Deployment of the Internal Revenue Service’s Customer Account Data Engine 2, or CADE 2, database has been delayed and its deployment cost has risen an estimated 74 percent to $83 million, according to a new government report.

The report, publicly released Tuesday by the Treasury Inspector General for Tax Administration, found that taxpayer service improvements that were supposed to be provided by the CADE 2 database have also been delayed.

The original mission of CADE 2 was to provide state-of-the-art individual taxpayer account processing that will improve service to taxpayers. Eventually, it will replace the current Individual Master File, or IMF, account settlement system with a relational database and become a key component of the IRS’s enterprisewide, data-centric information technology strategy.

In the meantime, CADE 2 is being implemented in phases. In the phase referred to by the IRS as “Transition State 1,” the agency is establishing a relational database that will store all individual taxpayer accounts. Over time, processing on the current IMF will be enhanced to allow daily batch processing, allowing the main IRS customer service database, the Integrated Data Retrieval System, or IDRS, to have the benefit of more timely posted data.

The IRS also plans to develop interfaces between the CADE 2 database and certain other systems, including the IMF, the IDRS, and Corporate Files Online, also known as CFOL.

The overall objective of TIGTA’s review was to determine whether the IRS has implemented adequate data validation to ensure that the data provided to select systems are accurate and complete.

The report found that while the IRS effectively managed and resolved more than 1,000 data defects, it did not meet its June 2013 deadline for implementing system interfaces to allow IRS employees to access data.

With a revised projected implementation date of January 2014, the overall total estimated cost of Transition State 1 system deployment rose from $47.7 million to $83 million.  In addition, the lack of security systems integration prevents transaction-level tracking of employee access to the CADE 2 database.

“I am troubled by these delays and the escalating costs associated with implementing this significant component of the IRS’s modernization efforts,” said TIGTA Inspector General J. Russell George in a statement. “The IRS needs to be aggressive in its efforts to resolve these problems.”

TIGTA made four recommendations, including that CADE 2 not exit Transition State 1 Milestone 5 until the interfaces with selected downstream systems are implemented into production and the database is accurate, complete and timely.

The IRS agreed with one of the four recommendations and plans to certify that the database is accurate, complete, timely, and available to serve as the trusted source. IRS management disagreed with the three remaining recommendations. But TIGTA said it believes that risks remain in the new system.

“While we agree with your recommendation around certifying readiness of the database to serve as the trusted source, we disagree with the other three recommendations that question aspects of our program governance process, guiding principles and solution architectural design,” wrote IRS chief technology officer Terence V. Milholland in response to the report. “We believe these recommendations question foundational decisions and management judgments rather than audit the processes we used to come to the decisions and judgments.”

Milholland acknowledged that TIGTA was actively involved with the program every step of the way, but he also stressed that the IRS fully leveraged its governance process and used responsible decision-making and guiding principles to deploy a “sound database solution.”

“And with the use of risk-based decisions along the way, the IRS was able to put timely and necessary emphasis on data quality, organizational readiness, and performance, which were instrumental to reaching Transition State 2 and our target state, versus substantially increasing risks by following an approach driven by a hard and fast schedule to deploy,” Milholland added. “We believe this audit does not take into account the comprehensive CADE 2 Program approach as it relates to implementation of the database and the underlying risk mitigations that account for the delays and increased cost. Nonetheless, we are committed to continuously improving our information technology systems and processes.”

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