IRS Spent $12 Million For Microsoft Software That It Couldn’t Even Use

IRS Wasted $12 Million Dollars on Unusable Email System

A report released by the Treasury Inspector General for Tax Administration (TIGTA) revealed that the IRS (Internal Revenue Service) spent $12 million on an email system that it couldn’t use. The agency purchased two years’ worth of email software subscriptions from Microsoft before finding out that its email systems were not compatible with Microsoft’s email services.

A 2014 Office of Management and Budget directive required the IRS to procure new software to manage permanent and temporary email records starting December 2016. The IRS went outside the normal acquisitions process to buy the subscriptions, categorizing the purchases as an upgrade to an existing system rather than a purchase of a new one, concluded the inspector general in the report.

Further, the IRS also failed to carry out the required and necessary cost inquiry, security assessments, and requirements analysis prior to purchasing the software. As the report notes:

“The purchase was made without first determining project infrastructure needs, integration requirements, business requirements, security and portal bandwidth, and whether the subscriptions were technologically feasible on the IRS enterprise.”

Accordingly, despite spending $12 million from taxpayer funds for buying two years’ worth of licenses, the software was never used. Additionally, the IRS failed to make sure that the contract was awarded full and open competition as required by federal law. As the report notes:

“The IRS violated the Federal Acquisition Regulation requirements by not using full and open competition in its acquisition of Microsoft Office 365 ProPlus and Exchange Online monthly subscriptions.”

However, IRS leadership did not agree with the conclusion that it blew money on the subscriptions. “We strongly disagree with the assertion that we wasted taxpayer dollars,” Chief Information Officer S. Gina Garza wrote in response. By purchasing subscriptions rather than perpetual licenses, the IRS thought it could achieve big savings, Garza wrote.

The inspector general’s office disagreed with the response. “The IRS purchased $12 million in subscriptions for software that is never used (deployed) over a two-year period. We consider this a waste of taxpayer funds,” it responded.

This is not the first time that the IRS has had problems with technology. Despite being expected to spend almost $140 million in taxpayer funds, the IRS failed to upgrade Windows software on its computers and servers by end of life deadlines, disclosed a TIGTA report released last year. At the time of this report, the agency had only upgraded half of its servers despite spending nearly four years upgrading this technology.