/609 FTEs to IRS from HIRIF in fiscal year 
2010 ($20.7 million/33 FTEs) and fiscal year 2011 ($168.2 million/576 
FTEs). 

Fiscal Year 2012 Funding Reductions: 

Fiscal Year 2012 Enacted IRS Appropriations Reduced by $305 Million 
(2.5 Percent) from Fiscal Year 2011: 

Most fiscal year 2012 reductions (in terms of dollars) were in the 
Enforcement and Operations Support appropriations. 

IRS requested $473.4 million (1,269 FTEs) for PPACA in fiscal year 
2012, but it was not funded. Subsequently, IRS received $135.4 million 
from HIRIF through March 31, 2012. Officials anticipate requesting an 
additional $196.8 million, totaling $332.2 million (803 FTEs) from 
HIRIF for fiscal year 2012. 

Table 1: Funding Reductions in IRS’s Appropriations between Fiscal 
Year 2011 and Fiscal Year 2012 (dollars in millions) : 

Enforcement: 
Fiscal year 2011 enacted: $5,493; 
Fiscal year 2012 enacted: $5,299; 
Dollar change (percent change) fiscal year 2011 to fiscal 
year 2012: -$194 (-3.5%). 

Operations support: 
Fiscal year 2011 enacted: $4,057; 
Fiscal year 2012 enacted: $3,947; 
Dollar change (percent change) fiscal year 2011 to fiscal 
year 2012: -$109 (-2.7). 

Taxpayer services: 
Fiscal year 2011 enacted: $2,293; 
Fiscal year 2012 enacted: $2,240; 
Dollar change (percent change) fiscal year 2011 to fiscal 
year 2012: -$54 (-2.3). 

BSM: 
Fiscal year 2011 enacted: $263; 
Fiscal year 2012 enacted: $330; 
Dollar change (percent change) fiscal year 2011 to fiscal 
year 2012: $67 (25.4). 

Health Insurance Tax Credit Administration (HITCA): 
Fiscal year 2011 enacted: $15; 
Fiscal year 2012 enacted: $0[A]; 
Dollar change (percent change) fiscal year 2011 to fiscal 
year 2012: -$15 (-100.0). 

Total appropriated resources: 
Fiscal year 2011 enacted: $12,122; 
Fiscal year 2012 enacted: $11,817; 
Dollar change (percent change) fiscal year 2011 to fiscal 
year 2012: -$305 (-2.5%). 

Source: Fiscal year 2013 Congressional Budget Justification for IRS. 
Note: Numbers may not add due to rounding. 

[A] In fiscal year 2012, administrative resources for HITCA were moved 
to the Taxpayer Services appropriation under the Consolidated 
Appropriations Act, 2012 (Pub. L. No. 112-74). 

[End of table] 

IRS Decreased FTEs and Other Costs, but Did Not Fully Implement GAO’s 
Recommendation to Systematically Re-Examine Base Operations: 

To manage the reductions to its appropriations, IRS: 

* Decreased FTEs by at least 3.4 percent[Footnote 7] from fiscal year 
2011 through use of attrition, a hiring freeze, and targeted buyouts 
of more than 900 staff. 
- After receiving HIRIF funding for staffing (227 FTEs), the net 
decrease in FTEs was 3.1 percent. 

* Reduced other costs through cuts to travel, training, consulting 
services, IT investments, and increased use of telework and video 
conferencing. 

IRS officials said they examined base operations at a high level, but 
did not provide us documentation of their analysis. IRS’s officials 
also said that spending reductions were focused on minimizing the 
impact on services to taxpayers and operations. 

* We previously recommended IRS expand efforts to systematically 
identify savings and efficiencies as part of its budget development 
process.[Footnote 8] 

* IRS may be missing opportunities to realize savings and efficiencies 
by not fully reviewing base operations. 

Selected Measures Show Declines in Performance or Planned Targets for 
Some Taxpayer Service and Enforcement Activities Since Fiscal Year 
2007: 

Table 2: Selected Taxpayer Service and Enforcement Measures for Fiscal 
Year 2007 through Fiscal Year 2013: 

Performance measure (in percent): 

Assistor calls: Level of service[A]: 
Fiscal year 2007 (actual): 82.1%; 
Fiscal year 2008 (actual): 52.8%; 
Fiscal year 2009 (actual): 70.0%; 
Fiscal year 2010 (actual): 74.0%; 
Fiscal year 2011 (actual): 70.1%; 
Fiscal year 2012 (planned target): 61.0%; 
Fiscal year 2013 (planned target): 63.0%. 

Assistor calls: Tax law accuracy[B]: 
Fiscal year 2007 (actual): 91.2%; 
Fiscal year 2008 (actual): 91.2%; 
Fiscal year 2009 (actual): 92.9%; 
Fiscal year 2010 (actual): 92.7%; 
Fiscal year 2011 (actual): 93.4%; 
Fiscal year 2012 (planned target): 92.7%; 
Fiscal year 2013 (planned target): 92.7%. 

Assistor calls: Account accuracy[B]: 
Fiscal year 2007 (actual): 93.4%; 
Fiscal year 2008 (actual): 93.7%; 
Fiscal year 2009 (actual): 94.9%; 
Fiscal year 2010 (actual): 95.7%; 
Fiscal year 2011 (actual): 96.0%; 
Fiscal year 2012 (planned target): 95.0%; 
Fiscal year 2013 (planned target): 95.0%. 

Examination coverage—-individual[C]: 
Fiscal year 2007 (actual): 1.0%; 
Fiscal year 2008 (actual): 1.0%; 
Fiscal year 2009 (actual): 1.0%; 
Fiscal year 2010 (actual): 1.1%; 
Fiscal year 2011 (actual): 1.1%; 
Fiscal year 2012 (planned target): 1.0%; 
Fiscal year 2013 (planned target): 1.0%. 

Examination coverage-—business[C] (assets greater than $10 million): 
Fiscal year 2007 (actual): 6.8%; 
Fiscal year 2008 (actual): 6.1%; 
Fiscal year 2009 (actual): 5.6%; 
Fiscal year 2010 (actual): 5.7%; 
Fiscal year 2011 (actual): 6.2%; 
Fiscal year 2012 (planned target): 5.6%; 
Fiscal year 2013 (planned target): 5.4%. 

Collection coverage[D]: 
Fiscal year 2007 (actual): 54.0%; 
Fiscal year 2008 (actual): 55.2%; 
Fiscal year 2009 (actual): 54.2%; 
Fiscal year 2010 (actual): 50.1%; 
Fiscal year 2011 (actual): 50.0%; 
Fiscal year 2012 (planned target): 47.8%; 
Fiscal year 2013 (planned target): 46.8%. 

Source: Fiscal Year 2013 Congressional Budget Justification for IRS. 

[A] The number of toll-free callers that speak to live IRS assistors 
divided by the total number of attempted calls. 

[B] Accuracy measures show how often customers receives the correct 
answer/solution to their inquiry from a live IRS assistor. 

[C] Examination coverage is the number of tax returns examined and 
closed during the current fiscal year divided by the number of returns 
for the preceding year. 

[D] Collection coverage measures the volume of collection work 
completed compared to the volume of collection work available. 

[End of table] 

IRS’s Telephone Level of Service in Fiscal Year 2012 Has Decreased: 

As of mid-April 2012, the telephone level of service[Footnote 9] was 
68.3 percent, down 6.3 percentage points compared to the same period 
last year. 

* At the enacted funding level, the planned target for fiscal year 2012 
is 61 percent, down from its target of 82 percent for fiscal year 
2008. 

Hours assistors are available to answer calls decreased 20 percent from 
fiscal year 2011, from 15 hours to 12 hours per day. Average wait times 
to talk with an assistor during the same period increased from 9.9 
minutes to 15.8 minutes. 

Abandoned, busy, and disconnected calls are up more than 26 percent 
during the same period in 2011 and are up almost 67 percent from the 
same period in 2008. 

Page 13 
Fiscal Year 2012 Funding Reductions 

New Tax Laws Increase IRS’s Responsibilities: 

Several new laws could substantially increase IRS’s workload beginning 
in 2012; for example: 

* In fiscal year 2011, IRS received 1.8 billion information returns. 
[Footnote 10] Three new laws require (1) brokers to report the 
adjusted cost basis for certain securities and identify whether a gain 
or loss is short or long-term,[Footnote 11] (2) merchants to report 
the gross amount of income from payment card or third-party payment 
network transactions,[Footnote 12] and (3) foreign banks to provide 
information on taxpayer accounts via the Foreign Account Tax 
Compliance Act (FATCA).[Footnote 13] IRS’s fiscal year 2012 and fiscal 
year 2013 information return projections increase to 2.5 billion and 
2.6 billion, respectively. 

* In addition to processing increased information reports, IRS will 
also have other responsibilities related to FATCA, such as identifying 
filers not complying with FATCA requirements and imposing tax 
penalties when necessary. 

* For PPACA, IRS has several new responsibilities, such as 
administering new fees on drug manufacturers and health insurers, 
processing newly required reports, and reviewing the community benefit 
activities of tax-exempt hospitals, which they need to prepare for and 
implement over the next several years. 

Opportunities Exist to Increase Efficiencies and More Strategically 
Manage Operations: 

In recent reports, we highlighted opportunities for IRS to modify its 
current operations to improve taxpayer services and enforcement 
programs, which could aid IRS by providing savings over time. For 
example: 

* providing more automated services (GAO-12-176); 

* conducting more pre-refund compliance checks through broadening use 
of Math Error Authority (GAO-10-349, GAO-10-225); 

* using data from new information returns effectively (GAO-11-557); 

* leveraging paid tax preparers (GAO-12-652T, GAO-11-336); and; 

* increasing availability of electronic data (GAO-12-33). 

These reports provide recommendations to increase efficiencies and 
manage operations more strategically. However, some may require 
upfront investments before the efficiencies can be fully realized. 

Fiscal Year 2013 Budget Data and Trends: 

Summary of Key Budget and FTE Data: 

The fiscal year 2013 budget request proposes: 

* a $944.5 million (8.0 percent) increase over fiscal year 2012, with 
the Enforcement and Operations Support appropriations accounting for 
the largest increase. 
- The fiscal year 2013 request is an increase of 5.3 percent over 
fiscal year 2011. 
- Of the $944.5 million, $360.5 million is for PPACA-related 
implementation, to be funded from IRS’s appropriations. IRS officials 
expect the HIRIF funds will not available for use in fiscal year 2013. 

* a Taxpayer Service appropriation at about the same level as last 
year. 
- IRS expects to gain savings and efficiencies from more 
electronically filed returns and other program reductions. 

* a net increase of about 4,500 (5.0 percent) FTEs over fiscal year 
2012. 
- The largest requested increase for FTEs is for Enforcement. 
- Of the 4,500 FTEs, 859 are for PPACA, including 803 FTEs which IRS 
officials told us were on-board and funded by HIRIF in fiscal year 
2012. 

Dollars by Appropriation Account, Fiscal Year 2008 through Fiscal Year 
2013: 

Table 3: Fiscal Year 2008 through Fiscal Year 2012 Enacted and Fiscal 
Year 2013 Budget Request for IRS by Appropriation Account (dollars in 
millions): 

Appropriation Account: Enforcement; 
Fiscal year 2008 enacted: $4,780; 
Fiscal year 2009 enacted: $5,117; 
Fiscal year 2010 enacted: $5,504; 
Fiscal year 2011 enacted: $5,493; 
Fiscal year 2012 enacted: $5,299; 
Fiscal year 2013 requested: $5,702; 
Dollar change fiscal year 2012 enacted compared to fiscal year 2013 
requested: $403; 
Percent change fiscal year 2012 enacted compared to fiscal year 2013 
requested: 7.59%. 

Appropriation Account: Operations support; 
Fiscal year 2008 enacted: $3,841; 
Fiscal year 2009 enacted: $3,867; 
Fiscal year 2010 enacted: $4,084; 
Fiscal year 2011 enacted: $4,057; 
Fiscal year 2012 enacted: $3,947; 
Fiscal year 2013 requested: $4,476; 
Dollar change fiscal year 2012 enacted compared to fiscal year 2013 
requested: $529; 
Percent change fiscal year 2012 enacted compared to fiscal year 2013 
requested: 13.40%. 

Appropriation Account: Taxpayer services; 
Fiscal year 2008 enacted: $2,191; 
Fiscal year 2009 enacted: $2,293; 
Fiscal year 2010 enacted: $2,279; 
Fiscal year 2011 enacted: $2,293; 
Fiscal year 2012 enacted: $2,240; 
Fiscal year 2013 requested: $2,253; 
Dollar change fiscal year 2012 enacted compared to fiscal year 2013 
requested: $13; 
Percent change fiscal year 2012 enacted compared to fiscal year 2013 
requested: 0.60%. 

Appropriation Account: BSM; 
Fiscal year 2008 enacted: $267; 
Fiscal year 2009 enacted: $230; 
Fiscal year 2010 enacted: $264; 
Fiscal year 2011 enacted: $263; 
Fiscal year 2012 enacted: $330; 
Fiscal year 2013 requested: $330; 
Dollar change fiscal year 2012 enacted compared to fiscal year 2013 
requested: $0; 
Percent change fiscal year 2012 enacted compared to fiscal year 2013 
requested: 0.00%. 

Appropriation Account: HITCA; 
Fiscal year 2008 enacted: $15; 
Fiscal year 2009 enacted: $15; 
Fiscal year 2010 enacted: $16; 
Fiscal year 2011 enacted: $15; 
Fiscal year 2012 enacted: [A]; 
Fiscal year 2013 requested: [A]; 
Dollar change fiscal year 2012 enacted compared to fiscal year 2013 
requested: [A]; 
Percent change fiscal year 2012 enacted compared to fiscal year 2013 
requested: [A]. 

Appropriation Account: Subtotal; 
Fiscal year 2008 enacted: $11,095; 
Fiscal year 2009 enacted: $11,523; 
Fiscal year 2010 enacted: $12,146; 
Fiscal year 2011 enacted: $12,122; 
Fiscal year 2012 enacted: $11,817; 
Fiscal year 2013 requested: $12,761; 
Dollar change fiscal year 2012 enacted compared to fiscal year 2013 
requested: $945; 
Percent change fiscal year 2012 enacted compared to fiscal year 2013 
requested: 7.99%. 

Appropriation Account: Other resources, such as user fees[B]; 
Fiscal year 2008 enacted: $566; 
Fiscal year 2009 enacted: $390; 
Fiscal year 2010 enacted: $539; 
Fiscal year 2011 enacted: $655; 
Fiscal year 2012 enacted: $559; 
Fiscal year 2013 requested: $592; 
Dollar change fiscal year 2012 enacted compared to fiscal year 2013 
requested: $34; 
Percent change fiscal year 2012 enacted compared to fiscal year 2013 
requested: 6.04%. 

Appropriation Account: Total funding available for obligation[C]; 
Fiscal year 2008 enacted: $11,661; 
Fiscal year 2009 enacted: $11,913; 
Fiscal year 2010 enacted: $12,686; 
Fiscal year 2011 enacted: $12,777; 
Fiscal year 2012 enacted: $12,375; 
Fiscal year 2013 requested: $13,354; 
Dollar change fiscal year 2012 enacted compared to fiscal year 2013 
requested: $979; 
Percent change fiscal year 2012 enacted compared to fiscal year 2013 
requested: 7.91%. 

Source: Fiscal Year 2010 through Fiscal Year 2013 Congressional Budget 
Justifications for IRS. 

Notes: Dollars are nominal and not adjusted for inflation, and numbers 
may not add due to rounding. 

[A] In fiscal year 2012, administrative resources for HITCA were moved 
to the Taxpayer Services appropriation under the Consolidated 
Appropriations Act, 2012 (Pub. L. No. 112-74). 

[B] Other resources available for obligation are estimated by IRS and 
not subject to the annual appropriations process. 

[C] IRS received an additional $20.7 million in fiscal year 2010 and 
$168.2 million in fiscal year 2011 from HHS’s HIRIF fund to implement 
PPACA. In fiscal year 2012, IRS plans to request $332.2 million from 
HHS and had received $135.4 million through March 31, 2012. IRS 
officials do not anticipate requesting HHS funds in fiscal year 2013, 
and have requested $360.5 million through IRS’s appropriation for 
fiscal year 2013. 

[End of table] 

Staffing by Appropriation Account, Fiscal Year 2008 through Fiscal 
Year 2013: 

Table 4: Fiscal Year 2008 through Fiscal Year 2011 Actual, Fiscal Year 
2012 Enacted, and Fiscal Year 2013 Requested FTEs by Appropriation 
Account: 

Appropriation Account: Enforcement; 
Fiscal year 2008 actual: 46,431; 
Fiscal year 2009 actual: 47,361 
Fiscal year 2010 actual: 50,400; 
Fiscal year 2011 actual[A]: 49,920; 
Fiscal year 2012 enacted: 47,586; 
Fiscal year 2012 requested: 51,583; 
FTE change fiscal year 2012 enacted compared to fiscal year 2013 
requested: 3,997; 
Percent change fiscal year 2012 enacted compared to fiscal year 2013 
requested: 8.40%. 

Appropriation Account: Operations support; 
Fiscal year 2008 actual: 12,079; 
Fiscal year 2009 actual: 12,101; 
Fiscal year 2010 actual: 12,262; 
Fiscal year 2011 actual[A]: 12,103; 
Fiscal year 2012 enacted: 11,985; 
Fiscal year 2012 requested: 12,609; 
FTE change fiscal year 2012 enacted compared to fiscal year 2013 
requested: 624; 
Percent change fiscal year 2012 enacted compared to fiscal year 2013 
requested: 5.21%. 

Appropriation Account: Taxpayer services; 
Fiscal year 2008 actual: 31,487; 
Fiscal year 2009 actual: 32,422; 
Fiscal year 2010 actual: 31,607; 
Fiscal year 2011 actual[A]: 31,574; 
Fiscal year 2012 enacted: 30,535; 
Fiscal year 2012 requested: 30,570; 
FTE change fiscal year 2012 enacted compared to fiscal year 2013 
requested: 35; 
Percent change fiscal year 2012 enacted compared to fiscal year 2013 
requested: 0.11%. 

Appropriation Account: BSM; 
Fiscal year 2008 actual: 347; 
Fiscal year 2009 actual: 322; 
Fiscal year 2010 actual: 337; 
Fiscal year 2011 actual[A]: 309; 
Fiscal year 2012 enacted: 605; 
Fiscal year 2012 requested: 495; 
FTE change fiscal year 2012 enacted compared to fiscal year 2013 
requested: -110; 
Percent change fiscal year 2012 enacted compared to fiscal year 2013 
requested: -18.18%. 

Appropriation Account: HITCA[B]; 
Fiscal year 2008 actual: 10; 
Fiscal year 2009 actual: 10; 
Fiscal year 2010 actual: 12; 
Fiscal year 2011 actual[A]: 0; 
Fiscal year 2012 enacted: 0; 
Fiscal year 2012 requested: 0; 
FTE change fiscal year 2012 enacted compared to fiscal year 2013 
requested: 0; 
Percent change fiscal year 2012 enacted compared to fiscal year 2013 
requested: 0%. 

Appropriation Account: Subtotal; 
Fiscal year 2008 actual: 90,354; 
Fiscal year 2009 actual: 92,216; 
Fiscal year 2010 actual: 94,618; 
Fiscal year 2011 actual[A]: 93,906; 
Fiscal year 2012 enacted: 90,711; 
Fiscal year 2012 requested: 95,257; 
FTE change fiscal year 2012 enacted compared to fiscal year 2013 
requested: 4,546; 
Percent change fiscal year 2012 enacted compared to fiscal year 2013 
requested: 5.01%. 

Appropriation Account: Other resources, such as user fees[C]; 
Fiscal year 2008 actual: 1,331; 
Fiscal year 2009 actual: 1,153; 
Fiscal year 2010 actual: 752; 
Fiscal year 2011 actual[A]: 1,003; 
Fiscal year 2012 enacted: 939; 
Fiscal year 2012 requested: 939; 
FTE change fiscal year 2012 enacted compared to fiscal year 2013 
requested: 0; 
Percent change fiscal year 2012 enacted compared to fiscal year 2013 
requested: 0%. 

Appropriation Account: Total FTEs[D]; 
Fiscal year 2008 actual: 91,685; 
Fiscal year 2009 actual: 93,369; 
Fiscal year 2010 actual: 95,370; 
Fiscal year 2011 actual[A]: 94,909; 
Fiscal year 2012 enacted: 91,650; 
Fiscal year 2012 requested: 96,196; 
FTE change fiscal year 2012 enacted compared to fiscal year 2013 
requested: 4,546; 
Percent change fiscal year 2012 enacted compared to fiscal year 2013 
requested: 4.96%. 

Source: Fiscal Year 2008 through Fiscal Year 2013 Congressional Budget 
Justifications for IRS. 

[A] IRS reported both enacted and actual FTEs for fiscal year 2011 in 
the fiscal year 2013 Congressional Budget Justification. For purposes 
of this table, we reported actual amounts. 

[B] The administrative resources for HITCA were moved to the Taxpayer 
Services appropriation under the Consolidated Appropriations Act, 2012 
(Pub. L. No. 112-74). 

[C] Other resources available for obligation are estimated by IRS and 
not subject to the annual appropriations process. 

[D] IRS realized an additional 33 FTEs in fiscal year 2010, 576 FTEs 
in fiscal year 2011, and is projecting 227 more FTEs for fiscal year 
2012, for a cumulative total of 803 FTEs to be funded from HIRIF, 
according to IRS officials. The budget for fiscal year 2013 requested 
an additional 56 FTEs to make the cumulative total 859 FTEs. For 
fiscal year 2013, the budget proposes to fund the entire 859 FTEs from 
IRS’s appropriation, and not HIRIF. 

[End of table] 

Of the $945 Million Requested Increase, the Administration Proposed a 
Program Integrity Cap Adjustment for Increases in IRS Enforcement and 
Compliance Funding: 

Congress passes program integrity cap adjustments to allow additional 
funding above discretionary spending limits for certain activities 
that are expected to generate benefits that exceed cost. 

The Administration requested a cap adjustment of $691 million for IRS 
in fiscal year 2013. 

Figure 3: Breakdown of IRS Fiscal Year 2013 Requested Increase: 

[Refer to PDF for image: vertical bar graph] 

Dollars in millions: 

Total proposed fiscal year 2013 budget: $12,761.2: 
Fiscal year 2012 enacted budget: $11,816.7; 
Requested increase within discretionary spending limits: $253.5; 
Requested increase requiring cap adjustment: $691.0. 
Discretionary spending cap: $12,000. 

Source: Fiscal year 2013 Congressional Budget Justification for IRS. 

[End of figure] 

Breakout of $945 Million Requested Increase: 

Table 5: Funding Requested for New Initiatives and Changes Due to 
Inflation, Pay Raises, and Savings and Efficiencies (dollars in 
millions): 

Description of new initiatives: 

Total changes: 
Total: $1,015.3. 

New initiatives: 
Subtotal: $906.9. 

New initiatives: 

Enforcement initiatives: Restore audit and collection coverage to 
address individual tax compliance issues (Projected ROI: 6.8 to 1. 
IRS’s ROI estimate is based on direct revenues collected and does not 
include revenue that may result from an increase in voluntary 
compliance); 
Fiscal year 2013 funding requested: $200.5. 

Enforcement initiatives: Implement tax law changes for Information 
Reporting and Document Matching (IRDM) and PPACA programs (Projected 
ROI: 3.5 to 1); 
Fiscal year 2013 funding requested: $128.9. 

Enforcement initiatives: Promote offshore compliance (Projected ROI: 
6.4 to 1); 
Fiscal year 2013 funding requested: $110.7. 

Enforcement initiatives: Implement revenue protection strategy 
(Projected ROI: 1.9 to 1); 
Fiscal year 2013 funding requested: $88.9. 

Enforcement initiatives: Other (improve international compliance, 
build out return preparer program, address appeals workload, leverage 
digital evidence, and implement uncertain tax position reporting 
requirements) (Unable to provide ROI because not all initiatives are 
revenue generating); 
Fiscal year 2013 funding requested: $102.9. 

Infrastructure initiatives: To implement PPACA-related IT and 
operational infrastructure to allow IRS to validate household income 
and determine the amount of advance payments of the tax credit; 
Fiscal year 2013 funding requested: $275.1. 

Inflation adjustment and pay raises: Inflation adjustments for non-
labor expenses such as rent, postage, and health benefits, in order to 
maintain current levels and a proposed pay raise of 0.5 percent; 
Subtotal: $108.4. 

Savings and efficiencies: Savings resulting from targeted program 
reductions ($59.7 million, e.g., using more online tools and 
IT contractual services), increased use of electronic filing of 
returns ($8.6 million), and reduced travel ($2.6 million); 
Total: -$70.9. 

Appropriation increase: 
Total: $944.5. 

Source: Fiscal Year 2013 Congressional Budget Justification for IRS. 

Note: Numbers may not add due to rounding. 

[End of table] 

New Initiatives and ROI: 

7 of the 12 Proposed New Enforcement Initiatives ($603.1 Million) 
Supported with ROIs[Footnote 14]: 

Figure 4: Implement Tax Legislative Changes: 

[Refer to PDF for image: vertical bar graph] 

Fiscal year: 2013; 
Cost: $128.9 million; 
Revenue: $177.3 million; 
Return on Investment: 1.4. 

Fiscal year: 2014; 
Cost: $122.4 million; 
Revenue: $304.7 million; 
Return on Investment: 2.5. 

Fiscal year: 2015; 
Cost: $120.4 million; 
Revenue: $424.0 million; 
Return on Investment: 3.5. 

Source: GAO analysis of IRS data. 

Implement IRDM (2015 ROI: 7.5 to 1) and PPACA (2015 ROI: 1.8 to 1). 
Related GAO work: GAO-12-59, GAO-11-719, GAO-11-557. 

[End of figure] 

Figure 5: Restore Audit Coverage to Address Individual Tax Compliance: 

[Refer to PDF for image: vertical bar graph] 

Fiscal year: 2013; 
Cost: $127.2 million; 
Revenue: $320.1 million; 
Return on Investment: 2.5. 

Fiscal year: 2014; 
Cost: $113.6 million; 
Revenue: $483.8 million; 
Return on Investment: 4.3. 

Fiscal year: 2015; 
Cost: $104.3 million; 
Revenue: $661.7 million; 
Return on Investment: 6.3. 

Source: GAO analysis of IRS data. 

Increases for audit and individual compliance programs, such as 
correspondence exams of refundable credits, the global high wealth 
strategy, two-dimensional barcoding, and document imaging. Related GAO 
work: GAO-12-33. 

[End of figure] 

Figure 6: Promote Offshore Compliance: 

[Refer to PDF for image: vertical bar graph] 

Fiscal year: 2013; 
Cost: $110.7 million; 
Revenue: $264.9 million; 
Return on Investment: 2.4. 

Fiscal year: 2014; 
Cost: $95.4 million; 
Revenue: $381.0 million; 
Return on Investment: 4.0. 

Fiscal year: 2015; 
Cost: $90.9 million; 
Revenue: $583.8 million; 
Return on Investment: 6.4. 

Source: GAO analysis of IRS data. 

Address FATCA requirements, strengthen offshore enforcement, and 
develop related IT. Related GAO work: GAO-11-730, GAO-11-493, GAO-11-
272, GAO-09-478T, GAO-08-99, GAO-08-778. 

[End of figure] 

Figure 7: Implement Revenue Protection Strategy: 

[Refer to PDF for image: vertical bar graph] 

Fiscal year: 2013; 
Cost: $88.9 million; 
Revenue: $73.7 million; 
Return on Investment: 0.8. 

Fiscal year: 2014; 
Cost: $79.8 million; 
Revenue: $117.2 million; 
Return on Investment: 1.5. 

Fiscal year: 2015; 
Cost: $78.2 million; 
Revenue: $146.5 million; 
Return on Investment: 1.9. 

Source: GAO analysis of IRS data. 

Prevent erroneous refunds through four programs (return review, 
management taxpayer assurance, identity theft, and prisoner tax 
compliance). Related GAO work: GAO-11-721T, GAO-11-691T, GAO-11-674T, 
GAO-09-882, GAO-02-363. 

[End of figure] 

Figure 8: Restore Collection Coverage: 

[Refer to PDF for image: vertical bar graph] 

Fiscal year: 2013; 
Cost: $73.3 million; 
Revenue: $220.6 million; 
Return on Investment: 3.0. 

Fiscal year: 2014; 
Cost: $65.3 million; 
Revenue: $389.5 million; 
Return on Investment: 6.0. 

Fiscal year: 2015; 
Cost: $63.9 million; 
Revenue: $486.9 million; 
Return on Investment: 7.6. 

Source: GAO analysis of IRS data. 

Increases for collection coverage such as staffing for Automated 
Collection Systems, Offers in Compromise, and Accounts Management 
programs. Related GAO work: GAO-06-525. 

[End of figure] 

Figure 9: Improve International Compliance: 

[Refer to PDF for image: vertical bar graph] 

Fiscal year: 2013; 
Cost: $38.9 million; 
Revenue: $130.3 million; 
Return on Investment: 3.3. 

Fiscal year: 2014; 
Cost: $32.7 million; 
Revenue: $175.7 million; 
Return on Investment: 5.4. 

Fiscal year: 2015; 
Cost: $30.0 million; 
Revenue: $263.5 million; 
Return on Investment: 8.8. 

Source: GAO analysis of IRS data. 

Improve international tax compliance for business by adding specialist 
covering complex transactions, U.S. multinationals, transfer pricing 
issues, etc. Related GAO work: GAO-11-730, GAO-11-493, GAO-09-934. 

[End of figure] 

Figure 10: Build Out Tax Return Preparer Program: 

[Refer to PDF for image: vertical bar graph] 

Fiscal year: 2013; 
Cost: $35.2 million; 
Revenue: $27.2 million; 
Return on Investment: 0.8. 

Fiscal year: 2014; 
Cost: $28.8 million; 
Revenue: $39.7 million; 
Return on Investment: 1.4. 

Fiscal year: 2015; 
Cost: $26.5 million; 
Revenue: $62.2 million; 
Return on Investment: 2.3. 

Source: GAO analysis of IRS data. 

Enforce compliance, pursue fraud, educate preparers and enforce 
ethical standards. Related GAO work: GAO-11-868T, GAO-11-336, GAO-06-
563T, GAO-03-610T, Podcast, “Regulation of Tax Preparation and Filing.” 

[End of figure] 

Some New Initiatives Were Not Supported by Economic Analysis: 

We examined 2 of the 5 new initiatives without ROIs, the ones 
pertaining to the PPACA mandate, which totaled $275.1 million. 

* IRS did not estimate ROIs for these 5 new initiatives because they 
do not generate enforcement revenue. However, IRS did not justify them 
with any other similar economic analyses, such as a cost-effectiveness 
analysis, which compares costs of alternative means of achieving the 
same benefit. 

Table 6: Purpose and Related GAO Work, Estimated Cost, and Basis for 
New Initiatives without ROI (in millions): 

Initiative: Implement IT and operational infrastructure to deliver 
PPACA; 
Purpose (related GAO work): Develop new and modify/enhance of new and 
existing IT systems to administer the PPACA. (GAO-11-719); 
Estimated fiscal year 2013 cost (FTE): $266.9 (537); 
Basis of initiative: Mandated. 

Initiative: Address appeals workload; 
Purpose (related GAO work): Add 92 settlement officers and 40 appeals 
officers to handle rising appeals workload; 
Estimated fiscal year 2013 cost (FTE): 20.3 (132); 
Basis of initiative: IRS-initiated. 

Initiative: Implement IT changes needed for individual coverage for 
PPACA; 
Purpose (related GAO work): For contractor to develop IT, 
infrastructure, and systems to implement individual responsibility 
health coverage requirement of PPACA. (GAO-11-719); 
Estimated fiscal year 2013 cost (FTE): 8.2 (0); 
Basis of initiative: Mandated. 

Initiative: Leverage digital evidence for Criminal Investigation (CI); 
Purpose (related GAO work): Implement “virtual digital evidence 
processing environment” that will allow CI to expedite and improve 
analysis of electronic data and avoid travel costs; 
Estimated fiscal year 2013 cost (FTE): 4.5 (8); 
Basis of initiative: IRS-initiated. 

Implement uncertain tax position reporting requirements; 
Purpose (related GAO work): Increase IRS capacity to provide guidance 
and certainty on areas of legal uncertainty for large business 
taxpayers, e.g., advanced pricing agreements and private letter 
rulings; 
Estimated fiscal year 2013 cost (FTE): 4.0 (20); 
Basis of initiative: IRS-initiated. 

Initiative: Total; 
Estimated fiscal year 2013 cost (FTE): $303.9 (697). 

Source: GAO analysis of IRS’s Fiscal Year 2013 Congressional Budget 
Justification for IRS. 

[End of table] 

Alternatives to Implement PPACA Initiatives Considered, but 
Not Potential Costs: 

At the time the PPACA mandate was imposed, IRS considered alternative 
approaches for implementing it, but did not consider the costs of the 
alternatives. The analyses did consider other factors, such as risk to 
the agency and time. We have previously reported on the need for IRS to 
conduct economic analyses.[Footnote 15] 

Sound cost-effectiveness analyses demonstrate that different 
approaches were evaluated, according to OMB Circular A-94. They also 
provide assurance that the alternatives chosen were the most cost 
effective and, if not, why. A cost-effectiveness analysis is itself an 
investment, so the level of detail should be commensurate with the 
magnitude of the initiative. 

Officials said they did not determine the costs of all PPACA 
alternatives. They said they normally develop cost estimates only for 
the alternative they plan to implement. 

When comparisons of alternatives do not consider costs, budget 
decision makers cannot be assured that alternatives were fully 
evaluated and the best alternative, based on factors including 
cost, was selected. 

PPACA Cost Estimate: 

PPACA Cost Estimate Partially Met Best Practices for Reliability, but 
Has Not Been Updated Since 2010: 

IRS developed a cost estimate for PPACA in October 2010. However, 
it did not fully meet best practices for a reliable cost estimate, 
including containing timely updates to ensure accuracy. We alerted 
IRS to this issue in June 2011. Since then, IRS has not updated its 
cost estimate (see appendix III for a full description of our 
assessment of IRS’s PPACA cost estimate). 

Cost estimates establish and defend budgets. They are integral to 
determining and communicating a realistic view of likely cost and 
schedule outcomes that can be used to plan the work necessary to 
develop, produce, install, and support a program. Best practices for a 
reliable cost estimate are outlined in our Cost Guide.[Footnote 16] In 
particular, we note the importance of updated and timely cost 
estimates that are available to decision makers as early as possible. 

IRS officials told us cost estimates are updated after projects reach 
particular milestones. The last milestone for PPACA was reached in 
January 2012. IRS awarded a contract to update the PPACA cost estimate 
on April 26, 2012. The contract specifies that the updated cost 
estimate should follow GAO best practices for a comprehensive, well 
documented, accurate, and credible cost estimate. IRS officials expect 
that the updated cost estimate will be completed by August or 
September 2012. 

Until the update is completed, budget decision makers may not have 
sufficient information to consider trade-offs for fiscal year 2013 
budget deliberations. For example, they will not know the fraction of 
the multi-year PPACA effort being funded in fiscal year 2013 and 
therefore will not know the costs that remain to be funded in future 
years. 

Budgeting for New Staff: 

Budgeting Practices Could Result in Funding Being Used for Other 
Purposes: 

IRS budgets for staff for new initiatives assuming an October 1 start 
date, but in recent years, it hired most new staff late in the fiscal 
year. During fiscal year 2009 and fiscal year 2010, the last years IRS 
received new initiative funding, most new staff started in the 3rd or 
4th quarter, as shown in figure 11. 

While partly due to the timing of enacted budgets, IRS’s hiring 
pattern is also due to practical limitations in hiring and training 
large numbers of staff. For example, IRS significantly planned and 
prepared for a large hiring wave in fiscal year 2009, when it brought 
on about 1,500 new employees in three waves over a 9 month period.
[Footnote 17] 

With congressional approval, IRS can use funding budgeted for new 
staff for other purposes within limits.[Footnote 18] 

Based on recent hiring trends for new initiatives, we estimate about 
$300 million of planned funding for FTEs in fiscal year 2013 could be 
used for other purposes, subject to congressional approval, and are 
not described or substantiated in the budget. 

Figure 11: Actual Hiring for New Permanent Staff for New Initiatives 
by Quarter, Fiscal Year 2009 through Fiscal Year 2010: 

[Refer to PDF for image: stacked vertical bar graph] 

Yearly quarter: Q1; 
FY 2009: 330; 
FY 2010: 261; 
Total: 561. 

Yearly quarter: Q2; 
FY 2009: 575; 
FY 2010: 1,004; 
Total: 1,579. 

Yearly quarter: Q3; 
FY 2009: 1,341; 
FY 2010: 678; 
Total: 2,019. 

Yearly quarter: Q4; 
FY 2009: 2,895; 
FY 2010: 1,766; 
Total: 4,661. 

Source: GAO analysis of IRS data. 

[End of figure] 

We have previously reported that budgets should be transparent, 
meaning that are made clear, salient, and understandable to decision 
makers and the public.[Footnote 19] Budget transparency is critical 
for effective congressional oversight and decision making. OMB 
Circular A-11 suggests agencies consider delays in recruiting and 
hiring and actual compensable number of hours worked when budgeting 
for staff. 

According to IRS and OMB officials, there is an agreement between the 
two agencies dating from the 1990s that permits IRS to budget for new 
staff assuming full year costs. According to officials, this practice 
helps IRS ensure it has full funding available for the newly hired 
staff in the second year without the need to justify a budget increase 
and manage uncertainties due to delays in funding. 

* Neither IRS nor OMB officials were able to provide us with written 
documentation of the agreement. OMB officials said that they commonly 
make informal, oral agreements with agencies as part of the budget 
process and that Circular A-11 allows for some flexibility. 

Providing substantiation that fully identified planned uses for 
funding that result from hiring later in the year could increase 
transparency and aid Congress in making difficult resource decisions. 

IT Investments: 

IT Is About 20 Percent of IRS’s Fiscal Year 2013 Budget Request: 

IRS requested about $2.5 billion for IT for fiscal year 2013—$330 
million for BSM and $2.14 billion for other investments. 

* Of the $2.5 billion requested, 
- $1.6 billion is planned to fund 18 major investments[Footnote 20] 
and, 
- $900 million is planned to fund 125 non-major investments. 

For fiscal year 2012, IRS has 20 major IT investments[Footnote 21] for 
which cost and schedule information and Treasury CIO ratings are 
reported to OMB on a monthly basis (see appendix IV for a description 
of the major investments). The CIO's evaluation is based on a number 
of factors to forecast the future success of the investment. 

IRS’s Major Investments and Estimated IT Costs: 

Table 7: IRS’s 20 Major Investments and Estimated IT Costs for Fiscal 
Year 2011 through Fiscal Year 2016 (in millions): 

Investment name: Account Management Services (AMS); 
Total estimated development costs: $0.0; 
Total estimated operations and maintenance costs: $43.0; 
Total estimated government FTE costs: $60.2; 
Total estimated costs: $103.2. 

Investment name: Affordable Care Act (ACA) Administration[A]; 
Total estimated development costs: $303.5; 
Total estimated operations and maintenance costs: $0.0; 
Total estimated government FTE costs: $0.0; 
Total estimated costs: $303.5[B]. 

Investment name: Current Customer Account Data Engine (CADE)[C]; 
Total estimated development costs: $557.5; 
Total estimated operations and maintenance costs: $116.0; 
Total estimated government FTE costs: $22.8; 
Total estimated costs: $696.3. 

Investment name: CADE 2; 
Total estimated development costs: $852.7; 
Total estimated operations and maintenance costs: $0.2; 
Total estimated government FTE costs: $295.0; 
Total estimated costs: $1,148.0. 

Investment name: Electronic Fraud Detection System (EFDS); 
Total estimated development costs: $0.0; 
Total estimated operations and maintenance costs: $59.6; 
Total estimated government FTE costs: $18.1; 
Total estimated costs: $77.7. 

Investment name: e-Services (e-SVS); 
Total estimated development costs: $28.7; 
Total estimated operations and maintenance costs: $34.3; 
Total estimated government FTE costs: $19.5; 
Total estimated costs: $82.5. 

Investment name: Foreign Account Tax Compliance Act (FATCA); 
Total estimated development costs: $23.9; 
Total estimated operations and maintenance costs: $8.5; 
Total estimated government FTE costs: $9.9; 
Total estimated costs: $42.3. 

Investment name: Implement Return Review Program (RRP) (Replaces EFDS); 
Total estimated development costs: $72.2; 
Total estimated operations and maintenance costs: $8.4; 
Total estimated government FTE costs: $6.8; 
Total estimated costs: $87.3. 

Investment name: Individual Master File (IMF); 
Total estimated development costs: $0.0; 
Total estimated operations and maintenance costs: $22.3; 
Total estimated government FTE costs: $49.1; 
Total estimated costs: $71.4. 

Investment name: Information Reporting and Document Matching (IRDM); 
Total estimated development costs: $54.8; 
Total estimated operations and maintenance costs: $6.6; 
Total estimated government FTE costs: $49.4; 
Total estimated costs: $110.8. 

Investment name: Integrated Customer Communication Environment (ICCE); 
Total estimated development costs: $16.2; 
Total estimated operations and maintenance costs: $29.8; 
Total estimated government FTE costs: $43.3; 
Total estimated costs: $89.3. 

Investment name: Integrated Data Retrieval System (IDRS); 
Total estimated development costs: $0.0; 
Total estimated operations and maintenance costs: $23.0; 
Total estimated government FTE costs: $266.9; 
Total estimated costs: $290.0. 

Investment name: Integrated Financial System/CORE Financial System 
(IFS); 
Total estimated development costs: $13.2; 
Total estimated operations and maintenance costs: $73.1; 
Total estimated government FTE costs: $8.5; 
Total estimated costs: $94.9. 

Investment name: Integrated Submission and Remittance Processing 
System (ISRP); 
Total estimated development costs: $1.3; 
Total estimated operations and maintenance costs: $65.2; 
Total estimated government FTE costs: $13.8; 
Total estimated costs: $80.3. 

Investment name: IRS End User Systems and Services (EUSS); 
Total estimated development costs: $0.0; 
Total estimated operations and maintenance costs: $585.1; 
Total estimated government FTE costs: $892.1; 
Total estimated costs: $1,477.3. 

Investment name: IRS Main Frames and Servers Services and Support 
(MSSS;) 
Total estimated development costs: $0.0; 
Total estimated operations and maintenance costs: $4,033.7; 
Total estimated government FTE costs: $0.0; 
Total estimated costs: $4,033.7. 

Investment name: IRS Telecommunications Systems and Support (TSS); 
Total estimated development costs: $0.0; 
Total estimated operations and maintenance costs: $1,432.9; 
Total estimated government FTE costs: $322.3; 
Total estimated costs: $1,755.1. 

Investment name: IRS.GOV - Portal Environment[D]; 
Total estimated development costs: $320.0; 
Total estimated operations and maintenance costs: $244.0; 
Total estimated government FTE costs: $564.0; 
Total estimated costs: $1,128.0. 

Investment name: Modernized e-File (MeF); 
Total estimated development costs: $184.8; 
Total estimated operations and maintenance costs: $54.4; 
Total estimated government FTE costs: $52.9; 
Total estimated costs: $292.1. 

Investment name: Service Center Recognition/Image Processing System 
(SCRIPS); 
Total estimated development costs: $1.0; 
Total estimated operations and maintenance costs: $56.0; 
Total estimated government FTE costs: $11.3; 
Total estimated costs: $68.3. 

Investment name: Total; 
Total estimated development costs: $2,429.9; 
Total estimated operations and maintenance costs: $6,896.3; 
Total estimated government FTE costs: $2,705.9; 
Total estimated costs: $12,032.0. 

Note: Numbers may not add due to rounding. 

Source: GAO analysis of IRS’s Exhibit 300A data. 

[A] IRS is implementing PPACA requirements under the investment name 
of ACA, and funding through the end of fiscal year 2012 is from HIRIF. 

[B] This amount only represents IT estimates for fiscal year 2013 
because we did not receive actual fiscal year 2011 costs from IRS in 
time to include them. We also did not receive IT estimates for fiscal 
year 2012, fiscal year 2014, fiscal year 2015, and fiscal year 2016 
from IRS in time to include them. 

[C] According to IRS, the Current CADE Investment ended on December 
31, 2011. The costs represent life-cycle costs consistent with how 
costs are reported to OMB for this investment. 

[D] The costs represent life-cycle costs consistent with how costs are 
reported to OMB for this investment. 

[End of table] 

Performance of IRS’s Major IT Investments: 

According to IRS, most major IT investments were generally within cost 
and schedule estimates between October 2011 and March 2012[Footnote 
22] and Treasury CIO ratings showed that most major IT investments 
were moderately low risk in recent months. However, we could not 
determine whether these investments delivered planned functionality. 

IRS reported that, between October 2011 and March 2012, 

* 14 of the 20 major IT investments were within 10 percent of cost and 
schedule estimates. 

* the remaining 6 investments reported significant variances from cost 
or schedule estimates.[Footnote 23] Significant variances are 
typically analyzed to determine root causes, as they may indicate 
problems needing corrective actions (see appendix V). 
- Over cost estimate: Current CADE and MeF 
- Over schedule estimate: ISRP and MSSS 
- Under cost estimate: ACA[Footnote 24] and ICCE 

CIO Rated 17 Investments at Moderately Low or Low Risk in Recent 
Months: 

The CIO rating shows how the Treasury CIO viewed the performance of 
each investment during a rating period. 

This rating is based on risk management, requirements management, 
contractor oversight, historical performance, human capital, or any 
other factors that the CIO deems important to forecasting the future 
success of the investment. 

Table 8: CIO Rated Major IT Investments: 

Investment Name: Account Management Services (AMS) 
Mar-11: 4; 
Apr-11: 4; 
May-11: N/A; 
Jun-11: 4; 
Jul-11: 3; 
Aug-11[B]: N/A; 
Sep-11[B]: N/A; 
Oct-11: 4; 
Nov-11: 4; 
Dec-11: 4; 
Jan-12: 4; 
Feb-12: 4; 
Mar-12: 4. 

Investment Name: Affordable Care AO Administration (ACa)[A]; 
Mar-11: [Empty]; 
Apr-11: [Empty]; 
May-11: [Empty]; 
Jun-11: [Empty]; 
Jul-11: [Empty]; 
Aug-11[B]: [Empty]; 
Sep-11[B]: [Empty]; 
Oct-11: N/A; 
Nov-11: N/A; 
Dec-11: N/A; 
Jan-12: N/A; 
Feb-12: N/A; 
Mar-12: N/A. 

Investment Name: Current Customer Account Data Engine (CADE)        
Mar-11: 4; 
Apr-11: 4; 
May-11: 4; 
Jun-11: 4; 
Jul-11: 3; 
Aug-11[B]: N/A; 
Sep-11[B]: N/A; 
Oct-11: 5; 
Nov-11: 5; 
Dec-11: 5; 
Jan-12: 5; 
Feb-12: 5; 
Mar-12: 5. 

Investment Name: CADE 2; 
Mar-11: 4; 
Apr-11: 4; 
May-11: 4; 
Jun-11: 4; 
Jul-11: 4; 
Aug-11[B]: N/A; 
Sep-11[B]: N/A; 
Oct-11: 4; 
Nov-11: 4; 
Dec-11: 4; 
Jan-12: 4; 
Feb-12: 4; 
Mar-12: 4. 

Investment Name: Electronic Fraud Detection System (EFDS); 
Mar-11: 4; 
Apr-11: 4; 
May-11: 4; 
Jun-11: 5; 
Jul-11: 5; 
Aug-11[B]: N/A; 
Sep-11[B]: N/A; 
Oct-11: 5; 
Nov-11: 4; 
Dec-11: 4; 
Jan-12: 4; 
Feb-12: 4; 
Mar-12: 4. 

Investment Name: e-Services (e-SVS); 
Mar-11: 4; 
Apr-11: 3; 
May-11: 3; 
Jun-11: 3; 
Jul-11: 3; 
Aug-11[B]: N/A; 
Sep-11[B]: N/A; 
Oct-11: 4; 
Nov-11: 4; 
Dec-11: 4; 
Jan-12: 4; 
Feb-12: 4; 
Mar-12: 4. 

Investment Name: Foreign Account Tax Compliance Act (FATCA)[A];
Mar-11: [Empty]; 
Apr-11: [Empty]; 
May-11: [Empty]; 
Jun-11: [Empty]; 
Jul-11: [Empty]; 
Aug-11[B]: [Empty]; 
Sep-11[B]: [Empty]; 
Oct-11: N/A; 
Nov-11: N/A; 
Dec-11: N/A; 
Jan-12: N/A; 
Feb-12: 4; 
Mar-12: 4. 
             
Investment Name: Implement RRP (Replaces EFDS); 
Mar-11: 3; 
Apr-11: 3; 
May-11: 3; 
Jun-11: 3; 
Jul-11: 4; 
Aug-11[B]: N/A; 
Sep-11[B]: N/A; 
Oct-11: 4; 
Nov-11: 3; 
Dec-11: 3; 
Jan-12: 3; 
Feb-12: 3; 
Mar-12: 3. 

Investment Name: Individual Master File (IMF); 
Mar-11: 4; 
Apr-11: 4; 
May-11: 4; 
Jun-11: 4; 
Jul-11: 4; 
Aug-11[B]: N/A; 
Sep-11[B]: N/A; 
Oct-11: 4; 
Nov-11: 4; 
Dec-11: 4; 
Jan-12: 4; 
Feb-12: 4; 
Mar-12: 4. 

Investment Name: Information Reporting and Document Matching (IRON); 
Mar-11: 2; 
Apr-11: 2; 
May-11: 2; 
Jun-11: 2; 
Jul-11: 3; 
Aug-11[B]: N/A; 
Sep-11[B]: N/A; 
Oct-11: 4; 
Nov-11: 4; 
Dec-11: 4; 
Jan-12: 4; 
Feb-12: 4; 
Mar-12: 4. 

Investment Name: Integrated Customer Communication Environment (ICCE); 
Mar-11: 4; 
Apr-11: 4; 
May-11: 4; 
Jun-11: 4; 
Jul-11: 4; 
Aug-11[B]: N/A; 
Sep-11[B]: N/A; 
Oct-11: 4; 
Nov-11: 4; 
Dec-11: 4; 
Jan-12: 4; 
Feb-12: 4; 
Mar-12: 4. 

Investment Name: Integrated Data Retrieval System ((DRS); 
Mar-11: 5; 
Apr-11: 5; 
May-11: 5; 
Jun-11: 5; 
Jul-11: 5; 
Aug-11[B]: N/A; 
Sep-11[B]: N/A; 
Oct-11: 5; 
Nov-11: 5; 
Dec-11: 5; 
Jan-12: 5; 
Feb-12: 5; 
Mar-12: 5. 

Investment Name: Integrated Financial System/CORE Financial System 
(IFS); 
Mar-11: 3; 
Apr-11: 3; 
May-11: 3; 
Jun-11: 3; 
Jul-11: 3; 
Aug-11[B]: N/A; 
Sep-11[B]: N/A; 
Oct-11: 4; 
Nov-11: 4; 
Dec-11: 4; 
Jan-12: 4; 
Feb-12: 4; 
Mar-12: 4. 

Investment Name: Integrated Submission and Remittance Processing 
System (ISRP); 
Mar-11: 5; 
Apr-11: 5; 
May-11: 5; 
Jun-11: 5; 
Jul-11: 5; 
Aug-11[B]: N/A; 
Sep-11[B]: N/A; 
Oct-11: 5; 
Nov-11: 5; 
Dec-11: 5; 
Jan-12: 5; 
Feb-12: 5; 
Mar-12: 5. 

Investment Name: IRS End User Systems and Services 
(EUSS)[A];              
Mar-11: [Empty]; 
Apr-11: [Empty]; 
May-11: [Empty]; 
Jun-11: [Empty]; 
Jul-11: [Empty]; 
Aug-11[B]: [Empty]; 
Sep-11[B]: [Empty]; 
Oct-11: 4; 
Nov-11: 4; 
Dec-11: 4; 
Jan-12: 4; 
Feb-12: 4; 
Mar-12: 4. 

Investment Name: IRS Main Frames and Servers) Services and Support 
(MSSS); 
Mar-11: [Empty]; 
Apr-11: [Empty]; 
May-11: [Empty]; 
Jun-11: [Empty]; 
Jul-11: [Empty]; 
Aug-11[B]: [Empty]; 
Sep-11[B]: [Empty]; 
Oct-11: 4; 
Nov-11: 4; 
Dec-11: 4; 
Jan-12: 3; 
Feb-12: 3; 
Mar-12: 3. 

Investment Name: IRS Telecommunications Systems and Support (TSS); 
Mar-11: [Empty]; 
Apr-11: [Empty]; 
May-11: [Empty]; 
Jun-11: [Empty]; 
Jul-11: [Empty]; 
Aug-11[B]: [Empty]; 
Sep-11[B]: [Empty]; 
Oct-11: 4; 
Nov-11: 4; 
Dec-11: 4; 
Jan-12: 4; 
Feb-12: 4; 
Mar-12: 4. 

Investment Name: IRS.GOV-Portal Environment; 
Mar-11: 3; 
Apr-11: 3; 
May-11: 3; 
Jun-11: 3; 
Jul-11: 3; 
Aug-11[B]: N/A; 
Sep-11[B]: N/A; 
Oct-11: 4; 
Nov-11: 4; 
Dec-11: 4; 
Jan-12: 4; 
Feb-12: 4; 
Mar-12: 4. 

Investment Name: Modernize e-File (MeF); 
Mar-11: 4; 
Apr-11: 4; 
May-11: 3; 
Jun-11: 3; 
Jul-11: 3; 
Aug-11[B]: N/A; 
Sep-11[B]: N/A; 
Oct-11: 4; 
Nov-11: 4; 
Dec-11: 4; 
Jan-12: 4; 
Feb-12: 4; 
Mar-12: 3. 

Investment Name: Service Center Recognition/Image Processing System 
(SCRIPS); 
Mar-11: 4; 
Apr-11: 4; 
May-11: 4; 
Jun-11: 4; 
Jul-11: 4; 
Aug-11[B]: N/A; 
Sep-11[B]: N/A; 
Oct-11: 5; 
Nov-11: 5; 
Dec-11: 5; 
Jan-12: 5; 
Feb-12: 5; 
Mar-12: 5. 

2: Moderately High Risk. 
3: Medium Risk. 
4: Moderately Low Risk. 
5: Low Risk. 
     
Source: GAO analysis of IRS's data and OMB's Dashboard. 

[A] These investments were not reported on the IT dashboard until it 
was designated a major IT investment in October 2011. 

[B] According to IRS, CIO ratings for August and September 2011 were 
not available because of the transition period to newer cost and 
schedule calculations. 

[C] Because HHS has overall responsibility for ACA, IRS does not 
provide separate reports to OMB on this investment. We did not obtain 
the CIO rating information prior to March 2012 from HHS in time for 
this review. 

[End of table] 

IRS Does Not Have a Quantitative Measure of Scope: 

While IRS reports on the cost and schedule of its major investments 
and provides CIO ratings for them, the agency does not have a 
quantitative measure of scope-—a measure that shows functionality 
delivered. 

Having such a measure is a good practice as it provides information 
about whether an investment delivered the functionality that was paid 
for. 

In 2007, we recommended that IRS develop a quantitative measure of 
scope for BSM in order to have complete information on the performance 
of these investments.[Footnote 25] IRS agreed with the recommendation, 
and in response, developed a measure to include in the fiscal year 
2012 BSM expenditure plan. The agency, however, did not use the 
measure since the expenditure plan was discontinued. 

* IRS has several methods for ensuring that intended functionality is 
delivered, including project health assessment reports, which provide 
project status updates and flag risks; and end of test completion 
reports, which are signed off at the end of the development and 
deployment phases. None of these methods, however, provides for a 
quantitative measure of functionality delivered. Officials stated they 
recognize the value of developing such a measure and plan to determine 
a schedule for doing this. 

Until it develops a quantitative measure of scope (i.e., functionality 
delivered), IRS will not have complete information on the performance 
of its investments and will therefore have less assurance that it is 
effectively managing these investments. 

Legislative Proposals: 

GAO Has Conducted Analyses Related to 6 of 22 Legislative Proposals 
Included in the Budget Request for IRS: 

The 22 legislative proposals are estimated to generate more than $12 
billion over 10 years and are estimated to cost $80.2 million over 3 
years. 

Table 9: Legislative Proposals Related to Prior GAO Work (in millions): 

IRS legislative proposals related to prior GAO work: Increase 
certainty about the rules pertaining to classification of employees as 
independent contractors; 
Projected revenues over 10 years: $8,372; 
Projected costs over 3 years: $1.9; 
Related GAO reports: GAO-09-717. 

IRS legislative proposals related to prior GAO work: Extend IRS math 
error authority in certain circumstances; 
Projected revenues over 10 years: $173; 
Projected costs over 3 years: Not available; 
Related GAO reports: GAO-10-349, GAO-10-225. 

IRS legislative proposals related to prior GAO work: Allow IRS to 
absorb credit and debit card processing fees for certain tax payments; 
Projected revenues over 10 years: $19; 
Projected costs over 3 years: $9.6; 
Related GAO reports: GAO-10-11. 

IRS legislative proposals related to prior GAO work: Improve and make 
permanent the provision authorizing the IRS to disclose certain return 
information to certain prison officials; 
Projected revenues over 10 years: Negligible revenue effect; 
Projected costs over 3 years: Not available; 
Related GAO reports: GAO-06-100. 

IRS legislative proposals related to prior GAO work: Provide Treasury 
with the regulatory authority to require electronic filing of all Form 
5500 Annual Report information; 
Projected revenues over 10 years: No revenue effect; 
Projected costs over 3 years: $11.2; 
Related GAO reports: GAO-05-491. 

IRS legislative proposals related to prior GAO work: Require taxpayers 
who prepare their returns electronically, but file their returns on 
paper, to print their returns with a two-dimensional bar code; 
Projected revenues over 10 years: No revenue effect; 
Projected costs over 3 years: $6.8; 
Related GAO reports: GAO-12-33, GAO-08-38. 

Sources: IRS, Fiscal Year 2013 Congressional Budget Justification, and 
Department of the Treasury, General Explanations of the 
Administration’s Fiscal Year 2013 Revenue Proposals (Washington, D.C.: 
February 2012). 

[End of table] 

GAO Open Matters and Recommendations: 

IRS At Least Partially Implemented 5 Prior GAO Recommendations to 
Improve the Budget Presentation: 

Table 10: IRS Took Steps to Implement Prior Recommendations: 

Recommendation: Extend the use of ROI in future budget proposals to 
include major enforcement programs[A]; 
Actions taken by IRS: IRS made a significant step forward in beginning 
to calculate actual ROIs for major enforcement programs. Specifically, 
IRS captured actual revenue and cost associated for Exam, Collections 
and Automated Underreporter (AUR) programs. IRS officials said they 
plan to report this data in the budget justification next year, 
pending various approvals. 
Benefit: Actual ROIs could provide information about how programs and 
initiatives are performing, and could serve as a basis for assessing 
the revenue and cost impact of program-level changes. 

Recommendation: Develop ROIs for IRS’s enforcement programs using 
actual revenue and full cost data and compare the actual ROIs to the 
projected ROIs included in the full budget request.[B]
Actions taken by IRS: Although not at the program initiative level, 
IRS made a significant step forward in beginning to calculate actual 
ROIs for major enforcement programs. Specifically, IRS captured actual 
revenues and costs associated for Exam, Collections and AUR programs. 
IRS officials said they plan to report this data in the budget 
justification next year, pending various approvals. 
Benefit: Actual ROIs could provide information about how programs and 
initiatives are performing, and could serve as a basis for assessing 
the revenue and cost impact of program-level changes. 

Recommendation: Report how savings beyond projections were used. The 
amount of explanation provided should correspond to the amount of 
savings.[C] 
Actions taken by IRS: IRS reported in the fiscal year 2013 budget 
request, how savings beyond 
projections were used. For fiscal year 2011, IRS reported that it 
realized $277.2 million and 960 FTE in actual savings-—$86.5 million 
and 488 FTE more than projected. 
Benefit: Knowing how an agency spent excess savings, particularly in 
years when the excess is significant, could help Congress assess 
budgetary needs in the future. 

Recommendation: Provide cost estimates for individual legislative 
proposals in future budget justifications.[C]
Actions taken by IRS: IRS provided cost estimates for individual 
legislative proposals in the Fiscal Year 2013 Congressional Budget 
Justification for IRS. 
Benefit: By knowing estimated costs to implement an individual 
legislative proposal, Congress has important information to use when 
weighing 
proposals. 

Recommendation: Include measures of cost and schedule performance for 
major IT systems in Operations Support, such as it does for BSM.[C] 
Actions taken by IRS: IRS included measures of cost and schedule 
performance for major IT 
systems in the Fiscal Year 2013 Congressional Budget Justification for 
IRS. 
Benefit: Congressional stakeholders we met with stated that having a 
summary of cost and scheduled performance for major IT systems in 
Operations Support would be helpful for oversight. 

Source: GAO analysis. 

[A] GAO-08-567. 

[B] GAO, Internal Revenue Service: Review of the Fiscal Year 2010 
Budget Request, GAO-09-754 (Washington, D.C.: June 3, 2009). 

[C] GAO-11-547. 

[End of table] 

Some Prior Recommendations to Improve the Budget Presentation Remain 
Open: 

Table 11: Some Recommendations to IRS Remain Open: 

Implementing the following recommendations could provide important 
information for budget decision makers. 

Open recommendation: Provide additional information, which could be 
qualitative if necessary to avoid losing existing reprogramming 
flexibility, about the program activities in the budget justification 
to better indicate IRS’s priorities.[A]
Benefit: Program-level information increases Congress’s ability to 
understand priorities and make more informed decisions about the use 
of resources. 

Open recommendation: Make explicit linkages between initiatives and 
proposals in the budget and strategic documents.[A]
Benefit: Without an explicit and transparent connection between IRS’s 
strategic documents and the budget request, Congress and other 
stakeholders may not be able to understand the priority that IRS is 
giving to its efforts to improve service and enforcement. 

Open recommendation: Explain in the budget justification noteworthy 
changes in performance goals that reflect changes from previous 
performance and describe the impact on funding.[A] 
Benefit: Clear linkages between performance goals and funding can help 
determine how funded activities contribute to operational goals and 
specific measures. These linkages can also illustrate how targets 
align with funding and how efficiently resources are used. 

Open recommendation: Expand efforts to systematically identify savings 
and efficiencies as part of its budget development process on a 
periodic, but not necessarily annual, basis.[B] 
Benefit: Best practices suggest that agencies routinely identify 
savings and efficiencies. By not applying the more systematic and 
productive IT approach agency wide, IRS might be missing opportunities 
to realize savings and efficiencies. 

Source: GAO analysis of prior budget related reports. 

[A] GAO-10-687R. 

[B] GAO-11-547. 

[End of table] 

106 Open Matters for Congress and Recommendations to IRS Regarding Tax 
Administration Could Result in Potential Savings or Increased Revenues: 

As of March 19, 2012, 33 GAO products contain 10 matters for Congress 
and 96 recommendations to IRS (see appendix VI). 

32 increase revenue, 7 increase savings, 16 increase both savings and 
revenue, and 51 have indirect financial benefits. For example: 

* If Congress amended the Internal Revenue Code to make all taxpayers 
with rental real estate activity subject to the same information 
reporting requirements as other taxpayers operating a trade or 
business, IRS could generate $2.5 billion over 10 years.[A] 

* If IRS could obtain more helpful information about taxpayers' 
mortgages by expanding information collected on Form 1098, it could 
improve taxpayer compliance with statutory requirements and increase 
revenues.[B] 

Since last year, 1 matter and 25 recommendations were implemented. 

[A] Joint Committee on Taxation, “Estimated Budget Effects of the 
Revenue Provisions Contained in the President’s Fiscal Year 2011 
Budget Proposal,” JCX-7-10 R (March 15, 2010). 

[B] GAO, Home Mortgage Interest Deduction: Despite Challenges 
Presented by Complex Tax Rules, IRS Could Enhance Enforcement and 
Guidance, GAO-09-769 (Washington, D.C.: July 29, 2009). 

Conclusions: 

We have identified several areas where budget decision makers lack 
information that would be helpful in making decisions about resource 
trade-offs at IRS. 

* Unlike most enforcement initiatives that IRS now justifies with ROI 
estimates, nonenforcement investment initiatives are not justified 
with similar economic analyses, such as cost-effectiveness analyses. 
When comparisons of alternative investments for accomplishing a goal 
do not consider costs, budget decision makers cannot be assured that 
alternatives were fully evaluated and that the best alternative was 
selected. 

* Without a timely, updated cost estimate for PPACA, budget decision 
makers will not know the fraction of the multi-year effort being 
funded in fiscal year 2013 or the subsequent remaining costs. 

* Because the budget request for hiring new staff is not based on 
expected hiring dates, but instead assumes hiring will occur at the 
beginning of the fiscal year, some funds will be available for other 
uses, which are not described or substantiated in the budget request. 

* Although IRS tracks the schedule and cost performance of IT 
investments, it does not have a quantitative measure to determine 
whether it is delivering planned functionality. Without this measure, 
budget decision makers lack complete information about IRS’s 
performance in managing IT investment projects. 

Recommendations for Executive Action: 

To continue to improve information on program cost and results that 
could aid in resource decision making, we recommend that the 
Commissioner of Internal Revenue: 

* ensure cost-effectiveness analyses are conducted for future 
significant investments when there are alternative approaches for 
achieving a given benefit, such as for any new significant PPACA 
projects; 

* ensure that an updated PPACA cost estimate is completed by September 
2012 in accordance with best practices in the GAO Cost Guide; 

* prepare funding requests for new staff based on estimated hiring 
dates; and; 

* develop a quantitative measure of scope, at a minimum for its major 
IT investments, to have more complete information on the performance 
of these investments. 

Briefing Slides Footnotes: 

1. IRS is one of several agencies charged with implementing PPACA, 
legislation aimed at reforming the private insurance market and 
expanding health coverage to the uninsured. IRS is responsible for 
implementing PPACA provisions relating to, among other things, new 
taxes, tax credits, and information reporting requirements. Pub. L. 
No. 111-148, 124 Stat.119 (Mar. 23, 2010), as amended by the Health 
Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, 
124 Stat. 1029 (Mar. 30, 2010). 

2. See GAO, Cost Estimating and Assessment Guide: Best Practices for 
Developing and Managing Capital Program Costs, [hyperlink, 
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: Mar. 2, 
2009). 

3. A FTE is a measure of staff hours equal to those of an employee who 
works 2,080 hours per year, or 40 hours per week for 52 weeks. 

4. Among other IT responsibilities, MITS has primary responsibility 
for managing and delivering IRS’s Business Systems Modernization 
program. 

5. Pub. L. No. 111-148, 124 Stat. 119 (Mar. 23, 2010). 

6. Health Care and Education Reconciliation Act of 2010, Pub. L. No. 
111-152, 124 Stat. 1029 (Mar. 30, 2010). 

7. Reduction in FTEs calculated from fiscal year 2011 actual and 
fiscal year 2012 enacted FTE levels. 

8. GAO, IRS Budget 2012: Extending Systematic Reviews of Spending 
Could Identify More Savings Over Time, [hyperlink, 
http://www.gao.gov/products/GAO-11-547] (Washington, D.C.: Apr. 11, 
2011). 

9. Level of service is the number of toll-free callers that speak to 
live IRS assistors divided by the total number of attempted calls. 

10. Information returns are tax documents third parties are required 
to file to IRS that report certain transactions, such as interest 
earned from a bank account. 

11. Energy Improvement and Extension Act of 2008, Pub. L. No. 110-343, 
div. B, § 403, 122 Stat. 3765, 3854-3860 (Oct. 3, 2008). 

12. Housing Assistance Tax Act of 2008, Pub. L. No. 110-289, div. C, § 
3091, 122 Stat. 2654, 2908-2911 (July 30, 2008). 

13. Hiring Incentives to Restore Employment Act, Pub. L. No. 111-147, 
title V, 124 Stat. 71, 97-117 (Mar. 18, 2010). 

14. IRS’s ROI calculations have limitations that reflect the 
challenges of estimating ROIs. For example, they do not include 
benefits of improved voluntary compliance. In addition, the 
"investment" or costs should ideally recognize not just IRS costs, but 
any costs borne by others. IRS's ROI estimates provide useful 
information but, given the limits of current data, are not complete 
estimates of benefits and costs. 

15. GAO, Tax Debt Collection: IRS Could Improve Future Studies by 
Establishing Appropriate Guidance, [hyperlink, 
http://www.gao.gov/products/GAO-10-963] (Washington, D.C.: Sept. 24, 
2010). 

16. [hyperlink, http://www.gao.gov/products/GAO-09-3SP]. 

17. Treasury Inspector General for Tax Administration, Challenges 
Remain to Balance Revenue Officer Staffing With Attrition and Workload 
Demands, TIGTA 2011-30-039 (Washington, D.C.: May 6, 2011). 

18. IRS can transfer funds between appropriations, but those transfers 
cannot exceed 5 percent of any appropriation or 3 percent of the 
Enforcement appropriation. 

19. GAO, Internal Revenue Service: Assessment of Budget Justification 
for Fiscal Year 2011 Identified Opportunities to Enhance Transparency, 
[hyperlink, http://www.gao.gov/products/GAO-10-687R] (Washington, 
D.C.: May 26, 2010), and GAO, Budget Issues: Budgeting for Federal 
Insurance Programs, GAO/T-AIMD-98-147 (Washington, D.C.: April 23, 
1998). 

20. According to IRS, major investments are defined by Treasury as 
those that cost $10 million in either current year or budget year, or 
$50 million over the 5 year period extending from the prior year 
through budget year +2. 

21. IRS eliminated two major investments in the fiscal year 2013 
budget request. 

22. Based on changes to OMB budget guidance, IRS adopted a new 
methodology for reporting on cost and schedule performance for its 
major IT investments, starting October 2011. Given these changes, we 
are reporting from October 2011 to March 2012. 

23. A significant variance from cost and/or schedule is defined as 
anything below or exceeds 10 percent. 

24. IRS is implementing PPACA requirements under the investment name 
of ACA. 

25. GAO, Business Systems Modernization: Internal Revenue Service’s 
Fiscal Year 2007 Expenditure Plan, [hyperlink, 
http://www.gao.gov/products/GAO-07-247] (Washington, D.C.: February 
15, 2007). 

Appendix II: Comments from the Internal Revenue Service: 

IRS Position Regarding GAO draft report dated May 17, 2012: 

IRS 2013 Budget: Continuing to Improve Information on Program Costs and
Results Could Aid in Resource Decision Making (GAO-12-606): 

The IRS appreciates the opportunity to review the draft GAO report 
regarding the IRS's FY 2013 President's Budget Submission. As in prior 
years, our budget submission reflects the continued improvement of the 
availability of information on program costs and the tools we use to 
support budget initiatives such as Return on Investment (ROI) 
calculations for both immediate and directly measurable revenue, as 
well as long term revenue effects for initiatives that do no have an 
immediate measurable ROI. The IRS provides the below Agency Position 
in regard to a few of the other areas addressed in the draft report: 

Implementation of the Patient Protection Affordable Care Act (PPACA): 
The IRS agrees with the recommendations as they relate to implementing 
new investments, such as the those associated with PPACA and to 
ensuring that an updated PPACA cost estimate is completed by
September 2012; however notes that the report does not acknowledge 
that although the FY 2013 request includes new funding for IRS 
appropriations, the majority of the funding supports ongoing efforts 
and for staff already on board in FY 2012. 

Development of a Quantitative Measure of Scope: 
While the IRS agrees with the recommendation to develop a quantitative 
measure of scope to present information on the performance of its 
major investments, the collective use of methods currently in place to 
document delivered functionality throughout the lifecycle. These 
methods include the use of business cases and valid reliable cost 
estimates which define the scope and value attributed to the 
investment. The progress of the investment is tracked through internal 
governance entities within the IT organization and additionally with 
business counterparts in Executive Steering Committees. Further more, 
project assessments are used to provide status updates in internal 
tracking systems to reflect the health of the project and flag any 
risks. Risks and supporting mitigations are also tracked to completion 
and escalated as necessary. As requirements are solidified, they are 
also tracked to ensure they meet functionality as intended. Finally, 
end of test completion reports provide the documentation for the 
desired end state and arc signed off on as part of the Milestone exit 
at 4b & 5. 

Development of Funding Requests for New Hires: 
While the IRS agrees with three of the four recommendations, as 
previously discussed with GAO, the IRS does not agree with the 
recommendation related to the development of funding requests for new 
staff based on estimated hiring dates and is concerned with the long 
term impact of such a recommendation. Not only is the current practice 
approved by OMB, but as in prior years, the IRS is committed to 
continuing to demonstrate full transparency in spending through the 
submission of the annual Operating Plan and requests for reprogramming 
that reflect any variance in spending as the result of late enactment 
of the budget or delayed hiring of new staff. 

[End of section] 

Appendix III: Reliability of Patient Protection and Affordable Care 
Act Cost Estimate: 

The following figures outline our assessment of the extent to which 
the Internal Revenue Service's (IRS) Fiscal Year 2013 Patient 
Protection and Affordable Care Act (PPACA) cost estimate for new 
initiatives meet best practices. This information is repeated in table 
1, following the graphics. 

Figure 1: How IRS's Fiscal Year 2013 PPACA Cost Estimate Aligns with 
the Best Practices for Comprehensiveness: 

[Refer to PDF for image: interactive graphic] 

Data follows in table format. 

[End of figure] 

Figure 2: How IRS's Fiscal Year 2013 PPACA Cost Estimate Aligns with 
the Best Practices for Being Well Documented: 

[Refer to PDF for image: interactive graphic] 

Data follows in table format. 

[End of figure] 

Figure 3: How IRS's Fiscal Year 2013 PPACA Cost Estimate Aligns with 
the Best Practices for Accuracy: 

[Refer to PDF for image: interactive graphic] 

Data follows in table format. 

[End of figure] 

Figure 4: How IRS's Fiscal Year 2013 PPACA Cost Estimate Aligns with 
the Best Practices for Credibility: 

[Refer to PDF for image: interactive graphic] 

Data follows in table format. 

[End of figure] 

The following table outlines our assessment of the extent to which 
IRS's Fiscal Year 2013 PPACA cost estimate for new initiatives meet 
best practices. This information is also depicted in the previous 
figures 1-4. 

Table 1: How IRS's Fiscal Year 2013 PPACA Cost Estimate Aligns with 
Best Practices Outlined in the GAO Cost Guide: 

Best practices characteristics: A comprehensive cost estimate; 
Overall assessment: Partially meets best practices for a comprehensive 
cost estimate; 
Assessment of whether best practices are met: [Empty]; 
Effect: [Empty]. 

Best practices characteristics: Includes all life-cycle costs; 
A life-cycle cost estimate provides a complete and structured 
accounting of all resources and associated cost elements required to 
develop, produce, deploy, and sustain a particular program. It should 
cover the inception of the program through its retirement; 
Overall assessment: [Empty]; 
Assessment of whether best practices are met: The Modernization and 
Information Technology Services (MITS) cost estimate contains all the 
IT needs for the program as known at the time of the estimate. The 
MITS estimate cost model includes labor and non labor costs as well as 
government and contractor costs, but they are only included for fiscal 
year 2010 through fiscal year 2013. Investment and operations and 
maintenance costs are included only for the same time period. The cost 
model did not mention disposal costs. (Partially meets); 
Effect: A life-cycle cost estimate should encompass all past (or 
sunk), present, and future costs for every aspect of the program, 
regardless of funding source, including all government and contractor 
costs. Without fully accounting for life-cycle costs, management will 
have difficulty successfully planning program resource requirements 
and making wise decisions. 

Best practices characteristics: Completely defines the program, 
reflects the current schedule, and is technically reasonable; 
The cost estimate should be based on a documented technical baseline 
description, which provides a common definition of the program, 
including detailed technical, program, and schedule descriptions of 
the system; 
Overall assessment: [Empty]; 
Assessment of whether best practices are met: The cost model 
documentation only discusses the architecture and project timeline, 
which is just part of the technical description. (Partially meets); 
Effect: Understanding the program--including the acquisition strategy, 
technical definition, characteristics, system design features, and 
technologies to be included--is key to developing a credible cost 
estimate. Without these data, the cost estimator will not be able to 
identify the technical and program parameters that will bind the cost 
estimate. 

Best practices characteristics: Has a product-oriented work breakdown 
structure (WBS), traceable to the program's technical scope at an 
appropriate level of detail; 
A WBS provides a basic framework for a variety of related activities 
like estimating costs, developing schedules, identifying resources and 
potential risks, and providing the means for measuring program status 
using earned value management (EVM). It is product-oriented if it 
allows a program to track cost and schedule by defined deliverables, 
such as a hardware or software component; 
Overall assessment: [Empty]; 
Assessment of whether best practices are met: The WBS has not been 
modified since our 2011 review[A] and does not include a schedule or 
EVM reporting. It is still based on high level requirements and is not 
standardized. However, a WBS and dictionary are now part of the 
statement of work for the upcoming new cost estimate. (Partially 
meets); 
Effect: Without a WBS, the program lacks a framework to develop a 
schedule and cost plan that can easily track technical 
accomplishments--in terms of resources spent in relation to the plan 
as well as completion of activities and tasks. 

Best practices characteristics: Documents all cost-influencing ground 
rules and assumptions; Cost estimates are typically based on limited 
information and therefore need to be bound by ground rules and 
assumptions. Ground rules are a set of estimating standards that 
provide guidance and common definitions, while assumptions are 
judgments about past, present, or future conditions that may affect 
the estimate. Any risks associated with assumptions should be 
identified and traced to specific WBS elements; 
Overall assessment: [Empty]; 
Assessment of whether best practices are met: Ground rules and 
assumptions are defined for each cost element in the cost model 
spreadsheet, assigned according to WBS, and reflect relevant 
historical data. However, we found no evidence that the assumptions 
were associated with any risk analysis or developed with input from 
IRS's technical community or were approved by management. The effect 
of budget constraints has not been identified despite the fact that 
the program has already experienced budget cuts. (Partially meets); 
Effect: Unless ground rules and assumptions are clearly documented, 
the cost estimate will not have a basis for resolving potential risks. 
Furthermore, the estimate cannot be reconstructed when the original 
estimators are no longer available. 

Best practices characteristics: A well documented cost estimate should: 
Overall assessment: Partially meets best practices for a well 
documented cost estimate; 
Assessment of whether best practices are met: [Empty]; 
Effect: [Empty]. 

Best practices characteristics: Capture the source data used, the 
reliability of the data, and how the data were made compatible with 
other data in the estimate; 
Data should be collected from primary sources. The source, content, 
time, and units should be adequately documented. Further, data should 
be analyzed to determine accuracy and reliability, and to identify 
cost drivers; 
Overall assessment: [Empty]; 
Assessment of whether best practices are met: Only some sources of 
data are shown in cost model. The cost estimate does not address the 
reliability of the data or if historical data was made compatible with 
other data in the estimate; (Partially meets); 
Effect: Data are the foundation of every cost estimate. The quality of 
the data affects the estimate's overall credibility. Depending on the 
data quality, an estimate can range anywhere from a mere guess to a 
highly defensible cost position. However, without sufficient 
background knowledge about the source and reliability of the data, the 
cost estimator cannot know with any confidence whether the data 
collected can be used directly or need to be modified. 

Best practices characteristics: Describe the calculations and the 
methodology used to derive each element's cost; 
Documentation should describe what calculation methods are used, as 
well as how they were applied, and explain any anomalies; 
Overall assessment: [Empty]; 
Assessment of whether best practices are met: Calculations are shown 
in a spreadsheet cost model. However, some of the estimates were based 
on expert opinion with no historical data provided to back up the 
estimates. (Substantially meets); 
Effect: [B]. 

Best practices characteristics: Describe how the estimate was 
developed; 
The data supporting the estimate should be available and adequately 
documented so that the estimate can be easily updated to reflect 
actual costs or program changes; 
Overall assessment: [Empty]; 
Assessment of whether best practices are met: Step by step 
calculations are shown. However, as mentioned above there were several 
subprojects that had cost estimates based on expert opinion that were 
hard coded into the cost model, which makes it difficult to understand 
how these estimates were developed. (Substantially meets); 
Effect: [B. 

Best practices characteristics: Discuss the technical baseline 
description; 
A technical baseline description provides a common definition of the 
program, including detailed technical, program, and schedule 
descriptions of the system, for a cost estimate to be built on. The 
data in the technical baseline should be consistent with the cost 
estimate; 
Overall assessment: [Empty]; 
Assessment of whether best practices are met: The cost model 
documentation only discusses some of the technical baseline 
description. (Partially meets); 
Effect: Without a technical baseline, the cost estimate will not be 
based on a comprehensive program description and will lack specific 
information regarding technical and program risks. 

Best practices characteristics: Provide evidence of management review 
and acceptance; 
There should be a briefing to management, including a clear 
explanation of how the cost estimate was derived. Management's 
acceptance of the cost estimate should be documented; 
Overall assessment: [Empty]; 
Assessment of whether best practices are met: Program officials said 
approval of the cost estimate was given by the Commissioner's Office. 
However, documentation showing management acceptance of the cost 
estimate was not provided. (Minimally meets); 
Effect: A cost estimate is not considered valid until management has 
approved it. It is imperative that management understand how the 
estimate was developed, including the risks associated with the 
underlying data and methods. 

Best practices characteristics: An accurate cost estimate: 
Overall assessment: Partially meets best practices for an accurate 
cost estimate; 
Assessment of whether best practices are met: [Empty]; 
Effect: [Empty]. 

Best practices characteristics: Produces unbiased results; 
Cost estimates should have an uncertainty analysis, which determines 
where the estimate falls against the range of all possible costs; 
Overall assessment: [Empty]; 
Assessment of whether best practices are met: The cost estimate budget 
was based on a high estimate as the program is in a very early stage 
and a lot of uncertainty remains. According to IRS officials, there is 
a 60 to 70 percent confidence rate that the estimate will fall between 
the low and high range of cost. (Partially meets); 
Effect: A cost estimate is biased if the estimated work is overly 
conservative or too optimistic. Unless the estimate is based on an 
assessment of the most likely costs and reflects the degree of 
uncertainty given all of the risks considered, management will not be 
able to make informed decisions. 

Best practices characteristics: Is properly adjusted for inflation; 
Cost data should be adjusted for inflation to ensure that comparisons 
and projections are valid. Data should also be normalized to constant 
year dollars to remove the effects of inflation. Also, inflation 
assumptions must be well documented; 
Overall assessment: [Empty]; 
Assessment of whether best practices are met: Inflation was not used 
in the cost model. (Does not meet); 
Effect: Adjusting for inflation is important because in the 
development of an estimate, cost data must be expressed in like terms. 
If a mistake is made or the inflation amount is not correct, cost 
overruns can result. 

Best practices characteristics: Contains few mistakes; Results should 
be checked for accuracy, double counting, and omissions. Validating 
that a cost estimate is accurate requires thoroughly understanding and 
investigating how the cost model was constructed; 
Overall assessment: [Empty]; 
Assessment of whether best practices are met: IRS did a line by line 
check of the estimate to validate it. We also performed a check of the 
spreadsheets provided and found no errors. (Fully meets); 
Effect: [B]. 

Best practices characteristics: Is regularly updated to reflect 
significant program changes; The cost estimate should be updated to 
reflect significant program changes, such as changes to schedules or 
other assumptions. Updates should also reflect actual costs so that 
the estimate always reflects the current program status; 
Overall assessment: [Empty]; 
Assessment of whether best practices are met: The IT cost estimate has 
not been updated since October 2010, except that IRS did include 
actual costs for 2011. Further, documentation did not show that 
staffing estimates were re-evaluated for fiscal year 2013. However, on 
April 26, 2012 IRS awarded a contract to update the entire development 
cost estimate which includes both the IT and staffing portions. 
(Minimally meets); 
Effect: If a cost estimate is not updated, it can become more 
difficult to analyze changes in program costs and collecting cost and 
technical data to support future estimates will be hindered. Cost 
estimates not updated when the technical baseline changes will lack 
credibility. 

Best practices characteristics: Documents and explains variances 
between planned and actual costs; Variances between planned and actual 
costs should be documented, explained, and reviewed. For any elements 
whose actual costs or schedules differ from the estimate, the estimate 
should discuss variances and lessons learned; 
Overall assessment: [Empty]; 
Assessment of whether best practices are met: Actual costs are being 
tracked but the documentation does not discuss variances or lessons 
learned. (Minimally meets); 
Effect: Without a documented comparison between the current estimate 
(updated with actual costs) and the old estimate, cost estimators 
cannot determine the level of variance between the two estimates. That 
is, the estimators cannot see how well they are estimating and how the 
program is changing over time. 

Best practices characteristics: Reflects cost estimating experiences 
from comparable programs; The estimate should be based on historical 
cost estimation data and actual experiences from other comparable 
programs. These data should be reliable and relevant to the new 
program; 
Overall assessment: [Empty]; 
Assessment of whether best practices are met: The majority of the 
estimate was based on historical data. (Substantially meets); 
Effect: [B]. 

Best practices characteristics: A credible cost estimate includes: 
Overall assessment: Minimally meets best practices for a credible cost 
estimate; 
Assessment of whether best practices are met: [Empty]; 
Effect: [Empty]. 

Best practices characteristics: A sensitivity analysis that identifies 
a range of possible costs based on varying inputs; A sensitivity 
analysis examines how changes to key assumptions and inputs affect the 
estimate. The estimate should identify key cost drivers, examine their 
parameters and assumptions, and re-estimate the total cost by varying 
each parameter between its minimum and maximum range; 
Overall assessment: [Empty]; 
Assessment of whether best practices are met: Each element of the cost 
estimate is presented as a high, low, and most likely range of costs. 
However, it is not clear how changing each variable would affect the 
overall total cost. (Minimally meets); 
Effect: Without sensitivity analysis that reveals how the cost 
estimate is affected by a change in a single assumption, the cost 
estimator will not fully understand which variable most affects the 
cost estimate. 

Best practices characteristics: A risk and uncertainty analysis; 
A risk and uncertainty analysis recognizes the potential for error and 
attempts to quantify it by identifying the effects of changing key 
cost drivers; 
Overall assessment: [Empty]; 
Assessment of whether best practices are met: Each element of the cost 
estimate is presented with a high, low, and most likely range of 
costs. However, a comprehensive risk and uncertainty analysis was not 
completed; The program has already experienced a reduced budget in 
fiscal year 2012. The IRS requested $473 million, but the request was 
not funded so IRS revised its fiscal year 2012 spending plan to $332.2 
million from HHS funds. However, the IRS has not considered the risk 
of future budget reductions on the estimate. By not risk adjusting the 
estimate, the IRS risks either running behind schedule or incurring 
more costs to maintain the schedule. (Minimally meets); 
Effect: For management to make good decisions, the program estimate 
must reflect the degree of uncertainty, so that a level of confidence 
can be given about the estimate. Having a range of costs around a 
point estimate is more useful to decision makers because it conveys 
the level of confidence in achieving the most likely cost and also 
informs them on cost, schedule, and technical risks. 

Best practices characteristics: Cross-checking of major cost elements; 
A cross-check is done by using a different cost estimation method to 
see if it produces similar results; 
Overall assessment: [Empty]; 
Assessment of whether best practices are met: No evidence of any cross-
checks was found in the cost estimate documentation. (Does not meet); 
Effect: One way to reinforce the credibility of the cost estimate is 
to see whether applying a different method produces similar results. 
The main purpose of cross-checking is to determine whether alternative 
methods produce similar results. If so, then confidence in the 
estimate increases, leading to greater credibility. 

Best practices characteristics: A comparison to an independent cost 
estimate conducted by another organization; A second, independent cost 
estimate should be performed by an organization outside of the program 
office's influence. It should be based on the same technical baseline, 
ground rules, and assumptions as the original estimate; 
Overall assessment: [Empty]; 
Assessment of whether best practices are met: IRS awarded a contract 
to update the PPACA cost estimate on April 26, 2012. The statement of 
work for this contract was provided and closely matches the best 
practices of the GAO Cost Guide. IRS officials told us they plan to 
use the IRS Estimation Program Office (EPO) to perform validation of 
the revised cost estimate from the contractor. Having the EPO create 
an independent cost estimate to validate the hired cost estimating 
contractor will provide assurance that the delivered cost estimate is 
high quality. (Minimally meets); 
Effect: A program estimate that has not been reconciled with an 
independent cost estimate has an increased risk of proceeding 
underfunded because an independent cost estimate provides an objective 
and unbiased assessment of whether the program estimate can be 
achieved. 

Source: GAO analysis of IRS's Fiscal Year 2013 PPACA cost estimate and 
GAO-09-3SP. 

Note: We determined the overall assessment rating by assigning the 
following ratings: Does Not Meet-IRS provided no evidence that 
satisfies any of the criterion, Minimally Meets-IRS provided evidence 
that satisfies a small portion of the criterion, Partially Meets-IRS 
provided evidence that satisfies about half of the criterion, 
Substantially Meets-IRS provided evidence that satisfies a large 
portion of the criterion, Fully Meets-IRS provided complete evidence 
that satisfies the entire criterion. 

[A] GAO, Patient Protection and Affordable Care Act: IRS Should Expand 
Its Strategic Approach to Implementation, GAO-11-719 (Washington, 
D.C.: June 29, 2011). 

[B] We did not describe effects for characteristics scored as "fully 
meets" or "substantially meets." 

[End of table] 

[End of section] 

Appendix IV: Description of the Internal Revenue Service's Major 
Information Technology Investments: 

Table 2: The Internal Revenue Service's 20 Major Information 
Technology Investments: 

Investment Name: Account Management Services (AMS); 
Investment Description: This investment is intended to enhance 
customer support by providing applications that enable IRS employees 
to access, validate, and update individual taxpayer accounts on demand. 

Investment Name: Affordable Care Act (ACA) Administration[A]; 
Investment Description: This investment allows the IRS to continue the 
development of new systems and modification of existing systems 
required to support new tax credits as prescribed in the Affordable 
Care Act. 

Investment Name: Current Customer Account Data Engine (CADE); 
Investment Description: This investment was intended to deploy a 
modernized database foundation that would replace the IRS's Individual 
Master File processing system and house tax information for more than 
200 million taxpayers while providing faster return processing and 
refunds. According to IRS, the Current CADE Investment ended on 
December 31, 2011. 

Investment Name: CADE 2; 
Investment Description: This investment is intended to leverage 
knowledge gained from the development on Current CADE and data from 
the Individual Master File to provide timely access to authoritative 
individual taxpayer account information and also enhance IRS's ability 
to address technology, security, financial material weaknesses, and 
long-term architectural planning and viability. 

Investment Name: Electronic Fraud Detection System (EFDS); 
Investment Description: This investment is intended to detect fraud at 
the time that tax returns are filed in order to eliminate the issuance 
of fraudulent tax refunds. 

Investment Name: e-Services (e-SVS); 
Investment Description: This investment is several web-based self-
assisted services that are intended to allow authorized individuals to 
do business with the IRS electronically. 

Investment Name: Foreign Account Tax Compliance Act (FATCA); 
Investment Description: This investment requires foreign financial 
institutions to report to the IRS information about financial accounts 
held by U.S. taxpayers, or foreign entities in which U.S. taxpayers 
hold a substantial ownership interest as required by the FATCA. 

Investment Name: Implement Return Review Program (RRP; 
replaces EFDS); 
Investment Description: This investment, currently under development, 
is intended to maximize fraud detection at the time that tax returns 
are filed to eliminate issuance of questionable refunds. 

Investment Name: Individual Master File (IMF); 
Investment Description: This investment is the authoritative data 
source for individual tax account data. All other IRS information 
systems that process IMF data depend on output from this source. This 
investment is a critical component of IRS's ability to process tax 
returns. 

Investment Name: Information Reporting and Document Matching (IRDM); 
Investment Description: This investment is intended to establish a new 
business information matching program in order to increase voluntary 
compliance and accurate income reporting. 

Investment Name: Integrated Customer Communication Environment (ICCE); 
Investment Description: This investment includes several projects that 
are intended to simplify voluntary compliance using voice response, 
Internet, and other computer technology such as the Modernized 
Internet Employee Identification Number (Mod IEIN), which allows third 
parties to act on the behalf of taxpayers. 

Investment Name: Integrated Data Retrieval System (IDRS); 
Investment Description: This investment is intended to provide 
systemic review, improve consistency in case control, alleviate 
staffing needs, issue notices to taxpayers, and allow taxpayers to see 
status of refunds. It is a mission-critical system used by 60,000 IRS 
employees. 

Investment Name: Integrated Financial System/CORE Financial System 
(IFS); 
Investment Description: This investment is the financial system used 
by IRS for budget, payroll, accounts payable/receivable, general 
ledger functions, and financial reporting. IRS uses this system to 
report on the cost of operations and to manage budgets by fiscal year. 

Investment Name: Integrated Submission and Remittance Processing 
System (ISRP); 
Investment Description: This investment is intended to process paper 
tax returns, and updates tax forms to comply with tax law changes. 

Investment Name: IRS End User Systems and Services (EUSS); 
Investment Description: This investment is intended to support 
products and services necessary for daily functions for over 100,000 
IRS employees at headquarters and field sites. 

Investment Name: IRS Main Frames and Servers Services and Support 
(MSSS); 
Investment Description: This investment is intended to support the 
design, development and deployment of server storage infrastructures, 
software, databases, and operating systems. 

Investment Name: IRS Telecommunications Systems and Support (TSS); 
Investment Description: This investment supports IRS's broad and local 
network infrastructure such as servers, and switches for voice, data, 
and video servicing of about 1,000 IRS sites. 

Investment Name: IRS.GOV - Portal Environment; 
Investment Description: This investment is intended to provide web-
based services such as tax filing and refund tracking, to internal and 
external users, such as IRS employees and other government agencies, 
taxpayers, and business partners. 

Investment Name: Modernized e-File (MeF); 
Investment Description: This investment is intended to provide a 
secure web-based platform for electronic tax filing of individual and 
business tax and information returns by registered Electronic Return 
Originators. 

Investment Name: Service Center Recognition/Image Processing System 
(SCRIPS); 
Investment Description: This investment is intended to be a data 
capture, management, and image storage system using high-speed 
scanning and digital imaging to convert data from the 940, 941, K-1, 
and paper returns from Information Returns Processing, into electronic 
format. 

Source: GAO analysis of IRS data. 

Notes: According to IRS, major investments are defined by the 
Department of Treasury as those that cost $10 million in either 
current year or budget year, or $50 million over the 5 year period 
extending from the prior year through budget year +2. 

[A] IRS is implementing the Patient Protection and Affordable Care Act 
requirements under the investment name of ACA. 

[End of table] 

[End of section[ 

Appendix V: Major Information Technology Investments with Significant 
Cost and Schedule Variances: 

Of the 20 major Information Technology (IT) investments, 6 had 
significant variances from the planned cost or schedule estimates. 
[Footnote 4] A significant variance is defined as 10 percent over or 
under the planned estimate. 

Affordable Care Act: 

Table 3: Cost and Schedule Performance Information for Affordable Care 
Act Administration: 

Reporting months: Quarter 1 2012; 
Planned days: [A]; 
Projected/actual days: [A]; 
Schedule variance (planned days-projected/actual days): [A]; 
Schedule variance (in percent): [A]; 
Planned costs (in millions): $27.84; 
Actual costs (in millions): $19.68; 
Costs variance (planned costs-actual costs) (in millions): $8.16; 
Cost variance (in percent): 29.31%. 

Reporting months: Quarter 2 2012; 
Planned days: [A]; 
Projected/actual days: [A]; 
Schedule variance (planned days-projected/actual days): [A]; 
Schedule variance (in percent): [A]; 
Planned costs (in millions): $95.40; 
Actual costs (in millions): $72.89; 
Costs variance (planned costs-actual costs) (in millions): $22.51; 
Cost variance (in percent): 23.60%. 

Source: Internal Revenue Service data. 

Note: Numbers may not add due to rounding. 

[A] The Internal Revenue Service did not provide us with any data on 
planned or actual schedule for this investment, but reported that it 
did not experience any variance. 

[End of table] 

* The Internal Revenue Service (IRS) officials stated that Affordable 
Care Act (ACA) was about 29 percent under planned cost during the 
first quarter of 2012 due to hardware and software acquisitions that 
have been postponed until later in fiscal year 2012.[Footnote 5] 

* According to IRS officials, ACA was approximately 24 percent under 
planned costs during the second quarter of 2012 due to: 

- lower than expected labor costs, and: 

- a delay in the receipt of funding for this quarter. 

Current Customer Account Data Engine: 

Table 4: Cost and Schedule Performance Information for Current 
Customer Account Data Engine: 

Reporting months: October 2011; 
Planned days: 549; 
Projected/actual days: 549; 
Schedule variance (planned days-projected/actual days): 0; 
Schedule variance (in percent): 0; 
Planned costs (in millions): $1.95; 
Projected costs (in millions): $1.95; 
Costs variance (planned costs-projected costs) (in millions): 0.00; 
Cost variance (in percent): 0.00. 

Reporting months: November 2011; 
Planned days: 549; 
Projected/actual days: 549; 
Schedule variance (planned days -projected/actual days): 0; 
Schedule variance (in percent): 0; 
Planned costs (in millions): $1.95; 
Projected costs (in millions): $1.95; 
Costs variance (planned costs-projected costs) (in millions): 0.00; 
Cost variance (in percent): 0.00. 

Reporting months: December 2011; 
Planned days: 549; 
Projected/actual days: 549; 
Schedule variance (planned days-projected/actual days): 0; 
Schedule variance (in percent): 0; 
Planned costs (in millions): $1.95; 
Projected costs (in millions): $1.95; 
Costs variance (planned costs-projected costs) (in millions): 0.00; 
Cost variance (in percent): 0.00. 

Reporting months: January 2012; 
Planned days: 549; 
Projected/actual days: 549; 
Schedule variance (planned days-projected/actual days): 0; 
Schedule variance (in percent): 0; 
Planned costs (in millions): $1.95; 
Projected costs (in millions): $1.95; 
Costs variance (planned costs-projected costs) (in millions): 0.00; 
Cost variance (in percent): 0.00. 

Reporting months: February 2012; 
Planned days: 549; 
Projected/actual days: 549; 
Schedule variance (planned days -projected/actual days): 0; 
Schedule variance (in percent): 0; 
Planned costs (in millions): $1.95; 
Projected costs (in millions): $2.68; 
Costs variance (planned costs-projected costs) (in millions): -$0.73; 
Cost variance (in percent): -37.48%. 

Reporting months: March 2012; 
Planned days: 549; 
Projected/actual days: 549; 
Schedule variance (planned days-projected/actual days): 0; 
Schedule variance (in percent): 0; 
Planned costs (in millions): $1.95; 
Projected costs (in millions): $1.97; 
Costs variance (planned costs-projected costs) (in millions): -$0.03; 
Cost variance (in percent): -1.41%[A]. 

Source: IRS data. 

Note: Numbers may not add due to rounding. 

[A] Variance under 10 percent is not considered significant. 

[End of table] 

* According to IRS officials, Current Customer Account Data Engine 
[Footnote 6] (CADE) was significantly over planned costs in February 
2012 due to the need for additional resources to help close down the 
system and redistribute hardware and software assets to other projects 
within the IRS. 

Integrated Customer Communications Environment: 

Table 5: Cost and Schedule Performance Information for Integrated 
Customer Communication Environment: 

Reporting months: October 2011; 
Planned days: 303; 
Projected/actual days: 303; 
Schedule variance (planned days -projected/actual days): 0; 
Schedule variance (in percent): 0; 
Planned costs (in millions): $3.74; 
Projected costs (in millions): $3.74; 
Costs variance (planned costs-projected costs) (in millions): 0.00; 
Cost variance (in percent): 0.00. 

Reporting months: November 2011; 
Planned days: 303; 
Projected/actual days: 303; 
Schedule variance (planned days -projected/actual days): 0; 
Schedule variance (in percent): 0; 
Planned costs (in millions): $3.74; 
Projected costs (in millions): $3.74; 
Costs variance (planned costs-projected costs) (in millions): 0.00; 
Cost variance (in percent): 0.00. 

Reporting months: December 2011; 
Planned days: 303; 
Projected/actual days: 303; 
Schedule variance (planned days -projected/actual days): 0; 
Schedule variance (in percent): 0; 
Planned costs (in millions): $3.74; 
Projected costs (in millions): $2.76; 
Costs variance (planned costs-projected costs) (in millions): $0.98; 
Cost variance (in percent): 26.16%. 

Reporting months: January 2012; 
Planned days: 303; 
Projected/actual days: 303; 
Schedule variance (planned days -projected/actual days): 0; 
Schedule variance (in percent): 0; 
Planned costs (in millions): $3.74; 
Projected costs (in millions): $2.76; 
Costs variance (planned costs-projected costs) (in millions): $0.98; 
Cost variance (in percent): 26.16%. 

Reporting months: February 2012; 
Planned days: 303; 
Projected/actual days: 303; 
Schedule variance (planned days -projected/actual days): 0; 
Schedule variance (in percent): 0; 
Planned costs (in millions): $3.74; 
Projected costs (in millions): $2.76; 
Costs variance (planned costs-projected costs) (in millions): $0.98; 
Cost variance (in percent): 26.16%. 

Reporting months: March 2012; 
Planned days: 303; 
Projected/actual days: 303; 
Schedule variance (planned days -projected/actual days): 0; 
Schedule variance (in percent): 0; 
Planned costs (in millions): $3.74; 
Projected costs (in millions): $2.49; 
Costs variance (planned costs-projected costs) (in millions): 1.25; 
Cost variance (in percent): 33.47%. 

Source: IRS data. 

Note: Numbers may not add due to rounding. 

[End of table] 

* According to IRS officials, although contractor costs were higher 
than originally estimated, spending on Integrated Customer 
Communication Environment (ICCE) was significantly less than 
originally planned between December 2011 and March 2012 because: 

- costs associated with Foreign Account Tax Compliance Act were 
removed as part of plans to create a new, separate investment for IRS, 
and: 

- some indirect costs associated with the Federal Student Aid activity 
may not have been fully reported within the financial system. 

Integrated Submission and Remittance Processing System: 

Table 6: Cost and Schedule Performance Information for Integrated 
Submission and Remittance Processing System: 

Reporting months: October 2011; 
Planned days: 547; 
Projected/actual days: 547; 
Schedule variance (planned days -projected/actual days): 0; 
Schedule variance (in percent): 0; 
Planned costs (in millions): $0.27; 
Projected costs (in millions): $0.27; 
Costs variance (planned costs-projected costs) (in millions): 0.00; 
Cost variance (in percent): 0.00. 

Reporting months: November 2011; 
Planned days: 547; 
Projected/actual days: 547; 
Schedule variance (planned days -projected/actual days): 0; 
Schedule variance (in percent): 0; 
Planned costs (in millions): $0.27; 
Projected costs (in millions): $0.27; 
Costs variance (planned costs-projected costs) (in millions): 0.00; 
Cost variance (in percent): 0.00. 

Reporting months: December 2011; 
Planned days: 547; 
Projected/actual days: 547; 
Schedule variance (planned days -projected/actual days): 0; 
Schedule variance (in percent): 0; 
Planned costs (in millions): $0.27; 
Projected costs (in millions): $0.27; 
Costs variance (planned costs-projected costs) (in millions): 0.00; 
Cost variance (in percent): 0.00. 

Reporting months: January 2012; 
Planned days: 547; 
Projected/actual days: 547; 
Schedule variance (planned days -projected/actual days): 0; 
Schedule variance (in percent): 0; 
Planned costs (in millions): $0.27; 
Projected costs (in millions): $0.27; 
Costs variance (planned costs-projected costs) (in millions): 0.00; 
Cost variance (in percent): 0.00. 

Reporting months: February 2012; 
Planned days: 547; 
Projected/actual days: 577; 
Schedule variance (planned days -projected/actual days): -30; 
Schedule variance (in percent): -5.48%[A]; 
Planned costs (in millions): $0.27; 
Projected costs (in millions): $0.27; 
Costs variance (planned costs-projected costs) (in millions): 0.00; 
Cost variance (in percent): 1.11%[A]. 

Reporting months: March 2012; 
Planned days: 547; 
Projected/actual days: 577; 
Schedule variance (planned days -projected/actual days): -60; 
Schedule variance (in percent): -10.97%; 
Planned costs (in millions): $0.27; 
Projected costs (in millions): $0.27; 
Costs variance (planned costs-projected costs) (in millions): 0.00; 
Cost variance (in percent): 1.11%[A]. 

Source: IRS data. 

Note: Numbers may not add due to rounding. 

[A] Variance under 10 percent is not considered significant. 

[End of table] 

* According to IRS officials, Integrated Submission and Remittance 
Processing System (ISRP) was approximately 11 percent behind planned 
schedule as of March 2012. IRS officials stated that this variance was 
caused by delays in the programming requirements for two projects, 
which extended the projected completion date by 2 months. 

IRS Main Frames and Servers Services and Support: 

Table 7: Cost and Schedule Performance Information for IRS Main Frames 
and Servers Services and Support: 

Reporting months: October 2011; 
Planned days: [A]; 
Projected/actual days: [A]; 
Schedule variance (planned days -projected/actual days): [A]; 
Schedule variance (in percent): [A]; 
Planned costs (in millions): [A]; 
Projected costs (in millions): [A]; 
Costs variance (planned costs-projected costs) (in millions): [A]; 
Cost variance (in percent): [A]. 

Reporting months: November 2011; 
Planned days: [A]; 
Projected/actual days: [A]; 
Schedule variance (planned days -projected/actual days): [A]; 
Schedule variance (in percent): [A]; 
Planned costs (in millions): [A]; 
Projected costs (in millions): [A]; 
Costs variance (planned costs-projected costs) (in millions): [A]; 
Cost variance (in percent): [A]. 

Reporting months: December 2011; 
Planned days: 498; 
Projected/actual days: 1056; 
Schedule variance (planned days -projected/actual days): -558; 
Schedule variance (in percent): -112.05%; 
Planned costs (in millions): $19.68; 
Projected costs (in millions): $19.68; 
Costs variance (planned costs-projected costs) (in millions): 0.00; 
Cost variance (in percent): 0.00. 

Reporting months: January 2012; 
Planned days: 249; 
Projected/actual days: 863; 
Schedule variance (planned days -projected/actual days): -614; 
Schedule variance (in percent): -246.59%; 
Planned costs (in millions): $9.84; 
Projected costs (in millions): $9.84; 
Costs variance (planned costs-projected costs) (in millions): 0.00; 
Cost variance (in percent): 0.00. 

Reporting months: February 2012; 
Planned days: 249; 
Projected/actual days: 863; 
Schedule variance (planned days -projected/actual days): -614; 
Schedule variance (in percent): -246.59%; 
Planned costs (in millions): $9.84; 
Projected costs (in millions): $9.84; 
Costs variance (planned costs-projected costs) (in millions): 0.00; 
Cost variance (in percent): 0.00. 

Reporting months: March 2012; 
Planned days: 737; 
Projected/actual days: 737; 
Schedule variance (planned days -projected/actual days): 0; 
Schedule variance (in percent): 0; 
Planned costs (in millions): $9.84; 
Projected costs (in millions): $9.84; 
Costs variance (planned costs-projected costs) (in millions): 0.00; 
Cost variance (in percent): 0.00. 

Source: IRS data. 

Note: Numbers may not add due to rounding. 

[A] IRS did not provide cost or schedule data for these months, but 
reported there were no cost or schedule issues. 

[End of table] 

* According to IRS officials, IRS Main Frames and Servers Services and 
Support (MSSS) was significantly behind planned schedule between 
December 2011 and February 2012. IRS officials stated that the delays 
were caused by several issues including: 

- the Storage Area Network (SAN) Switch Refresh project procurement 
process exceeding anticipated time frames, and: 

- the Modernized Infrastructure Solaris 10 & Supporting Technologies 
Upgrade (MISSTU) project experienced resource conflicts and various 
technical issues. 

Modernized e-File: 

Table 8: Cost and Schedule Performance Information for Modernized e-
File: 

Reporting months: October 2011; 
Planned days: 837; 
Projected/actual days: 837; 
Schedule variance (planned days -projected/actual days): 0; 
Schedule variance (in percent): 0; 
Planned costs (in millions): $62.03; 
Projected costs (in millions): $62.03; 
Costs variance (planned costs-projected costs) (in millions): 0.00; 
Cost variance (in percent): 0.00. 

Reporting months: November 2011; 
Planned days: 837; 
Projected/actual days: 837; 
Schedule variance (planned days -projected/actual days): 0; 
Schedule variance (in percent): 0; 
Planned costs (in millions): $62.03; 
Projected costs (in millions): $67.83; 
Costs variance (planned costs-projected costs) (in millions): -$5.80; 
Cost variance (in percent): -9.35%[A]. 

Reporting months: December 2011; 
Planned days: 837; 
Projected/actual days: 837; 
Schedule variance (planned days -projected/actual days): 0; 
Schedule variance (in percent): 0; 
Planned costs (in millions): $62.03; 
Projected costs (in millions): $67.83; 
Costs variance (planned costs-projected costs) (in millions): -$5.80; 
Cost variance (in percent): -9.35%[A]. 

Reporting months: January 2012; 
Planned days: 837; 
Projected/actual days: 837; 
Schedule variance (planned days -projected/actual days): 0; 
Schedule variance (in percent): 0; 
Planned costs (in millions): $62.03; 
Projected costs (in millions): $67.83; 
Costs variance (planned costs-projected costs) (in millions): -$5.80; 
Cost variance (in percent): -9.35%[A]. 

Reporting months: February 2012; 
Planned days: 837; 
Projected/actual days: 837; 
Schedule variance (planned days -projected/actual days): 0; 
Schedule variance (in percent): 0; 
Planned costs (in millions): $62.03; 
Projected costs (in millions): $68.47; 
Costs variance (planned costs-projected costs) (in millions): -$6.44; 
Cost variance (in percent): -10.39%. 

Reporting months: March 2012; 
Planned days: 837; 
Projected/actual days: 837; 
Schedule variance (planned days -projected/actual days): -61; 
Schedule variance (in percent): -7.29%[A]; 
Planned costs (in millions): $62.03; 
Projected costs (in millions): $73.67; 
Costs variance (planned costs-projected costs) (in millions): -$11.64; 
Cost variance (in percent): -18.77%. 

Source: IRS data. 

Note: Numbers may not add due to rounding. 

[A] Variance under 10 percent is not considered significant. 

[End of table] 

* According to IRS, Modernized e-File (MeF) is approximately 19 
percent over planned costs in February and March 2012 due to a number 
of unanticipated and unplanned work activities, such as, performance 
testing and the purchase of additional hardware and software. 

[End of section] 

Appendix VI: GAO Products with Open Matters for Congress and 
Recommendations to the IRS Regarding Tax Administration: 

Thirty-three GAO products contain 10 matters for Congress and 96 
recommendations to the Internal Revenue Service (IRS). Thirty-two 
increase revenue, 7 increase savings, 16 increase both savings and 
revenue, and 51 have indirect financial benefits. 

Table 9: List of Open Matters for Congress and Recommendations to IRS 
That Could Result In Potential Savings or Increased Revenues: 

Detecting abusive tax avoidance transactions: 

Report title and number: Abusive Tax Avoidance Transactions: IRS Needs 
Better Data to Inform Decisions about Transactions (GAO-11-493); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-11-493]; 
Potential financial impact: IR, IFB. 

Enhancing budget requests: 

Report title and number: IRS Budget 2012: Extending Systematic Reviews 
of Spending Could Identify More Savings Over Time (GAO-11-547); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-11-547]; 
Potential financial impact: IS. 

Enhancing collection of user fees: 

Report title and number: User Fees: Additional Guidance and 
Documentation Could Further Strengthen IRS's Biennial Review of Fees 
(GAO-12-193); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-12-193]; 
Potential financial impact: IFB. 

Enhancing electronic filing: 

Report title and number: E-Filing Tax Returns: Penalty Authority and 
Digitizing More Paper Return Data Could Increase Benefits (GAO-12-33); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-12-33]; 
Potential financial impact: IS, ISR, IFB. 

Report title and number: Electronic Tax Return Filing: Improvements 
Can Be Made before Mandate Becomes Fully Implemented (GAO-11-344); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-11-344]; 
Potential financial impact: IS, IFB. 

Report title and number: Tax Administration: Opportunities Exist for 
IRS to Enhance Taxpayer Service and Enforcement for the 2010 Filing 
Season (GAO-09-1026); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-09-1026]; 
Potential financial impact: ISR. 

Report title and number: Tax Administration: 2007 Filing Season 
Continues Trend of Improvement, but Opportunities to Reduce Costs and 
Increase Tax Compliance Should Be Evaluated (GAO-08-38); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-08-38]; 
Potential financial impact: ISR. 

Enhancing electronic filing and improving accuracy of paid preparers: 

Report title and number: Tax Administration: Many Taxpayers Rely on 
Tax Software and IRS Needs to Assess Associated Risks (GAO-09-297); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-09-297]; 
Potential financial impact: IFB. 

Enhancing internal controls: 

Report title and number: Management Report: Improvements Are Needed to 
Enhance the Internal Revenue Service's Internal Controls and Operating 
Effectiveness (GAO-11-494R); 
Website for current status of matters and/ or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-11-494R]; 
Potential financial impact: IS, IFB. 

Enhancing taxpayer services: 

Report title and number: 2011 Tax Filing: Processing Gains, but 
Taxpayer Assistance Could Be Enhanced by More Self-Service Tools (GAO-
12-176); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-12-176]; 
Potential financial impact: ISR. 

Expanding use of math error authority or third party data: 

Report title and number: 2011 Tax Filing: IRS Dealt with Challenges to 
Date but Needs Additional Authority to Verify Compliance (GAO-11-481); 
Website for current status of matters and/or recommendations: 
http://www.gao.gov/products/GAO-11-481]; 
[hyperlink, Potential financial impact: IR. 

Report title and number: Recovery Act: IRS Quickly Implemented Tax 
Provisions, but Reporting and Enforcement Improvements Are Needed (GAO-
10-349); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-10-349]; 
Potential financial impact: ISR. 

Report title and number: Tax Administration: IRS's 2008 Filing Season 
Generally Successful Despite Challenges, although IRS Could Expand 
Enforcement during Returns Processing (GAO-09-146); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-09-146]; 
Potential financial impact: ISR. 

Report title and number: 2009 Tax Filing Season: IRS Met Many 2009 
Goals, but Telephone Access Remained Low, and Taxpayer Service and 
Enforcement Could Be Improved (GAO-10-225); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-10-225]; 
Potential financial impact: IR, ISR. 

Implementing Information Reporting and Document Matching (IRDM) system: 

Report title and number: IRS Management: Cost Estimate for New 
Information Reporting System Needs to be Made More Reliable (GAO-12-
59); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-12-59]; 
Potential financial impact: IFB. 

Report title and number: Information Reporting: IRS Could Improve Cost 
Basis and Transaction Settlement Reporting Implementation (GAO-11-557); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-11-557]; 
Potential financial impact: IFB. 

Implementing Patient Protection and Affordable Care Act (PPACA): 

Report title and number: Patient Protection and Affordable Care Act: 
IRS Should Expand Its Strategic Approach to Implementation (GAO-11-
719); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-11-719]; 
Potential financial impact: IFB. 

Improving corporate tax compliance: 

Report title and number: Tax Gap: Actions Needed to Address 
Noncompliance with S-Corporation Tax Rules (GAO-10-195); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-10-195]; 
Potential financial impact: IR, IFB. 

Improving individual or corporate tax compliance: 

Report title and number: Financial Derivatives: Disparate Tax 
Treatment and Information Gaps Create Uncertainty and Potential Abuse 
(GAO-11-750); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-11-750]; 
Potential financial impact: IFB. 

Report title and number: Federal Tax Collection: Potential for Using 
Passport Issuance to Increase Collection of Unpaid Taxes (GAO-11-272); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-11-272]; 
Potential financial impact: IR. 

Improving international tax administration: 

Report title and number: Tax Administration: IRS's Information 
Exchanges with Other Countries Could Be Improved through Better 
Performance Information (GAO-11-730); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-11-730]; 
Potential financial impact: IFB. 

Improving management of information technology (IT) investments: 

Report title and number: Investment Management: IRS Has a Strong 
Oversight Process but Needs to Improve How It Continues Funding 
Ongoing Investments (GAO-11-587); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-11-587]; 
Potential financial impact: IS, IFB. 

Improving real estate tax compliance: 

Report title and number: Tax Administration: Expanded Information 
Reporting Could Help IRS Address Compliance Challenges with Forgiven 
Mortgage Debt (GAO-10-997); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-10-997]; 
Potential financial impact: IR. 

Report title and number: Home Mortgage Interest Deduction: Despite 
Challenges Presented by Complex Tax Rules, IRS Could Enhance 
Enforcement and Guidance (GAO-09-769); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-09-769]; 
Potential financial impact: IR. 

Report title and number: Real Estate Tax Deduction: Taxpayers Face 
Challenges in Determining What Qualifies; 
Better Information Could Improve Compliance (GAO-09-521); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-09-521]; 
Potential financial impact: IR. 

Improving rental real estate compliance: 

Report title and number: Tax Gap: Actions That Could Improve Rental 
Real Estate Reporting Compliance (GAO-08-956); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-08-956]; 
Potential financial impact: IR. 

Improving sole proprietors' compliance: 

Report title and number: Tax Gap: Limiting Sole Proprietor Loss 
Deductions Could Improve Compliance but Would Also Limit Some 
Legitimate Losses (GAO-09-815); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-09-815]; 
Potential financial impact: IFB. 

Improving third party compliance: 

Report title and number: Tax Gap: IRS Could Do More to Promote 
Compliance by Third Parties with Miscellaneous Income Reporting 
Requirements (GAO-09-238); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-09-238]; 
Potential financial impact: IR, IFB. 

Improving use of whistleblower claims: 

Report title and number: Tax Whistleblowers: Incomplete Data Hinders 
IRS's Ability to Manage Claim Processing Time and Enhance External 
Communication (GAO-11-683); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-11-683]; 
Potential financial impact: IR, IFB. 

Increasing collection of unpaid payroll taxes: 

Report title and number: Tax Compliance: Businesses Owe Billions in 
Federal Payroll Taxes (GAO-08-617); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-08-617]; 
Potential financial impact: IFB. 

Increasing tax debt collection: 

Report title and number: Tax Debt Collection: IRS Needs to Better 
Manage the Collection Notices Sent to Individuals (GAO-09-976); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-09-976]; 
Potential financial impact: ISR. 

Promoting effective use of third-party data: 

Report title and number: Tax Gap: IRS Has Modernized Its Business 
Nonfiler Program but Could Benefit from More Evaluation and Use of 
Third-Party Data (GAO-10-950); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-10-950]; 
Potential financial impact: IR, IFB. 

Reducing tax evasion: 

Report title and number: Tax Gap: IRS Can Improve Efforts to Address 
Tax Evasion by Networks of Businesses and Related Entities (GAO-10-
968); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-10-968]; 
Potential financial impact: IFB. 

Legend: IR - Increase revenue, IS - Increase savings, ISR - Increase 
savings and revenue, IFB - Indirect financial benefit. 

Source: GAO. 

Notes: Products with open matters and recommendations identified as of 
March 19, 2012. Some products may have matters and/or recommendations 
that do not have potential financial benefits or could be placed in 
different categories than provided above. 

[End of table] 

[End of section] 

Appendix VII: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

James R. White, (202) 512-9110 or WhiteJ@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Libby Mixon, Assistant 
Director; Mark Abraham; Amy Bowser; Dean Campbell; Mary Fike; Sairah 
Ijaz; Erik Kjeldgaard; Paul Middleton; Ed Nannenhorn; Sabine Paul; 
Cynthia Saunders; Mark Ryan; and Robyn Trotter made key contributions 
to this report. 

[End of section] 

Footnotes: 

[1] IRS is one of several agencies charged with implementing PPACA, 
legislation aimed at reforming the private insurance market and 
expanding health coverage to the uninsured. IRS is responsible for 
implementing PPACA provisions relating to, among other things, new 
taxes, tax credits, and information reporting requirements. Pub. L. 
No. 111-148, 124 Stat.119 (March 23, 2010), as amended by the Health 
Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, 
124 Stat. 1029 (Mar. 30, 2010). 

[2] GAO, Cost Estimating and Assessment Guide: Best Practices for 
Developing and Managing Capital Program Costs, [hyperlink, 
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: Mar. 2, 
2009). 

[3] A FTE is a measure of staff hours equal to those of an employee 
who works 2,080 hours per year, or 40 hours per week for 52 weeks. 

[4] According to IRS, major investments are defined by the Department 
of Treasury as those that cost $10 million in either current year or 
budget year, or $50 million over the 5 year period extending from the 
prior year through budget year +2. 

[5] IRS is implementing the Patient Protection and Affordable Care Act 
requirements under the investment name of ACA. 

[6] According to IRS, the Current CADE investment ended on December 
31, 2011. 

[End of section] 

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