The US Treasury Inspector General for Tax Administration says in a report that the IRS is still using an on-premises email environment and because the existing infrastructure is reaching end-of-support, a transition to cloud services was the best way to go “to effectively perform tax administration.”
And yet, the purchase of Microsoft software worth $12 million 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 notes.
The acquisition was reviewed between June 2014 and June 2016, and although the go-ahead was finally given, the software purchased from Microsoft was never deployed because of technical limitations.
“The IRS 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,” US Treasury Inspector General for Tax Administration explains.
The report also shows that the IRS paid for 12-month licenses for both Office 365 ProPlus and Exchange Online, having spent $8.8 million and $3.2 million, respectively. This leads to a total of $12 million spent on software that was not installed over a two-year period.
There’s also a section for recommendations, including a review by the IRS Chief Counsel to determine if the acquisition indeed violated the bona fide needs rule and “take any actions required by law.” The IRS has already agreed to this recommendation, the report shows, so the Chief Counsel will initiate an investigation to determine if any violation occurred.

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