IRS Wasted $12M on Failing E-Mail System:Watchdog

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By Colleen Murphy

Oct. 14 — The IRS’s on-site e-mail system doesn’t archive messages and is “experiencing numerous failures,” the agency’s watchdog said in a report.

The Internal Revenue Service may not be able to perform its duties effectively without an upgraded system, and its current setup is burdening information technology staff, the Treasury Inspector General for Tax Administration said in the report released Oct.13. The agency spent $12 million on a new system between June 2014 and June 2016 that it never used—an inappropriate waste of taxpayer money, the report also said.

Lacking the ability to archive all e-mails on site is especially troubling considering the blowback the agency has faced for the last several years, Douglas Mancino, a partner at Seyfarth Shaw LLP, told Bloomberg BNA Oct. 14. Members of the House Freedom Caucus are vying to impeach the IRS commissioner, saying he misled Congress and alleging the agency destroyed e-mails showing evidence of its scrutinizing of conservative groups. The agency’s records retention was also at the heart of a recent 2014 lawsuit ( Judicial Watch, Inc. v. IRS, D.D.C., No. 1:13-cv-01559).

“I would think that’s all the more reason to have had this issue be a front-burner issue,” Mancino said.

IRS Fights Back

The IRS strongly disagrees with the notion that it wasted taxpayer dollars or didn’t follow appropriate practices, Gina Garza, the chief information officer, said in a response letter included in the report. The IRS does plan to upgrade its system, and officials found in 2014 they could save money by purchasing subscriptions instead of perpetual licenses for the e-mail software, she said.

“The IRS takes seriously our obligation to manage taxpayer dollars in the most efficient and effective manner possible,” she said. “The IRS remains committed to continuously improve our IT systems and processes.”

Poorly Executed

TIGTA alleges the agency violated Federal Acquisition Regulation requirements in its purchase of a new Microsoft Office e-mail program. When the agency moves to a cloud-based system in the future, it must follow the regulations, TIGTA said. The IRS said it would “continue to follow all applicable procedures.”

The IRS didn’t consider infrastructure needs, business requirements, security bandwidth or feasibility when it purchased the e-mail subscriptions, TIGTA said.

The findings show mismanagement, and spending $12 million on a system that was never implemented would be considered “a career-limiting move” in the corporate world, Mancino said.

“The IRS expects taxpayers to have record-retention policies that extend for years, particularly for major corporate records, including when they’re maintained in electronic format. One would think the IRS itself would think along the same lines and have the same policies, especially in the environment of the last five or six years,” he said.

Not So Simple

But between conflicting priorities, inconsistent funding and complicated procurement requirements, it isn’t a matter of the IRS simply switching systems, Marcus Owens, a partner at Loeb & Loeb LLP, told Bloomberg BNA Oct. 14. The procurement process is slow and “the nature of the funding is almost a barrier,” he said.

Owens, a former director of the IRS Exempt Organizations Division, said the division received hand-me-down computers from other areas of the agency during his time there—an example of how the agency has historically not received enough funding to “do what it is supposed to do as well as to modernize the back-office systems.”

Congress has cut the agency’s budget by $900 million since 2010, which hurts its ability to keep its technology current—especially when that goal is secondary to collecting tax revenue and enforcing the tax laws, Owens said.

“If you’re going to underfund the agency’s core mission activities, which is what Congress has done the last few years, that means the money to support these non-mission critical, arguably not mission-related kinds of activities just isn’t there,” Owens said.

To contact the reporter on this story: Colleen Murphy in Washington at

To contact the editor responsible for this story: Meg Shreve at

For More Information

Text of the TIGTA report, “Review of the Enterprise E-Mail System Acquisition” (2016-20-080), is at

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