November 2004
Reference
Number: 2005-30-011
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.
November
18, 2004
MEMORANDUM FOR
COMMISSIONER, SMALL BUSINESS/SELF-EMPLOYED DIVISION
FROM: Gordon C. Milbourn III /s/ Gordon C.
Milbourn III
Acting Deputy Inspector
General for Audit
SUBJECT: Final Audit Report - Implementation of the
Collection Field Function Consultation Initiative Was Carefully Coordinated, but
Some Aspects Could Be Enhanced (Audit # 200330040)
This
report presents the results of our review of implementation of the Collection
Field function (CFf)
Consultation
Initiative. The CFf Consultation Initiative is a product of the Small Business/Self-Employed (SB/SE)
Division’s Collection Reengineering effort.
The
overall objective of this review was to determine whether the Internal Revenue
Service (IRS) has taken effective steps to ensure the successful nationwide
implementation of the CFf Consultation Initiative.
In summary, implementation
of the Consultation Initiative was coordinated carefully and supported by a
formalized training program.
Approximately 500 IRS Collection function managers nationwide were
trained in 33 classes during January and February 2004. The training classes covered the Consultation
Initiative in detail through 7 instructional modules administered over a 3-day
period.
Business
measures used by the IRS to monitor Collection function data trends have
indicated a slight decline in the percentage of overage cases residing in CFf inventory
in the three Area Offices we reviewed since implementation of the Consultation
Initiative. However, due to the
sometimes slow nature of Collection function inventory turnover, the true
effects of the Consultation Initiative cannot yet be fully evaluated. For example, many of the cases in our review
of a sample of 115 open Collection function cases had already been in process
for some time; thus, initial casework had not been through the complete
consultation process. Until Collection function
cases have undergone the entire consultation process, business results
measuring data trends will not capture the full effects of the Consultation
Initiative.
Also, the overall
effectiveness of the Consultation Initiative could be improved by ensuring
milestones and completion dates for required collection activities are clearly
identified and case plans of action are consistently prepared. In 20 percent of the consultations reviewed, the
next milestone was unclear and/or the case did not have a current plan of action
at the time of the consultation.
We recommended the Director,
Collection, SB/SE Division, continue to measure the impact of the Consultation
Initiative on key business measures, including the percentage of overage cases
in Collection function inventory, as well as continue to measure its impact on
case quality using the Collection Quality Management System. We also recommended the Director, Collection,
SB/SE Division, clarify existing procedures
for conducting group manager case consultations to clearly require that both the
estimated completion dates of milestones and the date of the next follow-up
consultation be plainly documented in all cases. In addition, the feasibility of developing a
provision to facilitate documentation of expected completion dates within the
ENTITY Management Information System (ENTITY) milestone menu should be
evaluated. Finally, we recommended the
Director, Collection, SB/SE Division, reemphasize existing procedures regarding
the need for managers to document milestones and revenue officers to timely
prepare a plan of action whenever a Collection function case cannot be closed
on the first contact.
Management’s
Response: IRS management agreed with the
recommendations presented in our report.
Management will continue to measure the effectiveness of the
Consultation Initiative using indicators such as the percentage of overage
cases in Collection function inventory.
In addition, management will update the Internal Revenue Manual (IRM) to
instruct group managers to clearly document the estimated completion dates of
milestones and follow-up consultations on the ENTITY calendar. Management will also update the Integrated
Collection System to include an action completion date field. Finally, management will update the IRM to instruct
group managers to ensure that revenue officers are determining and documenting
action plans. Management’s complete
response to the draft report is included as Appendix IV.
Copies
of this report are also being sent to IRS managers affected by the report
recommendations. Please contact me at
(202) 622-6510 if you have questions or Richard Dagliolo, Acting Assistant
Inspector General for Audit (Small Business and Corporate Programs), at (631) 654-6028.
Overage Inventory Has Declined Slightly Since the Introduction of the Consultation Initiative
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
In early 1998, the Internal Revenue Service (IRS) Commissioner outlined a program to modernize the IRS. As part of this effort, a new organizational structure was established to replace the previous function-based structure. The new IRS organizational structure is based on four groupings of taxpayers with similar customer needs. The Small Business/Self-Employed (SB/SE) Division began operations in October 2000 to service one of these groups. To improve the overall effectiveness and efficiency of its operations, the SB/SE Division initiated the Collection Reengineering effort.
The Collection Field function (CFf) Consultation Initiative is a product of the SB/SE Division’s Collection Reengineering effort. The Consultation Initiative was designed to improve CFf business results by preventing long lapses in case activity, resulting in quicker turnover of Collection function case inventory. The Consultation Initiative incorporates a process of regular meetings (consultations) between group managers and revenue officers, focusing on workload management and case resolution.
The CFf Consultation Initiative was piloted in the Boston Area Office during the period September 2002 through March 2003. One-half of the Territories in the Boston Area Office were selected to test consultation procedures, with the remaining Territories acting as control groups and continuing to process their workloads as normal. During this 6-month evaluation period, the pilot test groups only slightly outperformed control groups in reducing the amount of overage cases (cases assigned to the CFf for more than 15 months) in their inventory, and this difference was not considered statistically significant. However, management did note an improvement in the timeliness of initial taxpayer contacts and a reduction in extended periods of case inactivity. Based on these results, the CFf Consultation Initiative was scheduled for nationwide deployment. Implementation of the Consultation Initiative began in January 2004 and was completed in April 2004.
The CFf Consultation Initiative
emphasizes routine managerial involvement in cases and efficient case
resolution. The primary element of the Consultation
Initiative consists of monthly
group manager and revenue officer meetings to consult on a portion of each revenue
officer’s case inventory. Cases undergo
consultations within 60 days of assignment to a revenue officer, at
prescheduled dates following significant case milestones (such as seizures or
levies), and as the case is expected to be near completion. Consultations are scheduled, and established
milestones documented, using the calendar function within the ENTITY Management
Information System (ENTITY).
This review was performed at the CFf Consultation Initiative project office in Worcester, Massachusetts, and in the Detroit, Michigan; Nashville, Tennessee; and Los Angeles, California, SB/SE Division Compliance Area Offices during the period September 2003 through July 2004. The audit was conducted in accordance with Government Auditing Standards. Detailed information on our audit objective, scope, and methodology is presented in Appendix I. Major contributors to the report are listed in Appendix II.
Following the completion of the CFf Consultation Initiative
pilot in March 2003, the Area 1 Pilot Management Team maintained responsibility
for the Initiative and began to act as the lead project coordinators in the
nationwide rollout. The CFf Consultation
Initiative Team, consisting of the Area 1 Director, a Territory manager, and
four group managers, was responsible for directing and monitoring the
implementation of the Consultation Initiative nationwide. To accomplish this, the group provided
ongoing guidance to
A Coordinating Territory manager was appointed in each
Area Office to oversee implementation of the Consultation Initiative within
that Area Office
A Territory manager was selected to represent each Area Office within the Consultation Initiative. Coordinating Territory managers were responsible for identifying managers to act as instructors for the Consultation Initiative training delivered within their Area Offices, conducting conference calls as necessary with participants in their Area Offices, and monitoring the completion of mandatory Initiative introductory meetings at the group level. Coordinating Territory managers also received information from members of the CFf Consultation Initiative Team and distributed the information to the responsible managers.
Training was provided to responsible Collection
function managers nationwide
Members
of the CFf Consultation Initiative Team trained managers in the
The Consultation Initiative was designed to prevent long lapses in case activity and increase turnover of cases in revenue officer inventory, with the goal of ultimately reducing the occurrence of overage Collection function cases. The design of the Initiative emphasized conducting consultations on older cases at the outset of the Initiative. While it was expected that managers consult on all eligible cases in Collection function inventory within the first 60 days of the Initiative, all eligible cases over 180 days old were scheduled for consultation within the first 30 days of the Initiative.
Figure 1 shows that business measures used by the IRS
to monitor Collection function data trends reflect a slight decline in the
percentage of overage CFf cases in inventory involving delinquent taxpayer
accounts or investigations since the beginning of Calendar Year 2004 in the
three Area Offices we reviewed. However,
due to the sometimes slow nature of Collection function inventory turnover, the
true effects of the Consultation Initiative cannot yet be fully evaluated. Many cases we reviewed, for example, had been
in process for some time; thus, initial casework had not been through the
complete consultation process. Until
Collection function cases have undergone the entire consultation process,
business results measuring data trends will not capture the full effects of the
Consultation Initiative.
The chart was
removed due to its size. To see the
chart, please go to the Adobe PDF version of the report on the TIGTA Public Web
Page.
Similarly, an ongoing review by management of the impact of the Consultation Initiative on case quality using the Collection Quality Management System (CQMS) has yet to yield any definitive trends. This review began in January 2004 and was scheduled to provide results through September 2004. Long-term key business measures and case quality trend information are critical to the effective monitoring and reliable assessment of the Consultation Initiative.
1. The Director, Collection, SB/SE Division, should continue to measure the impact of the Consultation Initiative on both key business measures, including the percentage of overage cases in Collection function inventory, and case quality using the CQMS.
Management’s Response: Indicators are currently being identified to gather data generated from the CQMS and other sources. IRS management will continue to use indicators such as overage, management direct time, lack of case activity, and time involved from case receipt to closure to determine the effectiveness of the Consultation Initiative.
A primary component of the CFf Consultation Initiative is a determination by Collection function group managers and revenue officers of the next milestone that needs to be accomplished to resolve a particular case and an estimate of the completion date for this milestone. The next consultation should then be scheduled based on this date. Milestones include, for example, a levy, an account adjustment, or a determination that the account is not currently collectible. However, the procedures also allow the manager the flexibility of scheduling the follow-up consultation at any time up to 120 days after the first consultation.
Another key element of case resolution is a plan of action, prepared by the revenue officer, outlining the manner in which the case will be resolved. IRS procedures require the revenue officer to prepare a plan of action whenever a case is not resolved on the first contact with the taxpayer.
We selected 115 consultation cases from the 3 Area Offices we visited. In 23 (20 percent) of the 115 consultations reviewed, the next milestone was unclear and/or the case did not have a current plan of action at the time of the consultation. In addition, although all the cases reviewed had a documented date for the next scheduled consultation, the estimated completion date of the next key milestone was generally not separately documented. The next consultation was scheduled within an average of 71 days in the cases we reviewed; however, 20 (17 percent) of the 115 cases had follow-up consultations scheduled 100 or more days later.
The documentation of milestones is supported by a menu within the ENTITY; however, managers did not always use the menu or clearly document the next milestones within the ENTITY in some other way. In addition, the milestone menu does not contain a provision or prompt to facilitate the documentation of expected completion dates for milestones selected.
The effectiveness of the Consultation Initiative could be weakened when a case milestone is not documented or the estimated completion date of the milestone is unclear. Not separately documenting the milestone completion date is especially problematic in cases for which the manager elects to establish a more lengthy follow-up consultation date.
Similarly, the Collection function case plan of action prepared by the revenue officer is a key element of effective management. Not having a current plan of action could create the risk that, instead of consulting with the group manager on planned actions, a revenue officer will simply rely on the group manager to direct case resolution.
The Director, Collection, SB/SE Division, should:
2. Clarify existing procedures for conducting group manager case consultations to clearly indicate a requirement that both the estimated completion dates of milestones and the date of the next follow-up consultation be plainly documented in all cases. In addition, the feasibility of developing a provision to facilitate documentation of expected completion dates within the ENTITY milestone menu should be evaluated.
Management’s Response: The Internal Revenue Manual (IRM) is being updated to instruct group managers to ensure initial consultations, follow-up consultations, and estimated completion dates of milestones are clearly documented on the ENTITY calendar.
The system for recording the reminder information for the Consultation Initiative on the Integrated Collection System (ICS) is scheduled for implementation in May 2005. The ICS will include an “Action Completion Date” field.
3.
Reemphasize existing
procedures regarding the need for managers to document milestones and for
revenue officers to timely prepare a plan of action whenever a Collection
function case cannot be closed on the first contact.
Management’s Response: Revenue officers were provided an update of the
IRM which reemphasizes the need to maintain and update plans of action in their
case histories. The IRM is also being
updated to instruct group managers to ensure that revenue officers are
determining and documenting action plans, setting deadline dates for taxpayers,
as well as establishing specific target dates for actions. The group managers are instructed to clearly
document the dates in their ENTITY calendar for referral during subsequent
consultations.
Appendix I
Detailed Objective,
Scope, and Methodology
The overall objective of this review was to determine whether the Internal Revenue Service has taken effective steps to ensure the successful nationwide implementation of the Collection Field function (CFf) Consultation Initiative.
To accomplish this objective we:
I. Determined whether the CFf Consultation Initiative project office provided effective oversight to ensure the successful implementation of the CFf Consultation Initiative.
A. Reviewed the methodology used by the project office to monitor the progress of the implementation and ensure any ongoing problems were timely identified and surfaced for action.
B. Ascertained whether timely and comprehensive training regarding the CFf Consultation Initiative was provided to the CFf group managers nationwide.
II. Ascertained whether the CFf Consultation Initiative was implemented as intended.
A. Interviewed four randomly selected group managers and two Territory managers in each of three judgmentally selected Area Offices and determined whether they experienced any difficulties in implementing the CFf Consultation Initiative. Territories were selected randomly in order to infuse a more unbiased approach into case selection methodology. Selected Territories were chosen from among 13 Territories in the Detroit Area Office, 12 Territories in the Nashville Area Office, and 9 Territories in the Los Angeles Area Office.
B. Reviewed
a judgmental sample of 115 cases with consultations, selected from the
III. Determined whether a reliable measurement process was developed to evaluate the effectiveness of the CFf Consultation Initiative process.
A. Analyzed the completeness and reliability of the measurement system developed to assess the impact of the CFf Consultation Initiative process on Collection function case quality and timeliness.
B. Determined
whether the CFf Consultation Initiative project team established any short-term
or long-term measures to help guide its evaluation of the impact of the CFf
Consultation Initiative process.
Appendix II
Major Contributors to This
Report
Richard
Dagliolo, Acting Assistant Inspector General for Audit (Small Business and
Corporate Programs)
Parker F.
Pearson, Director
Philip
Shropshire, Director
Anthony J. Choma,
Audit Manager
James S. Mills, Jr.,
Lead Auditor
James D. Dorrell, Senior Auditor
Seth Siegel, Auditor
Appendix III
Commissioner C
Office of the Commissioner – Attn: Chief of Staff C
Deputy Commissioner for Services and Enforcement SE
Deputy Commissioner, Small Business/Self-Employed Division SE:S
Director, Collection, Small Business/Self-Employed
Division SE:S:C
Director, Communications and Liaison, Small Business/Self-Employed Division
SE:S:CL
Chief Counsel CC
National Taxpayer Advocate TA
Director, Office of Legislative Affairs CL:LA
Director, Office of Program Evaluation and Risk
Analysis RAS:O
Office of Management Controls OS:CFO:AR:M
Audit Liaison: Commissioner, Small Business/Self-Employed
Division SE:S
Appendix IV
The response was
removed due to its size. To see the
response, please go to the Adobe PDF version of the report on the TIGTA Public
Web Page.