From the U.S. Government Accountability Office, www.gao.gov Transcript for: IRS IT Risks Description: Information technology plays a pivotal role as the IRS processes the nation's taxes. In this podcast, GAO takes a look at how the IRS is handling IT risks and investments. Related GAO Work: GAO-18-298: Information Technology: IRS Needs to Take Additional Actions to Address Significant Risks to Tax Processing Released: June 2018 [ Background Music ] [ Dave Powner: ] Don't want to be in a situation where, during the tax filing season, you have a hiccup where the system breaks down. [ Matt Oldham: ] Welcome to GAO's Watchdog Report, your source for news and information from the U.S. Government Accountability Office. I'm Matt Oldham. Every year, the IRS collects more than $3 trillion in taxes and refunds more than 400 billion. The job of collecting and refunding taxes relies heavily on information technology. Dave Powner is a director in our Information Technology team, and he's here to talk about a report he led that reviewed the IRS's IT operations. Thank you for taking the time to speak with me, Dave. [ Dave Powner: ] Thanks, Matt. [ Matt Oldham: ] Your report looks at how IRS is handling new IT investments. What does this mean for the American taxpayer? [ Dave Powner: ] So what's important here is we're modernizing the current systems we have at IRS. So they spend over 2-and-a-half billion annually on IT. Only about 30 percent of that goes towards new systems or new acquisitions. Seventy percent goes to keeping the old systems running. So what's really important is the 30 percent that does go towards a new system, we want to deliver newer systems. The problem at IRS is we have aging infrastructure, old systems, and we really need to get these systems replaced. Primarily the main system that processes our tax returns is responsible for the $3 trillion in annual revenue, but there's also other important systems there too like fraud detection systems that catch fraud on the front end so that we actually don't have that going forward. [ Matt Oldham: ] What are the risks if this is delayed? What are the risks if this isn't done properly? [ Dave Powner: ] So there's a couple major risks here. When you look at the old systems that are in place, we have an issue not only with the software being old, but also with hardware that's very old and no longer under warranty. So what does that mean? It's no longer maintained, so in order to maintain it, you're paying a premium, which means even more of this 2-and-a-half billion is going towards the older systems. Then, the other thing, the old software that's in place. We're actually running out of programmers that know these languages, so they have a human capital crisis there from a programming point of view. And the way you get around that is you pay a premium with contractors or others to maintain these old languages. [ Matt Oldham: ] So it sounds like this is a pressing issue. This is something that needs to be addressed in the near future. How is the IRS situated to addressing risks in the farther future? [ Dave Powner: ] So that was one of the big things in our report that we mentioned. We think there's room for improvement in both their risk management processes, in particular, how they mitigate these risks, and, in particular, how they address the human capital crisis they're currently facing. What's really important here is the system that's in place that they're acquiring to replace this old system, it's one of the systems that had the worst performance, and we highlighted that in our report. It was late in terms of the deliverables. It only delivered less than 50 percent of the planned functionality this last year that we looked at how that was going. So that project is actually moving not quick enough, and what we really need is we need a firm plan in place to replace that old system where we're running out of programmers and we're paying a premium for the hardware. [ Background Music ] [ Matt Oldham: ] So it sounds like the IRS realizes it needs to invest in its IT programs, but they've had some varying results. You found some outdated hardware. You found some lack of skilled operators and scheduling delays. So Dave, what did your team recommend? [ Dave Powner: ] There were numerous recommendations in the risk management area to more aggressively manage and monitor those risks and then also to, and from a human capital perspective, do we really have a good plan to address the dwindling programmers that are there? This is really a tough situation that they're in, and, again, what's really important here is the older this system gets, not only is it more expensive to maintain, but you don't want to be in a situation where, during the tax filing season, you have a hiccup where the system breaks down. That's what we really want to avoid. So that's why it's so important on the front end to get these investments delivering more and eventually replacing the old tax processing systems. [ Matt Oldham: ] So what do you believe is the bottom line of this report? [ Dave Powner: ] So the bottom line is when you look at IRS, it's a lot of money. I mean, IRS spends more on IT than many of the big departments and agencies. Too much of that goes towards the old systems. We need to get more of that money going towards the newer systems, and the only way we end up doing that is we need to get a firm plan in place to decommission the old systems where we don't have as much risk, we don't have many, as many human capital problems, and we actually have a modern system that not only is cheaper to run, but is probably more secure and will better deliver in terms of the tax revenue that needs to come in for the country. [ Matt Oldham: ] Dave Powner is a director in our Information Technology team, and he was talking about a GAO report on the IT risks facing the Internal Revenue Service. Thank you for your time, Dave. [ Dave Powner: ] Thank you, Matt. [ Background Music ] [ Matt Oldham: ] And thank you for listening to the Watchdog Report. To hear more podcasts, subscribe to us on Apple Podcasts. [ Background Music ] For more from the congressional watchdog, the U.S. Government Accountability Office, visit us at gao.gov.