Unemployment Compensation Tax –An Integrated Tax Solution

Eli CastroDeloitte Consulting LLP

Louis PanebiancoFL Dept. Of Revenue

Lorrie NugentSAP Labs

Florida Integrated TaxIn a Nutshell

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$35 Billion Taxes

$4 Billion Non-Tax Collections

962,000 Businesses

Florida Tax By the Numbers (All Taxes)

10 Million/Year 2,276 Employees

36 Offices

Taxpayers Revenue

Agency Transactions

- 4 -

Increased revenue from the SUNTAX project covers entireannual operating budget of the agency.

Non Filer Revenue

Audit Revenue

Collections

Compliance

SUNTAX Creates Value for Florida

Better Taxpayer Service

Data-based Decisions

Fast Legislative Response

Reduced Errors

Improved Accuracy

Quantitative Qualitative

UP

UP

UP

UP

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-5-

A Few Milestones in SUNTAX History

1998 2000 2002 2004 2006 2008

PackageSelection

Deloitte andSAP Join Project

CIT Tax Sales Tax

Audit Case MgtCall Center

Amnesty

Fuels Tax

Doc StampTax

Data Warehouse

SAPUpgrade

Insurance Premium

Taxes

UnemploymentCompensation

Tax

Custom Registration App

SAPInfrastructure

- 6 -

Saved $108 Million in AdminCosts

Generated $1.2 Billion inAdditional Collections

10 Year ROI = 1,100%

$1.1 Billion Return on Investment

SummarySUNTAX

Benefits to FL,In Millions

Unemployment Compensation TaxThe Last Frontier

- 8 -

UCT was last major tax outside of SAP. Tax and system wasmigrated from FL Agency for Workforce Innovation

UCT Tax Project Objectives

Integrate Improve Reduce

Gain economies ofscale by integratingUnemployment TaxFunctionality into theSUNTAX System

Improve operationalefficiency byidentifying andaddressingopportunities toenhance businessprocesses throughSAP software

Reduce duplicationto improveproductivity

Reduceadministrativeoverhead to savecosts

Reduce errors tolower cost of rework

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UCT Integration Improves Service

IntegratedWorkforce

One Point OfContact forCollections

One StopRegistration

- 10 --10-

UnemploymentCompensation

Tax

Registration and e-Services Reporting

Front End Processing Business Warehouse

Document Exam Conversion

Taxpayer Accounting Data Interfaces

Revenue Accounting Case Management

UCT Scope Similar to Other Taxes

- 11 -

New FunctionsExperience Rating

Blocked Claims

Wage Audits

Federal reports

Supported FunctionsEmployer Registration

Employer Status

Employer Locations/Addresses

Determine Filing Dates

Predecessor/Successor Tracking

UT Tax Form Validation

Identify Errors and Exceptions

Calculate Penalty and Interest

Validate Credits and Prior Payments

Create Assessments

Issue Bills/Notices of Amounts Due

Employer Accounting

Employer Account Ledger

Employer Wage Reporting Summary

Match and Post Payments

Issue Installment Plans

Process Refunds

Correct/Adjust Accounts

Post Accounts Receivable

Fund Allocation

Trust Fund Accounting

Issue Revenue Accounting Reports

Post to Statewide Accounting System

Performance Measures

Reporting

Collections

Bankruptcy….

90% of UCT Functions Fit in SUNTAX

UCT Challenges Not Everything Was A Fit

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When an Employee files forclaims on an unregisteredEmployer, quick action isrequired

In FL UCT, each taxpayerhas their own rate,determined in a 10-variableformula

Four Big UCT Challenges

Overall Federal Funding ofprogram dependent onaccurate and timelyproduction of mandatedreports

Lead Development andAudit functions have theirown, sometimes Federallymandated rules for UCT

Experience Rating Blocked Claims

Audit Reporting

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In FL UCT, Tax Rates aren’t fixed. Every employer has theirvery own rate.

The Easy View– Rates are a function of an Employer’s Wages and Charges

The Hard View– Rates are established on a 10 variable formula including both

statewide aggregates and individual account data

Experience Rating

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- 15 -

When do you allow rates to transfer between businesses?

How do you help taxpayers understand the impact oflayoffs?

Who gets to participate in special programs?

Until the SAP solution, there was one rule: The HardQuestions Go To Melvin

ER Decision Support

Despite the complexity, the math was the easypart. These decisions were harder.

- 16 -

ER Screen Supports Decision Metrics

- 17 -

A unemployment claim is blocked if the benefits system can’tlocate the wage reports from the employer

Time is critical: without assistance, people suffer– Systems need real time communication– Cases need to be established and tracked– Performance needs to be continually improved

Blocked Claims Challenge

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Blocked Claims Solution

In Old System In SUNTAX

Fax information betweenagencies

Direct portal access for bothagencies

Manual research Consolidated online research

Case tracking via stickynotes

Managed case with workflowand alerts

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The UCT Audit Process in SUNTAX

GenerateLeads Manage Cases Perform Audits

Use DataWarehouse tofind possibleAudit Cases

Use CRM tointegrate

leads withother taxes

and caseloads

Use laptopprogram to

managecases in the

field

- 20 -

Use Lead function module toselect audit cases based ondesired characteristics fromuniverse

Use data warehouse togenerate entire populationfor case selection

Audit – Generate Leads

Automatically sendcorrespondence when leadis selected for case creation

Allocate leads to servicecenters based on zip code

1: Establish Universe 2: Apply Filters and Rules

3: Distribute Leads 4: Generate Case

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SUNTAX includes an integrated CRM system, which is usedto manage Audit and other cases

UCT audits handled in thesame system as othertaxes

UCT audits conductedalongside other taxes

Printing now available localas well as batch

Audit – Manage Cases

UCT Audits now visible toall users of master data

Auditors only need toaccess a single worklist

Training costs are reduced

Upload to field audit toolsimplified

What it Does Why it Does It

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Cases downloaded from CRM to laptop application

Data synchronized on login

New data and fields added for UCT (Wage Audits)

Benefits– Reduced need for printing– Up to date information– Uniform audit reporting and files– Automated time tracking

Audit – Work Cases Untethered

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Because UCT is a Federal Program administered by thestates, accurate reporting can make a big difference onfunding.

Reports needed for point in time

Snapshot data required for periodic audit

Full financial data needed for both periodic and operationalreports

Reporting Challenge

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Reporting Solution

Data Warehouse Financial

reconciliation

CustomManagementReports

No impact ontransactionalsystem performance

More accurateFederal reports

Portal Simple online

views of reports

Access for partneragencies

Export to Excel

Native search,filter and sortcapabilities fordata

SAP Tax and Revenue Solution Closing the Tax Gap

- 26 -

Open, scalable technology

Automated workflow management

Workload balancing

Configurable business rules

Single taxpayer view across taxes

Data mining strategies for collections

Performance management

Risk-based business rule engine

SAP Tax Solution Saves States Billions

1000s of SAP Deployments

Billions in R&D Annually

Education Network

Shared Best Practices

Online registration

Online filing

Online payment

Out-of-the-box correspondence

Increased Revenue Decreased Costs

Improved Service World Wide Network

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-27-

A Few Milestones in SUNTAX History

1998 2000 2002 2004 2006 2008

PackageSelection

Deloitte andSAP Join Project

CIT Tax Sales Tax

Audit Case MgtCall Center

Amnesty

Fuels Tax

Doc StampTax

Data Warehouse

SAPUpgrade

Insurance Premium

Taxes

UnemploymentCompensation

Tax

Custom Registration App

SAPInfrastructure

- 28 -

Louis PanebiancoSUNTAX Project Managerpanebial@dor.state.fl.us

Presenters

Eli CastroDeloitte Project Manager, SUNTAXelcastro@deloitte.com

Lorrie NugentIndustry PracticeTax and Revenue Managementlorrie.nugent@sap.com