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New audit finds IRS can’t keep track of its own software

By   /   August 20, 2013  /   3 Comments

By Eric Boehm | Watchdog.org

The Internal Revenue Service soon will have a larger role to play in managing the health records of Americans. But they’re having a hard time managing their own records, it seems.

WHERE DID IT GO: The IRS could not produce software licenses for 24 of 27 programs auditors asked about.

WHERE DID IT GO: The IRS could not produce software licenses for 24 of 27 programs auditors asked about.

A new audit report from the Treasury Inspector General for Tax Administration, which oversees the IRS, found the agency was not keeping track of its software licenses and did not employ specialized tools to track and manage the multitude of licenses being used daily at the IRS.

“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,” auditors wrote in their report.

The division of the IRS charged with managing the licenses could not provide auditors with the proper licenses for 24 of the 27 software products reviewed.

The IRS spent $235 million on computer software products during 2011, according to the audit.  Keeping better records of licenses could save the agency money by preventing unnecessary duplicate purchases of the same software, the auditors noted.

But it could also save the IRS from further embarrassment.  Poor record keeping of licenses could result in the agency running afoul of licensing agreements, which could bring legal trouble.

For example, eight of the products reviewed by the audit did not have unlimited licenses but IRS employees could not provide auditors with records showing how often the software was used.

“We could not determine whether licenses were over-or-under-deployed because the IRS could not provide us with records,” the auditors wrote.

Over-deployment of a license could bring a lawsuit.

Terence Milholland, the IRS’ chief technology officer, said the agency would address desktop and laptop software licensing as part of an overall effort to “ensure effective management controls.” The standardization effort would lead to more success and savings in the future, he wrote.

“We recognize that efficient and cost effective management of IRS software license(s) is crucial to ensuring that information technology services continue to support the IRS’s business operations that provide services to taxpayers,” Milholland, the IRS’ chief technology officer, wrote in the official response to the audit.

In an attachment to the audit, the agency announced six policy changes meant to address the audit’s concerns.

The IRS did not return calls for further comment.

Auditors recommended the development of new policies to manage software assets, the creation of a database for all software licenses used by the IRS and periodic reviews of the inventory to find cost-savings.

The audit may be less embarrassing for the agency than an earlier one that found IRS employees rang up more than $108 million in personal expenses on government-issued and taxpayer-funded credit cards, or a separate audit that found the IRS blew through $50 million in tax money between 2010 and 2012 to send employees to conferences around the country.

But the implied lack of internal control over the agency’s own technology and software could be equally worrisome.

The IRS will see its role expand in the coming years as the federal Affordable Care Act comes online.

The Congressional Budget Office, Congress’ nonpartisan number-crunching agency, said the IRS will have to spend between $5 billion and $10 billion over the first 10 years to implement the provisions of Obamacare, much of which will be spent on providing subsidies to individuals and businesses.

Eric Boehm is a reporter for Watchdog.org and can be reached at Eric@PAIndependent.com.  Follow him on Twitter at @EricBoehm87.


Eric is a reporter for Watchdog.org and former bureau chief for Pennsylvania Independent. He lives in Minneapolis, Minnesota, where he enjoys great weather and low taxes while writing about state governments, pensions, labor issues and economic/civil liberty. Previously, he worked for more than three years in Harrisburg, Pennsylvania, covering Pennsylvania state politics and occasionally sneaking across the border to Delaware to buy six-packs of beer. He has also lived (in order of desirability) in Brussels, Belgium, Pennsburg, Pa., Fairfield, Conn., and Rochester, N.Y. His work has appeared in Reason Magazine, National Review Online, The Freeman Magazine, The Philadelphia Inquirer, The Washington Examiner and elsewhere. He received a bachelor's degree from Fairfield University in 2009, but he refuses to hang on his wall until his student loans are fully paid off sometime in the mid-2020s. When he steps away from the computer, he enjoys drinking craft beers in classy bars, cheering for an eclectic mix of favorite sports teams (mostly based in Philadelphia) and traveling to new places.

  • RetiredCPA

    Is anyone really surprised? It’s a government operation!

  • OldmanRick

    The IRS(Irresponsible reckless Soviet) has not been remotely responsible since the time of F.D,R.

  • S Clark

    Software companies (including employees) have probably been afraid to check them for compliance, even before anybody ever heard of Lois Lerner.