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The IRS spaffed $12m on Office 365 subscription IT NEVER USED

Taxman can audit all your accounts, but can't tell cloud from on-premises

By Shaun Nichols in San Francisco


A report on spending from the office of the US Treasury Inspector General for Tax Administration (TIGTA) claims that between June 2015 and June 2016, the tax collectors paid $12m for subscriptions on Microsoft Office 365 and Exchange Online that were never used.

The TIGTA report [PDF] found that in 2014, the IRS kicked off a plan to move its email system from on-premises to cloud services, including subscriptions to the Office 365 and Exchange Online services. As part of that plan, subscriptions were purchased for both services.

Over that same time, however, the report found that the agency did not move forward with the plan to transition to the service and, as a result, the paid-for services went unused. Ironically, while wasting millions of dollars on Microsoft, the IRS was trying to extract billions in taxes from the software giant.

The report notes that, among other failings, the IRS purchased the cloud service licenses under the guise of an upgrade to existing on-premises systems, rather than as a migration to a new system – a process that would have required further review and scrutiny.

"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," the report found.

"The IRS never deployed the software to be used via the purchased subscriptions, and it may have violated the bona fide needs rule when it purchased the subscriptions using Fiscal Years 2014 and 2015 appropriations and did not deploy the software subscriptions in those years. In addition, the IRS violated Federal Acquisition Regulation requirements by not using full and open competition to purchase these subscriptions."

The IRS paid for 12 months of Microsoft service it never used ... Source: TIGTA

TIGTA goes on to conclude that the IRS failed to follow a number of its own procurement rules when it purchased the service – including making the proper distinction between cloud and on-premises software and violating competition requirements that would require it to consider bids from competing data services.

The figures involved here are basically rounding errors on the federal government's budget spreadsheet, although the TIGTA is keen to avoid this screw-up happening again.

In addition to taking measures to streamline and clarify its IT purchasing program, the TIGTA report recommends that the agency undertake its own review to determine whether the incident has also been a violation of the "bona fide needs" purchasing rules. ®

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