IRS relies on obsolete hardware, IG finds

Approximately two-thirds of the IT hardware and infrastructure used by the Internal Revenue Service is obsolete and “beyond its useful life,” according to a Sept. 11 audit by the Treasury Inspector General for Tax Administration.

The IRS operates with the goal of having outdated hardware comprise no more than 25 percent of its inventory, but over the last five years the tax agency has been moving the needle in the wrong direction. According to the audit, that percentage has ballooned from 40 percent in 2013 to 64 percent at the start of 2017. Auditors believe the IRS will need a cash infusion of at least $430 million to get back to its 25 percent goal.

"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," said the IG's office.

That's unlikely to happen in an agency that has seen its budget and staff cut repeatedly since 2010, when Republicans took over the House of Representatives. The Modernizing Government Technology Act, which passed in the House in May and more recently the Senate as an amendment to the National Defense Authorization Act, may provide new capital and the ability to roll over IT modernization savings into new hardware. The law would require additional actions by appropriators to create revolving funds at the agency level, however.

Even before more recent budget cuts took their toll, the IRS had been dealing with archaic IT systems and infrastructure, some of which date back to the 1960s. Meanwhile, the agency is struggling to adopt newer technologies like cloud computing, with former top IT officials saying the majority of their resources go towards maintenance and upkeep. Auditors think the IRS is already doing a good job of maximizing its current budget resources -- spending approximately 99.7 percent of Sustaining Infrastructure program funds on hardware replacement -- but recommend that the CIO, CFO and other top officials look for additional transfers, reprogramming or carryover funds to dedicate to future efforts.

Still, that may not be enough. In 2016, the IRS estimated that the SI program would need $459 million to adequately conduct IT lifecycle replacement in line with agency goals. It received $172 million. Additionally, officials told auditors that the agency has spent $1.36 billion between 2012 and 2016 to implement unfunded mandates, such as the Affordable Care Act and the Health Coverage Tax Credit, that might have been otherwise spent in part on IT hardware replacement.