Washington (CNN) -- The FBI's new system intended to streamline the electronic handling of evidence and documents is making progress toward completion, though concerns remain about its budget and whether it will meet its target deployment date, the Justice Department's internal watchdog said Friday.
The automated case management project, known as Sentinel, is intended to move the FBI from an outmoded paper-based system to an electronic system for handling and sharing information about criminal cases.
But the project has been plagued with problems. In 2010, investigators said in a stinging report that the system was at a crossroads, facing $100 million in cost overruns and running two years behind schedule.
On Friday, the Department of Justice's Acting Inspector General Cynthia Schnedar released the eighth in a series of reviews examining the progress toward implementing Sentinel.
The Office of the Inspector General (OIG) said the risks of the project, either exceeding its budget or failing to deliver, have been reduced, but the end goals remain challenging.
"It's too early to judge whether the FBI's Agile development of Sentinel will meet its newly revised budget and completion goals and the needs of FBI agents and analysts (by 2012)," the OIG review said.
According to the FBI's original plan, Sentinel was to be developed by December 2009 at an estimated cost of $425 million. The FBI subsequently increased the estimated total cost to $451 million and twice extended the project completion date.
Lockheed Martin was hired as the prime contractor to develop the system. At that time, the FBI announced plans to assume direct management and complete the project using a new Agile methodology, and to reduce Lockheed Martin's role greatly.
The latest OIG review concluded that the FBI has lowered its rate of spending and instituted a more direct approach to monitoring the system's development.
"We found that the FBI has reduced the number of Lockheed Martin personnel working on the project from about 135 approximately 10 employees," said the OIG. "Our audit also found that as of August 2011, the FBI was expending significantly fewer dollars per month than it had when Lockheed Martin was primarily responsible for the development of Sentinel."
In an effort to keep the project on track, the inspector general made a number of recommendations, including having the FBI conduct exercises to make sure the system performs adequately.
During a recent test exercise, the system experienced two outages, and the FBI later determined the current hardware structure was inadequate.
"The FBI has not yet procured the needed additional hardware nor has it fully assessed the personnel costs associated with the revised schedule," according to the inspector general.
Despite assurances from the FBI that it will pay for new hardware, Sentinel's development remains a work in progress.