Oversight Board: IRS modernization still troubled

Internal Revenue Service officials may have finally started using the database at the heart of the agency's troubled modernization project, but the tax agency's watchdog still has plenty of worries.

IRS Commissioner Mark Everson focused renewed urgency on the business systems modernization program following a serious setback last summer. "There is still ample room for concern," states the IRS Oversight Board's 2004 annual report, released today.

Although a small number of 1040EZ returns were processed last month using the Customer Account Data Engine (CADE), "no one is breaking out the champagne," said Larry Levitan, the board's business transformation committee chairman.

CADE is a new database system slated to replace the tape-based technology agency officials still use. Problems with CADE are "particularly troubling," according to the report. The project is about $37 million over budget and 30 months late, according to a February report from the Government Accountability Office.

The IRS' long-term success rests on the $1.7 billion modernization effort, which has been plagued by delays and cost overruns. Plans to update the IRS' aging computer systems and business processes have reached a point where "problems are too severe for half-measures," according to the board's report.

Board members reserved a salvo of criticism for Computer Science Corp. and the PRIME Alliance of contractors it leads. They said the alliance has failed in its "primary responsibility of serving as a trusted adviser and partner to the IRS in managing the program."

The PRIME Alliance includes IBM Corp., BearingPoint Inc., Northrop Grumman Information Technology, Science Applications International Corp. and Unisys Corp.

"The board keeps looking for improvements in this area, but finds few if any," the report states. "The IRS BSM program and its PRIME contractor did not acquit themselves well last year," Levitan said.

As an example, the report cites a six-month delay over release of the Integrated Financial System. The general ledger accounting system was set for release by April, but was delayed until October "and that date may yet be in jeopardy," the report states.

CSC Vice President Jim Sheaffer said his company will make the October due date. "I'm not sure what basis the report used to conclude that [IFS] was in jeopardy," he added.

In response to the report's general criticism, Sheaffer charged the board with ignoring recent improvements. "In the last six to nine months, we've clearly demonstrated that we can meet schedules and improve our performance," he said.

The Treasury Department requested $285 million for the IRS modernization in fiscal year 2005.

And the modernization effort is starting to produce some benefits, the report notes.

Among the successes are "modernized e-file, e-services for practitioners and various self-serve applications on www.irs.gov," the report states.

Board members recommended that the IRS "significantly strengthen the experience of the BSM team" and "place special attention to the CADE project."

Board members also board suggested the IRS create "a environment of trust, confidence and teamwork."

An IRS spokeswoman said the agency is reviewing the recommendations.