IRD accepts responsibility for IT budget blow-out

Inland Revenue is happy with lead provider Accenture overhauling its 30-year-old information technology system in a major transformation of its business, which so far is running under budget and on time.

IRD commissioner Naomi Ferguson told Parliament's finance and expenditure committee the government's tax gatherer has spent $83 million to date on its business transformation programme, and is currently running under budget and on time. The replacement of its ageing FIRST IT system aims to protect the agency's ability to collect tax, while meeting a raft of new responsibilities thrust upon the department over the past 15 years such as overseeing KiwiSaver payments, student loans and welfare entitlements.

Ms Ferguson couldn't immediately provide the committee with an estimate of how much would be spent on the project this year, but said "we are under budget and delivering against milestones in that business case."

Asked if she was aware of Accenture's cost blow-out when it developed a tax platform for the Australian Tax Office, Ferguson said she was aware of those problems and was comfortable with the appointment of the global management and consulting firm. One of the reasons behind the ATO's over-run in costs were extensive changes in superannuation policy that significantly altered the scope of the project.

IRD's IT project has attracted attention for its size, with initial estimates predicting a cost of some $1.5 billion over a 10-year period.

When asked why local companies such as cloud-based accounting software firm Xero weren't able to bid for the project, Ferguson told the committee that local software developers didn't build the kind of platforms the department needed but that IRD was engaging with people like Xero's chief executive Rod Drury to see how to better integrate the new system with their accounting platforms.

Accenture was one of a number of multi-national companies identified last year in a tax minimisation scheme routing funds through Luxembourg, and while Ms Ferguson wouldn't comment specifically on the company, she said the department has contractual obligations with suppliers to ensure they comply with New Zealand tax laws.

Ferguson accepted the IRD was responsible for poor project management, which underestimated the cost of the IT system for child support payments. The cost ballooned to $210 million from an earlier forecast of $120 million, which forced a delay to the second phases of its implementation to scale back the immediate cost to $163 million.

The department picked up the escalating costs through its own governance processes and was confident there wouldn't be a further increase in the project's bill.

(BusinessDesk)