U.S. Dept. of Labor’s Tax Performance System TPS Reviewer Training

Let’s begin with an Overview Welcome to TPS Welcome to TPS Overview of TPS Scope of Training: Overview of TPS Federal Oversight Federal Oversight Programs Design of TPS Computed Measures Systems Review of State’s Internal Controls Sampling of Tax’s Outputs Assessing Quality Reporting Data End - links Federal Oversight Design of TPS Quality Assess. Report Data End Let’s begin with an Overview

Overview Welcome to TPS Overview of TPS Federal Oversight TPS is a performance management tool for States and the Federal government. TPS Handbook 407 provides a set of instructions for evaluating quality of State UI tax operations. Design of TPS Quality Assess. Reports Data End How does this work?

Overview Cont. Welcome to TPS Overview of TPS Federal Oversight You examine and evaluate your State’s UI tax system and TPS is your tool. Identify any problem areas: Weaknesses in State’s system of internal controls Samples of each tax function’s outputs to check for accuracy Report this data into web-based system once each year “SUN System”. Work with State and Regional partners to improve tax operation. Design of TPS Quality Assess. Report Data End

Overview Cont. What is the Federal role? Welcome to TPS Overview of TPS Federal Oversight What is the Federal role? Monitor States’ UI tax systems If problems are discovered, the Regional office works with the State to propose solutions. Receive a “State Quality Service Plan” for any improvements necessary. If Corrective Action is needed, monitor to ensure agreed-upon actions are taken. Design of TPS Quality Assess. Report Data End “Inspect what you expect”

Overview Cont. Ensure TPS is in place and operating as intended Welcome to TPS Overview of TPS Federal Oversight Ensure TPS is in place and operating as intended Once every four years, neighboring States and Region examine a State’s most recent CY TPS findings. “Federal Team Reviews” are organized and conducted by Regional staff. Team Reviews promote consistency in application of TPS between States. Team Reviews facilitate exchange of information and best UI tax practices between States. Ensures integrity of the TPS program. Design of TPS Quality Assess. Report Data End

Overview Cont. Welcome to TPS Overview of TPS Federal Oversight Design of TPS Report to Congress via Government Performance and Results Act (GPRA) Long term, five year plans For UI Tax, GPRA reports on the timeliness of new employer status determinations. Example: By 2012, at least 86.7% of new employer status determinations should be completed by the end of the quarter in which the employer became liable. Quality Assess. Report Data End Now, for more details on Federal oversight.

Federal Oversight Welcome to TPS Overview of TPS Federal Oversight Design of TPS The US DOL’s oversight system for UI tax, UI benefits and the validation of UI data is called “UI Performs”. Quality Assess. Report Data End TPS BAM BTQ DV

Federal Oversight Cont. Welcome to TPS Overview of TPS Federal Oversight Several years’ of discussions with States and DOL resulted in “UI Performs”. State performance is measured by TPS, Benefit Accuracy Measure (BAM), Benefit Timeliness & Quality (BTQ), and Data Validation (DV). TPS is an examination of State tax operations using two aspects of performance: Timeliness and Quality. BAM is a statistical survey to determine the accuracy of paid and denied UI claims. BTQ is a quality review that provides an assessment of the adequacy of the State’s fact finding application of law, policy and written nonmonetary determinations. DV verifies the validity of the reports which are used for assessing performance of the State’s UI program. Design of TPS Quality Assess. Report Data End

Federal Oversight Cont. Welcome to TPS Overview of TPS Federal Oversight The Department has added emphasis on certain performance measures: “Core Measures”. Core Measures have been assigned certain “Acceptable Levels of Performance” (ALP). If scores fall below these levels, corrective action may be necessary. Note this is separate from the GPRA measures reported to Congress. Design of TPS Quality Assess. Report Data End

Federal Oversight Cont. Welcome to TPS Overview of TPS UI Tax Core Measures Timeliness 70% or more new employer status determinations must be made timely. Quality Less than four out of the thirteen tax functions sampled can fail. Quality Over Time No tax function can continue to fail for three successive years. Federal Oversight Design of TPS Quality Assess. Report Data End Fail Pass

Federal Oversight Cont. Welcome to TPS Overview of TPS Federal Oversight Core Measures of UI Tax Design of TPS Quality Assess. Tax Timeliness Tax Quality Computed Measure Passes? At least 70% of determinations made within 90 days Samples Pass? Three or less fail out of 13 samples Samples Pass Over Time? A sample can not fail 3 successive years Report Data End

Federal Oversight Cont. Failure to conduct one or more TPS sample reviews also results in the need for corrective action (unless the universe is too small to sample or a temporary Federal waiver has been granted). Corrective Action Plans may be necessary if TPS is not conducted according to Federal guidelines as noted in TPS Handbook 407.

Federal Oversight Cont. Welcome to TPS Federal Oversight Cont. Overview of TPS Federal Oversight The flow of TPS data: TPS Reviewer Design of TPS State Administrator Quality Assess. Report Data Federal Oversight Regional Office National Office End Congress Next, more detail on the design of TPS.

Let’s look at this step by step. Welcome to TPS Design of TPS Overview of TPS Federal Oversight To measure tax performance, TPS examines the States’ major tax functions. Two different methodologies used: Computed Measures Program Reviews Systems Reviews Sampling At the end of each year, TPS findings and any recommendations are submitted. Design of TPS Quality Assess, Report Data End Let’s look at this step by step.

TAX FUNCTIONS EXAMINED Design of TPS Cont. Welcome to TPS Overview of TPS Federal Oversight TAX FUNCTIONS EXAMINED STATUS DETERMINATION New Determinations Successor Determinations Inactivation's/ Terminations CASHIERING REPORT DELINQUENCY COLLECTIONS FIELD AUDIT ACCOUNT MAINTENANCE Report Processing Debits/Bills contributory Debits/Bills reimbursing Credits/Refunds Benefit Charging Experience Rating Design of TPS Every calendar year, TPS evaluates the timeliness and quality of State tax operations. The TPS reviewer examines 13 major tax functions once per CY. Experience Rating is only once every four years – see 407 Handbook for details. 1 Quality Assess. 2 3 4 Report Data 5 End 6 7 8 9 10 11 12 13

Design of TPS Cont. Several methodologies are used: Computed Measures Welcome to TPS Design of TPS Cont. Overview of TPS Federal Oversight Several methodologies are used: Computed Measures Program Reviews Systems Reviews Sampling Design of TPS Quality Assess. Report Data End Next, we will discuss Computed Measures.

Design of TPS Cont. Computed Measures Component Welcome to TPS Overview of TPS Federal Oversight TAX FUNCTIONS EXAMINED STATUS DETERMINATION -New determinations within 90 days -New determinations within 180 days -Successor determinations within 90 days -Successor determinations within 180 days CASHIERING -N/A REPORT DELINQUENCY -Timely reports - Reports secured within 90 days -Reports sec. or resolved within 180 days COLLECTIONS -Timely payments -Uncollectible -Accounts receivable FIELD AUDIT -Change in total wages -Contributory employers audited - Total wages audited (annualized) ACCOUNT MAINTENANCE Design of TPS COMPUTED MEASURES Quality Assess. Report Data End

Design of TPS Cont. Computed Measures Welcome to TPS Overview of TPS Federal Oversight Computed Measures We rely on existing reports that each State automatically submits every quarter. Data are then computed and show performance in terms of: Timeliness (Ex: percent of timely determinations) Numbers (Ex: percent of debt declared un-collectable, percent of employers audited) Data Validation program, under the UI Performs umbrella, ensures Federal definitions are used. Design of TPS Quality Assess. Report Data End

Design of TPS Cont. Computed Measures Welcome to TPS Overview of TPS Federal Oversight Computed Measures TPS reviewers have access to automated, “Computed Measures” data via the following link: www.ows.doleta.gov/unemploy/tps.asp. Note that the SUN system also provides State-specific data. This will be discussed during “Reporting Data”. Design of TPS Quality Assess. Report Data End

Design of TPS Cont. Welcome to TPS Overview of TPS Federal Oversight Computed Measures At the end of the calendar year when evaluating the tax system, the Computed Measures should be factored into the mix. This will be demonstrated later in the presentation. Also, see examples of Computed Measures in Annual Reports in the Links page at the end of this tutorial. In addition to the Computed Measures’ data, on tax timeliness, information about tax quality is needed. Next, we will discuss TPS’ Program Reviews. Design of TPS Quality Assess. Report Data End

Design of TPS Cont. Program Reviews Welcome to TPS Overview of TPS Federal Oversight TAX FUNCTIONS EXAMINED Systems Reviews Examination of Internal controls which ensure: Samples To confirm that internal controls are working - examination of: STATUS DETERMINATION -Accuracy of new determinations -Accuracy of successor determins -Accuracy of inactive determinations -New determinations -Successor determinations -Inactive determinations CASHIERING Timeliness of remittance processing Employer remittances REPORT DELINQUENCY Accurate id of delinquent employers Take actions to secure/resolve rpt del Accounts w/ delinquent reports COLLECTIONS -Take actions to manage acts recv -Accounts receivable FIELD AUDIT -Ensure audits meet requirements -Completed audits ACCOUNT MAINTNANCE -Accuracy of contrib.rpt processing -Accuracy of billings -Accuracy of credits/refunds -Accuracy of benefit charging -Accuracy of experience rating -Active contributory accounts -Contrib./reimb. Accounts receivable -Accounts payable credits/refunds -Accounts due benefit charges -Employer experience ratings Program Review Design of TPS Quality Assess. Report Data End

Design of TPS Cont. Program Reviews Welcome to TPS Design of TPS Cont. Program Reviews Overview of TPS Federal Oversight Design of TPS Program Reviews provide context – a look at the UI tax system as a whole Program Reviews consist of: Systems Reviews Sampling Quality Assess. Report Data End

Design of TPS Cont. Program Reviews: Systems Reviews Welcome to TPS Overview of TPS Federal Oversight Systems Reviews are conducted once every four years unless the State has made system changes or problems have been discovered. They are the most time-consuming of TPS activities For each tax function, TPS conducts a thorough examination of the function’s Internal Controls & Quality Assurance systems. These controls are supposed to be in place, working together to ensure that the tax operation is producing accurate outputs. If controls are missing, the tax function is deemed to be “at risk”. Design of TPS Quality Assess. Report Data End

Design of TPS Cont. Program Reviews: Systems Reviews Welcome to TPS Overview of TPS Federal Oversight Major Internal Controls: Design of TPS Handbooks For instance, does the status function have adequate and up-to-date handbooks and recorded instructions for staff to do its job? Training Does the collections unit provide training on the collections tools available to them? Quality Assess. Report Data End

Design of TPS Cont. Program Reviews: Systems Reviews Welcome to TPS Overview of TPS Federal Oversight Major Internal Controls: Design of TPS Supervisory Review Is the completed work of the Refunds/Credit staff subject to review by supervisors or others from time to time? Audit Trail Are field auditors required to examine employer source documents when examining payroll records and do the auditors provide documentation that this has been done? Quality Assess. Report Data End

Design of TPS Cont. Program Reviews: Systems Reviews Welcome to TPS Overview of TPS Federal Oversight Major Internal Controls: Authorized Individuals Does the State’s cashiering operation only allow certain individuals access to employer remittances? Checks & Balances Does the report delinquency unit have tracking systems to follow up when employers promise to submit delinquent reports? Design of TPS Quality Assess. Report Data End After a review of each tax function controls, small samples are examined.

Design of TPS Cont. Program Reviews: Sampling Welcome to TPS Overview of TPS Federal Oversight Small Samples reviewed 1 x year, to ensure internal controls are working as intended. Reviews examine the work each tax unit did during the CY under review. State IT unit should be building the universe from which each sample will be selected. At specific times during the year, samples should be automatically extracted for review. Design of TPS Quality Assess. Report Data End

Design of TPS Cont. Program Reviews: Sampling Welcome to TPS Overview of TPS Federal Oversight Design of TPS Each of the tax functions’ universes should have 60 samples extracted (Exception of Cashiering). TPS reviewer should ensure that this is taking place! Out of 60, if 3 or more cases fail, the tax function does not have “reasonable assurance of quality”. With such a small sample, it is a rough guide (just a warning flag). If there is disagreement about the sample’s findings A second sample can be extracted. If an actual error rate is needed– see Handbook 407 on Expanded Sample. Quality Assess. Report Data End

Design of TPS Cont. Program Reviews: Sampling Welcome to TPS Overview of TPS Federal Oversight A Quick Run Through: Status Determinations All new, successor and inactivation determinations that have been made during the CY. Examine 60 each for accuracy. Cashiering Employer checks sent for the 2nd q of CY. Sample 500 checks for timeliness of deposit. Report Delinquency Employers whose 1st q reports are delinquent. Examine 60 a few months later for actions taken. Design of TPS Quality Assess. Report Data End

Design of TPS Cont. Program Reviews: Sampling Welcome to TPS Overview of TPS Federal Oversight A Quick Run Through Cont. : Collections A one-day snapshot of active receivables. Review 60 a few months later for collections actions taken. Field Audits All audits completed 1, 2 and 3rd q of CY. Review 60 for adherence to auditing requirements. Account Maintenance Contribution Reports A one day snapshot of active employers for the 1st q. Review 60 at the end of the quarter for accuracy in processing. Design of TPS Quality Assess. Report Data End

Design of TPS Cont. Program Reviews: Sampling Welcome to TPS Overview of TPS Federal Oversight A Quick Run Through Cont. : Debits/Bills Select one quarter and identify all contributing & reimbursing employers who owe money. Look at 60 contributions and 60 reimbursements - were the debits/bills processed correctly? Credits/Refunds Select one quarter and identify employers who are owed money. Look at 60 - were the credits or refunds established properly? Benefit Charges Identify all employers who have been charged for UI benefits. Review 60 charges to ensure accuracy. Experience Ratings Identify employers who are to receive experience rate notices. Examine 60 employer accounts to confirm accuracy of rates. Design of TPS Quality Assess. Report Data End

Quality Assessment Welcome to TPS Overview of TPS Federal Oversight Design of TPS Each sample will either pass a quality review or fail. There should be a correlation between a sample that passes and “no risk”, found in that tax function’s set of internal controls. Ex: Benefit Charge unit has controls in place = sample passes. If a sample fails, it could be related to problems (“risks”) in the tax function controls. Ex: Status unit has outdated manuals and little training = failed sample. Quality Assess. Report Data End

Quality Assessment Cont. Welcome to TPS Overview of TPS Federal Oversight Program Reviews Possible Outcomes Design of TPS Systems Reviews Samples Consistency? No Risk Found Sample Passes Consistency Sample Fails Inconsistency Risk Found Quality Assess. Report Data End

Quality Assessment Cont. Welcome to TPS Overview of TPS When CY has ended, you produce an Annual Report by end of May Report identifies strengths and weaknesses SR findings – are there problems in State’s system of internal controls? Sampling – have samples failed test of accuracy? Computed Measures – are tax systems operating timely? Recommendations for improvement Goes to State administrator State and RO discuss problems and plans for improvement Federal Oversight Design of TPS Quality Assess. Report Data End

Quality Assessment Cont. Welcome to TPS Overview of TPS Federal Oversight You have spent months and months evaluating State’s tax operations. As you come to conclusions, keep the tax units appraised – no surprises at end of year. National Office needs TPS data Data entry into SUN by March 31 of each year CY 1 enter data by March 31 of CY 2. Here is what the TPS Web Application Menu looks like Design of TPS Quality Assess. Report Data End

Report Data TPS Web Applications Menu Welcome to TPS Report Data TPS Web Applications Menu Overview of TPS Federal Oversight Design of TPS Quality Assess. Report Data End Place-holder Selecting the “Computed Measures” option will lead to these screens….

Report Data Cont. Computed Measures Path Welcome to TPS Report Data Cont. Computed Measures Path Overview of TPS Federal Oversight Design of TPS The states’ scores will be displayed. Quality Assess. Report Data Selecting the Computed Measures options will lead you to these screens. End Or the actual data the state has entered will be displayed. Select the Report Type and Year. Then, Select either: Measures, Database Display Formulas. Or the formulas will be displayed.…

Report Data Cont. Sampling Path Welcome to TPS Overview of TPS Federal Oversight Design of TPS Quality Assess. Report Data End Select the Sampling option and it will lead you to these screens. Select a year and then enter your sampling data.

Report Data Cont. Systems Review Path Welcome to TPS Report Data Cont. Systems Review Path Overview of TPS Federal Oversight Design of TPS Quality Assess. Report Data End Select the Systems Review option and it will lead you to this menu. Select a year and enter your sampling data.

Report Data Cont. ET 581Contribution Report Path Welcome to TPS Overview of TPS Federal Oversight Design of TPS Quality Assess. Report Data End Select a Year and Quarter and you will see the states’ 581 Report. Select the 581 option and it will lead to this screen.

End This concludes the TPS training presentation Welcome to TPS Overview of TPS Federal Oversight This concludes the TPS training presentation A list of links follows Design of TPS Quality Assess. Report Data End For further assistance , don’t hesitate to use the Contact List link to call your Regional and National Office colleagues!

Links TPS Universe and Sampling Details Welcome to TPS Links Overview of TPS Federal Oversight TPS Universe and Sampling Details TPS Small Universes and Sample Sizes TPS Guide to Writing an Annual Report TPS and Tax Contacts List Design of TPS Quality Assess. Report Data End