jurisdiction: US

text: b"TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION\n\n\n\n\n Management Oversight Improved, but\n Expected Benefits and Capabilities for\n the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\n December 11, 2007\n\n Reference Number: 2008-10-025\n\n\n\n\n This report has cleared the Treasury Inspector General for Tax Administration disclosure review process\n and information determined to be restricted from public release has been redacted from this document.\n\n\n\n Phone Number | 202-622-6500\n Email Address | inquiries@tigta.treas.gov\n Web Site | http://www.tigta.gov\n\x0c DEPARTMENT OF THE TREASURY\n WASHINGTON, D.C. 20220\n\n\n\n\nTREASURY INSPECTOR GENERAL\n FOR TAX ADMINISTRATION\n\n\n\n\n December 11, 2007\n\n\n MEMORANDUM FOR COMMISSIONER, TAX EXEMPT AND GOVERNMENT ENTITIES\n DIVISION\n\n FROM: Michael R. Phillips\n Deputy Inspector General for Audit\n\n SUBJECT: Final Audit Report \xe2\x80\x93 Management Oversight Improved, but Expected\n Benefits and Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered (Audit # 200610047)\n\n This report presents the results of our review of the Tax Exempt Determination System (hereafter\n referred to as the TEDS or System)1 Release 2. The overall objectives of this review were to\n determine whether the Tax Exempt and Government Entities (TE/GE) Division developed\n TEDS Release 2 using sound system development practices and whether it managed the\n Release 2 investment in compliance with Office of Management and Budget and Clinger-Cohen\n Act of 19962 requirements. This audit was conducted as part of the Treasury Inspector General\n for Tax Administration Office of Audit Fiscal Year 2007 Annual Audit Plan.\n\n Impact on the Taxpayer\n In September 2003, TE/GE Division management began developing TEDS Release 2, which was\n to include the upfront imaging of Employee Plans function and Exempt Organizations function\n determination applications, enhanced reporting, and automated case assignment. The System is\n currently scheduled for implementation in May 2008. However, when the System is completed,\n\n\n 1\n In December 2001, the TE/GE Division Investment Executive Steering Committee approved a seven-stage release\n strategy for the TEDS to replace the Employee Plans/Exempt Organizations Determination System, automate certain\n manual processes, and reduce or eliminate employee labor expense. The System was needed to address several\n critical workload factors that threatened to overwhelm the Employee Plans function and Exempt Organizations\n function Determinations Programs.\n 2\n Federal Acquisition Reform Act of 1996 and Information Technology Management Reform Act of 1996,\n Pub. L. No. 104-106, 110 Stat. 642 (codified in scattered sections of 5 U.S.C., 5 U.S.C. app., 10 U.S.C., 15 U.S.C.,\n 16 U.S.C., 18 U.S.C., 22 U.S.C., 28 U.S.C., 29 U.S.C., 31 U.S.C., 38 U.S.C., 40 U.S.C., 41 U.S.C., 42 U.S.C.,\n 44 U.S.C., 49 U.S.C., 50 U.S.C.).\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\nits cost may far outweigh its benefits. The high cost of the TEDS compared to the benefits it will\ndeliver brings into question whether sound investment decisions were made during development\nof the System and whether this was the best use of Federal Government funds.\n\nSynopsis\nOverall, the TE/GE Division Investment Executive Steering Committee improved its oversight\nof the development of TEDS Release 2 from that provided during Release 1 by using certain\nproject management techniques. In addition, TE/GE Division management began tracking some\nproject costs as we had recommended.3 However, management did not fully implement our prior\nrecommendations to evaluate investment decisions and monitor whether business benefits would\nbe realized. We identified the following:\n \xe2\x80\xa2 Schedule delays and deletion of some system capabilities resulted in delivering only\n $33.5 million (less than one-half) of the $73.1 million in expected benefits included in\n the August 2004 Business Case.4\n \xe2\x80\xa2 Total project costs were not monitored and reported because TE/GE Division\n management did not have a process in place to appropriately evaluate investment\n decisions. The estimated contractor cost was exceeded by $2.1 million (26 percent), and\n estimated internal labor costs of $5.1 million were not tracked to the August 2004\n Business Case. As a result, we could not verify the reliability of $7.2 million in the\n Business Case.\n \xe2\x80\xa2 Very few benefits were received from the development of TEDS Release 1. Upon\n completion of Release 1, the technical infrastructure, including computer hardware and\n software designed to support all future System releases, was replaced because it did not\n meet new Internal Revenue Service (IRS) standards. As a result, an inefficient use of\n resources occurred when little benefit was realized from the $17 million spent on\n Release 1.\n \xe2\x80\xa2 Project management oversight may not ensure TEDS Release 2 will align with future\n IRS systems and processes. Oversight is necessary to ensure additional costs are not\n incurred in the future to bring the applications into alignment with other systems.\n\n\n\n\n3\n The Tax Exempt Determination System Release 1 Delivered Only a Small Portion of the Expected Benefits and\nSignificantly Exceeded Cost Estimates (Reference Number 2006-10-174, dated September 26, 2006).\n4\n See Appendix V for a glossary of terms.\n 2\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\nRecommendations\nWe recommended the Commissioner, TE/GE Division, ensure costs, schedule delays, and\nchanges in system capabilities on expected benefits are tracked and reviewed against business\ncases. In addition, we recommended the Director, Business Systems Planning, complete plans to\nimprove the tracking of actual Federal Government costs back to investments and provide this\ninformation to the TE/GE Division Investment Executive Steering Committee for review.\n\nResponse\nThe Commissioner, TE/GE Division, agreed with our recommendations and provided planned\nactions to address them. These actions include ensuring costs, schedule delays, and changes in\nsystem capabilities on expected benefit are tracked against business cases and actual Federal\nGovernment costs are tracked back to investments and provided to the TE/GE Division\nInvestment Executive Steering Committee for review. However, IRS management disagreed\nwith 1 of the 3 outcome measures described in the report ($17.0 million in inefficient use of\nresources). The Commissioner, TE/GE Division, stated the lack of success in a venture such as\nTEDS Release 1 does not equate to inefficiency. Instead, lessons learned from Release 1 helped\nform new IRS standards in Enterprise Architecture that were used in TEDS Release 2 and will be\nused in all future IRS projects.\nIn addition, the Commissioner, TE/GE Division, provided perspective on how the\nTE/GE Division manages systems development projects and how it experienced technical and\nother challenges in its work on the TEDS project. Management\xe2\x80\x99s complete response to the draft\nreport is included as Appendix VI.\n\nOffice of Audit Comment\nWe acknowledge the difficulty in managing a significant information technology project such as\nthe TEDS project and believe the TE/GE Division\xe2\x80\x99s commitment to make additional\nimprovements through its stated corrective actions will improve oversight of future systems\ndevelopment projects. Furthermore, we agree that lessons learned did provide a benefit to the\nIRS; however, we believe there was little tangible benefit for the investment in TEDS Release 1.\nWhile we recognize the costs for TEDS Release 1 cannot be recovered at this point, increased\ncontrols over tracking costs, delays, or other system capabilities should help the IRS better\nmonitor future projects and prevent implementation of new systems that are unable to\naccomplish their primary purposes.\nIn addition, the Commissioner, TE/GE Division, stated the TEDS project management team is\nworking closely with the IRS Enterprise Architecture to comply with emerging standards as they\napply to the TEDS and it is premature to conclude that Release 2 will not align with future\n\n 3\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\nEnterprise Architecture standards. We agree with the Commissioner\xe2\x80\x99s conclusion and have\nmade applicable wording changes to the report. However, we believe completing and approving\nrequired Enterprise Architecture documentation is a good preventive measure to ensure\ncompliance with the future IRS Enterprise Architecture.\nCopies of this report are also being sent to the IRS managers affected by the report\nrecommendations. Please contact me at (202) 622-6510 if you have questions or\nNancy A. Nakamura, Assistant Inspector General for Audit (Headquarters Operations and\nExempt Organizations Programs), at (202) 622-8500.\n\n\n\n\n 4\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\n\n Table of Contents\n\nBackground ..........................................................................................................Page 1\n\nResults of Review ...............................................................................................Page 4\n While Some Improvements Have Been Made, Management\n Oversight Did Not Ensure Significant Expected Savings Were\n Achieved and Expected Capabilities Were Delivered ..................................Page 4\n Recommendations 1 and 2: ..............................................Page 12\n\n\nAppendices\n Appendix I \xe2\x80\x93 Detailed Objectives, Scope, and Methodology.......................Page 13\n Appendix II \xe2\x80\x93 Major Contributors to This Report\xe2\x80\xa6\xe2\x80\xa6\xe2\x80\xa6\xe2\x80\xa6\xe2\x80\xa6 ....................Page 15\n Appendix III \xe2\x80\x93 Report Distribution List .......................................................Page 16\n Appendix IV \xe2\x80\x93 Outcome Measures...............................................................Page 17\n Appendix V \xe2\x80\x93 Glossary of Terms .................................................................Page 20\n Appendix VI \xe2\x80\x93 Management\xe2\x80\x99s Response to the Draft Report ......................Page 22\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\n\n Abbreviations\n\nIRS Internal Revenue Service\nTEDS; System Tax Exempt Determination System\nTE/GE Tax Exempt and Government Entities\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\n\n Background\n\nThe Tax Exempt and Government Entities (TE/GE) Division identified a critical need to\nmodernize and improve its processing of Employee Plans function and Exempt Organizations\nfunction determination letter1 applications. The Employee Plans/Exempt Organizations\nDetermination System in use at the time was an outdated technology that could not handle the\nrequired workload, fulfill statutory Internal Revenue Service (IRS) responsibilities under the\nInternal Revenue Code, and meet expectations of Employee Plans function and Exempt\nOrganizations function customers. In December 2001, the TE/GE Division Investment\nExecutive Steering Committee2 approved a seven-stage release strategy for the Tax Exempt\nDetermination System (hereafter referred to as the TEDS or System) to replace the Employee\nPlans/Exempt Organizations Determination System, automate certain manual processes, and\nreduce or eliminate employee labor expense.\nThe TEDS was needed to address several critical workload factors that threatened to overwhelm\nthe Employee Plans function and Exempt Organizations function Determinations Programs.\n \xe2\x80\xa2 Due to several law changes, the TE/GE Division anticipated receiving a significant\n increase in the number of employee plans restatement applications during\n Fiscal Years 2002 and 2003.\n \xe2\x80\xa2 The Determinations Programs were not effective or efficient. For example, the average\n time to work determination cases and the cycle time to respond to simple inquiries and\n status changes were too long; the level of accuracy for determinations was unacceptably\n low; expected peak volume demands could not be met; significant manual processes,\n paper handling, and tracking were inefficient; nonautomation of case grading,\n classification,3 and assignment was inefficient; and postal costs were excessive because\n of an inefficient practice of mailing case files.\nThe Determinations Programs are a key part of the TE/GE Division and the service provided to\nits customers. Without tax-exempt status, plan sponsors may have to operate pension plans\nwithout favorable tax treatment, and exempt organizations cannot give donors tax-deductible\nreceipts.\n\n\n1\n See Appendix V for a glossary of terms.\n2\n Executive-level members of the TE/GE Division Investment Executive Steering Committee are the Division\xe2\x80\x99s\nCommissioner, Deputy Commissioner, and Directors and their Executive Assistants.\n3\n The case grading system capability recommends the grade level of the employee assigned to work the case\n(i.e., General Service 9, 11, 12, or 13). The classification system capability shows the type of case to be worked\n(i.e., Automated, Merit, Non-Merit, and Washington Office).\n Page 1\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\nTEDS Release 1, deployed in March 2004, was intended to provide the initial technical\ninfrastructure for all future System releases, redesign the process for some Employee Plans\nfunction customers requesting determination letters,4 reduce cycle time, and improve customer\nsatisfaction and determination letter quality. In September 2006, we reported5 that many of the\nprojected benefits were not delivered and investments associated with the development of\nRelease 1 were not appropriately tracked, which prevented TE/GE Division senior management\nfrom receiving the information needed to effectively evaluate their investment in the System.\nThe actual cost to develop, implement, and maintain Release 1 (through February 17, 2006) was\nmore than $16.9 million, which was approximately $2.3 million higher than the estimate made in\nthe August 2003 TEDS Business Case. However, this Business Case was not appropriately\nupdated to reflect the severely curtailed capabilities of the System, the 16 percent increase in\ncost, and the 5-month delay in delivery of the System. We recommended and TE/GE Division\nmanagement agreed to adopt a business case model that tracked and monitored the actual project\ncosts.\nTE/GE Division Business Systems Planning function management started to develop TEDS\nRelease 2 in September 2003, and the Director, Exempt Organizations, became the new\nexecutive owner in August 2005. Release 2 was to include the upfront imaging of Employee\nPlans function and Exempt Organizations function determination applications, enhanced\nreporting, and automated case assignment. It was originally scheduled for implementation in\nMarch 2007. Release 2 implementation is currently scheduled for May 2008.\nProject responsibilities for developing TEDS Release 2 are designated as follows:\n \xe2\x80\xa2 The TE/GE Division Investment Executive Steering Committee has overall\n responsibility for approving the TEDS Business Cases used to request funding for the\n new computer system, monitoring and overseeing development of the project, and\n approving project requests to exit a milestone and continue with development and\n delivery of the System. The Committee also has a responsibility to stop the project, if\n necessary, when the budget is exceeded or the success of the project is in jeopardy.\n \xe2\x80\xa2 TEDS project management is responsible for managing project costs, schedules, and\n performance in accordance with IRS policy. This includes responsibility for acquisition\n and delivery of products or systems; ensuring the System complies with the IRS\n Enterprise Architecture; providing status information and recommendations to the\n TE/GE Division Investment Executive Steering Committee; and managing changes to\n costs, schedules, and requirements of the project.\n\n\n\n\n4\n Application for Determination for Adopters of Master or Prototype or Volume Submitter Plans (Form 5307).\n5\n The Tax Exempt Determination System Release 1 Delivered Only a Small Portion of the Expected Benefits and\nSignificantly Exceeded Cost Estimates (Reference Number 2006-10-174, dated September 26, 2006).\n Page 2\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\nThis review was performed at the TE/GE Division National Headquarters Business Systems\nPlanning function and Exempt Organizations function offices in Washington, D.C., during the\nperiod January through July 2007. We conducted this performance audit in accordance with\ngenerally accepted government auditing standards. Those standards require that we plan and\nperform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our\nfindings and conclusions based on our audit objectives. We believe that the evidence obtained\nprovides a reasonable basis for our findings and conclusions based on our audit objectives.\nDetailed information on our audit objectives, scope, and methodology is presented in\nAppendix I. Major contributors to the report are listed in Appendix II.\n\n\n\n\n Page 3\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\n\n Results of Review\n\nWhile Some Improvements Have Been Made, Management Oversight\nDid Not Ensure Significant Expected Savings Were Achieved and\nExpected Capabilities Were Delivered\nThe TE/GE Division Investment Executive Steering Committee improved its oversight of the\ndevelopment of TEDS Release 2 from that provided during Release 1 by using certain project\nmanagement techniques. In addition, TE/GE Division management began tracking some project\ncosts as we had recommended.6 However, management did not fully implement our\nrecommendations to evaluate investment decisions and monitor whether business benefits would\nbe realized. As a result, when TEDS Release 2 is completed, its cost may far outweigh its\nbenefits. The high cost of the System compared to the benefits it will deliver brings into\nquestion whether sound investment decisions were made during the System\xe2\x80\x99s development and\nwhether this was the best use of Federal Government funds. We identified the following:\n \xe2\x80\xa2 Less than one-half of the originally envisioned monetary benefits of Release 2 will be\n delivered, and the cost of the Release may now exceed the benefits. At the end of our\n audit work, TE/GE Division management provided some explanations for the change in\n value of individual benefits listed in the February 2007 Business Case7 and the impact\n schedule delays and deletion of some system capabilities had on overall project benefits.\n \xe2\x80\xa2 The IRS exceeded by $2.1 million (26 percent) the estimated contractor cost and did not\n track the estimated $5.1 million in internal labor costs in the August 2004 Business Case.\n As a result, we could not verify the reliability of $7.2 million in the Business Case.8\n \xe2\x80\xa2 TE/GE Division management did not ensure required Enterprise Architecture\n documentation was completed as required. Therefore, there is no assurance that the\n System was designed and built to work with other IRS computer systems to improve\n performance and productivity without the need to make additional future changes.\n \xe2\x80\xa2 We previously reported that significant benefits from Release 1 were not realized\n (i.e., reduced cycle times, improved customer satisfaction, and improved customer\n service). However, in our previous report, we did not comment on another significant\n benefit envisioned for Release 1: providing the initial technical infrastructure (hardware\n\n6\n The Tax Exempt Determination System Release 1 Delivered Only a Small Portion of the Expected Benefits and\nSignificantly Exceeded Cost Estimates (Reference Number 2006-10-174, dated September 26, 2006).\n7\n See Appendix IV for further details.\n8\n See Appendix IV for further details.\n Page 4\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\n and software) for future releases. We determined this benefit was not realized because\n computer hardware, software, and custom code were completely replaced for Release 2.\n As a result, an inefficient use of resources occurred when little benefit was realized from\n the $17 million spent on Release 1.9\n\nCertain project management techniques were generally planned for and applied\nduring development of the TEDS Release 2\nThe TE/GE Division Investment Executive Steering Committee improved its oversight of the\ndevelopment of Release 2 by using certain project management techniques. In previous reports\nconcerning the development of Release 1,10 we reported that project management techniques\nwere not effectively used.\nTE/GE Division management adopted the Enterprise Life Cycle-Lite as a process to plan and\nmanage the development of Release 2. The Enterprise Life Cycle-Lite is a disciplined system\ndevelopment methodology that uses reviews, checkpoints, and milestones to ensure projects are\nefficiently and effectively planned, designed, developed, and implemented. TE/GE Division\nmanagement planned for and generally implemented Enterprise Life Cycle-Lite techniques.\nThose techniques and management\xe2\x80\x99s activities included:\n \xe2\x80\xa2 Risk management \xe2\x80\x93 Processes were developed to identify, quantify, respond to, and\n control potential problems that could severely affect Release 2 development goals. We\n reviewed risk reports that identified the critical status of potential problems, as well as\n the actions identified to reduce the risk that the most likely problems could occur.\n \xe2\x80\xa2 Configuration management \xe2\x80\x93 Processes were developed to identify, control, and\n approve changes to system documentation, computer source code, and off-the-shelf\n software.\n \xe2\x80\xa2 Requirements management \xe2\x80\x93 Processes were developed to gather and document\n requirements, track the design and programming to the requirements, and manage any\n changes.\n \xe2\x80\xa2 Transition management \xe2\x80\x93 Processes were developed to transition from the old\n Employee Plans/Exempt Organizations Determination System to the new\n TEDS Release 2. The processes included identifying the gaps between current and\n future processes for organizational alignment, staffing, training, processing, assets\n needed to close the gaps, documentation, and communication.\n\n\n9\n See Appendix IV for further details.\n10\n Project Management Techniques Need to Be Followed to Effectively Develop the Tax Exempt Determination\nSystem (Reference Number 2003-10-103, dated May 2003) and The Tax Exempt Determination System Release 1\nDelivered Only a Small Portion of the Expected Benefits and Significantly Exceeded Cost Estimates (Reference\nNumber 2006-10-174, dated September 26, 2006).\n Page 5\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\nWhile TE/GE Division management improved their use of certain project management\ntechniques, they did not fully evaluate their investment decisions and did not ensure alignment\nwith the Enterprise Architecture. If prior Treasury Inspector General for Tax Administration\nrecommendations had been implemented, the cost overruns and decrease in planned benefits may\nhave been avoided or further minimized.\n\nThe cost of TEDS Release 2 may exceed the reduced monetary benefits delivered\nTEDS Release 2 may be completed with significantly reduced system capabilities and benefits.\nThe June 2004 TEDS Release 2 Business Case documented 16 high-level system capabilities\ncosting $46 million that would deliver benefits of $58 million. This Business Case was updated\nin August 2004 to document estimated benefits of $73.1 million. However, after work began on\nRelease 2, the TE/GE Division project team incurred delays in delivering benefits (e.g., 4 system\ncapabilities were deleted, some system capabilities have been only partially delivered, and\n5 system capabilities have been delayed by up to 2 years). An additional 8 capabilities were\nadded, but the February 2007 TEDS Release 2 Business Case documents the System is now\nexpected to deliver only $33.5 million (less than one-half) of the $73.1 million August 2004\nexpected benefits.\nTE/GE Division management advised us the August 2004 TEDS Release 2 Business Case\nbenefits were recalculated in February 2007 to correct:\n \xe2\x80\xa2 Benefit projections that used double inflation for labor.\n \xe2\x80\xa2 Benefit projections for changes in scope, schedule, and other financial factors.\n \xe2\x80\xa2 Cyber Assistant application benefit projections.\nIn addition, according to TE/GE Division management, part of the large decrease in benefits was\ndue to the elimination of certain TEDS features because functions that were intended to be\nperformed by another system could not be accomplished as planned. Figure 1 shows a\ncomparison of the cost and benefits calculations for the TEDS Release 2 Business Cases dated\nJune 2004, August 2004, and February 2007.\n\n\n\n\n Page 6\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\n Figure 1: Comparison of TEDS Business Case Changes in Costs and Benefits\n (in millions) Between June 2004 and February 2007\n\n $80.0\n\n $70.0\n\n $60.0\n\n $50.0\n Dollars\n\n\n\n\n $40.0\n\n $30.0\n\n $20.0\n\n $10.0\n\n $0.0\n June 2004 August 2004 February 2007\n Costs $46.3 $46.3 $46.8\n Benefits $58.2 $73.1 $33.5\n Business Case\n\n Source: Analysis of the June 2004, August 2004, and February 2007 Release 2 Business\n Cases.\n\nThe February 2007 Business Case shows a significant decrease in benefits from both the\nJune 2004 and August 2004 Business Cases. TE/GE Division management also advised us that\nupdates to the benefits calculations after February 2007 will now put the benefits at over\n$35 million.\nThe Clinger-Cohen Act of 199611 requires Federal Government agencies to use a disciplined\ncapital and investment control process to manage information technology investments. Agencies\nare required to put their technology investment decisions in a true \xe2\x80\x9cbusiness context\xe2\x80\x9d and analyze\ninvestments for their return on investment. Annually, the Office of Management and Budget\npublishes Circular A-11, Preparation, Submission and Execution of the Budget, to assist Federal\nGovernment agencies in complying with the Clinger-Cohen Act of 1996. Circular A-11 provides\nguidance on the preparation of business cases for information technology systems.\n\n\n\n11\n Federal Acquisition Reform Act of 1996 and Information Technology Management Reform Act of 1996),\nPub. L. No. 104-106, 110 Stat. 642 (codified in scattered sections of 5 U.S.C., 5 U.S.C. app., 10 U.S.C., 15 U.S.C.,\n16 U.S.C., 18 U.S.C., 22 U.S.C., 28 U.S.C., 29 U.S.C., 31 U.S.C., 38 U.S.C., 40 U.S.C., 41 U.S.C., 42 U.S.C.,\n44 U.S.C., 49 U.S.C., 50 U.S.C.).\n Page 7\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\nIn addition, according to organizational policy, the IRS requires tracking, monitoring, and\nevaluating of all project costs12 and expected benefits against the approved business case.\nBusiness cases provide decision makers with benchmark information necessary to make\nevaluations on a project\xe2\x80\x99s costs and benefits and a basis for measuring whether multimillion\ndollar investments make good business sense.\nWe performed additional reviews of documentation to determine whether TEDS project\nmanagement and the TE/GE Division Investment Executive Steering Committee tracked,\nmonitored, and evaluated project costs as required. We determined the following:\n \xe2\x80\xa2 Project management did not have information that associated the value of expected\n benefits to specific system capabilities. For example, the updated expected benefits in\n the February 2007 Business Case show Release 2 is now expected to deliver benefits of\n only $33.5 million, a decrease of $39.6 million from the August 2004 Business Case\n projection. Through our review of documentation and discussions with project\n management, we could not identify the relationship between the system capabilities and\n the benefits that make up the $39.6 million that have been deleted. However, at the end\n of our audit work, TE/GE Division management provided some information related to\n the changes in benefits. Information that relates the value of benefits to any changes in\n system capabilities is critical for evaluating whether a system should receive continued\n funding and development.\n \xe2\x80\xa2 Because project management did not have this information for Release 2, the Investment\n Executive Steering Committee did not receive the critical periodic updates of cost and\n benefit information needed to assess the impact that delayed or undelivered system\n capabilities had on expected benefits.\n \xe2\x80\xa2 Review of the Investment Executive Steering Committee\xe2\x80\x99s monthly meeting notes\n identified the Committee addressed issues that concerned specific system capabilities or\n funding for specific contracts. However, we did not find any documented discussion of\n the collective impact of schedule delays and the deletion of system capabilities on\n overall project benefits and actual project costs. When we discussed this with\n Committee members, they advised us that schedule delays and benefits were regularly\n discussed at meetings. However, we were not provided documentation showing these\n topics were discussed. The Commissioner, TE/GE Division (a key member of the\n Investment Executive Steering Committee), also advised us that, while he may not have\n known the exact dollar figure by which benefits were decreasing, he and the Committee\n members always knew what capabilities the IRS would be receiving and what\n capabilities the IRS would be losing when making decisions. He stated the\n decision-making process may not have involved looking back at the August 2004\n\n12\n Project costs include, but are not limited to, contract and Federal Government personnel direct and indirect labor\ncosts that support the investment.\n Page 8\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\n Business Case. In addition, despite not knowing the exact amount by which benefits\n were declining, TE/GE Division management may not have considered other alternatives\n because the system the TEDS is replacing, the Employee Plans/Exempt Organizations\n Determination System, is a failing and dying system.\nIRS policy provides that business cases may be updated any time during system development,13\nat the discretion of the Investment Executive Steering Committee. Conditions that may trigger a\nrevision to the business case include changing the scope of the project, increasing the cost of the\nproject by more than 10 percent, or extending the targeted delivery dates by more than\n10 percent of the estimate. Adverse changes in cost, schedule, and performance do not, by\nthemselves, automatically require a business case revision. However, if changes in cost,\nschedule, or performance result in modified baseline information and/or increases greater than\n10 percent, a revision to the business case and approval from the Investment Executive Steering\nCommittee may be needed to proceed with development. The revisions are necessary to ensure\nthe most accurate information is available for making investment decisions, monitoring the\nprogress of the system\xe2\x80\x99s development, and evaluating whether business benefits are actually\nrealized.\nThe TEDS Business Case was last updated in February 2007. However, due to the change in the\nproject\xe2\x80\x99s scope and the reduction in benefits of approximately 54 percent, we believe the\nBusiness Case should have been updated sooner. We could not determine the reason for the\nFebruary 2007 update because actual costs compared to estimated costs and the changes in\ncapabilities and benefits were not tracked. In addition to the significant reduction in benefits,\nthere was at least an 8-month delay in the Release 2 implementation. For the TEDS, the\nTE/GE Division Investment Executive Steering Committee had a responsibility to determine\nwhether the Business Case needed to be revised or updated. Knowing that the benefits decreased\nsignificantly, but not requesting a revision to the Business Case prevented the Committee from\nhaving full knowledge of the significant decrease in the benefits that the TEDS would deliver\ncompared to the original estimates in the approved Business Case. Significant deviations from\nthe Business Case, such as cost overruns or decreased capabilities or benefits, should be\ndiscussed as soon as they are identified.\n\nA process to track and monitor total project cost was not implemented, and\noverruns occurred\nTotal project costs were not monitored and reported because TE/GE Division management did\nnot have a process in place to appropriately evaluate investment decisions associated with the\ndevelopment of TEDS Release 2. None of the actual project costs to develop, implement, and\nevaluate Release 2 were tracked and monitored as required by IRS procedures. As a result,\n\n\n13\n IRS policy generally requires a business case to be updated after successful completion of integration, testing,\nacceptance, and piloting (testing the system in an actual business environment).\n Page 9\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\nproject management was not aware that actual contractor costs significantly exceeded the\nestimate in the August 2004 Business Case.\nWe reviewed the Project Manager\xe2\x80\x99s records and calculated that contractor costs exceeded the\nestimate by at least $2.1 million (an increase from $8.1 million to $10.2 million, or 26 percent)\nfor Fiscal Years 2004 through 2006. In addition, IRS internal labor costs estimated at\n$5.1 million were not tracked. This information should have been provided to the\nTE/GE Division Investment Executive Steering Committee so it would be aware of significant\ndeviations from the project\xe2\x80\x99s estimated costs and could determine whether the expected return on\ninvestment was being achieved. As a result, the Committee could not evaluate performance and\ndetermine if the project was being delivered within estimated costs.\nTE/GE Division management implemented procedures in response to a recommendation14 we\nmade as part of our review of the TEDS Release 1. We recommended adopting a business case\nmodel to include processes for tracking and monitoring actual project costs. TE/GE Division\nmanagement implemented procedures to verify actual contractor costs weekly to ensure the\nexpenses were actually incurred. However, the procedures did not include tracking, comparing,\nmonitoring, and evaluating contractor costs and IRS internal labor costs to estimates in the\napproved TEDS Business Case.\nIn addition, the Project Manager advised us the current IRS timekeeping system does not\nadequately support tracking internal labor costs. Release 2 project management advised us\nFederal Government labor cost is tracked back to the project as actual cost as accurately as\npossible, considering the limitations of the timekeeping system. This has been a longstanding\nweakness in other areas of the IRS, such as in the Modernization and Information Technology\nServices organization that recently corrected the problem.15\nWe determined there was $7.2 million of potentially unreliable information in the\nTEDS August 2004 Business Case for Fiscal Years 2004 through 2006. This includes\n$2.1 million paid to contractors that exceeded the estimated amount in the Business Case and\n$5.1 million in estimated IRS internal labor cost not tracked.16\nManagement Action: Project management informed us the TE/GE Division Business Systems\nPlanning function has been working to improve the tracking of actual Federal Government costs\nback to investments; however, additional process changes need to be made to facilitate reporting.\n\n\n\n\n14\n The Tax Exempt Determination System Release 1 Delivered Only a Small Portion of the Expected Benefits and\nSignificantly Exceeded Cost Estimates (Reference Number 2006-10-174, dated September 26, 2006).\n15\n The Modernization and Information Technology Services Organization Can Improve Its Budget Formulation,\nExecution, and Review Processes (Reference Number 2007-20-064, dated May 9, 2007).\n16\n See Appendix IV for further details.\n Page 10\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\nMinimal benefits were realized from TEDS Release 1\n\nThe TE/GE Division received very few benefits from the development of Release 1.\nApproximately $17 million was spent to purchase the technical infrastructure, including\ncomputer hardware and the development of computer code. Upon completion, Release 1 was\nexpected to reduce cycle time, processing time, and processing costs, while implementing\nprocess improvements to enhance the quality of determinations and the quality of service\ndelivered to TE/GE Division customers. The technical infrastructure, including computer\nhardware and software, was designed to support Release 1 and all future TEDS releases.\nHowever, according to TE/GE Division management, the initial infrastructure had to be replaced\nwhen it was completed because it did not meet new IRS standards. As a result, an inefficient use\nof resources occurred and the TE/GE Division realized little benefit from its $17 million\ninvestment for Release 1.17\n\nManagement oversight may not ensure TEDS Release 2 will align with the future\nIRS Enterprise Architecture\nProject management oversight may not ensure Release 2 will align with the future Enterprise\nArchitecture. Oversight is necessary to ensure additional costs are not incurred in the future to\nbring the applications into alignment with the Enterprise Architecture. We identified the\nfollowing two documents were not completed or approved as required.\n \xe2\x80\xa2 The Release 2 Enterprise Architecture Assessment was not completed. This omission is\n significant because the purpose of the Assessment is to determine whether the project is\n consistent with the Enterprise Architecture to ensure computer systems designed and\n built separately will improve performance and productivity.\n \xe2\x80\xa2 The Enterprise Architecture Charter for Release 2 was incomplete and had not been\n approved. This Charter is used to manage the scope of the project in a manner that is\n consistent with the IRS Enterprise Architecture.\nThe development, modernization, and enhancement of projects, such as TEDS Release 2, must\nshow compliance with the IRS Enterprise Architecture. Enterprise Architecture Directive 15,\nProject Chartering and Conformance with the IRS Enterprise Architecture, applies to all projects\nthat are part of the future Architecture. Projects such as TEDS Release 2 require chartering and\nverification of conformance to the Enterprise Architecture.\nAnticipated benefits of Release 2, such as streamlined work processes and improved service\ndelivery and efficiency, may not be realized if management does not ensure Release 2 is in\nalignment with the approved Enterprise Architecture. Likewise, incomplete and unapproved\n\n\n17\n See Appendix IV for further details.\n Page 11\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\nproject documentation increases the risk that Release 2 will not be successfully integrated into\nthe Enterprise Architecture.\n\nRecommendations\nRecommendation 1: The Commissioner, TE/GE Division, should implement controls to\nensure costs and the impact of schedule delays and changes in system capabilities on expected\nbenefits are tracked. The TE/GE Division Investment Executive Steering Committee should\nreview these impacts against business cases and ensure business cases are timely updated.\n Management's Response: IRS management agreed with the recommendation. The\n TE/GE Division Business Systems Planning function governance and control office will\n implement controls to ensure costs and the impact of schedule delays and changes in\n system capabilities on expected benefits are tracked. The TE/GE Division Investment\n Executive Steering Committee will review these impacts against business cases and\n ensure business cases are timely updated. However, IRS management disagreed with our\n $17 million inefficient use of resources outcome measure representing the funds spent to\n purchase the technical infrastructure, including computer hardware and the development\n of computer code. The Office of Audit Comment in Appendix IV (page 19) describes in\n more detail management\xe2\x80\x99s response and our position with respect to this outcome\n measure.\nRecommendation 2: The Director, Business Systems Planning, should complete plans to\nimprove the tracking of actual Federal Government costs back to investments and ensure this\ninformation is provided periodically to the TE/GE Division Investment Executive Steering\nCommittee so it has complete information for evaluating system development projects.\n Management's Response: IRS management agreed with the recommendation. The\n Director, Business Systems Planning, will complete plans for improving the tracking of\n actual Federal Government costs back to investments and ensure this information is\n provided periodically to the TE/GE Division Investment Executive Steering Committee.\n\n\n\n\n Page 12\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\n Appendix I\n\n Detailed Objectives, Scope, and Methodology\n\nThe overall objectives of this review were to determine whether the TE/GE Division developed\nTEDS Release 2 using sound system development practices and whether it managed the Release 2\ninvestment in compliance with Office of Management and Budget and Clinger-Cohen Act of\n19961 requirements. To accomplish these objectives, we:\nI. Determined if TE/GE Division management applied and adhered to the approved\n Enterprise Life Cycle-Lite2 methodology for development of TEDS Release 2.\n Specifically, we determined if:\n A. TE/GE Division management\xe2\x80\x99s development approach was adequate to monitor and\n control the Release 2 activities from project startup through closure.\n B. The risk management process was adequate to identify, quantify, respond to, and\n control the risks that could prevent successful completion of the project.\n C. The configuration management process was adequate to identify, document, monitor,\n evaluate, and approve all changes to system requirements.\n D. The requirements management process adequately identified the Release 2 user\n requirements.\n E. The transition management process was adequate to ensure Release 2 is ready for\n deployment and transfer to the Modernization and Information Technology Services\n organization.\nII. Determined if TE/GE Division management ensured alignment with the IRS Enterprise\n Architecture. Specifically, we determined if:\n A. The Release 2 project team adhered to Enterprise Architecture requirements.\n B. Project documents identified how Release 2 fits into the IRS architecture of the\n future.\n C. The project team had coordinated its development efforts and resolved any\n differences with the Tier II Project Office.\n\n1\n Federal Acquisition Reform Act of 1996 and Information Technology Management Reform Act of 1996,\nPub. L. No. 104-106, 110 Stat. 642 (codified in scattered sections of 5 U.S.C., 5 U.S.C. app., 10 U.S.C., 15 U.S.C.,\n16 U.S.C., 18 U.S.C., 22 U.S.C., 28 U.S.C., 29 U.S.C., 31 U.S.C., 38 U.S.C., 40 U.S.C., 41 U.S.C., 42 U.S.C.,\n44 U.S.C., 49 U.S.C., 50 U.S.C.).\n2\n See Appendix V for a glossary of terms.\n Page 13\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\nIII. Determined if TE/GE Division management\xe2\x80\x99s investment decisions followed estimates in\n the TEDS Business Cases.\n A. Compared the expected and actual Release 2 capabilities and determined if Release 2\n was developed as intended to deliver the expected benefits.\n B. Reviewed project management records and determined if actual expenditures were\n compared to estimates in the August 2004 Business Case.\n C. Followed up on the development of Release 1 and determined whether benefits\n outlined in the August 2003 Release 1 Business Case were delivered.\n\nInternal controls methodology\nInternal controls relate to management\xe2\x80\x99s plans, methods, and procedures used to meet their\nmission, goals, and objectives. Internal controls include the processes and procedures for\nplanning, organizing, directing, and controlling program operations. They include the systems\nfor measuring, reporting, and monitoring program performance. We determined the following\ninternal controls were relevant to our audit objectives: Office of Management and Budget\npolicies, Clinger-Cohen Act of 1996 requirements, Enterprise Life Cycle-Lite requirements, and\nIRS investment management requirements. We reviewed these controls by interviewing\nBusiness Systems Planning function and Exempt Organizations function management, analyzing\nInvestment Executive Steering Committee minutes, and reviewing various project plans.\n\n\n\n\n Page 14\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\n Appendix II\n\n Major Contributors to This Report\n\nNancy A. Nakamura, Assistant Inspector General for Audit (Headquarters Operations and\nExempt Organizations Programs)\nTroy D. Paterson, Director\nGerald T. Hawkins, Acting Director\nJulia M. Collins, Acting Audit Manager\nJohn W. Baxter, Lead Auditor\nAndrew J. Burns, Lead Auditor\nDeadra M. English, Senior Auditor\nYasmin B. Ryan, Senior Auditor\nMichael A. McGovern, Auditor\n\n\n\n\n Page 15\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\n Appendix III\n\n Report Distribution List\n\nActing Commissioner C\nOffice of the Commissioner \xe2\x80\x93 Attn: Acting Chief of Staff C\nDeputy Commissioner for Services and Enforcement SE\nDeputy Commissioner, Tax Exempt and Government Entities Division SE:T\nDirector, Business Systems Planning, Tax Exempt and Government Entities Division SE:T:BSP\nDirector, Exempt Organizations, Tax Exempt and Government Entities Division SE:T:EO\nChief Counsel CC\nNational Taxpayer Advocate TA\nDirector, Office of Legislative Affairs CL:LA\nDirector, Office of Program Evaluation and Risk Analysis RAS:O\nOffice of Internal Control OS:CFO:CPIC:IC\nAudit Liaison: Director, Communications and Liaison, Tax Exempt and Government Entities\nDivision SE:T:CL\n\n\n\n\n Page 16\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\n Appendix IV\n\n Outcome Measures\n\nThis appendix presents detailed information on the measurable impact that our recommended\ncorrective actions will have on tax administration. These benefits will be incorporated into our\nSemiannual Report to Congress.\n\nType and Value of Outcome Measure:\n\xe2\x80\xa2 Reliability of Information \xe2\x80\x93 Potential; $39.6 million (see page 4).\n\nMethodology Used to Measure the Reported Benefit:\nIRS project management did not have information that associated the value of expected benefits\nto specific system capabilities. For example, the updated expected benefits in the February 2007\nTEDS Business Case show Release 2 is now expected to deliver benefits of only $33.5 million, a\ndecrease of $39.6 million from the original projection in the August 2004 TEDS Business Case.\nInformation that relates the value of benefits to the system capabilities is needed to assess the\nimpact that delayed or undelivered system capabilities had on the expected benefits of Release 2.\nBecause this information was not available, project management could not assess the impact the\ndecrease in expected benefits had on the Release 2 investment.\nBenefits expected from Release 2 listed in the\nAugust 2004 Business Case $73.1 million\nLess: Benefits expected from Release 2 listed in the\nFebruary 2007 Business Case $33.5 million\nTotal $39.6 million\n\nType and Value of Outcome Measure:\n\xe2\x80\xa2 Reliability of Information \xe2\x80\x93 Potential; $7.2 million (see page 4).\n\nMethodology Used to Measure the Reported Benefit:\nWe determined contractor costs were being tracked; however, the IRS did not compare actual\ncontractor costs to the estimated contractor costs listed in the August 2004 Business Case. We\nmade this comparison and determined contractor costs had exceeded estimates by $2.1 million\nthrough Fiscal Year 2006. We also determined TE/GE Division management was not tracking\ninternal labor costs; therefore, we could not determine whether the $5.1 million estimated for\n\n\n Page 17\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\nIRS internal labor in the August 2004 Business Case was reliable. We added these amounts to\ndetermine the amount of potential unreliable information in the Business Case.\nAmount contractor costs exceeded estimates in the\nAugust 2004 Business Case through Fiscal Year 2006 $2.1 million\nAdd: Estimated IRS internal labor costs in the\nAugust 2004 Business Case that were not tracked $5.1 million\nTotal of potentially unreliable cost information in the Business Case $7.2 million\nThe estimated IRS internal labor costs in the TEDS Business Case were taken directly from the\nAugust 2004 Business Case. The amount of contractor costs that exceeded estimates in the\nTEDS Business Case through Fiscal Year 2006 were calculated by subtracting the estimated\ncontractor cost to implement Release 2 through Fiscal Year 2006 from the actual contractor cost\nto implement Release 2 through Fiscal Year 2006.\nActual contractor cost to implement Release 2 through Fiscal Year 2006 $10.2 million\nLess: Estimated contractor cost to implement Release 2 through\nFiscal Year 2006 $8.1 million\nTotal by which contractor costs exceeded estimates in the\nAugust 2004 Business Case through Fiscal Year 2006 $2.1 million\nWe calculated the actual contractor cost to implement Release 2 through Fiscal Year 2006 by\nadding contractor invoice information collected by IRS project management. We calculated the\nestimated contract cost to implement Release 2 through Fiscal Year 2006 by subtracting the\nestimated TE/GE Division and IRS labor cost of $5.1 million listed in the August 2004 Business\nCase from the $13.2 million total cost to implement Release 2 listed in that Business Case.\n\nType and Value of Outcome Measure:\n\xe2\x80\xa2 Inefficient Use of Resources \xe2\x80\x93 Actual; $17.0 million (see page 4).\n\nMethodology Used to Measure the Reported Benefit:\nTEDS Release 1 did not significantly improve the processing of Employee Plans function\ndetermination applications, and the technical infrastructure designed to support future releases of\nthe System was replaced. As a result, the TE/GE Division realized little benefit from its\n$17 million investment.\nWe determined the total Release 1 costs by adding prior project costs listed in the\nAugust 2003 TEDS Business Case to IRS internal labor costs and contractor costs to complete\nRelease 1.\n\n\n Page 18\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\nPrior project costs listed in the August 2003 Business Case $12.0 million\nAdd: TE/GE Division internal labor costs from August 7, 2003, through\nFebruary 17, 2006 $.5 million\nAdd: Contractor costs from August 7, 2003, through February 17, 2006 $4.5 million\nTotal $17.0 million\nThe TE/GE Division labor costs to complete Release 1 were obtained from IRS project\nmanagement. The contractor costs from August 7, 2003, through February 17, 2006, were\ncalculated by adding contractor invoice information collected by IRS project management.\n\nOffice of Audit Comment\nIRS management disagreed with 1 of the 3 outcome measures described in the report\n($17.0 million in inefficient use of resources). The Commissioner, TE/GE Division, stated the\nlack of success in a venture such as TEDS Release 1 does not equate to inefficiency. Instead,\nlessons learned from Release 1 helped form new IRS standards in Enterprise Architecture that\nwere used in TEDS Release 2 and will be used in all future IRS projects.\nWe agree that lessons learned did provide a benefit to the IRS; however, we believe there was\nlittle tangible benefit for the investment in TEDS Release 1. Furthermore, while we recognize\nthe costs for TEDS Release 1 cannot be recovered at this point, increased controls over tracking\ncosts, delays, or other system capabilities should help the IRS better monitor future projects and\nprevent implementation of new systems that are unable to accomplish their primary purposes.\nIn addition, the Commissioner, TE/GE Division, stated the TEDS project management team is\nworking closely with the IRS Enterprise Architecture to comply with emerging standards as they\napply to the TEDS and it is premature to conclude that Release 2 will not align with future\nEnterprise Architecture standards. We agree with the Commissioner\xe2\x80\x99s conclusion and have\nmade applicable wording changes to the report. However, we believe completing and approving\nrequired Enterprise Architecture documentation is a good preventive measure to ensure\ncompliance with the future IRS Enterprise Architecture.\n\n\n\n\n Page 19\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\n Appendix V\n\n Glossary of Terms\n\nTerm Definition\nBusiness Case Addresses how an investment project will provide\n the IRS with new business capabilities, increased\n productivity, and improved management decision-\n making tools. It provides a basis for making\n investment decisions and establishes a project\xe2\x80\x99s\n baseline cost, schedule, and performance to\n control and evaluate the investment.\nCyber Assistant An application that is an interactive tool for\n exempt organizations that will provide real-time\n education and guidance to assist in ensuring\n compliance with the tax law, reducing customer\n burden, and increasing the merit closure rates for\n Application for Recognition of Exemption Under\n Section 501 (c)(3) of the Internal Revenue Code\n (Form 1023).\nCycle Time The period from when a determination request is\n postmarked to the closing of the application and\n issuance of the determination letter.\nDetermination Letters Provide customers assurance their employee plan\n or exempt organization is in compliance with\n applicable tax laws.\nEnterprise Architecture The IRS Enterprise Architecture and its principles\n (1) provide the basis for defining architectural\n strategies and making implementation choices and\n (2) help business owners and program developers\n ensure proposed systems and other initiatives are\n approved, resourced, and integrated into overall\n IRS computer systems and processes.\nEnterprise Life Cycle-Lite A disciplined system development methodology.\n\n\n\n Page 20\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\nTerm Definition\nMilestone A milestone represents the completion of key\n activities within the project\xe2\x80\x99s life cycle and is used\n to measure progress and provide a review point for\n executive or oversight approval. Projects must\n receive formal approval to proceed from one\n milestone to the next.\nRequirements Generally, requirements reflect the needs of a user\n to solve a problem or achieve an objective.\nRestatement An application made to the IRS for an advance\n determination to ensure an amendment to an\n employee benefit plan meets the qualification\n requirements according to the Internal Revenue\n Code.\nReturn on Investment The net profit or loss in an accounting period\n divided by the capital investment used during the\n period, usually expressed as an annual percentage\n return.\nRisk A potential event that, if it occurs, will adversely\n affect the project\xe2\x80\x99s cost, schedule, and/or technical\n performance.\nTier II Tier II refers to a tiered level of information\n technology equipment (i.e., Tier I \xe2\x80\x93 Mainframes,\n Tier II \xe2\x80\x93 Servers, and Tier III \xe2\x80\x93 Desktops and\n Laptops).\n\n\n\n\n Page 21\n\x0c Management Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\n Appendix VI\n\nManagement\xe2\x80\x99s Response to the Draft Report\n\n\n\n\n Page 22\n\x0cManagement Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\n\n Page 23\n\x0cManagement Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\n\n Page 24\n\x0cManagement Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\n\n Page 25\n\x0cManagement Oversight Improved, but Expected Benefits and\n Capabilities for the Tax Exempt Determination System\n Release 2 Were Not Delivered\n\n\n\n\n Page 26\n\x0c"