    [House Hearing, 115 Congress]
    [From the U.S. Government Publishing Office]

    INTERNAL REVENUE SERVICE'S INFORMATION TECHNOLOGY MODERNIZATION EFFORTS

    =======================================================================

                                    HEARING

                                   BEFORE THE

                           SUBCOMMITTEE ON OVERSIGHT

                                     OF THE

                          COMMITTEE ON WAYS AND MEANS
                         U.S. HOUSE OF REPRESENTATIVES

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                OCTOBER 4, 2017

                                   __________

                              Serial No. 115-OS08

                                   __________

             Printed for the use of the Committee on Ways and Means

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                   __________

                        U.S. GOVERNMENT PUBLISHING OFFICE
    33-655                  WASHINGTON : 2019

    -----------------------------------------------------------------------------------

                         COMMITTEE ON WAYS AND MEANS

                          KEVIN BRADY, Texas, Chairman

    SAM JOHNSON, Texas                   RICHARD E. NEAL, Massachusetts
    DEVIN NUNES, California              SANDER M. LEVIN, Michigan
    PATRICK J. TIBERI, Ohio              JOHN LEWIS, Georgia
    DAVID G. REICHERT, Washington        LLOYD DOGGETT, Texas
    PETER J. ROSKAM, Illinois            MIKE THOMPSON, California
    VERN BUCHANAN, Florida               JOHN B. LARSON, Connecticut
    ADRIAN SMITH, Nebraska               EARL BLUMENAUER, Oregon
    LYNN JENKINS, Kansas                 RON KIND, Wisconsin
    ERIK PAULSEN, Minnesota              BILL PASCRELL, JR., New Jersey
    KENNY MARCHANT, Texas                JOSEPH CROWLEY, New York
    DIANE BLACK, Tennessee               DANNY DAVIS, Illinois
    TOM REED, New York                   LINDA SANCHEZ, California
    MIKE KELLY, Pennsylvania             BRIAN HIGGINS, New York
    JIM RENACCI, Ohio                    TERRI SEWELL, Alabama
    PAT MEEHAN, Pennsylvania             SUZAN DELBENE, Washington
    KRISTI NOEM, South Dakota            JUDY CHU, California
    GEORGE HOLDING, North Carolina
    JASON SMITH, Missouri
    TOM RICE, South Carolina
    DAVID SCHWEIKERT, Arizona
    JACKIE WALORSKI, Indiana
    CARLOS CURBELO, Florida
    MIKE BISHOP, Michigan

                         David Stewart, Staff Director

                     Brandon Casey, Minority Chief Counsel

                                     ______

                           SUBCOMMITTEE ON OVERSIGHT

                        VERN BUCHANAN, Florida, Chairman

    DAVID SCHWEIKERT, Arizona            JOHN LEWIS, Georgia
    JACKIE WALORSKI, Indiana             JOSEPH CROWLEY, New York
    CARLOS CURBELO, Florida              SUZAN DELBENE, Washington
    MIKE BISHOP, Michigan                EARL BLUMENAUER, Oregon
    PAT MEEHAN, Pennsylvania
    GEORGE HOLDING, North Carolina

                                C O N T E N T S

                                   __________
                                                                       Page

    Advisory of October 4, 2017 announcing the hearing...............     2

                                   WITNESSES

    Jeffrey Tribiano, Deputy Commissioner for Operations Support, IRS     4
    Gina Garza, Chief Information Officer, IRS.......................     4
    Mr. Danny Verneuille, Assistant Inspector General for Security
      and Information................................................    13
    Technology Services, Treasury Inspector General for Tax
      Administration (TIGTA).........................................    26
    Mr. David Powner, Director, IT Management Issues, Government
      Accountability Office (GAO)....................................    27

                            QUESTIONS FOR THE RECORD

    Questions from The Honorable Vern Buchanan, to Jeffrey Tribiano..    58
    Questions from The Honorable Jackie Walorski, to Jeffrey Tribiano    87
    Questions from The Honorable Mike Bishop, to Jeffrey Tribiano....    90
    Questions from The Honorable Vern Buchanan, to Danny Verneuille..    93
    Questions from The Honorable Vern Buchanan, to David Powner......    98

                       PUBLIC SUBMISSIONS FOR THE RECORD

    Citizens Against Government Waste (CAGW).........................   105
    The National Treasury Employees Union (NTEU).....................   107

            IRS REFORM: CHALLENGES TO MODERNIZING IT INFRASTRUCTURE

                                  ----------

                           WEDNESDAY, OCTOBER 4, 2017

                 U.S. House of Representatives,
                           Committee on Ways and Means,
                                     Subcommittee on Oversight,
                                                         Washington,DC.
        The Subcommittee met, pursuant to call, at 9:01 a.m., in
    Room 2020, Rayburn House Office Building, Hon. Vern Buchanan
    [Chairman of the Subcommittee] presiding.
        [The advisory announcing the hearing follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman BUCHANAN. The Subcommittee will come to order. We
    have Members that are running late, but I thought we would get
    started with this. Welcome to the Ways and Means Oversight
    Subcommittee hearing on IRS Reform: Challenges to Modernizing
    IT Infrastructure. Today's hearing will focus on the current
    state of the IRS IT, the challenges faced as the IRS seeks to
    modernize itself, and areas where the IRS could improve its
    efforts. The importance of this topic cannot be understated. A
    modern, efficient, IT infrastructure is essential to effective
    tax administration, something that we would all like to see in
    the near future.
        While I am sure today we will hear a lot about the idea of
    budgetary needs, this is not just simply a budgetary issue.
    Budget is one aspect of running a successful enterprise.
    However, as a guy that ran businesses over the years, I don't
    always have the money for everything I would like to do.
    Instead, I have to make tough decisions and set priorities in
    terms of my business moving forward in the future.
        Work from both the GAO and the inspector general has shown
    many instances where the IRS decision-making has led to
    significant IT problems. For example, in 2010, the IRS was
    instructed by the USCIO to pursue a cloud-first strategy.
    However, the IRS did not begin to work on the cloud strategy
    until 2016, and could not readily produce a full inventory of
    its clouds. The IRS has also spent millions of dollars
    procuring an IT system that later determined cannot be used.
        Again, examples such as these are not budget failures. They
    are management failures. But I am first to agree that we need
    to have a long-term vision in this area. As we examine tax
    administration reform, we welcome a discussion on changes to
    the IRS, its budget. However, changes to the budget must be
    coupled with better management and governance of its resources
    the IRS already has.
        As I have said before, we would like to see the IRS work to
    improve how it procures and implements its IT systems. We also
    want to see the IRS be good stewards of the resources that we
    have already given them. To that end, I look forward to hearing
    from the witnesses today on ways we might improve the
    management, the IRS, and IT investment.
        The Ranking Member is not present today, so we will move
    forward with witness testimony. Without objection, other
    Members' opening statements will be made part of the record.
        Today's witness panel includes four experts: Jeffrey
    Tribiano, Deputy Commissioner for Operating Support at the IRS;
    Gina Garza, Chief Information Officer at the IRS; Danny
    Verneuille, Assistant Inspector General for Audit for Security
    and Information Technology Services at TIGTA; David Powner
    Director of IT Management Issues at the GAO.
        The Subcommittee will have received your written
    statements, and they will be made part of the formal hearing
    record. You each have five minutes to deliver your oral
    remarks.
        We will begin with the gentleman here to the left. You may
    start when you are ready.

       STATEMENT OF JEFFREY J. TRIBIANO, DEPUTY COMMISSIONER FOR
     OPERATIONS SUPPORT, ACCOMPANIED BY SILVANA GINA GARZA, CHIEF
             INFORMATION OFFICER, INTERNAL REVENUE SERVICE

        Mr. TRIBIANO. Thank you, Mr. Chairman.
        Chairman Buchanan, members of the subcommittee, my name is
    Jeff Tribiano, and I am the Deputy Commissioner for Operations
    Support at the IRS. I appreciate the opportunity to testify
    today.
        In my position at the IRS, I oversee internal operations
    and administration, which includes information technology,
    human capital, finance, privacy, procurement, planning,
    facilities, security, enterprise risk, and the Office of Equity
    Diversity and Inclusion. Joining me at the witness table is Ms.
    Gina Garza, the IRS's Chief Information Officer.
        Providing outstanding taxpayer service is an ongoing high
    priority for the IRS. A safe, secure, and efficient, and up-to-
    date information technology system plays an increasing
    important role in our efforts to sustain and improve taxpayer
    service. The most visible taxpayer service the IRS provides is
    the delivery of a smooth, problem-free tax filing season, so
    people can file their returns and receive their refunds as
    quickly and easily as possible.
        Our IT systems process more than 150 million individual
    income tax returns, and we pay out more than $300 billion in
    refunds to individuals each year. During the filing season and
    throughout the year, we provide taxpayer services through a
    variety of delivery channels to help taxpayers file their
    returns accurately and on time. Hereto, our IT systems are an
    essential component of our service efforts.
        For example, IT supports our call center operation, which
    is one of the largest in the country, with which we answer over
    60 million taxpayers' calls in 2016. Our IT systems also
    support our ability to offer online services, which we continue
    to expand in response to increasing taxpayer demand.
        The agency has been working for several years on longer
    term improvements to taxpayer experiences, and to tax
    administration. In this effort, the IRS relies heavily on
    information technology to help carry out these improvements. A
    major part of the initiative is developing an online account
    where taxpayers, or their representatives, can log on securely,
    get information about their account, and interact with the IRS
    as needed, including self-correcting some issues.
        Last year, we took the first step towards this when we
    launched an application on IRS.gov that provides information to
    taxpayers who have straightforward balance inquiries. Since its
    launch, this new tool has been used by taxpayers more than 1.7
    million times.
        Providing outstanding taxpayer service also involves
    ensuring the information taxpayers provide to the IRS will be
    kept secure. We are constantly working to protect our main
    computer systems from cyber incidents, intrusions, and attacks.
    Our core tax processing systems remain secure and currently
    withstand more than 1 million attempts to maliciously access
    the system each day.
        Another important area that IT supports is our battle
    against stolen identity refund fraud. Over the past years, we
    have made steady progress in protecting against this crime.
    That progress has accelerated since 2015, thanks to the
    collective efforts of the Security Summit Group and the
    implementation of the Return Review Program, or what we call
    RRP. The efforts of this strong, unique partnership between the
    public and private sectors, combined with RRP's ability to
    enhance our fraud filters has produced real results. In fact,
    the number of people reported to us that they are victims of
    identity theft declined from 698,000 in calendar year 2015 to
    376,000 in 2016, a drop of more than 47 percent, and that
    decline has continued in 2017.
        For the IRS to improve, even to maintain all these
    services, it is critical for our IT systems to be up to date.
    But they have long been operating with antiquated hardware and
    software. Approximately 64 percent of the IRS hardware is aged
    and out of warranty. And 32 percent of the software is two or
    more releases behind the industry standards, with 15 percent
    more than four releases behind.
        The IRS needs to upgrade its IT infrastructure not only to
    help ensure reliable and modern taxpayer service, but also to
    mitigate the risk to the system. This is a high priority for
    us. We are concerned that the potential for a catastrophic
    system failure is increasing as our infrastructure continues to
    age. But in working modernization of our IT systems, the IRS
    faces a number of challenges. None is more critical than our
    budget. The IRS budget is currently about $900 million below
    what it was in 2010. And modernizing at a faster pace will
    require significant and substantial additional resources in the
    IT area.
        Along with providing adequate funding, Congress can also
    help us by reauthorizing streamline critical pay authority. The
    loss of this authority has made it very difficult and time
    consuming to recruit, retain employees, and expertise in highly
    technical areas in IT, such as cybersecurity, architecture,
    engineering, and operation.
        Chairman Buchanan and members of the subcommittee, this
    concludes our opening statement, and we are happy to take your
    questions.
        [The prepared statement of Mr. Tribiano and Ms. Garza
    follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman BUCHANAN. Thank you.
        Ms. Garza, you are recognized.
        Ms. GARZA. I have no opening statement. It was with Jeff.
        Chairman BUCHANAN. Okay. Let's see. Mr. Verneuille, you are
    recognized.

    STATEMENT OF DANNY VERNEUILLE, ASSISTANT INSPECTOR GENERAL FOR
       AUDIT, TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION
                                (TIGTA)

        Mr. VERNEUILLE. Chairman Buchanan, members of the
    subcommittee, thank you for the opportunity to discuss
    challenges to modernizing the IRS infrastructure. The IRS will
    spend about $2.9 billion, or 26 percent of its fiscal year 2017
    appropriations on information technology. About $500 million of
    this was allocated to business systems modernization. The IRS
    has faced significant challenges in modernizing its legacy
    systems.
        For example, the Customer Account Data Engine 2, referred
    to as CADE 2, is to plan replacement of the Individual Master
    File that is based on a 50-year-old program and architecture.
    Although CADE 2 has been under development since 2009, the
    previous CADE initiative dates back to the late 1990s. IRS has
    attributed the problems with developing CADE 2 to annual filing
    season, resources being provided for other system development
    projects, and the lack of key subject matter experts.
    Currently, there is no planned completion date for CADE 2
    development.
        For the 2017 filing season, the IRS replaced the fraud
    detection capabilities of its legacy systems with the Return
    Review Program, which enhanced its capabilities to prevent,
    detect, and resolve criminal and civil noncompliance. However,
    the enterprise case management solution being developed to
    provide case management functions for the Return Review Program
    has stopped development efforts due to technical limitations in
    the commercial off-the-shelf product. We have an ongoing audit
    that will evaluate the IRS development of an enterprise case
    management solution and expect to issue the report in February
    2018.
        The IRS has been slow to modernize its operations and
    deploy online applications. Our audit of the IRS's
    implementation and use of cloud technologies and services found
    that the IRS does not have an enterprise-wide cloud strategy.
    In July 2016, the IRS created an integrated planning team with
    an overall goal of developing a cloud strategy. However, there
    is no timetable for implementation of a cloud strategy.
        We also recently reported that the IRS successfully
    deployed four web applications as part of its future-state
    initiative. However, the deployments were delayed because of
    inconsistent governance, and lack of project funding, and
    incompatible workflow processes.
        In addition to challenges in modernizing legacy systems,
    the IRS's current hardware architecture is getting older and is
    in need of upgrading. At the beginning of fiscal year 2017, 64
    percent of the hardware is aged. This level far exceeds the
    acceptable level of aged hardware of 20, 25 percent. IRS
    management explained that its budget, over the past 5 years,
    has impacted their ability to reduce the aged hardware.
        In conclusion, TIGTA believes the IRS needs to improve its
    project planning prior to starting development activities. This
    should include more clearly defined requirements and scope, and
    a well-designed architecture and comprehensive assessments of
    commercial off-the-shelf products to be used. The IRS also
    needs to ensure that it follows established methodologies to
    guide project development.
        In addition, the IRS has more information technology
    demands that can be addressed with the skilled resources it has
    available. The IRS should focus on fewer projects and provide
    sufficient resources to ensure the completion of its highest
    priority projects. From a budget perspective, we have seen the
    IRS have success when appropriations are designated for
    specific programs such as when additional fiscal year 2016
    funding was provided for cybersecurity enhancements and
    identity theft prevention.
        In addition, we agree with the IRS's request in the fiscal
    year 2018 President's budget submission for additional
    operation support account funds to be available for 2 years.
    Given the length of the information technology life cycle
    process, 2-year funding will provide the IRS an opportunity to
    utilize appropriated funds before they expire.
        Chairman Buchanan, that ends my statement. I look forward
    to your questions.
        [The prepared statement of Mr. Verneuille follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman BUCHANAN. Thank you.
        Mr. Powner.

      STATEMENT OF DAVID POWNER, DIRECTOR, IT MANAGEMENT ISSUES,
                    GOVERNMENT ACCOUNTABILITY OFFICE

        Mr. POWNER. Chairman Buchanan, members of the subcommittee,
    thank you for inviting us to testify on IRS's efforts to
    modernize its antiquated IT systems and infrastructure. IRS
    spends about $2.7 billion annually on IT. Currently, about 1.9,
    or 70 percent, of this goes towards operational or legacy
    systems, and about $800 million, or 30 percent, goes towards
    new development or modernization. This proportion of spending
    on modernization is nowhere near ideal, and IRS's situation is
    a common Federal IT problem, as the Federal Government as a
    whole spends 80 percent of its IT spend on operational systems.
        Recognizing this problem, GAO put IT acquisitions and
    operations on our high-risk list in 2015, and we are tracking
    more than 800 recommendations across all agencies related to
    this area. Several of these are to IRS on how they prioritize
    and report performance on their IT modernization efforts.
        This morning, I would like to discuss, one, IRS's
    operational systems; two, efforts to modernize these systems;
    and, three, steps to address this situation.
        IRS's legacy, or operational systems, are critical assets
    that are essential to the annual collection of over $3 trillion
    in taxes. Some are newer systems, like the fraud detection
    system, which, this past filing season, prevented over $4
    billion in fraudulent payments. But IRS also has some of the
    oldest systems in the Federal Government, including the
    Individual Master File, which is over 50 years old.
        Our main concern with the Individual Master File is that we
    don't see a solid plan with realistic costs and milestones to
    replace it. Overall, IRS maintains over 20 million lines of
    assembly code. These millions of lines of archaic software and
    hardware that is no longer supported becomes more difficult and
    costly to maintain each year, and poses significant
    cybersecurity risks.
        To IRS's credit, it keeps these old systems running during
    the filing season. But relying on these antiquated systems for
    our Nation's primary source of revenue is highly risky, meaning
    that the chance of having a failure during the filing season is
    continually increasing.
        Now turning to IRS's efforts to modernize these systems, I
    would like to discuss the Fraud Detection System, the Foreign
    Account Tax Compliance Act known as FATCA, ACA, and CADE 2.
    CADE 2 is the system plan to replace the Individual Master
    File. Efforts continue to improve the Fraud Detection System.
    Congressional mandates like FATCA and ACA once consumed a large
    portion of IRS's modernization dollars, but that is no longer
    the case. CADE 2 is the number one modernization investment in
    terms of dollars. Having spent over $170 million in fiscal year
    2016, and 120 in fiscal year 2017, but our ongoing work is
    showing that IRS is not delivering on this modernization effort
    as planned, nor is there a solid plan here to eventually
    deliver CADE 2.
        We have made specific recommendations to IRS regarding
    modernization, but history tells us that congressional
    administration involvement could greatly help here starting
    with IRS. IRS needs to deliver on the priority modernization
    efforts like CADE 2. We are spending significant money here,
    and we are not delivering at an acceptable rate. IRS also needs
    to set clear modernization priorities and develop plans with
    accurate budgets and milestones. So, for instance, on IMF and
    CADE 2, we need to see exactly what it will take to convert the
    IMF to modern languages and replace it with CADE 2.
        Again, to be clear, we need to know how much money and a
    date when we expect to be done. No doubt, there will likely be
    gaps between needs and budget realities, but we need to know
    how much we are off, discuss it, and get realistic, achievable
    plans. Congress needs to hold IRS to the plan by receiving
    quarterly, or at least 6-month progress reports, to make sure
    they stay on track, and GAO can help with this effort.
        Turning to the administration. The administration has
    established the American Tech Council chaired by the President
    and the Office of Innovation, aimed at improving and
    modernizing Federal IT. Recently, these groups have set bold
    direction for the Department of Veterans Affairs to address
    tech improvements to better serve our vets. Leveraging these
    groups and setting similar direction for IRS modernization
    efforts are needed.
        Also, last fall, the comptroller general, Gene Dodaro, held
    a forum on IT high risk where former and current Federal and
    agency CIOs told us that one of the things that is important
    for these large modernization efforts is having the Federal CIO
    involved in our Nation's most important modernization efforts.
        In conclusion, when IRS focuses on priorities, we tend to
    get good results. Continued attention needs to occur with the
    filing season, congressional mandates, and fraud detection. But
    more needs to be done on replacing the Individual Master File.
    Modernizing these tax processing systems should be a top
    priority for our country. This concludes my statement. I look
    forward to your questions.
        [The prepared statement of Mr. Powner follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman BUCHANAN. Thank you for your excellent testimony,
    all of you. I will now proceed to the question-and-answer
    session. In keeping with my precedent, I will hold my questions
    until the end.
        I now recognize the lady from Indiana, Mrs. Walorski.
        Mrs. WALORSKI. Thank you, Mr. Chairman. Thank you to the
    panel for being here.
        Ms. Garza, on September 7th, nearly a month ago, we learned
    of the single largest data breach with more than 140 million
    individuals being impacted. When did the IRS learn of the
    breach?
        Ms. GARZA. So we learned it as part of the news that
    evening. The very next day, we got together and started to talk
    about what that impact to the IRS might be.
        Mrs. WALORSKI. On September 8th, the next day, you were in
    contact with Equifax about the scope of the breach, whether it
    impacted the IRS data----
        Ms. GARZA. That is correct.
        Mrs. WALORSKI [continuing]. As you just said. In fact, IRS
    sent a team of IT experts, criminal investigators, and the
    Treasury Inspector General for Tax Administration to Atlanta,
    to Equifax, to verify everything that Equifax had told the IRS,
    correct?
        Ms. GARZA. That is correct.
        Mrs. WALORSKI. Did you have any reason to doubt Equifax or
    what they had told you during that process?
        Ms. GARZA. I had no reason to doubt them, but it is our
    protocol to go and do a physical inspection to validate what we
    are being told.
        Mrs. WALORSKI. Did you learn anything that caused concern?
        Ms. GARZA. So, in this case there were a couple of things.
    One, we were able to verify, by looking at the forensics of
    what the bad actor did and was able to access, that none of the
    IRS data had been compromised. However, we did find that we had
    gotten inconsistent information when we had first talked to
    Equifax. We did find that in their network logs, along with
    other companies' information, some of our information that we
    had sent over was maintained. But, as I said, there was no
    evidence that the bad actors were able to get to the network
    logs. Their primary area to look at were the databases.
        Mrs. WALORSKI. I read last night in the press that the IRS
    had just signed a $7 million contract to have Equifax provide
    identity proofing. That contract was just signed on September
    29th, correct?
        Ms. GARZA. That is what I have learned this morning.
        Mrs. WALORSKI. So more than 20 days had passed since we
    learned of the greatest data breach in history, and you just
    signed a contract to pay Equifax to have access to IRS data for
    identity verification purposes. Did you approve and sign that
    contract?
        Ms. GARZA. I did not.
        Mrs. WALORSKI. Mr. Tribiano, did you approve and sign that
    contract?
        Mr. TRIBIANO. No, ma'am, I did not.
        Mrs. WALORSKI. Who signed the contract?
        Mr. TRIBIANO. Our procurement officer would have signed
    that contract.
        Mrs. WALORSKI. And who is that?
        Mr. TRIBIANO. Ms. Shanna Webbers.
        Mrs. WALORSKI. How many employees at the IRS have the
    authority to sign a $7 million contract binding the IRS on IT
    issues?
        Mr. TRIBIANO. I would have to get back to you on that,
    ma'am. I don't have that number.
        Mrs. WALORSKI. Can you do that?
        Mr. TRIBIANO. Yes, ma'am.
        Mrs. WALORSKI. You know, I am floored to sit here this
    morning. This is an abject failure. And I haven't been on this
    Committee very long. But I think this is my third or fourth
    hearing already on this issue of IT and who is responsible. And
    we sit here this morning, we talk about all these issues we
    have talked about before with no changes happening. The
    American people are sitting there this morning saying, this is
    beyond abject failure. This is a management failure. If
    nothing, it shows that the IRS structurally needs some reform
    and needs major change. This is why the American people hold us
    accountable and we try to hold you accountable. And then we
    have contracts being signed right in the middle of these
    investigations of the biggest data breach in the history of
    this country, exposing a massive amount of Americans now to
    identity theft.
        Frankly, the IRS should not be in the position to have
    major IT acquisitions happening without you, Ms. Garza, or you,
    Mr. Tribiano, even knowing that they are happening. I don't
    think there is anything anybody can say at this point, other
    than pointing the fingers now to a third person that signed the
    contract.
        Mr. Tribiano, did you want to say anything?
        Mr. TRIBIANO. Yes, ma'am, if I can. I just want to clarify
    a couple of things, if I can, and walk through this. And this
    is not an excuse. This is just what happens. We had a contract
    with Equifax. We had two different contracts. We had one that
    was managed out of our privacy team, and that was for credit
    monitoring. That contract was competed and awarded to a
    different vendor. So that happened and went into effect October
    1. We had the other contract, which was our eAuthenticated
    service contract that was competed.
        Mrs. WALORSKI. Okay. Excuse me. I know we are going to run
    out of time here. I see the yellow light. And I know you have
    got to get back to me the number of people that can sign these
    contracts, but, obviously, Ms. Garza can, and you can, and the
    woman that you just explained can. Who else can? That is three
    right there. But who else has the authority to sign something
    like a $7 million contract?
        Mr. TRIBIANO. I will get back to you on that, ma'am, about
    the numbers. But I want----
        Mrs. WALORSKI. But you have to know the other people in the
    office that can sign.
        Mr. TRIBIANO. Well, there are certain procurement officers
    that have warrants to be able to do that.
        Mrs. WALORSKI. Are we talking 10 people? Are we talking 15
    people? Are we talking five people?
        Mr. TRIBIANO. The range of what procurement officers'
    warrants are for are varied. Some procurement officers have
    warrants up to a certain dollar amount. I have to be able to
    get you that breakdown and show you who and what category can--
    --
        Mrs. WALORSKI. I appreciate it. And I know I am out of
    time. Thank you, Mr. Chairman. I will yield back.
        Chairman BUCHANAN. Thank you.
        Mr. Holding, you are recognized.
        Mr. HOLDING. Thank you, Mr. Chairman.
        Ms. Garza, I think this is a question for you. As we know,
    the Federal Acquisition Regulation, I think, is 12.101, sets
    forth the acquisition principles, policies, procedures that
    govern acquisitions of Federal agencies. And this regulation
    governs the contracts, orders, and agreements entered into by
    the IRS, obviously. And among things, the Federal Acquisition
    Regulation requires prime contractors and subcontractors to
    incorporate, to the maximum extent possible, practicable,
    commercial items and components of items supplied to the
    agency.
        So my question to you is, to what extent do you feel you
    are leveraging the new, more effective, and modern technologies
    that are currently purchased by the IRS?
        Ms. GARZA. So in developing our solutions for--especially
    in our modernized projects, we look for COTS products that
    might be available. RRP is a perfect example where we went out
    and we looked at a suite of products for us to utilize to
    deliver that capability. So we integrated those products. We
    look for things best-in-class in order to deliver modernization
    projects.
        Mr. HOLDING. So do you believe that there is anything you
    have currently purchased that you are underutilizing?
        Ms. GARZA. There might be something. I don't have an answer
    for that. I don't have full knowledge of that answer.
        Mr. HOLDING. Is there a way that you could--do you maintain
    some sort of inventory of products that you purchased, and, you
    know, measure their effectiveness, measure whether you are
    using them or not?
        Ms. GARZA. We measure whether we are using them or not. We
    have an inventory of those products to measure utilization. In
    some cases, there are some products that are underutilized. By
    that, I mean we don't have a lot of people using them. But some
    of this is a dialogue between us and our business customers.
    And there will be, like, groups of people that have unique
    needs that are using that product. And so it really goes back
    to, what is the business need? And is that product needed for
    that need? In some cases, we are trying to consolidate the
    products. We are trying to simplify our infrastructure, and we
    are making some progress in that. But it all goes back to, what
    is the business need? And does that product meet that need?
        Mr. HOLDING. So would you be able to provide the Committee
    with that inventory and with your analysis of what is being
    utilized or underutilized for our edification?
        Ms. GARZA. Sure.
        Mr. HOLDING. Good. Thank you.
        And, it came to light in a hearing last year, or the year
    before, the amount of unionization in the IRS. I think the
    Veterans Administration and the Internal Revenue Service are
    the two most unionized government agencies. Do you know the
    percentage of your IT employees that are unionized?
        Ms. GARZA. I do not know that answer.
        Mr. HOLDING. Mr. Tribiano, you are reaching for the mic
    there. Do you----
        Mr. TRIBIANO. No, sir. I do not know that answer. But those
    are statistics that we have, and we can deliver that answer to
    you.
        Mr. HOLDING. I think I recall that your contracts provide
    that you are able to spend something like 500,000 paid hours
    per year in union activity at the IRS. Does that sound about
    right?
        Mr. TRIBIANO. That could be right.
        Mr. HOLDING. I think Mrs. Walorski covered a couple of
    these in her questioning. But I want to make sure that we have
    got an answer for these for the Committee regarding the Equifax
    contract. Was it approved by the Director of Privacy at the
    IRS?
        Mr. TRIBIANO. No, sir. What I was trying to explain before
    is we had two contracts. The Director of Privacy had the one
    for credit monitoring which is different than the contract for
    eAuthentication. That contract for credit monitoring was
    recompeted and awarded to a new vendor. The eAuthentication was
    recompeted and awarded to a new vendor, but Equifax protested
    the procurement. And that happened in July. So that is under
    GAO right now for a decision about which way to go. So when we
    came down to September 29th when the Equifax contract expired,
    we had to either, one, stop the service, which means millions
    of taxpayers would not be able to get their transcripts,
    including those that are in need of it, like in the hurricane
    disaster areas. They use those tools to get their transcripts,
    or do a bridge contract with Equifax until GAO decides on the
    protest, and we move forward.
        Mr. HOLDING. All right. Mr. Chairman, I see I have run out
    of time. Thank you.
        Chairman BUCHANAN. Thank you. Mr. Bishop, you are
    recognized.
        Mr. BISHOP. Thank you, Mr. Chairman.
        I guess that I am not sure who to direct this to, Mr.
    Tribiano or Ms. Garza. I am listening to the questions. And,
    you know, Mrs. Walorski, I guess, I support the questions that
    she asked and the tone in which she asked them, because that is
    the tone in which my constituents are concerned about this.
        Can you give us some assurances, after this Equifax breach,
    that you have taken precautions, that there are steps that have
    been taken, to address what could be one of the biggest
    breaches in identity theft in the history of our country?
    Clearly, there is a gap there. And we have got to do something
    to address it. And I assume that the IRS has done something.
    What can you tell us today that would provide this Committee
    and our constituents assurances that we are going to do
    something about this to ensure that nothing really, really bad
    happens this tax filing season.
        Ms. GARZA. So I can take that. So what we did immediately,
    once we heard about the Equifax, we not only contacted Equifax,
    but we sent a team over. The team went over, and we did
    analysis of their data breach. We identified all of the
    elements that had been compromised. And then, working with--
    take the investigations. We went through all of that
    information. And then we went through, on an application-by-
    application basis, to determine if that compromise would put
    our systems at risk. Our evaluation showed that the approach
    that we have taken at the IRS is to have a multilayered defense
    mechanism in our applications. And so, based on that, we
    determined that we had other mitigating controls in place that
    would protect the taxpayer information. Furthermore, there was
    about 209,000 SSNs that we thought were at higher risk. And for
    those 209,000 SSNs, we are in the process of receiving the SSNs
    and we are going to protect those accounts specifically.
        Mr. BISHOP. Have those SSNs and the owners of those SSNs
    been informed of this situation?
        Ms. GARZA. That would be an Equifax question to be asked.
    We are going to tag the accounts to make sure that no one can
    come in and----
        Mr. BISHOP. But if my account is tagged, I would like to
    know why it is tagged. And I would think as a taxpayer I would
    have the right to know that.
        Ms. GARZA. So I think that is a business decision, and we
    will support whatever the business decision is.
        Mr. BISHOP. Okay. A million and one questions to ask here.
    Great concern. If a person--let me ask, Mr. Powner, did you
    have something to add to that?
        Mr. POWNER. Yeah. I would like to go back to the question
    of approving IT contracts. There was a law passed December 2014
    called the Federal Information Technology Acquisition Reform
    Act----
        Mr. BISHOP. Right.
        Mr. POWNER [continuing]. FITARA. I do a lot of work on
    FITARA at all agencies and departments. And one of the
    provisions in that law is to strengthen CIO authorities. The
    CIO should approve the IT budget. They should approve major IT
    contracts. That is a provision in the law. And I can tell you
    right now that was put in there because of this stuff that is
    happening. The procurement shop, and the IT shop, and sometimes
    the CFO organizations, there are walls between these
    organizations. And if we would simply approve major IT
    contracts by CIOs, it would help solve this problem.
        Mr. BISHOP. So that is another question that I have.
        Mr. Chairman, there has got to be a solution out there. In
    this great country of ours, with all the great innovation, the
    private sector has got to have a solution here. I know that the
    commercial side and the criminal side of the IRS deal with
    things differently. My understanding is the criminal side works
    with a 1994 product to address these issues, which is
    completely unacceptable to me. I may be wrong on that, on the
    timing, on the name of the product, but it is at EFDS.
        Ms. GARZA. So that is the system that RRP is replacing.
    And, basically, at this point, we have retired the bulk of the
    EFDS, the old system, and are using now the RRP system to do
    the pre refront in identity theft.
        Mr. BISHOP. How about the LCA system, the lead case
    analysis?
        Ms. GARZA. So that is part of the new RRP system, the link
    analysis, and it is available to be utilized on that new
    system. There are still components of the old legacy system,
    primarily around the case management components, that still
    need to be modernized. We made a decision in trying to simplify
    our footprint to develop an enterprise case management system.
    So rather than having RRP build its own case management system
    and other parts of the organization building separate, there is
    63 different case management systems that we are going to
    consolidate into one platform of case management. And so we are
    waiting for that platform to be developed so that then those
    components of EFDS can be replaced.
        Mr. BISHOP. Mr. Chairman, I see I am out of time. But I
    would hope that at some point in time, we can get this group
    together again and talk about what we have done and not what we
    are going to do. Because this is a 1994 technology, and there
    is too much technology in this country to not utilize.
        Chairman BUCHANAN. Thank you.
        Mr. Schweikert.
        Mr. SCHWEIKERT. Thank you, Mr. Chairman.
        Mr. Powner, and I will tell you, we were going through some
    of this late last night and early this morning, and there are
    lots and lots of questions. So let's sort of go a different
    direction. When you have actually looked over the agency, first
    off, do you have a sense of how much of legacy systems are
    still up and running? And when I say legacy, I mean things that
    are maybe 15, 20, 25 years old, are still running in the
    background.
        Mr. POWNER. Yeah. There is a good portion as legacy spans.
    There is real old stuff that is over 50 years old, going back
    to the origination on the Individual Master File that processes
    our tax returns.
        Mr. SCHWEIKERT. And are they just using bolt on, and bolt
    on, and bolt on----
        Mr. POWNER. And I think, as Mr. Tribiano mentioned, I mean,
    a lot of those versions behind, and we got hardware that there
    is no longer warranties on. That is the big issue. When you
    really look at IRS, I think the big problem at IRS is the
    Individual Master File. Because that is the system that
    processes our tax returns. And they do a great job getting this
    old system to work. But you know what is going to happen
    eventually one filing season? It is going to stop. And what is
    the plan to replace it? There isn't a good one.
        Mr. SCHWEIKERT. Okay. My thoughts, let's do them out of
    order. In your understanding, why is that master file not
    running on a cloud-based system?
        Mr. POWNER. Well, it is not running on a cloud-base or
    anything close to modern because there has been other
    priorities over the years. And it is not to say they don't work
    on it some, because it is the number one investment. But we are
    not getting enough return on it.
        Mr. SCHWEIKERT. Isn't there translational software that
    would basically do the migration?
        Mr. POWNER. Yes, sir. You can translate those languages. I
    mean, the issue with IRS now, they are multiple versions
    behind, so you are going to have multiple layers of
    translation. It is not an easy thing to do. But we need to
    focus on it as a priority. And that is why I say----
        Mr. SCHWEIKERT. No, no, no. It is a lot easier than running
    around sticking thumbs in dikes. And I know I am interrupting,
    but it is partially the time.
        When you also looked at the agency and its multiple
    subdivisions, did they have a commonality of platforms? They
    were all running on a certain type of software? Or did lots and
    lots, lots of little subdivisions within the agency, were they
    purchasing different types of software?
        Mr. POWNER. It is all over the board, depending on the
    mission criticality of the app--and some things are newer
    there. I think the RRP----
        Mr. SCHWEIKERT. I am less concerned about the age of the
    software. It is the commonality of the platform.
        Mr. POWNER. It would not be completely common across. No.
    There are probably opportunities to improve that.
        Mr. SCHWEIKERT. Okay. And I am going to screw up the quote.
    But I remember a year or two ago reading one of the biographies
    of Steve Jobs, and within there was a real interesting
    discussion when they had had a failure, a huge failure, trying
    to move their accounting systems, and coming back in and
    saying, we are going to try something new. We are going to
    change our work methodology to match the software instead of
    trying to force the software to match our work process.
        And everything I am reading, you have lots of subdivisions
    within the agency that are trying to make the software match
    how they already do their workflow. Workflow is a lot easier to
    change.
        There is one other on my list that I need--did you see any
    pattern of IT talent in the agency leaving the agency and
    turning around and being rehired as a contractor in the agency?
        Mr. POWNER. I don't have information on that. I will tell
    you, though, this. When you--the difference between paying an
    internal employee and a contractor to maintain that old
    assembly code, it is a lot more expensive if you hire a
    contractor.
        Mr. SCHWEIKERT. Okay. This may be for a future
    conversation, but we have someone who claims to be providing
    information that there is some sort of pattern.
        Mr. SCHWEIKERT. In my last--and, I am sorry. I thought I
    would go faster than this. I apparently haven't had enough
    coffee. Why such great difficulty moving to the cloud when that
    was--almost 10 years ago was going to be the major mission of
    the agency's CIO?
        Ms. GARZA. So although we do not have a cloud strategy
    documented, we have, for the last several years, been taking on
    elements of the cloud strategy. For example, our entire portal
    service, which was replaced in 2012 and has been steadily--as
    an infrastructure, as a service, private cloud strategy. We
    also did--our enterprise storage capability is a cloud solution
    that allows us to move data.
        Mr. SCHWEIKERT. Are you housing the enterprise servers?
        Ms. GARZA. I am sorry, what?
        Mr. SCHWEIKERT. Are you housing the enterprise servers?
        Ms. GARZA. Enterprise service.
        Mr. SCHWEIKERT. The servers. The servers. Do you control--
    --
        Ms. GARZA. For storage?
        Mr. SCHWEIKERT. Do you control the hardware or is the
    hardware distributed?
        Ms. GARZA. For the enterprise storage capability, the
    servers are in the cloud, and we move the data back and forth.
        Mr. SCHWEIKERT. And those servers in the cloud are owned by
    someone on the outside or the agency?
        Ms. GARZA. I don't have that answer.
        Mr. SCHWEIKERT. Okay. Mr. Chairman, I think this is one of
    those occasions where there is going to be a long letter to
    follow.
        Chairman BUCHANAN. Thank you.
        Mr. Rice, you are recognized.
        Mr. RICE. Thank you, Mr. Chairman.
        Who on the panel thinks that the modernization efforts of
    the IRS are acceptable? Who on the panel is in charge, or is
    anybody--any of you all the point person, the person who
    directs modernization? Is it you?
        Ms. GARZA. I am responsible for that.
        Mr. RICE. Okay. And if nobody up here thinks it is
    acceptable and you are the one in charge, how long have you
    been doing this?
        Ms. GARZA. So I became the CIO about 14 months ago.
        Mr. RICE. Uh-huh.
        Ms. GARZA. But I have been involved in the modernization
    effort for some time. I will tell you that we have had a lot of
    success, and I ask that you look at it from the bigger picture.
    Our current electronic filing system was a huge success. The
    Integrative Financial System was part of the modernization
    program. At the same time, we have been delivering very
    significant----
        Mr. RICE. What----
        Ms. GARZA [continuing]. Legislative mandates----
        Mr. RICE. What is the Individual Master File?
        Ms. GARZA. So the Individual Master File is the database,
    the system, that holds every individual taxpayer's account. It
    has a record of the account changes, the things that have
    occurred to that account.
        Mr. RICE. The system that holds that, it was designed 50
    years ago?
        Ms. GARZA. It was first implemented in 1962.
        Mr. RICE. Okay. So the hardware that runs--that system runs
    on, it can't be modern. That system----
        Ms. GARZA. It is running on modern. The application, which
    is the ALC code, was developed in 1962. However, the hardware
    that it writes on is current technology.
        Mr. RICE. All right. So if the code was written that long
    ago, then you must have folks on your payroll that are
    continually maintaining that. Is that correct?
        Ms. GARZA. Yes. And the number of people that know and
    understand ALC is dwindling. So we do have a sense of urgency
    that we need to get the ALC, especially the core components of
    the master file modernized.
        Mr. RICE. It is only 55 years old.
        Ms. GARZA. That is correct.
        Mr. RICE. That is a heck of a sense of urgency.
        Mr. Powner, you said that part of the problem is that
    Congress needs to set goals and hold people accountable. Is
    that right?
        Mr. POWNER. I think that would be very helpful. And I have
    just seen it work over the years.
        Mr. RICE. We can't go in there ourselves and write code and
    convert files. That is not our job, and we are not capable. But
    can you help us come up with a----
        Mr. POWNER. Where I think you could help is this: Ask Gina,
    Ms. Garza, how much money it will take, and how many years to
    replace the Individual Master File. We need a clear answer on
    that. Is it 5 years at $100 million each year, whatever it is,
    we need that----
        Mr. RICE. What is the answer, Ms. Garza? What is the
    answer?
        Ms. GARZA. So there are two major components of the IMF
    that we have developed----
        Mr. RICE. How much money and how long will it take?
        Ms. GARZA. So we believe that we can deliver a system
    replacing those core components in 5 years if we can get 50 to
    60 FTEs and the funding associated with it, with some direct
    hire authority so that we can hire the right skills, and about
    $85 million each year. We----
        Mr. RICE. $85 million a year?
        Ms. GARZA. Yes, sir.
        Mr. RICE. Well, you got $2.9 billion now, right?
        Ms. GARZA. So a lot of that fund, those funds, are going to
    do the unfunded legislative mandates, to do tax filing season,
    to run all of our current operations.
        Mr. RICE. But this $2.9 billion is for IT, right?
        Ms. GARZA. Yes.
        Mr. RICE. Isn't it more expensive, at some point, to
    maintain 55-year-old software than it is to just buy new and
    convert it over? I mean, wouldn't it be cheaper?
        Ms. GARZA. Actually, the IMF is very efficient.
        Mr. RICE. Mr. Powner, wouldn't it be cheaper?
        Mr. POWNER. Yes, I think over time it would be cheaper, and
    I think it is efficient. The issue is, I think, the human
    capital scenario where we are running out of programmers that
    know this stuff. You know, we are training young programmers
    who know modern languages this old assembly code to keep it
    running. I just think it is highly risky, and I think what we
    heard here is they need $85 million over a 5-year period----
        Mr. RICE. So if your programmer has a heart attack, nobody
    is going to be able to get their tax refund. Is that what you
    are saying?
        Mr. POWNER. You know what, we have had examples like this.
    Last year I highlighted all the old systems in the government.
    This is right up there along with the 8-inch floppy discs that
    DoD is using on our nuclear command system. So we got problems,
    but this is one of the top five.
        Mr. RICE. Mr. Chairman, I sure would like to keep going,
    but I see my time is up.
        Chairman BUCHANAN. Thank you. You know, our goal in this
    Committee, we are trying to do the overall Committee tax reform
    sometime this year ideally. We are hopeful. And then IRS reform
    we would like to do, it has been 20 years. But I guess my
    question, and a lot of us--at least I was motivated, to think
    that we have equipment out there--I got out of college in the
    mid 1970's, we would sell many computers. I mean, just to think
    that we have got equipment from 1970s and 1980s out there is
    mind-boggling. But I guess the question I would have initially
    as a business guy over the years, is do you have an IT plan in
    terms of going forward? Because I think one of the things is
    when we do IRS reform, we have to take a look at the whole
    thing on IT, and identity theft, and there are a lot of
    different things. But do you have a plan? Has that plan ever
    been presented to a committee? Because if someone came in to
    me--and we had this situation--what I would do is I would have
    the best and brightest, present a plan, and then get some sense
    of the return that we would get as shareholders or whatever. So
    let me just ask all of you. Do you feel like you have a plan?
    Is there a buy-in to the plan? We will start with the gentleman
    there.
        Mr. TRIBIANO. Yes, sir. We do have a digital roadmap on how
    we would get from where we are now to where we want to be. I
    don't know if we shared it with the committee. I have to go
    back and take a look.
        Chairman BUCHANAN. How long is that plan? Is that a five-
    year, 10-year plan?
        Mr. TRIBIANO. It depends on what--there is a lot of
    components to it, and there are certain milestones that you
    have to reach. One of the major things we have to get to is
    stabilizing the infrastructure as we see it now so we can
    continue at least delivering filing season as we modernize from
    that point. So my concerns have been focused on the delivery of
    the filing season part of it. So we can have that----
        Chairman BUCHANAN. The thing is, you have got to have a
    vision. You have got to have a sense of the future, because,
    you know, otherwise, I think that is probably why we are in the
    situation we are in. We are just trying to react instead of
    being proactive.
        Mr. TRIBIANO. Absolutely. And we would love to sit down and
    go through that plan with the committee, with your staff,
    whatever you deem necessary, roundtable discussion, and have
    that back and forth and explain where we are going and how we
    think we can get there and get the input. I mean, as our
    partners at GAO are stating, we want congressional engagement
    on this. We want you to understand the concerns and issues and
    how we need to get to where we need to go.
        Chairman BUCHANAN. What is your thought on that? Do you
    feel like we have got a workable plan going forward? I mean,
    you know, it is not just about throwing a lot of money at it.
    It just seems that we can be a lot more efficient going forward
    in terms of personnel costs and everything else. And I will get
    into that in a minute. But do you feel like there is a plan? I
    mean, you are the one that is kind of heading this up.
        Ms. GARZA. We have what we have called a technology
    roadmap. And that technology roadmap was developed in concert
    with a future-state vision for the IRS. And so as part of that
    document, you will see the evolution and the migration of
    current-state IT to future-state IT.
        A- subset of that is the digital roadmap, which is what we
    are really focused and have prioritized right now. We want to
    be able to get out and provide services to taxpayers. But those
    documents are in place. We do utilize them. And as we talked
    earlier, the enterprise case management system is one of those
    things that came out of the technology roadmap where we are
    trying to consolidate 63 legacy systems that have been around
    forever into a single COTS platform in the cloud so that we can
    provide case management capabilities across the board.
        One of the things that we did with RRP, we did not let them
    create their own case management system. That was a conscious
    decision on our part because we needed to stop creating
    stovepipe solutions.
        Mr. RICE. Mr. Chairman, can I make a suggestion?
        Chairman BUCHANAN. Yeah.
        Mr. RICE. Why don't we ask Mrs. Garza, the CIO, to give us
    a plan from here to modern----
        Chairman BUCHANAN. Uh-huh.
        Mr. RICE [continuing]. And have regular meetings, you know,
    quarterly, or whatever, and ask what the progress is on those.
        Chairman BUCHANAN. That is a good point. Do you feel like--
    is this a plan you have shared with anybody in terms of Members
    of Congress or anywhere else?
        Ms. GARZA. I don't know if we have shared the technology
    roadmap and the digital roadmap, is certainly something that we
    can do. And we would be happy--I remember--and Dave Powner and
    I go back to when we used to come up and brief, on a quarterly
    basis, congressional staff on the progress against----
        Chairman BUCHANAN. This is going to be an area where I
    think all of us are going to be interested going forward
    because it is not acceptable.
        But, Mr. Verneuille, I want to run through all of these.
    What is your sense? Is there a plan? Or is there a vision? What
    are your thoughts on it?
        Mr. VERNEUILLE. Like Ms. Garza mentioned, there is a
    technology roadmap, and we have seen it. The challenge we see
    is that the priorities change every year. So there is a
    strategy and a roadmap, but the details of what they deliver
    every year, the requirements that are going to be developed and
    delivered every year change annually based on priorities,
    resources, and other requirements coming in for that year. So
    it is a plan, but what they deliver is going to change every
    year.
        Chairman BUCHANAN. Mr. Powner, would you want to comment on
    it?
        Mr. POWNER. So to be balanced, I think there is a roadmap
    they have used to deliver on some aspects of the technology at
    IRS, but--and it is a big ``but''--there is not a workable,
    achievable plan to replace the IMF.
        Chairman BUCHANAN. The second follow-up question for all of
    you is this: I have a gentleman who has run a good-sized
    business, a lot of restaurants all over. He said to me, he
    said, Vern, you know, if I hire a manager, $50,000, in one of
    his stores--and then the cost today of supporting an individual
    is another 42 percent, so it is $70,000. He said, I have gone
    to much more automation, and as people retired out, I have just
    been able--not even had to cut head count, but, he said, we
    have been able to get a good return on our technology.
        And I guess the question is, is that, you know, as a part
    of a plan, I would like someone to tell me, here is what we
    need to invest, but here is the efficiency coming out of the
    system. Because if we are dealing with software back in the
    1970s and 1980s, and hardware, there has got to be a lot of
    deficiencies as a result of that. And I think that is the
    concern a lot of us have, just throwing more money at it. The
    question is, is to have a plan, what is the return on that plan
    in terms of the technology dollars being spent? We should have
    a way of being able to get to those numbers, because there has
    got to be an enormous savings.
        I went into a facility the other day with robots and
    everything. They have cut a lot of personnel out of this plant,
    a big plant, Amazon. It is one of our new facilities in our
    area. I was just shocked about it. They probably have three
    times as many folks working there because of today's
    capability. And that is something we need to think about. That
    is why I am big on planning, personally, as a business guy.
    Because if you don't have a vision, you perish. But we need to
    have a vision, a plan, in terms of this space, in terms of the
    IRS in general, before I would be willing to commit any
    dollars, because I would like to see what the return on that
    investment would be.
        So I will give you a chance, all of you, just to make a
    comment.
        Mr. TRIBIANO. Yes, sir.
        Chairman BUCHANAN. That is just my feeling. I am more of a
    big picture guy.
        Mr. TRIBIANO. Chairman, you are absolutely right. I mean,
    we have a plan. We have to do a better job of articulating what
    the results of that and the outcomes of those are. Now, there
    are some measurements with that that are not as easy as dollars
    versus costs.
        Chairman BUCHANAN. Uh-huh.
        Mr. TRIBIANO. But some of them is outcomes, meaning better
    taxpayer service, less lines at our walk-in centers, less calls
    to our call centers. But there are measurements that we can
    articulate.
        Chairman BUCHANAN. But my point is, is that it should also
    have some savings in terms of personnel costs, I would think.
    Because there is much more capability in terms of computing
    power and everything else.
        Would you like to add something, Ms. Garza?
        Ms. GARZA. I agree with you. And, actually, as we spoke
    earlier, we are looking to robotics ourselves. We believe that
    there are a lot of business processes that can be automated,
    and, therefore, decreasing the number of FTEs that the IRS
    might need. There is also areas in testing and other areas
    where automation would be very, very helpful. We keep looking
    for places where we can be more efficient. Moving to cloud is
    one of the strategies that we are pursuing. We believe that we
    can either have a managed service or a cloud service, that then
    we won't need to have the people in order to maintain those
    systems, and then we can rely on them to make sure that all of
    the hardware/software is being maintained. So this is part of
    the conversation that we are having and the plans that we are
    doing.
        Chairman BUCHANAN. Well, one thing we are going to want to
    do is get whatever plan that you do have, just talk about that,
    where we are at and where we are going.
        Mr. Verneuille?
        Mr. VERNEUILLE. Yes, sir. Part of the return on investment
    also involves retirement of systems that you are replacing. So
    the issue with IMF not being completed or converted to CADE 2,
    they cannot retire IMF until CADE 2 is completed. So that is a
    loss of efficiency. They are spending millions of dollars a
    year maintaining IMF. And if they complete CADE 2, that is more
    savings. As well as on the RRP case management process, they
    are currently spending millions of dollars maintaining the EFDS
    case management until they get the enterprise case management
    solution implemented. So there is more savings by retiring
    legacy systems.
        Chairman BUCHANAN. Mr. Powner.
        Mr. POWNER. I would agree that there are huge efficiencies
    with modernization. I think another key aspect, though, that
    comes with the efficiencies is the improved security,
    cybersecurity, with the modern technology.
        Chairman BUCHANAN. Huge issue, obviously.
        Mr. POWNER. Absolutely. So that is extremely important
    going forward.
        Chairman BUCHANAN. Mr. Bishop, did anybody else have a
    comment or a question? I think we have a couple of minutes.
        Mr. BISHOP. Mr. Chairman, I appreciate this hearing, and I
    think it is very helpful. This is not a shot at the IRS. But I
    think it would also be helpful for this Committee to bring in a
    panel from the private sector to hear their solutions for this
    issue. Because we have ample ingenuity out there, entrepreneurs
    out there, who are working in this space every day of the week.
    And when the IRS needs 35 FTEs, or $85 million a year, I think
    before we do anything like that, we spend taxpayer dollars in
    that way, we ought to be talking to the private sector to see
    what their solutions are. And I know that Palantir, for
    example, out in California, is one of the companies that has
    provided the technology on the--I believe it is on the civil
    side.
        Chairman BUCHANAN. Yeah.
        Mr. BISHOP. So it would be very helpful to be able to have
    them come in as well.
        Chairman BUCHANAN. Okay. I would like to thank our
    witnesses for appearing today before us. Please be advised that
    Members have two weeks to submit written questions, to answer
    later in writing. Those questions and answers will be a part of
    the formal record. And with that, the Subcommittee is
    adjourned.
        [Whereupon, at 9:57 a.m., the Subcommittee was adjourned.]
        [Member Questions for the Record follow:]

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