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					Virginia Department of
       Taxation

  Benefits Funded
 Partnership Project
                               Agenda



•   Partnership Background

•   Benefits Funding

•   Operational Improvements

•   Lessons Learned

•   Awards



                                        2
                 VATAX Partnership Project

•   Eight year program with CGI (formerly AMS)
     –   Reengineer all processes, applying technology where appropriate
     –   Replace entire technology platform
•   $171 million including interest
•   Following multiple requests to the Virginia General Assembly for direct funding,
    legislation was passed by the 1996 General Assembly authorizing partnerships
    where additional revenues from new initiatives are used to fund technology
    improvements
•   The selection process included a prequalification of vendors, an RFP that stated
    the business problem and asked for solutions. Also included a requirement that
    the final vendors were on-site at TAX for several months before selection was
    made
•   Contract signed with CGI July 1998


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              VATAX Partnership Project

•   Legacy Systems were antiquated. While the legacy system was integrated, it
    was developed in the early 1980’s using mainframe technology and hierarchical
    databases
     – The age of the technology made it difficult to attract new employees and retain
       existing employees
     – Maintenance of the application was time consuming. Simple changes such as interest
       rate updates required programming support
     – Ad Hoc reporting was difficult
     – There were no Internet capabilities




                                                                                    4
             VATAX Partnership Project


•   The Partnership was not a single technology project, but rather a series of
    thirty large technology and management projects culminating in the
    implementation of IRMS in August 2005
•   The modernization projects included:
         – Back-end systems replacement, including processing, collections, audit and
           revenue management
         – Technical infrastructure modernization including LAN/WAN, PCs, Servers
         – Customer Services including internet tax filing and registration, improved
           correspondence processing, better case management
         – Organizational Development and Change Management including the
           development of a Learning Center.




                                                                                        5
                                 Partnership Releases
                        Integrated Revenue Management System
                                        (IRMS)



eGovernment                              Customer Relationship                Staff Support Tools
  Teleplan (Payment Plans)               Management (CRM)                       Business Objects Reporting
  iFile for Businesses                     Siebel                               Procedures Repository (TARP)
  iFile for Individuals                    Telephony Integration                Technology-based Training
  iReg (Business Registration)             Imaging Integration
  Policy Library
  QuickPay                               Channel                           Enterprise Application
  Telefile (Return Filing)                 Electronic Filing (ELF)           Advantage Revenue
  AR Web                                   Lifeworks Data Entry System
  Secure Messaging                         Imaging System (OCR/ICR/2D barcode)
                                           Remittance Processing System
Compliance
  Automated Collections System (CACSG)   Infrastructure
  Compliance Repository                     LAN/WAN Replacement
  Audit Selection System                    Agency-wide Lotus Notes
  Risk Analysis (STRATA)                    Remote Connectivity (home-based staff)
  Audit Case Management                     Equipment Rollout
  Auditor Productivity Tools (STAUD)        Print and Mail Shop
                                            Disaster Recovery



                                                                                                          6
                       Benefits Funding



•   Project resulted in costs of $169 million, plus $2 million in interest
•   At peak, over 100 Tax Employees were dedicated to the project
•   TAX and CGI worked side-by-side throughout entire project
•   TAX and CGI shared responsibility for work done on deliverables
    and for success – was a true Partnership
•   The sharing of TAX’s revenue knowledge and CGI’s integration
    knowledge were key to success
•   However, CGI bore major risk if project was not successful




                                                                             7
                         Benefits Funding

•   In many respects operated like any fixed price contract
     – CGI performs services, TAX accepts deliverables, CGI invoices TAX
     – TAX pays invoices from money previously deposited into a special fund
        • If money is available in the fund, invoices are paid
        • If money is not available in the fund, then after 30 days, invoices
           accumulate interest
        • CGI is only paid for specified deliverables - no benefit sharing
•   CGI only receives payment to extent benefits are realized
     – Seven year implementation period
     – Eleven year payback period




                                                                                8
                          Benefits Funding continued

•   Strong oversight was key to success
•   TAX had two oversight groups
     – Financial Oversight: This oversight group was responsible for approving the
       methods used for measuring revenue attributable to the Partnership Project. It was
       was conducted by the following:
         •   State Comptroller
         •   Director of the Department of Planning and Budget
         •   The State Internal Auditor
         •   Representative appointed by the President Pro Tempore of the Senate
         •   Representative appointed by the Speaker of the House
     – Project Management oversight was conducted by Northrup Grumman. Northrup
       Grumman conducted an Independent Verification and Validation (IV&V) and were
       responsible for:
         • Evaluating the project work plan and progress against the plan
         • Reviewing and monitoring the Risk Management program, the Configuration
           Management program and the Quality Assurance program
         • Reviewing and evaluating the Project’s Test Plans
         • Performing Risk Identification and Risk Mitigation Strategy evaluations


                                                                                       9
                      Benefits Funding continued


•   Revenue benefits derived from audit and collections program
    improvements
    – Significant undertaking to determine revenue programs and how to accurately
      and fairly account for the revenue benefits. Effort was virtually a separate
      contract negotiation
    – Revenue Baseline Document was developed for each revenue program
    – Each revenue project has a baseline derived from historical collections
      projected into the future
    – Revenue benefits measured monthly by comparing actual collections to
      baseline
    – Collections over or under the baseline are netted together and deposited into
      the fund
    – Incremental revenue split 90/10
        • 90% CGI, 10% TAX until CGI paid or term expires. TAX used the 10% to
          cover indirect costs related to the project

                                                                                      10
                       Benefits Funding continued

•   Benefits Exceeded Expectations
     – Revenues surpassed initial projections
     – As of March 2004, sufficient revenue was generated to fund all expected
       contractual obligations to CGI (this was 16 months prior to final
       implementation)
     – We expect to save $16.5 million in interest costs($17.6 vs $1.1 million)
     – For FY 2004 and 2005, over $72 million (per year) in new revenue was
       generated.

•   Fast Track Projects – Revenue Results through FY 2004
     – STRATA: Prioritizing collections based on taxpayer filing/payment history,
       assigning collections activities based on risk factors - $157.6 Million
     – Field Audit Case Selection: Improved productivity through new hardware and
       software, as well as enhanced case selection through use of internal and
       external data sources. - $63.8 Million
     – Write-Off Reinstatements: Automated reinstatement of written off assessments
       by matching to updated lien sources - $9.3 Million
     – Other initiatives – These were eventually abandoned due to low productivity -
       $776 thousand
                                                                                       11
                             Improvements

Audit
•   GUI based Case Management application
•   Automatic download of invoices and improved invoice capture tool
•   Automatic upload of audit results to IRMS
•   Automatic download of filing/payment history into the audit application
•   Audit selection based on modeling using a data warehouse
•   Auditors are home-based
•   Online data matching and account management
•   Enhanced capability of identifying better exam candidates
•   Supporting documentation readily available through a Data Repository
•   Centralized case management system accessible across work groups
•   Data Warehouse which houses all internal and 3rd party data, allowing selection
    based on all available data




                                                                                      12
                            Improvements

Collections
•   Taxpayer can arrange partial payment plans pro-actively through phone system
    with no collector intervention
•   Expanded workflow, account scoring and collections effort tailored to
    taxpayer history
•   Near Real time updates from enterprise system to collections system
•   Internal Revenue Service setoff program (TOPS) Added
•   All Setoff claims received electronically
•   Eliminated manual review of Liens & added electronic signatures
•   Correspondence redesigned making letters easier to read. Insertions and
    attachments possible, and tear-off vouchers for payments
•   Field Agents home-based




                                                                                   13
                             Improvements

Customer Service
•   Generic information pre-populated, with dropdowns for common contacts
•   Screen Pops automatically to a consolidated view of the customer
•   Ability to track contact reasons
•   A consolidated view of the most current contacts and tax filings
•   Regulations and ruling letters available on Website with extensive search
    capabilities
•   Secure Messaging to allow electronic responses to taxpayer inquiries
•   Correspondence imaged and routed electronically, and available via Case
    Management System
•   Case inventories load balanced and managed online in the Case
    Management System
•   Refund status available via Website and Telephone
•   Automated contact tracking and contact analysis reports
•   Greatly expanded Website featuring Tax Policy Library, FAQs, forms, and online
    functionality

                                                                                     14
                             Improvements

Channel
•   83% of all individual returns data captured automatically
•   Electronic data capture via OCR, and 2D Barcodes
•   Images of the returns and checks available at ALL employee desktops
•   Electronic filing via expanded Fed/State program (ELF) and via iFile
•   Registration via Internet
•   Payments via check, ELF, Internet, payroll service EFT, credit card, standard EFT
•   Warehousing of payments available
•   Sales and Withholding filing via iFile
•   Image-based remittance processing
•   Process 75 returns/hour through remittance processing up from 35/hour
•   Warehouse space has already been reduced in half




                                                                                        15
                             Improvements

Accounting
•   Detailed audit trail between taxpayer accounts and Commonwealth’s
    Accounting System
•   Automated process for bad checks and contributions
•   Can identify all taxpayers that make up a bank deposit
•   Full Accrual Accounting System with additional accounts for tracking money
•   More automated reconciliation with Commonwealth Accounting System




                                                                                 16
                          Lessons Learned

•   A Detailed System Design phase was not done due to time-constraints
     – Occasionally resulted in problems with integration points and missed
       functionality
     – Assumptions made by developers were sometimes incorrect
     – But all business rules are documented
•   Limited Knowledge Transfer
     – Has made self sufficiency a challenge
     – Modification to the system take longer
     – Some end-users are still learning how to use the system, which impacts day-to
       -day efficiency




                                                                                       17
                         Lessons Learned

•   Complex Integration: The number of integration points and diverse
    technologies implemented, has increased the maintenance efforts for the
    system

•   In addition to early projects to generate revenue, “early wins” are needed
    for customer centric areas as well

•   Strong contract administration and administers are required – 1-2 full time
    at minimum. Strong contract processes (ie: change orders) are required




                                                                                  18
                      Final Outcome


While not perfect, The Partnership Project has been very successful, and
operational efficiencies have been gained in all areas of the agency as
well as our external users. In addition, Taxpayers are receiving much
better customer service from the agency.



     Revenue Benefits Aspect of
    Project was VERY Successful!


                                                                           19
Awards




         20
Awards




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