Business Systems Modernization: Results of Review of IRS'
Customer Account Data Engine Project (12-JUN-01, GAO-01-717).
The Internal Revenue Service (IRS) initiated the Customer Account
Data Engine (CADE) project to modernize the agency's outdated and
inefficient data management system. This report determines (1)
the reported status of CADE and IRS' plans for completing the
project, (2) whether IRS is managing the relationship between
CADE and the agency's enterprise architecture and current systems
environment, (3) whether IRS is managing CADE in accordance with
its Enterprise Life Cycle (ELC), and (4) whether IRS is ensuring
that CADE will satisfy agency business needs. IRS was over budget
and behind schedule in meeting CADE's next project milestone,
which is the completion of the preliminary design. IRS was not
effectively managing the relationship between CADE and the
enterprise architecture or its current systems environment. IRS
had not fully employed several critical management controls that
are intended to ensure that CADE is aligned with ELC. IRS had
completed or was in the process of completing steps to ensure
that CADE will satisfy agency business needs.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-01-717
ACCNO: A01198
TITLE: Business Systems Modernization: Results of Review of IRS'
Customer Account Data Engine Project
DATE: 06/12/2001
SUBJECT: Customer service
Data base management systems
Financial management
IRS Customer Account Data Engine Project
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GAO-01-717
A
Report to Congressional Requesters
June 2001 BUSINESS SYSTEMS MODERNIZATION
Results of Review of IRS? Customer Account Data Engine Project
GAO- 01- 717
Letter 1 Appendixes Appendix I: Briefing Slides From April 20, 2001, and
April 23, 2001,
Briefings of the Senate and House Appropriations Subcommittee Staffs 6
Appendix II: Comments From the Internal Revenue Service 56 Appendix III: GAO
Contacts and Staff Acknowledgments 59
Lett er
June 12, 2001 The Honorable Byron L. Dorgan Chairman The Honorable Ben
Nighthorse Campbell Ranking Minority Member Subcommittee on Treasury and
General Government Committee on Appropriations United States Senate
The Honorable Ernest J. Istook, Jr. Chairman Subcommittee on Treasury,
Postal Service and General Government
Committee on Appropriations House of Representatives
As part of its Business Systems Modernization program, the Internal Revenue
Service (IRS) initiated the Customer Account Data Engine (CADE) project to
modernize the agency's outdated and inefficient data management system. 1
IRS also plans for this project to be the corporate data source for enabling
future customer service and financial management applications. As you
requested, our objectives were to determine (1) the
reported status of CADE and IRS' plans for completing the project, (2)
whether IRS is managing the relationship between CADE and the agency's
enterprise architecture 2 and current systems environment, (3) whether IRS
is managing CADE in accordance with its Enterprise Life
1 The current system- referred to by IRS as the master files- contains
taxpayer account and return data. There are master files for individuals,
businesses, and employee retirement plans. There is also a nonmaster file
for taxpayer data that cannot be stored in the other
master files due to data format and space limitations. 2 An enterprise
architecture defines the critical attributes of an agency's collection of
information systems in both business/ functional and technical/ physical
terms.
Cycle (ELC), 3 and (4) whether IRS is ensuring that CADE will satisfy agency
business needs.
On April 20 and April 23, 2001, we briefed your respective offices on the
results of our review. This report transmits our briefing and reiterates the
recommendations to the Commissioner of Internal Revenue that we made in the
briefing. The full briefing, including our scope and methodology, is
reprinted in appendix I. In summary, we made four major points:
IRS was over budget and behind schedule in meeting CADE's next project
milestone, which is the completion of the preliminary design. Moreover, IRS
expected these budget and schedule shortfalls to increase, although specific
new cost and timeframe commitments had not yet been set. The budget and
schedule shortfalls and their anticipated increases were due, among other
things, to IRS (1) adding new requirements that created additional work, (2)
introducing a new requirements definition methodology that took extra time
and effort to learn and apply, and (3) ensuring that CADE's design is
sufficiently defined and aligned with the enterprise architecture. IRS
planned to implement CADE in two phases. The first phase, which was
scheduled to occur between 2002 and 2006, will transfer tax return and
account data of primarily individual taxpayers from the current system to
CADE.
The second phase will transfer the tax return and account data of primarily
businesses, but IRS had not yet established an implementation date for this
phase. IRS was not effectively managing the relationships between CADE and
the enterprise architecture or its current systems environment. For example,
IRS had not fully defined the relationships between the enterprise
architecture, including CADE, and the current systems
environment and was not managing these relationships using rigorous and
disciplined configuration management control practices. 4 IRS also had not
mapped CADE's design to the enterprise architecture to ensure that they were
aligned. After we discussed these weaknesses with IRS officials, they
initiated 3 The ELC includes the methods, processes, and products for
managing information
technology projects from conception, development, and deployment through
operations and support. See the background section of the briefing in
appendix I for a simplified diagram describing the major ELC phases and
milestones. 4 Configuration management is the means for ensuring the
integrity and consistency of system modernization program and project
products throughout their life cycles. Through
effective configuration management, for example, integration among related
projects and alignment between projects and the enterprise architecture can
be achieved.
steps intended to address the weaknesses by June 30, 2001. The steps
included fully defining the enterprise architecture, completing CADE's
design, implementing configuration management control practices, and mapping
CADE's design to the enterprise architecture to ensure that the two were
aligned. These steps are appropriate and prudent, and if properly
implemented, should effectively address identified weaknesses.
IRS was adhering to its ELC requirements for defining the work products
needed to exit project milestones. It was also taking steps to determine
whether work products met ELC process and product standards. However, as
previously noted, IRS had not yet fully employed several critical management
controls that are intended to ensure that CADE is aligned with the
enterprise architecture and
integrated with other modernization projects and existing systems.
IRS had taken steps to provide assurance that CADE will meet its business
needs. IRS' ELC specifies that interested IRS business organizations be
significantly involved in requirements development
processes, with the goal of minimizing misunderstandings and potential
rework. We verified that IRS had completed or was in the process of
completing these requirements development processes. However, as noted
above, IRS was not effectively employing critical management controls to
align CADE with the enterprise architecture, which put
CADE's ability to meet IRS business needs at risk. Recommendations for To
ensure that IRS fully addresses the management weaknesses associated
Executive Action
with the acquisition and implementation of CADE, we recommend that the
Commissioner of Internal Revenue expedite
completion of a sufficiently defined version of the enterprise
architecture to effectively guide and constrain CADE and other modernization
projects, and
implementation of other missing modernization management controls,
including configuration management.
We also recommend to the Commissioner of Internal Revenue that CADE approval
to exit Milestone 3 be conditioned upon IRS (1) having a complete validated
CADE design, (2) demonstrating through the use of mappings or traceability
matrices that CADE's requirements and design align with a
sufficiently defined version of the enterprise architecture, and (3)
implementing effective configuration management control practices.
Agency Comments In commenting on a draft of this report, the Commissioner of
Internal Revenue agreed with our recommendations and stated that IRS would
continue working to implement key management controls needed to ensure
CADE's success. The Commissioner's written comments are reprinted in
appendix II.
We are sending copies of this report to the Chairmen and Ranking Minority
Members of other Senate and House Committees and Subcommittees that have
appropriations, authorization, and oversight responsibilities for the
Internal Revenue Service. We are also sending copies to the Commissioner of
Internal Revenue, the Secretary of the Treasury, the Chairman of the IRS
Oversight Board, and the Director of the Office of Management and Budget.
Copies will also be made available to others upon request.
Should you or your staff have any questions on matters discussed in this
report, please contact us at (202) 512- 3439 or (202) 512- 5595,
respectively. We can also be reached by e- mail at hiter@ gao. gov or
whitej@ gao. gov. Key contributors to this report are listed in appendix
III.
Randolph C. Hite Director, Information Technology
Systems Issues James R. White Director, Tax Issues
Appendi xes Briefing Slides From April 20, 2001, and April 23, 2001,
Briefings of the Senate and House
Appendi x I
Appropriations Subcommittee Staffs Information Technology
Results of GAO s Review of IRS Customer Account Data Engine Project
Briefing to the Staffs of the Senate Committee on Appropriations,
Subcommittee on Treasury and General Government
( on April 23, 2001) and the House Committee on Appropriations, Subcommittee
on Treasury, Postal Service,
and General Government ( on April 20, 2001)
1
Briefing Overview Introduction Objectives cope and Methodology Background
Results in Brief Results Conclusions Recommendations
2
Introduction IRS recognizes that its current data management system for
storing tax
returns and tax account data is fundamentally deficient because it, , among
other things, relies on outdated storage technology ( magnetic tapes) , is
difficult to maintain and does not meet IRS needs in responding to taxpayer
inquiries.
As part of its business systems modernization ( BSM) program, IRS initiated
the Customer Account Data Engine ( CADE) project to acquire, through a prime
integration contractor ( PRIME) , a modernized database system. CADE is to
provide a single, authoritative corporate data source for enabling future
customer service and financial management applications, which in turn are to
allow IRS to meet its strategic performance and accountability goals.
3
Objectives IRS Senate and House appropriations subcommittees asked GAO to
determine: The reported status of CADE and IRS plans for completing CADE;
Whether IRS is managing the relationship between CADE and IR
enterprise architecture ( EA) and current systems environment; Whether IRS
is managing CADE in accordance with its Enterprise Life
Cycle ( ELC) ; and Whether IRS is ensuring that CADE will satisfy IRS
business needs.
4
Scope and Methodology To accomplish our objectives, we:
Reviewed and compared planned and reported project cost, schedule, and
performance data to identify any variances and their causes, and assessed
IRS near and long- - term plans for completing CADE;
Assessed IRS plans and controls for integrating CADE with its current
environment, and reviewed the alignment of CADE s data and business
requirements with IRS EA;
; Compared ELC- required processes and work products to CADE work
products and processes, including reviewing the results of independent
assessments of work products to ensure that they met ELC process and quality
standards, including configuration management and change control process
standards;
Reviewed processes and plans for developing and validating CADE business
requirements and ensuring that expected benefits are achieved, and compared
these efforts to ELC requirements to identify any variances;
5
Scope and Methodology Attended and observed review sessions that were
conducted by IRS to validate
requirements that were defined for the design of CADE; Discussed the CADE
project with the project director and officials, IRS business
owners and representatives, the independent technical assurance contractor
involved with the project, other Business Systems Modernization Office
officials responsible for overseeing the project, as well as members of the
PRIME team responsible for managing the project;
As agreed, did not validate planned and actual IRS- provided cost and
performance data;
Provided a draft of this briefing on April 13, 2001 to IR Chief Information
Officer, Associate Commissioner for Business Systems Modernization, CADE
Project Director, and other executives. We have incorporated their comments
where appropriate; and
Performed our work from August 2000 through mid- April 2001 in accordance
with generally accepted government auditing standards.
6
Background The Problem IRS currently stores taxpayer data in a 30- year-
old, tape- based system
that includes: Master files
Individual Master File ( IMF) - - taxpayer data about individuals. Business
Master File- - taxpayer data about businesses. Employee Plan Master File- -
data about employee retirement plans.
Non- master files ( data that cannot be stored in the master files because
of data format and space limitations) .
The IMF alone contains about 170 million taxpayers accounts and about 13
terabytes of data- - the equivalent of paper stacked 429 miles high.
7
Background Currently, it can take IRS several weeks to process taxpayer
returns and
update master file accounts. This is because the accounts cannot be
efficiently ( i. e. , without significant degradation of service) updated
while business applications are accessing those accounts. This requires IRS
to batch taxpayer return and account data during the week and wait until the
weekend to process them.
As a result, IRS has reported that taxpayer data are often out- of- date,
inaccurate, inconsistent, and incomplete, which degrades customer service.
8
Background The Proposed Solution CADE is to
replace the master files with a single database- - the Tax Account Data
Store ( TADS) ;
accept, validate, and store taxpayer return and account data, along with
financial account activity data, such as tax payments and liabilities, and
installment agreements;
perform other functions, such as generating refund notices, calculating
taxes, and detecting potential fraudulent transactions; and
enable future business application systems. 9
Background Background The Problem and Solution Illustrated for Processing of
Electronic Returns