Effective Use of Private Collection Agencies

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Effective Use of Private Collection Agencies
Ted London, Director, CGI Tax and Revenue Service
Line July 15, 2008
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Private Collection Agencies as a Tool

• Collection agencies can supplement (unlikely to
  ever replace your collectors
• Proper Management of collection agencies can mean
  the difference between a successful and
  unsuccessful program
• You get what you pay for
• Proactive management approaches greatly increase
  their output and revenue yield
• Private sector in general does a much better job
  maximize the value from their PCAs than
  Government
• besides the collection rate of the PCA can
  validate the work your staff are doing

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Typical Approaches toPCA Management

• Assign to PCA after State staff have had a chance
  to work
• Rules to mandate time before placement
• Cases assigned at a consistent time in the
  lifecycle
• Divide cases evenly between PCAs (or use only one
  PCA)
• 6-12 Months with each PCA to collect

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Timing of Case Assignment

• Review portfolio for best timing for PCA
  assignment
• Alter timing of assignment based on case
  characteristics
• Use of primary and secondary placements
• Review performance results and updating placement
  criteria
• Test and Learn

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PCA Scorecard

• Performance Based Scorecards
• In wide use in the private sector at Department
  of Ed and IRS
• Establishes well defined metrics for PCA
  comparison, normally five to eight metrics
  ranging from number of dollars collected and
  cases resolved to the number of taxpayer
  complaints
• Concept is migrating to the state level
• Generated on a quarterly or semi-annual basis
• Percentage of assignments basedon performance
• Encourages healthilycompetition

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Commission Rates

• Utilize different rates to maximize value and ROI
• Lowest Rate is generally not best
• Require a minimum level of work on cases
• Use risk scores to vary commission rates
• Provide upside on rates for more difficult cases

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Contact Information

• About the Presenter
• 15 Years of experience enhancing the operations
  of State and Federal tax agencies
• Experience with more than 20 different tax
  agencies
• Experience with enhancing collections, audit and
  tax accounting systems and business processes