IRS needs to improve business cases, IG says

IRS needs to improve business cases, IG says

IRS officials should not rely on the data in some of their recent
business cases to manage and fund IT projects, inspector general
auditors have found.

A new review says IRS business cases did not report costs accurately or
comply with federal requirements and agency guidelines.

The tax agency disagreed, saying auditors did not accurately portray
some agency actions that played only a minor role in decision-making.
IRS said it has started to fix reporting problems, which it will
complete later this year when fiscal 2007 budget submissions are due.

"Inaccurate information in business cases can distort viable analysis
and provide IRS executives with a false assessment of the actual
progress and costs of projects," said Pamela Gardiner, deputy inspector
general for audit at the Office of the Treasury Inspector General for
Tax Administration, in a report released this week.

Auditors evaluated business cases from June through December 2004 for
four major IT projects for the fiscal 2005 and 2006 budget years. IRS
makes about 30 business cases for IT investments each year to meet
requirements of the Office of Management and Budget and the 1996
Clinger-Cohen Act.

The report found that IRS omitted $38.5 million in labor costs in one
project and in another did not report project-specific security costs,
such as for systems administrators and background checks.

Earned-value management data for two projects under development was
incomplete, inaccurate and outdated, making it difficult for senior IRS,
Treasury Department and OMB officials to assess overall progress, the
auditors said. "Budgeted costs were inaccurate, baseline information
changed from one year to the next, project teams could not provide
supporting documentation and IT project costs were outdated," the report
said.

In addition, the capital planning and investment control office did not
always provide adequate guidance to project managers, who did not ensure
business cases were prepared accurately and in compliance with OMB and
IRS rules.

"Insufficient effort was made to prepare accurate business cases that
could be relied upon to better manage IT projects," the report said.

IRS Exhibit 300 business case submissions, however, have shown
consistent progress over the past two years, said the tax agency's CIO,
Todd Grams. "The outcome of our increased project manager support and
improved governance is evidenced by the substantial progress IRS has
made from fiscal 2005 to 2006," Grams wrote in a response last month.

At the time of the review, IRS had not defined clear lines of project
management responsibility. "Today each project manager is solely
accountable for the Exhibit 300 content," Grams said.

IRS is also establishing audit trails for business-case calculations. To
improve governance, IRS also has incorporated the business cases into
its quarterly reviews and other system management requirements, Grams
said.

About the Author

Mary Mosquera is a reporter for Federal Computer Week.

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