The WasteWatcher: The Staff Blog of Citizens Against Government Waste

Software Mess At IRS

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.


On August 29, 2013, The Washington Post published an article about Internal Revenue Service (IRS) Chief Information Officer (CIO) Terence Milholland and his desire to make the agency’s information technology (IT) program “world-class.”  The article cited the uphill battle Milholland faces in merging disparate IT systems, retraining programmers in newer technologies, and dealing with entrenched stove-piped IT systems.  While those are all daunting challenges, the Post missed an additional problem that the CIO needs to address.

On June 25, 2013, the Treasury Inspector General for Tax Administration (TIGTA) released a report entitled “Desktop and Laptop Software License Management Is Not Being Adequately Performed.”  According to the report, the IRS spent $235 million on software licenses in 2011 and has been quite sloppy with its accounting of software assets.  The TIGTA found that 21 of the 27 software products reviewed did not have unlimited software licenses and six had more than one license deployment record.

The confusing mishmash of software inventory records led to some licenses being either overused or underused, including eight software products that were not used in a cost-effective manner because the agency deployed significantly fewer licenses than it had purchased.  For three software products, the IRS deployed more licenses than it had purchased.

TIGTA recommended that the IRS implement a specialized software license tool designed to discover, track, and manage software license deployment and usage, and develop an inventory of software licensing data and maintain inventory with a special software license tool designed to discover, track, and manage software license deployment and usage.

The IRS’ response was rather shocking.  The agency claimed that no such system exists; therefore the IRS would have to create its own software inventory tool to manage software license deployment and usage.  That conclusion is absurd, self-serving, and displays a level of ignorance that is hard to fathom.

Sophisticated software asset management tools exist in the private sector to perform the functions that TIGTA recommended to the IRS.  A simple online search yields a number of companies, including Aspera, Eracent, Flexera Software and Snow Software that offer these programs.  Yet the agency persists in denying the availability of such systems in order to justify squandering taxpayer dollars to create its own version.

This is not the first time that the IRS would be wasting money building an IT system or tool that already existed in the private sector.  In 2002, the IRS tried to create its own tax preparation program called Cyberfile at a cost of $17 million.  The program never worked.  Similar programs already existed in the private sector.  The IRS finally figured this out in the 1990s, when the agency worked with tax preparation firms H&R Block and Jackson-Hewitt to develop and test an e-file system.  In 2003, the IRS partnered with Free File Alliance, a consortium of tax software companies, to make free tax preparation software and free e-file available to individual taxpayers.  During the 2012 tax season, nearly 100 million taxpayers used e-file to submit their individual tax returns, using various tax preparation services.

However, the IRS is being obtuse by failing to recognize the deployment of IT systems in the private sector and government agencies that track the overuse and underuse of software licenses.  In 1998, President Bill Clinton recognized that the overuse and underuse of software licenses could be a problem for federal agencies and issued Executive Order 13103, which ordered the implementation of policies requiring agencies to track their software assets.  As attested by TIGTA’s report, the IRS still lags behind other agencies.

On May 10, 2013, Citizens Against Government Waste (CAGW) hosted an educational briefing for congressional staff and federal agencies on the use of best practices for software inventory control including software asset management tools.  During this meeting, former Federal Aviation Administration Aviation Traffic Organization CIO Steve Cooper discussed his experience in creating software asset management policies for the agency using private sector tools.  According to Cooper, using these tools, the agency was able address the overuse and underuse of various software licenses, formalize the process for tracking software license use, and create a competitive software pricing environment in an agency app store to allow employees to access the software they needed.  In addition, according to a Flexera  report, a U.S. military agency has realized more than $1.7 million in annual software savings by using the company’s software asset management tools.

Building a “world-class” IT shop within a federal agency, especially at the IRS, takes time, patience and persistence, and proper management tools to track inventory.  The Post reported that the agency has been much more transparent with TIGTA and the Government Accountability Office when undergoing audits of its systems.  This transparency is a positive step for the IRS, but there is still no excuse for the agency to waste resources on building technology solutions that already exist.

Until the IRS and other federal agencies get a better handle on the deployment and use of software assets by using existing software asset management tools, they will continue to purchase either too many or not enough software licenses for their needs and waste millions of taxpayer dollars.

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