TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION

Sixty-Four Percent of the Internal Revenue 

Service’s Information Technology Hardware 

Infrastructure Is Beyond Its Useful Life 

September 11, 2017 

Reference Number: 2017-20-051

This report has cleared the Treasury Inspector General for Tax Administration disclosure review process 

and information determined to be restricted from public release has been redacted from this document.

Phone Number / 202-622-6500

E-mail Address / TIGTACommunications@tigta.treas.gov

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Information you provide is confidential and you may remain anonymous.
HIGHLIGHTS

SIXTY-FOUR PERCENT OF THE

INTERNAL REVENUE SERVICE’S

INFORMATION TECHNOLOGY

HARDWARE INFRASTRUCTURE IS 

BEYOND ITS USEFUL LIFE

Highlights

Final Report issued on 

September 11, 2017

Highlights of Reference Number: 2017-20-051

to the Internal Revenue Service Chief

Information Officer. 

IMPACT ON TAXPAYERS

The Sustaining Infrastructure Program manages

the replacement of aged information technology

hardware infrastructure that provides the 

foundation for technology services and supports

the IRS’s most critical business needs. The 

management, maintenance, and ongoing 

enhancement of the IRS’s information 

technology are central to the reliability of its

operations and to the successful

accomplishment of its mission to “provide 

America’s taxpayers top-quality service.” 

WHY TIGTA DID THE AUDIT

The overall objective of this review was to 

determine the efficiency and effectiveness of

key ongoing or planned activities aimed at

addressing the IRS operational challenge of

replacing its aged hardware infrastructure.

WHAT TIGTA FOUND

While the Sustaining Infrastructure Program

spends on average nearly 99.7 percent of its

allocated budget each year, the IRS has not yet

achieved its stated objective of reducing its aged 

information technology hardware to an

acceptable level of 20 to 25 percent. In fact,

this percentage has steadily increased from

40 percent at the start of Fiscal Year 2013 to 

64 percent at the start of Fiscal Year 2017. The 

IRS estimates that the current replacement cost

for its aged information technology hardware is

approximately $430 million.

Aged information technology hardware still in 

use introduces unnecessary risks. TIGTA 

analyzed 107 incident tickets most likely to 

involve aged hardware failures in Fiscal 

Year 2016 and found that the aggregate length 

of time to resolve the issues was approximately 

4,541 hours. These aged hardware failures may 

have also had a negative effect on IRS 

employee productivity, security of taxpayer 

information, and customer service.

Each year, the IRS provides varying amounts of 

funds to the Sustaining Infrastructure Program 

from a number of different internal sources, 

including the IRS’s base year operations support 

appropriation, user fees, and carryover money 

from previous fiscal years not used by other IRS 

business units. The IRS has a process in place 

to monitor each financial plan and identify

potential surplus funds. However, additional

coordination to identify the availability of surplus

funds earlier in the process and development of

plans to expeditiously spend these funds on the 

aged hardware inventory are needed. Such 

coordination may have resulted in a combined 

total of up to $67 million in additional unspent 

funds being available for the Sustaining 

Infrastructure Program. 

WHAT TIGTA RECOMMENDED

TIGTA recommended that the Chief Information 

Officer conduct additional coordination with the 

Chief Financial Officer and other business unit 

executives to identify the availability of additional 

transfers, reprogramming, and possible 

carryover funds earlier in the process to 

maximize their use and develop plans to 

expeditiously spend any potential surplus funds

that might become available to aid in reducing 

its aged information technology hardware 

infrastructure. 

In response to the report, the IRS agreed with 

two recommendations and disagreed with one. 

In its Fiscal Year 2018 budget submission, it

requested the realignment of funds and 

additional multiyear authority. This should be of 

significant benefit if funded as requested. 

However, given the substantial portion of its 

hardware infrastructure that is beyond its useful 

life, additional actions will likely be needed.
DEPARTMENT OF THE TREASURY

WASHINGTON, D.C. 20220

TREASURY INSPECTOR GENERAL

FOR TAX ADMINISTRATION

September 11, 2017 

MEMORANDUM FOR CHIEF INFORMATION OFFICER

FROM: Michael E. McKenney

Deputy Inspector General for Audit 

SUBJECT: Final Audit Report – Sixty-Four Percent of the Internal Revenue 

Service’s Information Technology Hardware Infrastructure Is Beyond 

Its Useful Life (Audit # 201620014) 

This report presents the results of our review to determine the efficiency and effectiveness of key 

ongoing or planned activities aimed at addressing the Internal Revenue Service operational 

challenge of replacing its aged hardware infrastructure. This audit is included in our Fiscal 

Year 2017 Annual Audit Plan and addresses the major management challenge of Achieving 

Program Efficiencies and Cost Savings.

Management’s complete response to the draft report is included as Appendix VII. 

Copies of this report are also being sent to the Internal Revenue Service managers affected by the 

report recommendations. If you have any questions, please contact me or Danny R. Verneuille, 

Assistant Inspector General for Audit (Security and Information Technology Services). 
Sixty-Four Percent of the Internal Revenue Service’s Information 

Technology Hardware Infrastructure Is Beyond Its Useful Life

Table of Contents

Background............................................................................................................Page 1

Results of Review ................................................................................................Page 3

Additional Coordination With Business Units Is 

Needed to Improve Replacement of Aged Information 

Technology Hardware...................................................................................Page 3

Recommendation 1:........................................................Page 10

Recommendation 2:........................................................Page 11

A Comprehensive Guidance Document Is Needed 

to Effectively Manage Aged Information Technology 

Hardware.......................................................................................................Page 12

Recommendation 3:........................................................Page 13

Appendices

Appendix I – Detailed Objective, Scope, and Methodology ........................Page 14

Appendix II – Major Contributors to This Report........................................Page 16

Appendix III – Report Distribution List .......................................................Page 17

Appendix IV – Outcome Measure ................................................................Page 18

Appendix V – Summary of the Sustaining Infrastructure 

Program’s Obsolescence Asset Report for Fiscal Year 2016 .......................Page 20

Appendix VI – Glossary of Terms................................................................Page 22

Appendix VII – Management’s Response to the Draft Report.....................Page 24
Sixty-Four Percent of the Internal Revenue Service’s Information 

Technology Hardware Infrastructure Is Beyond Its Useful Life

Abbreviations

IRS Internal Revenue Service

SI Sustaining Infrastructure

TIGTA Treasury Inspector General for Tax Administration
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Background

In Fiscal Year1 2016, the Internal Revenue Service (IRS) processed nearly 245 million tax 

returns and other forms and collected approximately $3.3 trillion in taxes. At the core of the 

IRS’s tax administration is its information technology infrastructure. The IRS information 

technology infrastructure provides the foundation for technology services, such as server and 

user computing, network, storage, and communications required for day-to-day operations. The 

management, maintenance, and ongoing enhancement of its information technology are central 

to the reliability of its operations to support the increasing number of tax forms submitted and 

processed and to the successful accomplishment of the IRS’s mission to “provide America’s 

taxpayers top-quality service by helping them understand and meet their tax responsibilities and 

enforce the law with integrity and fairness to all.”

The IRS’s Information Technology organization provides technology services and solutions that 

drive effective tax administration, improve service, modernize systems, and ensure the security 

and durability of IRS information systems and data. The Sustaining Infrastructure (SI) Program 

was established within the Information Technology Enterprise Services organization to provide 

for long-term infrastructure sustainability with the flexibility to meet changing business 

requirements. The SI Program manages a central investment program for the replacement of the 

IRS’s aged information technology hardware that have reached or surpassed their expected 

useful life span.2

Comprised of three employees assigned part-time,3 the SI Program follows a prioritization 

process to replace the aged hardware that supports the IRS’s most critical business needs. The 

objective of the prioritization process is to identify, prioritize, and manage information 

technology investments. This prioritization process requires a coordinated approach across the 

IRS that involves the SI Program working with various Associate Chief Information Officers 

along with input from the business units to identify aged hardware replacements each fiscal year. 

However, SI personnel stated that the replacement of aged hardware may not be fully realized for 

 

1 See Appendix VI for a glossary of terms. 2 The average life span for most information technology hardware is three to five years.

3 SI Program personnel explained that they are not part of a program office and have other responsibilities in 

addition to their SI duties.
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up to 18 to 24 months from the initial start of the procurement process to installation of the 

hardware into production.4

The IRS has a large and increasing amount of aged hardware, some of which is three to four 

times older than industry standards. In the IRS’s Fiscal Year 2016 President’s Budget (dated 

February 2, 2015), the IRS described that its current state of information technology 

“infrastructure poses significant risk of failure,” and that “it is unknown when these failures 

could occur, how severe they will be, or whether they will have material impacts on tax 

administration during the filing season.” In this document, the IRS also reported that it is 

focused on modernizing and consolidating its information technology infrastructure, and as 

budget reductions continue and new unfunded [legislative] mandates develop, it will largely have 

to defer upgrades to its aging infrastructure which, in turn, could limit the IRS’s ability to 

perform its mission.

This review was performed in the IRS’s Information Technology Enterprise Services 

organization at the New Carrollton Federal Building, in Lanham, Maryland, during the period 

July 2016 through March 2017. We conducted this performance audit in accordance with 

generally accepted government auditing standards. Those standards require that we plan and 

perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objective. We believe that the evidence obtained 

provides a reasonable basis for our findings and conclusions based on our audit objective. 

Detailed information on our audit objective, scope, and methodology is presented in Appendix I. 

Major contributors to the report are listed in Appendix II.

 

4 The time required to complete procurement of information technology hardware varies between approximately 

45 and 345 days and is based on many factors, including the estimated value, the nature of the hardware, 

competitive or noncompetitive sourcing, a new or existing contract, and whether special internal reviews and 

approvals are required. Moreover, a lack of subject matter experts to install new technologies could further delay 

the installation of the hardware.
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Results of Review

SI Program officials explained that the IRS follows an enterprise-wide life cycle process to 

identify, prioritize, and make decisions on funding the replacement of its aged information 

technology hardware assets. This annual process begins when the SI Program identifies all aged 

hardware and ranks them in order of criticality based on an applied risk value. Once identified

and ranked, owners of the most critically aged hardware that can be replaced within the current 

budget prepare detailed business cases to request funding for their replacement. The business 

cases are sent to the SI Program for processing and presented to the Infrastructure Executive 

Steering Committee for review and approval prior to funding the aged hardware replacement. 

SI Program officials also explained that they follow a process to help ensure that they do not

exceed the SI Program’s allocated budget each fiscal year. Based on these processes, the

SI Program spent on average nearly 99.7 percent of its allocated budget for Fiscal Years 2013

through 2016, while maintaining a minimum amount in reserves for adjustments of unaccounted 

expenses. However, additional coordination is still needed to identify the availability of surplus 

funds earlier in the process to replace the IRS’s aged information technology hardware, and a 

comprehensive guidance document is needed to effectively manage the SI Program.

Additional Coordination With Business Units Is Needed to Improve 

Replacement of Aged Information Technology Hardware

The SI Program objective and Federal standards for internal controls are outlined in two 

documents. In the Fiscal Year 2013 Congressional Budget Submission (dated

February 13, 2012), the IRS established an objective to reduce its aged information technology 

hardware to an acceptable level of 20 to 25 percent of its total hardware infrastructure. This 

objective has been included in each subsequent fiscal year’s budget request submission through 

Fiscal Year 2017.5

 The IRS established this objective based on an information technology asset 

useful life assessment conducted by an IRS contractor. In addition, according to the Government 

Accountability Office’s Standards for Internal Control in the Federal Government,6

“management should use quality information to achieve the entity’s objectives,” and the 

information should be “appropriate, current, complete, accurate, accessible, and provided on a 

timely basis.”

 

5 Starting in Fiscal Year 2014, the Congressional Budget Submission was renamed the President’s Budget. 6 Government Accountability Office, GAO-14-704G, Standards for Internal Control in the Federal Government 

(Sept. 2014).
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We reviewed IRS-provided data from Fiscal Year 2013 through the first month of Fiscal 

Year 2017 related to its aged information technology hardware.7 For each fiscal year, the IRS 

did not achieve its stated objective of reducing its aged information technology hardware to an 

acceptable level of 20 to 25 percent of its total hardware infrastructure. In fact, the IRS’s

percentage of aged hardware in use or in stock8 steadily increased from 40 percent at the 

beginning of Fiscal Year 2013 to 64 percent at the beginning of Fiscal Year 2017, which 

represents an overall 24 percentage point increase.9

At the beginning of Fiscal Year 2017, the number of aged information technology hardware 

assets was 137,721 out of 216,293, representing 64 percent of the total information technology 

hardware inventory. The IRS estimates that the current replacement cost for its aged information 

technology hardware is approximately $430 million. We reported in a previous Treasury 

Inspector General for Tax Administration (TIGTA) report10 that the IRS did not achieve its aged 

information technology hardware inventory goals for Fiscal Years 2008 through 2010. 

Additionally, in Fiscal Year 2008, the IRS acknowledged that sustaining the information 

technology infrastructure was one of its highest priorities, but the IRS continues to be unable to 

achieve its aged information technology hardware inventory objective. With its aged hardware 

inventory increasing to 64 percent at the beginning of Fiscal Year 2017, the IRS now recognizes 

its aging information technology infrastructure as its number one Service-wide risk.

Budget assessment

IRS management explained that the past five years have been some of the most challenging from 

a fiscal perspective, which has impacted their ability to reduce the aged information technology 

hardware to an acceptable level. Between Fiscal Years 2012 and 2016, the IRS Information 

Technology organization reported that it allocated $1.359 billion of its funds to implement 

several unfunded or partially unfunded legislative requirements, including the Patient Protection 

and Affordable Care Act11 and the Health Coverage Tax Credit. According to the IRS, this has 

limited its ability to replace its aged information technology hardware inventory.

We further examined the SI Program’s budgets for Fiscal Years 2013 through 2016 and 

identified that the allocated budgets were not sufficient to adequately address the increasing

percentage of aged information technology hardware inventory. For example, at the beginning 

of Fiscal Year 2016, the replacement costs for the aged hardware were estimated at 

approximately $459 million, but the SI Program’s Fiscal Year 2016 budget was approximately 

 

7 The IRS considers a piece of hardware that ages at any point in time during a fiscal year as being “aged” on the 

first day of the fiscal year.

8 An information technology hardware asset that is in storage and reserved for future use.

9 The number of IRS’s aged hardware for Fiscal Years 2013 and 2017 were 99,216 and 137,721, respectively. 10 TIGTA, Ref. No. 2011-20-006, The Sustaining Infrastructure Program Is Significantly Improved and a 

Comprehensive Information Technology Infrastructure Strategy Has Been Developed p. 16 (Dec. 2010). 11 Pub. L. No. 111-148, 124 Stat. 119 (2010) (codified as amended in scattered sections of the U.S. Code), as 

amended by the Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029.
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$172 million, which was a substantial increase from previous fiscal years. However, SI Program 

personnel explained that they did not receive sufficient funding each preceding fiscal year, and 

they would need an allocated budget of approximately two and a half times their Fiscal 

Year 2016 budget to replace all of the IRS’s aged information technology hardware. Figure 1 

presents our analysis of the SI Program’s allocated budgets and obsolescence asset reports,

detailing the number and associated replacement costs of total hardware and total aged hardware 

at the beginning of each fiscal year. See Appendix V for a summary of the IRS’s aged 

information technology hardware by asset category for Fiscal Year 2016.

Figure 1: Summary of the SI Program’s Allocated Budgets and Obsolescence 

Asset Reports for Fiscal Years 2013 Through the First Month of 2017

Fiscal Year

2013 2014 2015 2016 2017

SI Program’s Fiscal Year 

Allocated Budget $135,482,737 $56,685,003 $107,651,417 $171,862,084 Continuing 

Resolution12

Number of Total Assets 248,237 248,940 253,049 220,925 216,293

Number of Total Aged 

Assets 99,216 128,140 143,020 130,589 137,721

Percentage 40% 51% 57% 59% 64%

IRS Estimated 

Replacement Cost of 

Total Assets

$796,661,733 $837,549,135 $813,712,083 $732,957,233 $684,167,322

IRS Estimated 

Replacement Cost of 

Total Aged Assets

$405,113,551 $440,493,975 $482,710,171 $458,700,785 $430,250,820

Percentage 51% 53% 59% 63% 63%

Source: TIGTA’s analysis of the IRS’s allocated budgets and Obsolescence Asset Reports for Fiscal Years 2013

through the first month of 2017.

The IRS does not have an assigned budget dedicated specifically for the SI Program to address 

its aging hardware. Each year, the SI Program is funded in varying amounts from a number of 

 

12 The IRS was operating under a continuing resolution at the time of our review; therefore, the IRS did not yet have 

an allocated budget for the SI Program for Fiscal Year 2017.
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different internal sources, such as from the IRS’s base year operations support appropriation, 

user fees, and carryover money from previous fiscal years not used by other IRS business units.

In fact, the SI Program’s Fiscal Years 2014 and 2015 allocated budgets included approximately 

$20 million and $31 million, respectively, from carryover funds. Carryover funds are those that 

the IRS did not spend during a fiscal year, a portion of which may be “carried over” for use in a

subsequent fiscal year. Congressional approval is required to recover 50 percent of the 

unobligated funds from the expired appropriation for use in the next fiscal year based on 

documented IRS needs; the remaining 50 percent is returned to the Department of the Treasury’s 

General Fund. For those two fiscal years, the carryover funds came to the SI Program because

one or more IRS business units did not spend their full appropriation in a prior fiscal year. 

During Fiscal Years 2013 through 2016, a combined total of approximately $169.9 million of the 

IRS’s enacted appropriations was not spent (or obligated to be spent) by the end of the fiscal 

years.13

With additional coordination between the Chief Information Officer, Chief Financial Officer, 

and the other IRS business unit executives to identify the availability of additional transfers, 

reprogramming, and possible carryover funds earlier in the process to maximize their use and 

development of plans to expeditiously spend any potential surplus funds that may become 

available (using task orders on established contracts, modifying existing contracts, etc.), the IRS 

may have been able to provide the SI Program a combined total of up to $67 million14 in 

additional unspent funds during Fiscal Years 2013 through 2016. This represents a significant 

portion of the funds that expired at fiscal year–end that the IRS was not able to carry over.

IRS management explained that they have a process in place to monitor each financial plan 

during the fiscal year. The Chief Financial Officer’s staff meets twice monthly with executives 

covering financial management, program budget, and resources to identify potential surplus 

funds, focusing its effort on the midyear review. Any internal request for transfer of funds 

between appropriations are evaluated upon mission-critical needs and, if approved by IRS 

management, the request is placed on a priority list until additional funding is identified and 

becomes available. According to the IRS, the authority to transfer surplus funds between 

appropriations within a fiscal year requires an approved budget and congressional approval. IRS 

management told us that over the past few years, Congress has not approved the budget until 

several months into the fiscal year, and for the current year, the budget was not approved until 

May 2017. Moreover, Congress usually does not approve the request for funds transfers until 

mid-July, and the requested funds do not include any surpluses that may have materialized after 

the request has been submitted. As such, the IRS’s ability to spend these funds for this purpose

based on the current process is limited.

 

13 See Appendix IV for an analysis of the IRS’s funding and obligations for Fiscal Years 2013 through 2016. 14 See Appendix IV for calculation of a combined total of up to $67 million in additional unspent funds during Fiscal 

Years 2013 through 2016.
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IRS management stated that 1) approval of inter-appropriation fund transfers earlier in the fiscal 

year, 2) higher reprogramming of funds authority, and 3) expanded multiple-year or no-year 

budget authority would help them maximize the use of appropriated funds to replace the IRS’s 

aging information technology hardware.

The IRS has been provided multiyear authority in its Business Systems Modernization 

appropriation and a limited portion of its Operations Support appropriation (for specific 

purposes). Expanding multiyear authority for the purpose of replacing critical information 

technology hardware so that the IRS could draw on unused appropriations at fiscal year–end 

would provide a significant benefit and potentially help mitigate the risks of aged hardware 

failure.

Risks due to aged information technology hardware

Aged information technology hardware infrastructure still in use introduces unnecessary risk that 

excessive system downtime could occur due to hardware failures. As the information technology 

hardware infrastructure ages, it becomes more difficult to obtain adequate support, and extended 

support from outside vendors is often very expensive. To determine the scope of this risk, we 

requested from the IRS all Fiscal Year 2016 incident tickets from the Knowledge Incident/

Problem Service Asset Management system categorized as either Priority Code 1 (“critical”) or 

Priority Code 2 (“high”)15 for all aged information technology hardware. We analyzed the data 

provided by the IRS to identify the number of incident tickets by hardware asset categories and 

priority codes to determine the length of time needed to resolve the issues and to determine any 

potential replacement costs for the aged information technology hardware associated with the 

incident tickets.

Our analysis identified 107 (5 percent) of 2,268 incident tickets most likely involving an aged 

hardware failure.16 We further identified 19 (18 percent) of the 107 incident tickets were related 

to the Modernized e-File system, a web-based system that allows for electronic filing of tax 

returns. These incident tickets may have affected taxpayers and tax practitioners using that 

system because it took the IRS approximately 11 hours to resolve the tickets. While we believe 

that there are more incident tickets involving aged hardware failures, we limited our analysis to 

the three cause codes that appear to be specifically related to hardware failures. Figure 2 

 

15 Incident tickets are created as part of the IRS’s Information Technology Incident Management Process that 

defines the process and procedures for recording, categorizing, prioritizing, investigating, diagnosing, resolving, 

dispatching, monitoring, and closing out the incidents. Incident tickets are classified using a priority code number 

and a priority descriptor.

16 The data extract included an “Incident Cause Code” field for each record provided by the IRS. We identified 

three cause codes most likely related to true hardware failures: 1) HW_FAILURE, 2) HARD DRIVE FAIL, and 

3) HW_FAIL_MGT_SVC. The data extract also included 44 incident ticket records with an assigned 

“UNKNOWN” incident cause code, which we excluded from our analysis because we could not determine whether 

these are directly related to hardware failures.
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presents a summary of our analysis on the Priority Code 1 and 2 incident tickets of aged 

information technology hardware by category for Fiscal Year 2016.

Figure 2: Analysis of Fiscal Year 2016 

Priority Code 1 and 2 Incident Tickets for Aged Hardware

Hardware Category Description for 

Incident Tickets

Incident 

Priority 

Code

Number 

of 

Incident 

Tickets

Aggregate 

Length of 

Time to 

Resolve17

IRS 

Estimated 

Replacement 

Cost

Auto Call Distributor 1 1 2:14:46 $240,000

Auto Call Distributor 2 1 1:41:54 $240,000

Desktop 2 4 1:59:06 $3,564

High-End Printer 2 2 124:11:00 $5,018

Laptop 2 11 43:33:06 $17,083

Large Server ($100,000 – $1 million) 2 19 Unknown $4,940,000

Medium Server ($10,000 – <$100,000) 2 33 1,039:16:28 $858,000

Small Server (<$10,000) 2 35 3,285:30:17 $227,500

Small Automated Tape Library (<$51,000) 2 1 42:46:07 $25,000

TOTAL – 107 4,541:12:44 $6,556,165

Source: TIGTA’s analysis of Fiscal Year 2016 Priority Code 1 and 2 incident tickets for aged hardware.

The aggregate length of time to resolve these incident tickets was approximately 4,541 hours, 

and the IRS estimates that the aggregate replacement cost for the associated aged hardware is 

approximately $6.6 million. However, we believe that the length of time to resolve these tickets 

is longer than our calculation results. For the “Large Server” hardware category, we identified 

19 incident tickets that had negative resolve times (i.e., the resolve time was recorded prior to the 

problem ticket being reported). IRS personnel explained that these errors may be due to either a 

system miscalculation or human input error and that they are trying to determine how to prevent 

this from occurring in the future. Without complete and accurate information, management 

cannot make informed decisions.

Additionally, we analyzed the data to identify the aged information technology hardware with 

more than one incident ticket. Aged hardware with multiple incident tickets may indicate the 

importance of assigning a higher priority to replacing those aged assets. We identified 11 aged 

hardware components that combined had 53 incident tickets during Fiscal Year 2016. The 

aggregate length of time to resolve these tickets was approximately 1,951 hours, and the 

 

17 The Aggregate Length of Time to Resolve in Figure 2 is in the Hours:Minutes:Seconds format.
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replacement cost for this aged hardware is estimated at $656,500. However, because of the 

resolve time errors identified with the “Large Server” hardware category, we believe that the 

total aggregate length of time for the 53 incident tickets is longer than what our calculation 

results indicate. Figure 3 is a summary of the results of our analysis on the Fiscal Year 2016 

Priority Code 1 and 2 incident tickets for aged hardware with more than one incident ticket.

Figure 3: Analysis of Fiscal Year 2016 Priority Code 1 and 2 

Incident Tickets for Aged Hardware With More Than One Ticket

Hardware Category 

Description for 

Incident Tickets18

Incident 

Priority 

Code

Impacted 

System

Number 

of 

Incident 

Tickets

Aggregated 

Length of 

Time to 

Resolve

IRS 

Estimated 

Replacement 

Cost

Large Server 

($100,000 – $1 million) 2 Business Objects 

Enterprise 10 Unknown $260,000

Large Server 

($100,000 – $1 million) 2 Business Objects 

Enterprise 9 Unknown $260,000

Medium Server 

($10,000 – <$100,000) 2 Contact Recording 3 29:53:55 $26,000

Medium Server 

($10,000 – <$100,000) 2 Modernized e-File 14 12:20:41 $26,000

Medium Server 

($10,000 – <$100,000) 2 Modernized e-File 4 1:56:51 $26,000

Medium Server 

($10,000 – <$100,000) 2 Document Control 

System 2 98:24:05 $26,000

Small Server (<$10,000) 2 Contact Analytics 2 3:27:39 $6,500

Small Server (<$10,000) 2 E-Workforce 

Management 2 70:45:27 $6,500

Small Server (<$10,000) 2 Contact Recording 3 95:35:38 $6,500

Small Server (<$10,000) 2 Contact Analytics 2 1,225:15:16 $6,500

Small Server (<$10,000) 2 Contact Analytics 2 413:23:54 $6,500

TOTAL – – 53 1,951:03:26 $656,500

Source: TIGTA’s analysis of Fiscal Year 2016 Priority Code 1 and 2 incident tickets for aged hardware.

To provide further perspective on the negative effect these aged hardware failures may have had 

on IRS employee productivity, security of taxpayer information, and customer service, the 

 

18 Each server listed is a unique piece of equipment.
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following are just a few examples of incidents that the IRS reported affecting its ability to 

conduct daily operations.

• The existing Contact Recording infrastructure is extremely aged and averages one outage 

per day affecting more than 200 IRS call center employees answering and helping 

individuals with tax questions.

• The IRS “Web Farm” houses over 500 websites, including IRWeb, and many internal 

filing season websites in use by all IRS business units. On October 31, 2016, the 

Taxpayer Advocate’s web page went offline, affecting more than 1,700 employees.

• Although the IRS met the Department of the Treasury’s 100 percent Personal Identity 

Verification enablement compliance mandate in Calendar Year 2015, the interim solution 

that it deployed was not sustainable long term due a lack of operational effectiveness. A 

Direct Model Personal Identity Verification enablement solution required an updated 

software feature, which in turn required updated hardware. More than 30 percent of the 

IRS’s installed network equipment had no End-of-Software support19 and required 

replacement in order to activate Direct Model Personal Identity Verification enablement. 

Until the hardware is replaced, no software support means no computer bug fixes, no 

maintenance releases, and no security patches. This significantly increased the security 

risk vulnerability of the at-risk equipment. According to the IRS, hardware equipment 

for the proposed permanent solution is targeted to be installed in August 2017.

Aged information technology hardware still in use introduces unnecessary risks that, when 

combined with the fact that components of the infrastructure and systems are interrelated and 

interdependent, may cause a ripple effect, making outages and failures unpredictable and

introducing security risks to taxpayer data that IRS systems must protect. More needs to be done 

to reduce the amount of the IRS’s aged information technology hardware inventory in order for 

the IRS to perform its core tax administration responsibilities and provide taxpayers with 

top-quality service.

Recommendations

The Chief Information Officer should:

Recommendation 1: Conduct additional coordination with the Chief Financial Officer and 

other business unit executives to identify the availability of additional transfers, reprogramming, 

and possible carryover funds earlier in the process to maximize their use and develop plans to

expeditiously spend any surplus funds that might become available to aid in meeting the IRS’s 

objective of reducing its aged information technology hardware infrastructure. To further assist 

 

19 When a company ends support for a previous version of a software product or service. This may include ending 

support for security patches or upgrades that are used to protect users from viruses, malware, and other types of 

cyberattacks.
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in this objective, continue working with the Department of the Treasury and the Office of 

Management and Budget to request expanded flexibility, such as transfer authority between 

appropriations, and higher reprogramming and multiyear authority. Absent consideration of 

other higher IRS spending priorities, a greater percentage of the unused funds should be spent in 

current or subsequent fiscal years for the purpose of replacing critical information technology 

hardware instead of allowing 50 percent of the unspent funds to expire at fiscal year–end.

Management’s Response: The IRS disagreed with this recommendation based on 

actions it had already taken in its Fiscal Year 2018 President’s Budget submission. The 

IRS stated that the Chief Information Officer coordinated with the Chief Financial 

Officer and other business units this year as the Fiscal Year 2018 President’s Budget 

submission was being developed and requested that surplus funds identified in the 

Enforcement account be realigned to the Operations Support account, from which the 

Information Technology organization is funded. In addition, the IRS requested

$100 million of the Operations Support account be made available for two years, which is 

double the amount currently available to the IRS in its Fiscal Year 2017 budget. The IRS

believes that these actions satisfy the intent of this recommendation. The IRS also stated 

that it disagrees with the portion of this recommendation to allocate all surplus funds to 

aged hardware infrastructure and that it cannot commit to devoting all surpluses to aged 

hardware infrastructure as other, more pressing unfunded needs might arise.

Office of Audit Comment: The IRS’s actions should be of significant benefit if 

funded as requested. However, given the substantial portion of hardware infrastructure 

that is beyond its useful life, additional actions will likely be needed. We also note that

we did not recommend that the IRS allocate all surplus funds to replace aged hardware 

infrastructure, but a greater percentage of unused funds that would expire at fiscal yearend. Clearly, consideration must be given to other priorities; however, given that IRS’s 

operations depend on its information technology infrastructure, this will remain a very 

high priority.

Recommendation 2: Implement systemic controls to prevent erroneous incident ticket time 

entries to the Knowledge Incident/Problem Service Asset Management system for which the 

incident stop time is earlier than the incident start time.

Management’s Response: The IRS agreed with this recommendation. The IRS will 

implement systemic controls to prevent erroneous incident ticket time entries to the 

Knowledge Incident/Problem Service Asset Management system for which the outage 

stop time is earlier than the outage start time.
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A Comprehensive Guidance Document Is Needed to Effectively 

Manage Aged Information Technology Hardware

Federal standards for internal controls are outlined in two documents. Office of Management 

and Budget Circular No. A-13020 establishes general policy for the planning, budgeting, 

governance, acquisition, and management of Federal information, personnel, equipment, funds, 

information technology resources, and supporting infrastructure and services. According to this 

circular, in support of agency missions and business needs and in coordination with program 

managers, agencies shall define, implement, and maintain processes, standards, and policies 

applied to all information resources at the agency. In addition, according to the Government 

Accountability Office’s Standards for Internal Control in the Federal Government, management 

should develop and maintain documentation of its internal control system, implement control 

activities through defined policies and procedures, and assign responsibilities and delegate 

authority to key roles throughout the entity.

SI Program officials explained that they established a robust process to identify, prioritize, and 

make decisions on funding the replacement of the IRS’s aged information technology hardware. 

However, this process is not adequately documented. For example, the IRS does not have a 

comprehensive guidance document that details its complete processes, policies, and procedures; 

fully defines the roles and responsibilities; and establishes program objectives and goals to 

effectively manage its aged information technology hardware. The Internal Revenue Manual, 

provides instructions for the activities used to manage information technology hardware but not 

aged hardware.21 Further, the SI Program’s documentation of its processes, policies, procedures, 

and roles and responsibilities are outlined across three separate guidance documents:

• Sustaining Infrastructure Process Management Document (Version 9.0), dated 

June 20, 2013.

• Sustaining Infrastructure Program Overview briefing, dated July 31, 2015.

• Sustaining Infrastructure Process flowchart.

During a walk-through of the program, SI Program officials acknowledged that it is difficult to 

follow everything across three separate guidance documents. They explained that a 

comprehensive guidance document was not created due to their limited amount of time focusing 

on program priorities and being part-time employees as well as the impact of the IRS’s budget 

reductions over the past several years. However, SI Program officials agreed that it would be 

beneficial to develop a comprehensive guidance document to help them better manage the IRS’s 

aged information technology hardware.

 

20 Office of Management and Budget Circular No. A-130, Managing Information As a Strategic Resource 

(July 2016).

21 Internal Revenue Manual 2.149.3 (Oct. 2015).
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Because the IRS does not have a comprehensive guidance document, instructions on how to 

effectively manage its aged information technology hardware are not clear. Maintaining a 

complete and comprehensive guidance document with detailed instructions will provide the 

SI Program with clear direction and assist it with achieving its objective of reducing the IRS’s 

aged information technology hardware infrastructure assets to an acceptable level of 20 to 

25 percent.

Recommendation

Recommendation 3: The Chief Information Officer should develop a comprehensive 

guidance document that details the IRS’s enterprise-wide processes, policies, and procedures as 

well as roles and responsibilities to effectively manage the IRS’s aged information technology 

hardware.

Management’s Response: The IRS agreed with this recommendation. The IRS is

in the final stages of review for combining the three separate SI Program guidance 

documents into a comprehensive guidance document.
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Appendix I

Detailed Objective, Scope, and Methodology

The overall objective of this review was to determine the efficiency and effectiveness of key 

ongoing or planned activities aimed at addressing the IRS operational challenge of replacing its 

aged hardware infrastructure. To accomplish our objective, we:

I. Identified and assessed established key roles and responsibilities for guiding 

enterprise-wide planning and operational decisions for addressing the IRS’s aged 

information technology hardware.

A. Reviewed and evaluated key governance documents to manage and monitor the 

SI Program activities for aged information technology hardware.

B. Reviewed IRS guidance and other best practices relating to aged information 

technology hardware management.

II. Determined the status of the Fiscal Years1 2013 through 2016 appropriated funds the IRS 

received to manage and mitigate the risks of its aged information technology hardware 

infrastructure.

A. Identified whether the IRS has controls in place to identify, prioritize, and make 

decisions on funding the replacement of aged information technology hardware.

B. Obtained and reviewed supporting documentation for the Fiscal Years 2013 through 

2016 funding that the SI Program received to address the IRS’s aged information 

technology hardware and related expenditures.

III. Determined the efficiency and effectiveness of the IRS’s efforts to manage its aged 

information technology hardware and mitigate associated operational risks.

A. Interviewed IRS personnel to evaluate the status of its aged information technology 

hardware issue.

B. Assessed the IRS’s progress in moving towards its established objective to replace its 

aged information technology hardware infrastructure.

1. Identified and obtained supporting documentation for the process that the 

SI Program has in place to manage and monitor its aged information technology 

hardware. We analyzed the supporting documentation to measure the IRS’s 

progress in reducing its aged information technology hardware.

 

1 See Appendix VI for a glossary of terms.
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2. For the population of all aged information technology hardware as of 

September 30, 2016, we requested from the IRS all Fiscal Year 2016 incident 

tickets from the Knowledge Incident/Problem Service Asset Management system 

categorized as either Priority Code 1 or 2. We analyzed the IRS-provided data to 

identify the number of incident tickets by hardware asset categories and priority 

codes, determined the length of time needed to resolve the reported problems, and 

determined the potential replacement costs for the aged information technology 

hardware associated with the incident tickets.

We evaluated the reliability of the electronic data received from the IRS to help 

ensure that the data were reasonably complete and accurate. This was 

accomplished by recreating the data extract report provided by combining two 

other IRS-provided reports. We also randomly selected a judgmental sample2 of 

10 of 2,268 records and traced the data received in the data extract report to the 

IRS’s incident ticket database. We determined that the data were sufficiently 

reliable for purposes of this report.

Internal controls methodology

Internal controls relate to management’s plans, methods, and procedures used to meet their 

mission, goals, and objectives. Internal controls include the processes and procedures for 

planning, organizing, directing, and controlling program operations. They include the systems 

for measuring, reporting, and monitoring program performance. We determined that the 

following internal controls were relevant to our audit objective: Office of Management and 

Budget Circular No. A-130, Managing Information As a Strategic Resource;3 the Government 

Accountability Office’s Standards for Internal Control in the Federal Government;4 the Internal 

Revenue Manual; the IRS’s Congressional Budget and President’s Budget Submissions as well 

as policies and procedures related to aged information technology hardware management 

activities.

 

2 A judgmental sample is a nonprobability sample, the results of which cannot be used to project to the population.

3 Office of Management and Budget Circular No. A-130, Managing Information As a Strategic Resource 

(July 2016). 4 Government Accountability Office, GAO-14-704G, Standards for Internal Control in the Federal Government 

(Sept. 2014).
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Appendix II

Major Contributors to This Report

Danny R. Verneuille, Assistant Inspector General for Audit (Security and Information 

Technology Services)

Bryce Kisler, Director

Gwendolyn McGowan, Director

Louis Lee, Audit Manager

Suzanne Westcott, Audit Manager

David Allen, Lead Auditor

Carlos J. Parada-Cardenas, Auditor

Jason Rosenberg, Information Technology Specialist
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Appendix III

Report Distribution List

Commissioner

Office of the Commissioner – Attn: Chief of Staff

Deputy Commissioner for Operations Support

Chief Financial Officer

Deputy Chief Information Officer for Operations

Associate Chief Information Officer, Enterprise Services

Associate Chief Information Officer, Strategy and Planning

Information Technology Technical Director for Strategic Planning and Technology Direction

Director, Financial Management Services

Director, Office of Audit Coordination
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Appendix IV

Outcome Measure

This appendix presents detailed information on the measurable impact that our recommended 

corrective actions will have on tax administration. This benefit will be incorporated into our 

Semiannual Report to Congress.

Type and Value of Outcome Measure:

• Inefficient Use of Resources – Potential; $67 million in appropriated unspent funding by the 

IRS over a four-year period (see page 3).

Methodology Used to Measure the Reported Benefit:

During Fiscal Years1 2013 through 2016, a combined total of approximately $169.9 million from 

the IRS’s enacted appropriations was not spent (or obligated to be spent) by the end of the fiscal 

years. With additional coordination between the Chief Information Officer, the Chief Financial 

Officer, and the other IRS business unit executives to identify the availability of additional 

transfers, reprogramming, and possible carryover funds earlier in the process to maximize their 

use and development of plans to expeditiously spend any potential surplus funds that may 

become available (using task orders on established contracts, modifying existing contracts, etc.), 

the IRS may have been able to provide the SI Program a combined total of up to $67 million in 

additional unspent funds during this four-year period.

This represents a significant portion of the funds that expired at fiscal year–end that the IRS was 

not able to carryover. The $67 million value of the outcome measure is calculated as follows.

 

1 See Appendix VI for a glossary of terms.
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Fiscal Year 2013 2014 2015 2016 Total

Appropriated 

Resources Enacted $10,758,053,842 $10,743,474,000 $10,327,000,000 $10,529,000,000 $42,357,527,842

Appropriated 

Resources Obligated $10,709,988,356 $10,645,401,952 $10,321,095,452 $10,511,188,387 $42,187,674,147

Amount Not Spent or 

Obligated at Fiscal 

Year–End

$48,065,486 $98,072,048 $5,904,548 $17,811,613 $169,853,695

Minimum Amount That 

Should Remain at 

Fiscal Year–End

$10,000,000 $10,000,000 $10,000,000 $10,000,000 $40,000,000

Difference $38,065,486 $88,072,048 $0 $7,811,613 $133,949,147

50% of Difference

(Represents Net Benefit 

of Obligating by Fiscal 

Year–End)2

$19,032,743 $44,036,024 $0 $3,905,807 $66,974,574

Source: TIGTA’s analysis of budget information provided by the IRS. TIGTA did not independently validate the 

numbers provided by the IRS.

 

2 Difference totals may not be exactly 50 percent due to rounding.
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Appendix V

Summary of the Sustaining Infrastructure Program’s 

Obsolescence Asset Report for Fiscal Year 2016

Fiscal Year 2016

Hardware Category

Number 

of Assets

Number of

Aged Assets

Percentage 

of Aged 

Assets

IRS Estimated 

Replacement 

Cost

Auto Call Distributor 80 78 98% $18,720,000

Automated Tape Library Medium 

($51,000–$1 Million) 34 30 88% $10,500,000

Automated Tape Library Small 

(<$51,000) 208 154 74% $3,850,000

Desktop 65,328 38,091 58% $33,939,081

Disk Array Large ($150,000+) 35 28 80% $26,292,000

Disk Array Medium ($25,000–

$150,000) 296 251 85% $15,938,500

Disk Array Small (<$25,000) 2,405 1,636 68% $13,742,400

Electronic Key Telephone System 52 43 83% $5,469,600

Fax Device 6,380 5,344 84% $4,659,968

IBM Mainframe 6 3 50% $10,500,000

Laptop 66,194 26,607 40% $41,320,671

Plotter 246 152 62% $874,000

Print Output Processing Hardware 

Large 42 14 33% $10,500,000

Print System Large 48 9 19% $5,040,000

Printer High-End 15,958 12,096 76% $30,348,864

Printer Low-End 36,761 27,873 76% $12,821,580

Private Branch Exchange 120 79 66% $51,571,200

Router High-End (>$44,020) 12 2 17% $105,648
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Fiscal Year 2016

Hardware Category

Number 

of Assets

Number of 

Aged Assets

Percentage 

of Aged 

Assets

IRS Estimated 

Replacement 

Cost

Router Medium ($11,571–$44,020) 117 65 56% $902,460

Router Low-End (<$11,571) 1,226 680 55% $4,765,440

Scanner High-End 2,472 2,191 89% $12,828,305

Scanner Low-End 7,923 5,867 74% $2,757,490

Server Mega ($1 Million+) 5 3 60% $5,400,000

Server Large ($100,000-$1 Million) 90 69 77% $17,940,000

Server Medium ($10,000–$99,999) 1,816 1,205 66% $31,330,000

Server Small (<$10,000) 5,400 3,630 67% $23,595,000

Switch High-End (>$110,400) 4 1 25% $132,480

Switch Medium ($22,561–$110,400) 222 130 59% $3,519,360

Switch Low-End (<$22,561) 7,103 3,978 56% $29,520,738

Tape Drive 240 190 79% $4,446,000

UNISYS Mainframe 2 2 100% $8,000,000

Voice Messaging System High-End 

($100,000+) 22 21 95% $11,340,000

Voice Messaging System Low-End 

(<$100,000) 78 67 86% $6,030,000

Total 220,925 130,589 59% $458,700,785

Source: TIGTA’s analysis of the IRS’s Obsolescence Asset Report for Fiscal Year 2016. TIGTA did not 

independently validate the numbers in the Obsolescence Asset Report.
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Appendix VI

Glossary of Terms

Term Definition

Business Objects 

Enterprise

A software product that provides a comprehensive set of tools for reporting 

and analyzing data, scheduling and delivering documents, and managing 

project tasks.

Computer Bug A defect, imperfection, or malfunction in a computer program.

Contact Analytics A set of commercial off-the-shelf tools for analyzing the recorded audio 

component of customer contacts.

Contact Recording A commercial off-the-shelf software package for recording interactions 

between IRS customer service personnel and taxpayers or their 

representatives.

Document Control 

System

A batch process that allows the Error Resolution System function to pull error 

documents from blocks of work in order to release carts to files.

E-Workforce 

Management

A comprehensive resource planning and workforce management application 

that provides automated tools to forecast, schedule, and track call center 

workload and staffing requirements.

Fiscal Year Any yearly accounting period, regardless of its relationship to a calendar year.

The Federal Government’s fiscal year begins October 1 and ends on 

September 30.

Health Coverage Tax 

Credit

A tax credit that pays 72.5 percent of qualified health insurance premiums for 

eligible individuals and their families.

Internal Revenue 

Manual

The IRS’s primary source of instructions to its employees relating to the 

administration and operation of the IRS. The manual contains the directions 

employees need to carry out their operational responsibilities.

IRWeb IRS’s default intranet home page for all of its employees.

Knowledge 

Incident/Problem 

Service Asset 

Management 

System

Maintains the complete inventory of information technology and 

non–information technology organization assets, computer hardware, and 

software. It is also the reporting tool for problem management with all 

IRS-developed applications and shares information with the Enterprise 

Service Desk.

Multiple-Year 

Budget Authority

Funds that are available for obligation for a fixed period of time in excess of 

one fiscal year.
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Term Definition

No-Year Budget 

Authority

Funds that remain available for obligation for an indefinite period of time.

Obsolescence 

Asset Report

An SI Program report that reflects the IRS’s number and associated 

replacement costs of total hardware and total aged hardware.

Personal Identity 

Verification

A government-issued identity credential that contains a contact and a 

contactless chip. The cardholder’s facial image is printed on the card along 

with other identifying information and security features that can be used to 

authenticate the user for physical access to Federally controlled facilities and 

logical access to Federally controlled information systems.

Priority Code 1 

(“critical”)

Incidents defined as a severe business disruption, unable to operate, or a 

critical system component that failed or is severely impaired. The target 

resolution time is four hours.

Priority Code 2 

(“high”)

Incidents defined as a major business disruption, a critical user or group that 

is unable to operate, or the business unit is experiencing a significant 

reduction in system performance. The target resolution time is eight hours.

Web Farm Defined as either 1) a website that uses two or more servers to handle user 

requests or 2) an Internet service provider that provides web-hosting services 

using multiple servers. It may perform such services as providing centralized 

access control, file access, printer sharing, and backup for workstation users.
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Appendix VII

Management’s Response to the Draft Report
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