No Easy IT Fix for the IRS

By Elana Varon

April 01, 2004 — CIO — The internal revenue service’s Master File is an accident waiting to happen. A legacy of the Kennedy administration, this database stores the taxpaying histories of 227 million individuals and corporations, including every transaction between taxpayers and the IRS for the past 40 years. The Master File is used to determine if you’ve paid what you owe, and without it the government would have no way to flag returns for audits, pursue tax evaders or even know how much money is or should be flowing into its coffers.

Yet the system still runs code from 1962, written in an archaic programming language almost no one alive understands. Every year, programmers, some who have worked at the IRS for decades, add new code to the Master File to reflect new rules passed by Congress. As a result, the system has become a high-tech Rube Goldberg machine. Those familiar with the Master File say it is poised for a fatal crash that would shut the government down.

Congress and the IRS had hoped that by this tax season, this fragile system would be partially replaced by a centralized database that could provide both IRS agents and individual taxpayers with daily updates of taxpayer accounts, just as credit card companies and banks do, enabling speedier refunds and more timely customer service. This new Customer Account Data Engine, or CADE, is part of a massive $8 billion modernization program launched by the IRS in 1999 to upgrade its IT infrastructure and more than 100 business applications.

But the program, called Business Systems Modernization, has stumbled badly, running into serious delays and substantial cost overruns. The first of multiple software releases planned for the new database (which would enable faster processing of returns and faster refunds for 6 million out of the 21.5 million people who file the 1040EZ form) is nearly three years late and $36.8 million over budget. Eight other major projects have missed deployment deadlines by at least three months, and costs have ballooned by more than $200 million, according to the U.S. General Accounting Office and the congressionally chartered IRS Oversight Board, an independent panel of tax industry and technology experts who advise the IRS and Congress.

Those familiar with the program say the fault lies largely with the IRS’s entrenched bureaucracy. The agency did not follow its own procedures for developing the new systems and failed to give consistent direction and oversight to Computer Sciences Corp. (CSC), the vendor it hired to do the work. Longtime managers resistant to change undercut CSC and the private-sector IT executives who were hired to oversee the program, according to Mark Forman, who, as associate director for IT and e-government at the Office of Management and Budget, oversaw the government’s major IT initiatives from June 2001 until last summer. Three CIOs have come and gone in the seven years since planning began for Business Systems Modernization.