Information Technology:

Consistently Applying Best Practices Could Help IRS Improve the Reliability of Reported Cost and Schedule Information

GAO-13-401: Published: Apr 17, 2013. Publicly Released: Apr 17, 2013.

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What GAO Found

According to the Internal Revenue Service (IRS), 12 of its 20 major information technology (IT) investments were within 10 percent of cost and schedule estimates or significantly below cost between October 2011 and October 2012. For the remaining 8 investments, 3 were reported as being significantly over cost and 5 were reported as being significantly behind schedule. Reported reasons for these significant variances include unplanned work activities, procurement delays, and additional costs associated with terminating an investment that was being replaced.

The reliability of the reported variance information--which is dependent upon having (1) a reliable cost estimate and a well-constructed and controlled schedule estimate, and (2) a process for determining variances using estimates and comparing them to actual or projected amounts--varied for the seven investments reviewed. Specifically, the cost estimates for CADE 2 and IRDM, and the schedule estimates for CADE 2, IRDM, and ACA were more favorable than for the remaining investments because they were more consistent with best practices.

In addition, regarding IRS's process for determining variances, the agency generally determined investment cost and schedule variances for completed activities with actual amounts--although in about 25 percent of the cases it did not do so within the 60-day time frame specified in the Department of Treasury's guidance. Further, while IRS determined variances using projected cost and schedule for in-process activities, the guidance for doing so did not specify how projected amounts should be determined. This introduces the risk that projected amounts will not consistently reflect best practices and these amounts will therefore remain questionable.

Why GAO Did This Study

IRS relies extensively on IT systems to annually collect more than $2 trillion in taxes, distribute more than $300 billion in refunds, and carry out its mission of providing service to America's taxpayers in meeting their tax obligations. In fiscal year 2012, the agency spent about $2.5 billion for IT. Given the size and significance of IRS's IT investments, and the challenges inherent in successfully delivering these complex IT systems, it is important that Congress be provided ongoing, accurate, and objective information on the progress toward completion and the risks facing these projects.

Accordingly, GAO's objectives, among other things, were to (1) summarize the reported cost and schedule performance for IRS's major IT investments, and (2) for selected investments, determine the reliability of reported cost and schedule variances.

What GAO Recommends

GAO recommends that IRS improve the reliability of reported cost and schedule information by addressing weaknesses in future updates of cost and schedule estimates. GAO also recommends that IRS ensure projects consistently follow guidance for updating performance information 60 days after completion of an activity and develop and implement guidance that specifies best practices to consider when determining projected amounts. IRS agreed with three of GAO's four recommendations and partially disagreed with the fourth recommendation related to guidance on projecting cost and schedule amounts. GAO continues to believe this recommendation is warranted.

For more information, contact David A. Powner at (202) 512-9286 or pownerd@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: As of August 2016, IRS provided information on actions taken to address the weaknesses we identified with the cost estimates for 4 of 7 selected investments--e-Services, IRS.gov, CADE 2, and MeF. We are analyzing this information to determine the extent to which the actions taken address the recommendation. For ACA, our June 2015 assessment of IRS' February 2015 cost estimate (summarized in GAO-15-624) found that it met the key practices for being comprehensive, substantially met the key practices for being well-documented and accurate, and partially met the key practices for being credible. We are following up with IRS to determine what actions, if any, have been taken to ensure that the estimate at least substantially meets the key practices for being credible as we recommended. For RRP, we've requested the revised estimate and plan to analyze it to determine the extent to which this recommendation has been addressed. Finally, for IRDM this recommendation is no longer applicable the investment has been in operations and maintenance as of January 2014 and cost estimates are therefore no longer being updated for it.

    Recommendation: To improve the reliability of reported cost and schedule variance information for the seven major investments we reviewed, the Acting Commissioner of IRS should direct the Chief Technology Officer to improve the reliability of cost estimates by addressing the weaknesses we identified in this report so that each investment at least substantially meets each of the characteristics of a reliable cost estimate.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Open

    Comments: As of August 2016, IRS identified actions taken or provided revised schedule estimates (i.e., integrated master schedules) for 4 of the 7 selected investments--ACA, e-Services, IRS.gov, and Me. We plan to analyze the information provided to determine the extent to which it addresses our recommendation. For CADE 2, in October 2015, IRS provided the schedule estimate for Transition State 1. In July 2016, IRS informed us that it was revising the Transition State 2 schedule estimate. We will be obtaining the revised schedule, and will analyze it along with the schedule for Transition State 1. For RRP, we requested the revised schedule for Transition State 2 and will analyze it to determine the extent to which this recommendation has been addressed. Finally, for IRDM, this recommendation is no longer applicable as the investment has been in operations and maintenance since January 2014 and therefore schedule estimates are no longer being updated for it.

    Recommendation: To improve the reliability of reported cost and schedule variance information for the seven major investments we reviewed, the Acting Commissioner of IRS should direct the Chief Technology Officer to improve the extent to which schedules are well-constructed and controlled by addressing the weaknesses we identified in this report so that each investment at least substantially meets each of these characteristics.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  3. Status: Open

    Comments: In February 2015, we reported two actions that IRS had taken to address this recommendation (see GAO-15-297). First, the department of Treasury modified the monthly reporting system to automatically calculate a schedule variance based on the current date for any activity where the planned completion date had passed and investment staff had not provided an actual figure within 45 days. This action helped ensure schedule variances were appropriately updated. Second, IRS increased coordination between its Strategy and Planning group (responsible for overseeing monthly variance reporting) and investment staff to ensure cost performance information is appropriately updated. We verified that selected investments had updated performance information in 86 percent of the cases, which was an improvement from the 77 percent we had previously reported. As of August 2016, we have requested monthly performance data for selected investments, and will be analyzing this performance data to determine the extent to which IRS has fully complied with guidelines for updating performance information 60 days after completion of an activity.

    Recommendation: To improve the reliability of reported cost and schedule variance information for the seven major investments we reviewed, the Acting Commissioner of IRS should direct the Chief Technology Officer to ensure projects consistently follow guidelines for updating performance information 60 days after completion of an activity.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  4. Status: Open

    Comments: As of February 2015, IRS stated that it had addressed this recommendation in the practices documented in its July 2014 cost and schedule variance reporting procedure. We disagreed, however, because this procedure did not address the calculation of projected cost and schedule amounts used for the monthly reporting of cost and schedule variances for in-process activities, which was the subject of this recommendation. As of August 2016, we have requested information on any additional actions taken by IRS to address this recommendation.

    Recommendation: To improve the reliability of reported cost and schedule variance information for the seven major investments we reviewed, the Acting Commissioner of IRS should direct the Chief Technology Officer to develop and implement guidance that specifies best practices--such as including evaluating critical path (for projected schedule), using earned value management data, evaluating the performance of completed work and comparing it to the remaining budget, assessing commitment values for material needed to complete remaining work, and estimating future conditions--to consider when determining projected cost and schedule amounts.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

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