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.
The
Implementation of Some Customer Contact Center Optimization Recommendations Is
on Target
Continuing the Operation of a
Small Call Site May Diminish Organizational Efficiency
Appendix I – Detailed Objective, Scope, and Methodology
Appendix II – Major Contributors to This Report
Appendix III – Report Distribution List
Appendix IV – Management’s Response to the Draft Report
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 IRS’ 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 IRS’ Toll-Free telephone operations.
The ACS is the IRS’ 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 IRS’ 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 – 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 President’s Council on Integrity and Efficiency’s 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 IRS’ database and
automatically route the call, according to the caller’s 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 –
particularly for business taxpayers – 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 taxpayer’s 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 caller’s account
information, the ECR routes the calls based on the BOD, the telephone number
dialed by the caller, and the caller’s responses to script questions. Although the ECR routes the call to the most
appropriate target based on the caller’s 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 IRS’ 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 caller’s
account. The support for achieving employee group
skill specialization was based on the CCCO team’s 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.
Management’s 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.
Management’s 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.
Appendix I
Detailed Objective, Scope, and Methodology
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 IRS’ 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.
Appendix II
Major
Contributors to This Report
Gordon C. Milbourn III, Assistant
Inspector General for Audit (Small Business and Corporate
Programs)
Philip Shropshire, Director
William E. Stewart, Audit Manager
E. John Thomas, Senior Auditor
Appendix III
Commissioner N:C
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
Audit
Liaisons:
Commissioner, Small
Business/Self-Employed Division S
Commissioner, Wage and Investment Division W
Appendix IV
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.