Error:An attempt to connect to the data source failed

[KS]

We are upgrading to Cognos 10.2.1 and we have set up a new data source in Cognos Administration.  When the connection is tested it is successful.  The connection type is SQL Server 2012, SQLOLEDB and the authentication is AD.

We get an error when we try to run any reports using the package based on this data source. It says....'An attempt to connect to the data source failed'. The user is prompted for a Userid and Password. When we enter the AD credentials , the report runs.

How do we get around this error? Do I need to download a JDBC driver  from MS and configure the JDBC connection in the data source connection as well? I've read something about needing the driver but I'm not sure.

Or do I have to do something in Framework Manager? I haven't upgraded the packages there yet.

Thanks in advance for any help.