In carrying  out its mission, IRS annually collects over $2 trillion in taxes from millions  of individual taxpayers and numerous other types of taxpayers and  manages the distribution of over $300 billion in refunds. For fiscal year 2014, IRS requested about $2.6 billion for IT investments. The remaining 13 were  reported as having significant cost and schedule variances for at least 1  month of the year. Specifically, IRS reported 8 investments as being  below cost or ahead of schedule; 3 as behind schedule; and 2 as over  cost (see fig. IRS reported a range of reasons for these significant  variances, including cost savings from contract negotiations and scope  deferrals for those below cost or ahead of schedule, and procurement  delays for those behind schedule. Figure 2 shows a summary of investments with significant  cost and schedule variances. It is important to note that the reported monthly cost and schedule  variances are for the fiscal year only. IRS’s reporting would be more  meaningful for determining whether IRS is effectively managing its  investments if it included cumulative cost and schedule variances for the  investments or investment segments, consistent with OMB’s guidance for  measuring progress towards meeting investment goals. of reported information and provide Congress with a more accurate report  of the agency’s performance in meeting cost and schedule goals. Ensuring the variances for completed activities are consistently updated  with actual information within the 60-day time frame required by Treasury  as we previously recommended would provide more reliable information  on which to gauge IRS’s performance in meeting cost and schedule  goals. IRS is currently not working on developing a quantitative measure of  scope and does not plan on doing so because it believes it is difficult to  develop a single measure that would allow it to measure progress in  delivering scope for the range of IRS’s investments. First, we believe IRS could develop quantitative measures using different  methods as appropriate. Until such a measure is developed,  being more transparent about progress in delivering scope by reporting  qualitatively on how delivered scope compares to what was planned in  the congressional reports would help IRS provide Congress a complete  picture of its performance in managing its major investments—particularly  in those cases where functionality is deferred. Conclusions

For fiscal year, 2013, the cost and schedule performance for IRS’ major  IT investments was mixed, with six investments reported as being within  10 percent of cost and schedule goals throughout the year, eight reported  as being significantly below cost or ahead of schedule—although in some  cases, these are due to scope deferrals or poor estimating practices— and 5 behind schedule or over cost. Recommendations for Executive Action

To improve the reliability of reported cost and schedule variance  information for major investments, we recommend that the Commissioner  of IRS direct the Chief Technology Officer to take the following three  actions:  report cumulative investment and investment segment cost and  schedule information in the quarterly reports to Congress, consistent  with OMB requirements for measuring progress towards meeting  goals; ensure that projected cost and schedule variances for in-process  activities are updated monthly, for the six investments for which we  reviewed monthly updates, consistent with OMB and Treasury  reporting requirements, by ensuring investment staff have a  consistent understanding of the information to be included in monthly  reports; and until a quantitative measure of scope is developed, qualitatively report   on how delivered scope compares to what was planned in its quarterly  reports to Congress, for the seven investments for which we reviewed  scope reporting. Further, while IRS has  started to include scope performance (in the functional performance  section) in its quarterly reports to Congress, there are no quantitative  measures of progress in delivering scope. Appendix I: Objectives, Scope, and Methodology

Our objectives were to (1) summarize the reported cost and schedule  performance for IRS’s major information technology (IT) investments and  assess the reporting of the performance information; (2) for selected  investments, evaluate the reliability of reported cost and schedule  variances; and (3) determine IRS’s progress in implementing a  quantitative measure of functionality delivered for projects.
Why GAO Did This Study

IRS relies extensively on IT systems to annually collect more than $2 trillion in taxes, distribute more than $300 billion in refunds, and carry out its mission of providing service to America's taxpayers in meeting their tax obligations. For fiscal year 2014, the agency's budget request is $2.6 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 reliable cost, schedule, and scope information to assist with its oversight responsibilities.
Accordingly, GAO's objectives were to (1) summarize the reported cost and schedule performance for IRS's major IT investments and assess the reporting of the performance information (2) for selected investments, evaluate the reliability of reported cost and schedule variances; and (3) determine IRS's progress in implementing a quantitative measure of functionality delivered for projects. To address these objectives, GAO reviewed documentation, including monthly cost and schedule variance reports, and interviewed staff, including those from selected investments which are critical to IRS's mission.

What GAO Found

According to the Internal Revenue Service (IRS), 6 of its19 major information technology (IT) investments were within 10 percent of cost and schedule estimates during fiscal year 2013. The remaining 13 were reported as having significant cost and schedule variances for at least 1 month of the year. Specifically, IRS reported 8 investments as being below cost or ahead of schedule; 3 as behind schedule; and 2 as over cost (see figure). IRS reported a range of reasons for these variances, including cost savings from contract negotiations and scope deferrals for those below cost or ahead of schedule, and procurement delays for those behind schedule. It is important to note that the reported monthly cost and schedule variances are for the fiscal year only. IRS's reporting would be more meaningful if it were supplemented with cumulative cost and schedule variances for the investments or investment segments, consistent with the Office of Management and Budget's guidance for measuring progress towards meeting investment goals.
Summary of Investments with Significant Variances
The reported variances for six investments reviewed were not always reliable because the projected and actual cost and schedule amounts on which they depend were not consistently updated in accordance with OMB and Treasury reporting requirements. Specifically, projected amounts were not always updated on a monthly basis for in-process (i.e., ongoing) activities for a range of reasons; and actual information was not consistently updated for completed activities within the 60-day time frame required by Treasury guidance. Addressing these issues would help IRS improve the reliability of reported information and provide Congress with a more accurate report of the agency's performance in meeting cost and schedule goals.
IRS is currently not working on developing a quantitative measure of scope (i.e., functionality) as GAO recommended in June 2012 and does not plan on doing so, because it believes it is difficult to develop a single measure that would allow it to measure progress in delivering scope for the range of IRS's investments. However, the agency could develop measures using different methods as appropriate. In addition, IRS has started to include scope performance (in the functional performance section) in its quarterly reporting to Congress. However, this information does not include a quantitative measure of performance. In addition, it does not show how delivered scope compares to what was planned. Providing transparency into progress in delivering scope by reporting qualitatively in the congressional reports until a quantitative measure is developed would help IRS provide Congress a complete picture of the agency's performance in managing its major investments.

What GAO Recommends

GAO is making recommendations for IRS to report more comprehensive and reliable cost and schedule information and improve the transparency of reported scope information for its major investments. IRS agreed with GAO's recommendations and stated it believed it had addressed one of them. GAO continues to believe further actions are needed.