National Audit of the Implementation of the Appeals Timeliness Action Plan


Executive Summary

Background: The Appeals Branch of the Canada Revenue Agency (CRA) is responsible for resolving disputes of the Income Tax Act (ITA) and GST/HST/Excise Tax assessments, and appeals of Canada Pension Plan and Employment Insurance Act (CPP/EI). In addition, Appeals is responsible for the Voluntary Disclosures Program (VDP) and co-ordinating CRA's Fairness Initiative.

A comprehensive study entitled "Improving the Timeliness of Appeals Services: Appeals Branch Report and Recommendations on Timeliness", was completed in May 2002. The study addressed all Appeals business lines and identified issues common and/or specific to Headquarters (HQ) or the Regions. These issues were delineated into common themes across the Branch: Service and Performance Standards; Reliability of Statistical Information for Workload Management; and Resourcing. A three-year Action Plan, entitled "Improving the Timeliness of Appeals Services: Consolidated Headquarters and Field Timeliness Action Plan and Status Report", consisting of 90 action items, was implemented in 2002, and was scheduled for completion by March 2005.

Objective: The objectives of the audit were to:

  • provide assurance on the progress of the Action Plan;
  • determine if plans have been made for the implementation of any action items remaining;
  • determine if mechanisms were in place for measuring results of the actions taken; and
  • identify any barriers encountered to date.

The lines of enquiry were developed to reflect key themes observed in the Action Plan: Service Standards, Policy & Procedures, Resources & Efficiency and Quality Assurance & Monitoring. Planning of the audit began in November 2003 and examination was concluded in May 2004.

Conclusion: Since the implementation of the timeliness action plan in 2002, improvement in overall timeliness has been achieved in the larger business lines. Timeliness remains an issue with the CPP/EI business line that is dependant on external funding.

Since the implementation of the Timeliness Action Plan in 2002, workable inventories in the major business line, ITA Objections, have remained relatively constant. The level of workable inventories in the GST Objections, CPP/EI Appeals and VDP business lines continue to increase. The Timeliness Project and changes to performance standards and targets have resulted in an increased profile for "timeliness" however the branch has maintained the focus on quality.

The Action Plan consisted of both Regional and HQ specific action items, and those pertaining to Regional actions are complete. There are ten HQ specific action items remaining, and plans are in place for completion. The most significant of these are:

  • completion of volumetrics study for ITA/GST Objections; and
  • achievement of the new performance standards for processing turnaround times for CPP/EI.

The Appeals Branch has quality assurance processes and inventory tracking mechanisms in place to monitor the status of files, completion of files for accuracy, and time taken to complete workloads. During the conduct of this audit a new web-based inventory tracking system was implemented to improve management's ability to report on program results.

Some employees interviewed were unaware of newly developed policies, procedures, intra-branch protocols and the Timeliness Project itself. For example, adherence to timeframes outlined in the protocol could not be ensured, nor the consistent usage of new inventory status codes. Steps are required to ensure all staff are encouraged to access regularly the branch's intranet site for new information.

Action Plans

ITA/GST - To complete the volumetrics study, the Tax Appeals Directorate (TAD) will develop a new plan in April 2005 and execute it during the first quarter of fiscal 2005-2006.

CPP/EI - To specifically deal with the aged inventory a business case for additional funding was submitted in April 2004 and approved in January 2005. Resources will be provided over a two-year period to reduce the inventory to optimal levels.

After the ITA/GST volumetrics study, and to address the current inventory workload, CPP/EI management will consult with TAD to share common issues and methodologies prior to starting a CPP/EI volumetrics study. A workload tracking and process review project has been initiated in conjunction with program partners, including HRSDC, to identify inefficiencies in the redress process, risk management of files, real-time requirements to complete files, and where files should be handled. Once this project and the CPP/EI volumetric study are completed, further review of the resourcing of the program and performance targets will be addressed.

VDP - Implementation of the VDP action plan began in February 2004 and included VDP specific time codes and the inclusion of VDP in GLOBUS (a new case management system used by different workflows for tracking inventory). The data collection phase is currently underway to assist in determining the true costs of the VDP, the efficiencies that can be generated, and a model to forecast future costs for budgeting purposes. Program management will analyse relevant statistics for the current and past two years to determine if the field offices are fully utilizing existing budgets for the VDP. If additional funds are required, a business case to Treasury Board Secretariat will be prepared.

Communication - Appeals employees will be encouraged to access regularly the Appeals branch intranet site, for new information.

Introduction

The Appeals Branch of the Canada Revenue Agency (CRA) is responsible for resolving disputes of Income Tax Act (ITA) and GST/HST/Excise Tax assessments, and appeals of Canada Pension Plan and Employment Insurance Act (CPP/EI). In addition, Appeals is responsible for the Voluntary Disclosures Program (VDP) and co-ordinating CRA's Fairness Initiative. According to the Corporate Business Plan 2004-2005 to 2006-2007, the Appeals Branch business line of the CRA represented 2.8% of the total CRA planned spending for 2004-2005.

A comprehensive study entitled "Improving the Timeliness of Appeals Services: Appeals Branch Report and Recommendations on Timeliness", was completed in May 2002. The study addressed all Appeals business lines and identified issues common and/or specific to Headquarters (HQ) or the Regions. These issues were delineated into common themes across the Branch: Service and Performance Standards; Reliability of Statistical Information for Workload Management; and Resourcing. A three-year Action Plan, entitled "Improving the Timeliness of Appeals Services: Consolidated Headquarters and Field Timeliness Action Plan and Status Report", consisted of 90 action items, was implemented in 2002, and was scheduled for completion by March 2005.

Successful implementation of this Action Plan is expected to assist the Appeals Branch in meeting their clients' expectation of reducing the time taken to resolve disputes without compromising quality, fairness or impartiality. The Appeals Branch will be expected to be better able to manage the inventory of workable and non-workable files (e.g. awaiting a tax court decision or legal opinion), reduce the aged inventory, and prepare for the transfer of the non-workable files into the workable caseload.

Focus of the Audit

The Senior Management of Appeals Branch requested that an assurance review be conducted prior to the conclusion of the three-year Action Plan to address the timeliness issues experienced in each business line.

The objectives of the audit were to:

  • provide assurance on the progress of the Action Plan;
  • determine if plans have been made for the implementation of any action items remaining;
  • determine if mechanisms were in place for measuring results of the actions taken; and
  • identify any barriers encountered to date.

To assess the four audit objectives, lines of enquiry were developed to reflect key themes observed in the Action Plan: Service Standards, Policy & Procedures, Resources & Efficiency and Quality Assurance and Monitoring.

The scope of the audit was limited to a review of the issues, recommendations and action plans as detailed in the Action Plan. The following business lines were included: Income Tax and GST/HST Objections, Fairness Provisions Requests, Income Tax Referrals, GST/Excise Referrals, Voluntary Disclosure Program and CPP/EI Appeals.

The audit was conducted by reviewing the implementation of services standards, policies, procedures and guidelines related to the Action Plan. Systems data was also reviewed for trend analysis purposes. Interviews were conducted with Team Leaders, Chiefs of Appeals and Branch management. Documentation review was used to confirm the status of action items that required new policies/procedures be created; that performance agreements had been modified where required; and that monitoring tools were being used by management to track inventories. Documentation related to the ongoing status reporting and monitoring of the implementation process was also examined.

The audit was conducted in the Appeals Branch at HQ, and in the Prairie, Pacific, Northern Ontario, and Atlantic Regions. The planning of the audit began in November 2003 and examination was concluded in May 2004.

Findings, Recommendations and Action Plans

Progress On Action Plan

The Action Plan consisted of 90 action items in the four business lines covering both Regional and Headquarters action items. Of the initial 90 items, the Region-specific items are completed, four others are no longer applicable due to business changes, and there are ten HQ specific action items remaining for which action plans are in place to address them. The most significant of these remaining items are:

  • completion of volumetrics study for ITA/GST Objections;
  • achievement of the new performance standards for processing turnaround times for CPP/EI; and

While implementation is 90% complete, the impact of the two major outstanding items is significant to the Appeals Branch and their ability to address timeliness. CRA has identified timeliness of Appeals' workload as an important issue and has made a commitment for improvement to Canadians through the 2004-2007 Corporate Business Plan.

Table 1 - Ten Outstanding Action Plan Items

LOE

Action Plan Item

Significance

Service Standards

Volumetrics Study - ITA/GST Objections

Major

 

Implement and meet new performance standards - CPP/EI Appeals

Major

 

Performance objectives for first level Fairness Requests

Minor

Policy & Procedure

Updating the Appeals Manual or Taxation Operating Manual with fast-tracking guidelines

Minor

 

Review of the current assignment processes

Minor

 

GST Redesign project to streamline reassessment process

Minor

 

Gather field data on number of first-level Fairness requests erroneously sent to Appeals

Minor

Resources & Efficiency

Develop new VDP Budget Process and obtain interim Funding

Minor

 

Fairness Registry Updates to allow exclusion of non-workable days in calculation of processing times

Minor

Quality Assurance & Monitoring

VDP included in Case Management Software

Minor

As inventories are reduced, resources will be able to target new intakes and achieve the timeliness targets with the continued emphasis on quality decisions.

Good Practice

Monitoring of Inventory

The Southern Ontario Region monitored the increasing inventory of Fairness cases. A project was undertaken to review the Fairness entries and ensure accurate information on older cases appeared in the registry. This resulted in the number of open cases going from 18,000 to 11,000 in nine months (38.9% reduction). Consideration should also be made for all remaining regions to conduct a similar "clean-up" project so that an accurate inventory may be ascertained.

Mechanisms For Measuring Results

The Appeals Branch has quality assurance processes and inventory tracking mechanisms in place to monitor the status of files, completion of files for accuracy and time taken to complete workloads in all business lines.

The results achieved through the implementation process and changes to procedures and policies are measured on an ongoing basis through statistical analysis of inventories, both workable and non-workable.

The Appeals Branch has completed conversion of all workable and non-workable inventory from the previous inventory management system, Appeals Information and Reporting System (AIRS), to Globus (a case management system that is used by different workflows). The regions indicated there was an issue during the conversion with reporting functionality, e.g. "canned" reports, thus affecting the monitoring abilities of the managers. The Branch has taken steps to improve the functionality and reporting ability of this new system by implementing a Web infrastructure for Intranet based queries. Management at all levels can now produce customized reports for inventory and performance measurement, allowing the Branch to better measure and report on program results.

Plans for Completing Major Outstanding Items

ITA/GST Objections Business Line

The Tax Appeals Directorate (TAD) was to undertake a study, to better understand the exact nature and volumetrics of delays in the processing of objections and reassessments, in year two of the three-year Implementation Plan (2003-2004). At the time of the audit, TAD had not initiated this study, and the regional offices had not been solicited for their input or involvement with regards to gathering data as per the Action Plan. The effect on the Branch is that the root cause of the delays cannot be determined, and therefore, corrective action(s) cannot be implemented. This has impacted the Branch's ability to meet service standards and consequently impacts client satisfaction.

Recommendation - Volumetrics Study

The Appeals Branch, ITA/GST Objection Business Line, should conduct the volumetrics study that was scheduled for fiscal year 2003-2004 to better understand the exact nature of delays in the processing of objections and reassessments. An action plan to effectively address the identified issues should then be developed and implemented.

Action Plan

The Policy Section of Tax Appeals Directorate (TAD) will develop a new plan in April 2005 and will execute it during the first quarter of fiscal 2005-2006. The results of the study may impact other areas accountable for monitoring processing timeframes, standards, statistics, etc.; therefore, work will be conducted in conjunction with the Programs Initiative Section and the Quality Assurance and Review Section of the Programs and Fairness Coordination Directorate (PFCD).

CPP/EI Appeals Business Line

The CPP/EI Appeals Division implemented performance standards based on a graduated scale for reducing the turnaround time for processing CPP/EI files (benefit pending, benefit non-pending and assessment) to facilitate the reduction of the inventory backlog.

Table 2 - CPP/EI Appeals Performance Standards - Targeted Levels

2001-2002

Reduce average turnaround times to:

EI Benefit Pending

90 days in 85% of files

EI Benefit Non-Pending

90 days in 85% of files

Assessment and Other files

120 days in 85% of files


2002-2003

Reduce average turnaround times to:

EI Benefit Pending

75 days in 85% of files

EI Benefit Non-Pending

90 days in 85% of files

Assessment and Other files

105 days in 85% of files


2003-2004

 

EI Benefit Pending

Meet 60-day performance standard
in 85% of files

EI Benefit Non-Pending

Meet 75-day performance standard
in 85% of files

Assessment and Other files

Meet 90 day performance standard
in 85% of files

HQ management reported that the program has seen a significant number of changes in the caseload that has adversely impacted the turnaround times, resulting in increased inventories and an inability to meet performance targets. Therefore the performance standards outlined in the Action Plan were reduced.

Both regions and HQ indicated to Internal Audit the three main causes of changes to the caseload are:

  • more complex workload;
  • regional disparities; and
  • limited resourcing.

Recommendations - Volumetrics Study and Workload Tracking & Process Analysis

The CPP/EI business division should conduct its own volumetrics study, along with the workload tracking project and process review to determine the exact nature of workload changes, causes of delays, regional trends, the root cause of the growing "workable" inventory levels, etc. An action plan to effectively address the identified issues should then be developed and implemented.

The Appeals Branch, CPP/EI Division, should collaborate with the TAD when planning and conducting the volumetrics study planned for the ITA/GST Objections division.

Action Plan

To specifically deal with the aged inventory, a business case for additional funding was submitted in April 2004 and approved in January 2005. Additional resources will be provided over a two-year period to reduce the inventory to optimal levels. Regular monitoring of intakes and inventory levels between the Chiefs of Appeals and HQ, through monthly/quarterly telephone conferences, will help ensure the workload is properly managed amongst the regions.

A Review of the CPP/EI Appeals redress process began in March 2004 with the focus on addressing timeliness and procedural issues. This review is being undertaken in conjunction with our program partners, including Revenue Collections Branch, Department of Justice and Human Resources and Skills Development Canada. An interim report was issued in January 2005, and four initiatives will be given priority to address our two biggest challenges: inventory levels and timeliness issues.

An analysis of the work processes of the CPP/EI Appeals Division is currently underway in order to identify the most effective and efficient processes, and further, to identify and eliminate duplication of work, and to make recommendations that will optimize the use of resources and enhance program delivery at the local and national level. The results of these studies will provide a basis to revisit the funding model and to establish feasible performance targets.

CPPEI Appeals will consult with TAD to discuss common issues and methodologies prior to starting a CPP/EI volumetric study.

VDP Business Line

The Action Plan outlined a two-phased approach to address inventories and increasing intakes to meet performance standards; obtain interim funding and develop a new budget process. Compliance Programs Branch transferred funding of $3.222 million in 2002-2003 and $4 million for each of 2003-2004 and 2004-2005. However Inventories continue to increase. The establishment of a new budget process was not completed by the target date of 2003-2004 fiscal. All regions indicated that an increase in resources is required to meet the volume and standards set for this program.

To increase the up-take of the VDP, discussions have taken place around the idea of a marketing initiative. Should an initiative be launched, intakes will increase further and compound current inventory levels and the strain on resources.

Recommendation - VDP

The Appeals Branch should review the current expenditures for the VDP, and ensure the current funding is adequate. The Branch should complete this review before undertaking the planned marketing campaign.

Action Plan

Implementation of the VDP action plan began in February 2004 and included VDP specific time codes and the inclusion of VDP in GLOBUS (a new case management system used by different workflows for tracking inventory). The data collection phase is currently underway to assist in determining the true costs of the VDP, the efficiencies that can be generated, and a model to forecast future costs for budgeting purposes. Program management will analyse relevant statistics for the current and past two years to determine if the field offices are fully utilizing existing budgets for the VDP. If additional funds are required, a business case to Treasury Board Secretariat will be prepared.

Challenges to Implementation

The development of new policies and procedures that were identified in the Action Plan has been completed. With the use of the Infozone there is an increased reliance on employees to enter and check the "What's New" section to remain informed. Discussions with the regional employees indicated inconsistency in the awareness level of new protocols, policies, guidelines and the Timeliness Project itself. Although there is a "What's New" section on the Appeals' InfoZone, Appeals officers are not aware when new information relevant to their workloads, such as changes in policy, has been posted.

Recommendation - Communication

The Appeals Branch should review the current communication methods to ensure all employees are up-to-date with policy and procedure changes and the initiatives being undertaken by the Branch and/or Agency.

Action Plan

Branch management supports the use of InfoZone rather than email, therefore all Appeals employees will be encouraged to access regularly the branch's intranet site for new information. The Policy Section has visited the local Appeals Divisions of four regions and will conclude the two other regions by the end of April 2005. During these visits, the Policy Section stressed the importance of verifying the "What's New" of the Appeals Intranet Site to remain informed.

Conclusion

The Timeliness Project and changes to performance standards and targets have resulted in an increased profile for "timeliness" while maintaining the focus on quality. The Action Plan consisted of 90 action items in the four business lines covering both Headquarters and the Regions. Of the initial 90 items, the Region-specific items are completed, four others are no longer applicable due to business changes, and there are ten HQ-specific action items remaining for which action plans are in place. Completion of the two most significant action items remaining should lead to further improvement in the timely delivery of the programs.

The Appeals Branch has quality assurance processes and inventory tracking mechanisms in place to monitor: status of files, time taken to complete workloads, and accuracy to ensure quality is not traded for timeliness. During the audit, the conversion to a new inventory tracking system was taking place. The new web-based functionality allows HQ and field management to monitor changes in inventories in real-time and has addressed concerns regarding management reporting ability.

Some employees interviewed were unaware of newly developed policies, procedures, intra-branch protocols and the Timeliness Project itself. For example, adherence to timeframes outlined in the protocol could not be ensured, nor the consistent usage of new inventory status codes. Steps are required to ensure all staff are encouraged to access regularly the branch's intranet site for new information.

The Branch has indicated that the overall timeliness in the larger business lines has improved since the implementation of the timeliness action plan. However timeliness remains an issue with the CPP/EI business line. The Branch is working with their program partners to identify inefficiencies in the redress process, risk management of files real-time requirements to complete files, and where files should be handled.

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