Information Technology: IRS Needs to Improve Its Processes for Prioritizing and Reporting Performance of Investments
Highlights
What GAO Found
The Internal Revenue Service (IRS) has developed information technology (IT) investment priorities for fiscal year 2016, which support two types of activities—operations and modernization. For example, it has developed priority groups for operations such as: (1) critical business operations, infrastructure operations, and maintenance; and (2) delivery of essential tax administration/taxpayer services. It has identified priorities for modernization, such as web applications, to help reach IRS's future state vision. However, while IRS has developed a structured process for allocating funding to its operations activities consistent with best practices, it has not fully documented this process. IRS officials stated this is because the process is relatively new and not yet stabilized. In addition, IRS does not have a structured process for its modernization activities, because, according to officials, there are fewer competing activities than for operations activities. Fully documenting a process for both operations support and modernization activities that is consistent with best practices would provide transparency and greater assurance it is consistently applied.
Of the six investments GAO reviewed, two investments—Foreign Account Tax Compliance Act and Return Review Program—provided complete and timely performance information for GAO's analyses. These investments performed under cost, with varying schedule performance, and delivered most planned scope (see table). However, IRS did not always use best practices for determining scope delivered. Specifically, IRS used a method inconsistent with best practices for determining the amount of work completed by its own staff.
Performance of Foreign Account Tax Compliance Act and Return Review Program during Fiscal Year 2015 and the First Quarter of Fiscal Year 2016
|
Investment name |
Total budgeted costs (in millions) |
Total actual costs (in millions) |
Cost variance (in millions) |
Schedule status |
Percentage of planned scope delivered |
|
Foreign Account Tax Compliance Act |
$64.1 |
$51.7 |
$12.4 (19.4%) |
Late (-8.3%) |
91.7% |
|
Return Review Program |
$182.2 |
$157.7 |
$24.5 (13.4%) |
On-Time (-0.1%) |
99.9% |
Source: GAO analysis of performance information from IRS's Investment Performance Tool. | GAO-16-545
Two other investments reported completing portions of their work on time and $1.7 million under planned costs (for the Customer Account Data Engine 2), and on time and $10.3 million under planned costs (for Affordable Care Act Administration). However, neither investment reported information on planned versus actual delivery of scope in accordance with best practices. The remaining two investments—Mainframes and Servers Services and Support and Telecommunications Systems and Support—generally met performance goals.
Why GAO Did This Study
IRS relies extensively on IT systems to annually collect more than $2 trillion in taxes, distribute more than $300 billion in refunds, and carry out its mission of providing service to America's taxpayers in meeting their tax obligations. For fiscal year 2016, IRS planned to spend approximately $2.7 billion for IT investments. Given the size and significance of these expenditures, it is important that Congress be provided information on agency funding priorities, the process for determining these priorities, and progress in completing key IT investments.
Accordingly, GAO's objectives were to (1) describe IRS's current IT investment priorities and assess IRS's process for determining these priorities, and (2) determine IRS's progress in implementing key IT investments.
To do so, GAO analyzed IRS's process for determining its fiscal year 2016 funding priorities, interviewed program officials, and analyzed performance information for six selected investments for fiscal year 2015 and the first quarter of 2016.
Recommendations
GAO is recommending that IRS develop and document its processes for prioritizing IT funding and improve the calculation and reporting of investment performance information. IRS agreed with two recommendations regarding its prioritization processes, disagreed with one related to the calculation of performance information, and did not comment on one recommendation. GAO maintains all of the recommendations are warranted.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Internal Revenue Service | To help IRS improve its process for determining IT funding priorities and to provide timely information on the progress of its investments, the Commissioner of IRS should direct the Chief Technology Officer to document IRS's process for selecting and prioritizing operations support activities. |
Closed – Implemented
In response to this recommendation, on March 31, 2017, IRS issued its Portfolio Investment Plan Process Description Manual for selecting and prioritizing operations support activities. The manual addresses (1) criteria for prioritizing selections; (2) comparing assets against one another to create a prioritized portfolio; and (3) ensuring executives' funding decisions are based upon the process for selecting and prioritizing activities.
|
| Internal Revenue Service | To help IRS improve its process for determining IT funding priorities and to provide timely information on the progress of its investments, the Commissioner of IRS should direct the Chief Technology Officer to establish, document, and implement policies and procedures for selecting new and reselecting ongoing business systems modernization activities, consistent with IRS's process for prioritizing operations support priorities, which addresses (1) prioritization and comparison of IT assets against each other, (2) criteria for making selection and prioritization decisions, and (3) ensuring IRS executives' final funding decisions on IT proposals are based on IRS's prioritization process. |
Closed – Implemented
In October 2020, IRS provided evidence of several actions it had taken to implement the recommendation. Specifically, IRS demonstrated that it had incorporated modernization activities into the Portfolio Investment Planning process it has been using to select Operations Support activities. In addition, the agency made changes to its financial planning process, and to its process for reporting and communicating program execution. For example, for the Portfolio Investment Planning process, IRS modified the form that it used to submit funding requests for operations support activities to include funding requests for new and ongoing modernization activities. As another example, IRS took steps to align funding requests for modernization activities to fiscal year plans defined by IT leadership and approved through formal governance boards and executive steering committees. IRS officials from the IT organization's Strategy and Planning group told us that they had decided not to use scoring criteria to categorize projects as the selection and re-selection process involves input from multiple stakeholders and opportunities for them to weigh in on plans. Regarding improvements to its financial planning process, IRS developed an approach early in fiscal year 2020 to annually process the demand for all IT services through the Portfolio Investment Process. According to IRS officials from the Information Technology organization's Strategy and Planning group, this allowed for prioritization and comparison of IT assets against each other. Regarding the reporting and communication of program execution, as programs identify changes to the planning, such as the fiscal year planning, IT leadership briefings are held to ensure leadership agrees with the direction in which the programs are headed. IRS officials provided evidence that they had implemented the process for selecting new and reselecting ongoing modernization activities for two budget cycles. They stated that they expected to fully implement the process for the fiscal year 2022 budget cycle. IRS's actions to establish and implement a process for its modernization activities provide greater transparency into the agency's needs and priorities and also assist Congress and other decision makers in carrying out their oversight responsibilities.
|
| Internal Revenue Service | To help IRS improve its process for determining IT funding priorities and to provide timely information on the progress of its investments, the Commissioner of IRS should direct the Chief Technology Officer to modify existing processes for Foreign Account Tax Compliance Act (FATCA) and Return Review Program (RRP) for measuring work performed by IRS staff to incorporate best practices, including accounting for actual work performed and using the level of effort measure sparingly. |
Closed – Implemented
IRS took several actions to implement our recommendation. Specifically, in May 2019, IRS stated that it had piloted a new approach for measuring the work performed by IRS employees between May and July 2018. The pilot included (1) reporting of government costs in the project reports available in the Investment Performance Tool (IPT), (2) strengthening the collaboration between project management office and delivery partners to ensure plan, actual, and work performed data points are agreed to based upon up-to-date knowledge of the project status by management, and (3) only using level of effort for non-technical activities supporting the project. IRS also provided evidence of this pilot and its subsequent implementation. For example, IRS provided September 2018 Investment Performance Tool Activity Reports for the Return Review Program on infrastructure upgrade for several activities, such as final integration testing implementation, and production and alternate side processing upgrades, showing planned and actual work performed for government employees. In addition, IRS provided June 2018 and August 2018 budget meeting minutes referencing the need to obtain information on the actual work performed. In addition, in August 2020, IRS provided its updated Investment Performance Tool user guide (dated April 2019) which includes language addressing our recommendation. For example, the guide states that earned value (work performed) for government (i.e., IRS) employees is to be reported on monthly and be based on the percent complete of activities in the schedule or percent of completed features or user stories, among other methods. The guide also states that level of effort is only to be used for non-technical activities that support the project, such as planning, establishing program management office, product assessment, requirements or system analysis work. [Note: Foreign Account Tax Compliance Act transitioned into the operations and maintenance phase in fiscal year 2018 and thus we determined that the recommendation no longer applied to the investment.] IRS's actions to revise the method for determining the amount of work completed by its staff will help improve the reliability of the performance information for RRP.
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| Internal Revenue Service | To help IRS improve its process for determining IT funding priorities and to provide timely information on the progress of its investments, the Commissioner of IRS should direct the Chief Technology Officer to report on actual costs and scope delivery at least quarterly for the Customer Account Data Engine 2 and the Affordable Care Act Administration. For these investments, IRS should develop metrics similar to FATCA and RRP. |
Closed – Implemented
In response to our recommendation, IRS began reporting on planned versus actual delivery of functionality for CADE 2 using metrics similar to FATCA and RRP starting in fiscal year 2016. However, the agency did not report on planned versus actual functionality for ACA. In March 2017, officials responsible for managing the investment told us that the agency had not implemented the recommendation because it did not see the benefit in doing so given that the remaining development work was minimal. IRS subsequently completed the development work for ACA in September 2017, at which point the investment transitioned to operations and maintenance. Given the status of the investment, we agree that the recommendation is no longer applicable for ACA..
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