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Government DebtCollections

Ted London, Vice President, CGINovember 18, 2010

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Agenda

• Background and Context• Collections Survey Overview• Survey Results and Observations• Current Trends in Collections

Background

• Government is under significant pressure to generate additional revenues without increasing taxes

• Collection of delinquent Accounts Receivable is a viable tactic for governments to utilize

• Substantial evidence from multiple jurisdictions indicates that effective collection strategies can:• Generate a high ROI• Be launched quickly• Require little up front investment

• But…….

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Challenge: Decentralized Collections Environment in Many Governments

• No economies of scale to automate and standardize processes

• Significant legacy applications• Typical focus on providing

government services, not collecting debts

• Limited resources constrain activities – often no full-time staff

• Not a core focus of the agency – little thought or management attention

• And……

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Challenge: Balancing Expectations

Multiple stakeholder groups havedifferent – sometimes competingexpectations

• Revenue optimization• Improve customer service • Reduce cost of each collection

action • Increase customer fairness• Minimize customer intrusion• Increase voluntary compliance

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Agenda

• Background and Context• Collections Survey Overview• Survey Results and Observations• Current Trends in Collections

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NASACT and CGI Survey Research Objectives

• Gather information from the states on current debt collection strategies

• Analyze results to determine if collections improvements can be part of a solution to the current financial challenges

• Identify new and successful innovations that could be leveraged by others to increase collections

• Summarize findings and make them available to NASACT members

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Survey Methodology

• Survey sent to all NASACT members• 21 members responded between March and May of 2010• 23 questions• Both multiple-choice and open-ended questions

Budget Size

>= $50B >= $30B & < $50B >= $10B & < $30B < $10B

State CaliforniaIllinois

New YorkTexas

Georgia Massachusetts North Carolina Virginia

ColoradoKentuckyMissouriOregon

South CarolinaUtah

West Virginia

IdahoMaine

MontanaNebraska

NevadaNew Hampshire

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Key Topic Areas Explored

• Current Debt Management Strategies • Organizational Approach

• Centralized vs. Decentralized vs. Hybrid

• Current Collection Strategies and Tools

• Improvement Opportunities and New Initiatives• Effectiveness of Current Programs• Recently Completed Projects• Future Plans

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Agenda

• Background and Context• Collections Survey Overview• Survey Results and Observations• Current Trends in Collections

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Summary of Key Findings and Trends

• Most states considering collection improvements, but…• Each starting from a different level of maturity• Other priorities taking precedence

• Half of states have recently begun new collection initiatives, the other half plan to do something soon

• Significant opportunities for improvement reported• Over half believe their program effectiveness is just adequate• A majority believe significant opportunities available• A majority have plan to make program improvements

• A number report various constraints to becoming more effective (political, legal)

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Primary Approach to Manage Delinquent Debt?

• States currently use a variety of approaches to debt collection

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Have you initiated a new collection program recently?

• Almost half of the states surveyed have recently begun new programs to increase collections

• Likely based on need to increase revenues

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How effective are current collection processes?

• Most feel current processes working but can be improved

• Few believe current processes completely ineffective

(1 = Extremely Ineffective, 5 = Extremely Effective)

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Specific techniques used to collect effectively?

• Offsets (8)• Liens, levies, garnishments and license holds (if available)

(7)• Automated letters (4)• Centralized collections (2)• Collection agencies (2)• Automated Collection software• Electronic payments• Imposition of penalties and interest• Sufficient staffing

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Existing constraints?

• Insufficient AR data (2)• No central collections (2)• Insufficient legal authorities (2)• Too many accounts without sufficient staff• Third-party collection agencies• Benefit overpayments are very hard to collect once

issued• Too many manual processes

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Are there additional opportunities to increase collections?

• Most states believe that there are opportunities to increase revenues

• This is despite recognition of impediments to moving forward

• Legislation• Funding• Resources

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Plan to initiate new collection programs?

• Most states plan to move forward with new collection programs

• Clear vision for the opportunity and need

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What about centralized collections?

• Most states perform collections in ade-centralized fashion

• States are beginning to think about this as a model to reduce costs and increase revenues

• May require legislation and other (possibly new) resources

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Agenda

• Background and Context• Collections Survey Overview• Survey Results and Observations• Current Trends in Collections

Current Trends in Accounts Receivable Management

• Consolidation of Information• Support for complex case-debt-debtor merging and

cross referencing• Consolidated taxpayer view of all debts• Automated skip tracing

• Decision Analytics and Workflow• Use of data warehouse and decision analytics for

collections risk modeling and case treatment• Automated identification and prioritization of collection

cases based on risk

• Assets and Involuntary Collections• Automated asset gathering• Automation of involuntary collection actions• Pursuit of responsible officers for business liabilities• License holds or suspensions for debtors

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Current Trends in Accounts Receivable Management

• Business Processes• Combining strong customer service with robust

compliance processes• Increased usage of phone collections instead of field

actions• More sophisticated usage of private collection

agencies (PCA)• Pursuit of cases earlier in the lifecycle

• Payment and Self-Service• Increased Payment Options• Taxpayer self-service

• Technology Solutions• Usage of mature collections case management

systems• Usage of sophisticated call centers and technology

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Tools

Data gatheringBankWageSkip Tracing

Automated interfacesCase consolidationDebts and debtor informationOffsets

Case management Automated treatment paths Automated collection actions Automated correspondence Third-party assignments

as needed

Cashiering/Accounting

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Good News: Significant Collections Opportunities Likely Available

• A focused, directed, centralized function can likely achieve a 10-35% increase in delinquent receivables

• Automate data gathering for good addresses, phone numbers

• Provide authority to execute levies, garnishments and liens

• Consolidate debts from multiple departments• Utilize statistical modeling to prioritize cases

• Governments could likely collect millions in additional revenues per year

• Local debt collection could be supported as well

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What does this mean for you?

• There are a number of ways to delivered enhanced collections for your jurisdiction

• Many of your colleagues have started – get good ideas from them

• While some approaches require (or are enhanced) by legislation and resources, many do not

• Through technology automation or business process changes, government can quickly realize significant increases in revenue

• Centralization of data and processes can provide significant economies of scale

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What does your Improvement List Look Like?

• How will you respond if asked to support closing a budget shortfall?

• Possible Options• Expand Existing Programs • Address Specific Operational Problems• Or you can view this as a Broader opportunity

• Look for ways to develop your list through an operational review

One way to get started:Collections Debt AnalysisWhat is it? Review of debt collection practices at a number of

agencies Review to include:

- Tools in use- Operational statistics- Statutory impediments

Assimilates the information and compares to best practice catalog

Results Estimate for level and timing of revenue increases Identify opportunities and issues Prioritize debt types for implementation

Length Typically 1-3 days/debt type

Key Success Factor

Requires buy-in from agencies or mandate to participate

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Contact Information

About the Presenter• 17 Years with CGI exclusively

working with state, federal and local tax agencies

• Leader of CGI’s Global Tax, Revenue and Collections Practice

• Experience with more than 20 different tax agencies

• Experience with enhancing collections, audit and tax accounting systems and business processes

• Oversees estimation and measurement for CGI’s benefits funded tax projects

Ted LondonVice PresidentTax, Revenue andCollections Solutions

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

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