RD33 - Partnerhsip Project Update


Executive Summary:
INTRODUCTION

A 1993 study completed by the Joint Legislative Audit and Review Commission recommended that the Department of Taxation (TAX) replace its State Tax Accounting and Reporting System (STARS), the primary hardware and software supporting the Commonwealth's revenue system. TAX entered into a Partnership agreement with American Management Systems, Inc. (AMS), an international consulting company based in Fairfax, Virginia, that will not only replace the aging STARS systems, but will completely reengineer operations at the department.

Section 58.1-202.2, Code of Virginia authorizes the Tax Commissioner to enter into public-private partnership contracts to finance agency technology needs. Any such contract must be funded from increased tax revenue attributable to the successful implementation of new technology delivered under the contract. This section further calls upon the Commissioner to prepare an annual report to the Governor and the General Assembly "on all agreements under this section, describing each technology program, its progress, revenue impact, and such other information as may be relevant."

THE PUBLIC - PRIVATE PARTNERSHIP WITH AMS

A contract between TAX and AMS was signed in July 1998, in the amount of $122.9 million plus interest. This is the only agreement TAX has executed under the provisions of Section 58.1-202.2, except for successive amendments to the original agreement.

Initially, AMS finances the hardware, software, and services it provides. As results are achieved, TAX pays AMS from incremental tax revenues generated by the effort. The cost of the project is not supported by the Commonwealth's general operating budget. New tax revenue resulting from state-of-the-art case management techniques, better audit productivity and selection, enhanced discovery capabilities, and streamlined collection processes pay for the project. At the same time, use of these tools reduces the incidence of false positives in the selection of audit candidates, thereby freeing compliant taxpayers from the burden of unnecessary inquiries and needless audits.

Taxpayers benefit further by gaining access to new services and an enhanced service orientation, while TAX dramatically improves its operational effectiveness. State-of-the-art information systems provide TAX's customer service representatives with immediate electronic access to returns, taxpayer correspondence, payment history, and tax laws and regulations to answer customer inquiries about their accounts and filing obligations with dispatch. Individual and business taxpayers use a variety of secure, technology-based tools that simplify how and when they interact with TAX. By leveraging advancements in computing, imaging, and telephone technologies, taxpayers more easily file and pay their taxes, while TAX accelerates the issuance of refunds and the processing of returns.

TAX and AMS are combining a variety of best practices drawn from industry successes with the latest technological tools. "Placing the customer first in everything we do" is the underlying theme in the projects TAX is undertaking now and in the future. One key objective is to create a dynamic environment for taxpayers to understand tax requirements clearly and to file and pay in a timely, efficient, and convenient manner.

Partnership initiatives include reengineering all processes and replacing the entire technology platform, including the latest network infrastructure and Web-based technologies that link individual taxpayers, businesses, and employees who may be located in the central office, a district office, or working from their homes. Taxpayers are able to file returns electronically (gaining electronic access to account information, tax rulings, and regulations). Customers also benefit from access to customer service representatives who, in turn, have faster access to information pertinent to their inquiries. By using case management and Customer Relationship Management (CRM) tools, TAX ensures the prompt handling of cases, eliminates misplaced or misrouted paper, and reduces correspondence backlogs.

TAX's antiquated data entry equipment and huge paper warehouse are being replaced with modem Optical Character Recognition/Intelligent Character Recognition (OCR/ICR) technology. OCR/ICR captures and retrieves data and images and eliminates paper storage of returns and correspondence. The project will also replace TAX's automated accounts management system (STARS) with a new Integrated Revenue Management System (IRMS) which is easier to modify and adapt to constantly changing legislation and processing needs.

This 2003 Partnership Project Update Report for the Governor and General Assembly contains a complete description of the projects completed during the Partnership, including those activities from the first four years as described in earlier reports. In addition, for the first time, this report includes a section devoted to describing the incremental changes in services and operational efficiencies that have been achieved as a result of the initiatives implemented by the Partnership. These improvements have been recognized a full year or more ahead of the conclusion of the Partnership contract, and are described in the section titled "Operational Success."