_experience the commitment TM

August, 2011

Fast Track Collection Initiatives –A Strategy to Fund Modernization at North Carolina’s Department of RevenueTed London, Vice President, CGI

Confidential – CGI Proprietary – August 2011

Agenda

Guiding Principles

Fast Tracked Collection Initiatives

Results

Ongoing Improvement Projects

Predictive Analytics

Collections Case Management

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1. Cost effective treatment streams

2. Be easy to do business with

3. Maximize data and information available about debtors

4. Effective goal setting and management reporting

Guiding Principles - 4 Keys to Success

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Why Implement Changes Now?

A method of funding TIMS Project− Multi-year project to update NCDOR’s computer systems

and technical infrastructure Typical Project Funding Approaches

− Appropriations Traditional method

− Fees Fees for “services” Fee assessed at point in collection process

− Benefits based funding Typically used for large IT projects

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The “Fast Tracked 5”

Returned Mail Automation Automated Attachment Process Write-off Review and Reversal Vendor Attachment Collection Case Management and Decision

Analytics

Over $72 Million in benefits to date (includes July, 2011)

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Returned Mail Automation

14,000 notices worth $20 million in potential revenue were suppressed because they were returned by the USPS with incorrect addresses

Research was manual, time consuming and expensive

Partnered with LexisNexis to secure better addresses

After automated skip tracing, all resolved cases were released for collection action

Implemented May, 2010 Gross Benefits: $5.5 Million

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Automated Attachment Process

NC’s Statutes (NCGS 105-242) gives NCDOR administrative authority to attach and garnish wages, bank accounts and other intangible property

In All of CY 2009, the entire Department issued 190K attachments and garnishments (A&G’s)

Between implementation in Sept 2010 and June 30, 2011, the AA Process alone issued 355K A&G’s

Priority Process

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Automated Attachment Process

Implemented August 2010 Stats

− Moved 1.15 Million cases (value over $1.8B) through the process

− Issued 90,727 bank garnishments− Issued 265,046 wage garnishments

Gross Benefits: $32.4 Million

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Write-off Review and Reversal Process

Continuous review of accounts previously deemed uncollectible and written off using AA process

Allows more aggressive write-off program Implemented October 2010

− 95,608 taxpayers reviewed− 9,341 bank garnishments− 32,531 wage garnishments

Gross Benefits: $9.4 Million

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Vendor Attachment Process

Joint project between NCDOR and the NC Office of State Controller− Most agencies process vendor payments using the

Controller's North Carolina Accounting System (NCAS) − Nightly process matches NCAS payments with tax debts

and offsets any payments − Additional non-NCAS agencies to be added as a part of

TIMS project Implemented November 2011 Gross Benefits: $2.6 Million

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Collection Assistance Fee Year over Year

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$-

$500,000.00

$1,000,000.00

$1,500,000.00

$2,000,000.00

$2,500,000.00

$3,000,000.00

$3,500,000.00

$4,000,000.00

Fiscal Year 2001-02

Fiscal Year 2002-03

Fiscal Year 2003-04

Fiscal Year 2004-05

Fiscal Year 2005-06

Fiscal Year 2006-07

Fiscal Year 2007-08

Fiscal Year 2008-09

Fiscal Year 2009-10

Fiscal Year 2010-2011

Lessons Learned

1. Gain executive support before starting project2. Form a cohesive team (partnership) of the best

people you can find … State staff and contractor staff should be indistinguishable

3. Full involvement by sponsor with a willingness to make take risks and make quick decisions

4. Balance implementation speed with “quality” of product

− Don’t get too hung-up on “what-if’s”− Use exception reports to handle 80/20 decisions

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Projects In Progress

CACS-G (and total TIMS) Implementation 2010 Legislative Projects - Budget Bill (SB 897)

(Section 31.8 – Page 181)− FIRM (Financial Institutions Records Match) (in-progress

year end implementation) − E-Garnishment (pilot in-progress)− Expanded state refund offsets (in-progress)− Vendor Offset (in-progress)− Failure to Pay Penalty (completed)

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Decision Analytics – A Quick Primer Analyzing Information to

indentify patterns that will predict future outcomes

Translates this analysis into actionable “scores”

Uses scores to determine risk and predict behavior Expert ModelsEmpirical Models

Applies business rules based upon the scores to obtain better results

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Why you can’t Judge the Accounts Receivable Book by its Cover Determining strategies based upon

dollar balances is a risky business− Many key factors:

− Age of Debt(s)− Number of times in collections− Type of debt

What you need are models to predict the best collection strategy− Likelihood of voluntary payment− Estimated yield from the case− Likelihood of non-payment

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Using Decision Analytics to enhance collections

While a case may have a legal obligation to pay, the likelihood of payment may be low

Most organizations have more cases than staff to work them

Agencies need to determine− How long to stay in an automated

cycle

− How quickly to accelerate cases to stronger actions

− When to assign write-off18

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Collections Scoring in North Carolina(Workflow)

Development of models to determine the likelihood of self-compliance

Support for both failure-to-pay and failure-to-file Prioritization of cases based on risk of non-

compliance Workflow engine to support treatment streams Collection of data to

gauge the effectivenessof the models andtreatment Streams

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Collections Scoring in North Carolina(Other Collection Decisions)

Imbed risk scoring and decision analytics into various processes:− Write off identification

− Determine when the case is cost effective to pursue− Legal Action Determination

− Use risk to determine how to prioritize various actions− Payment plans

− Time to pay based on likelihood of default

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Collections Case Management

North Carolina decided to enhance their collections operations with a significantly enhanced collections tool (CACS®-G)− Merging of tax types into unified cases− Automated table-driven workflow− Enhanced workflow support for treatment streams− Automated involuntary collection actions− Enhanced payment agreement support− Enhanced management reporting

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Case creation

New case structure consolidates all tax types into a single case

CACS-G database structure allows for significant flexibility in the definition of a case− Case is the key unit of work− Multiple debt types linked to a single case

Allows creation of cases prior to delinquency to support creation of a payment plan earlier in the collection process

Decision scores for cases used to prioritize and route cases within the application

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Automated table-driven workflow

Goal: allow for power to create enhanced strategies, with the ease of changing rules by business users− Leverages a rule base for movement of cases− Allows workflow routing based on any case attribute− Allows for both primary and five secondary work queues

On-line table settings allow authorized business staff to adjust workflow and treatment streams without programmer support

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Involuntary Collection Support

Capture of bank and employer information through interfaces

Support for system initiated liens, levies and garnishments

Integrates Legal Actions with correspondence

Captures history, demographic, and debt information

Monitors for new asset sources (even after the account is written off) for new opportunities

Prioritizes levy sources24

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Payment Agreement Support

Electronic Funds Transfers (EFT) - Facilitates the initiation of an EFT associated with a payment plan− Integrates with payment plans for better monitoring − Supports the entire EFT life cycle from pre-note

processing to final and balloon payments− Supports resending failed requests

Supports self-service paymentagreements over the Internet

Uses risk score to determine validpayment plans

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Other capabilities

Enhanced management reporting− Inventory statistics− Collector Performance statistics− Workflow and risk model

effectiveness reports Portable Case Management

to support field user

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CGI Experience helping Government improve tax operations

• Integrated Tax Systems• Implemented numerous

successful tax processing systems and data warehouses for tax agencies

• Collection Enhancements• Automated collection tools• Taxes, court fines, child

support, student loans, motor vehicles

• Business process improvements

• Statistical Models• CGI has a proven process,

and is willing to be paid only out of increase in revenues

Internal Revenue Service

Grand TotalOver $1.7 Billion

Missouri$55 Million

Canada Revenue Agency

Benefits Funded Collections projects

Australian TaxOffice

Other Collections projects

Other Tax and Revenue Projects

New York City

North Carolina$72 Million

Virginia$231 Million

California$570 Million$176 Million$41 Million$37 Million

Kansas$182 Million

Hawaii$252 Million$133 Million

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Contact Information

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Charlie HelmsDirectorTax Compliance Collection DivisionNC Department of Revenue

(919) 733-3510charlie.helms@dornc.com

Ted LondonVice PresidentTax, Revenue and Collections Solutions

(916) 284-7277ted.london@cgi.com

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