Management Advisory Report:† Progress Has Been Made to Consolidate the Automated Collection System Workload, but Achieving Employee Skill Specialization Remains an Uncertainty
Reference Number:† 2002-30-166
This report has cleared the Treasury Inspector General for Tax Administration disclosure review process and information determined to be restricted from public release has been redacted from this document.
September 13, 2002
MEMORANDUM FOR ††††††† COMMISSIONER, SMALL BUSINESS/SELF-EMPLOYED DIVISION
††††††††††††††††††††††† COMMISSIONER, WAGE AND INVESTMENT DIVISION
FROM:†††† Pamela J. Gardiner /s/ Pamela J. Gardiner
†††††††††††††††† Acting Inspector General
SUBJECT:†††† Final Management Advisory Report - Progress Has Been Made to Consolidate the Automated Collection System Workload, but Achieving Employee Skill Specialization Remains an Uncertainty (Audit # 200130046)
This report presents the results of our review to determine whether the Internal Revenue Service (IRS) has effectively evaluated and addressed the major business risks in implementing the Customer Contact Center Optimization (CCCO) recommendations as they relate to the modernization of the Automated Collection System (ACS).† The Commissioner launched the CCCO Project in July 2000 to improve the quality of non-face-to-face communications between the IRS and its customers through the specialization of the workload.† We performed this review because modernizing the ACS is critical for the IRS due to the effect it has on economically addressing taxpayer compliance issues.† During Fiscal Year (FY) 2001, the ACS received 3.85 million Taxpayer Delinquent Accounts (TDA) totaling more than $19 billion, received 1.18 million Taxpayer Delinquent Investigations (TDI), and collected over $1.27 billion.
In summary, we found that the IRS had made progress in designing and implementing ACS changes that were part of the CCCO initiative.† The CCCO recommendations involving consolidating the ACS sites, testing the expansion of the predictive dialer, and sharing Submission Processing resources with the ACS have been completed or are on schedule.† However, the planned account-based call routing technology, called Data Directed Routing (DDR), has not been realized due to infrastructure and funding issues.† Correspondingly, ACS employee group skill specialization is not on target because it is dependent upon the DDR to fully realize the anticipated improvements to the quality of customer service, resource use, and productivity.† While Enhanced Call Routing (ECR) has been put into operation in place of the DDR, it does not permit the account-based routing of complex or routine calls from business taxpayers.† In addition, the ECR does not reroute calls received on the ACS telephone lines that were intended for the customer service lines.† One IRS study estimated that these calls represent 20 percent of the incoming calls to the ACS and could substantially reduce revenue collections on ACS accounts.† Also, the improved program efficiency anticipated from the implementation of the CCCO recommendations may be diminished if the IRS continues to operate one ACS call site at below the optimum staffing level.
We recommended that the Directors of the Compliance functions of the Small Business/Self-Employed (SB/SE) and Wage and Investment (W&I) Divisions evaluate how they plan to fully achieve ACS specialization without the DDR, ensure that the efficiency gains achieved through the ECR are carefully compared to the potential cost/benefits of implementing the DDR, and reevaluate the business practice of not rerouting Toll-Free calls received by the ACS given the potential adverse impact on revenue collections.† We also recommended that the Director, Compliance, SB/SE Division, determine how one small call site should be upgraded to achieve the program efficiencies envisioned under the new ACS footprint.
Copies of this report are also being sent to the IRS managers who are affected by the report recommendations.† Please contact me at (202) 622-6510 if you have questions or Gordon C. Milbourn III, Assistant Inspector General for Audit (Small Business and Corporate Programs), at (202) 622-3837.
Creating a modernized Internal Revenue Service (IRS) has been a top priority of the Commissioner, as well as a principal focus of Congressional oversight.† The IRS Restructuring and Reform Act of 1998 (RRA 98) legislated the modernization of the IRS and also mandated that the IRS do a better job of meeting the needs of taxpayers.† One of the IRSí first steps to implement the RRA 98 was to create a flatter organizational structure with four Business Operating Divisions (BOD) that are distinctly aligned by customer segment.
The Commissioner launched the Customer Contact Center Optimization (CCCO) Project in July 2000 with a mission to improve the quality of non-face-to-face communication between the IRS and its customers through an increased focus on workload specialization.† The CCCO Project covered both the Automated Collection System (ACS) and the IRSí Toll-Free telephone operations.
The ACS is the IRSí computerized inventory system that maintains certain balance due accounts and return delinquency investigations.† The ACS generally receives the accounts and investigations after taxpayers have failed to comply with several IRS notices for past due taxes or unfiled tax returns.† Customer Service Representatives (CSR) assigned to the ACS initiate and respond to telephone and correspondence contacts with these taxpayers in an attempt to collect the unpaid taxes and secure the unfiled tax returns.† The ACS contacts occur prior to any actions being taken by the IRSí Field Collection program that relies on face-to-face contacts with taxpayers.† Personnel assigned to the ACS and Field Collection perform many of the same processes, such as analyzing financial statement information, researching assets, entering into installment agreements, making currently not collectible determinations, and taking lien and/or levy enforcement actions.
Modernizing the ACS is critical to the IRS because of the effect it has on economically addressing taxpayer compliance issues.† The ACS was originally intended to serve as an aggressive outbound call program targeted at making early attempts to contact taxpayers with accounts needing resolution.† Over the years, however, the ACS operation has evolved into primarily taking incoming calls from taxpayers.
During Fiscal Year (FY) 2001, taxpayers attempted almost 3.3 million telephone calls to the ACS.† Figure 1 shows that 72 percent of the 2,634 Full Time Equivalents (FTEs) assigned to the ACS in FY 2001 were allocated to answering incoming telephone calls.†
Figure 1.† Allocation of ACS Resources Ė FY 2001
Figure 1 was removed due to its size.† To see the figure, please go to the Adobe PDF version of the report on the TIGTA Public Web Page.
During FY 2001, the ACS received 3.85 million Taxpayer Delinquent Accounts (TDA), totaling more than $19 billion, and 1.18 million Taxpayer Delinquency Investigations (TDI).† During the same fiscal year, the ACS disposed of 2.88 million TDAs and nearly 103,000 TDIs and collected over $1.27 billion.† At the end of the fiscal year, the ACS had an inventory of 2.87 million TDAs, totaling $7.83 billion, and nearly 900,000 TDIs.†
In this review, we determined the status of the major ACS recommendations that resulted from the CCCO Project and determined whether the IRS has effectively addressed the business risks associated with the implementation of these recommendations.† The review was performed at IRS offices in Washington, D.C., New Carrollton, Maryland, and Dallas, Texas, from November 2001 to April 2002.† The review was performed in accordance with the Presidentís Council on Integrity and Efficiencyís Quality Standards for Inspections.† Detailed information on our review objective, scope, and methodology is presented in Appendix I.† Major contributors to the report are listed in Appendix II.†
The IRS has completed two phases of the three-phase CCCO Project.† Phase I, completed in December 2000, involved developing the program vision and the footprint design for the new ACS operating model.† Phase II, completed in June 2001, involved a detailed blueprinting of the new operating model and resulted in several recommendations that were designed to increase the quality of customer service, reduce customer wait times, improve program efficiencies, and improve employee job performance, while reducing attrition.
After an IRS executive committee approved the Phase II recommendations, the implementation of these deliverables became the responsibility of the BODs.† Within each BOD, Program Management Offices were given the responsibility to drive the implementation, with support from site implementation teams and a central integration team.† Site-specific plans were developed to further facilitate the CCCO implementation.
The SB/SE and W&I Divisions both established organizational components to deal with problems and issues as the ACS implementation progressed.† These offices have controls in place to record and work issues as they are identified.† Other controls that monitor the progress of the CCCO implementation include BOD site operational reviews, biweekly conference calls with headquarters and site managers, and oversight by an executive-sponsored work group.
The Phase III site-level implementation of the CCCO recommendations was underway at the time we completed our review in April 2002.†† During Phase III, the IRS has completed or is on schedule for putting into operation the following CCCO recommendations that significantly affected ACS operations:
While meaningful actions have been taken toward accomplishing several of the CCCO recommendations, the implementation of the planned account-based call routing technology, called Data Directed Routing (DDR), was uncertain at the time we completed our review in April 2002 because of infrastructure and funding issues.† In addition, ACS specialization was not on target because it is dependent upon the DDR for complete implementation.† Without the successful resolution of these two issues, the enhancements to customer service, workforce utilization, and other program efficiencies envisioned by the CCCO initiative may not be completely realized.
The new call routing technology may not be implemented as originally planned
In a call center environment, technology, workforce management, and cell structure design need to be aligned to achieve efficiency.† To help align these elements, the IRS tasked the Modernization Program contractor to develop an account-based call routing capability to route calls to the new specialized cells developed by the CCCO Project.† The account-based routing and the infrastructure to support it were referred to as the DDR.
The DDR was designed to improve the routing of telephone calls to the appropriate ACS or Toll-Free CSRs that can best handle them.† Under the planned DDR technology enhancement, callers would be asked to enter their Taxpayer Identification Numbers (TIN) on the telephone keypad.† The TIN would be used to search the IRSí database and automatically route the call, according to the callerís account information, to a CSR with the skills to effectively handle the call.†
The deployment of the DDR was originally planned for December 1, 2001, as part of the Customer Communications Project FY 2002 (CC02) Release.† However, it was subsequently determined that implementing the original DDR design would require significant development costs of more than $17 million because major changes would be needed to the current infrastructure.†
The IRS employed the Enhanced Call Routing (ECR) in January 2002 as a short-term alternative to the DDR.† Although the ECR is designed to provide much of the call routing functionality envisioned with the DDR through incremental changes to existing systems, there are some limitations Ė particularly for business taxpayers Ė for routing some calls.
When an individual taxpayer enters an SSN on a telephone keypad, the ECR performs a data search and the call is routed to the appropriate resource based on the taxpayerís account information.† However, the ECR does not perform a data search when a business taxpayer or a self-employed taxpayer enters an EIN on a telephone keypad.† Instead of routing these calls based on the callerís account information, the ECR routes the calls based on the BOD, the telephone number dialed by the caller, and the callerís responses to script questions.† Although the ECR routes the call to the most appropriate target based on the callerís input, it does not route the call to a specialized (i.e., complex or routine) CSR skill group.† This increases the chances for less effective call routing and less efficient call handling.
In addition, the ECR does not have the capability to identify business taxpayers whose accounts are assigned to the ACS.† As a result, business taxpayers with delinquent tax or delinquent return issues that call the Toll-Free line will not automatically be routed to CSRs at one of the designated ACS sites.† Conversely, callers to an ACS telephone number with a non-ACS account condition will be routed to an ACS CSR.† The IRSí business practice is to allow the CSRs in the ACS to handle these calls rather than transfer them to the Toll-Free lines.
A local study completed by the IRS in October 2000 showed that non-ACS calls (e.g., account calls that should have been placed to the Toll-Free line) represented up to 20 percent of the calls received by the ACS and that the ACS might even receive a greater percentage of non-ACS calls during the peak filing season.† This means there were callers who could not gain access to the Toll-Free lines and who may have been using the ACS lines as an alternative.† Access to the Toll-Free system is the number one problem that taxpayers have with the IRS.† Therefore, the limitations with the ECR will not help resolve one of the most significant problems the IRS faces.†
The IRS study also estimated that, since ACS resources were not working on the ACS workload about 20 percent of the time, $100 million in revenue collections on ACS accounts could be lost per year.† However, IRS management advised us that they believe the actual revenue impact of handling non-ACS calls is less than $100 million because the study did not take into consideration that some of the non-ACS calls involve balance due notices that likely resulted in some collections.† In addition, management provided us with the results of an analysis of calls from individual taxpayers that were identified by CSRs at 1 site as having been transferred or erroneously routed to the ACS during a 2-week period in April 2002.† The analysis showed that only 23 (5.8 percent) of 396 calls had no valid reason to be transferred or routed to the ACS.† A similar analysis of calls from business taxpayers had not been performed.
In November 2001, a Customer Communications Engineering Study Team completed a tactical comparison of the functionality of the ECR and the DDR.† The study team concluded that the ECR is in alignment with the CCCO and provides nearly all of the call routing functionality expected in the DDR.† The study team also concluded that the limitations with the ECR approach would be better addressed in the context of an overall Next Generation Customer Contact Architecture.† The gaps between the ECR and the DDR will be addressed over time as computer systems are reengineered or replaced.† At the time we completed our review, IRS management had not made a final decision on the eventual implementation of the full DDR design.
Realizing ACS employee skill specialization is dependent on the DDR
The CCCO objectives were to improve the quality of customer service, maximize resource use, and increase productivity and employee satisfaction through workload consolidation and specialization.† For the ACS, specialization was to occur by BOD (i.e., the W&I and SB/SE Divisions), by ACS program areas, and by employee skill level within each ACS call site.† Employee skill specialization involves routing an incoming telephone call to either a new or experienced CSR based on the complexity of the callerís account.† The support for achieving employee group skill specialization was based on the CCCO teamís finding that ACS CSRs were overwhelmed by the enormous variety of incoming calls and often were unable to address all of the customer issues.
In January 2002, specialization by the BOD and by the ACS program area was achieved with the ECR.† At the time we completed our review in April 2002, however, it was still uncertain when ACS employee group skill specialization would be realized.†
The full implementation of the ACS employee group skill specialization recommendation is dependent on the DDR.† In March 2002, the W&I Division took steps to minimize the delay in implementing the DDR by requesting enhancements to the ECR that will allow some of the capabilities envisioned for ACS employee group skill specialization.† At the time we completed our review, it was not clear when these requested enhancements would be implemented and whether the SB/SE Division will request and make similar changes.†
Aligning the call routing technology with the cell design structure is critical for efficient call handling.† The CCCO design was predicated on these two elements operating in tandem.†
The Directors of the Compliance functions of the SB/SE and W&I Divisions need to:
1. Evaluate how they plan to fully achieve ACS employee group skill specialization if the DDR deliverable is not scheduled for implementation within a reasonable period of time.
2. Ensure that the efficiency gains achieved through the ECR solution are carefully compared to the potential cost/benefits of implementing the DDR, particularly since there are some limitations with the ECR in routing calls received from business taxpayers.
3. Reevaluate the business practice of not rerouting non-ACS calls received by the ACS, given their potential adverse effect on revenue collections.
Managementís Response:† The Commissioner, W&I Division, concurred with each recommendation.† The IRS is currently evaluating the use of the ECR to achieve employee group skill specialization.† The Compliance Staff will work with the Joint Operations Center to assess the feasibility of using the ECR to route incoming calls by employee skill level.†
The IRS will estimate efficiency gains through the ECR relative to what was estimated through the DDR.† The IRS will also ensure that the ECR routes the calls from business taxpayers to the appropriate call sites.†
The IRS has reevaluated its business practice of not rerouting non-ACS calls received by the ACS and, at this time, is satisfied that the current practice is appropriate.† There continue to be exceptions where the ACS receives calls that should properly be handled in the Accounts Management function, but the ECR has significantly reduced the problem of misrouted calls to the point that the opportunity cost in business results is minimal relative to the impact on customer satisfaction.† The IRS will continue to evaluate this area and may recommend changing this practice in the future, if warranted.
Improved program efficiency, gained in the areas of management, training, and support, was one of the key benefits that the CCCO team envisioned would be realized through consolidation and specialization.† The Phase II design proposed that all ACS call sites needed to be increased in size to reach a minimum annual allocation of 150 FTEs to achieve the desired organizational efficiencies.†
However, 1 SB/SE Division ACS call site, which has been designated as a non-continuing site by the IRS since 1992, was allocated only 54.4 FTEs in FY 2002.† This represents only slightly more than one-third of the 150 FTE minimum recommended by the CCCO team.† By comparison, the next smallest SB/SE Division ACS call site was allocated 147.8 FTEs in FY 2002.†
This potential organizational inefficiency exists because the degree of consolidation was limited by business requirements and constraints that were developed during the CCCO Phase II design phase.† These included maintaining the same number of call sites within the agreed BOD split.
4. The Director, Compliance, SB/SE Division, needs to determine how the small call site should be upgraded to achieve program efficiencies envisioned under the new ACS footprint.
Managementís Response:† The Commissioner, W&I Division, responded that the IRS concurs with this recommendation and has completed it.† In May 2002, the Commissioner, SB/SE Division, designated Detroit as a continuing ACS site.† The SB/SE Division intends to make Detroit a fully operational site and increase it to the size necessary to achieve program efficiencies.† A project manager has been designated, and a plan to develop and implement the changes is underway.† Due to funding constraints in FY 2002, the IRS plans to add staffing beginning in FY 2003 and continue the build-up through FY 2005.
The overall objective of the review was to determine whether the Internal Revenue Service (IRS) has effectively evaluated and addressed the major business risks in implementing the Customer Contact Center Optimization (CCCO) recommendations as they relate to the modernization of the Automated Collection System (ACS).† To accomplish this objective, we:†
I. Assessed the process the IRS used to evaluate the business risks for the ACS within the CCCO initiative.†
A. Determined whether CCCO management had analyzed whether its products and services were being delivered in ways that best meet customer and stakeholder needs.
B. Determined whether CCCO management used performance measures consistent with the requirements of the Government Performance and Results Act of 1993 (GPRA) to determine how well it was meeting desired outcomes and to identify and assess any performance problems.
C. Determined what indicators (i.e., quality, cost, time, etc.) were used to measure each core process and deliverable.
D. Determined whether CCCO management had developed a model of the existing ACS process that included a map of the workflow to the activity or task level, performance data for the activities within the ACS process, and validation of the mapping by employees who do the ACS work and the process owner.
E. Determined whether CCCO management had developed proposed ACS process alternatives that included the new workflow with all interfaces and dependencies noted, the new information flow, the impact and changes on the IRSí information and system architectures, changes to the organizational structures, management systems, job descriptions and skill requirements, reward systems, human resources policies, and facilities.
F. Determined whether CCCO management had identified the new tasks, roles, responsibilities, reporting relationships, and training needs required by the new ACS process.
II. Appraised the process the IRS used to develop specific deliverables for the ACS that were designed to address the stated business risks within the CCCO initiative.†
A. Obtained from IRS CCCO management the specific deliverables that were designed to address the listed business risks within the CCCO initiative.†
B. Determined whether CCCO management had stated its goals in measurable terms, such as cost, quality, and timeliness, and whether customers and stakeholders value these goals.
C. Determined whether CCCO management had established a sound performance measurement system that produces measures at each organizational level that demonstrates results, are limited to the vital few, respond to multiple priorities, and link to responsible programs.
D. Determined whether CCCO management had a formal plan for the CCCO ACS deliverables that included clear and measurable goals and objectives, explicitly stated assumptions, all tasks, responsibilities and deliverables, clearly stated schedules and deadlines, and identified skills and resources.†
E. Determined whether CCCO management had identified potential barriers to implementing the ACS process alternatives, ranked the barriers based on their potential impact, and identified ways to overcome the identified barriers.†
F. Determined whether CCCO management had identified risk factors associated with implementing each proposed ACS alternative, prepared a cost/benefit analysis for each alternative, and assessed how well each alternative meets the goals of the project.
Gordon C. Milbourn III, Assistant Inspector General for Audit (Small Business and Corporate
Philip Shropshire, Director
William E. Stewart, Audit Manager
E. John Thomas, Senior Auditor
Deputy Commissioner† N:DC
Deputy Commissioner, Small Business/Self-Employed Division† S
Deputy Commissioner, Wage and Investment Division† W
Director, Compliance, Small Business/Self-Employed Division† S:C
Director, Compliance, Wage and Investment Division† W:CP
Deputy Director, Compliance Services, Small Business/Self-Employed Division† S:C
Chief Counsel† CC
National Taxpayer Advocate† TA
Director, Legislative Affairs† CL:LA
Director, Office of Program Evaluation and Risk Analysis† N:ADC:R:O
Office of Management Controls† N:CFO:F:M
††††††††††† Commissioner, Small Business/Self-Employed Division† S
Commissioner, Wage and Investment Division† W
The response was removed due to its size.† To see the complete response, please go to the Adobe PDF version of the report on the TIGTA Public Web Page.