TREASURY
INSPECTOR GENERAL FOR TAX ADMINISTRATION
Annual Assessment of the Business Systems Modernization Program
August 24, 2007
Reference Number: 2007-20-121
This
report has cleared the Treasury Inspector General for Tax Administration
disclosure review process and information determined to be restricted from
public release has been redacted from this document.
Phone Number |
202-927-7037
Email Address | Bonnie.Heald@tigta.treas.gov
Web Site |
http://www.tigta.gov
August 24, 2007
MEMORANDUM FOR CHIEF INFORMATION OFFICER
FROM: Michael R. Phillips /s/ Michael R. Phillips
Deputy Inspector General for Audit
SUBJECT: Final Audit Report – Annual Assessment of the Business Systems Modernization Program (Audit # 200720003)
This report presents the results of our annual assessment of the Business Systems Modernization (Modernization) program. The overall objective of this review was to assess the progress of the Internal Revenue Service’s (IRS) Modernization program for Fiscal Year 2007, as required by the IRS Restructuring and Reform Act of 1998.[1]
Impact on the Taxpayer
The Modernization program, which began in 1999, is a complex effort to modernize the IRS’ technology and related business processes. According to the IRS, this effort will involve integrating thousands of hardware and software components. All of this must be done while replacing outdated technology and maintaining the current tax system. In Calendar Year 2006, the IRS continued with its delivery of Modernization project releases that provide significant benefits to taxpayers. However, this report, similar to our annual assessments of the Modernization program since Fiscal Year 2002, discusses four specific challenges the IRS faces in delivering a successful modernization effort. We continue to believe the eventual success of the modernization effort in delivering the level of service taxpayers expect will depend on how well the IRS addresses these challenges.
Synopsis
The Modernization program is in its ninth year and has received approximately $2.3 billion for contractor services. Additionally, the IRS had spent $220 million through Fiscal Year 2006 and plans to spend an additional $45 million in Fiscal Year 2007 to manage the Modernization program.
According to the IRS’ original plan, the Modernization program would be near the halfway point by Calendar Year 2007. However, due to receiving less funding than initially anticipated and having difficulties in managing contractor work, the IRS has not completed many Modernization projects as planned. For example, the Customer Account Data Engine,[2] the foundation of the Modernization program, was originally planned to replace the complete Individual Master File in 2005. The current estimated completion date for this replacement is 2012. The IRS Restructuring and Reform Act of 1998 set a long-range goal for the IRS to have at least 80 percent of all tax and information returns filed electronically by 2007. As of April 6, 2007, 69 percent of individual tax returns had been filed electronically.
The Modernization
program has continued to deploy new project application releases, improved its
method to account for its funding, and enhanced its program management and
strategy.
In Calendar Year 2006, the IRS
continued with its delivery of Modernization project releases. The Modernization program deployed new
releases for the Customer Account Data Engine, Modernized e-File, and Filing
Payment and Compliance projects and began development of the Account Management
Services project. In September 2006, the
IRS submitted to Congress a request to add $45 million to the Business Systems
Modernization Expenditure Plan and Information Technology Investments account
for Modernization program employee salaries.
Accounting for IRS labor costs associated with the Modernization program
will allow for more accurate reporting of program and project costs to outside
stakeholders and will provide reliable data for use in future budget
considerations. In addition, the
Modernization and Information Technology Services organization’s management of the
Highest
Priority Initiatives through the Enterprise Services
organization is improving its service to customers. These initiatives included transitioning the
Modernization program integrator role to the IRS.
Although the IRS has made advances in
its modernization effort, it has not maintained anticipated progress. Since Fiscal Year 2002, our Modernization
program annual assessments have cited four specific challenges the IRS needs to
overcome to deliver a successful modernization effort. Because of decreased funding and difficulties
in managing contractor work, these challenges continue to exist. The challenges are to:
1)
Implement planned improvements in key
management processes and commit necessary resources to enable success.
2)
Manage the increasing complexity and
risks of the Modernization program.
3)
Maintain the continuity and strategic
direction with experienced leadership.
4)
Ensure contractor performance and
accountability are effectively managed.
In Fiscal Year 2006, the IRS reported users should limit reliance on its system of management controls because it has remaining material weaknesses as part of the Federal Managers’ Financial Integrity Act of 1982[3] reporting requirements. An October 25, 2006, memorandum from the IRS Commissioner stated the IRS completed the actions identified in the Modernization material weakness action plan that was developed in response to the initial identification of the material weakness in Fiscal Year 1995. It is continuing to gather supporting evidence to show sustained performance. However, the Modernization material weakness action plan has not been updated to include weaknesses subsequently reported since 2003 by the Treasury Inspector General for Tax Administration, the Government Accountability Office, and IRS studies. Although the Modernization and Information Technology Services organization has taken actions to improve its effectiveness and efficiency, the Modernization material weakness should not be downgraded until the four challenges have been adequately resolved.
Recommendation
We recommended the Chief Information Officer continue to address Modernization program corrective actions from Treasury Inspector General for Tax Administration and Government Accountability Office reports through the Highest Priority Initiatives process. By focusing corrective action efforts through this process, the IRS can begin to achieve resolution of the challenges identified in this report and subsequently address downgrading the Modernization material weakness.
Response
The Chief Information
Officer agreed with our recommendation. The
IRS will continue to execute the Highest
Priority Initiatives process and include Modernization program corrective
actions from Treasury Inspector General for Tax Administration and Government
Accountability Office reports. The IRS
will continue to deliver monthly Highest
Priority Initiatives reports until it is able to downgrade the
Modernization material weakness. Management’s
complete response to the draft report is included as Appendix XI.
Copies of this report are also being sent to the IRS managers affected by the report recommendation. Please contact me at (202) 622-6510 if you have questions or Margaret E. Begg, Assistant Inspector General for Audit (Information Systems Programs), at (202) 622-8510.
The Internal Revenue
Service Continues to Move Forward With the Modernization Program
The Modernization Program Should Continue to Be Designated As a Material Weakness
Appendices
Appendix
I – Detailed Objective, Scope, and Methodology
Appendix
II – Major Contributors to This Report
Appendix
III – Report Distribution List
Appendix
IV – Modernization Projects and Status
Appendix
V – Enterprise Life Cycle Overview
Appendix
VI – Modernization Program Funding Timeline
Appendix
VII – Highest Priority Initiatives
Appendix VIII
– Open Recommendations Related to Modernization Program Material Weaknesses
Appendix
X – Glossary of Terms
Appendix
XI – Management’s Response to the Draft Report
Abbreviations
|
CADE |
Customer Account Data Engine |
|
e-file |
Electronic filing |
|
HPI |
Highest Priority Initiatives |
|
IRS |
Internal Revenue Service |
|
MITS |
Modernization and Information Technology
Services |
|
TIGTA |
Treasury Inspector General for Tax
Administration |
The Internal Revenue Service (IRS) Restructuring and Reform Act of 1998[4] requires the Treasury Inspector General for Tax Administration (TIGTA) to annually evaluate the adequacy and security of the IRS’ information technology. This report provides our assessment of the IRS Business Systems Modernization (Modernization) program for Fiscal Year 2007.
The IRS
planned to complete the Modernization program in 10 years to 15 years at a cost
of approximately $8 billion.
The Modernization program, which began in 1999, is a complex effort to modernize the IRS’ technology and related business processes. According to the IRS, this effort will involve integrating thousands of hardware and software components. All of this must be done while replacing outdated technology and maintaining the current tax system.
To successfully deliver the Modernization program, the IRS planned to:
Ÿ Partner with an experienced contractor that would assist in the management and delivery of the program.
Ÿ Develop and implement a methodology to follow in planning, developing, implementing, and deploying Modernization program results (hardware, software, and business practices).
Ÿ Implement a mature management and governance process.
Ÿ Deliver approximately 13 modernized information systems. See Appendix IV for a table presenting the Modernization projects and their status.
Ÿ Meet the IRS Restructuring and Reform Act of 1998 requirement of electronically filing 80 percent of tax and information returns by Calendar Year 2007.
In December 1998, the IRS hired the Computer Sciences Corporation as its PRIME contractor[5] for the Modernization program. It relied on the PRIME contractor to act as a systems integrator to find and manage the best expertise and technical resources to achieve its organizational goals. In addition, the Modernization program implemented the Enterprise Life Cycle[6] to plan and manage work throughout the Modernization program.
The Modernization
program is in its ninth year and has received approximately $2.3 billion for
contractor services.
The Modernization program is in its ninth year and has received approximately $2.3 billion for contractor services. The IRS had spent $220 million through Fiscal Year 2006 and plans to spend an additional $45 million in Fiscal Year 2007 to manage the Modernization program.[7]
According to the IRS’ original plan, the Modernization program would be near the halfway point by Calendar Year 2007. However, due to receiving less funding than initially anticipated and having difficulties in managing contractor work, the IRS has not completed many Modernization projects as planned. For example, the Customer Account Data Engine (CADE), the foundation of the Modernization program, was originally planned to replace the complete Individual Master File in 2005. The current estimated completion date for this replacement is 2012. In addition, the IRS Restructuring and Reform Act of 1998 set a long-range goal for the IRS to have at least 80 percent of all tax and information returns filed electronically by 2007. As of April 6, 2007, 69 percent of individual tax returns had been filed electronically.
This review was performed at the TIGTA office in Laguna Niguel, California. The information presented in this report is derived from current and previous TIGTA, Government Accountability Office, and IRS Oversight Board reports and discussions with appropriate Modernization program officials.
Compilation of information for this report was conducted
during the period January through May 2007.
Previous audits and our limited analyses were conducted in accordance
with Government Accounting Standards. Detailed
information on our audit objective, scope, and methodology is presented in
Appendix I. Major contributors to the
report are listed in Appendix II.
The Internal Revenue Service Continues to Move Forward With the Modernization Program
The Modernization
program has continued to deploy new project application releases, improved its
method to account for its funding, and enhanced its program management and
strategy.
In Calendar Year 2006, the IRS continued with its delivery of Modernization project releases. The Modernization program deployed new releases for the CADE, Modernized e-File, and Filing Payment and Compliance projects and began development of the Account Management Services project. From January 2006 through May 4, 2007, the Modernization program:
Ÿ Introduced new CADE capabilities for the 2006 Filing Season. The Modernization program’s CADE supports faster refunds to taxpayers by issuing direct deposit refunds between 1 day and 7 days faster and paper refunds 4 days to 13 days faster than refunds generated by the current processing system. In Calendar Year 2006, the CADE posted more than 7.3 million returns (a greater than 400 percent increase over the previous year) and issued 7 million refunds totaling in excess of $3.4 billion. The CADE improved taxpayer service by allowing access to account information up to 7 days sooner, thus increasing the likelihood of single telephone call resolution, faster issue detection, and more timely account settlement. In Calendar Year 2007, the IRS reported that the CADE had posted approximately 11 million returns as of May 4, 2007.
Ÿ
Implemented Release 3.2 of its Modernized e-File
project, which enabled the filing of both Federal and State returns
concurrently for corporations (U.S.
Corporation Income Tax Return (Form 1120) or U.S. Income Tax Return for an S
Corporation (Form 1120S)) and tax-exempt organizations (Return of Organization Exempt From Income Tax
(Form 990)).
In Calendar
Year 2006, the Modernized e-File project supported an electronic filing mandate
for certain large corporations and tax-exempt entities and accepted more than 550,000
corporate returns. Tax returns for large corporations typically
include hundreds, or even thousands, of pages. Receiving the data electronically improves the
accuracy of the tax returns, reduces the volume of paper tax returns submitted
to IRS campuses, and accelerates the examination process by having all tax
return data available electronically. Electronic
capture of return information enables the IRS to quickly deliver the data to
analysts and agents for compliance risk assessment and action.
The IRS has expanded the Modernized e-File system’s taxpayer base in Calendar Year 2007 to include partnership income
tax returns (U.S. Return of Partnership Income (Form 1065)), eventually enabling nearly 2.7 million
small business and self-employed taxpayers to benefit from electronic filing. The IRS is in the planning stage to migrate
the individual tax return (U.S. Individual
Income Tax Return (Form 1040))
to the Modernized e-File system. It
plans to implement the initial deployment of Modernized e-File Form 1040 system capability in January 2009
and plans to complete Modernized e-File Form1040 system capability in January 2011.
Ÿ Implemented the Filing Payment and Compliance project software. This project analyzes tax collection cases and separates cases that require direct IRS involvement from those that can be handled by Private Collection Agencies. The introduction of Private Collection Agencies is expected to assist the IRS by addressing the volume of delinquent taxpayers that exceeds the IRS’ work capacity, approximately 250,000 cases per year. This project also is expected to help eliminate backlogs in the large number of outstanding tax liabilities, which have grown by 118 percent over the last 12 years, thereby increasing tax revenue and reducing the tax gap.
Ÿ Began the development of the Account Management Services project. This project, in conjunction with the CADE, will enable the IRS to break the weekly update system paradigm that has existed since the 1960s, enabling the IRS to begin to provide settlement of account information within 1 day, similar to what a person expects from major private-sector financial institutions. The first release of the Account Management Services is due in the summer of 2007. This release plans to support instant address change capability in the CADE and enable faster notice processing for taxpayers with mathematical errors on their tax returns.
The IRS has made improvements in its method to account for Modernization program funding and expenditures by including associated IRS labor costs
The IRS budgets for Modernization program hardware and contractor costs in the Business Systems Modernization Expenditure Plan and funds the costs through the Information Technology Investments account. Labor costs associated with the Modernization program are budgeted and funded through the Modernization and Information Technology Services (MITS) organization’s budget.
In November 2001, we reported the Modernization program did not accurately account for IRS costs associated with Modernization projects.[8] While the IRS tracked and monitored contractor costs, it had not established a means to accurately track and report the IRS labor costs associated with Modernization projects.
Accounting
for IRS labor costs associated with the Modernization program will allow the
IRS to properly budget and fund all related Modernization program costs.
With implementation of its new human resources system (HR Connect) and accounting system (the Integrated Financial System), the IRS has been able to begin tracking its labor costs associated with the Modernization program. These systems allow the IRS to track costs to individual projects as well as to general Modernization program support, such as requirements management and project testing.
In September 2006, the IRS submitted to Congress a request to change its process to budget and account for Modernization program labor costs. The IRS requested that Congress add $45 million to the Business Systems Modernization Expenditure Plan and Information Technology Investments account for Modernization program employee salaries.
Accounting for IRS labor costs associated with the Modernization program will allow for more accurate reporting of Modernization program and project costs to outside stakeholders and will provide reliable data for use in future budget considerations. In addition, Modernization program management will be able to include these costs in important internal progress measurements, such as earned value management and return on investment.
The Modernization program has begun reporting informative assessments of variances between planned and actual project cost and schedule delivery
The Business Systems Modernization Expenditure Plan includes project status for in-progress and recently delivered Modernization projects. This status includes an assessment of project progress and accomplishments in terms of meeting cost and schedule estimates. The IRS presents variances against original cost and schedule estimates and reports variances associated with a project’s release delivery.
The Business Systems Modernization Expenditure Plan project status presentation acknowledges circumstances where estimates exceed available budget funding and treats any use of additional funds as a variance. The status is presented in tables showing the variances in both day and dollar units, as well as percentages. The IRS is in the process of developing a method to assess progress and accomplishments in meeting planned delivery of project capabilities.
The IRS began implementing the Information Technology Modernization Vision and Strategy
In October 2006,
the IRS issued the Information Technology Modernization Vision and
Strategy, which describes its business
priorities for the next 5 years with particular emphasis on informing and
guiding the definition of investment priorities for Fiscal Years 2007 through
2009. The initial emphasis of the investment priorities is on tax administration
at the frontline and on enabling technical capabilities provided by the
infrastructure.
This strategy aims
to optimize management capacity, provide a direction for managing program
costs, identify the ability to use common information technology services throughout
the IRS, and deliver business value in smaller and more frequent releases. The IRS plans to reuse existing systems where
possible and develop new projects only when necessary.
The IRS is continuing to identify and address its most significant issues and is developing its organization to improve services to customers
The MITS organization is continuing to address significant challenges and program barriers by identifying and implementing action plans. It is accomplishing this by addressing the Highest Priority Initiatives, a program of continual process improvement with executive-level oversight.[9]
The MITS
organization’s management of its Highest Priority Initiatives through
the
The IRS is also continuing to develop its Enterprise Services organization. In Calendar Year 2004, the IRS began investigating industry best practices for organizing certain information technology services common to all projects under development. In an effort to improve services provided to internal customers, the MITS organization began consolidating several existing functions and offices to form the new Enterprise Services organization under a newly appointed Associate Chief Information Officer. With a Fiscal Year 2007 estimated budget of $85.9 million, the Enterprise Services organization is structured into 2 functions: Business Integration and Systems Integration. This restructuring of multiple MITS organization functions into the Enterprise Services organization included 667 IRS employees as of May 1, 2007.
In Calendar Year 2006,
the IRS continued work to assume the role as integrator for the Modernization
program effort. In January 2005, due to
budget reductions and concerns about the adequacy of the PRIME contractor’s
performance, the IRS began transitioning numerous activities from the PRIME
contractor and taking over the primary role as the systems integrator for all
projects. The systems integrator role is
a significant operational change for the IRS, requiring new procedures, personnel,
and offices. The IRS has successfully
taken the first steps to transition modernization activities away from the
PRIME contractor and is taking additional actions to build on these initial
steps.
Although the Internal Revenue Service Has Made Advances in Its Modernization Effort, It Has Not Maintained Anticipated Progress
Since Fiscal Year 2002, our Modernization program annual assessments have cited four specific challenges the IRS needs to overcome to deliver a successful modernization effort. Because of decreased funding and difficulties in managing contractor work, these challenges continue to exist. The challenges are to:
1) Implement planned improvements in key management processes and commit necessary resources to enable success.
2) Manage the increasing complexity and risks of the Modernization program.
3) Maintain the continuity and strategic direction with experienced leadership.
4) Ensure contractor performance and accountability are effectively managed.
The key
focuses of Post Implementation Reviews are to assess the effect of new projects
on the IRS mission, customers, workforce, and technology.
Implement
planned improvements in key management processes and commit necessary resources
to enable success
The
MITS organization has taken steps to assume the integrator role
of the Modernization program. It is in
the process of transitioning these activities and developing mature management
capabilities and repeatable processes.
During Calendar Year 2006, we reported the need for management process
improvements in the following areas:
Ÿ
The IRS has not developed performance measures for all of
the transitioned activities that can be measured. The Transition Management
Performance Measurement Process did not provide a means to measure the interim
status of the Transition Management process and its resultant products.
Ÿ The Transition Management Office can further improve transition efforts by ensuring project readiness activities adhere to guidance. The Integrated Financial System project did not follow guidance that required it to validate and control readiness activities to help ensure completion of the Transition Management Plan.
Ÿ To ensure the Federally Funded Research and Development Corporation continues to meet the IRS’ needs, the IRS should more effectively monitor the contractor’s performance in terms of timeliness, quality, and cost. For example, the IRS did not prepare a Task Order Monitoring Plan, a practice commonly employed for modernization task orders, for this contractor’s task orders. A Task Order Monitoring Plan describes the various Federal Government roles and responsibilities for monitoring and documenting the contractor’s performance against timeliness, quality, and cost goals.
Ÿ
Post
Implementation Reviews assess the effect of a new information technology
project by comparing and evaluating actual project results to estimates of
cost, schedule, performance, and mission improvement outcomes. Federal law,[10] executive branch guidance,[11] and the IRS Enterprise Life Cycle establish
the need to perform Post Implementation Reviews after project completion and
after completion of major project releases.
However, the IRS has completed only one Post Implementation Review since
the Modernization program began. Although
existing procedures provide adequate directions for performing Post
Implementation Reviews, the Program Performance Management office has not
scheduled Reviews for all projects that have exited milestones or for deployed
releases. The Chief Information Officer
stated the MITS organization does not have the resources to perform Post Implementation
Reviews, and it is uncertain when it will begin performing them.
Ÿ The Enterprise Services organization needs to further define its missions and goals, validate staffing assignments, and create performance measures. In Calendar Year 2005, the MITS organization began consolidating several existing functions and offices to form the new Enterprise Services organization under a newly appointed Associate Chief Information Officer, in an effort to improve services provided to internal customers. However, the overall mission, purpose, and goals of the Enterprise Services organization at the program level need to be defined and detailed to provide the necessary direction and oversight to the Enterprise Services organization functions and their offices.
Without
consistent implementation of mature management capabilities and defined,
repeatable processes, Modernization projects experienced delays and increased
development costs. These delays and
increased costs have contributed to the Modernization program delivering
projects and releases with fewer capabilities than originally planned. Table 1 shows project cost and schedule
variances incurred on Modernization project releases from January 2006 through
May 2007, as reported by the IRS.
Table 1:
Modernization Project Cost and Schedule Variance Summary
|
Release |
Current |
Milestone |
Cost Variance (Dollars) |
Cost Variance (Percent) |
Schedule Variance (Days) |
Schedule Variance (Percent) |
|
|
CADE |
|||||||
|
1.3.2 |
January 17, 2006 |
|
($713,000) |
-3% |
10 |
3% |
|
|
2.1 |
August 25, 2006 |
4 |
$4,190,000 |
15% |
11 |
7% |
|
|
2.2 |
May 28, 2007 |
4 |
$779,000 |
3% |
101 |
54% |
|
|
3 |
November 20, 2006 |
2-3 |
$0 |
0% |
0 |
0% |
|
|
Modernized e-File |
|||||||
|
3.2 |
March 22, 2006 |
4-5 |
$8,550,000 |
36% |
-7 |
-2% |
|
|
4 |
April 24, 2007 |
4-5 |
$750,000 |
3% |
16 |
5% |
|
|
5 |
March 5, 2007 |
3 |
$200,000 |
4% |
30 |
41% |
|
|
Account Management Services |
|||||||
|
1.1 |
January 31, 2007 |
2-3 |
$0 |
0% |
0 |
0% |
|
|
1.1 |
April 30, 2007 |
4a |
$0 |
0% |
0 |
0% |
|
|
1.1 |
September 27, 2007 |
4b |
$0 |
0% |
0 |
0% |
|
|
1.2 |
March 13, 2007 |
2-3 |
$0 |
0% |
0 |
0% |
|
|
Filing and Payment Compliance |
|||||||
|
1.1 |
January 31, 2007 |
3-5 |
$484,000 |
6% |
0 |
0% |
|
|
1.2 |
February 28, 2006 |
3 |
($7,536,000) |
-46% |
0 |
0% |
|
|
1.2 |
July 10, 2006 |
4a |
$0 |
0% |
5 |
6% |
|
|
1.2 |
January 19, 2007 |
4b |
($340,000) |
-3% |
-8 |
-6% |
|
Source: IRS Applications Development organization –
Resources Management office.
Manage the increasing complexity and risks of the Modernization
program
TIGTA
audit reports issued from April 2006 through May 2007 stated that the MITS organization needs to comply with its Enterprise Life
Cycle project development
guidance. Compliance with project
milestone development and exit criteria will help the IRS ensure the contractor
meets its responsibilities.
We reported Enterprise Life Cycle compliance gaps on the CADE and Modernized e-File projects
and reported the following examples of Modernization project teams not
complying with Enterprise Life Cycle guidance:
Ÿ
Adequate
procedures were not in place to ensure all CADE Release 1.3 requirements were
timely controlled. When we requested a
complete list of Release 1.3 requirements, the project team and the PRIME
contractor needed more than 3 months to assemble and provide us with all
information relating to the requirements.
Effective
requirements development and management will allow for more effective and efficient
project development.
Ÿ
CADE
Release 2.1 deferred requirements to later releases because all of the work
related to the release requirements was not identified during the Enterprise
Life Cycle Preliminary Design Phase of the project.
The MITS
organization reconfigured itself with the Applications Development and
Ÿ
During
the development and deployment of Modernized e-File Release 3.2 in Calendar
Year 2006, the project team could not complete plans for release requirements
due to funding uncertainties and the uncertainty of the release content
and schedule. The project team experienced further
difficulties because of extended requirements development, deferrals, and
additions. These complexities affected
project management’s ability to use fixed-price contracts, which provide the
highest level of assurance that the Federal Government receives the defined
services for the agreed-upon price.
Ÿ
The IRS
did not ensure completed projects and releases were reviewed after
implementation, as required by the Enterprise Life Cycle.
In
addition, the IRS has experienced similar issues with non-Modernization
projects such as the Electronic Fraud Detection System. Our initial review of the Electronic Fraud Detection System found that executive
oversight was not adequate, risks were not effectively managed, contractor performance was not
effectively monitored, and performance-based contracts were not used. During our followup review of the Electronic Fraud
Detection System, we found that executive oversight, management of project
risks, and contractor performance had improved.
Inconsistent
compliance with Enterprise Life Cycle project development controls has contributed to delays in
project and release deliveries, increased development costs, and reduced
functionality. Application of these
controls will become increasingly important as the IRS expands them to both
Modernization and non-Modernization projects.
Maintain the continuity and strategic direction
with experienced leadership
Since
our last Modernization annual assessment in April 2006, the MITS organization has undergone significant changes. It completed a major reconfiguration of
systems and application development offices and has consolidated all systems
development (both Modernization and non-Modernization projects) under one
office, the Applications Development organization. This
organization was created to allow the MITS organization to better manage development
costs and deliver higher quality service to customers. It plans to improve development performance by
removing the gaps, overlaps, and inconsistencies inherent with maintaining two
separate applications development organizations.
The Applications
Development organization will also advance MITS
organization strategic goals to
1) improve service, 2) deliver
Modernization, and 3) increase value.
A new Associate
Chief Information Officer, Applications
Development, was appointed to manage all MITS organization systems and application development activities. The Business Systems Modernization Office no
longer exists.
As part of the organizational changes, the Associate
Chief Information Officer, Business Systems Modernization, was appointed to the
Chief Information
Officer position after the resignation of the former Chief Information Officer. The current Chief Information Officer assumed
this position in September 2006, becoming the IRS’ fifth such Officer in 8
years. The current Associate Chief
Information Officer, Applications Development, was appointed in October 2006,
after serving as the Deputy Associate Chief Information Officer, Business
Integration. Therefore, the Associate
Chief Information Officer, Applications Development, has become the sixth
executive responsible for the Modernization program in its 9 years of
existence.
The
MITS organization published its Information Technology Modernization Vision and
Strategy in October 2006. The objective
of this document was to establish
a 5-year plan, focusing on identifying both major and nonmajor investments
needed to achieve Modernization goals and defining an integrated portfolio for
Fiscal Years 2007 and 2008 investment plans for both major and nonmajor
investments.
The
MITS organization has changed the governance roles of the MITS Enterprise Governance Investment Management committee and has
established an Executive Advisory Board based on Information Technology
Modernization Vision and Strategy processes and categories. In addition, Executive Steering Committee
roles have been aligned with the Information Technology Modernization Vision
and Strategy categories.
The
Information Technology Modernization Vision and Strategy recognizes that
modernization goals can be achieved through a combination of new systems;
leveraging and enhancement of existing systems; and application of common
services, applications, and standards.
The
IRS began assuming the primary Modernization program integrator role from the
PRIME contractor during Calendar Year 2005 and identified 14 activities it needed to assume
to transition modernization activities from the PRIME contractor. However, as of October 24, 2006, it had
assumed only 2 of these 14 activities.
For the remaining 12 activities, the IRS had taken positive first steps
and established an initial capability.
The transition will not be complete until additional actions are taken
and the IRS has more time to consistently use new processes and strengthen its
new capabilities.
In March 2005, the MITS
organization began consolidating several existing functions and offices to form
the new Enterprise Services organization under a newly appointed Associate
Chief Information Officer, in an effort to improve services provided to
internal customers. In May 2006, the Enterprise Services organization documented the missions and
goals of its subordinate offices. In
early 2007, the validation of these missions and goals was ongoing at many
levels of the Enterprise Services organization,
and work was underway to define
short-term and long-term (transformational) plans, validate staffing assignments, and measure performance. Additional changes to the Enterprise
Services organization structure were
also being considered.
While
these new structures may prove beneficial over the long run, the continuity in Modernization
program management has again been interrupted.
The continual changes in management add to the time and cost of
delivering the Modernization program. For
these changes to improve program-level management in the long run, the managers
must first go through a learning curve. The
MITS organization can achieve the intended benefits
from this new structure only with dedication to development and maturation of
the processes supporting the Modernization program.
Ensure contractor performance and accountability
are effectively managed
The
IRS uses contractors to perform the vast majority of the Modernization program
design and development. Contractors have
received 90 percent of the funding for Modernization program work.[12] In Calendar Year 2006, our reviews identified
opportunities to improve the IRS’ contract management and oversight of the
Modernization program.
Ÿ Our review of the PRIME Program Management office found that the IRS could strengthen task order monitoring to ensure it is spending Federal Government funds wisely. The IRS did not prepare Quarterly Status Reports, as required by the task order monitoring plan to document monitoring results, and inconsistently implemented some monitoring processes.
Ÿ
Extended
development, deferral, and additions to requirements have made project funding
and contract accounting difficult. As the
Modernized e-File project was developed, additional
funding was needed to add controls to reduce
potential system security threats and to implement unplanned system
changes. Funds designated for future
release development were used to develop these controls and system changes,
although Congress specifically directed the IRS to stop shifting funds
between releases and to notify the Congressional committees of any proposed
changes to the Business Systems Modernization Expenditure Plans. Further, the Modernized e-File project team has not
performed an analysis to assess the cost effect on the current release and the
requirements planned for deployment, as well as the effect on funding
availability to develop the deferred requirements in future releases.
The IRS can
strengthen its management of contractor performance with more timely
negotiations, improved controls for monitoring task orders, and implementation
of accounting controls to track project requirements.
Ÿ Negotiations and approvals of project contracting actions were not always accomplished timely, and performance-based contracts were not used. For example, costs for work on some Modernized e-File project requirements were not expeditiously determined because of incomplete contract negotiations. The IRS Procurement Office has experienced problems in completing some Modernized e-File project contract negotiations with the PRIME contractor. For example, negotiations for costs of work completed by the PRIME contractor on July 31, 2005, were not finalized until July 27, 2006. ****3(d)****
As
previously discussed, the IRS has experienced similar issues with non-Modernization
projects such as the Electronic Fraud Detection System.
To provide a foundation for mature, repeatable
software acquisition processes, the IRS chose to implement the Software
Engineering Institute’s Software Acquisition Capability Maturity Model.
Inconsistent
contract management activities and inadequate oversight of contractor
activities have contributed to project delays, inadequate deliverables, and
increased development costs.
The
Modernization Program Should Continue to Be Designated As a Material Weakness
In Fiscal Year 2006, the IRS reported users should limit reliance on its system of management controls because it has remaining material weaknesses as part of the Federal Managers’ Financial Integrity Act of 1982[13] reporting requirements. An October 25, 2006, memorandum from the IRS Commissioner stated the IRS completed the actions identified in the Modernization material weakness action plan that was developed in response to the initial identification of the material weakness in Fiscal Year 1995. It is continuing to gather supporting evidence to show sustained performance. However, the Modernization material weakness action plan has not been updated to include weaknesses subsequently reported since 2003 by the TIGTA, the Government Accountability Office, and IRS studies.
The Government Accountability Office and Congress have
required matured Modernization program management processes for continued
funding. The Software Acquisition Capability
Maturity Model is used to measure an organization’s capability to manage the
acquisition of software. The Model
defines five levels of software acquisition maturity. Each level of maturity indicates process
capability and identifies key process areas. For a maturity level to be achieved, all key
process areas related to that level must be implemented effectively.
The IRS determined that Software Acquisition Capability Maturity Model level 2 would
provide sufficient management processes to effectively manage the Modernization
program effort. In March 2003, the Modernization program was certified as compliant
with Software Acquisition Capability Maturity Model level 2. This designation indicates the Modernization
program has documented a set of repeatable, disciplined management processes
that increase the probability of success for the Modernization program.
In August 2006, the
Software Engineering Institute released the updated version of its Software
Acquisition Capability Maturity Model, now called the Capability Maturity Model
Integrated. The major themes of the
Capability Maturity Model Integrated are to reduce the size and complexity of
the Model, increase Model coverage, and increase confidence in appraisal
results. With the release of the
Capability Maturity Model Integrated, the Software Engineering Institute
announced that existing Software Acquisition Capability Maturity Model
certifications will expire on August 25, 2007.
Continued reference to the IRS as a certified Capability Maturity Model Integrated
organization will require the IRS to be reappraised.
As discussed previously, the IRS continues to encounter problems related to the four challenges it needs to overcome to deliver a successful modernization effort, indicating program risks remain. In addition, the Government Accountability Office continues to include the Modernization program on its list of high-risk programs.
The IRS has continued to recognize the importance of improving the Modernization program. The MITS organization is continuing to address significant challenges and program barriers by addressing the Highest Priority Initiatives. Initially, IRS executives and managers use this process to identify and seek resolution for the highest priority initiatives facing the Modernization program. IRS executives and senior managers are appointed to oversee the plans to resolve each of the highest priority initiatives, and progress is reported monthly. New initiatives are identified every 6 months. This process is in its sixth 6-month cycle and has been expanded to include initiatives affecting the entire MITS organization.
Although the MITS organization has taken actions to address initiatives affecting its effectiveness and efficiency, the Modernization material weakness should not be downgraded until the four challenges have been adequately resolved.
Recommendation
Recommendation 1: The Chief Information Officer should continue to address Modernization program corrective actions from TIGTA and Government Accountability Office reports through the Highest Priority Initiatives process. By focusing corrective action efforts through this process, the IRS can begin to achieve resolution of the challenges identified in this report and subsequently address downgrading the Modernization material weakness.
Management’s Response: The Chief Information Officer agreed with this recommendation, acknowledging that the Highest Priority Initiatives process is a prescribed 6-month cycle for the MITS Associate Chief Information Officer organizations to identify, select, manage, and prioritize initiatives that executive leadership considers crucial for continued strategic growth and success. Corrective actions are evaluated and submitted as Highest Priority Initiatives candidates, when appropriate, and are selected based upon executive leadership discretion. In this manner, the IRS will continue to execute the Highest Priority Initiatives process and include Modernization program corrective actions from TIGTA and Government Accountability Office reports. The IRS will continue to deliver monthly Highest Priority Initiatives reports until it is able to downgrade the Modernization material weakness.
Appendix I
Detailed Objective,
Scope, and Methodology
The overall objective of this review was to assess the progress of the IRS’ Business Systems Modernization (Modernization) program for Fiscal Year 2007, as required by the IRS Restructuring and Reform Act of 1998.[14] To accomplish this objective, we:
I. Determined the current condition of the Modernization program.
A. Reviewed TIGTA reports issued from April 2006 through April 2007[15] and five previous Modernization program annual assessment reports (issued in Fiscal Years 2002, 2003, 2004, 2005, and 2006).[16]
B. Reviewed recent IRS Oversight Board documents to identify current IRS Oversight Board issues and concerns.
C. Reviewed Government Accountability Office reports relevant to Modernization program activities.
II. Determined the status and condition of the Modernization program reported by the IRS by reviewing the following documentation.
A. The Systems Modernization Material Weakness Plan.
B. The Information Technology Modernization Vision and Strategy[17] documents.
C. The Business Systems Modernization Expenditure Plans and evaluated any cost, schedule, and functionality variances. We did not validate the information provided by the IRS on the cost, scope, and business value of the Modernization program.
D. The IRS’ Highest Priority Initiatives[18] status reports for the Modernization program.
Appendix II
Major Contributors to This Report
Margaret E. Begg, Assistant Inspector General for Audit (Information Systems Programs)
Gary V. Hinkle, Director
Edward A. Neuwirth, Audit Manager
Michael A. Garcia, Senior Auditor
Glen J. Rhoades, Senior Auditor
Charlene Elliston, Auditor
Appendix III
Acting Commissioner C
Office of the Commissioner – Attn: Acting Chief of Staff C
Deputy Commissioner for Operations Support OS
Associate Chief Information Officer, Applications Development OS:CIO:AD
Associate Chief Information Officer, Enterprise Services OS:CIO:ES
Director, Procurement OS:A:P
Director, Stakeholder Management OS:CIO:SM
Deputy Associate Chief Information Officer, Applications Development OS:CIO:AD
Deputy Associate Chief Information Officer, Business Integration OS:CIO:ES:BI
Deputy Associate Chief Information Officer, Systems Integration OS:CIO:ES:SI
Director, Test, Assurance, and Documentation OS:CIO:AD:TAD
Chief Counsel CC
National Taxpayer Advocate TA
Director, Office of Legislative Affairs CL:LA
Director, Office of Program Evaluation and Risk Analysis RAS:O
Office of Internal Control OS:CFO:CPIC:IC
Audit Liaisons:
Associate Chief Information Officer, Applications Development OS:CIO:AD
Director, Procurement OS:A:P
Director, Program Oversight
OS:CIO:SM:PO
Appendix IV
Modernization Projects and Status
Table 1 presents the Modernization projects initiated by the IRS and the status of these projects as of April 2007. Projects are presented by year in the order in which they were initiated.
Table 1: Modernization
Projects
|
Project Name |
Year Initiated/ |
Project Description |
Project Status per the IRS |
|
Custodial Accounting Project |
Initiated
1999/Not Launched |
Uses a data warehousing approach for
storing, analyzing, and reporting taxpayer accounts and collections information. |
Canceled February 2005. |
|
Infrastructure[19]
Shared Services: Security and Technology Infrastructure
Release |
Initiated 1999/ |
Provides a customer-focused technical
infrastructure for secure telephone and electronic interaction among employees,
tax practitioners, and taxpayers. |
· Provides secure Internet solutions for registered
and employee users and related registration processes, security access
controls, intrusion detection, and audit trail processing. · Is critical to the success of the Integrated
Financial System, e-Services, Internet Refund/Fact of Filing, Modernized
e-file, and Internet Employee Identification Number projects that rely on
secure, robust portal access. · Supports the acquisition, installation, and
operation of the development and test environments that support all
modernization initiatives. The
increased stability of the Development, Integration, and Test Environment and
timely acquisition of hardware/software to support project schedules has
contributed significantly to improved project performance. |
|
Customer Communications |
Initiated 1999/ |
Improves communications
infrastructure, including telephone call management, call routing, and
customer self-service applications. |
· 68,000 calls in one 3-minute period during initial
week (coincided with start of the Advanced Tax Refund of 2001). · 50 percent reduction in wait time for assistors to
answer calls. · 50 percent reduction in abandoned calls. · More accurate prerouting of calls. |
|
Customer Relationship Management Exam |
Initiated
1999/ |
Provides
standard tax computation software to Large and Mid-Size Business Division
revenue agents. |
· Deployed to almost 4,000 Large/Medium/Small Business
revenue agents. ·
Taxpayers can
independently verify a revenue agent’s computations. · Allows for “what-if” computations to better use the
examiners’ and taxpayers’ time. |
|
Enterprise Systems Management |
Initiated
2000/ |
Executes a strategy to provide network
and systems management to improve the information technology infrastructure
availability and performance. |
· Provides enterprise systems management and
monitoring of the e-Services, Integrated Financial System, Modernized e-File,
and Internet Refund/Fact of Filing projects and core infrastructure systems. · Gathers information and provides appropriate
response through monitors at the component, business, and enterprise levels. · Provides reliability, high availability, and optimal
performance of complex e-business infrastructure and applications, helping to
meet and exceed both internal and external service level agreements and
reducing total cost of ownership. ·
Allows for
proactive identification and resolution of information technology problems. |
|
CADE CADE
(continued) |
Initiated
2000/ |
Provides an online, modernized data
infrastructure that will house the authoritative taxpayer account and return
data. The CADE replaces the IRS Master File,
the repository of all taxpayer information. |
·
Release 1.1
went into production July 12, 2004, issuing refunds over 50 percent faster
than the Master File. ·
The processing
of returns in the CADE marks the first time in 40 years that American tax
returns have been processed in a system other than the Master File. ·
Release 1.3.2
was implemented in January 2006. The
CADE is now able to process a subset of Forms 1040EZ, 1040, and 1040A with no
schedules. ·
For the 2006 Filing
Season, more than 7,372,572 returns were posted by the CADE. The CADE issued more than 2,811,278
electronic and ·
CADE Release
2.1 became operational in September 2006, expanding the Form 1040 processing
to include Schedules A, B, and R; Form 1040A Schedules 1 and 3; and Form 1040
filers claiming the Head of Household filing status. ·
CADE Release
2.2 began supporting the 2007 Filing Season in March 2007. This release includes filing season changes
and capabilities to handle the Telephone Excise Tax Refund and additional Form
1040 schedules. ·
To date, the CADE
has posted 8,587,976 returns and issued more than8,441,893 refunds totaling
in excess of $9,457,341,713. ·
Direct deposit
refunds continue to be issued 4 business days after posting to the CADE, and
paper refunds continue to be issued 6 business days after posting to the
CADE. ·
The IRS
continues to quantify taxpayer savings due to decreased cycle time for CADE-processed
returns. Since Release 2.2 was
implemented in March 2007, more than $823,303 in potential interest earned
for direct deposit refunds (3.5 days for the CADE versus 7 days for legacy-processed
returns), more than $1,335,736 in potential interest earned for paper refunds
(7 days quicker than legacy-processed returns), and more than $5,887,000 in
potential Refund Anticipation Loan fees were eliminated by CADE processing. |
|
e-Services
e-Services
|
Initiated
2000/ |
Focuses on revolutionizing the way
taxpayers transact and communicate with the IRS. Creates a web portal and value adding
e-Services to promote the goal of conducting most of the IRS’ transactions
with tax practitioners electronically. |
·
More than 230,000
online registration participants of the Registered User Portal. ·
More than 309,000
Electronic Return Originator applications for electronic filing (e-file). ·
More than 381,000
online requests for Preparer Taxpayer Identification Numbers. ·
More than 196
million bulk Taxpayer Identification Number match requests processed. ·
More than 7.8
million interactive Taxpayer Identification Number match requests since
launch. · Transcript Delivery System processed, as of April 10,
2007, more than 2,243,704 requests via the Registered User Portal. Through February 2007, more than 359,000
transcripts were processed using the new Income Verification Express Services
user fee functionality, with potential IRS revenue of more than $1.6 million. · Transcript Delivery System processed more than 10.7
million requests for transcripts via the Employee User Portal since launch in
May 2005. · More than 125,000 Power of Attorney requests
received through Disclosure Authorization. · Received and processed more than 26,000 requests via
Electronic Account Resolution. ·
The Taxpayer
Identification Number matching tool in the current suite of e-Services
applications has uncovered more than $35.7 million in potential unpaid taxes
on Miscellaneous Income (Form 1099 series). ·
New
fingerprinting capability reduced turnaround time for fingerprint card checks
from an average of 30 days to an average of 1 day for cards with “hits” and
to an average of 15 minutes for cards with “no hits.” · Total operational savings (print/mail/ labor costs)
of more than $45 million for e-File Application, Preparer Taxpayer
Identification Numbers, Disclosure Authorization, Transcript
Delivery System, Electronic Account Resolution, and Address Change via the
Registered User Portal and Employee User Portal. · E-Services and Modernized e-File were 2 of 11
winners of the 2005 Government Computer
News Agency Award for Innovation, out of a field of 132 nominations. |
|
HR Connect HR Connect (continued) |
Initiated
2001/ |
Delivers an
enterprise solution to allow IRS employees to access and manage their human
resources information online. |
·
All IRS
employee accounts are now on HR Connect. ·
Accessible by
kiosks for campus employees who do not have desktop access. ·
HR Connect
upgraded the software platform to PeopleSoft 8.3®; enhancements
include increased employee self-service functionality and additional
management reports. ·
HR Connect
Workforce Analytics offers management information to each business unit based
on its organizational requirements (e.g., the status of the workforce,
vacancies, upcoming retirements, and pending personnel actions are available
at each management level). · Cited by the IRS Commissioner as a factor in the
redirection of roughly 750 staff years to enforcement. |
|
Integrated Financial System
Integrated Financial System (continued) Integrated Financial System (continued) |
Initiated 2001/ |
Operates as the
new IRS accounting system, replacing the IRS’ core financial systems,
including expenditure controls, accounts payable, accounts receivable,
general ledger, budget formulation, and purchasing controls. The Integrated Financial System manages the IRS’ $10.4
billion operating budget for administering tax payments, collecting taxes,
and enforcing tax laws. Currently, the
Integrated Financial System is in an operations and
maintenance phase. |
·
Achieved
initial operating capability on November 10, 2004, and achieved full
operating capability on January 31, 2005. ·
More than 2,100
end users have been trained and are using the Integrated Financial System daily. ·
The monthly
Statement of Transactions (Form SF-224) and Treasury Reporting files have
been submitted to the Department of the Treasury on time since going live in
November 2004. ·
The IRS
received an “unqualified opinion on its financial statements” from the Government
Accountability Office for Fiscal Year 2006 for the second consecutive year
under the Integrated Financial System.
Again, the Government Accountability Office did not issue any systemic
audit inquiries or matters for further consideration relating to the Integrated
Financial System. ·
Moved the
Statement of Net Cost to the Business Warehouse, improving performance and
timeliness of cost information to decision makers. Allowed the IRS to confidently use the
automated Statement of Net Cost for Financial Reporting and audit purposes,
eliminating the very labor-intensive, manual Statement of Net Cost. ·
Improved sender
cost information in the allocation process that provided transparency to end
users on overhead costs allocated to their organizations. ·
Implemented new
Purchase Card interface among the Integrated Financial System, the Request
Tracking System, and the Integrated Procurement System, which resulted in an
automated process for reconciliation and payment of IRS Purchase Card
invoices in the Integrated Financial System. This new process eliminated a very labor-intensive,
error–prone, and costly manual process, freeing up valuable business unit
resources. It also provides timely and
accurate information on Purchase Card funding, positions the IRS to increase
rebates, and improves audit information. ·
Worked with the
Procurement Office on improved Material Group coding and guidance facilitating
more accurate accounting information on procurement actions. This resulted in improved financial
reporting information and reduced audit risk. ·
The Monthly Treasury
Reporting file has been submitted to the Department of the Treasury within a 3-day
close time period since the Integrated Financial System went into production
in November 2004. ·
Developed eight
Status of Funds workbook reports as requested by the business units. ·
Implemented improved
upward and downward adjustment program. ·
Developed new
business processes and configured the Integrated Financial System to support
the Private Collection Agency initiative.
The IRS has collected approximately $17.8 million to date. |
|
Internet Refund/ Fact of Filing |
Initiated
2001/ |
Improves
customer self-service to the taxpayer by providing instant refund status
information and instructions for resolving refund problems to taxpayers with
Internet access. |
· Processed more than 22,677,344 refund status/fact of
filing inquiries (October 1, 2006 to April 1, 2007). · Received more than 28,345,632 inquiries so far in Fiscal
Year 2007 |
|
Advance Child
Tax Credit |
Initiated 2002/ |
Modifies the Internet
Refund/Fact of Filing application to provide taxpayers with Advance Child Tax
Credit refund status on the Internet. |
·
15.5 million
inquiries in 2003. ·
12.3 million
inquiries in 2004. · Application has served its purpose; its life cycle
ended on December 31, 2004. |
|
Internet
Employee Identification |
Initiated 2002/ |
Allows
businesses and taxpayers to apply for and receive Employee Identification
Numbers over the Internet. |
·
7,113,658 Internet
Employee
Identification Number applications
received to date (as of March 24, 2007). |
|
Customer Account Management |
Initiated
2002/ |
Interfaces the redesigned business
processes to be used daily by IRS customer service representatives. Due to budget constraints, the project has
not been funded since Fiscal Year 2003. |
·
Suspended. |
|
Filing and Payment Compliance/ Collection
Contract Support Filing and Payment Compliance/ Collection
Contract Support (continued) |
Filing and
Payment Compliance Initiated 2001 Filing and
Payment Compliance Suspended 2002 Collection
Contract Support Initiated 2003 Filing and
Payment Compliance and Collection Contract Support Combined 2004 Launched
2006 |
Improves the processes and technologies
that support the Filing and Payment Compliance Modernization and is an
end-to-end strategy to resolve payment and filing compliance issues quickly
and fairly. The Filing and Payment
Compliance strategy has 3 ultimate business goals to be achieved in an
environment that ensures taxpayer rights are protected and customer
satisfaction is improved: 1) resolve
all balance-due cases above a minimum threshold, 2) shorten the filing
compliance life cycle to resolve issues before the next filing due date, and
3) shorten the payment compliance life cycle to 6 months for nonenforcement
cases. |
·
Release 1 will
provide infrastructure, processes, and organizational structure to implement
the law authorizing private debt collection.[20]
·
Release 1.1 was
partially released in January 2006. ·
Release 1.1 was
retired on January 31, 2007. ·
Release 1.2
went live on January 22, 2007. ·
During the
29-week period from initial case placements on September 7, 2006, to March
22, 2007, the Filing and Payment Compliance strategy placed more than 33,000
cases with contractors, which facilitated the collection of more than $17.8
million on cases formerly unassigned for active collection. ·
During Fiscal Year
2007, gross revenue received as a result of the private debt collection
program is projected to be between $47,752,389 and $65,026,017.With
$3,018,000 commissions paid to the Private Collection Agencies, the net
benefit to the Department of the Treasury is approximately $14,062,000. ·
There have been
no identified instances of fraud or misuse of taxpayer information. |
|
Modernized e-File Modernized e-File (continued) |
Initiated
2002/ |
Develops the modernized web-based
platform for filing IRS forms electronically. Provides electronic filing of nearly 100
forms and schedules for large corporations and small businesses (Form 1120 series),
tax-exempt organizations (Form 990 series) and partnerships (Form 1065 series),
and associated extension forms (e.g., Form 7004). |
·
Release 1 launched
in February 2004. ·
Release 2 launched
in August 2004. ·
Release 3.1 launched
in January 2005. ·
Release 3.2 launched
in January 2006. ·
Release 3.2
completed in 2006 with more than 981,000 accepted submissions out of 1.2
million submitted returns. ·
More than 15,000
Forms 1120 mandated returns (corporations with assets of greater than $50
million) received since Release 3.2 launch (as of December 27, 2006). · More than 1,100 Forms 990 mandated returns
(organizations with assets of greater than $100 million) received since Release
3.2 launch (as of December 27, 2006). · Release 4 was delivered on January 8, 2007, for the
fourth season of electronic filing allowing select businesses and tax-exempt
organizations to file their Federal and State forms in one transaction and States
to retrieve their returns from the Modernized e-File system. Release 4 implements the ability to receive
Forms 1065 and 1065B (Partnerships), meeting the mandate for taxpayers with
100 or more partners to file electronically.
More than 1,195,826 returns/extensions received since launch, a 193
percent increase from 2006 (as of April 3, 2007). ·
More than 103,477
Forms 1120 mandated returns (corporations with assets of greater than $10
million) received since launch (as of April 3, 2007). ·
Feedback from
external stakeholders indicated satisfaction with the electronic filing
experience. ·
The Modernized
e-File project received the 2006 Commissioner’s Award for Exceptional
Achievement in Modernization. |
Source:
IRS status report entitled “IRS Modernization Has Delivered Real
Business Value” dated April 2007.
Appendix V
Enterprise Life
Cycle Overview
The Enterprise Life Cycle is the IRS’ standard approach to business change and information systems initiatives. It is a collection of program and project management best practices designed to manage business change in a successful and repeatable manner. The Enterprise Life Cycle addresses large and small projects developed internally and by contractors.
The Enterprise Life Cycle includes such requirements as:
·
Development of
and conformance to an enterprise architecture.
·
Improving
business processes prior to automation.
·
Use of
prototyping and commercial software, where possible.
·
Obtaining early
benefit by implementing solutions in multiple releases.
·
Financial
justification, budgeting, and reporting of project status.
In addition, the Enterprise Life Cycle improves the IRS’ ability to manage changes to the enterprise; estimate the cost of changes; and engineer, develop, and maintain systems effectively. Figure 1 provides an overview of the layers, paths, phases, and milestones (shown as “MS” in Figure 1) within the Enterprise Life Cycle Framework.
Figure
1: Enterprise Life Cycle Framework
Figure 1 was removed due to its size. To see Figure 1, please go to the Adobe PDF
version of the report on the TIGTA Public Web Page.
The Enterprise Life
Cycle is a framework for organizing and using IRS directives, processes,
procedures, templates, and standards to accomplish business change. It is organized as a set of six interacting
layers.
·
The Management Layer specifies how to plan
and control business change programs, projects, acquisitions, and solutions
throughout the Enterprise Life
Cycle.
·
The Governance Layer specifies additional
controls imposed from outside the project or program.
·
The Solution Life Cycle Layer specifies
what should be done but not how to do it.
·
The Solution Layer manages the solution as
it is produced, including providing standards for consistent solution
specification and formal review of solution content. This Layer provides control over work
products that may be produced by multiple internal and external developers
using differing methodologies.
·
The Methodology Layer details how to do the
work and specifies a unique set of work products to be produced. Specific methodologies are not a part of the Enterprise Life Cycle Framework.
·
The Specialty Areas Layer provides
additional guidance for areas of particular importance within the IRS. These areas include Enterprise Integration,
Test, and Evaluation; Business Rules Harvesting and Management; Transition
Management; Enterprise Architecture; Capital Planning and Investment Control;
Security and Privacy; and Requirements Development and Management.
A path specifies a
unique “philosophy” or orientation for performing the work. Although the Enterprise Life Cycle specifies
a standard for the work required to produce and operate business change
solutions, there are multiple ways to approach and accomplish the required
work. Paths are like alternate roads,
each of which crosses different terrain, but all of which lead to the same
destination. The Enterprise Life Cycle
provides five distinct paths or approaches to developing systems:
·
The Large Custom Path is for large
projects.
·
The Small Custom Path is for small
projects.
·
The Commercial-Off-the-Shelf Path is a
commercial software-based approach.
·
The Joint Application Development/Rapid
Application Development Path is a highly accelerated, prototyping-based
approach for very small, standalone solutions or solution components.
·
The Iterative Custom Path is a hybrid
approach that combines elements of the other approaches.
A phase is a broad segment of
work encompassing activities of similar scope, nature, and detail and providing
a natural breakpoint in the life cycle.
Each phase begins with a kickoff meeting and ends with an executive
management decision point (called a milestone) at which IRS executives make
“go/no-go” decisions for continuation of a project. Project funding decisions are often
associated with milestones.
Figure
2: Enterprise Life Cycle Phases and
Milestones
|
Phase |
General Nature of Work |
Concluding Milestone |
|
Vision and
Strategy/ Enterprise Architecture Phase |
High-level direction setting. This is the only phase for enterprise
planning projects. |
0 |
|
Project Initiation
Phase |
Startup of development projects. |
1 |
|
Domain Architecture
Phase |
Specification of the operating concept,
requirements, and structure of the solution.
|
2 |
|
Preliminary
Design Phase |
Preliminary design of all solution
components. |
3 |
|
Detailed
Design Phase |
Detailed design of solution components. |
4A |
|
System Development
Phase |
Coding, integration, testing, and
certification of solutions. |
4B |
|
System Deployment
Phase |
Expanding availability of the solution
to all target users. This is usually
the last phase for development projects. |
5 |
|
Operations
and Maintenance Phase |
Ongoing management of operational
systems. |
System Retirement |
Source: The Enterprise Life Cycle Guide.
Appendix VI
Modernization Program Funding Timeline
Chart 1 depicts cumulative funding received by the Modernization program for contractor costs.
Chart 1: Modernization Program Funding Timeline
(dollars are cumulative)
Chart 1 was removed due to its size. To see Chart 1, please go to the Adobe PDF version
of the report on the TIGTA Public Web Page.
Chart 2 depicts a timeline of the funding received annually by the Modernization program for program management and development of business and infrastructure projects.
Chart 2: Modernization
Program Funding by Fiscal Year
Chart 2 was removed due to its size. To see Chart 2, please go to the Adobe PDF
version of the report on the TIGTA Public Web Page.
Chart 3 depicts the cumulative funding received by the Modernization program for noncontractor costs of managing Modernization program activities. The IRS stated approximately 25 percent of its noncontractor budget since Fiscal Year 2001 has been used to support non-Modernization program activities in the IRS.
Chart 3: Noncontractor Modernization Funding Timeline by
Fiscal Year
(dollars are cumulative)
Chart 3 was removed due to its size. To see Chart 3, please go to the Adobe PDF
version of the report on the TIGTA Public Web Page.
Chart 4 depicts a timeline of the funding received
annually by the Modernization program for noncontractor costs of managing
Modernization program activities.
Chart 4: Noncontractor Modernization Costs by Fiscal
Year
Chart 4 was removed due to its size. To see Chart 4, please go to the Adobe PDF
version of the report on the TIGTA Public Web Page.
Chart 5 depicts the funding received by the Modernization program for noncontractor and external (contractor) costs of managing Modernization program activities.
Chart 5:
Internal and External Modernization Program Costs (in millions)
Chart 5 was removed due to its size. To see Chart 5, please go to the Adobe PDF
version of the report on the TIGTA Public Web Page.
Appendix VII
The
IRS created a number of Highest Priority
Initiatives to develop, implement, and execute a variety of activities
within the MITS organization. Table 1
lists the Highest Priority Initiatives[21] identified by the IRS and their status as of May
2007.
Table 1: IRS Highest Priority Initiatives
|
Highest Priority Initiatives (HPI) |
Status |
Description |
|
HPI-30 |
Closed |
Enterprise
Services: Build out Disaster Recovery
Infrastructure for the Integrated Financial System in the Enterprise
Computing Center[22]
– Memphis. |
|
HPI-32 |
Closed |
Enterprise
Services: (Carryover) Integrate Change
Management into Configuration Management function. |
|
HPI-39 |
Closed |
Applications
Development: Build on existing Business
Systems Modernization recruitment strategy to develop a recruitment plan to
address aging workforce and shortages. |
|
HPI-40 |
Closed |
Applications
Development: Standup of productivity
measuring system. |
|
HPI-41 |
Closed |
Applications
Development: Develop audit trails
strategy and execution plan. |
|
HPI-42 |
Closed |
Applications
Development: Applications Development standup
– 2nd Phase. |
|
HPI-43 |
Closed |
Applications
Development: Develop an electronic
filing strategy going forward. |
|
HPI-44 |
Closed |
Enterprise
Services: Institutionalize the Information
Technology Modernization Vision and Strategy. |
|
HPI-45 |
Closed |
Enterprise
Services: Demand Management. |
|
HPI-46 |
Closed |
Enterprise
Services: Health Check Triage. |
|
HPI-47 |
Closed |
Enterprise
Services: Service-Based Architecture and
Enterprise Application Integration Broker Follow-on Integration (Carryover of
HPI-28 and HPI-36) |
|
HPI-48 |
Closed |
Enterprise
Services: Update Enterprise Transition
Plan and Release Architecture to reflect results of the Information
Technology Modernization Vision and Strategy. |
|
HPI-49 |
Closed |
Enterprise
Services: Develop a data strategy to
guide projects that extract data from the Master File. |
|
HPI-50 |
Closed |
Enterprise Services:
Strengthen IRS system integration capability through hiring of
candidates for current senior technical vacancy. |
|
HPI-51 |
Closed |
Applications Development: Standup of code quality measures. |
|
HPI-52 |
Closed |
Enterprise Services: Clarify mission operating model for the Enterprise
Services organization. |
|
HPI-53 |
Closed |
Enterprise Services: Tiered Program Management/Project Health
Assessment Process. |
|
HPI-54 |
Closed |
Enterprise Services: Define governance structures and process
across all projects. |
|
HPI-55 |
Closed |
Enterprise Services:
Implement Best Practices for Requirements Development and Management. |
|
HPI-56 |
Closed |
Enterprise Services:
Business Integration will establish and execute a plan to hire additional
employees to fill its current vacancies. This will occur in two phases. |
|
HPI-57 |
Closed |
Applications Development: Establish strategic plans for each
Application Development Domain based on Information Technology Modernization Vision
and Strategy plans and steady state commitments (replacing current process of
rolling over base from prior year). |
|
HPI-58 |
Closed |
Enterprise Services:
Continue to strengthen IRS Enterprise Services organization technical
capabilities through hiring of candidates for current Systems Integration
vacancies. |
|
HPI-59 |
Closed |
Enterprise Services:
Data Strategy Phase 2. |
|
HPI-60 |
Closed |
Enterprise Services:
Align IRS Service Oriented Architecture with Information Technology Modernization
Vision and Strategy. |
|
HPI-61 |
Closed |
Enterprise Services:
Develop Enterprise Capacity Planning and Performance Engineering Plan
within the Enterprise Services organization. |
|
HPI-62 |
Closed |
Applications Development: Develop a strategy to manage software
transmittals scheduling in the Applications Development organization to
reduce the number of transmittals. |
|
HPI-63 |
Closed |
Applications Development: Institutionalize a tiered Program Office
Model for the Applications Development organization to include all Current Production Environment projects
except Major Investments. |
|
HPI-64 |
Closed |
Applications Development: Further refine the new Applications
Development organization. |
Source:
Identification of Applications Development organization and Enterprise
Services organization Highest Priority Initiatives provided by IRS management
from IRS status reports as of May 2007.
Appendix VIII
Open Recommendations Related to
Modernization Program Material Weaknesses
Table 1 lists TIGTA audit recommendations with current IRS open corrective actions related to the Modernization program material weakness.
Table
1: TIGTA Recommendations Related to the
Modernization Program Material Weakness
|
The
Modernization, Information Technology and Security Services Organization
Needs to Take Further Action to Complete Its Human Capital Strategy (Reference
Number 2003-20-209, dated September 2003) |
|
|
2003-20-209 Finding 1, Recommendation 1 |
To
ensure the MITS organization has sufficient data to determine human capital
demands, the Chief Information Officer needs to support the Director,
Management Services, to work with offices throughout the MITS organization to
identify the human capital demand. The
demand includes information to adequately plan the number, location, and
assignment schedule of human capital assets for existing information systems
(from owners in the Information Technology Services organization) and future MITS
organization operations (from owners in the Business Systems Modernization
program). Due Date: December 31, 2010. |
|
2003-20-209 Finding 2, Recommendation 1 |
To
ensure the MITS organization has adequate staffing to meet its needs, the Chief
Information Officer should charge the Director, Management Services, to
develop detailed hiring and retention plans. These plans should consider staff position
“return on investment” as a consideration for determining the type of talent
to recruit or retain and should be incorporated into the MITS organization’s
human capital strategy with relevant links to its budget. Recruiting:
Prioritize the most critical skill
needs and position locations with project development, deployment,
implementation, and operation schedules. Proceed with hiring specific skills based on
decisions for recruiting the subject position with either fully trained or
trainable talent or through an internship position. Retention:
Identify and compile retention
incentives into a plan to maintain the MITS organization talent pool. Due Date: December 31, 2010. |
|
Risks
Are Mounting as the Integrated Financial System Project Team Strives to Meet an
Aggressive Implementation Date (Reference Number 2004-20-001, dated
October 2003) |
|
|
2004-20-001 Finding 2, Recommendation 1 |
To
ensure a high-quality system is delivered, the Chief Information Officer should
ensure the disaster recovery environment is completely built out and tested
as soon as possible. Due Date: December 31, 2010. |
|
The Office of Release Management Can Improve
Controls for Modernization Program Coordination (Reference
Number 2004-20-157, dated September 2004) |
|
|
2004-20-157 Finding 1, Recommendation 1 |
To
help provide clear direction in the development of the Modernization program,
the Chief Information Officer should determine whether and how the Business Systems
Modernization Office will fulfill the Modernization program integrator role
and document the related responsibilities and processes. Due Date: December 31, 2010. |
|
The
Business Systems Modernization Program Has Achieved Mixed Success in
Addressing Weaknesses Identified in Internal and External Studies (Reference
Number 2006-20-003, dated November 2005) |
|
|
2006-20-003 Finding 1, Recommendation 2 |
To
ensure study weaknesses and previous recommendations concerning
change/configuration management are addressed, the Associate Chief
Information Officer, Enterprise Services, should create an overall plan that
includes defined tasks, responsible individuals, and estimated completion
dates for implementing the standardized configuration management toolset. Due Date: December 31, 2010. |
|
The
Electronic Fraud Detection System Redesign Failure Resulted in Fraudulent
Returns and Refunds Not Being Identified (Reference Number 2006-20-108, dated
August 9, 2006) |
|
|
2006-20-108 Finding 3, Recommendation 4 |
The
Chief Information Officer should defer additional work on the Web Electronic Fraud
Detection System until the IRS decides who will perform the Electronic Fraud Detection
System work. If some or all of the
work will transfer to other business units, the Chief Information Officer
should ensure their requirements are identified before initiating a contract
for further development of the Web Electronic Fraud Detection System. The contract should be opened to competition.
Due Date: December 31, 2010. |
|
The Modernization and Information Technology
Services Organization’s Revised Post Implementation Review Procedure Can Be
Improved (Reference Number 2007-20-001, dated October 26, 2006) |
|
|
2007-20-001 Finding 1, Recommendation 1 |
The
Chief Information Officer should direct the Program Performance Management
office to develop a schedule to perform Post Implementation Reviews for
releases deployed and to identify and obtain staffing resources commitments
needed from the Program Performance Management office, the Office of Program
Evaluation and Risk Analysis, and appropriate business unit representatives
to effectively execute the Post Implementation Reviews. The Chief Information Officer should also
direct the Program Performance Management office to eliminate the requirement
to perform Post Reviews of milestone completion activities after milestone
exits, with the option of identifying any lessons learned for further project
progress through the Milestone Exit Reviews.
Due Date: March 1, 2010. |
|
2007-20-001 Finding 1, Recommendation 2 |
The
Chief Information Officer should direct the Program Performance Management
office to implement a procedure to control Post Implementation Review results
that ensures appropriate executives and decision makers have access to these
documents. Due Date: March 1, 2010. |
|
2007-20-001 Finding 1, Recommendation 3 |
The
Chief Information Officer should direct the Program Performance Management
office to identify skills and abilities desired for Post Implementation
Review team members and ensure team assignments consider these
qualifications. The Program
Performance Management office should develop a training guide for Post
Implementation Review team members to provide them with an understanding of
the purpose, objectives, and processes of the Post Implementation
Review. Due Date: March 1, 2010. |
|
The
Internal Revenue Service Is Successfully Taking Steps to Transition
Modernization Activities From the PRIME Contractor; However, Difficult
Challenges Remain (Reference Number 2007-20-003, dated |
|
|
2007-20-003 Finding 1, Recommendation 1 |
To ensure the IRS is successful in performing modernization activities, the Chief Information Officer should ensure performance measures are developed for each transitioned modernization activity that can be measured. When traditional performance measures are difficult to develop, the IRS can obtain feedback from modernization stakeholders and users to measure customer satisfaction. Due Date: November 1, 2007. |
|
The
Modernized E-File Project Can Improve the Management of Expected Capabilities
and Associated Costs (Reference Number
2007-20-005, dated December 27, 2006) |
|
|
2007-20-005 Finding 3, Recommendation 2 |
The
Chief Information Officer should ensure the IRS Procurement office develops
additional guidance to work with project development teams to timely monitor
contractor progress and ensure work is properly authorized. Imminent contract expiration dates should
also be timely identified so contract modifications and extensions can be
approved before contractors perform work, thereby helping prevent work
stoppages or potential legal actions. Due
Date: September 1, 2007. |
|
Business
Cases for Information Technology Projects Remain Inaccurate (Reference Number 2007-20-024, dated January 25, 2007) |
|
|
2007-20-024 Finding 1, Recommendation 1 |
To
ensure project costs are reported accurately, the Chief Information Officer
should provide increased oversight and training to ensure Project Managers
include complete and realistic cost estimates for their projects and more
closely review Project Managers’ business cases to ensure realistic cost
estimates are provided and costs are substantiated. Particular attention should be paid to the
allocation of management, labor, and security costs. Due Date: June 1, 2007. |
|
2007-20-024 Finding 1, Recommendation 2 |
To
ensure project costs are reported accurately, the Chief Information Officer
should coordinate with the Department of the Treasury Capital Planning and
Investment Control office and follow Office of Management and Budget guidance
requiring allocation of management and labor costs to specific projects. Due Date: June 1, 2007. |
|
2007-20-024 Finding 2, Recommendation 1 |
To
ensure earned value management data are accurately computed and disclosed in
IRS business cases, the Chief Information Officer should provide additional
oversight of Project Managers to ensure sufficient care is taken in
developing and reporting earned value management data. Each Project Manager should disclose all
significant facts related to the earned value management data, including the
significant percentage of costs omitted from earned value calculations and
the number of times the project has been rebaselined. These disclosures would help explain how the
investment is able to achieve its high performance standards. Due Date: June 1, 2007. |
|
2007-20-024 Finding 2, Recommendation 2 |
To
ensure earned value management data are accurately computed and disclosed in
IRS business cases, the Chief Information Officer should ensure reviews are
conducted to determine whether contractors’ earned value management systems
comply with industry standards. Noncompliance
and failure to conduct the reviews should be disclosed. Due Date: October 1, 2007. |
|
2007-20-024 Finding 4, Recommendation 1 |
The
Chief Information Officer should ensure the Director, Capital Planning and
Investment Control, reviews the IRS Federal Information
Security Management Act[23] Master Inventory of major systems annually to
ensure business cases are prepared for required projects. Due Date: June 1, 2007. |
|
Telecommunication
Projects Need Improved Contract Documentation and Management Oversight (Reference Number 2007-20-030, dated March 5, 2007) |
|
|
2007-20-030 Finding 1, Recommendation 1 |
The
Chief Information Officer should ensure project documentation supports
consideration of the Department of the Treasury contracts during the
procurement process when comparing alternative solutions for
telecommunication services. Due Date: May 1, 2007. |
|
2007-20-030 Finding 2, Recommendation 1 |
The
Chief Information Officer should analyze all (steady state and development,
modernization, and enhancement stage) information technology investments
included in the Telecommunications Infrastructure Exhibit 300 to identify
projects under development that should be classified as major information
technology investments requiring increased executive oversight and the
preparation of internal Exhibits 300. Due
Date: September 1, 2007. |
|
Complete
Actions Were Not Taken to Validate the Best Software Solution Was Chosen for
the Private Debt Collection Program (Reference
Number 2007-20-065, dated April 10, 2007) |
|
|
2007-20-065 Finding 1, Recommendation 1 |
The
Chief Information Officer should work with officials from the Department of
the Treasury and the Office of Management and Budget to determine the level
of effort required to develop estimates and supporting documentation for a
new Alternatives Analysis for submission to the Department of the Treasury in
June 2007. Due Date: August 1, 2007. |
|
Continued
Improvements Are Needed for the Development and Operations of the New
Enterprise Services Organization (Reference
Number 2007-20-073, dated April 27, 2007) |
|
|
2007-20-073 Finding 1, Recommendation 1 |
To
ensure the continued orderly evolution of the Enterprise Services organization,
the Associate Chief Information Officer, Enterprise Services, should complete
the work necessary to appropriately identify, document, and validate missions
and goals at all levels, functions, and offices of the new Enterprise
Services organization. Due Date: December 1, 2007. |
|
2007-20-073 Finding 1, Recommendation 2 |
To
ensure the continued orderly evolution of the Enterprise Services organization,
the Associate Chief Information Officer, Enterprise Services, should develop
and document short-term and long-term transformational plans tied to
missions, goals, and strategic plans of the MITS organization and the IRS. Due Date: February 1, 2008. |
|
2007-20-073 Finding 1, Recommendation 3 |
To
ensure resource staffing assignments are commensurate with the work being
conducted, the Associate Chief Information Officer, Enterprise Services,
should track individual assignments and work products, when applicable; revise
Single Entry Time Reporting system codes to provide a more accurate and
detailed accounting of staffing and activities; and reevaluate staffing needs
based upon current and future workloads to help prioritize and allocate
resources. Once workload and resource
plans are developed, this information should be used in developing business
and action plans for each Enterprise Services organization office. Due Date: April 1, 2008. |
|
2007-20-073 Finding 1, Recommendation 4 |
To
ensure performance is defined and measured, the Associate Chief Information
Officer, Enterprise Services, should complete the current performance
measures pilot, identify performance measures for offices not included in the
performance measures pilot, and identify key performance measures for the
entire Enterprise Services organization, based on goals and missions as well
as short-term and long-term plans. Due
Date: April 1, 2008. |
|
The
Modernization and Information Technology Services Organization Can Improve
Its Budget Formulation, Execution, and Review Processes (Reference Number 2007-20-064, dated May 9, 2007) |
|
|
2007-20-064 Finding 1, Recommendation 1 |
The
Chief Information Officer should implement a process to develop the entire MITS
organization budget in line with the Information Technology Modernization
Vision and Strategy’s rolling 5-year prioritized plan. The budget process should consider
organizational goals for each of the MITS organization components and include
costs for operations and maintenance of existing computer systems,
telecommunication systems, and other programs such as end-user support and
help desk activities. Due Date: October 1, 2008. |
|
2007-20-064 Finding 2, Recommendation 1 |
The
Chief Information Officer should ensure (1) the draft Budget Cycle procedures
are approved and implemented timely and (2) the Financial Management Services
organization supplements the budget formulation processes with detailed
procedures documenting Financial Management Services organization staff
duties and responsibilities for soliciting, receiving, reviewing, and
reporting MITS organization budget estimates.
Due date: January 1, 2008. |
|
2007-20-064 Finding 3, Recommendation 1 |
The
Chief Information Officer should ensure (1) the draft Budget Cycle document
is approved timely and the spending review procedures are implemented and (2)
the Financial Management Services organization supplements the spending
review reporting with additional procedures that identify Fund Center Changes
necessary to realign funds in response to spending review results. Due date: January 1, 2008. |
Source:
The Joint Audit Management Enterprise System (as of May 2007) and TIGTA reports
issued as of May 2007.
Appendix IX
Recent Treasury Inspector General for Tax
Administration Reports on the Internal Revenue Service’s Modernization Program
Table 1 lists TIGTA reports related to the IRS Modernization program issued from April 2006 through May 2007 and the associated findings that included recommendations.
Table 1:
Recent TIGTA Reports and Findings
|
Report Title |
Findings |
|||
|
Enhancements to Transition
Management Guidance Will Enable Effective and Efficient Modernization Project
Implementation (Reference Number 2006-20-054, dated April 2006) |
Transition
management[24]
performance measures need further development. |
|
|
|
|
The Business Systems
Modernization Program Is Receiving Value From Contract Work; However,
Monitoring Can Be Strengthened (Reference Number 2006-20-079, dated May 2006) |
The
Business Systems Modernization program received partial value for two
services. |
Task
order monitoring can be strengthened. |
|
|
|
Focusing Management Efforts
on Long-Term Project Needs Will Help Development of the Customer Account Data
Engine Project (Reference Number 2006-20-076, dated June 2006) |
The
PRIME contractor’s inadequate testing resulted in reduced capabilities for
CADE Release 1.3. |
Successful
development of the CADE is dependent upon its ability to serve as an
efficient and effective foundation for modernized systems and applications. |
Controls
to manage CADE requirements do not allow ready access for project team use. |
Defining CADE project
release requirements will help enable the use of fixed-price contracts. |
|
The Electronic Fraud Detection System Redesign
Failure Resulted in Fraudulent Returns and Refunds Not Being Identified (Reference Number 2006-20-108, dated August 9, 2006) |
The
Electronic Fraud Detection System did not have adequate executive oversight. |
The
Electronic Fraud Detection System risks were not effectively managed. |
The
contractor’s performance was not effectively monitored, and performance-based
contracts were not used. |
|
|
The Modernization and
Information Technology Services Organization’s Revised Post Implementation Review
Procedure Can Be Improved (Reference Number 2007-20-001, dated October 26, 2006) |
Enhancements
to post implementation review procedures can make them more effective and
efficient. |
|
|
|
|
Stronger Management
Oversight Is Required to Ensure Valuable Systems Modernization Expertise Is
Received From the Federally Funded Research and Development Center Contractor (Reference Number
2007-20-002, dated October 20, 2006) |
The
process to effectively and timely monitor the contractor’s performance should
be enhanced. |
|
|
|
|
The
Internal Revenue Service Is Successfully Taking Steps to Transition
Modernization Activities From the Prime Contractor; However, Difficult
Challenges Remain (Reference Number 2007-20-003, dated October 24, 2006) |
The
IRS should measure how effectively transitioned modernization activities are
being performed. |
|
|
|
|
The
Modernized E-File Project Can Improve the Management of Expected Capabilities
and Associated Costs (Reference Number 2007-20-005, dated December
27, 2006) |
The
Modernized e-File project has not completely defined its release requirements
and release schedule to allow use of fixed-price contracts. |
Extended
development, deferral, and additions to requirements have made Modernized
e-File project funding and contract accounting difficult. |
Negotiations
and approvals of Modernized e-File project contracting actions were not
always accomplished timely. |
|
|
Business
Cases for Information Technology Projects Remain Inaccurate (Reference
Number 2007-20-024, dated January 25, 2007) |
Project costs remain
inaccurate. |
Progress
on development projects continues to be measured inaccurately. |
The
Department of the Treasury’s programming of the ProSight system continues to
contribute to inaccuracies in business cases. |
Major
applications were omitted from the budget submission. |
|
Telecommunication
Projects Need Improved Contract Documentation and Management Oversight (Reference
Number 2007-20-030, dated March 5, 2007) |
Project documentation
did not show that the Treasury Communications System contract was considered
as an acquisition vehicle for development of the Enterprise Remote Access
Project. |
Telecommunication
projects were considered infrastructure projects and not classified as major
information technology investments. |
|
|
|
Oversight
of the Electronic Fraud Detection System Restoration Activities Has Improved,
but Risks Remain (Reference Number 2007-20-052, dated March
29, 2007) |
Contracting
activities have improved, but a cost reimbursement issue remains. |
|
|
|
|
Complete
Actions Were Not Taken to Validate the Best Software Solution Was Chosen for
the Private Debt Collection Program (Reference Number
2007-20-065, dated April 10, 2007) |
Efforts to revalidate
the alternatives analysis were not sufficient. |
|
|
|
|
Continued
Improvements Are Needed for the Development and Operations of the New |
The Enterprise
Services organization needs to further define its missions and goals,
validate staffing assignments, and create performance measures. |
|
|
|
|
The
Modernization and Information Technology Services Organization Can Improve
Its Budget Formulation, Execution, and Review Processes (Reference
Number 2007-20-064, dated May 9, 2007) |
The MITS organization
budget estimates are not based entirely on program objectives and operations
planned for the upcoming budget cycle. |
The MITS organization
does not have formal procedures for the Budget Formulation process. |
Procedures
for transferring funds were not followed, and guidance for performing
Spending Reviews is not complete. |
|
Source:
TIGTA reports issued from April 2006 through May 2007.
Appendix
X
|
Term |
Definition |
|
Account Management
Services |
The Account Management Services project will modernize
the capability to collect, view, retrieve, and manage taxpayer information. |
|
Best Practice |
A best
practice is a technique or methodology that, through experience and research,
has proven to reliably lead to a desired result. |
|
Business Rule |
A business
rule is a statement that defines or constrains some aspect of the business. |
|
Business Rules
Harvesting |
Business rules
harvesting is a general term used to broadly describe the entire set of
activities involved in gathering, formalizing, analyzing, and validating
business rules for a particular scope. |
|
Campus |
The campuses are the data processing arm of
the IRS. They process paper and
electronic submissions, correct errors, and forward data to the Computing
Centers for analysis and posting to taxpayer accounts. |
|
Customer Account
Data Engine (CADE) |
The CADE is the foundation for managing
taxpayer accounts in the IRS modernization plan. It will consist of databases and related
applications that will replace the IRS’ existing Master File processing
systems and will include applications for daily posting, settlement,
maintenance, refund processing, and issue detection for taxpayer tax account
and return data. |
|
Deferral |
A deferral is
an approved request for verification of a requirement or set of requirements
to be moved to another phase of testing. |
|
Earned
Value Management |
Earned value management involves measuring actual cost and work accomplished against the budgeted cost and planned work scheduled. Variances are analyzed for decision making. |
|
Electronic
Fraud Detection System |
The Electronic Fraud Detection System is the primary information system used to support the IRS Criminal Investigation Division’s Questionable Refund Program, which is a nationwide program established in January 1997 to detect and stop fraudulent and fictitious claims for refunds on income tax returns. |
|
Enterprise
Application Integration Broker |
The Enterprise
Application Integration Broker is a commercial off-the-shelf solution that
will be used to enable the communication and data transformations between components
of the Account Management Services organization, the current processing
environment, and the CADE. |
|
Enterprise
Computing Center |
An Enterprise
Computing Center supports tax processing and information management through a
data processing and telecommunications infrastructure. |
|
Enterprise
Integration, Test, and Evaluation |
Enterprise
Integration, Test, and Evaluation includes processes for integrating multiple
components of a solution and conducting various types and levels of testing
on the solution. |
|
Enterprise Life
Cycle |
The Enterprise Life Cycle is a structured business systems
development method that requires the preparation of specific work products
during different phases of the development process. |
|
Executive Steering
Committee |
An Executive Steering Committee oversees investments, including validating
major investment business requirements and ensuring that enabling
technologies are defined, developed, and implemented. |
|
Filing and Payment
Compliance |
The Filing and Payment Compliance project
will provide support for detecting, scoring, and working nonfiler cases
(filing compliance) and delinquency cases (payment compliance). |
|
Filing Season |
The
filing season is the period from January
through mid-April when most individual income tax returns are filed. |
|
Firm
Fixed-Price Task Order |
A firm
fixed-price task order sets a price that is not subject to any adjustment
because of cost overruns incurred by the contractor. |
|
Forms 1040,
1040EZ, and 1040A |
Forms 1040,
1040EZ, and 1040A are the series of IRS forms for individual income tax
returns. |
|
Individual Master
File |
The Individual
Master File is the IRS database that maintains transactions or
records of individual tax accounts. |
|
Information
Technology Modernization Vision and Strategy |
The Information
Technology Modernization Vision and Strategy establishes a 5-year plan that
drives investment decisions; addresses the priorities around modernizing
front-line tax administration and supporting technical capabilities; and
leverages existing systems (where possible) and new development (where
necessary) to optimize capacity, manage program costs, and deliver business
value on a more incremental and frequent basis. |
|
Infrastructure |
Infrastructure is the fundamental structure of a system or organization. The basic, fundamental architecture of any
system (electronic, mechanical, social, political, etc.) determines how it
functions and how flexible it is to meet future requirements. |
|
Logical Design |
Logical design
describes the functions required of a system; that is, what is to be done,
not how it will be done. Logical
design is concerned with the processes to be performed. |
|
Master File |
The Master
File is the IRS database that stores various types of taxpayer
account information. This database
includes individual, business, and employee plans and exempt organizations
data. |
|
Milestone |
Milestones provide for “go/no-go” decision
points in a project and are sometimes associated with funding approval to
proceed. |
|
Modernized e-File |
The Modernized
e-File project develops the modernized, web-based platform for filing
approximately 330 IRS forms electronically, beginning with the U.S.
Corporation Income Tax Return (Form 1120), U.S. Income Tax Return for an S
Corporation (Form 1120S), and Return of Organization Exempt From Income Tax
(Form 990). The project serves to
streamline filing processes and reduce the costs associated with a
paper-based process. |
|
PRIME Contractor |
The PRIME contractor is the Computer Sciences Corporation, which
heads an alliance of leading technology companies brought together to assist
with the IRS’ efforts to modernize its computer systems and related
information technology. |
|
Release |
A release is a
specific edition of software. |
|
Return on Investment |
Return on
investment is the net profit or loss in an accounting period divided by the
capital investment used during the period, usually expressed as an annual
percentage return. |
|
Task Order |
A task order
is an order for services placed against an established contract. |
|
Tax Gap |
The tax gap is
the difference between the annual Federal tax obligation and the amount of
tax that taxpayers pay voluntarily and timely. |
|
Transition
Management |
Transition
management helps ensure personnel and organizations are prepared to receive,
use, operate, and maintain the business processes and technology provided by
business change solutions. |
|
Vision and Strategy |
The Vision and
Strategy phase translates the fundamental business strategy into a
transformation strategy for business processes, information technology, and
organizational change. |
Appendix XI
Management’s Response to the Draft Report
The response was removed due to its size. To see the response, please go to the Adobe
PDF version of the report on the TIGTA Public Web Page.
[1] Pub. L. No. 105-206, 112 Stat. 685 (codified as amended in scattered sections of 2 U.S.C., 5 U.S.C. app., 16 U.S.C., 19 U.S.C., 22 U.S.C., 23 U.S.C., 26 U.S.C., 31 U.S.C., 38 U.S.C., and 49 U.S.C.).
[2] See Appendix X for a glossary of terms.
[3] 31 U.S.C. Sections 1105, 1113, 3512 (2000).
[4]
Pub. L. No. 105-206, 112 Stat. 685 (codified as
amended in scattered sections of 2 U.S.C., 5 U.S.C. app., 16 U.S.C., 19 U.S.C.,
22 U.S.C., 23 U.S.C., 26 U.S.C., 31 U.S.C., 38 U.S.C., and 49 U.S.C.).
[5] See Appendix X for a glossary of terms.
[6] Appendix V presents an overview of the Enterprise Life Cycle.
[7] Appendix VI presents the Modernization program funding timeline.
[8] Modernization Project Teams Need to Follow
Key Systems Development Processes (Reference
Number 2002-20-025, dated November 2001).
[9] Appendix VII presents the Highest Priority Initiatives identified by the IRS and their status as of April 2007.
[10] Clinger-Cohen Act
of 1996 (Federal Acquisition Reform Act of 1996) (Information Technology
Management Reform Act of 1996), Pub. L. No. 104-106, 110 Stat. 642 (codified in
scattered sections of 5 U.S.C., 5 U.S.C. app., 10 U.S.C., 15 U.S.C., 16 U.S.C.,
18 U.S.C., 22 U.S.C., 28 U.S.C., 29 U.S.C., 31 U.S.C., 38 U.S.C., 40 U.S.C., 41
U.S.C., 42 U.S.C., 44 U.S.C., 49 U.S.C., 50 U.S.C.).
[11] Management of Federal Information Resources (Office of Management and Budget Circular No. A-130, dated March 2006).
[12] See Appendix VI for an analysis of Modernization program funding.
[13] 31 U.S.C. Sections 1105, 1113, 3512 (2000).
[14] Pub. L. No. 105-206, 112 Stat. 685 (codified as amended in scattered sections of 2 U.S.C., 5 U.S.C. app., 16 U.S.C., 19 U.S.C., 22 U.S.C., 23 U.S.C., 26 U.S.C., 31 U.S.C., 38 U.S.C., and 49 U.S.C.).
[15] See Appendix IX for a detailed list of recent TIGTA reports and associated findings.
[16] Annual Assessment of the Business Systems Modernization Program (Reference Number 2002-20-189, dated September 2002); Annual Assessment of the Business Systems Modernization Program (Reference Number 2003-20-208, dated September 2003); Annual Assessment of the Business Systems Modernization Program (Reference Number 2004-20-107, dated June 2004); Annual Assessment of the Business Systems Modernization Program (Reference Number 2005-20-102, dated August 2005); and Annual Assessment of the Business Systems Modernization Program (Reference Number 2006-20-102, dated June 2006).
[17] See Appendix X for a glossary of terms.
[18] See Appendix VII for details on the Highest Priority Initiatives.
[19] See Appendix X for a glossary of terms.
[20] American Jobs Creation Act of 2004, Pub. L. No. 108-357, 118 Stat. 1418 (2004).
[21] The Highest Priority Initiative numbers that are skipped in Table 1 are unrelated to the transition of program management activities away from the PRIME contractor.
[22] See Appendix X for a glossary of terms.
[23] The Federal Information Security Management Act of 2002 (44 U.S.C. § 3541, et seq.) is a United States Federal law enacted in 2002 as Title III of the E-Government Act of 2002 (Pub. L. 107-347, 116 Stat. 2899).
[24] See Appendix X for a glossary of terms.