August 24th, 2006

Taxing Problems

Posted by Michael Krigsman @ 5:20 pm

Categories: Government projects, Project failures

Tags: Michael Krigsman

The Wall Street Journal reports (subscription required) that $2-300 million of fraudulent US tax refunds were paid due to an IT project screw-up. From the article:

“The management efforts of both the IRS and its contractor to improve our automated-refund fraud-detection system were insufficient and are unacceptable,” IRS Commissioner Mark Everson said in a statement Friday.

Computer Sciences Corp. is the main IRS contractor on the project. A CSC spokeswoman declined to comment. The company inherited the contract when it acquired DynCorp in 2003.

[Senate Finance Chairman Charles Grassley (R., Iowa)] said about $20.5 million was spent on developing a new Web-based electronic fraud-detection system, “and the Web-based system never materialized.”

“Because of this contractor, the IRS’s poor oversight of that contractor, and the IRS’s own poor judgment, the IRS lost as much as $320 million over this botched project,” Mr. Grassley said in a statement. “That’s money down the drain.”

The electronic fraud-detection system was intended to scan all refunds, which totaled $227.5 billion in the 2005 fiscal year. The data-mining system was first deployed as a prototype in 1995. The IRS went on to redesign the system in 2002, with a target launch of January 2005.

Mr. Everson said the IRS contractor had failed to deliver on a redesigned Web-based refund fraud-detection system for the 2005 tax-filing season.

The contractor assured the IRS the system would be in place by January 2006, but that deadline wasn’t met either, the IRS said in a statement.

There’s one part of this I don’t get: how can a large government contractor just not finish a project? Maybe they thought no one would notice if they slipped away quietly after getting paid.

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