WASHINGTON - The Internal Revenue Service (IRS) is making progress with the

implementation of the Customer Account Data Engine 2 (CADE 2), according to three audits

publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).

TIGTA reviewed:

• The preliminary and detailed designs of the CADE 2 database to ensure that the design is

  secure and satisfies the stated requirements;

• The design, implementation and management of the CADE 2's Daily Processing

  activities; and,

• The CADE 2 Program Management Office's oversight of the design activities associated

  with the first phase of CADE 2.

The goal of the CADE 2 program is to provide state-of-the-art individual taxpayer account

processing and technologies to improve service to taxpayers. When complete, CADE 2 should

allow the IRS to more effectively and efficiently update taxpayer accounts, support account

settlement and maintenance, and process refunds on a daily basis.

"Overall, the IRS is managing the CADE 2 program successfully," said J. Russell George,

Treasury Inspector General for Tax Administration, commenting on the three reports. "However,

additional improvements and adherence to all project management criteria will help ensure that

CADE 2 functions as intended by the stated January 2012 release date."

The first CADE 2 audit,"The Customer Account Data Engine 2 Database Implementation

Program Made Progress in Design Activities, but Improvements Are Needed," found that the

IRS made progress completing CADE 2's design, addressed many security and privacy controls,

and had an improved partnership with the IRS's security organization to make critical decisions

relating to security. TIGTA recommended improvements to ensure the timely delivery of key

activities. The IRS agreed with most of TIGTA's recommendations and has taken or plans to

take appropriate corrective actions.

The second CADE 2 audit, "The Customer Account Data Engine 2 Is Making Progress Toward

Achieving Daily Processing, but Improvements Are Warranted to Ensure Full Functionality,"

found that the IRS is making progress towards meeting its goal of daily processing of taxpayer

records, but improvements and adherence to all program criteria will help ensure that CADE 2

functions as intended. TIGTA recommended a series of systems development process

improvements. IRS management agreed with most of these recommendations and stated that

they plan to take appropriate corrective actions. However, IRS management disagreed with the

recommendation to ensure that all open issues are addressed and closed prior to exiting a

milestone. Exiting a milestone without properly addressing critical open issues could result in

rework, potentially impact the design, and result in unnecessary costs.

The third CADE 2 audit, "The Customer Account Data Engine 2 Program Management Office

Implemented Systems Development Guidelines; However, Process Improvements Are Needed to

Address Inconsistencies," found that the IRS added enhanced security controls beyond those

controls required by security guidelines to help protect data from unauthorized access,

modification, and corruption. TIGTA made recommendations to ensure the consistent

application of systems development processes and proper controls were in place prior to

initiating testing activities. IRS management agreed with most of these recommendations and

indicated that corrective actions have been completed.