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IRS Again Delays Modernized Taxpayer Database

The Internal Revenue Service (IRS) has again delayed the implementation of its master taxpayer database modernization plan and launched an independent review of the program to evaluate its progress and determine whether any changes are needed.

The system, the Customer Account Data Engine (CADE), will be a modern database that will house tax information for more than 200 million individual and business taxpayers and replaces the antiquated, magnetic tape-based system that came into use four decades ago. The system is being developed by consortium of companies led by Computer Sciences Corp.

The first group of taxpayers, approximately six million 1040 EZ filers, was originally scheduled to move to the new system in 2001. Development delays pushed that date to August of this year, but the IRS recently learned from CSC that there would be an additional delay in CADE, forcing the launch of the new system too close to the agency's timeframe for programming 2004 filing season tax changes.

Consequently, the IRS decided to implement CADE during the 2004 filing season, minimizing the risk of any potential disruptions to another filing season for taxpayers. As a result of the delays, the IRS addressed performance issues and renegotiated the cost-plus contract with CSC a firm-fixed price contract.

"This most recent setback is a serious matter," said IRS Commissioner Mark W. Everson, who named the Software Engineering Institute of Carnegie Mellon University to conduct the study and report back to the IRS in 60-90 days.

Iverson added, "The CADE project has had a number of delays over the past several years -- too many delays. These delays are particularly disturbing, especially since the General Accounting Office continues to view modernization as a 'high risk area.'"

While the review is conducted by outside experts, work on CADE will continue.

"The review will evaluate its progress and determine whether any mid-course corrections are needed," Everson said.

He said he will also ask the IRS Oversight Board to assess CADE and the future of the project. The review will also look at the performance of the contractor and the agency's management of the contract since its beginning more than four years ago.

In Fiscal Year 2003, the IRS has budgeted $33 million on the CADE project out of the total $422 million for all modernization efforts. In FY 2004, the agency currently plans to allocate $84 million on CADE out of a total of $458 million.

Everson has identified delivering modernization as one of three areas of emphasis, along with improving customer service and enhanced enforcement activities.