IRS Wasted $11.6 Million of Computer Software

TIGTA: ‘Software license management at the IRS is not being adequately performed’

April 4, 2014

The Internal Revenue Service (IRS) bought $11.6 million worth of computer software the agency never used, according to the Treasury Inspector General for Tax Administration (TIGTA).

TIGTA attributed the error to poor management and a lack of inventory of more than $200 million in software purchased by the IRS, according to an audit released Thursday.

"Software license management at the IRS is not being adequately performed," the audit said. "Efficient and cost-effective management of the IRS’s software assets is crucial to ensuring that information technology services continue to support the IRS’s business operations and help it to provide services to taxpayers efficiently."

Upon reviewing the IRS’ software contracts, TIGTA found 11 products that were bought by the IRS but never installed.

"The original compliance review determined that the IRS did not deploy, i.e., purchased but did not use, mainframe licenses and software support, resulting in the IRS wasting an estimated $11.6 million," the audit said.

The $11.6 million in wasted software was part of a 5-year contract with IBM worth $239 million, which was awarded in September 2007.

Since the IRS has no software license management system the agency "cannot effectively determine if the software contracts it enters into are reflective of its current or future projected mainframe software license and support needs," TIGTA said.

The agency watchdog said waste is likely to continue until the IRS improves management over its software contracts.

"The lack of an enterprise-wide inventory with comprehensive data on all mainframe software assets and software licensing impedes the IRS’s ability to more effectively analyze the relationships among its software license agreements and vendors to more cost effectively buy software licenses and maintenance," TIGTA said. "Until the IRS addresses the issues presented in this report, it is incurring increased risks in managing software licenses."

"In fact, these deficiencies have already resulted in an estimated waste of $11.6 million and overutilization of $1.5 million in licenses and software support fees on one mainframe software contract," they said.

In response to the audit, the IRS argued it did not waste $11.6 million. The agency admitted it did not use 5 of the 11 products, and said it had "no obligation to pay for them."

However, TIGTA reported that when discussing the products with the agency, IRS management "agreed that these 11 products were paid for and were never deployed."

The IRS could not provide documentation to back up their claim, TIGTA said.