GAO

United States General Accounting Office

Report to Congressional Requesters

June 2001 BUSINESS SYSTEMS 

MODERNIZATION

Results of Review of 

IRS’ Customer 

Account Data Engine 

Project

GAO-01-717

Page i GAO-01-717 IRS’ CADE Project

Contents

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
Contents

Page ii GAO-01-717 IRS’ CADE Project
Page 1 GAO-01-717 IRS’ CADE Project

United States General Accounting Office

Washington, D.C. 20548 Letr

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(CADE) project to modernize the agency's outdated and inefficient data 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 architecture2

 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. 
Page 2 GAO-01-717 IRS’ CADE Project

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.
Page 3 GAO-01-717 IRS’ CADE Project

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 

Executive Action

To ensure that IRS fully addresses the management weaknesses associated 

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.
Page 4 GAO-01-717 IRS’ CADE Project

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.
Page 5 GAO-01-717 IRS’ CADE Project

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
Page 6 GAO-01-717 IRS’ CADE Project

Appendix I

Briefing Slides From April 20, 2001, and April Apendxies

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs ApendxiI

1

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)

Information Technology
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 7 GAO-01-717 IRS’ CADE Project

2

• Introduction

• Objectives

• Scope and Methodology

• Background

• Results in Brief

• Results

• Conclusions

• Recommendations

Briefing Overview
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 8 GAO-01-717 IRS’ CADE Project

3

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.
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 9 GAO-01-717 IRS’ CADE Project

4

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 IRS’

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.
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 10 GAO-01-717 IRS’ CADE Project

5

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;
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 11 GAO-01-717 IRS’ CADE Project

6

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 IRS’ 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.
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 12 GAO-01-717 IRS’ CADE Project

7

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.
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 13 GAO-01-717 IRS’ CADE Project

8

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.
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 14 GAO-01-717 IRS’ CADE Project

9

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.
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 15 GAO-01-717 IRS’ CADE Project

10

Background

The Problem and Solution Illustrated for Processing of Electronic Returns

Notices to

taxpayers

(math errors,

balance due)

	






	





















	








		








	

	






		




	

	




	



 










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Batch returns

Future

Customer

Service

System

Treasury FMS

(direct deposit

refunds and 

paper checks)

Legacy

Customer

Service

System
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 16 GAO-01-717 IRS’ CADE Project

11

Background

The Problems and Expected Solutions Summarized

IRS-reported Problems Solutions to be provided or enabled by CADE

Taxpayers’ electronic returns take 2 weeks or

longer to process and paper returns can take up

to 6 weeks.

Taxpayer electronic returns can be processed within

48 hours and paper returns within 4 weeks.

Taxpayers are given incorrect and out-of-date

account information.

IRS representatives are to have access to accurate

and up-to-date account information; CADE is to

automatically compute taxes and provide daily

updating of taxpayer data.

Multiple copies of information reside on different

systems with varying update schedules,

producing inconsistent data.

Single, authoritative location of return and account

data intended to provide consistent and accurate

data.

Out-of-date account information results in

incomplete or incorrect collection and other

notices.

Correspondence with taxpayers are to be accurate

and complete because of daily account updates.

Existing systems do not allow IRS to store

enough account information to properly prepare

financial statements.

Sufficient data are to exist for taxpayer account

transactions to be traceable to the General Ledger.

Financial transactions stored in CADE are to be

linked to systems that create financial statements
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 17 GAO-01-717 IRS’ CADE Project

12

Background

Simplified Diagram of CADE and IRS’ Existing and Modernized Systems





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Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 18 GAO-01-717 IRS’ CADE Project

13

Background

• IRS estimates CADE costs through 2009 to be about $350 million.

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Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 19 GAO-01-717 IRS’ CADE Project

14

Background

• Since mid-1999, we have reported on the risks IRS faces with building

systems before defining its EA and instituting other program

management controls (e.g., configuration management).

• An EA is institutional blueprint defining how an enterprise operates

today, in both business and technology terms, and how it wants to

operate at some point in the future. An EA also includes a roadmap

for transitioning between these “as is” and “to be” business and

systems environments. Effective use of such blueprints, which is

requirement of law, OMB, and an industry best practice, requires that

system modernization investments be aligned with (i.e., traceable to

and in compliance with) relevant and adequately defined EA

artifacts.

• 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 systems and

alignment between projects and the EA can be achieved.
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 20 GAO-01-717 IRS’ CADE Project

15

Background

• Configuration management is but one of many management

controls required under IRS’ ELC, which is a structured method for

managing system modernization program initiatives and projects

throughout their life cycles (see below simplified diagram of ELC).



	












	

































  




 



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Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 21 GAO-01-717 IRS’ CADE Project

16

Background

• As we have reported, the risks associated with building systems without

the requisite management controls are not as severe early in projects’

life cycles when they are being planned (project definition and

preliminary system design), but escalate as projects are built (detailed

design and development). In the case of IRS and its ELC, this point of

risk escalation is ELC Milestone 3.

• To mitigate these and other risks, we have made recommendations to

IRS to, among other things,

• expedite the completion of the EA and implementation of other

missing modernization management controls, and

• not approve and fund post-Milestone 3 detailed design and

development activities for any project prior to instituting requisite EA

and other program management controls.1

• IRS agreed with our recommendations.

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Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 22 GAO-01-717 IRS’ CADE Project

17

Results in Brief

Objective 1: Status and Plans

• IRS data show that CADE is currently about $600,000 over (4 percent

increase) and 3 1/2 months behind (70 percent delay) in meeting its

Milestone 3 commitments (completing detailed design).

• Moreover, these Milestone 3 shortfalls are anticipated to widen, although

specific new cost and timeframes have yet to be set.

• The shortfalls are due to, among other things, 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 EA.
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 23 GAO-01-717 IRS’ CADE Project

18

Results in Brief

• IRS plans to complete CADE in 2 phases:

Current CADE

(Phase 1)

Future CADE

(Phase 2)

Implementation

dates 2002 - 2006 To be determined

Master files

moved to TADS

Individual master file

Individual portion of non-master file

Selected business master file

taxpayers (small business and selfemployed)

Remaining business master

files

Employee Plans master file

Business portion of non-master

file
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 24 GAO-01-717 IRS’ CADE Project

19

Results in Brief

Objective 2: Managing CADE Relationship with EA and Existing 

Systems

• The many and complex relationships between IRS’ EA (future systems

environment) and IRS’ current systems environment are not fully defined

and are not currently being managed using rigorous and disciplined

configuration management control practices.

• This is particularly significant because the state of definition of the EA and the

CADE design are changing continuously as both efforts proceed concurrently.

• IRS’ mapping of EA/CADE relationship was done about 7 months ago and this

mapping was between early CADE requirements and the 1997 Modernization

Blueprint and its 1999 update. Since then, both CADE and the EA have

changed significantly.

• Per the ELC, such mapping should be accomplished by developing traceability

matrices between the ELC required CADE requirements and design products

and the ELC required EA products. For example, the CADE business

requirements and the EA business process model view.
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 25 GAO-01-717 IRS’ CADE Project

20

Results in Brief

• This is also important with respect to existing systems. In fact, given the

complexity and importance of effectively managing these interfaces as well

as progress made to date in doing so, IRS has designated current system

integration as a high risk.

• In the interim, IRS is relying on informal communications among EA,

CADE, and other modernized and existing systems to design and control

these complex and evolving relationships. While this interim approach has

been moderately risky up to this point, it represents a more significant risk

now because of the high level of development concurrency among IRS’ EA,

CADE, and other BSM projects, and because CADE and these projects are

moving into, or are in, post-Milestone 3 life cycle phases.

• Since we discussed these control weaknesses with IRS, the agency has

initiated steps that are intended to sufficiently define the EA and create a

CADE system design, implement configuration management control

practices, map CADE to the EA, and thereby ensure CADE alignment with

the EA and integration with related modernization projects and existing

systems. If properly implemented, these steps should address the

weaknesses.
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 26 GAO-01-717 IRS’ CADE Project

21

Results in Brief

Objective 3: CADE Adherence to ELC

• IRS is adhering to its ELC requirements that define the products needed

to exit ELC defined project milestones. It is also taking steps to assess

whether the work products meet ELC process and product standards.



	












	

































  




 



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Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 27 GAO-01-717 IRS’ CADE Project

22

Results in Brief

• However, as previously noted, IRS has not yet fully employed several

critical ELC required management controls that are intended to ensure

that its modernization projects are integrated vertically with the

architecture and horizontally with related modernized and existing

systems. Specifically, IRS has not

• aligned CADE’s requirements and system design with a sufficiently

defined version of the EA, and

• employed rigorous and disciplined configuration management.

• Without doing so, IRS is greatly increasing the risk that its modernization

projects will require costly rework to meet expectations.

• We discussed these management weaknesses with senior IRS

modernization executives, including IRS’ Commissioner. Since then,

IRS has initiated steps, which, if properly implemented, should address

the weaknesses.
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 28 GAO-01-717 IRS’ CADE Project

23

Results in Brief

Objective 4: CADE Requirements and IRS Business Needs

• IRS is taking steps to ensure that CADE will meet IRS’ business needs.

IRS’ ELC defines a detailed requirements development process that

provides for significant involvement from the IRS business

organizations. We verified that IRS has or is in the process of

completing some of these requirement development steps.

• However, as previously noted, IRS is not effectively employing ELC

steps to effectively align CADE’s requirements and design with the

changing EA and manage CADE’s configuration, which puts CADE’s

ability to meet IRS business needs at risk. To address these problems,

IRS has initiated steps, which if properly implemented, should rectify

each of these weaknesses.
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 29 GAO-01-717 IRS’ CADE Project

24

Results

Objective 1: What is the reported status of CADE and what are IRS’

plans for completing the project?

What is the reported status of CADE?

• CADE began in September 1999. IRS reports that CADE met Milestone

2 cost and schedule commitments and exited Milestone 2 on August 8,

2000.

• As of March 30, 2001, IRS reported that CADE is currently behind

schedule and slightly over cost commitments for completing Milestone 3.

 Commitments

made in March

2000

Revised

Commitments Change

Start date for

Milestone 3August 8, 2000 August 8, 2000 No change

End date for

Milestone 3December 31, 2000 April 9, 2001

+ 3.5 months

(70% delay)

Cost to

Milestone 3

$15.3 million $15.9 million + $600,000

(4% increase)
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 30 GAO-01-717 IRS’ CADE Project

25

Results

• Since then, IRS has tentatively revised CADE’s Milestone 3 date to

May/June 2001, and anticipates additional, yet-to-be determined costs.

• According to IRS, these variances are due to

• adding a new requirement to allow non-technical IRS employees to

instruct CADE to identify and select taxpayer returns based on

business-developed criteria (rather than having a computer

programmer develop and test code to do this),

• underestimating the time required to define CADE’s requirements at

the desired level of detail,

• not anticipating the learning time associated with using a new

requirements definition methodology, and

• ensuring that CADE’s design is sufficiently defined, including having

defined interfaces to existing and modernized systems, managing

CADE’s configuration, and aligning CADE with the EA.
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 31 GAO-01-717 IRS’ CADE Project

26

Results

• CADE is currently in the ELC Architecture Phase, performing

requirements determination and preliminary design activities required to

exit Milestone 3.

What are IRS’ plans for completing the project?

• IRS plans a two-phase approach to acquiring and implementing CADE.

• Phase 1:

• transfer to TADS in 5 incremental releases the taxpayer account and

return data from the individual master file and selected parts of the

business master file (small businesses and self-employed individuals)

and non-master file (individuals and businesses); and

• acquire and implement applications for each release to:

• accept, validate, and store taxpayer data by receiving return and

account data, verifying payment or refund calculations, and updating

taxpayers’ return and account records; and

• generate refund information; calculate taxes, penalties, and interest;

detect liabilities; and identify potential fraudulent transactions.
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 32 GAO-01-717 IRS’ CADE Project

27

• Phase 2:

• is to replace (1) the remaining parts of the business master file and

non-master file and (2) employees plans master file.

• has not yet been started as a project so implementation date has not

been established.

Release

1

Release

2

Release

3

Release

4

Release

5

Implementation

Date

To be

Determined2

January

2003

January

2004

January

2005

January

2006

Taxpayer type Single Single

Married

Head of

household

Single

Married

Head of

household

Single

Married

Head of

household

Single

Married

Head of

household

Return type 1040EZ that has

refund or no

balance due

1040 that has

refund or no

balance due

1040 family

Full paid, refund,

or balance due

1040 with

schedule C, E, or

F forms 94x and

720 for 1040

customers

All individual

Results

2The implementation date for Release 1 was January 2002, but IRS anticipates that the decision to extend CADE’s Milestone 3 date will

delay the Release 1 implementation date to later in 2002. IRS has not yet completed revising the CADE project schedule and, thus, has not

yet established a new date.
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 33 GAO-01-717 IRS’ CADE Project

28

Objective 2: Is IRS managing the relationship between CADE and

IRS’ EA and current systems environment?

• CADE is closely related to both IRS’ EA (future systems environment) as

well as IRS’ current systems environment.

• To effectively manage such relationships, it is essential that IRS employ

rigorous and disciplined information technology (IT) management

controls, including

• Development and enforcement of a sufficiently complete EA, and

• Configuration management of BSM program and project products,

including change control of requirements and design baselines.

Results
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 34 GAO-01-717 IRS’ CADE Project

29

• IRS has initiatives underway to implement these controls, but they are

not yet in place. Specifically, IRS has not yet

• adequately defined the EA and CADE’s design, and mapped the

EA/CADE relationship to ensure they are aligned,

• adequately defined CADE’s interfaces to existing systems, and

• effectively managed CADE’s configuration.

EA Still Being Defined/CADE Mapping to Architecture Has Not Occurred

• IRS is developing its EA in 3 releases (1.0, 1.1, and 2.0).

Results

1/00 1/01 1/02 3/00 6/00 9/00 3/01 6/01 9/01

 Began EA 1.0

Original 

EA 1.0 Release 

Goal

EA 1.0

Released

EA 1.1 

Planned

Release

EA 2.0

Planned

Release
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 35 GAO-01-717 IRS’ CADE Project

30

• Prior to IRS approval of EA 1.0, an independent contractor evaluation

found that it was neither complete nor adequate, and did not meet its

stated objectives. Nevertheless, IRS conditionally approved EA 1.0 in

December 2000, without addressing these known limitations.

• Since December 2000, IRS has made significant changes to EA 1.0 to

address these limitations and other comments, and it is still deliberating

how to address other EA issues. To address its immediate needs for

having sufficient architectural definition to allow “near-term” projects to

proceed, IRS officials stated that it has recently decided to produce a

“near-term projects” or “release 2002” architecture that will be used to

guide and constrain near-term modernization project investments.

According to these officials, this “release 2002” architecture will be

mapped to EA.

Results
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 36 GAO-01-717 IRS’ CADE Project

31

• Concurrent with these numerous completed and planned changes to EA

1.0, IRS has proceeded with defining CADE’s requirements and design

in order to exit Milestone 3. However, it has not

• completed and/or decided upon key CADE design features such as

the

• application program interfaces (specification of how application

software will interact with system software; in CADE’s case, how

business applications interact with CADE; and

• logical data model (A representation of CADE’s data, including

relationships, attributes, and other details about the data). The

“logical”data model is then used to develop actual or “physical”

models that are used to define an implementation approach for

data in a data base management system).

• mapped CADE to the EA to ensure alignment.

Results
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 37 GAO-01-717 IRS’ CADE Project

32

• IRS officials stated after the CADE design is completed, they plan to

map CADE to the “release 2002” architecture. Such mapping is

accomplished by developing traceability matrices between CADE

products and related EA products. For example,

• According to IRS, the “release 2002“ architecture is to be completed

by the end of June 2001. Open EA comments are to be addressed

and included in EA 1.1 and EA 2.0.

CADE Work Products

Business process requirements

Location requirements

Organizational requirements

Data model requirements

Technology requirements

Application requirements

EA Work Products

Business process model view

Location model view

Organization model view

Data model view

Technology model view

Applications model view

Results
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 38 GAO-01-717 IRS’ CADE Project

33

EA and CADE Concurrent Development Without Ensuring

Traceability and Alignment Between Each Other

01/97 3/00 1/00 9/01 4/01

CADE

CADE “Mapped” to 1997

Blueprint Update

Blueprint 97 EA 1.0 EA 2.0

5/97 9/99 8/00

Planned CADE “Mapping” to 

Release Architecture 2002

EA 1.1

Milestone 3

EA

Alignment?

Blueprint 97 Update

Milestone 2
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 39 GAO-01-717 IRS’ CADE Project

34

IRS Working to Define CADE Relationship with Current Systems

• IRS plans for CADE to interface with about 15 existing systems that

process master file data until those systems are replaced.

• IRS is in the process of defining these relationships (designing CADE)

and establishing configuration control over the interface requirements,

including assessing the impact on these existing systems. For example,

• In February 2001, CADE officials submitted requests for changes to

the Information Systems organization responsible for operating and

maintaining IRS’ current systems.

• Joint CADE/legacy interface teams are expected to agree--via written

memos of understanding--with the information systems organization

on such matters as the timing, nature, and responsibility for defining

and implementing these changes, including configuration

management roles and responsibilities.

Results
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 40 GAO-01-717 IRS’ CADE Project

35

• According to IRS, these agreements will be used to update IRS’

“Release 2002” management plan. The plan is to be updated by

June 2001.

• Because of the complexity and importance of these interfaces,

CADE’s project managers identified this integration as high risk.

IRS Configuration Management Controls Not Being Followed

• 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 EA can be achieved. According to

the ELC, configuration management involves

• preparing a list of program and project configuration items (as well

as item components and subcomponents as necessary) that will be

formally managed;

Results
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 41 GAO-01-717 IRS’ CADE Project

36

• checking these items into a configuration library (repository with

controlled access) to establish a baseline version against which

changes will be tracked;

• evaluating, coordinating, and approving proposed changes to these

items via change control boards on the basis of costs, benefits, and

risks; and

• accounting for changes to the current baseline and performing

configuration audits to ensure functional and physical integrity of the

current baseline configuration.

• IRS and the PRIME share configuration management responsibilities.

Results

IRS PRIME

Products prepared by PRIME

that are under development X

Products prepared by PRIME

that are approved by IRS X

Oversight of PRIME

Configuration Management X

Products prepared by IRS

X
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 42 GAO-01-717 IRS’ CADE Project

37

• Following our inquiry, IRS in January 2001, reviewed PRIME

configuration management of selected projects, including CADE, and

found that key project deliverables were not under configuration control

because the contractor was not following procedures. Accordingly, IRS

has worked with the PRIME to develop a “get well” plan.

• In addition, IRS has yet to operationalize its configuration management

function. For example,

• Baselines for all approved products prepared by PRIME have not

been established.

• IRS and PRIME change control boards have been created and are

meeting regularly, but roles and responsibilities have not been fully

defined, and therefore the boards are not yet fully functional.

• Definition of all configuration items are not to be completed until

June 1, 2001.

Results
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 43 GAO-01-717 IRS’ CADE Project

38

• IRS officials stated that IRS and PRIME configuration management will

be fully operational by June 30, 2001.

• In the interim, IRS will be relying on informal communication among

modernization project and enterprise architecture teams. In particular,

IRS is relying on individuals working on the projects to, for example,

remember the nature and content of relationships, to update this

information to reflect changes, and to share changes with all affected

parties on the other project teams.

• IRS and PRIME officials recognize the weaknesses associated with this

control approach and have stated that they are working to implement the

requisite controls to ensure such a complex task is effectively managed.

• The following diagram illustrates the differences in the interim and

desired configuration management approaches.

Results
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 44 GAO-01-717 IRS’ CADE Project

39

Results

Simplified Diagram Characterizing Interim and Desired

Configuration Management Approaches

EA

______________

RELEASE

ARCHITECTURES

EA

PROJECT D

PROJECT A PROJECT C

PROJECT B

PROJECT A

PROJECT B

PROJECT C

PROJECT D
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 45 GAO-01-717 IRS’ CADE Project

40

Results

Objective 3: Is IRS managing the CADE project in accordance with

its ELC?

• IRS’ ELC defines the methods, processes, products, and sequence of

activities that are to be used to manage BSM program initiatives and

projects.

• IRS completed all Milestone 2 required work products and exited

Milestone 2 on August 8, 2000.

• Milestone 2 work products provide the basis for conducting and

managing Milestone 3 activities.
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 46 GAO-01-717 IRS’ CADE Project

41

Results

• IRS is currently in the process of completing all ELC products required

to exit Milestone 3 and proceed with Milestone 4 activities.

ELC Work Product Product Description In Process Completed

Project Management Plan 01
23

04
2

3

1
5(

(
(3
33
0


2/




3





((5(3



3

2/



Organizational Transition

Plan

	
33
	6
36





333






'6
7




7


3


2/



Organizational Initiative

Plan

Provides a comprehensive plan for developing,

testing, and implementing all organizational initiatives

identified in the Organizational Transition Plan.


Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 47 GAO-01-717 IRS’ CADE Project

42

Results

ELC Work Product Product Description In Process Completed

System Life Cycle

Management Plan

Provides preliminary information on release planning,

training, testing, logistics, and operations for the

system.



Security Certification

Package

Includes documents such the security risk

assessment, security plan, privacy impact assessment

needed to measure the level of security and privacy

provided by the project.



System Requirements

Report

Identifies and defines system requirements including

functional, performance, and interface requirements. 

System Design Report Provides the baseline system design upon which

subsequent development phase work will build. 

Acquisition Management

Plan

Identifies the objectives of the project and the

resources required to accomplish them. Also defines

how the resources will be organized and managed to

accomplish the objectives.



Baseline Business Case Documents baseline information for the project and

provides justification for developing and

implementing it.


Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 48 GAO-01-717 IRS’ CADE Project

43

Results

• In completing Milestone 2 and working toward Milestone 3, IRS and

PRIME have taken steps to ensure work product quality. For example,

• PRIME has assigned a quality manager to CADE who is responsible

for reviewing all work products. We verified that these quality

reviews occurred.

• IRS business users have periodically reviewed CADE requirements

to ensure they will meet IRS’ business needs.

• IRS has employed MITRE to review all CADE work products.

• However, as previously noted, IRS has not yet not fully implemented

critical ELC management controls.

• IRS has not aligned CADE with a sufficiently defined version of EA.

• IRS has not managed CADE configuration in accordance with the

ELC.
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 49 GAO-01-717 IRS’ CADE Project

44

Objective 4: Is IRS ensuring that CADE will adequately satisfy IRS’

modernized business needs?

• IRS is taking steps to provide assurance that CADE requirements will

meet IRS business needs.

• The ELC specifies requirements development processes that include

significant involvement from interested IRS business organizations. The

processes are intended to use the business to identify and specify IRS’

modernized business needs and translate them into CADE requirements

so as to minimize misunderstandings and potential rework .

• IRS has or is in the process of completing these steps, as displayed in

the following table.

• However, as previously noted, IRS is not implementing critical ELC

management controls.

• IRS has not aligned CADE with a sufficiently defined version of EA.

• IRS has not managed CADE configuration in accordance with the

ELC.

Results
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 50 GAO-01-717 IRS’ CADE Project

45

Results

Requirements

development processes

required by ELC

Completed by CADE Examples of steps taken

by CADE to satisfy ELC

requirement

Project requirements are to

be reviewed and approved

by business

representatives.

In process

IRS business

representatives are

validating requirements,

and business executives

are to approve CADE

requirements.

A 14-step process is to be

followed for developing,

assembling, reviewing, and

approving requirements.

In process

IRS is in the process of

completing these steps.

Independent verification

and validation personnel

are to be involved in the

requirements definition

process to help ensure

completeness and

technical accuracy of the

requirements.

Yes

IRS engaged MITRE to

participate in customer

technical reviews of the

system requirements and

review the system

requirements report.

Once deployed, projects’

actual performance is to be

compared to their expected

performance

improvements.

Planned

IRS has defined measures

to quantify performance

improvements.
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 51 GAO-01-717 IRS’ CADE Project

46

Conclusions

• CADE is IRS’ “linchpin” modernization project. In light of the

modernization projects that depend on CADE, as well as the many

interrelationships that are to exist between (1) CADE and IRS

modernized applications and (2) CADE and IRS current applications,

IRS must effectively manage this critical project. Without CADE, the

business systems modernization program cannot succeed.

• To IRS’ credit, it has made important progress on CADE, such as

defining requirements and developing preliminary designs, meeting cost

expectations, and following many ELC required steps.

• However, CADE has already begun to experience relatively significant

schedule delays, and important management controls for effectively

integrating CADE with other existing and modernized systems are not

yet in place and functioning.
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 52 GAO-01-717 IRS’ CADE Project

47

Conclusions

• In particular, IRS is not effectively ensuring that CADE is aligned and

consistent with the evolving EA by managing the traceability among

CADE and EA products. Additionally, IRS is not effectively managing

and controlling CADE's configuration in relation to the configuration of

related systems. While these controls are important early in the

development life cycles of systems that must work together effectively

and efficiently, they are absolutely vital for systems like CADE and its

related modernization projects that are advancing beyond the

preliminary design and moving into phases where rework is time

consuming and expensive.

• IRS officials recognize the importance of moving swiftly to implement

these overdue management controls and in early April 2001, the

Commissioner outlined steps (1) underway and to be taken to do so by

June 30, 2001, and (2) to move CADE’s Milestone 3 date to ensure that

CADE’s design is sufficiently defined and the integration of this design

with other modernized and existing systems is effectively accomplished

via, among other things, alignment with the EA and adherence to

rigorous configuration management.
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 53 GAO-01-717 IRS’ CADE Project

48

Conclusions

• We believe that these steps are appropriate and prudent, and if properly

implemented, should effectively address the control weaknesses

discussed in this briefing.
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 54 GAO-01-717 IRS’ CADE Project

49

Recommendations for

Executive Action

To the Commissioner of Internal Revenue, we reiterate our

recommendation to expedite:

• completion of a sufficiently defined version of the EA 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

• having a complete validated CADE design,

• demonstrating through the use of traceability matrices that

CADE’s requirements and design align with a sufficiently defined

EA version, and

• implementing effective configuration management control

practices.
Appendix I

Briefing Slides From April 20, 2001, and April 

23, 2001, Briefings of the Senate and House 

Appropriations Subcommittee Staffs

Page 55 GAO-01-717 IRS’ CADE Project

50

Agency Comments

In commenting on a draft of this briefing, IRS’ CIO agreed with our

conclusions and recommendations and committed to implement the

modernization management control improvements discussed in this

briefing by the end of June 2001.
Page 56 GAO-01-717 IRS’ CADE Project

Appendix II

Comments From the Internal Revenue ServiceApendxiI
Appendix II

Comments From the Internal Revenue 

Service

Page 57 GAO-01-717 IRS’ CADE Project
Appendix II

Comments From the Internal Revenue 

Service

Page 58 GAO-01-717 IRS’ CADE Project
Page 59 GAO-01-717 IRS’ CADE Project

Appendix III

GAO Contacts and Staff Acknowledgments ApendxiI

GAO Contact Gary Mountjoy, (202) 512-6367

Acknowledgements In addition to those named above, other key contributors were Bernard 

Anderson, Nancy DeFrancesco, Timothy Hopkins, Larry Korb, Sabine Paul, 

Jay Pelkofer, Sherrie Russ, Pietro Salatti, Aaron Thorne, Teresa Tucker, 

William Wadsworth, and Glenda Wright.

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