Treasury is the primary federal agency responsible for the economic and financial prosperity and security of the United States, and as such is responsible for a wide range of activities, including advising the President on economic and financial issues, promoting the President’s growth agenda, and enhancing corporate governance in financial institutions. To accomplish its mission, Treasury is organized into departmental offices and operating bureaus. The departmental offices are primarily responsible for the formulation of policy and management of the department as a whole, while the nine operating bureaus—including the Internal Revenue Service and the Bureau of Public Debt—carry out specific functions assigned to Treasury. Figure 1 shows the organizational structure of the department. Information technology plays a critical role in helping Treasury meet its mission. For example, the Internal Revenue Service relies on a number of information systems to process tax returns, account for tax revenues collected, send bills for taxes owed, issue refunds, assist in the selection of tax returns for audit, and provide telecommunications services for business activities, including the public’s toll-free access to tax information. To assist with delinquent debt collections, Treasury is engaged in the development of the FedDebt system. In fiscal year 2008, Treasury plans to spend approximately $3 billion for 234 IT investments— including about $2 billion (about 71 percent) for 60 major investments. In 2004, we identified weaknesses in Treasury’s IT investment management processes. For example, Treasury did not describe or document work and decision-making processes for agencywide board(s). Additionally, it did not use the IT asset inventory as part of managerial decision making. As a result of these and the other identified weaknesses, we made recommendations to the Secretary of the Treasury to improve the department’s IT investment management processes. In 2007, we reported that Treasury had made progress in establishing many of the practices needed to build an investment foundation and manage its products as a portfolio. However, we identified additional investment management weaknesses. Specifically, the department lacked an executive investment review board that was actively engaged in the investment management process. As a result of these weaknesses, we made recommendations to Treasury for strengthening their investment management capability. In response, Treasury stated that it would take steps to strengthen its investment board operations and oversight of IT resources and programs. For example, the department recently established an executive-level investment review board. In July 2008, we reported that Treasury’s rebaselining policy fully addressed one of five practices leading organizations include in their policies and partially addressed the remaining practices. Since the time of our review, Treasury has improved its rebaselining policies and procedures to be more consistent with those of leading organizations. Several of Treasury’s projects have been deemed to be poorly planned and managed by the OMB and have warranted inclusion on OMB’s Management Watch and High Risk Lists. In recent testimony summarizing our analysis of projects on these lists, we reported that Treasury had 4 projects on the Management Watch List as of July 2008, including one on the list for the fourth consecutive year. We also reported that the department had 21 high-risk projects determined to be poorly performing, most of them because of cost and schedule variances exceeding 10 percent. Pulling together essential cost, schedule, and technical information in a meaningful, coherent fashion is a challenge for most programs. In addition to comparing budgeted to actual costs, EVM measures the value of work accomplished in a given period. This technique compares the earned value with the planned value of work scheduled and with the actual cost of work accomplished for that period. Differences in these values are measured in both cost and schedule variances. Cost variances compare the earned value of the completed work with the actual cost of the work performed. For example, if a contractor completed $5 million worth of work and the work actually cost $6.7 million, there would be a –$1.7 million cost variance. Schedule variances are also measured in dollars, but they compare the earned value of the work completed with the value of work that was expected to be completed. For example, if a contractor completed $5 million worth of work at the end of the month but was budgeted to complete $10 million worth of work, there would be a –$5 million schedule variance. Positive variances indicate that activities are costing less or are completed ahead of schedule, whereas negative variances indicate activities are costing more or are falling behind schedule. These cost and schedule variances can be used to estimate the cost and time needed to complete a program. Without knowing the planned cost of completed work (that is, the earned value), it is difficult to determine a program’s true status. Earned value provides information necessary for understanding the health of a program; it provides an objective view of program status. As such, it can alert program managers to potential problems sooner than expenditures alone can, thereby reducing the chance and magnitude of cost overruns and schedule delays. Moreover, EVM directly supports the institutionalization of key processes for acquiring and developing systems and the ability to effectively manage investments—areas which are often found to be inadequate based on our assessments of major IT investments. Because of the importance of ensuring quality earned value data, in May 1998 the American National Standards Institute (ANSI) and the Electronics Industries Alliance (EIA) jointly established a national standard for EVM systems. This standard delineates 32 guidelines on how to establish a sound EVM system, ensure that the data coming from the system are reliable, and use the earned value data to manage the program. See appendix III for details on the 32 guidelines. In June 2002, OMB’s Circular A-11 included the requirement that agencies use a performance-based acquisition management system based on the May 1998 ANSI/EIA Standard to obtain timely information regarding the progress of capital investments. This requirement was restated in subsequent versions of the circular and, in August 2005, OMB issued a memorandum that outlined steps that agencies must take for all major and high-risk development projects to better ensure improved execution and performance and to promote more effective oversight through the implementation of EVM. Specifically, this guidance directs agencies to: 1. develop comprehensive policies to ensure that agencies are using EVM to plan and manage development activities for major IT investments, 2. include a provision and clause in major acquisition contracts or agency in-house project charters directing the use of an EVM system that is compliant with the ANSI standard, 3. provide documentation demonstrating the EVM system complies with 4. conduct periodic surveillance reviews, and 5. conduct integrated baseline reviews on individual programs to finalize the cost, schedule, and performance goals. Building on OMB’s guidance, in July 2007, we issued an exposure draft on best practices for estimating and managing program costs. This draft highlights policies and practices adopted by leading organizations to implement an effective EVM program. Specifically, the guidance identifies the need for organizational policies to require clear criteria for which programs are required to use EVM, compliance with the ANSI standard, a standard product-oriented structure for defining work products, integrated baseline reviews, specialized training, criteria and conditions for rebaselining programs, and an ongoing surveillance function. In addition, the guidance identifies key practices that individual programs can use to ensure that they establish a sound EVM system, that the earned value data are reliable, and that they are used to support decision making. OMB refers to this guide as a key reference manual for agencies in its 2006 Capital Programming Guide. Treasury’s approach to EVM involves several entities, including the Office of the Chief Information Officer (OCIO), the Office of the Procurement Executive—both of which are under the Assistant Secretary for Management and Chief Financial Officer, and Capital Planning and Investment Control (CPIC) desk officers. Responsibility for the administration and maintenance of Treasury’s EVM policy lies with the OCIO. Specifically, the CPIC group within that office supports the department’s investment management oversight process. CPIC desk officers are responsible for oversight of one or more bureaus and serve as the bureau CPIC coordinator’s primary point of contact, responsible for scoring exhibit 300s and coordinating information sharing with the departmental budget office and other critical partners. Further, they develop bureau-level IT portfolio expertise and provide input and recommendations to the bureaus, Treasury’s CIO, and Treasury’s Investment Review Board. Working with the OCIO to identify acquisitions which require earned value management, the Office of the Procurement Executive is responsible for ensuring that the identified acquisitions throughout Treasury and its bureaus contain EVM requirements that are consistent with the Federal Acquisition Regulation. According to agency officials, 40 investments are currently using EVM. Project managers and contractors are required to gather the monthly costs and progress associated with each of their investments. The information gathered includes the planned value, actual costs, and earned value. This information is analyzed and used for corrective actions at the bureau level. Quarterly, the bureaus forward investment performance reports to the OCIO’s CPIC office, which reviews them and forwards summaries to Treasury’s Technical Investment Review Board. In January 2008, Treasury convened an EVM working group, which has representation from every bureau. According to the CPIC Director, the working group has several objectives including establishing (1) level of reporting for contractors and government employees based on thresholds; (2) rule sets, processes, and procedures for the development of work breakdown structures, integrated baselines, standard roll-up into milestones, and the use of EVM systems at the bureaus; (3) bureau monthly recordkeeping requirements; (4) standard procedures for quarterly uploading of data from the bureaus into Treasury’s automated investment management tool; and (5) requirements for maintaining documentation to support the project manager validations and bureau CIO certifications of cost, schedule, and performance data for major and nonmajor investments. According to the CPIC Director, the working group is also working on revising the department’s EVM policy.