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IT projects that formed part of Revenue and Customs' (HMRC) compliance and enforcement programme missed key delivery milestones and failed to bring the expected recovery of tax, according to a report by the National Audit Office.

The compliance and enforcement programme was implemented between 2006 and 2011 with the aim of increasing compliance yield – the amount of extra tax generated through compliance work – by £4.56bn over the five years.

Over the period, HMRC invested £387m in more than 40 projects, including ICT systems and processes to improve risk targeting and identify non-compliance more effectively, as well as systems to processes to improve how compliance cases are managed and documented.

The five largest projects delivering ICT systems within the programme, which cost £239m or 62 per cent of programme spending, all missed planned delivery milestones, the NAO says. "Our analysis showed that virtually all phases of the projects to deliver ICT systems slipped against planned delivery dates," the report adds.

The NAO attributes the delays to a series of factors, including late approval of project design or specification changes, projects being phases in over successive financial years to keep within funding limits, including adjusting the scope of work to fit within those limits, and greater complexity in the delivering the projects than was first envisaged.

In addition, in 2010 HMRC deferred completion of three projects while it justified the need for funding, in response to the Cabinet Office moratorium on capital spending.

Affected by the delays were two projects, Caseflow and Spectrum, which received £98m of programme funding. The schemes were forecast to yield £743m of tax that would otherwise be lost through avoidance and evasion by March 2011. It had not delivered any by that point, while the HMRC had to spend a further £5m on a new system that was originally included in the Caseflow project. HMRC's forecasts now predict the projects will generate £547m of additional tax by 2014-15 instead.

"There were tensions between the business requirements and available funding on all of the projects to deliver ICT systems," says the report. "We found that project teams delivered the core ICT infrastructure, although the functionality and scope of some systems was lower than the original specification. HMRC de-scoped some projects to live within annual funding allocations and did not always have a clear understanding of business requirements when designing systems."

The NAO report highlights that, while the HMRC managed the design phase of the projects well, it did not examine the related business process issues. "Particularly on projects to implement new ICT systems, it did not sufficiently consider redesigning business processes or developing the staff capability needed to exploit the full potential of the new technologies," it says.

The report recommends the HRMC should focus on the business changes needed by:

  • refining operating models to ensure new ICT systems and approaches are integrated into business processes – this should specify the staff capabilities and training needed to effectively use the new technologies and processes;
  • improving the performance of new systems by monitoring regularly against a range of indicators to assess how systems are being used and their impact on working practices;
  • making sure full project costs, including the whole-life costs of ICT systems, are included in business cases, including decommissioning costs; and
  • ensuring ICT systems that are no longer needed are decommissioned promptly.

The report says that the department has now established management information on the use and performance of new systems and will seek to use this "to better understand the impact on business performance".

"The new ICT systems have been designed so that they can be integrated with HMRC's broader ICT infrastructure," says the NAO. "HMRC plans to improve their effectiveness and there are funding bids, totalling £21m, to enhance the Connect system and develop data analytical skills and training."

On the overall performance of the programme, the report says that it has delivered £4.32bn of additional tax revenue between 2006 and 2011, as well as reducing staff numbers and introducing a range of improvements in its compliance work.

This article was originally published at Guardian Government Computing.

Guardian Government Computing is a business division of Guardian Professional, and covers the latest news and analysis of public sector technology. For updates on public sector IT, join the Government Computing Network here.

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