October 16, 2008

IRS Acknowledges Security Vulnerabilities

A treasury watchdog said in a report Thursday that two new IRS computer systems that will eventually cost taxpayers almost $2 billion are being put into service despite known security and privacy vulnerabilities.

Internal Revenue Service officials failed to ensure that identified weaknesses had been addressed before putting the new systems into use, according to the office of the Treasury Inspector General for Tax Administration.

"It was very troublesome that the IRS was aware of, and even self-identified, these weaknesses," said Inspector General J. Russell George.

A statement issued by the IRS said security of taxpayer data "is of paramount importance" to the agency and that, as noted in the report, it had implemented many of its recommendations and taken steps to improve security. It stressed that no taxpayer data has been harmed and numerous security safeguards were in place.

The report focused on the Customer Account Data Engine, which will provide the foundation for managing all taxpayer accounts, and the Account Management Services system, which will provide faster and improved access by employees to taxpayer account data.

Gradually, both systems are being put into use. CADE, expected to cost more than $1 billion through 2012 to develop and operate, this year processed about 20 percent of the 142 billion returns filed. The Account Management Services system, AMS, still in its initial stages, will cost more than $700 million to develop and maintain through 2024.

The IRS organizations responsible for giving the go-ahead to partial deployment of the systems were aware of security and privacy problems but did not consider them significant, the IG report said.

However, it said those vulnerabilities increased the risks that unscrupulous people could gain access to vast amounts of taxpayer information with little chance of detection and that systems could not be recovered effectively during an emergency.

Administrators to the CADE system could access, modify and delete information without being detected, that contractors could make changes to system configurations without approval and that backup tapes from offsite storage facilities were not adequately tested to ensure that data would be restored without errors or losses.

According to the report, the CADE system might be vulnerable to malicious code attacks such as computer viruses.

Similarly, it said auditing controls for the AMS system were not sufficient to ensure that illegal browsing, changes or theft of taxpayer files would be detected.

Recommendations in the report suggest the committee in charge of approving implementation of new stages of the systems consider all security vulnerabilities before giving that approval and that interim measures be put in place when significant security problems have been identified.

The IRS agreed with their recommendations, the report said.


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