Performance audit, Department of Revenue, collections and taxpayer services functions

              PERFORMANCE AUDIT
DEPARTMENT OF REVENUE
COLLECTIONS AND TAXPAYER SERVICES FUNCTIONS
Report to the Arizona Legislature
By the Auditor General
July 1988
88- 6
DOUGLAS R NORTON, C P A
AUDITOR GENERAL
STATE OFARlZON4
OFFlCEOFTHt
AUDI1' OR GENERAI,
LlNDAJ B L E S S I N G , CPA
? l i l y AUDITOR GENERAL
July 29, 1988
Members of the Arizona L e g i s l a t u r e
The Honorable Rose Mofford, Governor
Mr. Paul Waddell, Acting Director
Department of Revenue
Transmitted herewith i s a report of the Auditor General, A Performance
Audit of the Department of Revenue, c o I i e c t i o n s and taxpayer services
functions. This report i s i n response to the provisions of Chapter 401,
Section 6 of the 1986 Session Laws.
Since our 1985 a u d i t s , DOR has made s i g n i f i c a n t improvements i n both the
c o l l e c t i o n s and taxpayer services functions. However, DOR could c o l l e c t
an additional $ 5 m i l l i o n annually through f u r t h e r automation and at least
another $ 4 m i l l i o n by working unlocated accounts more aggressively. In
a d d i t i o n , DOR needs to improve i t s supervision and t r a i n i n g of c o l l e c t o r s
and improve i t s processing time for taxpayer i n q u i r i e s .
My s t a f f and I w i l l be pleased to discuss or c l a r i f y items i n the r e p o r t .
S~ JinbciueI rse & lRy,.& No rton
~ u d i F o r General
DRN: lmn
STAFF: William Thomson
Peter N . Francis
Arthur E. H e i k k i l a
Mark J. Syracuse
J. Lee Milman
2700 NORTH CENTRAL AVE. SUITE 700 PHOENIX, ARIZONA 85004 ( 602) 255- 4385
SUWARY
The O f f i c e o f the Auditor General has conducted a performance a u d i t of
the Arizona Department of Revenue, c o l l e c t i o n s and taxpayer services
functions, i n response to the p r o v i s i o n s of Chapter 401, Section 6 of the
1986 Sessions Laws. This report i s a follow- up of our 1985 a u d i t s of
these f u n c t i o n s .
Since our l a s t a u d i t s , the Department of Revenue ( DOR) has reorganized
i t s c o l l e c t i o n s and taxpayer services f u n c t i o n s several t i m e s .
C u r r e n t l y , the c o l l e c t i o n s f u n c t i o n i s comprised of phone and f i e l d
c o l l e c t i o n s , which attempt to secure payment through phone c a l l s , l e t t e r s
or f i e l d v i s i t s . The taxpayer services f u n c t i o n was r e c e n t l y reorganized
i n t o the Taxpayer Support and Education Services D i v i s i o n . This d i v i s i o n
handles taxpayer general i n q u i r i e s and refund questions, and researches
disputed b i l l i n g s . The Bingo Section i s also located i n the Taxpayer
Support and Education Services D i v i s i o n .
WIR COULD INCREASE PHONE COLLECTIONS REVENUES BY AT LEAST $ 5 MILLION BY
FURTHER IMPROVING COLLECT IONS METHODS ( see pages 9 through 13
DOR could increase phone c o l l e c t i o n s p r o d u c t i v i t y , generating an
a d d i t i o n a l $ 5 m i I I ion annual l y , by f u r t h e r improving col I e c t i o n s
methods. Using an a u t o d i a l i n g enhancement f o r i t s automated c o l l e c t i o n s
system would increase c o l l e c t o r p r o d u c t i v i t y s i g n i f i c a n t l y . C u r r e n t l y ,
DOR phone col l e c t o r s manual l y d i a l account phone numbers. This i s very
time consuming because only h a l f of the c a l l s are p r o d u c t i v e , r e s u l t i n g
i n a contact w i t h a taxpayer. With an a u t o d i a l e r , a computer p r e d i a l s
phone numbers u n t i l a taxpayer i s contacted. Unanswered c a l l s , busy
signals and operator i n t e r c e p t e d c a l l s are screened o u t , a l l o w i n g
c o l l e c t o r s t o concentrate on productive c a l l s .
DOR estimates i t could increase phone c o l l e c t i o n s p r o d u c t i v i t y - - a n d thus
increase phone c o l l e c t i o n s revenues-- by a t least 10 percent by using an
a u t o d i a l i n g system. Several other s t a t e s and the IRS use a u t o d i a l i n g and
have experienced even greater p r o d u c t i v i t y increases. C u r r e n t l y , DOR
contacts an average of two taxpayers per hour per c o l l e c t o r . By
c o n t r a s t , the IRS expects t h e i r col l e c t o r s to contact f i v e taxpayers per
hour .
With a 10 percent increase i n phone col l e c t ions revenues, DOR could
r e a l i z e a $ 5 m i l l i o n annual increase i n phone c o l l e c t i o n s revenues. This
increase could be obtained at an estimated cost of approximately $ 500,000
to purchase the a u t o d i a l i n g equipment plus some implementation costs.
DOR COULD COLLECT AT LEAST $ 4 MILLION IN ADDITIONAL REVENUE IF UNLOCATED
ACCOUNTS WERE WORKED MORE AGGRESSIVELY ( see pages 15 through 18)
DOR could c o l l e c t a minimum of $ 4 m i l l i o n i n a d d i t i o n a l revenue by
aggressively working unlocated accounts. Unlocated accounts are those
for which DOR does not have a current address or phone number to contact
the delinquent taxpayer.
DOR has nearly 45,000 accounts w i t h o u t c u r rent phone numbers, and near l y
42,000 accounts w i t h o u t c u r r e n t addresses. Combined, these nearly 87,000
accounts represent more than $ 42 m i l l i o n owed t o the State. We estimate
that DOR could c o l l e c t a t least 10 percent of t h i s $ 42 mi l l i o n . ( DOR
o f f i c i a l s t e l l us a 10 percent estimate i s conservative. One DOR
o f f i c i a l believes approximately 24 percent could be c o l l e c t e d . ) However,
DOR only has two people assigned to locate current phone numbers for
these accounts. No one i s assigned to locate current addresses.
F u r t h e r , the number of accounts w i t h missing phone numbers i s increasing
f a s t e r than the two s t a f f can work.
DOR needs to assign more s t a f f to locate these accounts. In a d d i t i o n ,
DOR should adopt methods used by the IRS and other s t a t e s such as
computer searches of telephone company l i s t i n g s , motor v e h i c l e
r e g i s t r a t i o n s and property records. DOR should also review the
f e a s i b i l i t y of using p r i v a t e vendors to locate accounts.
DOR NEEDS TO STRENGTHEN SUPERVISION AND TRAINING OF COLLECTIONS STAFF
( see pages 19 through 25)
DOR needs to improve supervision and t r a i n i n g o f c o l l e c t i o n s s t a f f .
I n d i v i d u a l c o l l e c t o r performance i n d i c a t e s that some c o l l e c t o r s do not
meet acceptable l e v e l s of p r o d u c t i v i t y . C o l l e c t o r performance v a r i e s
widely, and does not on average meet DOR's established performance
standards. In a d d i t i o n , many c o l l e c t o r s do not f o l l o w DOR c o l l e c t i o n
guidelines. For example, c o l l e c t o r s take too long to levy accounts when
taxpayers refuse to make, or keep, payment agreements.
C u r r e n t l y , DOR management exercises minimal supervision over c o l l e c t o r s .
DOR needs to increase i t s phone c o l l e c t o r supervision to ensure
s u f f i c i e n t c o l l e c t o r performance. DOR also needs to provide s u f f i c i e n t
t r a i n i n g to new c o l l e c t o r s , p a r t i c u l a r l y on good c o l l e c t i o n s technique.
TAXPAYER SERVICES HAS GENERALLY IMPROVED, HOWEVER, DELINQUENT BILLING
INQUIRIES ARE STILL NOT RESOLVED IN A TIMELY MANNER ( see pages 27
through 39)
Although Taxpayer Services has improved since our l a s t a u d i t , b i l l i n g
i n q u i r i e s are s t i l l n o t resolved i n a timely manner. DOR has made
several s u b s t a n t i a l improvements r e s u l t i n g i n more e f f i c i e n t processing
of taxpayer i n q u i r i e s . These include reducing i t s r e l i a n c e on temporary
personnel, adopting an automated case t r a c k i n g system, and improving
phone s e r v i c e .
However, DOR needs to improve i t s response time f o r correspondence
i n q u i r i e s from taxpayers d i s p u t i n g amounts owed. Our analysis revealed
that i n 1987 i t took the Accounts Management Sect ion ( AMS) more than 125
days on the average to respond to taxpayer i n q u i r i e s . This slow response
i s due i n large p a r t to a 131 percent s t a f f turnover r a t e coupled w i t h a
three month average delay i n f i l l i n g vacant p o s i t i o n s .
I f DOR could reduce turnover to 50 percent and f i l l p o s i t i o n s sooner, AMS
could increase i t s p r o d u c t i v i t y by 21 percent. DOR could reduce turnover
through more e f f e c t i v e management, upgrading worker s a l a r i e s and
improving t r a i n i n g .
TABLE OF CONTENTS
Page
INTRODUCTION AND BACKGROUND . . . . . . . . . . . . . . . . . . . . . 1
FINDING I: DOR COULD INCREASE PHONE COLLECTIONS REVENUES BY
AT LEAST $ 5 MILL ION BY FURTHER
IMPROVING COLLECTIONS METHODS. . . . . . . . . . . . . . . . . 9
Significant lmprovementSince1985Audit . . . . . . . . . . . . . . 9
Autodialing System Could Increase
Phone Collections Revenues By A t
L e a s t $ 5 M i l l i o n . . . . . . . . . . . . . . . . . . . . . . . . 9
Automated Financial Statement Review And
Extended Hours Could Increase Efficiency . . . . . . . . . . . . . 11
Recomnendations . . . . . . . . . . . . . . . . . . . . . . . . . 13
F l ND l NG I I : DOR COULD COLLECT AT LEAST $ 4 MI LL ION
IN ADD l T l ONAL REVENUE I F UNLOCATED ACCOUNTS
WERE WORKED MORE AGGRESSIVELY . . . . . . . . . . . . . . . . . . 15
Aggressive Pursuit of Unlocated
Accounts I s Important . . . . . . . . . . . . . . . . . . . . . . . 15
Additional $ 4 . 2 M i l l i o n Could Be Collected . . . . . . . . . . . . 15
More Staff Needed To Work Unlocated Accounts . . . . . . . . . . . 16
Adopt i ng New Met hods Cou l d l nc rease
Location Function Performance . . . . . . . . . . . . . . . . . . 17
Recomnendations . . . . . . . . . . . . . . . . . . . . . . . . . 18
FINDING I l l : DOR NEEDS TO STRENGTHEN SUPERVISION
AND TRAINING OF COLLECTIONS STAFF. . . . . . . . . . . . . . . . . 19
Some Collectors Perform Poorly . . . . . . . . . . . . . . . . . . 19
SupervisionNeedsToBelmproved . . . . . . . . . . . . . . . . . 22
Training can Be Strengthened . . . . . . . . . . . . . . . . . . . 24
Recomnendations. . . . . . . . . . . . . . . . . . . . . . . . . . 25
TABLE OF CONTENTS ( con t i nued)
FINDING I V : TAXPAYER SERVICES HAS GENERALLY
IMPROVED; HOWEVER, DELINQUENT BILLING INQUIRIES
ARE STILL NOT RESOLVED IN A TIMELY MANNER . . . . . . . . . . . . 27
DOR Has Made S i g n i f i c a n t Improvements
I n I t s Taxpayer Services Areas . . . . . . . . . . . . . . . . 27
Accounts Management Services Does Not Respond
To Correspondence In A Timely Manner . . . . . . . . . . . . . . 31
Excessive Turnover Reduces Productivity . . . . . . . . . . . . . 35
DOR Should Take Steps To Reduce Turnove'r And
Thereby Improve P r o d u c t i v i t y . . . . . . . . . . . . . . . . . . . 36
Recomnendations . . . . . . . . . . . . . . . . . . . . . . . . . 3 9
OTHERPERTINENT INFORMATION. . . . . . . . . . . . . . . . . . . . . 41
DEPARTMENT RESPONSE . . . . . . . . . . . . . . . . . . . . . . . . . 49
APPEND l X
AMS Productivity Analysis
LIST OF TABLES
TABLE 1 - Department of Revenue- Annual Reports of
Delinquent Tax Revenues Collected
. . . . . F iscal Years 1984- 85 Through 1986- 87 ( Unaudi ted) . . . . . . 3
TABLE 2 - Taxpayer Assistance A c t i v i t i e s And Workload
. . . . . F iscal Years 1984- 85 Through 1986- 87 . . . . . . . . . . . . 4
TABLE 3 - Sumnary Of Bingo Section Enforcement A c t i v i t y
. . . . . 1 985 Through 1987 . . . . . . . . . . . . . . . . . . . . . 5
TABLE 4 - DOR Actual And Estimated Expenditures
. . . . . Collections And Taxpayer Services
. . . . . F iscal Years 1985- 86 Through 1987- 88 ( Unaudited) . . . . . . 6
TABLE 5 - Collector Monthly Performance Vs. DOR Standards
. . . . . JulyThroughDecember1987. . . . . . . . . . . . . . . . . 20
TABLE 6 - Average Number of Days To
. . . . . Resolve B i l l i n g Inquiries
. . . . . C alendar Year 1987 . . . . . . . . . . . . . . . . . . . . . 32
TABLE OF CONTENTS ( cont i nued)
TABLE 7 - Average Days For Each Inquiry Processing
. . . . . Step Calendar Year 1987 . . . . . . . . . . . . . . . . . . 33
TABLE 8 - DOR Implementation Status Of Auditor
. . . . . General Report 85- 10 Reconmendations . . . . . . . . . . . . 42
LIST OF FIGURES
FIGURE 1 - Information And Legislative Services
. . . . . . . . . Age Of Taxpayer Inquiries Calendar Year 1987. . . . . 29
FIGURE 2 - Accounts Management Services
. . . . . . . . . Age Of Taxpayer Inquiries Calendar Year 1987. . . . . 34
INTRODUCTION AND BACKGROUND
The O f f i c e o f the Auditor General has conducted a performance audit of
the Arizona Department of Revenue, c o l l e c t i o n s and taxpayer services
functions, i n . response to the provisions of House B i l l 2181, Chapter 401,
Second Regular Session 1986. This report i s a follow- up of our 1985
a u d i t s o f these f u n c t i o n s .
The Department o f Revenue ( DOR) has reorgan i zed i t s co l lec t i ons and
taxpayer services functions twice since our 1985 a u d i t . The most recent
reorganization occurred i n May 1988, w i t h the formation of a new
d i v i s i o n , Taxpayer Support and Education Services. This d i v i s i o n
contains several f u n c t i o n s , i n c l u d i n g : Accounts Management Services
( AMS) which handles b i l l i n g i n q u i r i e s , lnformation and L e g i s l a t i v e
Services ( ILS) which handles general i n q u i r i e s and refund i n q u i r i e s ,
Accounts Receivable, Education and T r a i n i n g , Taxpayer Education, and
Bingo. The C o l l e c t i o n s D i v i s i o n , which was reestablished i n May 1988,
houses the Department's phone and f i e l d c o l l e c t i o n s functions. From July
1986 u n t i l May 1988, DOR had grouped the C o l l e c t i o n s , Bingo and Taxpayer
Services delinquent b i l l i n g functions together under a d i v i s i o n c a l l e d
the Revenue Enforcement and Adjustments D i v i s i o n ( READ). During the same
time period, the Taxpayer Services general i n q u i r y and refund question
functions were reorganized i n t o the lnformation and L e g i s l a t i v e Services
D i v i s i o n . The May 1988 reorganization i n large p a r t recreated the 1985
organization s t r u c t u r e f o r C o l l e c t i o n s and Taxpayer Services.
Organization And Personnel
The Collections D i v i s i o n had 201 s t a f f i n f i s c a l year 1988 i n i t s Phoenix
and Tucson o f f i c e s . lnformation and L e g i s l a t i v e Services and Accounts
Management Services, w i t h i n the Taxpayer Support and Education Services
D i v i s i o n , comprises the taxpayer services function and has 69 permanent
s t a f f , w i t h a d d i t i o n a l temporary s t a f f h i r e d during tax f i l i n g season.
The Bingo and Accounts Receivable Sections, also w i t h i n the Taxpayer
Support and Education Services D i v i s i o n , have 13 s t a f f and 11 s t a f f ,
respectively.
Phone c o l l e c t i o n s - The phone c o l l e c t i o n s s e c t i o n c o l lects past due
taxes i n the f o l l o w i n g tax types: corporate and i n d i v i d u a l income, sales
and withholding. Phone col l e c t o r s attempt to contact the taxpayer and
e i t h e r col l e c t the amount due or place the taxpayer on a payment
schedule. The sect ion has 137 s t a f f in i t s Phoenix and Tucson o f f i c e s to
carry out these r e s p o n s i b i l i t i e s .
Since our last a u d i t , the Department has i n s t i t u t e d two s i g n i f i c a n t
improvements i n i t s c o l l e c t i o n s process to enhance e f f i c i e n c y and
effectiveness. The f i r s t of these i s the automated b i I l i n g c y c l e , a
series of computer generated l e t t e r s which demand payment of taxes. Only
those taxpayers who f a i l to respond to the f i n a l demand i n t h i s s e r i e s o f
l e t t e r s are referred to the phone c o l l e c t i o n s section.
Another s i g n i f i c a n t improvement i s DOR's implementation of an automated
phone c o l l e c t i o n s system. The Computer Assisted C o l l e c t i o n s System
( CACS) p r i o r i t i z e s accounts according to the do1 l a r amount due to ensure
that phone c o l l e c t o r s are pursuing higher d o l l a r accounts. In a d d i t i o n ,
the system provides DOR management w i t h a v a r i e t y of reports which allow
supervisors to monitor c o l l e c t o r p r o d u c t i v i t y and performance.
F i e l d c o l l e c t i o n s - The f i e l d c o l l e c t i o n s section has 57 s t a f f i n
Phoenix and Tucson, divided i n t o the f i e l d c o l l e c t i o n s and bankruptcy
u n i t s . The f i e l d c o l l e c t i o n s u n i t handles cases the phone c o l l e c t i o n s
sect ion has been unable to resolve and may seize a taxpayer's assets t o
s a t i s f y an outstanding l i a b i l i t y . This u n i t also c o l l e c t s luxury taxes
and taxes from special events. The bankruptcy u n i t monitors business and
i n d i v i d u a l e n t i t i e s that have f i l e d for p r o t e c t i o n under various
bankruptcy laws.
Table 1 summarizes the amounts of delinquent tax revenues cot l e c t e d f o r
f i s c a l year 1984- 85 through f i sca l year 1986- 87.
TABLE 1
DEPARTMENT OF REVENUE- ANNUAL REPORTS OF
DELINQUENT TAX REVENUES COLLECTED
FISCAL YEARS 1984- 85 THROUGH 1986- 87
( Unaud i ted
Payments Made I n
Response to
B i l l i n g s $ 1 1 ,343,065 $ 36,902,776 ( a ) $ 46,830,313
Delinquent Tax
C o l l e c t i o n s 78,075,754 85,048,350 80,402,880 ( b )
D u p l i c a t i o n , C r e d i t
Audits and Other
Adjustments( c) unknown ( 16,328,783) ( 13,540,447)
Total $ 89.418.819 $ 105,622,343 $ 113.692.746
( a ) According t o DOR, t h e s u b s t a n t i a l increase from 1984- 85 t o 1985- 86 r e f l e c t s some
b i l l i n g s t h a t should have been a t t r i b u t e d to 1984- 85 but were inadvertent1 y included i n
1985- 86 t o t a l s , and, the e f f e c t s of the automated b i l l i n g system.
( b ) According t o DOR, the decrease i n revenues from 1985- 86 to 1986- 87 can be a t t r i b u t e d to
s h i f t i n g the r e p o r t i n g of some b i l l i n g payments from delinquent tax c o l l e c t i o n s to
payments made i n response to b i l l i n g s .
( c ) According t o DOR, some c o l l e c t i o n s of the a u d i t u n i t were included i n delinquent t a x
c o l l e c t i o n s .
Source: 1986 and 1987 Annual Reports, Arizona Department of Revenue.
Accounts Management Services - Accounts Management Serv i ces has 49
s t a f f . This s e c t i o n responds t o questions from taxpayers about b i l l i n g s
they have received. The accounts receivable u n i t , a separate sect ion i n
the Taxpayer Support and Education Services D i v i s i o n , makes adjustments to
and manages the accounts rece i vab Ie system. The Accounts Rece i vab Ie
section has 11 s t a f f .
Information and L e g i s l a t i v e Services - Information and L e g i s l a t i v e
Services i s responsible f o r answering general taxpayer i n q u i r i e s or
i n q u i r i e s concerning refunds. ILS has 20 permanent s t a f f i n i t s
correspondence and phone u n i t s , and h i r e s a d d i t i o n a l temporary s t a f f
during tax season to handle i t s increased work load. ILS also s t a f f s a
walk- in o f f i c e . Table 2 summarizes the work load f o r the taxpayer
services f u n c t i o n f o r f i s c a l years 1984- 85 through 1986- 87.
A c t i v i t y
Correspondence
received
TABLE 2
TAXPAYER ASSISTANCE ACTIVITIES AND WORK LOAD
FISCAL YEARS 1984- 85 THROUGH 1986- 87
Phone assistance 349,629 332,758 220,383
Walk- in assistance 41 ,327 47,967 35,276
( a) DOR a t t r i b u t e s the decline i n work load to improved taxpayer education programs i n
1985- 86.
Source: 1987 Annual Report, Arizona Department of Revenue.
Bingo - The Bingo Section i s located i n the Taxpayer Support and
Education Services D i v i s i o n . The bingo f u n c t i o n has 13 s t a f f who license
bingo operations, c o l l e c t i n l i e u tax revenues and enforce t h e bingo
s t a t u t e s . There are c u r r e n t l y 712 small and large game licensees i n
Ar i zona.
Table 3 summarizes the bingo s e c t i o n ' s enforcement a c t i v i t y for calendar
years 1985 through 1987.
TABLE 3
SWARY OF BINGO SECTION ENFORCEMENT ACTIVITY
1985 THROUGH 1987
Act i v i t y 1985 1986 1987
Comp l i ance checks
C i v i l cases
Opened
C l osed
L i cense revocat ions
Licenses cancelled
Informal r e s o l u t i o n s
Criminal cases
Opened
Closed
Indictments
Source: Bingo Section Management Report.
REVENUE AND EXPENDITURES
Taxpayer services and c o l l e c t i o n s functions are funded p r i m a r i l y through
the State General Fund. The bi. ngo section previously received revenue
from the c o l l e c t i o n o f i n l i e u taxes, but under recent l e g i s l a t i o n , w i l l
now only receive General Fund appropriations. Table 4 summarizes the
expenditures for the taxpayer services and c o l l e c t i o n s functions for
f i s c a l years 1985- 86 through 1987- 88.
TABLE 4
DOR ACTUAL AND ESTIMATED EXPENDITURES
COLLECTIONS AND TAXPAYER SERVICES
FISCAL YEARS 1985- 86 THROUGH 1987- 88
( UNAUD I TED )
ACTUAL ACTUAL APPROPRIATED
Func t i on - FTE 1985- 86 FTE 1986- 87 FTE 1987- 88
Collections 165 $ 3,079,400 164 $ 3,537,600 201 $ 4,422,100
CACS ( a ) 0 290,800 0 $ 250,000 0 250,000
Taxpayer
Services 52 956,500 67 862,400 69 1 ,351,800
B i ngo 13 320,000 13 361,800 13 473,400
Accounts
Receivable 15 220,500 11 194,400 11 178,300
( a) This i s the three- year cost of the Computer Assisted C o l l e c t i o n System
Source: DOR Comptroller's Office- Expenditure Report.
Audit Scope And Purpose
Our audit of the taxpayer services and c o l l e c t i o n s functions concentrated
on the phone col l e c t ions and taxpayer assistance areas i n both the
Phoenix and Tucson o f f i c e s . Detailed work, i n c l u d i n g on- site v i s i t s to
the Internal Revenue S e r v i c e ' s Regional C o l l e c t i o n s Center and Colorado's
Department of Revenue, was conducted on the fo l lowing i ssues.
0 Whether phone c o l l e c t i o n s revenues could be increased through
a d d i t i o n a l methods improvements.
0 Whether DOR has adequately pursued past due accounts that were
previously not located.
0 Whether supervision and t r a i n i n g o f c o l l e c t i o n s s t a f f i s adequate
0 Whether the taxpayer s e r v i c e s f u n c t i o n has improved since our l a s t
audit and whether t h i s area i s operating e f f i c i e n t l y and e f f e c t i v e l y .
In a d d i t i o n , we developed information about the organizational placement
of the bingo f u n c t i o n , and DOR's progress i n implementing the
recommendations from our previous r e p o r t . This information i s presented
i n the section Other Pertinent Information ( see page 41).
Several other issues were not f u l l y developed due to time l i m i t a t i o n s .
The issues are discussed i n the section Areas For Further Audit Work ( see
page 45 1.
Th i s aud i t was conducted i n accordance w i t h general l y accepted
governmental a u d i t i n g standards.
The Auditor General and s t a f f express appreciation to the D i r e c t o r and
s t a f f of the Department o f Revenue for t h e i r cooperation and assistance
during our a u d i t .
FINDING I
DOR COULD INCREASE PHONE COLLECTIONS REVENUES BY
AT LEAST $ 5 MILLION BY FURTHER IMPROVING COLLECTIONS METHODS
DOR could increase phone c o l l e c t i o n s revenue by f u r t h e r improving
c o l l e c t i o n s methods. I n s t a l l a t i o n of an a u t o d i a l i n g system would
increase c o l l e c t i o n s by a t least 10 p e r c e n t , g e n e r a t i n g $ 5 m i l l i o n
annually i n a d d i t i o n a l revenue. Automating the f i n a n c i a l statement
review process and extending the workday by staggering s h i f t s would also
improve phone c o l l e c t i o n s e f f i c i e n c y .
S i g n i f i c a n t Improvement Since 1985 Audit
DOR has s i g n i f i c a n t l y improved i t s phone c o l l e c t i o n s process since our
1985 audit ( see Auditor General Report 85- 8.) In 1985 we reported that
DOR was not e f f e c t i v e l y p u r s u i n g d e l i n q u e n t accounts w i t h large
balances. Our report a t t r i b u t e d t h i s to 1) a poor account assignment
system, 2) inadequate c o l l e c t o r t r a i n i n g , and 3) inadequate m o n i t o r i n g o f
c o l l e c t o r p r o d u c t i v i t y . To address these d e f i c i e n c i e s , DOR implemented
an automated c o l l e c t i o n s system i n 1987. This system p r i o r i t i z e s
accounts by d o l l a r amounts to ensure t h a t l a r g e s t d o l l a r cases are worked
f i r s t . In a d d i t i o n , the system provides reports of c o l l e c t o r
p r o d u c t i v i t y and performance.
A u t o d i a l i n g System Could Increase Phone C o l l e c t i o n s
Revenues Bv At Least $ 5 M i l l i o n
DOR could s i g n i f i c a n t l y increase i t s phone c o l l e c t i o n s revenues through
the use of an a u t o d i a l i n g enhancement for i t s automated c o l l e c t i o n s
system. Using an a u t o d i a l e r , DOR estimates at least a 10 percent
increase i n phone c o l l e c t i o n s revenues, or more than $ 5 m i l l i o n
annually. DOR could recoup a u t o d i a l i n g system costs w i t h i n one year
through increased revenues.
How a u t o d i a l i n g increases p r o d u c t i v i t y - An a u t o d i a l i n g system
s i g n i f i c a n t l y increases p r o d u c t i v i t y because i t e l i m i n a t e s c o l l e c t o r
non- productive time on the phone. According to several c o l l e c t i o n s
a d m i n i s t r a t o r s , approximately 50 percent of the number o f t o t a l phone
c a l l s made manually r e s u l t i n contact w i t h a taxpayer ( productive
c a l l s ) . Unanswered c a l l s , busy signals and operator intercepted c a l l s
make up the other h a l f of t o t a l c a l l s made ( unproductive c a l l s ) .
Collectors using a manual d i a l i n g system handle fewer productive c a l l s
because they must manual l y d i a l each account ' s phone number and wai t to
determine whether i t w i l l be productive. Using an autodial ing system,
c o l l e c t o r s handle only productive c a l l s . With an a u t o d i a l e r , a computer
automatically p r e d i a l s phone numbers, screening out unproductive c a l l s ,
u n t i l a taxpayer responds. The taxpayer i s placed on hold u n t i l the
c o l l e c t o r i s f i n i s h e d w i t h the previous account. The a u t o d i a l e r always
has a productive c a l l w a i t i n g for the phone c o l l e c t o r . According to
industry and s t a t e o f f i c i a l s , an a u t o d i a l i n g system also increases
p r o d u c t i v i t y because i t reduces time spent i n preparation for the c a l l ,
during the c a l l and updating the account a f t e r the c a l l i s
completed.(')
DOR estimates a 10 percent revenue increase w i t h a u t o d i a l e r - DOR
estimates a 10 percent increase i n phone c o l l e c t i o n s revenue from the
implementation of an a u t o d i a l e r . The DOR phone coI1ections group
c o l l e c t e d $ 58.5 m i l l i o n i n f i s c a l year 1987- 88. A ten percent revenue
increase as a r e s u l t of autodialer implementation would equate to
approximately $ 5.85 m i l l i o n i n a d d i t i o n a l revenue annually. DOR derived
the 10 percent increase through an analysis of c o l l e c t o r time spent on
telephone c a l l s that were not productive. According to the DOR a n a l y s i s ,
unanswered c a l l s , busy signals and operator intercepted c a l l s comprised
over 10 percent of c o l l e c t o r ' s time. Because a u t o d i a l i n g eliminates
unproductive c a l l s and the r e s u l t a n t time loss, c o l l e c t o r s have at least
10 percent more time to spend on productive o r revenue generating c a l l s .
Other states and the I n t e r n a l Revenue Service ( IRS) experienced even
greater p r o d u c t i v i t y increases through implementing a u t o d i a l i n g systems
i n t o t h e i r own c o l l e c t i o n s processes. ( * ' Because co I l ec t ions
Another autodial i n g system b e n e f i t allows management to set parameters f o r accessing
cases i n the inventory. For instance, i f backlogs a r e o c c u r r i n g i n some tax types
o r i f some accounts have been on the system a long time, management can p r i o r i t i z e
the work load t o ensure t h a t these accounts are worked f i r s t .
( 2 ) We v i s i t e d and observed autodial i n g c o l l e c t i o n s processes i n both t h e Colorado
Department of Revenue and the I R S regional phone c o l l e c t i o n s center i n Denver. We
also spoke a t length w i t h o t h e r s t a t e s t h a t have successfully implemented
autodial i n g systems i n c l u d i n g C a l i f o r n i a , F l o r i d a and I l l i n o i s .
processes vary between s t a t e s , other states p r o d u c t i v i t y increases ( up to
500 percent for c e r t a i n phases of the process) cannot be expected of
DOR. However, the IRS c o l l e c t i o n s process i s generally s i m i l a r to DOR's,
except that the IRS uses an a u t o d i a l e r . The IRS expects c o l l e c t o r s t o
contact 5 taxpayers per hour. I n c o n t r a s t , our analysis showed that DOR
c o l l e c t o r s averaged 2 contact per hour for the time period of July
through December, 1987. While f a c t o r s such as b e t t e r supervision and
t r a i n i n g may also c o n t r i b u t e to IRS' greater p r o d u c t i v i t y , t h i s
comparison at least demonstrates that increased p r o d u c t i v i t y i s
possible. ( 1 )
Increased revenue c o l l e c t i o n s could q u i c k l y pay for system - The cost
of implementing an a u t o d i a l i n g system could be quickly recouped i n less
than a year's time. To equip a l l c o l l e c t o r s w i t h a u t o d i a l e r s would cost
approximately $ 500,000 plus costs to i n t e r f a c e w i t h the e x i s t i n g
automated systems. Once the system costs are recouped, DOR w i l l continue
to r e a l i z e at least a $ 5 m i l l i o n annual increase i n phone c o l l e c t i o n s
revenues. (" Other states w i t h autodial ing systems reported that
system costs were also recouped q u i c k l y .
Automated Financial Statement Review And
Extended Hours Could Increase E f f i c i e n c y
In addition to a u t o d i a l i n g , DOR should consider two other methods to
improve e f f i c i e n c y : ( 1) Automating the f i n a n c i a l statement review
process and ( 2 ) extending the workday by staggering s h i f t s .
( ) DOR may experience even greater p r o d u c t i v i t y increases, p a r t i c u l a r l y i f i t modifies
i t s c o l l e c t i o n s process to take f u l l advantage of autodial i n g e f f i c i e n c i e s . Other
states w i t h v e r y h i g h p r o d u c t i v i t y increases r e s u l t i n g from autodial i n g
imp1 ementation have separate work groups f o r each step i n the c o l l e c t i ons process
rather than having each c o l l e c t o r perform a l l steps f o r each account as i s done a t
DOR .
( 2 ) Once a u t o d i a l i n g i s implemented, we be1 ieve the p r o d u c t i v i t y gains may allow DOR to
eventual1 y generate other revenues and/ or savings by reducing s t a f f or reassigning
p o s i t i o n s to other f u n c t i o n s . For example, DOR could real l o c a t e some c o l l e c t o r
p o s i t i o n s to pursue n o n - f i l e r s of sales and w i t h h o l d i n g r e t u r n s . Current1 y , DOR has
a backlog of these accounts which exceeds 48,000. More s t a f f are needed to help
work these accounts, which are on the CACS system and handled l i k e other accounts.
I n a l i m i t e d e f f o r t from July 1987 through A p r i l 1988, DOR c o l l e c t e d nearly
$ 3,000,000 from n o n - f i l e r s . DOR also has a s i g n i f i c a n t backlog of unlocated
accounts ( see Finding 11, page 1 5 ) .
F i n a n c i a l statements - Automating the f i n a n c i a l statement review
procedure would also increase c o l l e c t o r e f f i c i e n c y by leaving c o l l e c t o r s
more time f o r c a l l i n g . According to the phone c o l l e c t i o n s a d m i n i s t r a t o r ,
DOR's current procedure of reviewing taxpayers' f i n a n c i a l statements i s
time- consuming and requires much manual e f f o r t . C o l l e c t o r s contact a
taxpayer and request the taxpayer to submit f i n a n c i a l i n f o r m a t i o n to
allow DOR t o determine the t a x p a y e r ' s abi i i t y t o pay. Once received, the
data i s analyzed and entered i n the computer. The c o l l e c t o r then cal I s
the taxpayer again and sets up a payment arrangement.
Automating the f i n a n c i a l statement review process would reduce paperwork
handled by the c o l l e c t o r and cut down on the number of c a l l s per
account. I n many cases, i n one c a l l taxpayer f i n a n c i a l i n f o r m a t i o n could
be taken over the telephone and entered d i r e c t l y i n the computer. During
the c a l l , the computer could analyze the data and the c o l l e c t o r could
determine the taxpayer's payment amount and schedule. According to the
company that provided DOR i t s automated c o l l e c t i o n s system, the cost for
t h i s enhancement i s est imated a t $ 25,000.
The IRS has automated i t s f i n a n c i a l statement review procedure to
expedite the c o l l e c t i o n of past due taxes. IRS phone c o l l e c t o r s o b t a i n a
taxpayer's f i n a n c i a l i n f o r m a t i o n over the telephone and enter the
information d i r e c t l y i n t o the computer. According t o an IRS o f f i c i a l ,
t h i s e l i m i n a t e s delays and the amount of correspondence handled by i t s
phone agents. Moreover, the automated procedure ensures e q u i t a b l e
treatment f o r a l l taxpayers by c o n s i s t e n t l y c a l c u l a t i n g a repayment
schedu l e .
Extended hours - Another way to increase e f f i c i e n c y would be to extend
DOR's phone c o l l e c t i o n o f f i c e hours. C u r r e n t l y , DOR's phone c o l l e c t i o n
centers i n Phoenix and Tucson operate only Monday through Friday from 8
a. m. to 5 p. m. Several other s t a t e s and the IRS have extended phone
c o l l e c t i o n s hours to maximize t h e i r contact of delinquent taxpayers.
Extending the hours of phone c o l l e c t i o n s i n t o the e a r l y evening and
Saturday morning provides the o p p o r t u n i t y t o contact delinquent taxpayers
who work or are not home during normal business hours. A c o l l e c t i o n
administrator at the Colorado Department of Revenue s t a t e d that phone
c o l l e c t o r s have a p a r t i c u l a r l y high contact rate on Monday n i g h t s i n the
f a l l due to the p o p u l a r i t y of Monday Night Footbal I .
DOR made a l i m i t e d attempt from 1984 through 1987 to extend c o l l e c t i o n
hours, but d i d n o t c o n t i n u e the p r a c t i c e because, according to the
c o l l e c t i o n s a d m i n i s t r a t o r , few a d d i t i o n a l d o l l a r s were c o l l e c t e d .
However, t h i s occurred p r i o r to f u l l implementation of the automated
c o l l e c t i o n s system which p r i o r i t i z e s accounts based on d o l l a r amount and
provides reports o f c o l l e c t o r a c t i v i t y and performance.
Reconendations
1 . DOR should request from the L e g i s l a t u r e an a p p r o p r i a t i o n f o r the
purchase of an a u t o d i a l i n g system and an automated f i n a n c i a l
statement package.
2. DOR should extend i t s phone c o l l e c t i o n s hours and schedule s t a f f to
work i n t o the e a r l y evening and on Saturday morning i n order to
improve i t s telephone contact r a t e .
FINDING I I
DOR COULD COLLECT AT LEAST $ 4 MILLION IN ADDITIONAL REVENUE
IF UNLOCATED ACCOUNTS YERE WORKED MORE AGGRESSIVELY
The Department of Revenue ( DOR) could c o l l e c t a t a minimum $ 4 m i l l i o n i n
a d d i t i o n a l revenue by a g g r e s s i v e l y p u r s u i n g c u r r e n t l y unlocated
accounts. The department could r e a l i z e t h i s a d d i t i o n a l revenue i f only
10 percent of the $ 42 m i l l i o n i n unlocated accounts were c o l l e c t e d .
However, DOR has not committed enough s t a f f resources f o r r e s o l v i n g these
accounts and has not adopted methods used by other e n t i t i e s t o more
e f f i c i e n t l y search f o r account information.
Aggressive Pursuit O f Unlocated Accounts I s Important
An important part of the process of c o l l e c t i n g d e l i n q u e n t r e c e i v a b l e s i s
l o c a t i n g those i n d i v i d u a l s and businesses t h a t owe taxes. L o c a t i n g , o r
" s k i p - t r a c i n g " delinquent taxpayers i n v o l v e s u s i n g several research
techniques, such as c a l l i n g d i r e c t o r y assistance or contacting the
Department of Economic S e c u r i t y f o r employment i n f o r m a t i o n to determine a
current phone number or address.
Aggressive p u r s u i t of a l l delinquent taxpayers i s important f o r two
reasons. F i r s t , as accounts become older there i s less p r o b a b i l i t y that
they w i l l be c o l l e c t e d because taxpayers may move o u t - o f - s t a t e , d e c l a r e
bankruptcy, become d e s t i t u t e or pass away. The second reason f o r
aggressive p u r s u i t i s the p o s i t i v e impact on f u t u r e taxpayer compliance.
According to an IRS o f f i c i a l , strong enforcement i s necessary t o ensure
that taxpayers comply w i t h tax law requirements.
A d d i t i o n a l $ 4.2 M i l l i o n
Could Be Col lected
DOR could increase revenue to the State by more than $ 4 mi l l i o n i f i t
c o l l e c t e d only 10 percent of unlocated delinquent tax accounts.
C u r r e n t l y , DOR has more than $ 42 m i l l i o n i n d e l i n q u e n t r e c e i v a b l e s owed
by taxpayers who c a n ' t be located. These accounts are maintained i n two
automated data systems. Accounts f o r taxpayers who c a n ' t be located
because of inaccurate addresses a r e s t o r e d i n the accounts receivable
system. Accounts f o r taxpayers who c a n ' t be located because of
inaccurate telephone numbers are located i n the automated c o l l e c t i o n s
system ( ACS). Based on December 1987 and February 1988 DOR i n f o r m a t i o n ,
unlocated delinquent accounts i n both systems t o t a l e d $ 42,391,981, which
represented 25 percent of the t o t a l DOR delinquent account balance of
$ 168.5 mi l l ion.
We selected 10 percent as a reasonable and c o n s e r v a t i v e e s t i m a t e of
accounts that might be c o l l e c t e d . Ten percent of the balance of these
accounts i s approximately $ 4.2 m i l l i o n . According to DOR o f f i c i a l s , a 10
percent c o l l e c t i b i l i t y rate f o r unlocated accounts i s v e r y c o n s e r v a t i v e -
a minimum estimate of p o t e n t i a l revenue. A DOR c o l l e c t i o n s o f f i c i a l
estimates that 40 t o 50 percent of unlocated taxpayers could be con-t
a c t e d . ( ' ' Of those, he estimates 60 percent of the accounts could be
c o l l e c t e d , which i s approximately 24 percent of the $ 42 mi l l i o n , o r more
than $ 10 m i l l i o n . The IRS contacts more than 50 percent of unlocated
accounts and c o l l e c t s 13 percent of those, according to an IRS o f f i c i a l
at the IRS Phone Center i n Denver ( which serves 10 western and midwestern
s t a t e s ) .
More S t a f f Needed
To Work Unloeated Accounts
DOR has not a l l o c a t e d s u f f i c i e n t s t a f f resources to resolve unlocated
taxpayer accounts. According to DOR o f f i c i a l s , no one i s assigned to
f i n d the 45,000 taxpayers for which i t has i n c o r r e c t addresses. Only two
s t a f f are assigned to f i n d the 42,000 taxpayers w i t h inaccurate o r
missing phone numbers. Although these s t a f f are l o c a t i n g some accounts,
more accounts are coming i n than a r e b e i n g resolved. From January 30,
1987 through December 27, 1987, the number of accounts w i t h i n c o r r e c t
phone numbers i n the Phoenix inventory increased from 3,088 to 14,867
accounts t o t a l ing $ 16,817,633.
( I ) I n October 1986, DOR found t h a t many delinquent taxpayers w i t h i n c o r r e c t address
i n f o r m a t i o n could be located. DOR mailed l e t t e r s t o 362 d e l i n q u e n t taxpayers who
d i d not have v a l i d addresses, according t o Department records. DOR received
p o s i t i v e responses ( e i t h e r the taxpayer contacted DOR o r the post o f f i c e provided a
forwarding address) f o r 101 o f the 362 accounts ( 27.9 p e r c e n t . ) This i s j u s t one of
several approaches used t o l o c a t e taxpayers. Other techniques could f u r t h e r
increase t h e c o n t a c t r a t e .
16
The IRS devotes p r o p o r t i o n a l l y more resources toward i t s s k i p - t r a c i n g
function than does DOR. The IRS Denver Phone Center has s i x s t a f f
assigned to work an inventory of 14,684 accounts. In c o n t r a s t , DOR has
two s t a f f working nearly 42,000 unlocated accounts i n the ACS system and
no s t a f f working the nearly 45,000 accounts i n the accounts receivable
sys tem.
According to DOR c o l l e c t i o n s management, the Department i s considering
placing eight new p o s i t i o n s i n t o the s k i p - t r a c i n g f u n c t i o n . However, as
of May 2, 1988, t h i s had not yet been done. Eight a d d i t i o n a l p o s i t i o n s
to help recover the p o t e n t i a l $ 4 to $ 10 mi l l i o n would cost the State an
estimated $ 128,000. However, cost savings from phone c o l l e c t i o n s
p r o d u c t i v i t y improvements could make s t a f f a v a i l a b l e f o r s k i p - t r a c i n g
without any increased cost to the State ( see Finding I , page 11).
Adopting New Methods Could
Increase Location Function Performance
DOR could improve i t s s k i p - t r a c i n g methods by adopting techniques used by
other col l e c t i o n e n t i t i e s . For accounts on the ACS system ( those without
phone numbers), DOR c u r r e n t l y uses m a i l i n g s , d i r e c t o r y assistance,
Department of Economic Security ( DES) employment information, Department
of Transportation Motor Vehicle D i v i s i o n ( MVD) information and address
d i r e c t o r i e s to determine delinquent taxpayers' phone numbers and
addresses. However, except for DES information and other DOR tax
information, these searches are a l l conducted manually. For example, DOR
s t a f f phone d i r e c t o r y assistance to ask for phone numbers.
In c o n t r a s t , the IRS has developed a more e f f i c i e n t and e f f e c t i v e
skip- tracing process. According to IRS o f f i c i a l s , the IRS has automated
several of i t s information sources. The IRS has an agreement w i t h
Mountain B e l l t o p r o v i d e computer data tapes of names, addresses and
phone numbers ( u n l i s t e d phone number information i s not provided). In
a d d i t i o n , the IRS has developed an automated locator package which
integrates data tapes from several s t a t e and local government automated
information systems that contain employment, automobile and property
data. S t a f f do a manual search only i f these automated systems cannot
provide information.
DOR could also make greater use o f p r i v a t e vendors i n l o c a t i n g accounts.
Colorado uses p r i v a t e vendors to locate and c o l l e c t accounts that are
more than one year o l d , and the IRS employs p r i v a t e vendors to provide
telephone information for those areas not served by Mountain B e l l .
According to a DOR o f f i c i a l , DOR has considered but not yet implemented
use of p r i v a t e vendors f o r s k i p - t r a c i n g .
F i n a l l y , DOR should consider combining unlocated account i n v e n t o r i e s ,
which are c u r r e n t l y stored i n two separate systems. DOR could simply
t r a n s f e r e l e c t r o n i c a l l y accounts w i t h inaccurate addresses from the
accounts receivable system to the automated co l l e c t ions system skip
t r a c i n g inventory. As mentioned previous! y, s i m i l a r methods are used to
locate accounts i n both systems, yet DOR has not a l located any resources
to work accounts i n the accounts receivable system. Combining both
inventories and assigning several s t a f f to work these accounts would
increase the l i k e l i h o o d that these accounts w i l l be resolved.
RECOWENDAT IONS
1 . DOR should devote more s t a f f i n g resources to i t s skip- trace f u n c t i o n
to ensure that the State obtains maximum revenue from taxes and that
taxpayers comply w i t h State tax laws.
2. When p o s s i b l e , DOR should develop automated s k i p - t r a c i n g procedures
to replace those c u r r e n t l y performed manually.
3 . DOR should review the f e a s i b i l i t y of using p r i v a t e vendors to a s s i s t
i n l o c a t i n g d e l i n q u e n t accounts.
4. DOR should consider combining i t s accounts receivable and automated
c o I l e c t i o n s system unlocated account i n v e n t o r i e s , and form a
s k i p - t r a c i n g u n i t to ensure that a l l accounts are worked.
FINDING I l l
DOR NEEDS TO STRENGTHEN SUPERVISION
AND TRAINING OF COLLECTIONS STAFF
The Department of Revenue ( DOR) needs to improve supervision and t r a i n i n g
of c o l l e c t i o n s s t a f f . I n d i v i d u a l performance data and other evidence
suggest that some col l e c t o r s do not meet acceptable l e v e l s of
p r o d u c t i v i t y and do not f o l l o w proper c o l l e c t i o n s procedures. C u r r e n t l y ,
minimal supervision i s exercised to monitor and ensure adequate
performance. I n a d d i t i o n , c o l l e c t o r s do not receive comprehensive and
consistent t r a i n i n g needed to perform e f f e c t i v e l y .
Some C o l l e c t o r s Perform
Poor l y
Analysis of c o l l e c t o r performance d a t a i n d i c a t e s t h a t some col l e c t o r s do
not meet acceptable l e v e l s of p r o d u c t i v i t y . Based on number of c a l l s
made and d o l l a r s c o l l e c t e d , p r o d u c t i v i t y v a r i e s widely among c o l l e c t o r s .
C o l l e c t o r s a l s o do not always f o l l o w proper c o l l e c t i o n s procedures and do
not always employ e f f e c t i v e phone techniques.
Performance standards and c o l l e c t i o n s g u i d e l i n e s e s t a b l i s h e d by DOR help
ensure that i n d i v i d u a l c o l l e c t o r s meet acceptable l e v e l s of p r o d u c t i v i t y
and e f f e c t i v e n e s s . C o l l e c t o r s who do not meet acceptable standards or
f o l l o w proper procedures reduce DOR's c o l l e c t i o n s e f f e c t i v e n e s s . Low
p r o d u c t i v i t y among i n d i v i d u a l c o l l e c t o r s can also r e s u l t i n c o s t l y
o v e r s t a f f i n g .
C o l l e c t o r performance v a r i e s widely - Our a n a l y s i s of c o l l e c t o r
performance found that p r o d u c t i v i t y v a r i e d w i d e l y . Some c o l l e c t o r s
perform w e l l below established standards.
DOR standards requi re col l e c t o r s to make or respond to 35 cal I s per day.
This includes both incoming and outgoing cal I s . Based on an average of
18.2 workdays per month, c o l l e c t o r s should be attempting approximately
637 c a l l s per month. DOR has also established a standard of $ 85,000 i n
c o l l e c t i o n s per month per c o l l e c t o r . Other c o l l e c t i o n s e n t i t i e s caution
a g a i n s t e v a l u a t i n g c o l l e c t o r s s o l e l y on the basis of d o l l a r s c o l l e c t e d
due to v a r i a t i o n s i n amounts due. However, examining amounts c o l l e c t e d
along w i t h other i n d i c a t o r s o f i n d i v i d u a l performance i s reasonable
because DOR's automated system p r i o r i t i z e s accounts according t o amounts
due and c o l l e c t o r s access a common pool of accounts.
Based on a review o f DOR management r e p o r t s d e t a i I ing col l e c t o r
performance from J u l y through December 1987, phone c o l l e c t o r s have not
a t t a i n e d performance standards established by DOR for several c o l l e c t i o n s
a c t i v i t i e s . For example, the average number of c a l l s handled on a
monthly basis per c o l l e c t o r ranged from 389 to 834, w i t h a m a j o r i t y of
c o l l e c t o r s f a l l i n g below DOR's monthly standard goal of approximately 637
c a l l s . Further, average monthly c o l l e c t i o n s amounts ranged from $ 34,681
to $ 122,898. Table 5 i l l u s t r a t e s the wide discrepancy i n c o l l e c t o r
performance compared t o performance standards.
TABLE 5
COLLECTOR MONTHLY PERFORMANCE VS. DOR STANDARDS
JULY THROUGH DECEMBER 1987
Range Ave rage DOR Standard
Number of cal Is 389- 834 521 63 7
Number of contacts 196- 51 5 320 319 c a )
D o l l a r s c o l l e c t e d $ 34,681 -$ 122,898 $ 73,274 $ 85,000
( a ) This f i g u r e i s based on DOR's standard of a 50 percent contact r a t e . This contact
r a t e i s used by several organizations w i t h phone c o l l e c t i o n operations. The data
presented was comp~ led from c o l l e c t o r s who were empi f o r the e n t i r e s i x month
per1 od.
Source: Compiled by Auditor General s t a f f from DOR management reports
for July through December 1987.
Procedures not followed - I n a d d i t i o n to not meeting performance
standards, many c o l l e c t o r s do not follow DOR's c o l l e c t i o n g u i d e l i n e s .
DOR has established guidelines for phone c o l l e c t o r s for dealing w i t h
delinquent taxpayer accounts. For example, a f t e r two unsuccessful phone
attempts, c o l l e c t o r s should obtain levy information and send a f i n a l
demand. I f the taxpayer does not respond the account should be l e v i e d .
Our a n a l y s i s o f some recent levies showed that c o l l e c t o r s generally are
very l e n i e n t , and only levy a f t e r many c o l l e c t i o n attempts have been
made. The f o l l o w i n g examples i l l u s t r a t e instances of col l e c t o r s
disregarding c o l l e c t i o n g u i d e l i n e s .
Case 1: 2- 1- 88 - CoI l e c t o r cal led a taxpayer w i t h an outstanding
balance of $ 954. No answer. C o l l e c t o r ! z i t a message for the
taxpayer to c a l l back.
2- 4- 88 - A f i n a l demand before enforced c o l l e c t i o n notice was
sent to the taxpayer informing him to contact DOR or r i s k a
levy of wages or bank account. A 20- day hold was set.
2- 25- 88 - The c o l l e c t o r again c a l l e d the taxpayer. The
c o l l e c t o r l e f t a message for the taxpayer to c a l l DOR. A
14- day hold date was s e t .
3- 1- 88 - The c o l l e c t o r received taxpayer c r e d i t bureau
information to help determine levy sources.
3- 4- 88 - The c o l l e c t o r received employment information to help
determine levy sources.
3- 8- 88 - The c o l l e c t o r made a c a l l to the taxpayer's place of
employment and l e f t a message. Another 14- day hold date was
s e t .
3- 22- 88 - Another f i n a l demand notice was sent and the
c o l l e c t o r set a 24- day hold date.
Conment: According to DOR g u i d e l i n e s , t h i s account should
have been levied on 2- 25- 88, but was not because the c o l l e c t o r
d i d not obtain levy source information on a timely basis.
Securing a levy source i s one of the f i r s t actions c o l l e c t o r s
should take according to DOR g u i d e l i n e s . As of 4- 15- 88, 79
days since the account was f i r s t worked, no levy had been
served or any payment made.
Case2: 2- 20- 87 - A taxpayer was contacted by DOR c o l l e c t o r for sales
taxes due t o t a l i n g $ 1,079. C o l l e c t o r sent a f i n a n c i a l
statement form, to be completed and returned by the taxpayer
by 3- 2- 87.
3- 2- 87 - Taxpayer d i d n o t r e m i t the f i n a n c i a l statement.
Phone contact attempts were unsuccessful.
3- 10- 87 - Taxpayer c a l l e d DOR and said the statement would be
completed by 3- 16- 87.
3- 13- 87 - An i n s t a l l m e n t payment arrangement was made w i t h
taxpayer .
5- 14- 87 through 2- 18- 88 - Taxpayer broke payment arrangement
f o u r t i m e s . Each time, the c o l l e c t o r reset the payment
arrangement.
Comnent: The taxpayer should have been levied on 5- 14- 87,
because of a broken promise to pay, according t o DOR
g u i d e l i n e s . Moreover, the c o l l e c t o r d i d not perform a f u l l
compliance check to v e r i f y i f other taxes were owed. I n t h i s
case, the taxpayer had not f i l e d personal income tax returns
f o r 1985 and 1986.
Our observations showed t h a t , i n a d d i t i o n to not f o l l o w i n g c o l l e c t i o n s
g u i d e l i n e s , some DOR phone c o l l e c t o r s d i d not use good c o l l e c t i o n
techniques such as c o n t r o l l i n g the conversation and demanding f u l l
payment when attempting to c o l l e c t past due taxes. A DOR c o l l e c t i o n s
supervisor also expressed concern that employees were using poor
technique. According to IRS and p r i v a t e i n d u s t r y o f f i c i a l s , proper phone
technique i s e s s e n t i a l t o an e f f e c t i v e c o l l e c t i o n s e f f o r t .
Supervision Needs To Be Improved
DOR management exercises minimal supervision of c o l l e c t o r performance and
technique. Management does not e f f e c t i v e l y use a v a i l a b l e performance
reports nor monitor phone c a l l s and review work to ensure that proper
procedures are followed.
DOR management does not e f f e c t i v e l y u t i l i z e a v a i l a b l e c o l l e c t o r
performance reports t o moni t o r and address i nadequate performance. The
automated c o l l e c t i o n s system provides reports summarizing d a i l y c a l l
s t a t i s t i c s and how c o l l e c t o r s use t h e i r time. These reports are
generated t o help s u p e r v i s o r s m o n i t o r t h e i r s t a f f i n order to i d e n t i f y
and respond to performance problems. However, DOR supervisors make
l i t t l e use of these r e p o r t s , c l a i m i n g t h a t other d u t i e s preclude them
from spending enough time monitoring. However, other c o l l e c t i o n s
e n t i t i e s w i t h s i m i l a r supervisor to s t a f f r a t i o s s t a t e d t h a t supervisors
are indeed able to use management reports and monitor s t a f f i n a d d i t i o n
to completing other tasks.
Although t e c h n i c a l l y capable of doing so, DOR c o l l e c t i o n s management does
not monitor c o l l e c t o r phone conversations w i t h taxpayers. Monitoring
phone c a l l s allows the supervisor to determine whether a c o l l e c t o r i s
using proper phone techniques. The IRS and Colorado use t h i s method to
help ensure that proper techniques are used. While l i s t e n i n g , the IRS
supervisor uses a standardized check1 i s t of procedures to grade that
conversation. L a t e r , the supervisor relates any areas for improvement
from the c h e c k l i s t . IRS supervisors are required to monitor an average
of two conversations per c o l l e c t o r every week.
F i n a l l y , DOR management does l i t t l e review of c o l l e c t o r work to ensure
that proper procedures and guidelines are followed. According to DOR
supervisors, c o l l e c t o r s ' work i s usually examined only when supervisor
approval i s requi red for a payment arrangement or when l iens and levies
are issued.
Both the IRS and one major local bank r e g u l a r l y review c o l l e c t o r work.
The IRS has a separate q u a l i t y control u n i t that samples completed work
and also monitors phone c a l l s . Results are compiled monthly and used to
emphasize areas for improvement. The local bank we v i s i t e d requires
supervisors to review 40 percent of accounts older than 90 days to ensure
that c o l l e c t o r s are pursuing an e f f i c i e n t means of r e s o l u t i o n . In
a d d i t i o n , these supervisors monitor c o l l e c t o r performance through
system- generated performance reports.
DOR supervisors stated that they d i d not have enough time to properly
monitor c o l l e c t o r s because of other work requirements. Again, other
c o l l e c t i o n s agencies w i t h s i m i l a r supervisor to s t a f f r a t i o s stated that
supervisors monitor s t a f f and are able to complete other t a s k s . To be
e f f e c t i v e , more supervisor review of s t a f f must occur!"
Training Can
Be Strengthened
I n a d d i t i o n to b e t t e r supervision, more comprehensive and consistent
t r a i n i n g i s needed to enable c o l l e c t o r s t o perform e f f e c t i v e l y .
C u r r e n t l y , t r a i n i n g i s not s u f f i c i e n t l y comprehensive and on the job
t r a i n i n g i s l e f t to the d i s c r e t i o n o f i n d i v i d u a l supervisors. New phone
c o l l e c t o r s receive two and one- half weeks of t r a i n i n g , which centers on
the automated c o l l e c t i o n s system, the accounts receivable system, the tax
types and agency- wide t o p i c s . However, according to the phone c o l l e c t i o n s
a d m i n i s t r a t o r , no t r a i n i n g i s provided on proper telephone techniques.
F u r t h e r , any on- the- job t r a i n i n g i s l e f t to the d i s c r e t i o n o f the
i n d i v i d u a l supervisors. No uniform on- the- job t r a i n i n g i s provided.
I n c o n t r a s t t o DOR, the IRS t r a i n i n g program for new s t a f f i s
comprehensive and includes t r a i n i n g i n the use of proper telephone
technique. A l l new phone c o l l e c t o r s at the IRS are given e i g h t to ten
weeks of combined classroom and on- the- job t r a i n i n g . New c o l l e c t o r s are
c l o s e l y monitored to ensure that proper techniques are used and
guidelines are followed. According to the deputy branch chief at the IRS
c o l l e c t i o n center i n Denver, Colorado, t r a i n e e s r o l e - p l a y as c o l l e c t o r s
while IRS management p o r t r a y various taxpayer a t t i t u d e s and behavior.
Trainees have the o p p o r t u n i t y to observe and p r a c t i c e proper phone
technique.
According to DOR, several o t h e r f a c t o r s contributed to the wide v a r i a t i o n i n
c o l l e c t o r performance. These i n c l u d e t h e implementation of the automated
c o l l e c t i o n s system, high turnover and d i f f i c u l t y r e c r u i t i n g qua1 i t y s t a f f .
RECOWENDAT IONS
1 . DOR should r e q u i r e c o l l e c t i o n s u p e r v i s o r s t o increase t h e i r review o f
c o l l e c t o r performance and take c o r r e c t i v e a c t i o n when d e f i c i e n t
performance i s noted. S p e c i f i c a l l y , supervisors should monitor and
review c o l l e c t o r p r o d u c t i v i t y , adherence to DOR g u i d e l i n e s and use o f
proper phone c o l l e c t i o n techniques.
2. DOR should include e f f e c t i v e telephone c o l l e c t i o n te- hniques i n i t s
new c o l l e c t o r t r a i n i n g program i n s t r u c t i o n . I n a d d i t i o n , on- the- job
t r a i n i n g should be c o n s i s t e n t f o r a l l s t a f f .
FINDING IV
TAXPAYER SERVICES HAS GENERALLY IMPROVED;
HOWEVER. DELINQUENT BILLING INOUlRlES
ARE STILL NOT RESOLVED IN A TIMELY MANNER
Department of Revenue ( DOR) taxpayer services areas have general ly
improved since our l a s t a u d i t . The sections that respond to taxpayer
i n q u i r i e s now provide b e t t e r phone service and more timely and e f f i c i e n t
responses to correspondence. However, due to high s t a f f turnover r a t e ,
the Accounts Management Services section i s not able to respond to
i n q u i r i e s and b i l l i n g s w i t h i n a reasonable period of time. DOR could
reduce turnover i n Accounts Management Services by improving management
effectiveness, upgrading s t a f f p o s i t i o n s and providing b e t t e r t r a i n i n g .
Background
Since our 1985 a u d i t , DOR has divided i t s taxpayer services
respons i b i I i t i es i n to two f unc t i ona l areas, Accounts Management Se rv i ces
( AMS), and Information and L e g i s l a t i v e Services ( ILS). AMS responds to
taxpayer i n q u i r i e s r e l a t i n g to amounts owed. ILS handles general
i n q u i r i e s from a l l taxpayers and answers taxpayer questions concerning
refunds. Both sections respond to telephone c a l l s and correspondence.
In a d d i t i o n , ILS handles walk- in taxpayers i n Phoenix.
DOR Has Made S i gn i f i cant l mp rovemen t s
In Its Taxpayer Services Areas
DOR has made several s u b s t a n t i a l improvements which have resulted i n more
e f f i c i e n t processing of taxpayer i n q u i r i e s . Taxpayer services areas have
s i g n i f i c a n t l y reduced t h e i r reliance on temporary personnel. Also, by
separating the taxpayer s e r v i c e s f u n c t i o n i n t o two sections that answer
general and b i l l i n g i n q u i r i e s , r e s p e c t i v e l y : response time for general
i n q u i r i e s has improved. Furthermore, the new automated case tracking
system has reduced case d u p l i c a t i o n and improved a c c o u n t a b i l i t y .
F i n a l l y , improved phone service has also increased DORIS a b i l i t y to
handle i n q u i r i e s .
Greatly reduced use of temporary employees - As we recommended i n our
previous a u d i t , taxpayer services has reduced i t s r e l i a n c e on temporary
personnel. Our 1985 report found that taxpayer services had 21 permanent
employees and approximately 72 temporary workers. Turnover was high,
w i t h more than 40 percent of the temporary employees leaving taxpayer
services w i t h i n three months. With such high turnover, t r a i n i n g f o r new
h i r e s was minimal. As a consequence of high turnover and inadequate
t r a i n i n g , p r o d u c t i v i t y was poor.
The taxpayer services areas have taken a s i g n i f i c a n t step toward
improving s t a f f i n g problems by c u r t a i l i n g the use of temporary
employees. AMS does not use any temporary s t a f f . ILS has reduced use of
temporaries during the tax season. For the 1988 tax season, ILS h i r e d
e i g h t temporary phone agents, who have received three weeks of formal
t r a i n i n g . A d d i t i o n a l l y , according to the ILS a d m i n i s t r a t o r , management
monitors t h e performance of the temporary workers they use.
Response time for general i n q u i r i e s improved - General i n q u i r i e s have
been handled on a more t i m e l y b a s i s due to the d i v i s i o n of the taxpayer
services f u n c t i o n i n t o two s e c t i o n s . I n June 1986 the Taxpayer Service
D i v i s i o n was spl i t i n t o Informat ion and L e g i s l a t i v e Services, which
responds to general and refund i n q u i r i e s , and Accounts Management
Services, which handles b i l l i n g questions. Our previous a u d i t found that
the former Taxpayer Services D i v i s i o n average time to respond to taxpayer
i n q u i r i e s was 51 days, and that much of the s e c t i o n ' s unanswered
correspondence was more than 70 days o l d .
With the current d i v i s i o n o f the taxpayer services f u n c t i o n , ILS i s able
to research and respond to general i n q u i r i e s i n a more timely manner.
According t o the ILS A d m i n i s t r a t o r , DOR has a standard goal that
i n q u i r i e s be resolved w i t h i n 30 days, w i t h two a d d i t i o n a l weeks allowed
i f more i n f o r m a t i o n i s requested from the taxpayer. Figure 1 ( page 29)
shows the percentage of cases f a l l i n g above and below t h i s standard
during 1987 and shows that ILS generally meets t h i s standard. Most
general i n q u i r i e s are answered w i t h i n four weeks.
FIGURE 1
INFORMATION AND LEGISLATIVE SERVICES
AGE OF TAXPAYER INQUIRIES
1987
MONTH
LEGEND
9- 20 w r r k r
3- 8 w r r k r
4 wrclkr or l r r r
Source: Auditor General analysis of TRACS Aging Inventory Summary
Reports - January 1 through December 31 , 1987.
2 9
TRACS has reduced dupl i cat ion - Automat i ng the t rack i ng of cases has
also resulted i n s u b s t a n t i a l improvements i n case processing e f f i c i e n c y .
Taxpayer Request Ass i stance and Control System ( TRACS) , the computer
t r a c k i n g system used by both taxpayer s e r v i c e s s e c t i o n s to account for
a l l cases, has reduced d u p l i c a t i o n and made workers more accountable to
supervisors who can monitor case processing. During our previous a u d i t
we c i t e d instances of more than one worker responding to the same i n q u i r y
while other cases were sometimes l o s t o r hidden by employees. We also
noted i n s u f f i c i e n t numbers of camputer terminals for workers t o o b t a i n
access to taxpayer information.
The implementation of TRACS has improved t h e processing of taxpayer
i n q u i r i e s . C~ sework d u p l i c a t i o n has decreased, according to the taxpayer
services a d m i n i s t r a t o r s . Using TRACS, caseworkers can check to see i f an
i n q u i r y i s being handled by another DOR area. TRACS p o r t f o l i o s for each
worker l i s t a l l cases i n a predefined p r i o r i t y order and by the o r i g i n a l
i n q u i r y d a t e . Supervisors can check p o r t f o l i o s to determine whether
cases are being worked i n order and i n a timely manner. Supervisors can
then access i n d i v i d u a l cases on TRACS to check for accuracy. Since a i l
workers have terminals at t h e i r desks, TRACS a l s o a l l o w s them access to
taxpayer information. This has saved time previously spent accessing
cases manually or w a i t i n g for a t e r m i n a l .
Phone service has improved - DOR's improved phone system has f u r t h e r
enhanced DOR's a b i l i t y to handle the volume of taxpayer i n q u i r i e s .
During our previous a u d i t we found that taxpayer services lacked
information on the number of taxpayers who attempted to reach them by
telephone. This system d i d not measure numbers of taxpayers who received
busy signals, who were w a i t i n g f o r assistance, or who had abandoned t h e i r
c a l l s . As a r e s u l t , taxpayer services was not able to make s t a f f i n g
decisions to o p t i m a l l y meet the p u b l i c demand for t h e i r s e r v i c e s .
The current automatic c a l l d i s t r i b u t o r used by ILS and r e c e n t l y expanded
to AMS provides b e t t e r phone s e r v i c e . This system measures average
taxpayer w a i t i n g time, average t a l k time, percentage of abandoned c a l l s ,
and average w a i t i n g times b e f o r e c a l I s are being abandoned. The ILS
phone supervisor monitors w a i t i n g time of taxpayers and numbers of
abandoned c a l l s , and makes s t a f f i n g adjustments based on t h i s
information. Since the automatic c a l l d i s t r i b u t o r was expanded to
include AMS, t h i s section w i l l be able t o b e t t e r assess i t s s t a f f i n g
needs to handle phone i nqu i r i es.
Accounts Management Services Does Not
Respond To Correspondence I n A Timely Manner
While there have been improvements i n DOR's taxpayer services areas,
further improvements are needed. Accounts Management Services ( AMS) does
not complete work on correspondence cases i n a timely manner. On the
average, i t takes AMS more than 125 days to respond to b i l l i n g
i n q u i r i e s . Further, there i s a large backlog of unworked cases i n AMS,
and during the past year the percentage of cases older than 20 weeks has
increased.
Early i n the course of the a u d i t , the AMS a d m i n i s t r a t o r stated that DOR
had established a standard goal of 60 days to resolve b i l l i n g i n q u i r i e s .
However, the standard was suspended because AMS could not meet i t . DOR
l a t e r changed the standard to 90 days. This standard i s
conservative and less s t r i n g e n t than some other states and the IRS. We
surveyed f i v e western states and found that of the three w i t h s i m i l a r
taxpayer services functions, a l l have shorter response time standards
than DOR. C a l i f o r n i a and Utah, which handle b i l l i n g and general i n q u i r i e s
w i t h i n one section, have i n q u i r y r e s o l u t i o n standards of 21 days and 30
days, respectively. Colorado and the IRS, which, l i k e DOR, handle b i l l i n g
i n q u i r i e s separately from general i n q u i r i e s , have b i l l i n g i n q u i r y
r e s o l u t i o n standards of 42 days and 40 days, r e s p e c t i v e l y .
Accounts Management Services does not complete cases w i t h i n the time
standard - Although the standard DOR has set f o r b i l l i n g i n q u i r y
r e s o l u t i o n time i s conservative compared to other s t a t e s we surveyed, AMS
( ' ) During our 1985 a u d i t , DOR had a 60 day standard to resolve a l l Taxpayer Services
i nqui ri es.
(') We sampled 383 cases, using numbers of cases i n each t a x type proportionate to t h e i r
occurrence i n the AMS correspondence work load, and were able t o draw conclusions
about the average case r e s o l u t i o n time f o r 1987 a t a 95 percent l e v e l of confidence
with + or - 5 percent e r r o r .
has generally not been able to meet i t . Table 6 i l l u s t r a t e s the average
correspondence case r e s o l u t i o n time for each tax type. F u r t h e r , the
table shows that 124 days i s the average age o f i n q u i r i e s received i n
1987 which have not yet been resolved "'
TABLE 6
AVERAGE NUMBER OF DAYS
TO RESOLVE BILLING INQUIRIES
CALENDAR YEAR 1987
TAX TYPE
Pe r sona l l ncome
Corporate
Sales
Withholding
CLOSED CASES
( N = 252)
OPEN CASES
( N = 131)
A l l Types Combined 125 124
Source: Auditor General analysis of sample data from Accounts Management
Services Inventory January 1 through November 6, 1987.
Further review d i s c l o s e d t h a t most of the delay i n response time occurred
because cases were pending an average of 88 days b e f o r e b e i n g assigned to
someone who could resolve them. A smaller sample of cases showed t h a t 70
percent of the t o t a l r e s o l u t i o n time was spent w a i t i n g for cases to be
assigned to a caseworker a f t e r i n q u i r i e s were received.
( ' ) For cases not r e q u i r i n g adjustments to account balances, DOR n o t i f i e s the taxpayer
approximately two weeks sooner.
Table 7 shows the average time i t took to complete each step of resolving
an i n q u i r y , f o r each tax type. ( 1 )
TABLE 7
AVERAGE DAYS FOR EACH INQUIRY PROCESSING STEP
CALENDAR YEAR 1987
BEFORE REV I EW, NUMBER
CASEWORKER CASEWORK QUALITY CONTROL, OF
TAX TYPE ASS l GNMENT COMPLETED CLER l CAL PROCESS l NG CASES
Personal Income 86 2
Corporate 185 1
Sales 3 6 2
Withholding 9 6 5
A I l Types
Comb i ned 88 3
Source: Auditor General analysis of sample data from Accounts Management
Services lnventory January 1 through November 6, 1987.
lnventory contains many older cases - Further analysis revealed many
older cases. During 1987 AMS was able to reduce i t s t o t a l inventory, but
at the cost of allowing a number of cases to age considerably beyond
eight weeks. The percentage of cases older than e i g h t weeks exceeded 50
percent during eight o f the 12 months. During four months of the year,
more than 40 percent of the AMS caseload was older than 20 weeks. Figure
2 ( page 34) shows the age of AMS cases, and an increase i n the percentage
of older cases throughout the year. According to the AMS a d m i n i s t r a t o r ,
t h i s resulted because of a management decision to reduce the inventory by
prescreening cases and responding to those that could be more easi l y
resolved .
( I ) The smaller number of cases i n the i n q u i r y processing i n t e r v a l analysis i s a r e s u l t
of v a r i a t i o n s i n the dating o f cases by some AMS u n i t s , i n an e f f o r t to track cases
more accurate1 y. This analysis incorporated oni y those cases whose i n t e r v a l s
represented actual dates when processes occurred.
FIGURE 2
ACCOUNTS MANAGEMENT SERV l CES
AGE OF TAXPAYER INQUIRIES
1987
- --
MONTH
LEGEND
W ovrr 20 r o r k m
9- 20 w o a k m
rook. or lam.
Source: Auditor General a n a l y s i s of TRACS Aging Inventory Summary
Reports - January 1 through December 31, 1987.
Excess i ve Turnover
Reduces P r o d u c t i v i t y
High s t a f f turnover prevents DOR from a t t a i n i n g the p r o d u c t i v i t y levels
needed to improve processing time and reduce i t s case backlog. Not only
i s turnover i n AMS excessively high, but p o s i t i o n s remain u n f i l l e d for
extended periods. F u r t h e r , AMS s t a f f generally terminate employment j u s t
as they are becoming productive. I f the rate of turnover could be
reduced, DOR could s u b s t a n t i a l l y increase p r o d u c t i v i t y .
Turnover i s excessive - The high turnover rate i n AMS compares
unfavorably with the other states we surveyed and w i t h DORIS Information
and L e g i s l a t i v e Services s e c t i o n which does somewhat comparable work. In
1987, there were a t o t a l of 21 vacancies out of 16 taxpayer technician
p o s i t i o n s i n AMS, f o r a turnover rate of 131 percent. Throughout 1987
s t a f f remained w i t h AMS about s i x months.
Other states have much lower turnover r a t e s . Colorado and New Mexico,
for example, estimate that t h e i r turnover r a t e s a r e less than 10 percent,
while Utah and C a l i f o r n i a estimate t h e i r turnover rates at 20 percent and
about 17 percent r e s p e c t i v e l y . (' I While i t would not be r e a l i s t i c to
expect AMS, at least i n the near f u t u r e , to achieve these low turnover
levels, a goal of reducing turnover to 50 percent may be reasonable.
DORIS Information and L e g i s l a t i v e Services section ( I L S ) , which also
responds to taxpayer i n q u i r i e s , averaged 45 percent turnover from July
1986 through May 1988.
The high turnover and numerous vacancies i n AMS i n 1987 s i g n i f i c a n t l y
reduced p r o d u c t i v i t y . P o s i t i o n vacancies remained u n f i l led for an
average of approximately 12 weeks during 1987. Unproductive vacant
p o s i t i o n s consumed the equivalent of almost f i v e f u l l - t i m e p o s i t i o n s , or
almost one- third of the t o t a l AMS casework s t a f f of 16.
Caseworkers leave as they become productive - Turnover also reduces
p r o d u c t i v i t y because, g e n e r a l l y , workers leave soon a f t e r they have
gained enough experience to be the most p r o d u c t i v e . We found a
( ' ) The C a l i f o r n i a Taxpayer Services turnover r a t e does not include those workers who do
n o t s u c c e s s f u l l y complete the new h i r e s t r a i n i n g program, estimated a t 20 percent.
s t a t i s t i c a l l y s i g n i f i c a n t d i f f e r e n c e i n the average time i t takes to
complete work on a b i l l ing i n q u i r y between workers w i t h tenure of at
least s i x months and workers w i t h less than s i x months tenure. Our
analysis of worker p r o d u c t i v i t y , records for 1987 i n d i c a t e s that the group
of workers w i t h more experience was 43 percent more productive,
completing an average of 5.88 more cases per week than the workers w i t h
less than s i x months tenure. Further, such gains i n worker p r o d u c t i v i t y
did not occur p r i o r to s i x months tenure. However, the average tenure of
AMS caseworkers i s about s i x months, showing that they terminate
employment o r t r a n s f e r to other DOR areas soon a f t e r they achieve AMS
p r o d u c t i v i t y standards.
AMS could increase p r o d u c t i v i t y by reducing turnover and f i l l i n g
vacancies i n a timely manner - Based on our analysis of worker tenure
and p r o d u c t i v i t y , i f turnover was reduced from i t s current level of 131
percent to 50 percent annually, and i f the length of time p o s i t i o n s
remained vacant was also reduced to a reasonable period, AMS could handle
approximately 2,467 a d d i t i o n a l b i l l i n g i n q u i r i e s annually. This would be
a 21 percent gain i n p r o d u c t i v i t y , and would reduce the length of time
c u r r e n t l y required to complete a case(. 1 )
DOR Should Take Steps To Reduce Turnover
And Thereby Improve P r o d u c t i v i t y
Accounts Management Services could reduce turnover through more e f f e c t i v e
management, upgrading i t s taxpayer services p o s i t i o n s and improving
t r a i n i n g . Both management problems and low grade and pay for workers
negatively impact morale and c o n t r i b u t e t o h i g h t u r n o v e r . DOR could also
improve morale and reduce turnover by providing b e t t e r t r a i n i n g for new
workers.
MIR could reduce turnover by improving management - Several former and
current employees of AMS c i t e management problems as a cause of
turnover. We were able to contact 15 of the 24 workers who had l e f t AMS
employment i n 1987. Eleven of the 15 contacted, 77 percent, reported
that management problems contributed to turnover i n AMS. These same
( ' ) See Appendix 1 f o r a d i s c u s s i o n o f how these estimates were derived.
3 6
employees noted that morale was poor i n t h i s section. H a l f o f the former
workers who were interviewed said that workers were not treated f a i r l y .
Six o f the former workers reported that procedures were changed
frequently, c o n t r i b u t i n g t o worker f r u s t r a t i o n .
Statements made by current workers i n d i c a t e some of the same management
problems reported by the former workers. We sent management climate
surveys to a l l taxpayer services employees. Fi fteen o f the 49 employees
i n AMS responded, for a response r a t e o f a p p r ~ x i m a t e l y 31 percent. Of
those who d i d respond, e i g h t disagreed w i t h the statement " I have
confidence i n the f a i rness and honesty of management. ' I Add i t i onal Iy ,
eight disagreed w i t h the statement " We receive enough information from
top management to do our jobs we1 l ." Interviews w i t h current workers
r e f l e c t e d the survey r e s u l t s . Some workers s a i d t h a t management
problems, p a r t i c u l a r l y the frequent changes i n procedures, c o n t r i b u t e to
turnover.
AMS employees may be undergraded i n comparison t o other areas and
states - Another step DOR could take to reduce turnover would be to
increase pay and o p p o r t u n i t i e s f o r advancement for AMS employees. Both
former and current AMS employees c i t e low pay as a cause of turnover.
AMS team leaders s t a t e that workers leave because of low pay. According
to the AMS a d m i n i s t r a t o r , workers leave the section because there are
b e t t e r o p p o r t u n i t i e s elsewhere i n DOR. AMS c u r r e n t l y does not have any
supervisor p o s i t i o n s , f u r t h e r l i m i t i n g o p p o r t u n i t i e s f o r advancement.
Team leaders responsible for supervising and t r a i n i n g as many as nine
workers are c l a s s i f i e d as Taxpayer Services Technician I l l s , rather than
as supervisors. "' I n c o n t r a s t , the di rector o f CaI i f o r n i a ' s Taxpayer
1 1 ) S i m i l a r l y , i n ILS o n l y one o f the two employees r e s p o n s i b l e f o r s u p e r v i s i o n i s
graded as a Taxpayer Services Supervisor, w i t h the other graded a t the same l e v e l as
those who supervise employees i n AMS.
Services Bureau noted that he i s able to f i l l l i n e supervisory p o s i t i o n s
w i t h good workers because these supervisory p o s i t i o n s are considered good
promotional o p p o r t u n i t i e s w i t h i n the department!"
Better t r a i n i n g would improve morale and reduce turnover - Training for
newly h i red employees i n AMS i s inadequate and c o n t r i b u t e s to poor
p r o d u c t i v i t y . In our previous a u d i t we recommended that t r a i n i n g be
improved. This generally has not occurred. The t r a i n i n g and education
section a d m i n i s t r a t o r s t a t e d that approximately 95 hours of t r a i n i n g are
mandated for new workers during t h e i r f i r s t three months of employment.
She acknowledged, however, that d i f f i c u l t i e s i n scheduling classes and
pressures on workers to produce, rather than spend time on t r a i n i n g , may
reduce the amount of actual t r a i n i n g received by i n d i v i d u a l
employees.
According to the AMS Administrator, new h i r e s during the past year have
received almost no t r a i n i n g from the Training and Education Section. AMS
supervisors s t a t e that the t r a i n i n g which i s provided generally does not
occur at the time a new h i r e s t a r t s work. The bulk of the t r a i n i n g for
new employees, according to AMS supervisors, occurs on- the- job. Team
leaders r e p o r t t h a t they spend about two weeks t r a i n i n g each new worker.
However, procedural manuals used i n on- the- job t r a i n i n g may not be
complete, according to one team leader.
( ' ) AMS management has stated t h a t p o s i t i o n s i n that s e c t i o n a r e undergraded. Recent1 y,
the Department of Administration has studied t h e minimum requirements of the
Taxpayer Services Technician s e r i e s i n AMS and recommended t h a t the number of lead
workers and supervisors be i ncreased. Addi ti o n a l l y, the Department of
Administration recommended t h a t a l l c u r r e n t AMS employees be upgraded from the
e n t r y - l e v e l to the journeyman l e v e l of the c l a s s i f i c a t i o n s e r i e s , and t h a t new
employees be h i r e d a t a r a t e of 10 percent above the c u r r e n t s t a r t i n g pay. The
i n t e n t of these recommendations, according to the C l a s s i f i c a t i o n Group manager, i s
to reduce turnover, so other problems w i t h i n AMS can then be addressed. The
upgrading of the taxpayer s e r v i c e s t e c h n i c i a n s e r i e s as recommended by the
Department of Administration would b r i n g s a l a r i e s more i n 1 i n e w i t h those paid by
Colorado, C a l i f o r n i a and the I R S i n t h e i r taxpayer services areas.
A d d i t i o n a l l y , some former and current AMS employees have s t a t e d t h a t the
q u a l i t y o f t r a i n i n g they have received i s poor. Ten of the 15 former
employees who were surveyed about t h e i r reasons for leaving AMS, stated
that the q u a l i t y of t r a i n i n g was poor. Current employees have also
s t a t e d t h a t t r a i n i n g i s inadequate. By c o n t r a s t , both the IRS and
C a l i f o r n i a mandate formal classroom t r a i n i n g o f f i v e weeks and four to
f i v e weeks, respectively. Further, new h i r e s w i t h both C a l i f o r n i a and
the IRS must pass t r a i n i n g exams before they can begin work. These tests
are designed to screen out workers who would function poorly on the job.
RECOWENDATIONS
1 . DOR should improve i t s response time to taxpayer i n q u i r y
correspondence by taking steps to reduce turnover and increase
p r o d u c t i v i t y . These should include:
a. Improving AMS management through more e f f e c t i v e communication
w i t h employees and more stable and c o n s i s t e n t o p e r a t i n g
procedures,
b. Improving t r a i n i n g and adopting a formal t r a i n i n g program for
new h i r e s , and
c. Creating a career- path for AMS workers by increasing the number
of lead workers and supervisors.
2. DOR and the State Personnel O f f i c e should consider upgrading the
taxpayer services t e c h n i c i a n s e r i e s to b r i n g grade and pay levels of
these p o s i t i o n s up to the levels of those i n other DOR areas and i n
other s t a t e s ' revenue departments.
OTHER PERTINENT INFORMATION
Bingo Section
During the a u d i t we developed i n f o r m a t i o n r e l a t i n g to changes t h a t have
occurred since our l a s t a u d i t and those which are proposed for the Bingo
Sect ion.
Our previous performance a u d i t of DOR's Bingo S e c t i o n ( A u d i t o r General
Report 85- 10) recommended t h a t the Bingo Section strengthen i t s
enforcement e f f o r t s and t h a t the l e g i s l a t u r e adopt a m u l t i - t i e r e d bingo
l icensing system. Some posi t ive steps have been taken by the Bingo
Section t o improve enforcement. I n a d d i t i o n , l e g i s l a t i o n to create a
m u l t i - t i e r e d l i c e n s i n g system has been adopted.
Previous Audit Recomnendations
DOR has implemented most of the recommendations from our previous a u d i t .
We recommended that DOR strengthen enforcement of the bingo s t a t u t e s by
e l i m i n a t i n g volume discounts on bingo p l a y i n g cards, doing comprehensive
c r i m i n a l background i n v e s t i g a t i o n s of license a p p l i c a n t s , conducting
routine and i n v e s t i g a t i v e a u d i t s o f licensees, r e q u i r i n g that f i n a n c i a l
reports be completed by licensees f o r each bingo session, and conducting
routine and undercover comp l i ance v i s i t s . Table 8 ( page 42) summar i zes
the implementation s t a t u s of our 1985 a u d i t recommendations.
TABLE 8
DOR IMPLEMENTATION STATUS
OF AUDITOR GENERAL REPORT 85- 10
RECOWENDATIONS
Recornendation Status
Eliminate volume discounts Completed
Requ i re reports on each
bingo session from licensees
Conduct audits of licensees
In process ( implementat ion
delayed by m u l t i - t i e r e d l i c e n s i n g
l e g i s l a t i o n ) .
Program compl iance auditor
p o s i t i o n to conduct audits of
licensees added i n 1988
Criminal background i n v e s t i g a t i o n s DOR decided not to do
including f i n g e r p r i n t i n g f i n g e r p r i n t checks
Routine and undercover compliance Approximately 200 compliance
v i s i t s checks done annually, 50 percent
undercover.
DOR has decided against doing f i n g e r p r i n t checks of licensees, c i t i n g the
costs involved, the burden i t creates on small game licensees, and the
b e l i e f t h i s requirement could be circumvented by those operators i t i s
designed to i d e n t i f y . However, costs t o f i n g e r p r i n t are minimal,
approximately $ 15, and could be passed on to the licensee as i s done by
the Department of r a c i n g . A d m i n i s t r a t i v e c o s t s to DOR would be absorbed
as a part of the regular l icensing process. DOR could also explore ways
to l i m i t f i n g e r p r i n t i n g to larger game operators, thus a v o i d i n g a burden
on small game licensees. F i n a l l y , to prevent operators from
circumventing the f i n g e r p r i n t i n g process, DOR could i n s i s t that p r i n t s be
taken by law enforcement agencies and that proper i d e n t i f i c a t i o n be shown
before f i n g e r p r i n t i n g .
Without f i n g e r p r i n t i n g , DOR cannot conduct comprehensive background
i n v e s t i g a t i o n s on license a p p l i c a n t s . Only through f i n g e r p r i n t checks
can DOR l e g a l l y access the Arizona Criminal Justice Information System
operated by the Department of Public Safety ( DPS) and the c r i m i n a l
h i s t o r y information maintained by the Federal Bureau of I n v e s t i g a t i o n .
New L e g i s l a t i o n Makes Major Changes I n The Bingo Function
In addition to recommending stronger enforcement e f f o r t s i n our previous
r e p o r t , we also recommended that the l e g i s l a t u r e adopt a m u l t i - t i e r e d
system f o r l i c e n s i n g bingo operators. This system would focus DOR's
enforcement e f f o r t s on the l a r g e r bingo operations t h a t r e p o r t higher
gross receipts and, t h e r e f o r e , have greater o p p o r t u n i t i e s to gain from
improper use of such funds.
Senate B i l l 1055 r e c e n t l y enacted by the L e g i s l a t u r e and signed by the
Governor on May 25, 1988 established a m u l t i - t i e r e d l i c e n s i n g s t r u c t u r e
based on the recommendations from our previous r e p o r t . This l e g i s l a t i o n
changes the current system of two types of licensees to a system w i t h
three classes o f licenses, w i t h d i f f e r e n t r e p o r t i n g and tax
requirements.
In addition to i t s m u l t i - t i e r e d approach to l i c e n s i n g , the new law also
mandates that a l l bingo i n l ieu taxes and I icense fees be deposited i n
the State General Fund. Previously, DOR retained i n the Bingo
Administration Fund a1 l of the small game tax and h a l f o f the large game
tax, to cover a d m i n i s t r a t i o n o f bingo l i c e n s i n g and enforcement. The
remainder was then deposited i n the General Fund.
Organizational Placement o f the Bingo Function
The organizational placement of the bingo function remains an unresolved
issue at DOR. Placement of the Bingo S e c t i o n , b o t h i n terms of where i t
should be located w i t h i n DOR and whether i t should be moved out of DOR,
continues t o be discussed.
Since our last a u d i t i n 1985, the Bingo Section has been moved four times
w i t h i n DOR's o r g a n i z a t i o n a l s t r u c t u r e . The Bingo Section was p a r t of the
Taxpayer Services D i v i s i o n at the time of our 1985 a u d i t . In February
1986 the section was moved to the Taxation D i v i s i o n , and was t r a n s f e r r e d
to the Revenue Enforcement and Adjustment D i v i s i o n ( READ) i n July 1986.
During our current a u d i t , the Bingo Section was moved i n January 1988 to
the D i r e c t o r ' s O f f i c e and most r e c e n t l y , i n May 1988, has been added to
the newly created Taxpayer Support and Education Services D i v i s i o n .
DOR has considered s p l i t t i n g up the separate functions of the Bingo
Section, assigning each to a d i f f e r e n t DOR area. Several concerns have
been raised about the problems t h i s might create. According to the Bingo
a d m i n i s t r a t o r , the Attorney General has argued that separating the
functions of the Bingo section would jeopardize i t s status as a c r i m i n a l
j u s t i c e agency. This s t a t u s allows the section to share information w i t h
other law enforcement agencies and i s , i n the opinion of the
a d m i n i s t r a t o r , c r u c i a l to e f f e c t i v e enforcement. Further, the Bingo
administrator has stated that separating the l i c e n s i n g and i n v e s t i g a t i o n
functions would negatively impact background i n v e s t i g a t i o n s of a p p l i c a n t s .
In a d d i t i o n , the f e a s i b i I i t y of mov, ing at least the enforcement
r e s p o n s i b i l i t i e s of t h i s section to the Department of Public Safety
continues to be considered. As we reported i n our previous a u d i t , there
are precedents i n other s t a t e s f o r such a move. The administrator of the
Bingo Section has supported a t r a n s f e r of the function t o DPS, noting
that t h i s would allow use of the statewide DPS network for enforcement.
AREAS FOR FURTHER WORK
During the course of our audit we i d e n t i f i e d p o t e n t i a l issues that we
were unable to pursue because they were beyond the scope of our audit or
we lacked s u f f i c i e n t time.
Could the f i e l d c o l l e c t i o n s operations be made more e f f i c i e n t and
e f f e c t i v e ?
Both DOR management and our l i m i t e d work i n the f i e l d c o l l e c t i o n s section
indicated that management and operational improvements may be needed.
DOR management expressed concern that f i e l d c o l l e c t o r s were spending too
much time i n the o f f i c e , and not enough time i n the f i e l d and working
cases located outside the Phoenix metropolitan area. Our observations
also noted that f i e l d c o l l e c t o r s spent much time i n the o f f i c e rather
than i n the f i e l d . The Colorado Department of Revenue f i e l d c o l l e c t i o n s
supervisor s t a t e d t h a t f i e l d c o l l e c t o r s need to be i n the o f f i c e only one
or two hours per day. Management also noted that the section has
c o l l e c t e d less revenues to date t h i s f i s c a l year than l a s t f i s c a l year.
Our analysis showed f i e l d c o l l e c t i o n s revenues dropped more than 20
percent i n the period July through December 1987, as compared to the same
p e r i o d f o r the previous year.
In a d d i t i o n , our l i m i t e d analysis o f f i e l d c o l l e c t o r inventories raised
questions about case assignment s t r a t e g y . Numbers of accounts assigned
t o c o l l e c t o r s varied widely, ranging from 45 to 377 cases per c o l l e c t o r .
Because the f i e l d c o l l e c t i o n section had not yet f u l l y implemented the
automated c o l l e c t i o n s system, f i e l d c o l l e c t i o n s management i s not f u l l y
able t o t r a c k c o l l e c t o r performance and ensure that highest do1 l a r cases
are worked f i r s t . Further a u d i t work i s needed to measure and analyze
the time f i e l d c o l l e c t o r s spend i n the f i e l d , and to determine whether
management i s assigning cases properly and ensuring that the greatest
d o l l a r amounts are c o l l e c t e d .
Should DOR phone c o l l e c t o r s a l a r i e s be increased?
DOR has d i f f i c u l t y r e t a i n i n g phone c o l l e c t o r s because of low pay and lack
of promotional o p p o r t u n i t i e s . DOR phone c o l l e c t o r s a l a r i e s are low
compared to other c o l l e c t o r p o s i t i o n s i n both s t a t e and local government
agencies i n Arizona. DOR s t a r t s c o l l e c t o r s a t $ 15,364, whereas most ADOT
and a l l DES c o l l e c t o r s begin at $ 17,156. The C i t y of Phoenix c o l l e c t o r s
begin at $ 19,219. A DOR i n t e r n a l study revealed that 50 percent of the
38 phone and f i e l d c o l l e c t o r s terminating i n F i s c a l Year 1985- 86 l e f t
because of low pay or lack of career advancement. Our 1985 audit also
raised the issue of low pay and lack of career o p p o r t u n i t i e s . Further
audit work i s needed to determine the impact of lower c o l l e c t o r s a l a r i e s
and lack of a career path on turnover and p r o d u c t i v i t y .
Shou I d DOR estab l i sh mandatory increased enforcement act ions at some
p o i n t during the c o l l e c t i o n s process?
C u r r e n t l y , DOR c o l l e c t o r s may not be c o n s i s t e n t l y exercising increased
enforcement a u t h o r i t y ( l e v y i n g a taxpayer's wages or bank account or
p u t t i n g a l ien on p r o p e r t y ) . Some accounts we examined could have been
levied at several d i f f e r e n t p o i n t s according to DOR guidelines but were
not ( see Finding I l l , pages 21 through 22). Both the IRS and Colorado
have mandatory levys at c e r t a i n stages i n the c o l l e c t i o n s process. The
IRS automatically levys delinquent taxpayers who have not responded to
f i n a l b i l l i n g n o t i c e s . According to an IRS o f f i c i a l , these taxpayers who
previously ignored b i l l i n g notices are motivated by the impending levy to
contact the IRS to arrange payment i n l i e u of the levy. Colorado w i l l
i n s t i t u t e garnishment proceedings o r seize property i f a taxpayer does
not respond to c o l l e c t i o n attempts. Further audit work i s needed to
determine whether DOR's current increased enforcement actions are
adequate, and whether mandatory enforcement would increase taxpayer
w i l l i n g n e s s to arrange for payment of delinquent taxes.
Should DOR s t a f f i t s Tucson o f f i c e t o p r o v i d e s e r v i c e t o walk- in
taxpayers?
DOR has not allocated any general i n q u i r y s t a f f t o s e r v i c e walk- in
taxpayers i n i t s Tucson o f f i c e . In c o n t r a s t , the Phoenix o f f i c e has a
walk- in taxpayer o f f i c e w i t h i n the Information and L e g i s l a t i v e Services
Section. By d e f a u l t , the Tucson b i l l i n g inquiry s t a f f handle taxpayer
needs. However, according to the b i l l i n g i n q u i r y a d m i n i s t r a t o r , they
performed t h i s function i n l i e u of doing t h e i r own work, r e s u l t i n g i n an
inventory backlog i n 1987. Tucson b i l l ing i n q u i r y s t a f f had t o t r a n s f e r
approximately 2,500 taxpayer b i l l i n g i n q u i r i e s t o the Phoenix o f f i c e to
be worked. Further audit work i s needed to determine i f DOR needs
a d d i t i o n a l s t a f f i n Tucson to service walk- in taxpayers.
ARIZONA DEPARTMENT OF REVENUE
1600 WEST MONROE PHOENIX, ARIZONA 85007
ROSE MOFFORD
GOVERNOR July 26, 1988
PAUL WADDELL
ACTING DIRECTOR
Douglas R. Norton
Auditor General of Arizona
2700 North Central, Suite 700
Phoenix, Arizona 85004
Dear Mr. Norton:
We have reviewed the draft report of the performance audit of
the Department of Revenue, collection and taxpayer services
functions.
I was pleased with the recognition given for the substantial
progress made to date. It is worth mentioning that most of the
improvements, such as the automated collection system ( CACS) and
increased use of terminals were funded out of improvement made
in operations rather than budget issues.
The attached responses are offered to the findings and
recommendations in your report.
Sincerely, 3
6 4 d - 1 9 . . L
PAUL WADDELL
Acting Director
OTHER LOCATION: 402 W. CONGRESS TUCSON, ARIZONA 85701
FINDING I DOR COULD INCREASE PHONE COLLECTIONS REVENUES BY
AT LEAST $ 5 MILLION BY FURTHER IMPROVING
COLLECTION METHODS.
* Significant improvement has been made since
the 1985 audit.
* Autodialing system could increase collection
revenues by $ 5 million.
* Automated financial statement review and
extended hours could increase efficiency.
DOR is pleased that the progress made in the last three years
was recognized.
We agree there is a potential for increased productivity in our
phone collections unit with the addition of an autodialing
system. We have prepared a budget issue for such system for
inclusion in our FY 89/ 90 budget request.
We are also preparing a budget issue for the automated financial
statement capability. We will, however, study the potential of
this feature more in depth prior to the budget hearings to
verify that the estimated productivity gains will be realized.
The process requires a collector to gather more information
while on the phone, thus increasing the time spent per call.
Since much of the information requested will not be readily
available at the taxpayer's desk when we call, there is the
potential for a substantial increase in the call time. We will
have to develop a test to determine if the net result, in our
situation, increases or decreases the collector productivity.
As noted, the Department has on several occasions tested the
concept of after hours or extended hours collections. On the
surface, it is very attractive in that it also provides better
utilization of equipment. In every case when the Department
tried this approach, however, the results have been a reduction
in productivity. The Department is planning a pilot program on
extended hours utilizing new employees during the fiscal year.
FINDING I1 DOR COULD COLLECT AT LEAST $ 4 MILLION IN
ADDITIONAL REVENUES IF UNLOCATED ACCOUNTS WERE
WORKED MORE AGGRESSIVELY.
* It should devote more staff to skip tracing. * It should develop automated skip- tracing
procedures.
* It should form a skip- tracing unit.
DOR agrees that there is a potential for additional revenues if
skip- tracing is given more emphasis. As a result, we have
already consolidated activities to create a separate 9- person
skip- trace unit. We are working with ADOT to install a data
link to provide access to the MVD files, are working with the
IRS on an extract program and will be evaluating outside vendor
potential during the fiscal year.
FINDING I11 DOR STAFF NEEDS TO STRENGTHEN SUPERVISION
AND TRAINING OF COLLECTION STAFF.
* Some collectors do not meet DOR
Standards of Performance. * Supervisors should increase their review
of monitoring tools.
* Training can be strengthened.
DOR agrees that there have been substantial variances in
performance . That is due to a number of factors besides
supervision and training, however. First, the introduction of
the new automated collection system last fiscal year completely
changed how collection worked. The vendor that sold us the
software warned that typically such a change is hard on staff.
Their experience is that it takes months before the effect of
the change occurs. They also alerted us that their clients
often experience a very high turnover in staff, as many
collectors used to a manual system can't adopt to the
computerized approach. In addition, standards were developed
before we had a chance to bring the new system up and were
designed to make staff stretch to accomplish them. Finally, the
Department has had substantial difficulty recruiting quality
employees. Often we found that, as fast as we trained them,
they left for higher paying jobs elsewhere. All these factors
contribute to a wide range in performance.
DOR has recently reorganized the collection function again, to
remove the accounts receivable and taxpayer service functions.
The remaining activities that report to a single administrator
are all pure collections functions. It is believed that both the
reduction in size of the unit and purification of function will
result in improved supervision. DOA has just agreed to allow us
to hire at a higher entrance salary and create a career ladder.
These steps should allow us to improve the quality of our
recruitment program and at the same time enable us to retain our
more productive employees.
DOR has already taken steps to improve the collector training
program. We would be remiss, however, if we failed to point out
that substantial new collector training was developed and
provided in the last 18 months. With the implementation of the
CACS System, every collector received a block of 40 hours of
training. Many required additional tutorial training to become
proficient. The new program, implemented 1- 1- 88, will provide
132 hours of formal training per collector ( almost 3- 1/ 2
weeks ) . The prior program provided 79 hours of formal
training. In addition, VCR equipment has been acquired so that
more of this training can be offered on interactive workstations
as needed, rather than having to wait for enough new employees
to make up a class. That program, together with OJT planned,
will allow new employees to complete the entire training in a
12- week period. Total new training program development will be
completed by 1989. With the implementation of the " talk off"
program and other improvements made in collection training, we
feel our program will be equal to that which is utilized by the
IRS .
Finally, DOR has added a Collection Supervisor I11 position
which will be specifically dedicated to collector review and act
as the unit's Quality Assurance Officer.
FINDING IV TAXPAYER SERVICES HAS GENERALLY IMPROVED;
HOWEVER, DELINQUENT BILLING INQUIRIES ARE STILL
NOT RESOLVED IN A TIMELY MANNER.
* DOR has made substantial improvements in its
taxpayer service areas.
* Improvements need to be made to AMS to:
Improve management
Improve training
Create a career path
* Classifications for taxpayer technicians
should be reviewed for possible upgrade.
DOR is pleased that the report recognized the substantial
improvement made in the last three years. Further improvement
has been made in the last six months which has reduced response
times appreciably, and we will be reopening a walk- in office for
taxpayer assistance in Tucson.
Care must be taken when analyzing response times. While it is
true that additional training and improved turnover rates will
help, these are not the only reasons for the response time being
excessive. It was pointed out to the auditors that the biggest
factor was the size of the caseload. That is a function of the
number of inquiries and the staff size. That equation can be
affected by actions which reduce the number of inquires, change
the staffing or improve the organization. More aggressive
collection results in more inquires, for example. In June, the
Department pulled the AMS function out of the Collection area
and combined it with ILS. This move allows the idministrator of
the combined work force the flexibility to shift resources as
required, from a pool of commonly trained staff.
DOA has just agreed to raise the entry level pay and provide a
career ladder for taxpayer technicians. That, coupled with the
improved working conditions in the new DOR building, should
result in both an increase in productivity and a reduction in
turnover.
The core curriculum in training for this staff was 95 hours. It
has been increased to a 161- hour program. The remaining key
ingredient is to provide a vehicle to insure the training is
taken in a timely manner. To assist in that effort, most of the
material will be available in interactive VCR presentations so
that personnel do not have to wait for classes to become large
enough to be scheduled.
Finally, it is important to note that the turnaround time on AMS
cases has dropped substantially in the last six months. During
this period the average time from receipt to reply dropped to 69
days, and we are currently at 42 days. ( These averages were
calculated based on data compiled on every case in the AMS
inventory. )
BINGO FUNCTIONS
* The only recommendations from the previous report not
implemented was to fingerprint licensees.
DOR strongly disagrees with the recommendation to fingerprint
licensees. As part of the application, operators must include
people who will work the games. Most of these are volunteers,
and it would be an unreasonable burden to require them to be
fingerprinted each year. This is particularly so when it is
recognized that DOR has only found one person with a criminal
record who committed a crime related to bingo in the history of
bingo administration.
APPEND l X
AMS PRODUCTIVITY ANALYSIS
Examination of weekly p r o d u c t i v i t y records of AMS current s t a f f for the
past year showed t h a t workers w i t h more than s i x months experience
averaged 1 .27 hours t o complete a case, whi l e workers w i t h more than s i x
weeks b u t l e s s than s i x months experience took an average of 1.81 hours
to complete a case. F u r t h e r , we found a s t a t i s t i c a l l y s i g n i f i c a n t
d i f f e r e n c e i n p r o d u c t i v i t y between these two groups. Estimated cases per
week were computed f o r each group based on the standard of 25 hours of
casework per week. This standard was derived from AMS time data. Based
on t h i s standard, the group w i t h more tenure could respond to an average
of 19.69 i n q u i r i e s per week, while t h e l e s s experienced group could
respond to 13.81 i n q u i r i e s each week. The 5.88 d i f f e r e n c e i n the number
of i n q u i r i e s resolved means that the workers w i t h more than s i x months
tenure were 43 percent more productive than the group w i t h less than s i x
months tenure.
We used the formula below to compute the increase i n the number of
i n q u i r y r e s o l u t i o n s t h a t resulted from reduced turnover. The formula
assumes that AMS could reduce turnover to 50 percent from the current
level of 131 percent and that vacant p o s i t i o n s could be f i l l e d w i t h i n one
month. DOR management has s t a t e d t h a t the l a t t e r i s a reasonable goal.
( 8 X 19.69 X 52) Eight workers producing at an average r a t e f o r workers
w i t h tenure of s i x months or more ( 19.69 cases per week)
f o r 52 weeks
t ( 8 X 12.44 X 26) Eight new h i r e s during the year ( a r e s u l t of 50 percent
t u r n o v e r ) completing cases at the average r a t e f o r
workers w i t h less than s i x months tenure ( 12.44 cases
per week) f o r 26 weeks
t ( 8 X 19.69 X 26) The same e i g h t workers a f t e r they have reached s i x
months tenure and are producing at the average f o r
workers w i t h s i x months or more tenure
-( 34.4 X 19.69) The loss of e i g h t t o p producing p o s i t i o n s which remain
vacant f o r 4.3 weeks each.
The d i f f e r e n c e between t h i s projected number of resolved inqui r ies i f
turnover was reduced, and the actual number o f i n q u i r i e s resolved by AMS
i n 1987 ( 11,726), i s 2,467 cases. The increase i n the number of cases
resolved represents a 21 percent gain i n p r o d u c t i v i t y , and would l i k e l y
reduce the length of time taxpayers must w a i t before workers s t a r t t o
resolve t h e i r i n q u i r i e s .