IRD's $1 billion-plus IT project running under budget

The Inland Revenue Department's $1 billion-plus project to replace its aging information technology infrastructure is running 15% under budget, and is expected to be at the lower end of its initial price range.

Commissioner Naomi Ferguson told Parliament's finance and expenditure committee the project's finances are being tightly managed, and reaffirmed expectations the total project cost will be at the lower of the $1.3 billion to $1.9 billion range. She says there is scope for more benefits to be derived from the programme.

The government agency has spent $120 million of its $194 million budget allocation, and will update the projected cost in a business case for ministers by the end of March next year.

"In terms of financial controls, the programme is running under budget by 15%," she said when asked what measures IRD had in place to mitigate the risk of ballooning costs. "Our strong track record shows the strength of the financial discipline we have in place."

The tax department's business transformation project to replace its 30-year-old FIRST IT system aims to protect the agency's ability to collect Crown revenue, while allowing it to deal with a raft of new responsibilities tacked on to the network over the past 15 years. These include overseeing KiwiSaver payments, student loans and welfare entitlements.

In June, Colorado-based Fast Enterprises was selected as the preferred software supplier for the new system, and will deliver the bulk of the project.

Deputy commissioner Greg James says about 87% of the core services will be provided by Fast's out-of-the-box software, such as analytics and information needing add-on development.

It's a "very, very high fit of core processes both tax and social out of the box," he says.

Ms Ferguson told politicians the IRD had specifically looked at the glitch-plagued Novopay school payroll system as a project it could learn from, and hired former Deloitte partner Murray Jack, who was involved in the Novopay report, to ensure the tax department had measures to prevent the same problems occurring.

Earlier this year, the Office of the Auditor General investigated the governance of the IRD project, finding it provided clear direction and supported decision-making, but that the tax department needs to carefully manage the risks associated with the programme.

(BusinessDesk)