It's year 12 of a 15-year Internal Revenue Service effort to update its decades-old computer tax processing systems and the agency is handling about 31 percent of all returns with a modernized system.

That's according to the Treasury Inspector General for Tax Administration, which released last week its annual assessment of IRS modernization efforts in a report dated Sept. 23.

From January through May of this year, the Customer Account Data Engine, the relational database system meant to replace the magnetic tape files still used by the IRS to record most taxpayer information, processed approximately 40.5 million returns, the report states. CASE is the centerpiece effort of the effort, known as Business Systems Modernization.

In 2008, IRS significantly changed its approach to building CADE and while the modernization effort has improved IRS operations, significant risks remain, the report warns. Planned capabilities haven't always been delivered, and project management hasn't always relied on processes to support project delivery, the report adds.

Past TIGTA reports on CADE have found cybersecurity vulnerabilities in the system, and of the 16 vulnerabilities auditors identified in 2008, six remain unresolved, the annual assessment states. Also, an additional three vulnerabilities reported as closed have been only partially resolved, the report adds.

Cybersecurity testing in January 2010 also revealed that identified cybersecurity holes in another IRS modernization effort system, Modernized e-File, also remain open. Of 13 vulnerabilities identified by TIGTA, also in 2008, 11 remained open as of January, the report says.

Since 1999, the IRS has spent more than $6.4 billion on modernization, according to information within the annual assessment (click here for a for chart of IRS spending from fiscal 1999 through requested fiscal 2011 amounts).

For more:
- download the report, TIGTA 2010-20-094 (.pdf)

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