IRS, IG disagree on process vs. independent judgment

Inspector General report

The Internal Revenue Service and its inspector general are divided on whether to define a process or use managers’ judgment to analyze the effects of project delays.

IRS officials objected to the IG’s recommendation to establish a process to determine the effects of deferred work on funding and for marking incomplete work to avoid paying for it again, according to a December 2006 Treasury Inspector General for Tax Administration report on the Modernization e-File project.

Officials consider the process a waste of resources.

But, the IG wrote, such a process should help prevent the agency from paying for the same work if it must be deferred. The IRS’ Modernization e-File project team has failed to analyze the effect on costs regarding the project’s current tasks and requirements, the IG found.

“Until a control is implemented to identify and account for project costs, the [Modernization e-File] Acquisition Project Manager has no means to identify the costs devoted to deferred requirements or partially completed work segments,” the report concludes.

The IG cites a process similar to its recommendation for the IRS’ Customer Account Data Engine, the foundation for the e-File modernization project, as a successful example of its proposal.

In a letter of response to the IG, IRS Chief Information Officer Richard Spires said project managers analyze the effects of delays.

Instead of a process, their “judgment is required to handle these situations on a case-by-case basis,” Spires wrote.

When necessary, managers assess the situation to decide the way to proceed, he wrote. Their best practices require proactive supervision of three constraints: cost, schedule and scope. The current system keeps the three aligned and attainable, he added.

Such a change to the system “is not an appropriate or productive use of resources,” Spires wrote.

The report states that the modernization project team has not assessed the cost effect on the project’s current stages and requirements, nor has it looked at the effects on available funding. The IG found no copy of any assessment. Managers have not done a definitive analysis on what portion of the deferred work was already developed and paid, the report states.

IRS officials agreed with the IG’s five other recommendations, such as warning Congress about changes to expenditure plans and working with the procurement office to clarify policies for escalating failed negotiation attempts.


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