Michigan Department of

Treasury
FY17 Legislative Presentation
House General Government Subcommittee
March 9, 2016

Michigan Department of Treasury

Improving Operations Progress Report

Fair and efficient

administration of
taxes

Focus on employee
engagement and
development

Develop a culture of
taxpayer service

Cornerstone
Strategic
Goals
Develop a habit of
continuous improvement
1

Summary

2015 was the year we began a journey to improve Treasury

operations and how we interact with taxpayers
It started by defining our collective aspirations, strategy
and near-term tactics
Much was accomplished during the second half of the year,
from improved income tax processing to a new streamlined
audit process
But we have just started - the Department is building on
what was learned in 2015 to create further improvements in
2016

2015 - Treasury Developed a New

Aspiration and Strategic Plan

Our Aspiration
Michigan Treasury will become the best operated Treasury
department in the United States and the States thought
leader on all tax and revenue issues.

Best Operated has 3 building Blocks

Engaged Employees
Culture of Taxpayer Service
Continuous Improvement

Underlying Our Work are

5 Key Values

1.

In all we do always ask what is the impact on

Taxpayer?

2.

Fair and efficient administration of tax system not

maximum revenue collection at all costs

3.

Be metric driven

4.

Think outside our department to find innovative

solutions

5.

Communicate and celebrate success

Accomplishments
FY 15 and FY 16

We Started with a List of Over 20

Projects to Improve the Efficiency of the
Department

Individual Income Tax Processing

Audit
Tax Hearings
Communications
Liens
Power of Attorney
Systems
Correspondence Backlog
Escheats Audits

Individual Income Tax Processing (IIT)

Issue: Returns were not consistently processed in year filed, and backlogs continued to
grow.

Metric: All current year IIT returns are processed in the same year received.

Number of Returns

Total IIT Backlog Per Calendar Year

60000
50000
40000
30000
20000
10000
0
2013

2014

2015

2016

Calendar Year
Prior Year Returns Backlog at 12/31

Current Year Returns Backlog at 12/31

Total Backlog at 12/31

How Did We Do This?

Streamlined work instructions for staff to complete returns with average 38%
efficiency gain.
Increased accountability.
Prioritized backlogs and ensured work sent to appropriate skill level staff.

Audit

Issue: Audits can take more than a year to complete.

Metric: Ensure quality and efficient audits by reducing the average length of Sales and Use tax audits
by 35% of prior year audit period.
Average Days in Process for Audits Completed

Pre Timeline Tool

(Audits started
prior to 1/1/2015)

Number of Days

200
175

189

150

160

125

123

100

105

75
50

Sales

With Timeline Tool

(Audits started
after 1/1/2015)

Use

How Did We Do This?

New audit timeline tool

Increased accountability
Pre-audit conferences to set mutually agreed upon timelines
Pilot more focused audits

Tax Hearings

Issue: Informal hearings can take up to two years.

Metric: Reduce timeline for hearings to less than 6 months by Jan. 1st, 2017.
Time to Complete Dockets in Informal Hearings Process
20

18+

18+

Time in Months

18
16
14

12-18

12
10
8

6-12

2016

2017

6
4
2
0

2013

2014

2015

Year

How did we do this?

Set clear deadlines and increased staff accountability.

Worked with internal tax areas to clear old accounts.

Determined that internal review by audit staff was redundant and could be
eliminated.

10

Power of Attorney (POA)

Issue: Form for requesting POA and Section 8* was unclear, and taxpayers were often
asked to resend forms due to lack of internal process to share forms across areas.

Metric: Improve POA/Section 8 form and create process for sharing among all
Treasury areas.

How Did We Do This?

Implemented one page, user friendly form that includes POA and Section
8 (available 11/2/15).
Developed internal and external training to ensure form and requirements
were understood by all.
Created manual workflow to comply with Section 8 requests and began
tracking number of requests.

Note* - Section 8 refers to the taxpayers request that copies of all documents related to a specific dispute be given to their authorized
representative

11

Taxpayer Communications

Issue: The Department did not consistently provide timely guidance to taxpayers on
how Treasury will interpret tax laws - few Revenue Administrative Bulletins (RABs)
were issued and could take more than a year to publish

Number of Months
to Issue

Metrics: Minimum of 10 new or updated RABs will be issued annually.

Length of Time to Issue RABs
30
25
20
15
10

12-24
Months
6 Months

0
2009-2014

How Did We Do This?

2015

Year

Set goal to minimum of 10 new or revised RABs issued annually.

Created timelines and reporting tool to ensure RABs are issued within 6 months.

Increased accountability for all staff timelines.

12

Escheats Audits

Issue: Unclaimed Property audits could take years to complete.

Metric: Implement new streamlined audit procedures, with target of 18 months to
complete audit

How did we do this?

Work group of external stakeholders and Treasury staff issued recommendations for
improving escheats process on 7/2/15
Workgroups recommendations to streamline escheats process were used to create
legislation
Legislation was signed by the Governor on 12/22/15 and became PA 242 of 2015

13

System Improvements

Michigan Treasury Online (MTO) Enhancements

In June 2015 Treasury made a commitment to fix the Sales/Use/Withholding (SUW) automated taxpayer
system. The enhanced system was launched on January 11, 2016.
Taxpayers will need just one username and password to enter MTO, file a return and make a
payment and can reset their own username and password.
Added Fast File Now feature to allow immediate filing access and reduced the number of user
steps in the process.
Survey results show user satisfaction went up 400% (from 15% to 60%) since the enhancements were
made.
This is the first of many upgrades in 2016 to Treasurys operating systems.
Phase 2
Scheduled for April 2016, bringing additional user-end enhancements, such as saving as draft
and the addition of screen previews, and improved return selection filters.
Phase 3
Scheduled near end of 2016, focusing on ease-of-use for 3rd party providers and more user-end
enhancements.

14

FY 15 and FY 16
Investment Update

FY 15
Scholarships & Grants Electronic Grants Reporting System

One portal system for agency users, Michigan families, high school counselors and financial aid staff

Allows students to self-certify online eliminating manual entry

Allows us to more easily share information with CEPI and to participate in the Presidents FAFSA Completion Initiative

Replaced 14 unsupported legacy databases with a supported solution

Office of School Review & Accountability

Technical assistance to schools with deteriorating financial circumstances

Working with schools on deficit elimination plans through collaboration between school districts and the Department

Working with more than 100 school districts currently:

o 75 schools are on the potential fiscal stress watch list
o 19 identified districts having potential fiscal stress
o 9 school districts that are subject to preliminary reviews
o 3 schools are subject to enhanced deficit elimination plans
o 5 school districts have gone through the PA 436 process

15

FY 15 and FY 16
Investment Update

FY 16 In Progress
Personal Property Tax Reform & State Essential Services Act
Implementation is in progress for the Essential Services system
This project will go live on April 4, 2016
This project was designed in cooperation with the end-user community
Financial Review Commission (FRC)
Created under Public Act 181 of 2014 to ensure completion of the City of Detroit post-bankruptcy plan of adjustment
The goal of the 9-member commission is to assure continued financial stability for the City of Detroit
City Income Tax Administration (CITA)
This project went live in January 2016 for City Individual Income Tax
80,000 returns received to date with the majority electronically filed, of which 25,000 have been processed
50% of the processed returns have resulted in taxes owed and 50% require a refund
City Business and Withholding is in early design with a planned go live in February of 2017
Fraud Prevention & Detection
Stopped over 83,000 suspicious income tax refund requests last year
Prevented potential tax-related identity fraud and potential fraudulent refunds of over $75,000,000
Currently, the validation process has been expedited to provide efficient processing of legitimate refunds, while being
more vigilant at intercepting fraudulent refunds
16

FY 16
Operational Improvement
Plan

17

Last Year was Just the Start. We have

Developed a Plan to Build on Our Success.

I.

Call Center process improvement

II.

Identifying/eliminating delays in processing returns that require additional

taxpayer information

III.

Move to a paperless environment limit snail mail

IV.

Single sign-on/password for employees

V.

Fix SAP

VI.

Develop robust employee engagement plan

VII.

Better use of metrics as a management and accountability tool

18

Operating Budget History

19

Total FY 16 Treasury Gross

Appropriation Breakdown ($ in Millions)
PILT
Grants

$26.1

One-time Funding

$29.9
Operations

$143.0

$283.2
Debt Service

$156.4

Total Gross
Appropriation
$1,886.0
Revenue
Sharing

$1,247.4

Treasury Operations

Revenue Sharing

Debt Service

Grants

PILT

One Time Funding

20

FY 16 Operations Appropriations
Funding Type
($ in Millions)
Total Operations $283.2
General Fund

Operations Restricted

$61.8

$102.9

Delinquent Tax

$118.4
Operations Restricted Funds

Delinquent Tax

General Fund

21

$350.0

Treasury Operations FY 13 FY 16
($ in Millions)

$300.0
$11.8 million
New Programs
$250.0

$21.6 million
New Programs

$35.4 million
New Programs

$50.9 million
New Programs

$200.0

$150.0

$100.0
$261.5 million
Base

$242.8 million
Base

$246.4 million
Base

$232.3 million
Base

2013

2014

2015

2016

$50.0

$0.0
Total Operations
$273.3 million

Total Operations
$264.4 million

Total Operations
$281.8 million

Appropriated Operations Budget

Total Operations
$283.2 million

(Cumulative)

22

New Program Responsibilities 2013-2016

2013

2015

Office of Fiscal Responsibility

Essential Services Assessment

Tobacco Tax Enforcement Program

City Income Tax FTEs Only

Emergency Financial Manager

Payments

Financial Independence Teams

Total - $11.8 million

State Building Authority Transfer

Data Governance Staff
Scholarships and Grants IT Funding

2014
Sales Use and Withholding
Replacement
Collections Credit Card Services
Financial Review Commission
Implementation Funding

Technical Resolutions Unit

Office of Tax Plan Implementation
IFTA Funding IT

2016
Financial Review
Commission Built into Base
Personal Property
Tax/Essential Services
Assessment - Permanent
Funding
City Income Tax (Detroit)
Permanent Funding
Dual Enrollment
MTO IDG Project Funding
Total - $15.5 million

Driver Responsibility Community Service

Fraud Prevention

City Income Tax Implementation

Funding

Tax Programs - Credit Card Payment

Program

Tobacco Tax EnforcementEquipment Costs

Financial Review Commission Executive

Director Hire

Total - $9.8 million

MBT Legislative Changes IT

*Some programs reflect multi-year

Personal Property Tax Reform One Time

impacts based on implementation, onetime, transfer, and baseline

adjustments

Total - $13.9 million

Cumulative Total $50.9 million

23

FY 16 and FY 17 Operations Remain Flat

($ in Millions)

$350.00
Economics and
DTMB Rate
Increase

$300.00

$2.8

$0.75
Expansion of
Existing
Program Treasury IT
Project
Management

One-Time
Free E-File

$250.00

$200.00

$5.6

Operations,
$283.20

Operations,
$283.20

2016

2017

$150.00

$100.00
Operations

One Time

New Programs

Economics

24

FY 17
Departmental Priorities

25

FY 17 Priorities

Manage Treasury program areas by improving existing processes and procedures with the
goal of doing more with what we already have.
Self-fund improvements where possible through productivity enhancements and process
improvements.
Information Technology

Flawless Execution of all IT Projects

Customer Service and Business Process Improvement Metrics for all Critical Projects

Expansion of Customer E-Services

Develop a Legacy Replacement Strategy

Fund Banking Services

Pursue RFP Solutions for Competitive Pricing

26

FY 17 Funding Requests

Treasury expertise to implement successful IT projects

Permanent Treasury project staff - 4 FTEs/$750,000
Improved initial design and outcomes
Development of appropriate and effective testing, training and customer
communications
Less costly remediation after go-live
Better customer service
Return 47 borrowed testing staff to their program areas

Provide free E-File for most 1040 tax filers

Provide Michigan individual tax filers the ability to e-file annual returns without incurring a fee $2.8 million one-time

Reduction of 36,000 manually reviewed returns

Ability to reallocate 6 FTEs to phones , correspondence and backlogs
4 weeks to process paper filing/80,000 e-returns processed daily

27

DTMB FY 17 IT Funding Requests

Impacting Treasury

Treasury IDG Increase - $1.5 million

DTMB rate increase for Unisys mainframe costs
DTMB IT Investment Fund Request FY17 - $5 million one-time and $5 million on-going from
existing IT investment fund revenues
Redefine our project implementation strategy

Stabilize our current SAP system for taxpayers

Do a full SAP system assessment

Business Process Reviews prior to all critical projects based on timeline

Feasibility studies to determine best fit for IT system decisions

Require customer service and business process improvement metrics for all IT
projects

Strategic plan for expansion of e-services for customers

Review and proof of concept for automated testing solutions

Knowledge transfer effort for DTMB state staff support

Creation of the legacy replacement roadmap

Allow legacy replacement to move with mandates

Continuation of our commitment to an integrated tax system

Define impacts to customers and revenues in prioritization

28

New Programs &

Legacy Replacement Plan

Michigan Business Tax

Corporate Income Tax
Flow Through Withholding
Tax
Business Tax Registration
Sales, Use and Withholding
Phase 1
Paradox Delphi Replacement
Filenet Document
Management
Data Capture Retrieval
System
Human Resources Database
Service Timekeeping System
Fraud Detection System
Experian
IFTA Tax Connection

10 Year Plan

In Progress

Completed

Essential Services Assessment

City Income Tax Individual
City Income Tax Withholding
City Income Tax Corporate
Michigan Treasury On-Line
SIGMA
Intelligent Work Design
Scholarships and Grants

Individual Income Tax

State Treasury Accounts Receivable
Garnishments and Levies
Motor Fuel Tax
Statutory Refund
Fiduciary Tax
Composite Filer
Tobacco Taxes
Health Insurance Claims Assmt.
Bottle Deposit
Estate Tax
Home Heating Credit
Offset Debt Management Services
Lottery Offset
Revenue Sharing
Customer Financials
Centralized Correspondence
Power of Attorney System
Accounting Services Access Database System
Principal Residence Exemption
Municipal Loan and Bond System
Hearings System
Local Government Audit System
ESKORT Audit System
Revenue and Tax Planning Program Analysis System
Customer Relationship Management Call Center
Personal Property Tax Payment System

$130 Million
Remaining
Investment

29

Appendix

30

Departmental Metrics

31