Office of the Chief Financial Officer
Executive Summary for In Progress Reports
As of November 30, 2012
10-2-26-OTR, Audit of Internal Controls Over Undelivered Mail and Address Change Processes at the Office of Tax and Revenue (OTR), dated January 3, 2012.
Issues: Medium risk classification, resulting in appropriate priority status in TSG queue. In addition, other non-IT issues have been delayed due to management turnover, which has been resolved. Resource availability continues to be an issue for both working existing returned mail as well as finding additional solutions to reduce volume.
Chief Risk Officer’s Risk Assessment
Financial risk associated with the large volume of undelivered mail has been assessed as Medium risk. Given the scarcity of resources, other items have been given higher implementation priority. A root cause analysis performed by OTR’s Chief Operating Officer revealed the primary source for this situation is residential property owners/taxpayers who do not occupy properties they own in the District. In response, an effort was undertaken to end the practice of sending mail to renters where the taxes are paid by the mortgage company. This effort reduced undelivered mail in the Real Property portfolio (representing 70% of all undelivered mail) from 10% to 5.9%. Systematic changes in the non-real property portfolio have reduced undelivered mail, as well. OTR continues to leverage the IRS’ Taxpayer Address Tackler (TAR) file and the USPS’ Code One address database. However, all of OIO recommendations were considered.
Overview of Recommendations
Eleven recommendations were provided. Three have currently been implemented. Recommendations completed to strengthen existing internal controls included the following:
- A root cause analysis associated with the systemic application of the hierarchical tables was performed. It was determined that the hierarchical table is not a root cause for the volume of undelivered mail.
- The Compliance Administration has been providing training for selecting “best known” addresses when mailing manual certified mail and notices. Real Property Tax Administration (RPTA) also established a process for determining and confirming “best known” addresses. Both OTR and Wells Fargo, the lockbox vendor, send all addresses through Code One, a USPS tool to help identify best addresses. The non-real property portfolio also leverages the IRS’ TAR file.
- Performed a detailed, comprehensive review of all Integrated Tax System (ITS) User Classes to remove an employee’s ability to both adjust and approve refunds within an account. Going forward, a quarterly review of this security will ensure the integrity of the User Classes.
Seven of the recommendations are classified as In Progress. Three of these are in the Technology Services Group (TSG) prioritization queue. Across the OCFO, and especially OTR, there are a variety of technology needs. TSG has a bi-weekly meeting to prioritize OTR’s needs. The meeting is attended by the OTR Board of Directors, as well as the Office of the Chief Risk Officer (OCRO) and the Office of the Chief Information Officer (OCIO).
- A cumulative report will be done to facilitate review of items that have been suppressed for a period of time. (In this context, ‘suppressed’ means…….) The administrations will then review mail suppressions on a quarterly basis to determine whether the AR is still collectible, and to remove those suppressions that should be removed. TSG has prioritized the Suppressions Report for delivery 1st quarter 2013. It should be noted that the audit work performed by OIO “revealed the validity of the mail return suppressions and the bona fide existence and collectability of the related accounts receivable are in doubt as they are old and may have been overtaken by recent events.” This suggests minimal financial risk associated with suppressions.
- The OTR senior management was provided with a prototype report of taxpayers with blank address fields. Preliminary results determined that the number of items made the report of limited use. Additional work is being done to enhance the report. A new delivery date is being determined.
- TSG is determining the level of effort (LOE) associated with amending ITS taxpayers’ address fields manual "related party update" program so that "blanks" are not allowed, unless it is specifically end-dated, suppressed, and explained. LOE will be provided by 12/31/2012.
Four recommendations require new processes and companion procedures.
- Both the Compliance Administration (CA) and the Real Property Tax Administration (RPTA) maintain tracking logs and sample returned mail to determine cause. The Customer Service Administration is in the processing of developing logs and will implement by 12/31/2012.
- Once TSG (working closely with its business partners) has finished developing the blank field report, the OTR will review the report to (a) determine whether those taxpayer address fields should be blank or perform the necessary corrections, and (b) conduct training classes for those OTR employees who are consistently updating taxpayers related party fields to blank. A new due date will be determined once a useable report is delivered.
- The TAR exception reports are made available through the OCFO public folders. The TAR process was executed in CY12 on 2/20/12 and 8/09/12. Procedures are being developed to use the TAR exception report to evaluate addresses. Procedures will be completed 1st quarter calendar 2013.
- The CA currently performs quality control using trending and sampling on returned collection and/or audit notices to ensure that 'best known' addresses are used for future mailings to those taxpayers who have special addresses that are not designed into the ITS mailing program logic. RPTA and CSA are developing a like process to be completed by 12/31/2012.
OTR will not be implementing the recommendation to improve ITS data integrity associated with multiple profile accounts because its computer system is being replaced.Prior to conversion to the new system, multiple profile accounts will be cleaned up as part of the overall conversion project. The system will continue to create multiple profiles to avoid congestion to the review queue causing a dilutive effect on the primary purpose of review items.The system's algorithm for assigning new profiles does allow the user to identify connected multiple profiles.
To view the full report, go to: Undelivered Mail and Address Change Processes Final Report