Implementation of the Collection Field Function Consultation Initiative Was Carefully Coordinated, but Some Aspects Could Be Enhanced

 

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) Divisionís 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.

Managementís 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.Managementís 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.

 

Table of Contents

Background

Implementation of the Consultation Initiative Was Coordinated Carefully and Supported by a Formalized Training Program

Overage Inventory Has Declined Slightly Since the Introduction of the Consultation Initiative

Recommendation 1:

Consultation Effectiveness Could Be Improved by Ensuring Milestones Are Clearly Identified and Case Plans of Action Are Consistently Prepared

Recommendation 2:

Recommendation 3:

Appendix I Ė Detailed Objective, Scope, and Methodology

Appendix II Ė Major Contributors to This Report

Appendix III Ė Report Distribution List

Appendix IV Ė Managementís Response to the Draft Report

 

Background

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 Divisionís 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 officerís 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.

Implementation of the Consultation Initiative Was Coordinated Carefully and Supported by a Formalized Training Program

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 Coordinating Territory managers, established a Deployment Schedule monitoring the completion of key aspects of the rollout, and trained the instructors who later provided Consultation Initiative training to the group and Territory managers in their respective Area Offices.

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 Boston, Los Angeles, and Detroit Area Offices during the fourth quarter of Fiscal Year (FY) 2003.Selected managers from those Area Offices then acted as instructors and subject matter experts for the remaining 13 Area Offices.Approximately 500 managers nationwide were trained in 33 classes during January and February 2004.The training classes covered the Consultation Initiative through 7 instructional modules administered over a 3‑day period.The topics of instruction included the goals of the Consultation Initiative, scheduling consultations using the ENTITY, and consultation documentation requirements.Generally, managers we interviewed evaluated the training they received positively.We attended two of the training sessions and determined that the training was appropriate and beneficial.

Overage Inventory Has Declined Slightly Since the Introduction of the Consultation Initiative

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.

Recommendation

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.

Managementís 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.

Consultation Effectiveness Could Be Improved by Ensuring Milestones Are Clearly Identified and Case Plans of Action Are Consistently Prepared

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.

Recommendations

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.

Managementís 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 ďAction Completion DateĒ 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.

Managementís 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 Detroit, Los Angeles, and Nashville Area Offices, and determined whether case milestones were developed and estimated completion dates were established during the consultations.We used judgmental sampling for both Steps II.A. and II.B. to allow for the early, onsite review of recently completed consultations within the constraints of the staggered implementation of the Consultation Initiative and our available staffing.There were 36,633 taxpayers with delinquent accounts and 16,267 taxpayers with delinquent return investigations assigned to the 3 selected Area Offices at the time we began our onsite reviews.

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

 

Report Distribution List

 

CommissionerC

Office of the Commissioner Ė Attn:Chief of StaffC

Deputy Commissioner for Services and EnforcementSE

Deputy Commissioner, Small Business/Self-Employed DivisionSE:S

Director, Collection, Small Business/Self-Employed DivisionSE:S:C

Director, Communications and Liaison, Small Business/Self-Employed Division

SE:S:CL

Chief CounselCC

National Taxpayer AdvocateTA

Director, Office of Legislative AffairsCL:LA

Director, Office of Program Evaluation and Risk AnalysisRAS:O

Office of Management ControlsOS:CFO:AR:M

Audit Liaison:Commissioner, Small Business/Self-Employed DivisionSE:S

 

Appendix IV

 

Managementís Response to the Draft Report

 

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.