Integrated solution for the selection of cases to audit social security contributions with a predictive model A case of the Social Insurance Bank

Transcription

1 Good Practices in Social Security Good practice in operation since: 2011 Integrated solution for the selection of cases to audit social security contributions with a predictive model A case of the Social Insurance Bank Social Insurance Bank Uruguay Published

2 1 Summary In order to be more efficient and effective in detecting irregularities and fraud, the Social Insurance Bank (Banco de Previsión Social (BPS)) has built an integrated solution based on the use of modeling techniques and predictive analysis to select taxpayers to be audited (Integrated Solution for the Selection of Cases to Monitor or Solución Integral de Selección de Casos a Fiscalizar (SISCA)). This solution enables the identification, analysis and selection of cases (based on taxpayer behaviour and the analysis of fiscal risk models), and to monitor results. Moreover, it is integrated to the existing information control and management systems. This good practice presents the following advantages: Increasing efficiency in the quality of taxpayers selection by using predictive models and by incorporating feedback from the results of previous selections. Increasing efficiency by automating processes, shortening the selection process from 5 days to 20 minutes. Improving the quality of information given to the auditor for the fieldwork, incorporating the taxpayer s record. Implementing indicators and management reports. CRITERIA 1 What was the issue/problem/challenge addressed by your good practice? In Uruguay, registered taxpayers present a high percentage of voluntary compliance (over 94 per cent of companies pay their contributions on time). Although the BPS computes the amount of contributions through pre-invoicing, this computing is based on the statements provided by companies. The challenge is to identify in a timely manner those taxpayers who do not provide correct information and pay contributions accordingly, as well as detecting undeclared workers and those who are outside the system, ensuring their access to social security rights. Before the SISCA was implemented, the BPS conducted a selection based on functional knowledge, without automation or any type of feedback.

3 2 The selection and data analysis took several days and no specific information was provided to auditors to facilitate their task. CRITERIA 2 What were the main objectives and the expected outcomes? The main objectives of the SISCA were the following: 1. Building a tool to predict taxpayers irregularities by assigning probabilities of underreporting, omission or fraud, with the aim of ensuring an optimal selection of cases. 2. Improving and automating the selection process, gathering information from various sources, both internal and external to the organization, and integrating it to existing systems. 3. Improving workers inclusion and access to the benefits of the social security system. CRITERIA 3 What is the innovative approach/strategy followed to achieve the objectives? The SISCA has several innovative aspects, particularly the incorporation of business intelligence tools, combined with predictive analysis (Cognos and SPSS). The use of predictive models reveals new patterns of taxpayer behaviour that cannot be detected with traditional systems. The implemented solution includes an SPSS tax intelligence software that analyses risk models using over 600 different variables. This system detects companies presenting higher levels of fiscal risk (avoidance, omission, underreporting and fraud), generating an irregularity score. Among the variables analysed, it is worth underlying the ranking of evasion and underreporting (obtained from another predictive model developed on SPSS). This ranking is based on the information obtained from the Continuous Household Survey conducted biannually by the National Statistics Institute of Uruguay. The selection of cases to audit is done, on the one hand, by combining the results of the analysis of predictive models and the integrated and consolidated information that the BPS has on taxpayers; and,on the other hand, by applying the criteria of professional analysts. The selections can be done over generic or specific groups of activity.

4 3 For each selected company, the SISCA provides a record including information on taxpayers, their score and the variables that determined their selection. This information is used by the auditor to prepare the fieldwork. Another innovative aspect is that the results of the audits of selected companies is registered and the resulting feedback is incorporated as one of the variables in the model selection. Finally, it is noteworthy that the solution includes an important set of indicators and reports (over 30 indicators and 30 reports), for both operational and managerial analysis, the latter with a view to mobile devices. CRITERIA 4 Have the resources and inputs been used in an optimal way to achieve the set objectives and the expected outcomes? Please specify what internal or external evaluations of the practice have taken place and what impact/results have been identified/achieved so far. This practice has been considered very positive by organizations such as the International Monetary Fund (IMF) and the World Bank (WB), which have analysed it in detail. Particularly, the IMF recommended its implementation in the General Tax Administration of Uruguay. Moreover, in 2014, it was chosen to be presented at the IBM Insight in Las Vegas. Currently, we are working with the Ministry of Labour and Social Security of Uruguay in order to help them adapt this practice to incorporate it into their system. The SISCA was implemented through the IBTAL Project (Institutions Building TAL), developed by the World Bank, with a mixed team of consultants from the BPS and the World Bank. This combination of resources allowed to combine business knowledge with the experience and knowledge of the tools in use. The project lasted ten months and included a transfer of knowledge and methodology by BPS consultants, so as to ensure the maintainability of the project. The SISCA is fully operative and integrated into other monitoring processes. The average time to generate a selection improved by 900 per cent, down from five days to 20 minutes. The detection of irregularities for large taxpayers increased from 60 per cent to 90 per cent.

5 4 CRITERIA 5 What lessons have been learned? To what extent would your good practice be appropriate for replication by other social security institutions? The lessons learnt include the positive performance of these projects that combine different knowledge: on the one hand, the body providing business knowledge and experience; and, on the other hand, consultants sharing their knowledge and experience in modelling techniques and tools. Conceptually, the SISCA is a generic solution that can be adapted to different functions and not only for monitoring task. A similar solution was adopted in BPS for the judicial recovery of debts, and it is currently being implemented for the collection of debts in administrative proceedings. Both initiatives were carried out through the World Bank IBTAL Project. It is also possible to reproduce the practice in other social security institutions, as well as in other health and tax administrations.