Report 2014-108 Recommendation 4 Responses

Report 2014-108: State Board of Equalization Building: Despite Ongoing Health and Safety Concerns, the State Has Not Thoroughly Analyzed the Costs and Benefits of Relocating Employees (Release Date: September 2014)

Recommendation #4 To: Equalization, Board of

To ensure that it can accurately estimate any shifts in worker productivity and state revenue, BOE should strengthen its current methodology by analyzing the productivity and revenue collection of its employees and by monitoring those metrics at least semiannually. Additionally, BOE should support its methodology with documentation.

Annual Follow-Up Agency Response From September 2018

The methodology used in creating the LAO report analyzing the productivity and revenue collection of CDTFA team members has been documented and is monitored. Any changes to the methodology will be updated and documented.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

The California Department of Tax and Fee Administration (CDTFA)--the agency that handles most of the taxes and fees previously collected by the BOE--provided us with its procedures and instructions for how it prepares what it refers to as "Consumer Use Tax Section's Legislative Analysis Office (LAO) annual reports." These reports tabulate the revenue generated by its various units and compare the revenue totals to the cost of associated activities.

The department annually reports to a legislative committee the benefit-to-cost ratio of the audits and other compliance-related activities performed by its revenue-generating units. Although this process appears to be annual, rather than semiannual as we recommended, we believe CDTFA's efforts to document how it prepares these calculations are sufficient to deem this recommendation fully implemented.

Annual Follow-Up Agency Response From November 2017

Effective July 1, 2017, legislation enacted as part of the 2017 Budget Act recast the BOE as the California Department of Tax and Fee Administration (CDTFA).

The Centralized Revenue Opportunity System (CROS) project is an information technology modernization effort designed to expand tax and fee payer services while improving the efficiency and effectiveness of CDTFA's operations. The new system will provide the Department with increased access to real-time data, enabling more robust monitoring of the productivity and revenue collection of CDTFA employees.

The CROS information technology modernization effort, which will implement defined processes associated with Sales and Use Tax accounts, as well as certain associated Special Taxes accounts is being rolled out in phases. The go live date for Rollout 2 is May 2018 when the majority of CDTFA staff will be utilizing the system. The remaining Special Taxes accounts not in Rollout 2 are scheduled to be implemented in two subsequent rollouts scheduled through mid-2020.

In addition, the Department is centralizing many of its finance and data functions under a new Chief Financial Officer structure. This new organizational model will facilitate the increased use of data to measure more precisely the effectiveness of CDTFA's various programs and activities.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

Annual Follow-Up Agency Response From September 2017

Effective July 1, 2017, legislation enacted as part of the 2017 Budget Act recast the BOE as the California Department of Tax and Fee Administration (CDTFA). The Centralized Revenue Opportunity System (CROS) project is an information technology modernization effort designed to expand tax and fee payer services, improve the efficiency and effectiveness of CDTFA's operations, enhance its ability to generate increased revenues and provide taxpayers expanded on-line services with which to conduct business with CDTFA.

The CROS information technology modernization effort, which will implement defined processes associated with Sales and Use Tax accounts, as well as certain associated Special Taxes accounts is being rolled out in phases. The go live date for Rollout 2 is May 2018. The remaining Special Taxes accounts not in Rollout 2 are scheduled to be implemented in two subsequent rollouts scheduled through mid-2020.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

Annual Follow-Up Agency Response From October 2016

The BOE's Board approved the CROS contract at its August 30, 2016 meeting. The CROS project is an information technology modernization effort designed to expand tax and fee payer services, improve the efficiency and effectiveness of the BOE's operations, and enhance its ability to generate increased revenues reducing the tax gap. The contract is expected to take approximately 53 months, beginning in October 2016.

The new system will assist BOE to accurately estimate shifts in worker productivity and revenue for the entire agency, due to a concentrated effort to report revenue and associated positions by program across the agency.

With the activity based cost analysis, the BOE's estimate of revenue per employee will be available to assist in calculating and documenting the anticipated revenue loss associated with an employee being unable to work and the estimate revenue loss related to the Efficiency and Process Improvement Study. The BOE is committed to the results of the study that present a strong business case to consolidate its headquarters operations as part of its ongoing commitment to fair and efficient tax administration.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

1-Year Agency Response

The BOE has strengthened the methodology used to estimate revenue per employee for the Sales and Use Tax Department's Audit and Collection programs. The BOE will be able to accurately estimate shifts in worker productivity and revenue for the entire agency, due to a concentrated effort to report revenue and associated positions by program across the agency. The proposed allocation of revenue and positions has been reviewed and changes have been recommended. These changes are being incorporated into an agency-wide activity based costs analysis that will track revenue per personnel year beginning with the section level and summarized at the department and agency level.

With the activity based costs analysis, the BOE's estimate of revenue per employee will be available to assist in calculating and documenting the anticipated revenue loss associated with an employee being unable to work and the estimated revenue loss related to the Efficiency and Process Improvement Study.

California State Auditor's Assessment of 1-Year Status: Pending

6-Month Agency Response

The BOE has strengthened the methodology used to estimate revenue per employee for the Sales and Use Tax Department's Audit and Collection programs over the past few years. The BOE will be able to accurately estimate shifts in worker productivity and revenue for the entire agency, due to a concentrated effort to report revenue and associated positions by program across the agency. A draft of the proposed allocation of revenue and positions is currently under review. The BOE plans to complete these reports with supporting documentation by fiscal year end.

Once complete, the BOE's estimate of revenue per employee will be available to help calculate anticipated revenue loss if an employee is unable to work, as well as estimated revenue loss related to the Time-In-Motion study.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

The BOE will be strengthening its worker productivity and revenue collection methodology. We will also be monitoring metrics semiannually. While this does not have an estimated completion date, we have begun and will continue to collect more data in preparation for the cost-benefit analysis.

California State Auditor's Assessment of 60-Day Status: Pending

All Recommendations in 2014-108

Agency responses received are posted verbatim.