IRS Wasted $3.4 Million on Software It Never Used, Watchdog Says

An Internal Revenue Service building in downtown Washington, D.C.

An Internal Revenue Service building in downtown Washington, D.C. Mark Van Scyoc/

Auditors also found the agency bought a software product without testing that it worked for its intended purposes. It didn’t.

IT management shortcomings led the IRS to waste millions of dollars on licenses and subscriptions for software agency officials never used, according to an internal watchdog.

Because it failed to follow federal acquisition requirements, the agency also deployed a software product that fell far short of its promised functionality, auditors said.

In a recent report, the Treasury Inspector General for Tax Administration found the IRS didn’t actively manage its IT assets or monitor the cost of the myriad software subscription and support packages used across the enterprise. As a result, the agency spent roughly $3.4 million between 2015 and 2017 on tools it didn’t need, auditors said.

They also found insufficient management caused the agency to lean too heavily on a separate package of software tools, which put it at risk of penalties and fines from the vendor, IBM.

TIGTA advised the agency to start conducting an annual review of its software subscriptions and cancel unused deals. It also recommended the agency’s legal team run a retroactive review of the subscriptions to see if federal purchasing requirements were violated. IRS told the watchdog the investigation was already underway.

Auditors also found IRS broke with the Federal Acquisition Regulation in purchasing another IBM software product that ended up falling short of the agency’s needs.

The agency bought the “BigFix” service in 2014 with the intention of using the product to manage software licenses, deploy security patches and measure IT usage across the agency. Three years later, however, officials said the product couldn’t be used for software management. IRS never tested the tool before purchasing it, auditors said, and it turns out the tech can only manage licenses for products built by IBM.

IRS officials told the watchdog the shortcomings resulted from IBM removing significant portions of the software’s functionality after the purchase, but they couldn’t provide any documentation to prove it.

“Testing the BigFix product prior to purchasing and implementing the software ... would have allowed the IRS to determine if it would meet its [software asset management] needs,” TIGTA wrote. “As a result, the IRS is still searching for a tool capable of performing SAM nearly three years after the IRS’s initial planned implementation date.”

Auditors urged the agency to more closely adhere to federal procurement requirements, including software testing. IRS officials agreed with the recommendation.