Major weaknesses still dog IRS modernization

The IRS CIO has said the tax agency needs a culture change to succeed at Business Systems Modernization.

“We need to fundamentally change the agency’s behavior. A culture change must occur,” said IRS CIO Todd Grams in a letter dated May 24 to the Treasury Department Inspector General for Tax Administration, in response to a review of IRS Business Systems Modernization.

Grams’ comments were aimed at IRS’ need to stop setting overly ambitious and impractical time periods for delivering projects that end up repeatedly delayed and overpriced.

The IRS and Computer Sciences Corp., the lead Prime contractor, must shore up management and performance weaknesses that continue to plague modernization.
“We conclude that BSM weaknesses continue to exist and that the IRS and its contractors need to complete planned corrective actions to address the root causes identified in the studies,” said Gordon Milbourn III, acting deputy inspector general for audit, Treasury Department Inspector General for Tax Administration, in a report released today.

While IRS and CSC have made progress, schedule delays and cost increases continue. “Pressure has been mounting from various oversight groups to deliver a successful program,” Milbourn said in the report.

The IRS plans to deploy these initial releases this year:
  • Customer Account Data Engine in August for 1040 EZ filers who are single or filing jointly with no dependents. The CADE database, which is the foundation for managing taxpayer accounts in IRS’ modernization plans, will replace the decades old Individual Master File in 2009. (Click for GCN story)
  • .
  • Custodial Accounting Project in summer, which will provide the IRS with a data warehouse of detailed taxpayer account information for analysis and financial reporting. The first CAP release will extract taxpayer account data from the Individual Master File for the Taxpayer Account Subledger, an integrated data repository of taxpayer information including account history and unpaid tax assessment information. Full deployment unknown.

  • Integrated Financial System in October will include accounts payable and receivable, general ledger, budget execution, cost management and financial reporting activities. Future releases will resolve other financial management weaknesses.

  • The assessment was “fair and balanced,” Grams said in his letter. “Our results have been mixed,” he said of IRS progress. On the positive side, IRS has built a strong technical infrastructure, developed a rigorous enterprise lifecycle methodology and worked toward maturing the management processes. IRS has delivered projects that are providing tangible benefits to taxpayers and improving IRS tax administration, such as its Internet features to track refunds and to obtain employer identification numbers and corporate e-filing.

    “The bad news, however, is major,” he said, citing the significant cost overruns and schedule delays of major projects, such as CADE, IFS and CAP. To change IRS behavior, “we are shifting our management focus from ‘doing things fast’ to ‘doing things right,’” he said. But it will take time for changes that IRS has just begun to implement to take root.

    In addition to the action plan:
  • Carnegie Mellon University’s Software Engineering Institute would periodically review the Customer Account Data Engine program.

  • A third party, Mitre Corp. of Bedford, Mass., would regularly assesses the overall health of the modernization program.

  • IRS is developing a human resource capacity planning model to help ensure the right people with the right skills are dedicated to projects for the right amount of time.

  • IRS said it has already:
  • Scaled back modernization efforts to better match management capacity

  • Held senior IRS business unit managers accountable for the success of modernization efforts as it relates to business requirements

  • Instituted capped or fixed-price contracts for development work to balance the financial risk between the government and contractor

  • Begun hiring two associate CIOs for the modernization IT organization, and an executive search firm is conducting a search for five seasoned senior technology executives who have experience managing large-scale complex IT projects.

  • Out of several studies conducted last fall, the IRS and CSC are implementing a 48-point action plan, called the BSM Challenge Plan, to fulfill 21 recommendations from groups including the IRS Oversight Board, the Software Engineering Institute and Treasury’s Inspector General for Tax Administration. IRS said it has completed 44 of the 48 actions.

    The Business Systems Moderation initiative is in its sixth year at a cost of $1.6 billion. The effort is expected to take up to 15 years to accomplish and cost $7 billion, the report said.

    IRS and CSC must overcome the same four primary challenges that have dogged them for years, the Treasury inspector general report said:
  • Implement planned improvements in key management processes and commit necessary resources to them

  • Manage the increasing complexity and risks of the modernization program

  • Maintain the continuity of strategic direction with experienced leadership

  • Ensure the contractors’ performance and accountability are effectively managed.

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