TIMS Compliance Benefits Fast Track Initiatives. NC Department of Revenue Data, Information and Knowledge Management

Transcription

1 TIMS Compliance Benefits Fast Track Initiatives NC Department of Revenue Data, Information and Knowledge Management North Carolina May 23, 2011

2 Executive Summary After extensive meetings with employees, the administration, legislators and the business community, the North Carolina Department of Revenue (NCDOR) developed a new e-business Strategic Plan which was comprised of the agency s five strategic pillars: 1. Maximize tax compliance and state tax revenue 2. Achieve operational excellence 3. Improve constituent services 4. Ensure public trust 5. Reshape the NCDOR culture to better support innovation, continuous learning and performance improvement. NCDOR works to provide services which will not only fulfill each of these strategies/pillars, but also works to build a foundation which will embrace future applications and technologies as they become available. The Tax Information Management System (TIMS) Program is a foundational component of NCDOR s e- Business Strategic Plan and is transforming the way NCDOR does business. The e- Business Strategic Plan was originally driven by the need to replace our legacy integrated tax system, improve e-services, and improve efficiencies in processes across the agency. The Agency s existing tax application system (ITAS) is over 15 years old, mainframe based, costly to run, and difficult to maintain. The Agency s new strategy could not move forward using the old system. In 2008 NCDOR began its implementation of the Tax Information Management System (TIMS) Program. The TIMS Program included a modernized integrated tax system (Oracle s Enterprise Tax Management System ETM), a compliance data warehouse and audit case management (RSI s DiscoverTax and TaxMaster), collections case management and decision analytics (CGI s Collections Case Management CCM), with business intelligence and enterprise reporting. The overall projected cost of implementing the TIMS program was set at $86M. NCDOR contracted $69M for these efforts and planned to contract for the remaining $10M for e-services and CRM at a later date. The other $7M was to be used for NC DOR internal costs. However, the legislature only appropriated $45M, leaving the responsibility to generate the remaining $41M through the project itself by NCDOR via the recently approved Public-Private Partnership legislation. As the project generated benefits, NCDOR was to use a percentage of what was collected to pay the vendor the remaining $41M. The budget projections showed that the existing system could not bring in the expected revenue, and the new system would not be built in time to pay for itself. DOR chose to completely revamp the project schedule to bring in key revenue generating segments much earlier than originally scheduled. Page 1 of 7

3 Description of Business Problem and Solution After completing a major e-business Strategy document, the Department of Revenue embarked on a re-invention drive. Its existing major tax system ITAS was over 15 years old, was mainframe based, expensive to run and difficult to maintain. The agency knew that this was the wrong platform on which to build a new tax system. In 2008 NCDOR began its implementation of the Tax Information Management System (TIMS) Program. The TIMS Program included a modernized integrated tax system (Oracle s Enterprise Tax Management System ETM), a compliance data warehouse and audit case management (RSI s DiscoverTax and TaxMaster), collections case management and decision analytics (CGI s Collections Case Management CCM), with business intelligence and enterprise reporting. The overall projected cost of implementing the TIMS program was set at $86M. NCDOR contracted $69M for these efforts and planned to contract for the remaining $10M for e-services and CRM at a later date. The other $7M was to be used for NC DOR internal costs. However, the General Assembly only appropriated $45M, leaving the responsibility to generate the remaining $41M through the project itself by NCDOR via the recently approved Public-Private Partnership legislation. As the project generated benefits, NCDOR was to use these monies to pay the vendor. Unfortunately, no one anticipated the depth or length of the recession. Budget projections showed vendor invoices would come ahead of generated revenue, which would result in negative impacts to the project and a deficit duration lasting 20 months. The business problem NCDOR was trying to solve was quite simple how to generate enough benefits to pay the vendor. The difficult problem was how to generate the benefits utilizing the agency s 15 year old, mainframe based tax system (ITAS) before TIMS was fully operational and able to provide those benefits. Working toward a resolution, the department collaborated with the vendor to create an aggressive, yet innovative approach. The best approach to increase revenues at a faster pace was to move all compliance/collection efforts to the front of the project and create interim programs to capitalize on ITAS. These projects became known as the Collections Benefit Initiatives - Fast Track. These projects included the following efforts/initiatives: Return Mail: This Fast Track Initiative involved taking collection cases that had been suppressed from any further collections activity as a result of returned mail. This effort attempted to obtain a better address by sending a file to LexisNexis for the identification of a more recent address. The result was an automated process that allowed more efficient processing of returned mail. Automated Attachment Process: This initiative implemented an automated process to match eligible taxpayers against financial and wage garnishment sources based on a predetermined order of priority and automatically generated garnishment notices to the applicable bank and employer. Also in this initiative, all levy data would be sourced and loaded into one central repository. Write Off Reversal: This effort involved taking taxpayers in the legacy integrated tax system with a written-off debt and without an active collection case, then Page 2 of 7

4 reversing the write-off of the taxpayer after a data match of wages and financial levy sources. At that time NCDOR did not have an automated process to match taxpayer data to bank levy sources. The objective of this Fast Track Initiative was to implement an automated process to identify eligible taxpayer cases which were written-off and then compare them against levy and garnishment sources. For cases with matching levy sources, the write-off would be reversed and a garnishment notice would be automatically generated and delivered to the source. Vendor Attachment: This Fast Track Initiative involved coordination with the NC Office of State Controller (OSC) to prevent vendor payments from being paid when the vendor had delinquent debt. Through incorporation of this initiative, NCDOR matched the vendor payment file provided by OSC to a file of vendors with delinquent debt. OSC garnished any payments in which the NCDOR found a match and then NCDOR issued a garnishment to the appropriate state agency. OSC then issued a payment to the agency for the amount of the garnishment. These initiatives included data interfaces with several other state agencies and banks, and partnerships/agreements for obtaining data, as well as an integration point to allow the data to work together toward improved efficiencies and providing a temporary revenue stream to pay for TIMS. From a technology perspective, the effort included modifications to the legacy Integrated Tax Administration System (ITAS), new custom code, use of third party tools, and a robust data warehouse. Data and information integration was achieved through the following methods: 1. Automated Attachment and Write-off Reversal projects: Data from various sources (potential sources of levies) was loaded into a separate central repository. Analytics were applied by matching taxpayer information from our legacy systems with the data in the repository. Data sources included the Internal Revenue Service, Employment Security Commission, Division of Health and Human Services, Online Filing and Payments, Integrated Tax Administration System, Unauthorized Substances, and Motor Fuels. 2. Vendor Attachment: No repository here, but ITAS data was matched against an external data source from OSC. Vendors identified with matching liabilities were submitted to OSC for offset processing. 3. Returned Mail: No repository, but previously suppressed collection notices were matched with an external data source and Lexis-Nexis in order to obtain a new address. At the time this solution was recommended, vendors and NCDOR were in early stages of designing the first release for the ETM component. Challenges included changing the course as a way of keeping the ETM design work on track. This approach required adding more resources, managing yet another project, and in some cases balancing resources between several projects. Page 3 of 7

5 Since the goal of the Fast Track Initiatives was to generate revenues very quickly in order to fund the TIMS Program, there was a need to implement in an extremely accelerated mode. At the time of its inception, multi-tasking of resources due to multiple active projects was a pervasive condition, contributing to heightened risks for delay. Therefore, the project was structured and managed in order to ensure tight schedule control through the following approaches: Up-front planning time by the team helped develop a detailed schedule in which tasks, responsibilities, work effort, and dependencies were clear. Once completed, workstream leads reported on the actual amount of work completed and provided a forecast of the remaining effort. This enabled the team to immediately identify and take action on activities which were at risk. To prevent the risk of multi-tasking resources being overspread and becoming unfocused, dedicated resources were assigned to key roles including the project manager, business leads, and technical resources. Since the resources were dedicated, there was solid cohesion, opportunities to build good teamwork and to facilitate collaboration, which improved team members commitment to the program s goal. The team held daily 30-minute stand-up meetings to check on the day s deliverables, active tasks, and issues. These meetings were attended by the Business Project Sponsor who was readily on hand to dispense advice, make decisions, resolve issues quickly, and to steer the group. From a technology perspective, there were three major challenges to overcome: Since the increased volume of paper garnishments was overwhelming banks processes and resources, NCDOR created a file to send to the bank to automatically process for both attachments and releases, thereby eliminating the need for additional resources and reducing processing time. To resolve the need for secure information exchange between agencies and other external sources, NCDOR utilized the secure LPAR of the mainframe, which is an existing secure method to exchange data with external entities. Additional data exchanges created a data storage problem. To house new data sources and levy information, a central repository was created. The central repository is part of a 2 TB data warehouse database running Oracle 11.1G. The DB runs on a 16 CPU IBM P560 system with 24 GB of memory, utilizing the AIX 5.3 operating system. It has a web front end for user administration; however, the bulk of the processing is completed through approximately 30 batch jobs which are run nightly. The repository stores levy data for the taxpayer information matched files which is then sent prioritized to the banks to garnish a bank account. Below is an example of the data/process flow and databases for the Write-Off Reversal Fast Track Initiative. Page 4 of 7

6 Tickler Files Perform Attachment Match Match Results Files Current Tickler Process Add Written-off Cases ITAS Reintroduce Case into Collection Extract Interface Reverse Write offs Generate Attachment Notice File of Eligible Written-Off Accounts Attachment Match File Selection Criteria Process Automated Attachment Prioritization Bank/Employer Upload Central Repository Sufficient Funds Exist? Take Action or Return Notice The vendor cost for this project was $1,196,400. Total person-hours for all resources involved was 9,930. Although initiatives had staggered production dates, the duration for all initiatives to go into production was eight months (from 2/22/10 to10/24/10). The Leadership Team, consisting of the Secretary of Revenue, Chief Operating Officer, Chief Financial Officer, Chief Information Officer, Assistant Secretary for Business Systems, Assistant Secretary for Tax Compliance, and Assistant Secretary for Tax Administration, made the final decision to approve the solution after determining that it aligned with the five strategic pillars for the department. The most critical pillar for the state at this time was to maximize compliance and state tax revenue with which this program was clearly aligned. It also directly aligned with the agency s objective for FY10 and FY11 to address non-compliance effectively, which dovetailed with IT s objective to improve the existing compliance data warehouse. Fast Track Initiatives were expected to generate $3,725,000 per quarter. Each initiative was slated for completion within four to seven months. There were no other proven solutions which could meet or surpass these revenue projections or the timeframe. Once the commitment was made by agency leadership to move forward, the required approach was for the program to be reviewed, approved, and monitored by the stakeholders, including but not limited to the State Chief Information Officer, NC Joint Legislative Committee, and the Public Private Partnership Committee overseeing the contractual arrangement. Obviously, there was a vested interest from the Governor s office in that a percentage of the benefits remained with the state as the vendor was being paid. After all vendor invoices were paid, 100% of the benefits went to the General Fund for North Carolina. However, at that time, the state was expecting a potential shortfall of $3B. Significance No one could have imagined what a positive impact this project would have for the State of North Carolina. Not only did it automate many manual processes, introduce new data exchanges with external sources, and implement new technology, but the project met the objective for any state CIO, legislator or governor in the country to increase state revenues. Page 5 of 7

7 Original Benefit Forecast (in $ Millions) Q Page 6 of 7 The success of this project was measured purely by the amount of revenue generated by the project. Initially, we did not expect to begin accruing any benefits until the second quarter of 2012, which would have meant approximately 20 months or so of non-payment. The impact of this delay could have resulted in a delay in the project which may have resulted in the vendor having to terminate some contractors for a period of time, or worse, the state could have incurred capital charges - late fees for not paying invoices as they were due. Benefit of the Project Q2 Q Q Q Quarterly Gross Benefits-Forecast Cumulative Gross Benefits-Forecast Quarterly Gross Benefits-Actual Cumulative Gross Benefits-Actual The outcome, however, proved to be very successful and began paying for itself immediately. After only two initiatives were in production in the second quarter of 2010, we saw returns of $10.81M. It should be noted that we had expected $0 returns until the fourth quarter of (See chart above for forecast versus actual). The last initiative was implemented in October of 2010 and all have been running in production since then. The benefits have increased each quarter. To date, these initiatives have accrued $43M. Based on original projections this is an exceedingly better outlook, based on current trajectory for benefits and costs. The probability is very good that there will not be any months where we will experience a deficit in which we are in arrears Collections by Initiative Gross Collection To-Date Automated Attachment $30,675,096 Write-off Reversal $6,641,134 Automation Returned Mail $4,136,188 Automation Vendor Attachment $1,570,240 TOTAL $43,022,657 in paying vendor invoices. Additionally, we do not expect capital charges to be incurred. Our original baseline showed NCDOR to be in deficit for 20 months with capital charges totaling $700K. However, by May 2011, we will have generated the benefits required to pay for the current vendor contract ($69.9M) well before the calculated timeline; this was originally calculated to be sometime in Finally, by August 2011 we will have generated benefits required to pay for the entire anticipated vendor contract ($79M); this was originally calculated to be sometime in The Fast Track Program has proven to be a valuable prototype not only for identifying new data sources and analytic practices for our current environment, but will serve as a model for future projects through which data integration and increased revenue may be realized. Through challenges described in this document - adding projects while balancing others, enhancing existing code while implementing new technology - the lessons learned in the implementation of this program will serve not only as a beacon for the state of North Carolina, but for other states as they look toward resolving budget constraints and non-compliance issues. It embraced the agency s main strategic pillar and is on track to deliver benefits well after the TIMS project is in place.