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The Tech Modernization Fund Continues to Lack a Plan to Fully Recover Its Operating Expenses

Posted on January 12, 2022

The federal government relies on information technology (IT) systems for everything from processing tax returns, to delivering mail, to protecting national security from threats both foreign and domestic.

But, while this IT provides services critical to our nation’s health, economy, and security, aging systems are increasingly becoming more difficult to manage and prone to security vulnerabilities.

In today’s blog post, we look at the management of funding meant to modernize federal IT systems. 


Image of Hands on a laptop keyboard


A key source of IT modernization funding

In 2017, Congress and the President established the Technology Modernization Fund (TMF), which provides funds to agencies to improve, retire, or replace aging federal IT systems. Congress provided an initial $175 million for the TMF, from which 11 projects received $89 million. An additional $1 billion was appropriated through the American Rescue Plan. 

The funds are awarded with the intention that agencies pay them back, plus a fee, within 5 years. Agency proposals to receive funds are supposed to include reliable estimates of any project-related savings, which can be used to reimburse the TMF. However, in December, we reported that the fund continues to cost more to run than it collects in fees. We also found that most of the reported projects’ savings estimates were unreliable.

For example, of the seven projects approved in 2018 and 2019, two reported savings but lacked documentation of their savings. For the remaining five projects, two no longer plan on savings, two plan on savings starting in 1 to 3 years, and one does not know when savings will begin.

We previously recommended that the Office of Management and Budget (OMB) and General Services Administration (GSA) develop a plan to fully recover operating costs and clarify that agencies should follow required cost estimating guidance. In this most recent report we reiterated the need for OMB and GSA to implement these changes.

Additional $1 billion to address cross-agency projects and cybersecurity gaps

In May 2021, OMB updated TMF guidance to agencies regarding the $1 billion from the American Rescue Plan. Among other things, the guidance directs agencies to prioritize projects that cut across agencies and address immediate cybersecurity gaps.

GSA has announced the approval of seven new projects with awards totaling at least $311 million after receiving 113 project proposals from agencies requesting a total of more than $2.3 billion for IT modernization.

TMF continues to lack sufficient fee collection and reliable cost estimates

The TMF Program Management Office, which administers fund operations, has improved its fee collection to recover about 29% of its operating expenses. As of August 2021, it is still not clear when or if the program office will be paid back for future operating expenses, through program savings or otherwise. There are hundreds of millions of dollars remaining in the TMF to address urgent IT modernization challenges that could help ensure that more aged and outdated federal information systems are updated or replaced.