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pdfTAX PERFORMANCE SYSTEM
ET HANDBOOK NO. 407 4th Edition
TABLE OF CONTENTS
Chapters I - VIII
CHAPTER I
TPS OVERVIEW
Introduction . . . . . . . . . . . . . . . . . . .
Background . . . . . . . . . . . . . . . . . . .
TPS Policy . . . . . . . . . . . . . . . . . . . .
Regional Role. . . . . . . . . . . . . . . . . . .
Overview
...................
CHAPTER II
GENERAL PROCEDURES
Introduction . . . . . . . . . . . . . . . . . . .
Planning for Reviews. . . . . . . . . . . . . .
Conduct Reviews/Surveys. . . . . . . . . . .
Acceptance Sampling. . . . . . . . . . . . . .
Concluding Review . . . . . . . . . . . . . . .
CHAPTER III
III-1
III-7
III-17
CASHIERING
Introduction. . . . . . . . . . . . . . . . . . . . . .
Program Review. . . . . . . . . . . . . . . . . . .
CHAPTER V
II-1
II-9
II-17
II-33
II-44
STATUS DETERMINATION
Introduction . . . . . . . . . . . . . . . . . . .
Computed Measures . . . . . . . . . . . . . .
Program Review. . . . . . . . . . . . . . . . . .
CHAPTER IV
I-1
I-2
I-3
I-10
I-12
IV-1
IV-9
REPORT DELINQUENCY
Introduction . . . . . . . . . . . . . . . . . . .
Computed Measures . . . . . . . . . . . . . .
Program Review. . . . . . . . . . . . . . . . . .
V-1
V-7
V-17
CHAPTER VI
COLLECTIONS
Introduction . . . . . . . . . . . . . . . . . . .
Computed Measures . . . . . . . . . . . . . .
Program Review. . . . . . . . . . . . . . . . . .
CHAPTER VII
FIELD AUDIT
Introduction. . . . . . . . . . . . . . . . . . . . . .
Computed Measures. . . . . . . . . . . . . . .
Program Review. . . . . . . . . . . . . . . . . . .
CHAPTER VIII
VI-1
VI-7
VI-19
VII-1
VII-7
VII-19
ACCOUNT MAINTENANCE
Introduction . . . . . . . . . . . . . . . . . . .
Contribution Report Processing. . . .
Debits/Billings. . . . . . . . . . . . . . . . . . .
Credits/Refunds. . . . . . . . . . . . . . . . . .
Benefit Charging. . . . . . . . . . . . . . . . .
Tax Rates. . . . . . . . . . . . . . . . . . . . . . .
VIII-1
VIII-11
VIII-71
VIII-133
VIII-195
VIII-255
TAX PERFORMANCE SYSTEM
Operations Handbook 407
4th Edition
United States Department of Labor
TAX PERFORMANCE SYSTEM
OPERATIONS HANDBOOK 407
4thEdition
United States Department of Labor
CHAPTER I
TAX PERFORMANCE SYSTEM OVERVIEW
COMPONENTS
INTRODUCTION
BACKGROUND
TPS POLICY
REGIONAL ROLE
OVERVIEW OF HANDBOOK
ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CHAPTER ONE
TAX PERFORMANCE SYSTEM OVERVIEW
INTRODUCTION
The Tax Performance System (TPS) is intended to assist State administrators in improving their
Unemployment Insurance (UI) programs by providing objective information on the quality of
existing revenue operations. TPS will also serve to help the U.S. Department of Labor carry out
its oversight, technical assistance, and policy development responsibilities.
The TPS program is a part of the Department's "UI Performs", a comprehensive performance
system in which the States and Federal government work together as partners to strengthen the
UI system. Other UI measurement programs such as Benefit Accuracy Measurement and
Performance Measurement Review are also a part of this system. One of the primary goals of
the system is to achieve continuous improvement of overall performance quality.
This handbook provides the standard instructions for operating the Core TPS program. This
chapter is intended as an executive summary of TPS background and policy. Chapter II
describes the approach for conducting reviews, while subsequent chapters contain detailed
instructions for review of each major tax function. Appendices containing reference material are
included. An on-line tutorial has also been created at: http://ows.doleta.gov/tps/
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BACKGROUND
In 1983, the Department, upon the recommendation of an interagency Benefit Payment
Oversight Committee, decided to implement a quality control (QC) program for the UI system
administered by the State Employment Security Agencies (States). The first component,
Benefits Quality Control (BQC), now known as Benefit Accuracy Measurement, was
implemented in all States except the Virgin Islands.
Before QC became mandatory, the Department undertook a thorough public policy review of the
intended design. The lasting result of this review was the development of a series of "consensus
principles" by major parties with an interest in the UI program, which the Department not only
accepted but also reflected explicitly in the QC regulation.
State Input
In 1988, the Department began the development of TPS. A small
Federal workgroup was established, assisted by tax specialists
from several States working under Intergovernmental Personnel
Act (IPA) arrangements.
Over the years, major design and many subsequent improvements were
initiated and produced by these State tax experts from Florida, Alabama,
Illinois, Minnesota, Texas, Kansas, New Mexico, Colorado, Utah,
Arizona, California, Oregon, and Washington. The work group also
consulted extensively with the public and outside interest groups.
Numerous States were visited to inform them of the work in progress and
obtain reaction to the design approaches and conclusions. In addition,
Federal Register notices and UI Program Letters were published to solicit
comments on the TPS design. Discussions were also conducted by a
contracting firm with a panel of State tax experts and administrators from
Connecticut, New York, the District of Columbia, Florida, South Carolina,
Wisconsin, Kansas, Missouri, Oklahoma, North Dakota, California, and
Washington.
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Testing the
Design
In 1990, TPS was pretested in eight States (Massachusetts,
Pennsylvania, Kentucky, Oklahoma, Colorado, Illinois, Hawaii, and
Alaska), and pilot tested in eight States (New York, Maryland, the District
of Columbia, South Carolina, Wisconsin, Iowa, Montana, and California)
during 1991 - 1992. Revisions were made to the design based upon the
feedback of those involved in testing the TPS design.
Phasing in
the Program
Effective 1993, a revised operating manual was released and
49 States began to voluntarily implement the program. A video describing
the program was released and four large-scale training sessions were held
to assist in implementation. Unemployment Insurance Program Letter
number 32-94 announced full implementation as a two-phased approach to
begin with the revised ETA 581 taking effect January 1995 and the
balance of TPS to become mandatory January 1996 under the Secretary's
existing statutory authority to require reports and operations data from the
States.
TPS POLICY
The following policy decisions were reached based on pilot testing, and input and comments
from States and other interested parties.
Tax Functions
Examined
TPS will review the following major tax functions:
Status Determination
Cashiering
Report Delinquency
Collections
Field Audit
Account Maintenance.
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Methodologies
The dimensions of quality in UI tax operations are accuracy, timeliness,
and (in some instances) completeness. Two methodologies are utilized
(See Figure I-1).
1.
Computed Measures - consist of reporting the data about
UI tax operations with the bulk of information received from the
ETA 581 reports. These measures, based on reported aggregate
information, are indicators of timeliness and completeness with
which UI tax transactions occur. States report a quarterly series of
data elements, which the TPS data system uses to automatically
calculate the computed measures. Data are provided to the TPS
reviewers so that they may factor them as part of the assessment of
each tax function.
Under separate development is a methodology to validate report
data to ensure that the data mean the same thing in every State.
2.
Program Reviews - consist of Systems Reviews which
examine tax systems for the existence of internal controls, and
Acceptance Samples which examine small numbers of transactions
to verify the effectiveness of the internal controls in producing
accurate outputs. If more extensive review is deemed necessary,
this handbook contains instructions for pulling a second small
sample as well as pulling large, representative samples ("Expanded
Samples") to determine a specific error rate.
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Figure I-1
TAX PERFORMANCE SYSTEM
REVIEW METHODOLOGIES
TAX FUNCTION
COMPUTED
MEASURES
PROGRAM REVIEW
Systems Review/
Acceptance Sampling
STATUS
DETERMINATION
X
X
X
(Estimation Sampling)
CASHIERING
REPORT
DELINQUENCY
X
X
COLLECTIONS
X
X
FIELD AUDIT
X
X
ACCOUNT
MAINTENANCE
X
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Overview of Steps
TPS Review includes the following:
Collect and examine computed measures to identify trends
in the timeliness and completeness of State operations.
Conduct a review to ensure that internal control/quality
assurance systems are in place (Systems Review).
Draw a small sample of outputs or transactions - 60 per tax
function (Acceptance Sampling).
Review the quality of the outputs against uniform standards
of quality (Acceptance Sample Questionnaire).
If two or fewer errors or defects are found in the acceptance
samples, a judgment is made that the State internal controls
are effective in producing quality outputs.
Draw conclusions from Computed Measures, Systems
Reviews and Acceptance Sample findings and prepare
recommendations for improvement.
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Organizational
Placement
State management, in consultation with the Regional Office (RO),
should determine the organizational placement of TPS. The unit
should be placed so as to ensure integrity and acceptance of TPS
data and findings.
Regulations (20 CFR Part 602.20) requires that the program be
"...independent of, and not accountable to, any unit performing
functions subject to evaluation by the…unit." The Regulation
would prohibit TPS staff from reporting to a manager whose sole
or predominant responsibility is to manage an area being evaluated
by TPS.
Staffing
One staff year per State has been allocated in the Grants to States
to perform the TPS review. This effort can be completed by one
full time person or divided among several staff on a part time
basis.
A comprehensive knowledge of the UI tax system is essential in
completing an TPS review. Skills in planning and conducting
reviews of State systems and procedures are also necessary. The
ability to communicate effectively through presentation of findings
and recommendations to line staff and management is critical in
fostering improvements in the State tax operation.
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Major Tasks
Major tasks include the following:
Conducting meetings with management and line staff to
discuss the project and to update on progress and findings.
Developing annual workplans to conduct the TPS review
including coordination of tax and ADP staff involvement
Performing examinations of State internal controls and
verifying their existence through direct observation
Selecting and reviewing samples of outputs from the
various tax functions to test the effectiveness of internal
controls
Evaluating computed measures to determine trends over
time
Preparing annual reports of findings, conclusions, and
recommendations for program improvement. Ensuring that
sample data is entered into the SUN system.
Development and implementation of program improvement
plans based on strategy arrived at by State and Region
Potential travel to other States to assist in conducting
fourth-year Federal TPS reviews (subject to State and RO
agreement).
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Sequencing
Reviews
TPS reviews are conducted on a cyclical basis. Complete reviews
of State internal controls take place every four years unless
problems have been discovered or program changes have been
made within the last year. To confirm that the State's controls are
working effectively and producing accurate outputs, samples of
each tax function's outputs are drawn and examined every year.
(Tax Rates are excluded from the yearly review and subject to a
minimum of one review every four years if they, and related
functions of Report Processing and Benefit Charging pass the
previous year’s review; and no program changes have been made.
If Report Processing and/or Benefit Charging fail a subsequent
review, the Rate sample must be conducted as usual the following
year.)
Technical
Assistance
TPS design encourages extensive technical assistance. As the TPS
reviewer discovers and confirms areas of strengths and
weaknesses, State management can identify internal problems and
take corrective action immediately when remedies are apparent; or
later, after interrelated factors are analyzed.
Participation in the reviews by experts from other States and
Federal staff, and the subsequent exchange of ideas between them
and staff from the host State, can result in secondary benefits to
both parties.
Automation of
Data Collections
TPS provides for the use of automation in several areas to assist in
data collection. Detailed specifications are provided to States for
selecting the various samples and reporting data elements used in
functional indicators. Information gathered as a result of the
review is collected and entered into the State computers currently
being used by Benefit Accuracy Measurement system, and for
processing the Required Reports. TPS software developed by the
National Office is used to assist in the analysis of results.
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REGIONAL ROLE
The Regional Office (RO) staff act as liaisons between the National Office and the TPS
reviewer. The RO will work with the TPS reviewer during all phases of the review process to
answer questions and offer technical assistance. The RO is responsible for ensuring that all
aspects of the review process are being conducted properly and timely. This can consist of
requesting a workplan for the upcoming year and requiring progress reports during the year to
ensure the work is being completed on schedule.
REGIONAL RESPONSIBILITIES DURING ONGOING REVIEWS
Approving requests for waivers of Systems Reviews.
Ensuring state meets guidelines if changing sampling periods.
Allowing the use of “Not Applicable” responses.
Allowing the use of “Other” responses (Compensating Controls).
Ensuring reviewer is adhering to workplan.
Ensuring TPS Annual Report is properly completed and accurate.
In its capacity as liaison between the National Office and the state, the RO is the primary source
of guidance for interpreting TPS policy and procedures. State will direct programmatic
questions and problems to the RO. Questions regarding ADP issues such as sampling frames,
extraction routines and computed measures should be directed to the National Office hotline:
1-800-473-0188.
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As described in the “Sequencing Reviews” section, every fourth year, the RO coordinates a
review utilizing home state and neighboring state staff. They also organize and participate in
reviews and sampling, and are responsible for coordinating the development of the TPS Annual
Report.
REGIONAL RESPONSIBILITIES DURING FOURTH YEAR REVIEWS
Organizing a team to conduct the review.
Coordinating and reviewing completed Systems
Reviews.
Coordinating and reviewing completed Acceptance
Samples.
Coordinating development of the Annual Report.
Text referring to the RO will be italicized in the remainder of the handbook.
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OVERVIEW OF HANDBOOK
The following chapters of this Handbook cover these topics:
General Procedures. Chapter II presents the general instructions for conducting the TPS
Review, including preparation, conducting the review, and reporting findings.
Function-specific Procedures. Chapters III-VIII present detailed instructions for
conducting the Systems Review, reviewing the Acceptance Samples, examining the
Computed Measures, and for drawing conclusions on the strengths and weaknesses of
each tax function. (As shown on Figure I-1, the type of methodology employed differs
from function to function.)
Appendices. Reference materials supporting the review are included as appendices.
They include: sampling specifications, computed measures specifications, the TPS
glossary, an example of an Annual Report, the Employment Security Manual section
regarding Field Audits, and data entry instructions.
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CHAPTER II
GENERAL PROCEDURES
COMPONENTS
INTRODUCTION
PLANNING FOR REVIEW
CONDUCTING SYSTEMS REVIEWS
SAMPLING
CONCLUDING REVIEW
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GENERAL PROCEDURES
CHAPTER TWO
INTRODUCTION
INTRODUCTION
The TPS review is designed as a cost effective means to evaluate the State's UI tax operations. This
chapter describes the general procedures to be followed in conducting the TPS review, and each
subsequent chapter contains the specific data collection instruments to be used for the review of each
tax function. The following major tax functions will be reviewed:
Tax Functions Examined
Status Determination
Cashiering
Report Delinquency
Collections
Field Audit
Account Maintenance
Two different methodologies are provided for evaluating the State tax operation. They can be used
in concert with each other in order to comprehensively assess the strengths and weaknesses of each
tax function. The methodologies are:
Methodologies
1
Computed Measures
2
Program Reviews
Systems Reviews
Acceptance or Estimation Sample
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Figure II-1
TPS ASSESSMENT METHODS OVERVIEW
Program Reviews
Computed Measures
STATUS
DETERMINATION
New determinations within 90 days
New determinations within 180 days
Successor determinations within 90 days
Successor determinations within 180 days
FIELD AUDIT
ACCOUNT
MAINTENANCE
Accuracy of new determinations
Accuracy of successor determ.
Accuracy of inactiv./terminations
New determinations
Successor determinations
Inactiv./terminations
Employer remittances
(*Estimation Sample 500)
Timely reports
Reports secured within 90 days
Reports secured or resolved within 180
days
Accurate identification of
delinquent employers
Take all reasonable actions to
secure/resolve rpt del
Accounts with delinquent
reports
Timely payments
Uncollectible
Accounts receivable
Take all reasonable actions to
manage accounts receivable
Change in total wages
Contributory employers audited
Total wages audited (annualized)
Ensure that audits meet ESM
requirements
Completed audits
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
CASHIERING
COLLECTIONS
Samples (60)
*Cashiering sample 500
Accuracy of employer remittance
processing
Accuracy of posting
NA
REPORT
DELINQUENCY
Systems Reviews
NA
Accounts receivable
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GENERAL PROCEDURES
CHAPTER TWO
INTRODUCTION
Computed Measures
Specific indicators have been developed for the Status Determination, Report Delinquency,
Collections, and Field Audit functions. Data elements for these indicators will be gathered from the
current system used by states to electronically report quarterly data to the U.S. Department of Labor.
These measures will be automatically transformed into indicators of timeliness and completeness by
the TPS ADP system and provided to the TPS reviewer to aid in the final evaluation of state tax
operations.
Computed Measures
Status Determination
.
.
.
.
% New determinations made within 90 days
% New Determinations made within 180 days
% Successor Determinations made within 90 days
% Successor Determinations made within 180 days
Report Delinquency (contrib. & reimb.)
. % Timely Reports
. % Reports Secured within 90 days
. % Reports resolved within 180 days
Collections (contrib. & reimb.)
. % Timely Payments
. % Receivables declared uncollectible
. % Accounts Receivable
Field Audit
. % Total wage change
. % Contributory employers audited
. % Total wages audited (annualized)
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CHAPTER TWO
INTRODUCTION
The timeliness and completeness findings from these indicators should be presented along with the
findings about accuracy from program reviews when evaluating the quality of a particular tax
function in the Annual Report.
Program Reviews
The Program Review methodology is designed to alert the TPS reviewer to the
tax functions that are producing inaccurate, untimely, or incomplete outputs.
This is done as a two-fold process: Systems Review and Acceptance Sampling.
Systems Review
To ensure accurate and timely tax operations, each state has built in various
internal controls and quality assurance systems such as edits and checks,
reviews of completed work and audit trails. However, such systems are not
absolute. The systems themselves could be flawed, or stated policy may not
always be followed. Therefore, the TPS review begins with an extensive
examination of the state's controls, verifying their existence and use,
documenting areas of potential "risk" where controls are weak or nonexistent.
Acceptance
Sampling
To confirm that state controls are producing the desired outputs
(such as accurately determining the status of potential employers, properly
resolving delinquent reports, and following state procedures when collecting
accounts receivable), small "acceptance" or "discovery" samples are
examined for each tax function. Due to the small number of samples, this
test is intended simply to signal potential problem areas in those tax functions
where 3 or more cases are found to fail. It indicates - with a 90% confidence
level - that the particular tax function has an error rate of 8.8% or more. For
more details or to determine a specific level of error, the reviewer may draw
a larger sample (see Appendix A).
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CHAPTER TWO
INTRODUCTION
Review Steps
To conduct the TPS Review, the reviewer will need to complete four major steps: Plan for the
Reviews, Conduct Systems Reviews, Acceptance Sampling, and Conclude Reviews (see Figure II2). The following sections of this chapter provide directions for the review steps. Chapters three
through eight provide TPS data collection instruments for the review of each major tax function.
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Figure II-2
OVERVIEW OF REVIEW STEPS
I.
a.
b.
c.
d.
e.
PLANNING FOR REVIEWS
Review All TPS Materials
Ensure that Records are Retained
Schedule and Conduct Introductory Meetings
Lay Groundwork for Reviews and Computed Measures
Develop Workplans for Reviews
II.
CONDUCTING SYSTEMS REVIEWS
a.
b.
c.
d.
e.
III.
ACCEPTANCE SAMPLING
a.
b.
c.
d.
e.
f.
g.
IV.
Begin Reviews
Gather Information
Verify the Source of Information
Complete the Systems Review Forms
Complete the Program Review Chart (preliminary)
Select Samples
Replace Missing Cases (if needed)
Review Samples
Post Coding Sheets
Prepare Preliminary Findings
Select and Examine Expanded Samples (if needed)
Sampling by Exception
CONCLUDING REVIEWS,
a.
b.
c.
d.
e.
Assess Computed Measures' Findings
Complete Program Review Chart
Prepare Draft Report
Conduct Exit Interview
Prepare Annual Report
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GENERAL PROCEDURES
CHAPTER TWO
PLANNING FOR REVIEWS
I. PLANNING FOR REVIEWS
a. Review All TPS Materials
To complete the Program Review, the reviewer must be thoroughly familiar with the TPS review
procedures. Knowing the required review steps of Computed Measures, Systems Review, and
Acceptance Sampling will allow the reviewer to conduct all necessary activities without undue
delays. Understanding the review questions is also essential to building reviewer credibility. If the
reviewer is not knowledgeable, respondents may think their time is being wasted and be less
cooperative.
The reviewer should thoroughly examine the materials in this handbook and other TPS background
materials before contacting the state UI tax staff regarding the review. If there are any questions,
please call the Regional TPS staff for clarification.
b. Ensure that Records are Retained
Upon familiarization with the TPS design, the reviewer must ensure that the state is retaining the
necessary records from the specific tax functions to such a degree as to allow all Acceptance Sample
questions to be answered (e.g., paper copies, imaging, microfiche, back up discs, etc). If employers
are registering and reporting electronically, or entering data directly into the state’s automated
system, the exact information entered must be recorded by the state, along with an electronic audit
trail including the entry’s date and identity of the employer or representative entering the data.
For example, in the Status Determination chapter an Acceptance Sample question asks if, at the time
of the TPS review, evidence exists the account had been correctly set up. In this instance to
properly answer the question the state must have retained sufficient documentation for the reviewer
to make that determination, whether examining the registration form or a printout of an electronic
data screen which captured the original information entered by the employer. Another question
asks if the employer provided all the information that is material to the Inactivated/Terminated
Determination. For the reviewer to properly answer this question, documentation authorizing the
termination must exist. Such documentation may be found in the form of a letter for the termination
from the employer, or a report from state field staff indicating the business is closed, or on a
computer listing of accounts terminated after the required quarters have lapsed with no reported
wages.
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GENERAL PROCEDURES
CHAPTER TWO
PLANNING FOR REVIEWS
It is the responsibility of the TPS reviewer to become knowledgeable about the information
requested in the Acceptance Samples and ensure if the State is not currently retaining the
information that arrangements are made to do so. In each chapter's Acceptance Sample instructions,
information is provided that will also assist the reviewer in clarifying what work product must be
retained by the State.
At a minimum, documentation must be recorded and maintained until the TPS Annual Report has
been reviewed and approved by the Regional Office. The records can be retained in their original
hard copy form, on microfiche or any other means that provides sufficient detail; or the State must
maintain an audit trail which permits the reviewer to follow the flow of the work in complete enough
detail so as to allow the Acceptance Sample to be answered in full.
c. Schedule and Conduct Introductory Meetings
The next step of the TPS review is to meet with the UI Director and the Tax Chief to ensure
management support for scheduling and conducting the review. In addition, the State administrator
who will deal with the reviewer in terms of TPS findings and recommendations must be identified.
A meeting should be scheduled with all appropriate personnel including unit supervisors and ADP
staff to discuss the review, to request necessary materials, procedures, charts, etc. and to ensure that
data processing staff are informed of their involvement in the creation of sampling universes and the
processing of computed measures.
At both administrative and tax staff meetings the TPS reviewer must explain the purpose and content
of the TPS review. It should be explained that the primary purpose of the review is to produce
information for the State to use to improve the quality of their revenue operation; and that the
secondary purpose is to make a formal judgment about whether reasonable assurance of quality
exists in each of the functional areas.
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CHAPTER TWO
PLANNING FOR REVIEWS
Other items to explain include:
the tax function subjected to review
the role of Computed Measures
the role of System Reviews, Acceptance Samples and
Expanded Samples
the steps of the review
the highly detailed nature of the review including the
need to identify information sources to verify findings
Other activities to be covered at the initial meeting with unit supervisors are:
Providing copies of all review documents to the units involved in the
review. This includes the individual tax functions (i.e., the Status
unit, Cashiering, Delinquency unit, Field operations, and
Accounting), as well as the Data Processing section.
Drafting a Flow Chart of the Tax Operation to serve as a road map to
the TPS Program Review. It should show units responsible for each
function and subfunction which will be reviewed and should identify
the individuals to contact about each. This will also guide the
reviewer in scheduling interviews, and clarify the operational flow of
the tax functions.
Arranging to obtain materials describing the State's revenue
procedures and rules. These materials should include UI Tax laws
and regulations, manuals, and other written descriptions of
organization and procedures.
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GENERAL PROCEDURES
d.
CHAPTER TWO
PLANNING FOR REVIEWS
Lay the Groundwork for Reviews and Computed Measures
The first objective of the reviewer is to learn enough about the applicable laws, rules and regulations
of the State tax operation to effectively plan and administer the TPS review. The reviewer will
complete the following tasks as part of the preparation:
Examine the data elements for Computed Measures. The reviewer
must ensure that they are being gathered and that Federal definitions
are being interpreted and reported as intended.
Complete or update the Organizational Chart. The TPS review will
examine six tax functions in every State, but each State's tax agency
is organized differently. Some agencies may call these functions by
different names or have parts of a single function managed by many
different units. By understanding who does what, the reviewers will
become familiar with the specific structure of the State's Revenue
organization prior to conducting the review.
Listing the staff to contact for information on each TPS subfunction
will provide the reviewer with an understanding of the structure of
revenue operations.
Assemble and review the materials including State's organization
chart, laws, regulations, manuals and procedures. Many questions in
the Program Review materials ask the reviewer to determine whether
State procedures ensure that staff are correctly applying State UI tax
laws and regulations. Questions on Recorded Information &
Instructions ask whether such documentation reflect accurately and
completely the current laws and regulations.
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To prepare to answer these questions the reviewer should examine
State UI tax laws, regulations and other written policies. These
materials may be lengthy. If the reviewer is very familiar with the
TPS review instruments it should be possible to identify those
sections of State law and regulations which are most relevant. The
reviewer might develop a reference sheet prior to conducting the
review which could note key features of the State law, citations, and
dates of enactment.
If an audit of the State has been recently performed by groups or
firms outside the State tax area, the reviewer should examine the
findings and the State's response to those findings. Information from
the findings can aid the reviewer in developing a comprehensive
understanding of the State's tax operation. Since audits are financial
in nature, their focus is likely to be different from that of the TPS
review. Therefore, the existence of a recent audit will not replace an
TPS review.
During the preparation for this review, the reviewer should determine if there might be any questions
in the Acceptance Sample Questionnaire which have no material effect on the current or future
payment of UI tax.
If such questions are identified in the Acceptance Samples, the State will need to coordinate with the
Regional representatives to obtain necessary approval to enter a code of "Not Applicable" one time
for the entire column deemed not material. Regions will produce a brief memorandum attesting that
due to State regulations, a particular question is Not Applicable. This memo will be attached as
part of the State's Annual Report.
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e. Develop Workplan for Reviews and Schedule Interview
A central part of the preparation and workplan development will be to schedule all
interviews, Acceptance Sample reviews, and meetings with agency staff. The
reviewer should develop a workplan which lists dates of review activities. The
workplan should include starting dates as well as target completion dates for review
of Computed Measures findings, Systems Reviews, Acceptance Sampling and
completion of the Annual Report.
During the implementation of TPS, an integral part of the preparation and workplan is the
examination of the Acceptance Sample universe time frames and required identification dates to
determine whether each universe is to be identified by the "build as you go", or the "identify after
the fact" method (see Appendix A).
The workplan should ensure that all required review steps are anticipated, that data processing is in
simultaneous progression, that the State tax staff know when to expect review activities, and that all
parties know whether the review is on schedule.
The contact person for each tax function should be informed of progress and findings so that no
misunderstandings arise, and be made aware of any problem areas in the units as soon as possible.
In States where tax functions are spread out over many different locations, the reviewer should
factor this into planning. Ideally, all locations should be examined each year, but if this is not
possible, the reviewer should plan to visit a number of different locations each year, so that by the
end of the four year Systems Review cycle, each location has been visited and evaluated.
The reviewer will submit a workplan for each upcoming year to the RO. The RO will require
progress reports to ensure that projected work is being completed on schedule, to the extent
possible, and that the TPS Annual Report will be completed on time.
(Figure II-3 displays anticipated scheduling of Acceptance Sampling.)
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Figure II-3
Figure II-3, done on "Pagemaker," will be inserted on this page. It was originally recorded as
C:\document\PMDOCS\TPS\exhib2-5.PM5, but this filename has been changed and Bob Timms has
the correct filename.
ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
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CHAPTER TWO
SYSTEMS REVIEWS
II. CONDUCT SYSTEMS REVIEWS
a. Begin Systems Review
The Systems Review is an organized assessment of each State's internal controls or quality assurance
systems. The presence of these controls should ensure that the State's UI revenue transactions are
processed accurately.
A system of "internal controls" is typically based on methods and policies
designed to prevent fraud, minimize errors, promote operational efficiency,
and achieve compliance with established policies.
A "quality assurance review" system is a periodic review, generally
conducted at a point in the process where errors are likely to occur. The
review may be performed by an individual or team within or outside the unit,
to measure the performance of a function and make recommendations for
improvements where warranted.
The internal controls included in the TPS Systems Review are based on the standards set for auditing
which were published by the General Accounting Office (GAO/AIMD-00-21.3.1, Nov 1999). In
each chapter of this handbook, internal controls will be modified as they relate to each particular tax
function. Universal criteria are described below with added clarification.
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States should have the following types of internal controls:
Recorded Information and Instructions
Training Systems
Recording of Transactions and Events
Execution by Authorized Individuals
Systems to Assure Execution of Events
Review of Completed Work
Recorded
Instructions
The State establishes requirements, rules, and procedures to implement
laws and regulations. Information about systems and procedures which guide how
work is to be performed should be clearly documented and readily available for
examination. Relevant information should be available to the appropriate staff
both at the central and field offices. Recorded information and instructions should
be sufficient or complete enough to ensure that personnel can learn and
understand their jobs and perform their duties properly. Instructions should also
be up-to-date, reflecting current procedures or laws
Recorded information may include manuals, handbooks, desk aids, computer help
screens, training guides, organized collections of procedures or policies, or other
readily accessible instructions which can help staff do their work correctly.
Instructions will normally include both general information such as compilations of
relevant laws and regulations, as well as detailed instructions for carrying out individual jobs in the
agency. This means that reviewers may need to look in many places to examine all relevant
instructions.
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Training Systems
CHAPTER TWO
SYSTEMS REVIEWS
Managers and employees responsible for key decisions should possess and
maintain a level of expertise which enables them to accomplish their
assigned duties. Training systems should be sufficient to ensure that
personnel understand and perform their duties properly. (New employees
should have some form of training, and experienced employees also
benefit from refresher courses.)
When reviewing training systems, reviewers must look for formal training
procedures (e.g., the training is conducted using an established schedule
and using set guidelines to make judgments about the quality of work being produced). There
should be procedures for identifying general and specific training needs and for delivering
training as needed.
Recording of
Transactions and
Events
Transactions and other significant events are to be recorded and properly
classified. The entire life cycle of a transaction or events should be
promptly recorded. This includes recording the action which initiated the
transaction(s), recording the transaction(s) that took place and recording
the end result.
Whether systems are manual or automated, audit trails are necessary so
that original information is recorded and retained. Hard copies,
microfiches or imaging of original information can provide audit trails.
For employers filing or reporting electronically, on disk or tape, a copy of the reported
information loaded into the employers’ account/file would be considered an “original”
document and provide an audit trail. Subsequent changes or deletions to the file must also be
recorded. If the reviewer comes across a system which simply overlays new information over
the original, without any apparent provision for an audit trail, the IT unit should be contacted
to locate back up files such as tapes, disc, etc. of the computer program runs. The IT or
Internal Security units should be able to explain how original information is recreated (short of
running every back up tape), and the method used to catalog information so that the reviewer
can be assured he or she is looking at original, versus adjusted, information.
Electronic source data will not have the same appearance as the more-familiar paper document
versions. For the TPS reviewer to understand and identify information when examining a
string of fixed width fields in various data rows, the IT unit may have to provide a data
dictionary, or assist in deciphering record specifications.
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Reviewers will determine whether State audit trail requirements
provide for the classification and prompt recording of all significant
events. The reviewer will also need to determine whether records are
readily available to be used as needed for agency operation and
management review.
Execution by
Authorized
Individuals
Transactions and other significant events are to be executed
only by persons acting within the scope of their authority. Only
authorized individuals have access to and accountability for resources
such as employer remittances.
Reviewers will determine whether State requirements provide for the
execution of significant events by only authorized individuals.
Systems to Assure
Execution of Events
Systems and controls such as monitoring procedures, exception
identifications, checks and balances, reconciliations and edits should
be routine in operational procedures. Automated or manual exercise
of these controls as an integral part of program operations assures
accurate and timely execution of transactions and events.
Reviewers should determine if such program management systems
have been built into the State revenue operation.
Review of
Completed Work
Qualified and continuous review is to be provided to ensure
that objectives which are material to the proper payments of tax are
achieved. The following tasks are involved:
Systematic review of assigned work on a regular, ongoing basis.
Systematic review to determine whether systems and procedures
are working as intended.
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Review of completed work can take many forms. It may be traditional
supervision where a manager reviews and approves the work outputs of
immediate subordinates. For some functions, such as cashiering, supervisory
review may take the form of checking to assure that reconciliations are being
performed. Other agencies may use peer review or quality assurance
techniques where representative samples of the work of a tax unit are
periodically reviewed, and based on the review, new procedures, training or
assignments are implemented to improve quality.
Not all tax functions are similarly affected by each internal control. Completing the TPS Systems
Review questions for some internal controls like Recorded Information and Instructions, and
Training may be repetitive in States where the same people (e.g., Technical Support Services or
Training Section) provide different training for various units; or where there is only one manual,
handbook, etc. for the entire tax operation.
Most of the questions in the Systems Review guide are evaluative. If the reviewer can not confirm
that a particular control exists and that no other compensating control exists, a weakness is presumed
to exist in the system and the State is judged to be at "risk". Some Systems Review questions are
non-evaluative and for informational purposes only. Lack of these controls does not put State at
risk. These informational questions, identified by an asterisk (*), are planned to be used to provide
technical assistance for States in their various tax functions.
Note that if a State elects to operate with a weakness/risk in its system and no major changes have
been put in place, the reviewer does not have to perform another Systems Review on that tax
function the following year. However, that tax function will be deemed at “Risk” until the problem
is resolved.
While it is important to identify areas of strengths and weaknesses for program improvement - the
final evaluation is based on the Acceptance Sample findings, not the Systems Review. The
design of Program Review focuses on the downstream effect -if there is no material effect on current
or future payment of UI tax (as evidenced by the sample results), then the State has reasonable
assurance of a quality tax operation.
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b. Gather Information
The Systems Review is directed and organized by a set of fact finding questions and
narratives. They are not intended to be "interview instruments" where the contents
of a dialogue between the reviewer and State staff are simply recorded. Rather, the
questions and narratives should serve as a vehicle for reviewers to record and verify
information from many sources about the systems and controls States have installed
to assure accuracy and timeliness in their tax operations. The reviewer will use and
probe as many sources as necessary to come to conclusions as to the proper answer
to each question.
A typical Systems Review will require the reviewer to gather information from three sources:
Examinations of manuals, handbooks, laws and other
documentation
Interviews with State staff
Direct observation
The reviewer will need to use all of these sources to complete the Systems Review, and in most
cases will need to go back and forth between the sources to fill in gaps. For example, a reviewer may
have an idea of the responsibilities of an individual staff member based upon a review of the desk
procedures for the person's job. Later, when interviewing the person the reviewer may hear a
different description of the responsibilities. By returning to the documentation the reviewer can
clarify the answers to the questions and identify additional questions which need to be asked to
avoid any confusion.
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Examination of Documentation. The least intrusive means of data collection
is review of documentation. By examining materials describing agency
practices the reviewer can obtain preliminary answers to Systems Review
questions without bothering agency staff or interrupting their work. More
importantly, when it does come time to interview staff, the reviewer will get
more accurate answers if he or she is credible.
The reviewer must be knowledgeable about both the TPS process and agency
procedures to assure the respondents that their time is not being wasted.
Review of documentation will help the reviewer become familiar with
agency procedures and terminology.
Interviewing Staff. A major source of information for the Systems Review
will be discussions with State staff who are familiar with the tax function
being reviewed.
While the questions in this handbook are a start, they should not be the end.
The reviewers will need to ask additional questions to be sure they fully
understand the responses. They also need, in most instances, to speak with
several staff persons to get full answers to all questions. Additionally, they
may need to come back to some questions later if they cannot verify the
response by examining documentation or by directly observing the system at
work.
Direct Observation. The review of documentation and interviews with staff
will leave the reviewer with an understanding of the way systems
"are supposed to" operate, or the way administrators think they are operating.
It is the reviewers' responsibility to assure themselves, through direct
observation, that the systems actually operate that way. Any number of
methods exist to observe a process, including: (1) reviewing reports,
calculator tapes and other evidence of a procedure, (2) observing a process
on-site, or (3) checking for the presence of a procedure while reviewing the
Acceptance Sample.
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All Systems Review guides begin with a form to list people and documents that have been reviewed
(Interview Sheet). This list is to be kept up to date as the review proceeds. The list will help other
reviewers in subsequent years in conducting their review by serving as a recorded register of
information sources used in support of the review effort. (It should be part of the TPS workpapers,
but does not have to be submitted with the Annual Report.)
c. Verify the Information Obtained
The reviewer is expected to document the evidence obtained to support
each "Yes" answer in the Systems Review checklist. Informational
questions (marked with an asterisk) do not require any verification since
they are not evaluative. This evidence will be recorded for each question
or clusters of related Systems Review questions as the "Verification
Source", often noted on the forms simply as VS. The Verification
Source should be the most direct evidence to support the answer recorded. Only when no
other source is available will the verification source be solely the response from an interview.
In completing the Systems Review, verification of some answers may only be possible after
examining a sample of outputs or after completion of the Acceptance Sample (e.g., to answer
whether certain actions taken by field audit staff are being documented in their audits). The Systems
Review will be in final form only after completion of Acceptance Sampling. Following are several
examples of appropriate review activities and verification sources for specific areas of inquiry:
Question: Does the State have recorded information and instructions to assist employees
performing Status functions in each category in accordance with State laws and written
policies?
Review Activities: Read the manual, handbook, or procedures that were assigned to
employee; interview staff to confirm use, etc.
Verification Source: Record the precise name and section or page number of
documents containing information and instructions for making status determinations.
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Question: Does the State use Employer account number edits (e.g., hash totals, check
digits) to assure accurate processing of employer contribution reports?
Review Activities: Read recorded instructions; interview staff to confirm or
modify knowledge of how system works; and observe computer edits while in
process for inputting reports or review system rejects.
Verification Source: Record the procedure or evidence observed (e.g., observing
actual inputting of contribution reports using hash totals or check digits, or
checking system edit rejects).
Question: Is there a systematic review of the accuracy of new employer status
determinations? If yes, what type of review? (e.g., supervisory, peer, quality review,
etc.)
Review Activities: Review procedural manual; interview supervisor and
employees; and use Acceptance Sample to look for initials on forms or other
evidence that supervisory review occurred. If Quality Review (QR) System is
said to exist, review the procedures, interview QR supervisor and employees, and
examine the evidence that review occurred or observe actual test run in process.
Verification Source: Record the procedure or evidence observed (e.g.,
supervisor's initials on forms, or observation of actual Quality Review in process).
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Question: Does the State have a means to assure prompt deposit of checks that must be
removed from normal processing (suspense account/exception file) due to problems (i.e.,
reports received from new employers whose liability has not yet been determined, or
reports with no employer account number, etc.)?
Verification Test: Review procedures State uses and select several employer
remittance items at random with unidentified employer account numbers from
their suspense account or exception file at beginning of the quarter, and at end of
quarter check to see what disposition has been made of items selected for the
sample.
Verification Source: Record suspense account procedures used by the State and
note the findings of the verification test conducted.
Question: Is there an automated system indicator to identify accounts that are
delinquent?
If yes, is a system check performed every time a program is changed?
Verification Test: Interview programming staff as to the frequency of program
changes. (These may be infrequent.) If programming changes are occurring,
observe system checks to verify accuracy. If no programming changes are
occurring, interview programming staff on the process that would be followed to
verify changes are made properly.
Verification Source: Record observations if programming changes have
occurred. Document interviews with programming staff if no changes have
occurred.
Verification Sources should be listed in detail for each question. If a particular control or quality
assurance measure can not be verified (and no compensating control can be identified), the
answer to that Systems Review question will be "No", and the reviewer will have identified a
"risk" in that tax function. It should be clearly noted on the Systems Review coding sheet and
referenced in the comments of the Annual Report.
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d. Complete the Systems Review Forms
For each tax function, System Review forms are provided in this handbook. They consist of the
review form, coding sheets, and narratives. Several common features of the forms are described
below.
Review Form. Most questions on the form are answered either Yes
or No; however, some questions request a particular number or a
percentage. The reviewer should record the correct answer to each
question based upon review of all sources of information.
Some questions on the form provide for "A" (Not Applicable), which
should be used only when appropriate. An example of using an "A" could
be the answer to a Review question in Account Maintenance which states,
"Does the State apply a tolerance level for differences between amount
due and amount received?", when the State does not use a tolerance level
for such discrepancies.
Some questions ask the reviewer to explain or describe something. Space
is provided to write answers out in their entirety.
Questions marked with an asterisk (*) are for information only and are
non-evaluative. (NOTE: a portion of a question may be asterisked,
but other, sub components of the same question such as
"a.","b.","c.", etc. may not be asterisked. In such a circumstance,
only the asterisked portion is non evaluative.) Informational questions
in the Systems Review are not evaluative and do not require verification
or explanation of "No" responses.
Coding Sheet. Data entry procedures described in a separate handbook.
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Narratives. The System Review forms provide a narrative section
following each set of internal control questions to explain any "No",
"NA" or "Other" responses or exceptions that the reviewer thinks warrant
further details. Should there have been a Compensating Control that has
been identified, verified, and authorized by the Regional staff as an
appropriate control, it must also be described here.
Additional space at the end of each tax function's Systems Review is
provided to describe any exemplary procedures or practices used in a
particular tax function. If additional controls were identified beyond those
mentioned in the TPS review, they are to be described as well, and this
form is to be sent to the Regional Office who will transmit it to the
National Office at the end of the Program Review as technical assistance.
e. Complete the Program Review Chart (preliminary)
The Program Review Chart serves to compile the results of the Systems Reviews and
Acceptance Sampling. Upon completion of the Systems Review, enter the preliminary findings
on the Program Review Chart (Figure II-4). There are three possible entries for the Systems
Review findings - the State's system of internal controls could be: (C) Complete, (R) Risk
identified, or (O) Other Compensating Control identified. (Note: Later, after completion of the
Acceptance Sampling, if any case has been found to be unacceptable, yet the System review was
coded as "Complete", the reviewer may need to review the systems again to resolve the
inconsistency between the Systems Review and the Acceptance Sample findings. Such
additional review may yield some revisions to the Program Review Chart to identify the
particular systemic weakness which caused the case to fail.)
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Complete
For each tax function, record "C" if all internal controls and quality
assurance systems listed in the Systems Review were in place. This means that
all evaluative questions were verified (VS) and answered "Yes", except for
questions marked "Other"; and questions which are marked with an asterisk
(because they are non-evaluative).
Risk
If any "No" answers appear in the Systems Reviews, it identifies a potential risk
or weakness in that area of State controls. The reviewer must enter an "R" to
signal the area of risk. The actual significance of the problem may not be evident
until a sample of outputs is examined during the Acceptance Sampling phase of
review. If any sample cases are coded as having "failed", the reviewer can
quickly scan the Program Review Chart for the presence of an "R" to see what
may have caused the problem.
Other
If a "No" answer is entered for a particular control, but the State has an "Other"
control thought to compensate for this weakness or risk, the reviewer must
examine the control, verify its existence (VS), and describe it in the spaces
provided. Regional staff must agree that the control adequately substitutes for the
missing control. (Acceptance Sampling results should aid in this decision.)
An example for using "other" might be a State which does not reconcile total
benefits charged with benefits paid to ensure accuracy of their charges.
Normally, this would result in a "Risk" in their system of internal controls.
However, a legitimate compensating control could be the State's system of
sampling each potential charge allocation scenario on a random basis to confirm
accuracy. TPS's Acceptance Sampling would confirm the effectiveness of the
State's control and no "risk" would be assigned. An "O" is to be entered after the
final judgement is made by the Regional Office that this Compensating Control is
adequate.
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State :
Review Period :
Figure II-4
PROGRAM REVIEW FINDINGS
Sampling
Systems Review Verified Controls for:
Tax Function
Recorded
Instructions
Training
Recording
of Events
Authorized
Individuals
Execution
of Events
Review of
Work
EXCEPTIONS
COMPLETE
Contr
Contr
Reimb
Reimb
*
STATUS DETERMINATION
New
Successor
Inact/Term.
CASHIERING
REPORT DELINQUENCY
COLLECTIONS
FIELD AUDIT
ACCOUNT MAINTENANCE
Contrib Rpt Processing
Employer Debits/Billings
Employer Credits/Refunds
Employer Charging
Employer Tax Rates
SYSTEMS
REVIEW:
C = All controls verified as present
SAMPLING EXCEPTIONS: S
R = Risk, 1 or more controls missing
I
O = Other control compensated for
E
missing control (requires Regional approval)
F
W
= Size of universe too small
SAMPLING COMPLETE: P = Passed
= Invalid universe or not sampled
F/# = Failed/ # of Cases Failing
= Exemption, tempo (Exp Rate only)
F/I = Failed/ Invalid or not sampled
= Failed due to missing case information
F/M = Failed/ Missing case information
= Waived, tempo (requires Regional approval)
N = Not marked complete
U = Undeterminable (Cashiering only)
*
= Out of tax unit’s authority
ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
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CHAPTER TWO
ACCEPTANCE SAMPLES
III. ACCEPTANCE SAMPLING
a. Select Samples
Acceptance Samples are not meant to stand alone. They are to be the means of confirming the
performance of a system whose internal controls have already been assessed by a Systems
Review. If risks have been identified in the Systems Review, the samples will likely verify that
system outputs fail to meet minimum levels of accuracy or completeness. If a system is deemed
to be risk-free, samples of outputs should confirm this fact. For these purposes, it is not
necessary to draw large samples for estimating the defect or error rate. Large samples are costly
and time consuming. Since the purpose of the samples in the TPS Program Review is to verify a
level of performance, much smaller samples can be used.
In assembling files from which samples will be selected, the state must ensure that they are
randomized, or that a randomized algorithm is used before the sample is selected.
Once the Systems Review is complete, draw a sample of 60 cases from each tax function to
confirm that system outputs meet minimum levels of accuracy or completeness (e.g., all
appropriate actions are being taken to resolve delinquent reports, and field audits meet ESM
requirements).
The desired accuracy/completeness level is 98% - that is, 98% of the tax function’s outputs or
work products should be accurate. For a tax unit operating with an underlying accuracy level of
98%, there is an 88% chance that two or fewer errors will be discovered in a sample of 60 cases.
As the tax function's underlying accuracy level increases, there is a proportional increase in the
chances of passing. Conversely, as the tax function's accuracy level decreases, the more cases in
the sample are likely to fail.
The failure of three or more cases is reason to conclude that the exception rate for that function is
at an unacceptable level. As the graph below shows, tax functions with accuracy levels below
98% still have a chance to pass the sample review, but the probability of passing rapidly
decreases as the underlying accuracy level decreases. For instance, if the underlying error is 9%,
there is only an 8% chance of passing the sample.
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S
b. Case Removal or Non Use.
There are three instances where cases may not be used, or case removal may be necessary.
1. The particular case selected should not have been in the universe to be sampled. Note that this
should not occur if, when developing sampling systems, the universe files were properly reviewed.
There may be instances when the universe was not assembled correctly. For example, when
building the universe of Collection cases, an account receivable which had less than $100.00 unpaid
UI tax due, could be inadvertently included. (The universe should consist of $100.00 or more in
unpaid tax.) However, it is important to have some evaluation of each tax function if at all possible.
If cases that should not be in the universe are selected, do not replace them; instead, continue
extracting samples. As long as the sample contains a minimum of 53 valid cases (i.e., cases that
meet the universe definition), two cases can still fail and the results of the Acceptance Sample will
remain consistent with that of 60 case samples. In such instances, the Regional Office needs to
notify the National Office, which will ensure that the SUN system accepts such modification on a
case-by-case basis. If the sample size drops below 53, that tax function cannot be evaluated
The IT section should be alerted in order to make modifications for future sampling efforts. The
reviewer must then advise the Regional Office to ensure that future universes will be sound. Note
must also be included in the Annual Report of the problem as well as corrective action steps taken
to rectify the situation.
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ACCEPTANCE SAMPLES
A non-evaluated tax function can not be found to have reasonable assurance of quality and will
be counted as a failure. Code the Program Review Findings Chart’s Sampling Exceptions cell
with an “I”. This will generate a failing score in the tax function’s Sampling Complete cell.
The only permissible exceptions for non-sampling are universes that are too small (“S”),
Experience Rate samples not due for a review (“E”), or Federally-approved waivers (“W”).
2.
In Collections, any cases selected that had been subject to a TPS review the previous
year, for which no subsequent debt was created, should be removed.
3. The particular case selected cannot be reviewed due to a missing case folder, or other
documentation is missing, such as the microfiche or image of source documents. Sometimes
documents cannot be found in order to make a ruling on the case's accuracy. Records may
have been destroyed through circumstances beyond control (e.g., fire, flood, etc.). The
documents may be misfiled or "checked out" to some other staff member and cannot be found.
In instances of this type removal is allowed for one and only one lost case.
Before removal the reviewer must: Assure (to the extent possible) that the work on the
case was actually done, and make every effort to find the information. Check all possible
places/ persons where the information could be located. Inform the Regional Office of the
removal.
If a second case in the sample is missing then the reviewer cannot reach a conclusion
that there is reasonable assurance of accuracy, and the entire sample will fail. The
failure will count towards the total number of tax functions that have failed TPS quality
review. Code the Program Review Findings Chart’s Sampling Exceptions cell with an “F”.
This will generate a failing score in the tax function’s Sampling Complete cell. Further
details on the finding can be explained in the Annual Report.
While the review may stop at this point, tax managers may wish to continue the review in
order to get an unofficial assessment of how the tax function is faring or to see the extent of
missing documentation.
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c. Review Samples
Once the sample is selected, each case in it must be reviewed, using the
appropriate sample questionnaire. Each questionnaire contains a series
of questions which must be answered for each case to determine
whether it is correct.
One of the more difficult aspects of rating the cases involves deciding
whether or not a given case is acceptable. For some transactions, the decision is relatively
simple. For example, if a given employer contribution was not credited to the proper account in
the right amount, then the transaction is not acceptable. However, Status Determinations,
Collections, and Field Audits have many more elements in them. Some of those elements may
be incomplete or inaccurate without materially affecting the accuracy of the outcome. In each
function, every effort has been made to identify the essential elements for analysis and to
exclude unnecessary elements.
Any question that the reviewer and State has about materiality of an element should be resolved
with Regional staff as per the earlier Planning for Reviews section.
Note that if a sample case uncovers that something was done in error, but that the error was
subsequently discovered and rectified due to the State's internal controls, the case would not fail.
If, however, the error is rectified due to the employer bringing it to the State's attention, the case
fails.
Appeals When a case appearing in the sample is under appeal, the review procedure should not
be affected when the reason or basis for an appeal or its outcome is not germane
to the purposes of the review. However, the appeal is a structured legal
proceeding. The reviewer should determine if the agency has followed
established procedure up to the point at which the case is being reviewed.
d. Complete the Acceptance Sample Coding Sheet
The answers to the Acceptance Sample Questionnaire questions should be recorded on the
coding sheet for the respective function. The coding sheet allows space to record an answer for
each question on the questionnaire. Most questions are coded Yes or No; however,
some questions on the form provide for "I" (Information Not Available) or "A" (Not Applicable)
which should be used only when appropriate.
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Information
Not
Available
There may be instances when information is not available. For example:
There is a question for the Collections sample which asks, "Were telephone
contacts made...for the most recent quarter of liability?". It cannot be answered
"yes" if no evidence can be located in the employer file to confirm a specific
telephone call. However, if a letter referencing a previous phone call is found the
TPS reviewer may draw the conclusion that such a phone call had probably been
made. Under such circumstances "I" would be the appropriate answer. If no
evidence exists that a phone call was made, yet State procedure requires one be
made, then the answer to this question would be "No". This is a judgment call on
the part of the reviewer, based on the information at hand and an understanding of
the State's particular policy regarding collections procedures.
Not
Applicable
Acceptance Sample questions are to be answered "A" only when appropriate.
This means that an "A" response is acceptable only if the State does not utilize
that process in their tax operations.. Regional Office approval would be sought
and this question would no longer be asked of the State.
The second instance when an "A" response would be acceptable is when the
process being reviewed was unnecessary in the case being examined. In the
Collection chapter a question is asked, "Did State procedures require enforcement
actions be taken to collect?" An example when "A" would be appropriate is if the
money was received after a couple of calls and further enforcement action was
unnecessary.
When all cases have been reviewed, the total number of acceptable cases should be entered at the
bottom of the coding sheet. At this time, the reviewer may wish to begin the process of entering
sample data into the SUN system.
An Acceptance Sample Explanation Sheet has been included in each chapter. Any sample case
that fails should be identified, and the potential responsibility for its failure should be noted.
This will assist reviewers later when they attempt to correlate systemic weaknesses with
resultant inaccuracies in various tax functions' output.
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e. Prepare Preliminary Findings and Meet with State Staff
At the conclusion of the Systems Reviews and Acceptance Sampling, the
reviewer should complete the Reasonable Assurance Chart and draw
conclusions as to whether the State has accuracy in all of the functions
examined. (Soon after each review is finished tax managers should also
be made aware of any problems that may have been found so they can
clarify any misunderstandings or begin to consider potential program
improvement strategies.)
Systems Reviews and Acceptance Sampling results are complementary. There are four possible
outcomes after both procedures have been conducted: If no risk was found in the review of State
controls, passing Acceptance Sampling is a consistent outcome. So is the situation of having
identified risks in the State's internal controls and having failed sampling. However, findings of
risk coupled with passing sampling; and findings no risk and failing sampling are inconsistent
and require analysis and explanation.
SYSTEMS REVIEW
ACCEPTANCE SAMPLE
No Risk Found
Pass (consistency)
Fail (inconsistency)
Risk Found
Pass (inconsistency)
Fail (consistency)
The reviewer must take whatever steps are necessary to make the findings from the Systems
Review and the Acceptance Sampling Review rational and consistent. For both inconsistent
outcomes, additional analysis will be necessary to resolve the findings or provide an explanation
for the inconsistency. Only then is the reviewer finished with preliminary findings.
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ACCEPTANCE SAMPLES
FRAMEWORK FOR PROGRAM REVIEW ANALYSIS
SYSTEMS REVIEW
FINDING
ACCEPTANCE SAMPLE
FINDING
No Risk Found
Acceptance Sample Passes
Finding: the tax function's controls are in place and producing high
quality outputs.
No Risk Found
Acceptance Sample Fails
Further Work: Re-examine the failed cases to confirm that they
should have been judged as having failed. Examine the cause of
sample failure, determine if it had simply been due to a rare case of
human error and whether another sample case should be pulled.
Re-examine Systems Review findings. Are there any controls that
should have been deemed at risk? If controls are proper, are they
being executed by staff - is there a defect in the control's design? Were the controls verified to be in place? Consider drawing second
sample to confirm or refute findings, or drawing an expanded
sample to produce a specific error level.
Finding: The tax function's controls are at risk and allowing
inaccurate or incomplete outputs.
OR
Expanded sampling indicates that the tax function's controls are in
place and producing quality outputs.
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Risk Found
CHAPTER TWO
ACCEPTANCE SAMPLES
Acceptance Sample Passes
Further Work: re-examine area at risk to determine whether 1)
there is significant risk; or 2) the existing controls are strong enough
to produce quality outputs; or 3) compensating controls have been
overlooked; or 4) there are off-setting factors (still considered a risk
by TPS) such as long-time competent employees in place.
Consider selecting another sample to confirm that the outputs are
truly accurate. The sample design is such at there is a change of
passing (2 or fewer errors in a sample of 60) even though there is an
underlying error rate of 8.6% - this may be such a situation.
Finding: The tax function's controls are in place/or have offsetting
factors/or are strong enough to produce accurate outputs. Produce
recommendations for improving any controls.
OR
Additional sampling has produced failed cases - confirming that the
tax function's controls are at risk and allowing inaccurate outputs.
Risk Found
Acceptance Sample Fails
Further Work: Analyze the cause and effect relationship of risk to
failure. Consider drawing an expanded sample to estimate a true
error rate. Develop recommendations for improvement.
Finding: The tax function's controls are at risk and allowing
inaccurate outputs.
As always, it is important that State staff be integrally involved in the review process.
Therefore, the reviewer should meet at this point with the appropriate State decision-maker (e.g.,
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UI Director and/or Tax Director) to discuss the preliminary findings. At the meeting the
reviewer should briefly remind the State staff of the objectives and sub-objectives being
analyzed. All findings should be discussed, the cause and impact of any problems should be
presented, and means of addressing the problems should be considered.
The reviewer should also have examined the findings from Computed Measures, before meeting
with State staff
If the State decision maker agrees with the findings the reviewer may proceed with data entry
into the SUN system and the preparation of a written "draft" Annual Report. If the State
decision maker does not agree with the findings, the reviewer will need to gather additional
information. The reviewer may choose at this point to return to parts of the Systems Review.
For example, the State staff might indicate that the reviewer has misunderstood something which
was reviewed, or that additional information is available from a source which the reviewer did
not use. The reviewer can repeat segments of the Systems Review to revise the findings or to
confirm that the findings are correct. The State may elect to draw a second Acceptance Sample
to confirm or deny the initial findings. Only two Acceptance Samples may be selected for each
function.
If the State does not agree with the findings from the second Acceptance Sample, the next
required step in the Program Review process becomes Expanded Sampling.
f. Select and Examine Expanded Samples
The purpose of expanded sampling in TPS is to support the findings of the review of internal
controls, quality assurance systems and the acceptance or procedure review samples. Expanded
sampling is not necessary when the State concurs with the findings. If, however, the State does
not agree, then an expanded sample is necessary to estimate the potential impact of the weakness
on program quality. Even when the State might agree with a finding, the reviewer has the option
to select an expanded sample when there is uncertainty about the nature of findings and more
detailed information is desired.
Expanded samples will be used to assess the extent of the problems identified by acceptance
sampling. They will need to be large enough to develop precise estimates of the error rate. The
State and TPS reviewer also may choose to use expanded sampling to identify the nature and
cause of errors found during acceptance sampling. When used for these purposes it may be
appropriate to draw the expanded sample only from a particular type of transaction.
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As the name implies, an expanded sample is an expansion of the acceptance sample. Therefore,
expanded sampling follows the same steps and the preparation conducted for the acceptance
sampling review can be used directly in conducting the expanded sampling.
The steps are:
1) determine the sample size
2) identify the transaction types and time periods
3) select the sample
4) review the sample, using the questionnaire for the function.
The steps are described in detail in Appendix A of this handbook.
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g. Sampling by Exception
The TPS Program Review examines the routine processing of work in each major tax function
by extracting samples of work products. By examining small samples of the majority of the
State's work, assessment is made on the quality of the overall tax operation. However, some
States may also be concerned about potential problems outside the routine flow of work. Areas
that are more error-prone may warrant special attention: an example could be employer charge
statements with credits which involve claimants with overpayments and/or monetary
redeterminations.
These areas have not been included in the basic TPS design even though they are much more
likely to result in error, because they only represent a small proportion of the tax operation's
output.
If the State wishes to examine such exceptions, they may design an Acceptance Sample for these
error-prone cases, or they may contact the Regional Office for assistance. Regional staff may
have knowledge of similar sampling processes used by other States, or the National Office may
have a design that would be applicable
The State may also want or need more information about a risk which the Systems Review
identifies or a problem which reoccurs in Acceptance Sample cases. In these instances States
may design a "special study" for informational purposes. Such a study may involve designing
special questions and selecting a sample where the questions may be used to gather information
or, in the case of an expanded sample, to determine the error rate. States should contact their
Regional Office for additional information regarding exception sampling.
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CONCLUDING REVIEWS
IV. CONCLUDING REVIEW
a. Assess Computed Measures' Findings
Program Reviews are intended mainly to assess reasonable assurance of accuracy in the tax
operation. Computed Measures provide indicators of end-product timeliness and completeness.
An assessment of a tax operation must weigh all these factors (i.e., timeliness and accuracy are
both important in the Status operation - however, timeliness of determinations should not be at
the cost of accuracy. An acceptable balance must be sought). Computed measures will be
generated based on data derived from routine State reports.
TPS has developed reports which display trends over time within a State and among States.
These reports are on the TPS section within the SUN system should be examined by the TPS
reviewer along with the findings from Program Reviews to develop a comprehensive evaluation
of the State's tax operation. Links to national tax data are also available at the web site
www://ows.doleta.gov, under “Unemployment Insurance”, “Performance Management”, “UI
Performs Performance Measures” and under “Tax Performance System”.
Refer to Appendix B for data processing instructions for Computed Measures.
b. Complete the Program Review Chart
Before completing the Annual Report, reviewers need to complete the Program Review Chart.
The purpose of the chart is to:
Summarize the results of the Acceptance Sampling relative to which
functions have reasonable assurance of accuracy,
Record how individual portions of the System Reviews contribute to
reasonable assurance of quality.
Reviewers should fill in every cell on the Chart which is not shaded. The allowable entries are
described. (Note that the electronic version of this Chart on the SUN system has slightly
different codes to reflect the automated nature of the SUN version.)
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COMPLETION OF THE PROGRAM REVIEW CHART
Systems Review
ENTRY
MEANING
C (Complete)
All internal controls were verified as being in place and
operating
R (Risk)
One or more controls were missing or not verified (One
or more "No" answers to evaluative questions)
O (Other)
Another, "compensating control" was verified as being in
place and operating (Regional approval required)
Acceptance Sampling
ENTRY
MEANING
Y (Pass)
Fewer than 3 cases failed sampling (internal controls are
effective in producing quality outputs)
N (Fail)
Three or more cases failed sampling review (internal
controls are not effective in producing quality outputs)
or
Two or more cases were missing (insufficient documentation
to rule on quality of outputs)
D (Discard)
Sample was discarded
At this point the data from the Systems Reviews and Acceptance Sampling should be consistent, in
which case judgments are reasonably straight forward. When/if there is inconsistency between
findings from the two sources and it's impossible to resolve them, the overall determination of the
tax function's quality is to be based on the findings of the Acceptance Sample (or Expanded Sample
if one was used). Inconsistencies should be noted in the Annual Report.
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The Program Review Chart should be attached to the Annual Report. Any Regional comments such
as those dealing with compensating controls or approval of "A" categories in Acceptance Sampling
should also be included.
c. Prepare Draft TPS Report
Upon completion of all portions of the review, the reviewer will prepare a
draft report of the findings. The report should follow the structure of the
TPS Report (example provided in Appendix D) with the exception of the
section on State response, which is not completed at this time.
The draft report is to include information from Systems Reviews,
Acceptance Sampling, Expanded Sampling (as necessary), and Computed Measures. It is meant to
convey in narrative form the areas of strengths and weaknesses in the State tax operation. The TPS
Report should simply and clearly inform State Administrators and Regional representatives of the
areas of concern, exemplary practices and program improvements.
The report should be organized under the following topics:
Purpose
A brief statement of the purpose of the report and the date the review was completed.
Summary of
Findings
The purpose of this part of the report is to provide a synopsis of
what was found, recommendations, and exemplary practices.
(The remainder of this report goes into greater depth on how the data was
gathered, sources, cause, effects, and more detailed recommendations.)
Objectives
Explain what was reviewed and the methodologies used.
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Principal
Findings
CHAPTER TWO
CONCLUDING REVIEWS
Provide a detailed analysis of overall findings, identifying the tax
functions that failed Acceptance Sampling, and areas identified as needing
improvement.
For each tax function indicate:
If any cases failed, the number, and why they failed.
The risks identified during the Systems Review and where they were
found.
List any compensating controls found to exist. (Attach Regional approval
of the ability of such controls to substitute for TPS-listed controls)
List any controls that were said to be in place but could not be verified
(VS).
Correlate any Acceptance Sample failures with risk found in the Systems
Review, or explain any inconsistencies (e.g., risks but pass, no risks but
fail)
If computed measures data is provided for the function, examine the
trends they reveal, and if appropriate, correlate them with Program
Review findings.
Make recommendations - if appropriate, discuss possible solutions with
the individual responsible for the tax function being reviewed.
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Exemplary
Practices
Mention practices that are positive which could be used by other units
within the State or other States. Bring these to the Region's attention.
Global/Systemic
Trends
Mention any overall trends where risks are found or areas of concern
were noted. If systemic strengths are noted throughout the various reviews,
they should be elaborated on in this area of the report.
As the reviewer analyzes TPS findings, potential recommendations should be developed. Input
could be sought from those most directly involved with the tax functions at the State and Regional
levels.
d. Conduct Exit Interview
At the Exit Interview the entire review team should meet with the UI Director, Tax Director and
other staff designated by the State. The meeting will cover each section of the written report and is
to be shared with the State. If the preliminary meeting on findings was detailed, and if no expanded
sampling was done, this portion of the Exit Interview may be brief. It may simply confirm that the
written document incorporates previous understandings.
The second portion of the Exit Interview will be a discussion of State activities which could be
undertaken to correct problems identified or to expand the approaches which are producing high
quality products.
e. Prepare the TPS Annual Report
The Report should consist of a 1- or 2-page Executive Summary which briefly describes principal
findings and summarizes suggested improvements, and a more detailed section which evaluates
every tax function in terms of accuracy, timeliness and completeness. It must include information
from: Computed Measures, Program Reviews (i.e., Systems Reviews and Acceptance Sampling),
and Expanded Sampling (if performed).
Any comments the agency wishes to make should become a part of the report. Action(s) taken
and/or planned to be taken to correct any areas identified as needing improvement should also be
reported.
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CONCLUDING REVIEWS
The final evaluation of the State's tax operations is based on Computed Measures data and
Acceptance Sample findings. The Systems Review serves to identify areas of strengths and
weaknesses for program improvement. The TPS design focuses on the downstream effect - if there
is no material effect on current or future payment of UI tax (as evidenced by sample findings in
which all cases "pass" i.e., meet quality standards), then the State has reasonable assurance of a
quality tax operation. For instance, when risks are identified in the Status operation, but the unit is
still able to produce accurate and timely determinations, the TPS Annual Report will indicate that
there are specific areas of risk (and what the recommended solutions may be), but that the State
presently has confirmed acceptable levels of accuracy for its Status Determinations.
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CHAPTER III
STATUS DETERMINATION
COMPONENTS
INTRODUCTION
COMPUTED MEASURES
PROGRAM REVIEW
INTRODUCTION
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
INTRODUCTION
The Status function identifies employers liable for unemployment insurance (UI) coverage and
assists them in their effort to comply with State UI Laws and written policies. This is the
initial process in the tax operation. The major tasks within the function are:
Identify potential employers subject to the law
Determine Status (e.g., new, successor, non-subject)
Assign account numbers
Notify employers of their liability and initial rate
Inactivate/terminate employer accounts
Process and record all coverage information
(Account Maintenance)
Handle liability appeals as appropriate
PRIMARY OBJECTIVE
The primary objective of the Status function is to identify and register employers in a timely and
accurate manner. To accomplish this, the State will need to meet several sub objectives:
1.
Determine employer Status in a timely fashion (Timeliness)
2.
Determine and record employer Status and tax rate correctly (Accuracy)
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INTRODUCTION
Timeliness
To assess the effectiveness in producing timely Status Determinations,
Computed Measures will be generated based on data routinely reported.
These data elements will be converted into four indicators by the TPS ADP
system. These indicators will measure from the end of the quarter in which
liability occurred.
Accuracy
To determine whether accurate determinations are being made, a Program
Review will be conducted to ascertain the existence of necessary internal
controls and to determine whether or not such controls are functioning
properly.
REVIEW METHODOLOGIES
Computed Measures
Computed Measures will provide indicators to measure timeliness of New and Successor Status
Determinations. These measures will be generated on data elements reported by States through
routine quarterly reports. There are four indicators which will be used to measure timeliness of
Status Determinations.
1.
Percentage of newly established accounts made within 90 days
2.
Percentage of newly established accounts made within 180 days
3.
Percentage of successor accounts made within 90 days
4.
Percentage of successor accounts made within 180 days
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CHAPTER THREE
INTRODUCTION
REVIEW METHODOLOGIES
Program Review
The Program Review to be conducted for Status has two components: a Systems Review section
and an Acceptance Sample section composed of three samples.
The Systems Review covers the following topics:
Recorded Information and Instructions
Training
Recording of Transactions and Events
Systems to Assure Execution of Events
Review of Completed Work
The Systems Review will be used to identify the internal controls and quality assurance systems
necessary for an effective Status Determination operation, and to verify that the State has such
controls in place.
The Acceptance Samples examine the following:
New Employer Determinations
Successor Determinations
Inactivations/Terminations
Three Acceptance Samples of completed Status Determinations will be examined to confirm that the
State's system of controls is ensuring accurate Status Determinations. The Acceptance Samples will
validate the effectiveness of the State's internal controls and confirm that accurate Status
Determinations are being made and posted to the employer account record.
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COMPUTED MEASURES
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STATUS DETERMINATION
CHAPTER THREE
COMPUTED MEASURES
COMPUTED MEASURES
Computed Measures will provide indicators for timeliness of New and Successor Status
Determinations. These measures will be generated based on data elements reported by States
through routine quarterly reports. The State TPS reviewer must ensure that the State captures these
data elements as defined so that the TPS ADP system can produce output reports based on these data
elements.
Some States accumulate the data elements required for Status computed measures through ADP
records. Other States keep manual records. Either way it is important that accurate records be kept
from the beginning. Data elements needed to calculate Status timeliness indicators will be extracted
from the routine Form ETA 581 reports which are transmitted from States to the National Office
electronically. Appendix B explains the technical process for gathering this information.
Status Determination Indicators
The four indicators to measure timeliness of Status Determinations are described below.
1.
Percentage of Status Determinations of newly established accounts made within 90
days from the last day of the quarter in which the business first became liable.
2.
Percentage of Status Determinations of newly established accounts made within 180
days from the last day of the quarter in which the business first became liable.
3.
Percentage of Status Determinations of successor accounts made within 90 days from
last day of the quarter in which the business became a successor.
4.
Percentage of Status Determinations of successor accounts made within 180 days
from last day of the quarter in which the business became a successor.
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CHAPTER THREE
COMPUTED MEASURES
COMPUTED MEASURES
Indicator 1 - Percentage of 90 day New Employer Status Determinations.
Rationale. This indicator reflects the percent of Status Determinations made during the 90
day time period from the last day of the quarter in which a new business becomes liable.
The end of the quarter was set for the indicator to promote consistency in measuring time
lapse (the old time lapse was from the date the employer became liable and because of
differences in their laws, the States did not count from the same date).
90 days is also important because of the need to have employer wage records in the State
files for benefit payment purposes. Finally, undue delay in setting up an account can result
in a loss of revenue.
Formula
# determinations made within 90 days (581 Item 15)
total # New Status Determinations (581 Item 14)
Example:
700 timely new determinations
1000 total new determinations
= 70%
Indicator 2 - Percentage of 180 day New Employer Status Determinations.
Rationale. This indicator reflects the percent of Status Determinations made during the 180
day time period from the end of quarter in which a new business becomes liable. The 180
day timeliness indicator is governed by the need for additional time and incentive to make
determinations which have passed the due date for the 90 day indicator. This indicator
encourages States to use all available methods to identify and register those employers
whose registration could not be completed within the 90 day period.
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COMPUTED MEASURES
COMPUTED MEASURES
Formula
# determinations made within 180 days (581 Item 16)
total # New Status Determinations (581 Item 14)
Example:
900 timely new determinations
1000 total new determinations
= 90%
Indicator 3 - Percentage of 90 day Successor Status Determinations.
Rationale. This indicator reflects the percent of Status Determinations made during the 90
day time period from the last day of the quarter in which the business becomes liable as a
successor. The rationale is the same as for indicator 1.
Formula
# succ. determinations made within 90 days ((581 Item 18)
total # Successor Status Determinations (581 Item 17)
Example:
700 timely successor determinations = 70%
1000 total successor determinations
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CHAPTER THREE
COMPUTED MEASURES
COMPUTED MEASURES
Indicator 4 -Percentage of 180 day Successor Status Determinations.
Rationale. This indicator reflects the percent of Status Determinations made during the 180
day time period from the last day of the quarter in which the business becomes liable as a
successor. The rationale is the same as for indicator 2.
Formula
# succ. determinations made within 180 days (581 Item 19)
total # Successor Status Determinations (581 Item 17)
Example:
900 timely successor determinations = 90%
1000 total successor determinations
Data Elements
The numbers of new and successor determinations made within 90 and 180 days of the end of
quarter in which liability occurs are reported on Form ETA 581. TPS requires the number of new
and successor determinations made within 90 and 180 days from the end of the quarter of liability
rather than the "time lapse" formerly reported. It is important to count the exact number of days
since not all quarters have exactly 90 days. The "determination date counted to" should be the date
the Status information is input into the States automated system. See above examples.
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
COMPUTED MEASURES
COMPUTED MEASURES
Drawing Conclusions
If an analysis of the results of these measures does not show high percentages of timely
determinations or an improving trend, the TPS Reviewer should examine the findings of the Systems
Review to ascertain whether problems causing delays are controllable within the State or are caused
by external factors.
Findings or trends from computed measures should be considered with Systems Review and
Acceptance Sample findings in evaluating the effectiveness of the State's operation and be included
in the Annual Report.
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PROGRAM REVIEW
COMPONENTS
SYSTEMS REVIEW
ACCEPTANCE SAMPLES
SYSTEMS REVIEW
ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CHAPTER THREE
STATUS DETERMINATION
PROGRAM REVIEW
SYSTEMS REVIEW INTERVIEW SHEET
Function
Reviewer
Persons Interviewed
Date
Name:
Documents Reviewed
Title:
Title:
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Form#:
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW
Recorded Information and Instructions
For Status Determination, recorded information and instructions should include requirements
for unemployment insurance coverage and procedures for processing information to establish,
suspend, terminate, reactivate and maintain accounts.
The reviewer should examine recorded instructions available to the staff and
compare procedures to the laws and written policies of the State to determine
if the recorded information and instructions are current, accurate, and
complete. The reviewer should also observe the Status Determination
process and talk with employees to learn whether or not the recorded
instructions are available to staff.
In the narrative section following the questions, explain "Other" responses
and describe "Compensating Controls". Identify the question being
explained by referencing the number and section. If there are no recorded
instructions, describe in the narrative how the staff becomes aware of the
proper procedures to perform the tasks of the Status Determination function.
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
1.
Does the State have recorded information and instructions to assist employees performing
Status functions in each major category in accordance with State laws and written policies?
Yes No
a.
b.
c.
2.
New Determinations ..................................................................................................
Successor Determinations..........................................................................................
Inactivations/Terminations ........................................................................................
If yes, for each major Status category, are all the recorded information and instructions:
New Succ. Inact.
Acct. essor Term.
a.
b.
c.
d.
(Indicate Yes or No for Each Category)
Current? .....................................................................................................................
Accurate? ...................................................................................................................
Complete? ..................................................................................................................
Readily available to staff?..........................................................................................
VS:(Questions 1 and 2)
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
3.
If any of the preceding evaluative questions are answered "no", does the State have a
substitute or compensating control?
Yes
No
N/A ___
If Yes, describe in the Narrative Section following these questions.
VS:(Question 3)
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW
Training
New employees need to learn the requirements for unemployment insurance coverage and the
procedures for processing Status information to establish, suspend, terminate, reactivate and
maintain accounts. Experienced employees benefit from periodic refresher courses and need
additional training when changes occur, and when quality defects or a significant number of
errors appear in a particular area.
The reviewer should become familiar with the methods and procedures
the State uses to identify and meet training needs of employees involved
in determining the liability of subject employers.
In the narrative section following the questions, explain "other" responses
and describe "Compensating Controls". Identify the question being
explained by referencing the number and section. If there are no training
programs, describe how the staff know the laws, rules, written policies
and proper procedures to perform Status functions.
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
1.
Does the State have methods or procedures to provide training for newly hired employees?
Yes
No __
*If yes, identify the type of training:
Yes No
a.
b.
c.
d.
e.
*Formal Classroom Training .........................................................................
*On the Job Training?....................................................................................
*One-on-One Training? .................................................................................
*Individual Self-guided Training?.................................................................
*Other?...........................................................................................................
Describe the type and frequency of training in the narrative.
2.
Does the State have methods or procedures to provide refresher training for experienced
employees?
Yes
No __
*If yes, identify the type of training:
Yes No
a.
b.
c.
d.
e.
*Formal Classroom (e.g., refresher courses)? ...............................................
*On the Job Training?....................................................................................
*One-on-One Training? .................................................................................
*Individual Self-guided Training?.................................................................
*Other?...........................................................................................................
Describe the type and frequency of training in the narrative.
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
3.
Does the State provide training when there are:
a.
b.
c.
d.
e.
4.
Yes No N/A
State law changes? .....................................................................................................
Policy/procedure changes? ........................................................................................
Needs identified from review of finished work
(e.g., supervision, quality assurance review? ............................................................
Hardware/software changes? .....................................................................................
*Other ........................................................................................................................
Does the State have processes (e.g., back-up training or organizational flexibility) to assure
that staff absences will not disrupt operations?
Yes
No __
If yes, describe in the narrative.
VS:(Questions 1 - 4)
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
5.
*In the opinion of the supervisor or manager, does the training meet the needs of the Status
function? (e.g., Are sufficient resources available--training packages, facilities, staff, etc.)
Yes
6.
No __
If any of the preceding evaluative questions were answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A
If Yes, describe in the Narrative Section following these questions.
VS:(Question 6
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STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW
Recording of Transactions and Events
The Status function should have procedures and controls to assure that Status Determinations
are recorded and that the source information is readily available for examination. Whether the
State system is manual or automated, an audit trail should lead from the data recorded in the
employer account record to the Status source document upon which the determination was
based.
A Status source document is the information basis from which a Status
Determination is made. It can consist of a registration form, Status
change form, blocked claim report, appeal finding, letter from the
employer or whatever documentation the State has accepted as the
information source.
The reviewer should become familiar with the various types of Status
Determinations which require an audit trail leading to the supporting
documentation.
In the narrative section following the questions, explain "other" responses
and describe "Compensating Controls". Identify the question being
explained by referencing the number and section. If the State does not
maintain source documents or an audit trail, describe how it assures that
correct Status Determinations have been made.
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
1.
Does the State have procedures to assure that Status Determinations can be traced to their
source (even if the source is via electronic media)?
Yes
No __
2.
Can the following items be identified through the audit trail for New Employer
Determinations:
Yes No
a.
b.
c.
d.
e.
3.
Employer or employer representative who
notified State of liability change? ..............................................................................
State employee who recorded or authorized the
determination? ...........................................................................................................
Type of determination (new)?....................................................................................
Date of Status Determination? (either the date
decision is made, mailed or put into the ADP
system) .......................................................................................................................
The supporting documentation for the
determination? ...........................................................................................................
Can the following items be identified through the audit trail for Successor Employer
Determinations:
a.
b.
c.
d.
e.
Yes No
Employer or employer representative who
notified State of change?............................................................................................
State employee who recorded or authorized the
determination? ...........................................................................................................
Type of determination (successor)? ...........................................................................
Date of Status Determination? (either the date
decision is made, mailed or put into the ADP
system) .......................................................................................................................
The supporting documentation for the
determination? ...........................................................................................................
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
4.
Can the following items be identified through the audit trail for Inactivation/Termination
Determinations:
a.
b.
c.
Yes No
Type of determination (inactivation/termination)?....................................................
Date of Status Determination? (either the date
decision is made, mailed or put into the ADP
system) .......................................................................................................................
The supporting documentation for the
determination? ...........................................................................................................
VS:(Questions 1 - 4)
5.
Is a source document required to make a Status Determination for:
a.
b.
c.
Yes No
New Determinations? ................................................................................................
Successor Determinations? ........................................................................................
Inactivations/Terminations?.......................................................................................
VS:(Question 5)
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
6.
*Which of the following are acceptable as source documents for Status Determinations?
Enter "Y" for yes, "N" for no or "A" for not applicable.
New Succ- Inact./
Acct. essor Term.
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
7.
*Registration form? ...................................................................................................
*Status change form?.................................................................................................
*Correspondence from employer?.............................................................................
*Field audit report?....................................................................................................
*Contribution report, remittance?..............................................................................
*Notes of telephone conversation? ............................................................................
*Blocked claims report? ............................................................................................
*Appeals findings? ....................................................................................................
*Electronic media?.......................................................................................................
*Other? ………………………………………………………………………………
Are original and amended information sources, including electronic source documentation,
retained and accessible for State use for:
a.
b.
c.
Yes No
New Determinations? ................................................................................................
Successor Determinations? ........................................................................................
Inactivations/Terminations?.......................................................................................
VS:(Question 7)
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
8.
If any of the preceding evaluative questions are answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following the questions.
VS: Question 8)
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW
Systems to Assure Execution of Events
For Status Determination, controls should be built in to assure that new employers are
assigned correct, initial new employer rates and that successor accounts are assigned correct
initial rates according to the State's successorship and transfer of experience laws and
regulations. A follow-up system to maintain control of work in progress assures that all Status
documents received by the State are acted upon in a timely manner.
The reviewer should become familiar with built in systems and automated
or manual controls which assure accurate and timely execution of Status
Determinations.
In the narrative section following the questions, explain "other" responses
and describe "Compensating Controls". Identify the question being
explained by referencing the number and section. If the State does not
have internal controls or safeguards, describe how it assures the
correctness of Status Determinations, initial rate assignments and posting
of Status information.
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
1.
Does the State have systems procedures or internal controls to minimize the possibility of
setting up duplicate accounts for the same employer?
Yes
No __
VS: (Question 1
2.
)
Does the State have system procedures or internal controls to assure that all Status
documents are acted upon by:
Yes
3.
No
a.
Tracking documents? .................................................................................................
b.
Following up potentially liable
determinations? ..........................................................................................................
c.
*Other?.......................................................................................................................
*Does the State have written procedures to allow Status Determinations to be made with less
than complete information?
Yes
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
If yes, does the State:
a.
Have system procedures or internal controls to assure that there is a follow up on all
items for which all information has not been received?
Yes
VS:(Question 2 and 3a.
4.
No __
)
Does the State have system procedures or internal controls to assure that written Status
Determinations and initial rates are issued to:
a.
b.
Yes No
New employers?.........................................................................................................
Successor employers? ................................................................................................
VS:(Question 4
)
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
5.
Is there a built-in edit or manual review to assure that the correct initial rate is assigned to
new employers?
Yes
No __
If yes, describe
6.
Is there a built-in edit or manual review to assure that correct initial rates are assigned to
successor employers according to the State law and written policy?
Yes
No __
If yes, describe
VS:(Questions 5 and 6
)
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
7.
Is the information from Status Determinations and other material changes to the employer
records verified for accuracy (e.g., Is information on the employer record compared to
source documents to assure accurate posting of Status Determinations, address changes,
etc.)?
Yes
VS: (Question 7
8.
)
Does the state have a quarterly procedure to inactivate employer accounts if the employers
have not reported wages for eight consecutive quarters (or less than eight if state procedures
require less), or have filed a “no wage” report?
Yes
VS:
No __
(Question 8
No __
)
*a. If yes, is the procedure automated?
Yes
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
9.
If procedures are automated, is a systems check performed every time a program is changed?
Yes ____ No ____
VS: (Question 9)
10.
)
Does the state have a system in place and operating to detect tax rate manipulation
(i.e., SUTA Dumping)?
Yes____ No ____
If Yes, answer below.
a. Have written procedures or guidelines been developed to document requirements for
identification and investigation of potential rate manipulators?
Yes ____ No ____
VS: Examine operating instructions to confirm rule criteria for SUTA Dumping detection.
(Question 10 a.)______________________________________________________________
b. Does the agency compile a data base of employers who indicate an “excessive”
movement of employees from one quarter to the next?
Yes ____ No ____
VS: Examine query documentation for tracking movement of employees, changes in tax rate,
changes to reimbursing status and excess voluntary contributions.
(Question 10 b.) ________________________________________________________________
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STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
c. Are potential rate manipulators routinely identified and assigned for further
investigation every quarter?
Yes ____ No ____
VS: Locate cases and confirm they have been investigated.
_(Question 10 c.) ______________________________________________________________
11.
If any of the preceding evaluative questions are answered "No", does the state have a
substitute or compensating control?
Yes
No
N/A __
If yes, describe in the Narrative Section following the questions.
VS:
__(Question 11) _________________________________________________________
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW
Review of Completed Work
For the Status function, the State should be conducting systematic reviews of Status
Determinations made and initial rates assigned. The information received and the action
taken should be checked against the information recorded in the employer's account.
A review of completed work should be done on a regular basis for all staff
members involved in processing documents for the employer's account.
This review may be done on an individual basis for each staff member, or
by sampling work done throughout the entire unit. The following
questions are designed to determine how these reviews are conducted.
The reviewer should become familiar with the kind of review program the
State uses to assess the work performed by the Status function.
In the narrative section following the questions, explain "other" responses
and describe "Compensating Controls". Identify the question being
explained by referencing the number and section. If there is no review
performed, describe how the State has reasonable assurance that correct
decisions are being made.
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For all staff members involved in processing Status documents, are the following components subject to some form of systematic review?
For Yes answers, enter a "Y" in the appropriate column(s). If there are no reviews, answer "N" in column 6 which is evaluative.
Type of review
Component
*1
Supv
*2
Peer
*3
QR
Qual.Rev
*4
Support
Clerical
*5
Other
6
Review
Conducted
Y/N
New Determinations
a.
Accuracy of determinations
b.
Accuracy of initial rate assignment
c.
Accuracy of posting employer information
d.
Prompt completion of determinations
Successor Determinations
e.
Accuracy of determinations
f.
Accuracy of initial successor rate assignment
g.
Accuracy of posting information
h.
Prompt completion of determinations
Inactivation/Termination Determinations
i.
Accuracy of determinations
j.
Accuracy of posting
VS: (Question 6)
*Informational
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
7.
If any of the preceding evaluative questions are answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following these questions.
VS: (Question 7)
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
Additional Controls
1.
*Does the State have internal controls or quality assurance systems in the Status function
which this review failed to identify?
Yes
No __
Yes
No __
If yes, describe below:
2.
*Are there any exemplary practices for the Status function?
If yes, describe below:
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ACCEPTANCE SAMPLES
ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
NEW EMPLOYER STATUS DETERMINATIONS
Purpose/Intent
To confirm that the state's internal controls ensure accurate
determinations by examining completed New Employer
Status Determinations.
To determine that correct, initial rates are being assigned to
new employers.
To evaluate whether the state follows its procedures to obtain
any necessary additional information.
To assess the accuracy of posting Status information to the
employers' account records.
Scope
The scope of the review will focus on all new and reactivated
Status Determinations made during the selected calendar
year. (Accounts which are reactivated only to make
corrections, do not meet the definition of "reactivation" and
should not be included.)
Universe
The universe to be identified for the New Employer Status
Determinations Acceptance Sample will include:
1.
All Status Determinations for New and Reactivated
Employers, (e.g., employing units initially meeting
the definition of "employer" in the state
unemployment compensation law or previously
terminated employing units which again meet the
definition of employer) made during one complete
calendar year. Exclude temporary or "pending"
accounts, or accounts that have not met a liability
provision of the state’s law.
2.
60 cases will be selected from this universe.
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ACCEPTANCE SAMPLE INSTRUCTIONS
Timing/Frequency
The sample will be selected once per calendar year.
The universe can be identified immediately following the end
of the calendar year.
Sampling Procedures
The following steps must be taken to establish the universe and select
the sample accounts:
1.
Identify all New Employer Status Determinations
(including Reactivations) made during the calendar
year selected for the review.
2.
Select 60 sample cases after identifying the universe.
3.
If a case should not have been in the New Employer
universe to begin with, follow the Case Replacement
instructions in Chapter II of this Handbook.
However, some accounts in the sample may later have
been redetermined to be successorships, or the new
account may later have been terminated, or
redetermined not to be liable after all. Such cases can
remain in the universe. Subject to review, however,
are the decision, tax rate and posting of the new
determination. Subsequent decisions such as
successorship, or to terminate are not part of the
review. If errors are found in the subsequent
decisions, they should be noted in the Annual Report,
but the case will focus on the new employer
determination.
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CHAPTER THREE
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ACCEPTANCE SAMPLE INSTRUCTIONS
Sampling Procedures
If the System is automated, the Reviewer must work closely
with the IT unit to ensure a thorough understanding of what,
when and how the samples should be selected.
Appendix A describes what action needs to be taken for
sampling in both manual and automated systems.
Reviewing Samples
Assemble the following information for each of the New
Status Determinations selected for review:
1. Status information in the employer account record.
2. The original source of information and any other
documentation from the state's records. Documentation
can consist of a hard copy registration form, field
auditor's report notations to the file explaining the source,
etc.
If the employer registered electronically, the
electronic data screen containing the original registration
information or facsimile of the original data entered by
the employer (or employer’s representative) can be used
as the source document. If the employer registered by
telephone with agency staff transmitting the data directly
into the mainframe, that mainframe data can be used as
the source document. Employer contact information and
identity of agency staff must also be documented.
If the original information is not available, the answer to
question 3a. must be “no.”
Compare all source documents with the information on the
employer's account record, and answer the questions on the
Acceptance Sample Questionnaire.
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CHAPTER THREE
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ACCEPTANCE SAMPLE INSTRUCTIONS
Reviewing Samples
1.
Accuracy of Initial Liability Decision - includes questions to
evaluate if a correct initial decision based on minimum
information was made. (TPS refers to actual rather than
temporary or "pending" accounts). Some States have
procedures which allow an initial liability decision to be
made based on partial information (i.e., a partially completed
contribution return with no other information). These States
should follow up after the initial liability decision to ensure
that information to make an accurate Status Determination
has been obtained. If insufficient time has lapsed for the
information to have been received, the review may end with
question 3. The time period needed to obtain information is
as set by State procedures, but not longer than 3 months, to
avoid a situation where a blocked claim could result. States
which do not have such a procedure are directed to proceed to
question 3.
2.
Accuracy of New Employer Determination at Time of
Review - includes questions to evaluate if a correct, decision,
liability date and initial rate have been assigned. Initial rate
means the first rate assigned to the account. I.e., if liability
began five years ago, the rate assigned for the first year of
liability would be the “initial rate”.
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CHAPTER THREE
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ACCEPTANCE SAMPLE INSTRUCTIONS
Reviewing Samples
Cont.
3. Accuracy of Posting - includes questions to evaluate if the
Status Determination was posted correctly in accordance with
State requirements. The reviewer must use some discretion in
this section to avoid penalizing a case which may contain
slight typographical errors that have little or no material
effect on the employer’s account. Such findings should be
noted in the Annual Report, but should not fail the case.
Drawing Conclusions
All questions are evaluative except 1, the first part of 2, and 4 f.
correct posting of “Other” information. A "No" answer to any
evaluative question means that the case is not considered
acceptable.
If the completed review of 60 cases includes three or more
unacceptable cases, then the reviewer must conclude that
accuracy in the Status function was not confirmed.
For all unacceptable cases, the reviewer must provide an
explanation on the Acceptance Sample Explanation Sheet for
each unacceptable case.
Documentation
All source documentation (gathered to review samples) must
be kept until the completion and Regional Office approval of
the Annual Report. Either hard copy documentation or (in
some highly automated systems) the ability to recreate the
identical information used in the review must be maintained.
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STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
ACCEPTANCE SAMPLE QUESTIONNAIRE
Accuracy of Initial Liability Decision
1.
*Do State procedures permit setting up active accounts with less than complete information?
Yes
No __
If “Yes”, answer question 2. If “No”, go to question 3.
2.
*Was the case under review set up with less than complete status information?
Yes
No __
If “Yes”, answer questions 2a., and 2b. If “No”, go to question 3.
a.
Based upon the information available at the time the account was set up, was a
correct liability decision made?
Yes
b.
No __
Is there evidence that the State tried to obtain the necessary additional information?
Yes __ No __
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CHAPTER THREE
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ACCEPTANCE SAMPLE QUESTIONNAIRE
NOTE: If, at the time of the review, the liability decision was made with less than complete
information, and there has not been sufficient time to obtain necessary additional
information, answer question 3 based on the evidence available when the initial liability
decision was made. If question 3a is answered “No”, do not answer the rest of the
Questionnaire.
Accuracy of New Employer Determination at Time of Review
3.
At the time of the review:
a. Is there sufficient documentation to support a liability decision?
Yes __ No __
b. Was the correct liability decision made?
Yes __ No __
c. Was the liability date established within the correct quarter?
Yes __ No __
d. Was the correct tax rate assigned?
Yes __ No __ NA __
NOTE: Answer question 3d as “NA” if the account is a reimbursable account.
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CHAPTER THREE
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ACCEPTANCE SAMPLE QUESTIONNAIRE
4.
At the time of the review, indicate whether the following account information was
correctly posted.
No __
a. Employer name?
Yes
b. Employer mailing address?
Yes __ No __
c. Liability date?
Yes __ No __
d. Type of organization?
Yes __ No __ NA __ INA __
e. Initial tax rate?
Yes __ No __
f. *Other ____________________________
Yes __ No __ NA __
NOTE Typographical errors such as the spelling of the employer’s name should not
result in a “No” answer, so long as it does not impact the proper administration of the
account.
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TAX PERFORMANCE SYSTEM
Status Sample Coding Sheet
New Employers Checklist
State: ___________
Case
Number
Employer
Identification
Number
Period Covered: ____________
Date: ___________
Reviewer:____________________
Sample Type:
Acceptance
Expanded
1
2
2a
2b
3a
3b
Questions 2a, 2b, 3a, 3b, 3c, 3d, 4a, 4b, 4c, 4d, and 4e are evaluative.
3c
3d
4a
4b
4c
Total Acceptable ___ of ___
4d
4e
4f
Pass/Fail
Y/N
Page __ of ___
TAX PERFORMANCE SYSTEM
Status - Sample Explanation Sheet
New Employers Checklist
State: _____________________ Period Covered: _______________ Date: _______________ Reviewer: _______________
Sample Type:
Case
Number
Employer
Identification Number
Acceptance
Expanded
Explanation
Page _____ of _____
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
SUCCESSOR EMPLOYER STATUS DETERMINATIONS
Purpose/Intent
To confirm that the State's internal controls ensure accurate
determinations by examining completed Successor
Employer Status Determinations.
To determine that correct initial successor rates are being
assigned to employers according to the State's
successorship laws and written policies.
To evaluate whether the State follows its procedures to
obtain any necessary additional information.
To assess the accuracy of posting Status information to the
successor employers' account records.
Scope
The scope of the review will focus on all Successor Status
Determinations made during the selected calendar year.
Universe
The universe to be identified for the Successor Employer
Status Determinations Acceptance Sample will include:
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ACCEPTANCE SAMPLE INSTRUCTIONS
Universe cont.
Timing/Frequency
1.
All accounts which during one calendar year are
determined to be successors according to State laws
and regulations (an employing unit which has
acquired the organization, trade, or business in
whole or in part, of another employer, declared
subject as of the day on which it meets the
requirement of the State employment compensation
law for a successorship).
2.
Both first time and existing employers. Some
States do not require the transfer of experience to
successor accounts. Such an account may be
assigned a new employer rate even if it is
determined to be a successor.
3.
Various types of successorships permitted by State
law and written policy (e.g., mandatory, optional,
total or partial).
4.
60 cases will be selected from this universe.
The sample will be selected once per calendar year.
The universe can be identified immediately following the
end of the calendar year.
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CHAPTER THREE
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Sampling Procedures
The following steps must be taken to establish the universe
and select the sample accounts:
1.
Identify all Successor Status Determinations made
during the calendar year selected for the review.
2.
Select 60 sample cases after identifying the
universe.
NOTE: Sometimes an account is selected in the successor
sample which was set up based on less than complete
information. If it is discovered when the State follows its
investigative procedures that the account should have been
a "new" employer, continue to review it with this
questionnaire and consider the case acceptable.
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STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Sampling Procedures
If the system is automated, the reviewer must work
cont.
closely with the ADP unit to ensure a thorough
understanding of what, when and how the samples should
be selected.
Appendix A describes what action needs to be taken for
sampling in both manual and automated systems.
Reviewing Samples
Assemble the following information for each of the
successor Status Determinations selected for review:
1.
Status information in the employer account record.
2.
The original source of information and any other
documentation from State's records. Documentation
can consist of a registration form, successor and or
predecessor application form, field auditor's report,
notations to the file explaining the source, etc. If the
employer reported electronically, or entered data
directly into the state’s automated system, the
electronic data screen containing the original
successorship information entered by the employer
(or employer’s representative) can be used as the
source document. If the original source of
information is not available, the answer to question
3a. must be “no”.
Compare all source documents with the information on the
employer's account record.
Using this information, answer the questions in the
Acceptance Sample Questionnaire.
NOTE: If the account has been terminated by the time of
the TPS review, the Successor Employer Status
Determination, rate assignment and posting should be the
basis for answering the questions.
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CHAPTER THREE
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Reviewing Samples
cont.
1.
Accuracy of Initial Liability Decision – includes
questions to evaluate if a correct initial decision
based on minimum information was made (actual
rather than temporary or pending accounts).
Sometimes State procedures allow an initial liability
decision to be made based on partial information
(i.e., a partially completed contribution return). The
State should follow up to ensure that information to
make an accurate Status Determination has been
obtained. If insufficient time has lapsed for the
information to have been received, the review may
end with question 3.
2.
Accuracy of Successor Employer Determination at
Time of Review - Questions evaluate if State is
following its law provisions with regard to the
initial rate first assigned to successors. Some States
require that successors who are first time employers
be assigned the predecessor's rate. In this instance it
may be necessary to determine which predecessor
rate was in effect at the time the successor was
determined to be an employer. In States that
require immediate transfer of experience and
recalculation of the rate, it may be necessary to
review the components of the rate calculation to
ascertain that the correct initial rate was assigned.
It is the initial successor rate that should be
examined, not any subsequent rates that may have
been assigned. For example, if the successor has
been assigned an initial rate in Year 1, and then
another rate in Year 2, the reviewer should examine
year 1’s rate only.
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CHAPTER THREE
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Drawing Conclusions
For the Successor Acceptance Sample all questions are evaluative
except 1, the first part of 2, and 4f. Posting of “Other”
information.
A "No" answer to any evaluative question indicates that the
Status Determination was not accurate or the rate was not
correctly assigned. This means that the case is not
considered acceptable.
If the completed review of 60 cases includes three or
more unacceptable cases, then the reviewer must conclude
that accuracy in this function was not confirmed.
If the completed review of 60 cases includes three or more
unacceptable cases, the reviewer must conclude that
accuracy in the Status Successor Account Maintenance
function was not confirmed.
For all unacceptable cases, the reviewer must provide an
explanation for the unacceptable case on the Acceptance
Sample Explanation Sheet.
Documentation
All source documentation (gathered to review samples)
must be kept until the completion and Regional Office
approval of the Annual Report. Either hard copy
documentation or (in some highly automated systems) the
ability to recreate the identical information used must be
maintained.
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STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
ACCEPTANCE SAMPLE QUESTIONNAIRE
Accuracy of Initial Successor Liability Decision
1.
*Do State procedures permit setting up successor accounts with less than complete
information?
Yes
No __
If “Yes”, answer question 2. If “No”, go to question 3.
2.
*Was the case under review set up with less than complete status information?
Yes
No __
If “Yes”, answer questions 2a., and 2b. If “No”, go to question 3.
a.
Based upon the information available at the time the account was set up, was a
correct successor liability decision made?
Yes
No __
b. Is there evidence that the State tried to obtain the necessary additional information?
Yes __ No
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CHAPTER THREE
PROGRAM REVIEW
ACCEPTANCE SAMPLE QUESTIONNAIRE
NOTE: If, at the time of the review, the successor liability decision was made with less than
complete information, and there has not been sufficient time to obtain necessary additional
information, answer question 3 based on the evidence available when the initial successor
liability decision was made. If question 3a is answered “No”, do not answer the rest of the
Questionnaire.
Accuracy of Successor Determination at Time of Review
3.
At the time of the review:
a. Is there sufficient documentation to support a successor liability decision?
Yes __ No __
b. Was the correct successor liability decision made?
Yes __ No __
c. Was the successor liability date established within the correct quarter?
Yes __ No __
d. Was the correct tax rate assigned?
Yes __ No __ NA __
NOTE: Answer question 3d as “NA” if the account is a reimbursable account.
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ACCEPTANCE SAMPLE QUESTIONNAIRE
4. At the time of the review, indicate whether the following successor account information was
correctly posted.
No __
a. Employer name?
Yes
b. Employer mailing address?
Yes __ No __
c. Liability date?
Yes __ No __
d. Type of organization?
Yes __ No __ NA __ INA __
e. Initial successor tax rate?
Yes __ No __
f. *Other ____________________________
Yes __ No __ NA __
NOTE Typographical errors such as the spelling of the employer’s name should not
result in a “No” answer, so long as it does not impact the proper administration of the
account.
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Status Sample Coding Sheet
Successor Checklist
State: ___________
Case
Number
Employer
Identification
Number
Period Covered: ____________
Date: ___________
Reviewer:____________________
Sample Type:
Acceptance
Expanded
1
2
2a
2b
3a
3b
Questions 2a, 2b, 3a, 3b, 3c, 3d, 4a, 4b, 4c, 4d, and 4e are evaluative.
3c
3d
4a
4b
4c
Total Acceptable ___ of ___
4d
4e
4f
Pass/Fail
Y/N
Page __ of ___
TAX PERFORMANCE SYSTEM
Status - Sample Explanation Sheet
Successor Checklist
State: _____________________ Period Covered: _______________ Date: _______________ Reviewer: _______________
Sample Type:
Case
Number
Employer
Identification Number
Acceptance
Expanded
Explanation
Page _____ of _____
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TAX PERFORMANCE SYSTEM
STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
INACTIVATED/TERMINATED STATUS DETERMINATIONS
Purpose/Intent
To confirm that the State's internal controls ensure accurate
determinations by examining completed
Inactivated/Terminated Status Determinations.
To evaluate whether the State follows its procedures to
obtain any necessary additional information.
To assess the accuracy of posting Status information to the
employers' account records.
Scope
The scope of the review will focus on all Inactivated and
Terminated Status Determinations made during the selected
calendar year.
Universe
The universe to be identified for the Inactivated and
Terminated Employer Status Determinations Acceptance
Sample will include:
1.
All Status Determinations for inactivated and
terminated employers. Inactivated employing units
have been granted permission to suspend filing of
quarterly reports, whereas terminated employing
units have been granted termination of coverage by
reason of not meeting the State's definition of
employer. If State law permits both types of
determinations, the population from which the
sample is selected should include both.
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CHAPTER THREE
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Timing/Frequency
The sample will be selected once per calendar year.
The universe can be identified immediately following the
end of the calendar year.
Sampling Procedures
The following steps must be taken to establish the universe
and select the sample accounts:
1.
Identify all Inactivated or Terminated
Determinations made during the calendar year
selected for the review.
2.
Select 60 sample cases.
The review can be completed any time after the cases are
selected.
If the System is automated, the Reviewer must work
closely with the ADP unit to ensure a thorough
understanding of what, when and how the samples should
be selected.
Appendix A describes what action needs to be taken for
sampling in both manual and automated systems.
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STATUS DETERMINATION
CHAPTER THREE
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Reviewing Samples
Assemble the following information for each of the
Inactivated or Terminated Determinations selected for
review:
1.
Status information in the employer account record.
2.
The original source of information and any other
documentation from the State's records.
Documentation can consist of a letter or Status
change form from an employer, a list or an
automated code which indicates that State law or
policy permits the inactivation or termination of
accounts after a certain number of quarters in which
no wages were reported, etc.
If the employer provided inactivation information
electronically, or entered data directly into the
state’s automated system, the electronic data screen
containing the original inactivation information
entered by the employer (or employer’s
representative) can be used as the source document.
If the original source of information is not available,
the answer to question 3a. must be “no”.
Compare all source documents with the information in the
employer's account record.
Using this information, answer the questions on the
Acceptance Sample Questionnaire.
NOTE: If the account has been reactivated by the time of the TPS
review, the Terminated Employer Status Determination, and
posting should be the basis for answering the questions.
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CHAPTER THREE
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Drawing Conclusions
All the questions are evaluative, except 1, the first part of 2, and
4b. Posting of “Other” information.
A "No" answer to either of these questions indicates that
the Status Determination was not accurate. This means
that the case is not considered acceptable.
If the completed review of 60 cases includes three or more
unacceptable cases, then the reviewer must conclude that
accuracy in the Status Inactivated/Terminated function was
not confirmed.
For all unacceptable cases, the reviewer must provide an
explanation on the Acceptance Sample Explanation Sheet
for each unacceptable case.
Documentation
All source documentation (gathered to review samples)
must be kept until the completion and Regional Office
approval of the Annual Report. Either hard copy
documentation or (in some highly automated systems) the
ability to recreate the identical information used in the
review must be maintained.
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CHAPTER THREE
PROGRAM REVIEW
ACCEPTANCE SAMPLE QUESTIONNAIRE
Accuracy of Inactivated/Terminated Determination
1.
*Do State procedures permit inactivating accounts with less than complete information?
Yes
No __
If “Yes”, answer question 2. If “No”, go to question 3.
2.
*Was the case under review inactivated with less than complete status information?
Yes
No __
If “Yes”, answer questions 2a., and 2b. If “No”, go to question 3.
a.
Based upon the information available at the time the account was inactivated, was a
correct inactivation decision made?
Yes
b.
No __
Is there evidence that the State tried to obtain the necessary additional information?
Yes __ No
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CHAPTER THREE
PROGRAM REVIEW
ACCEPTANCE SAMPLE QUESTIONNAIRE
NOTE: If, at the time of the review, the inactivation decision was made with less than
complete information, and there has not been sufficient time to obtain necessary additional
information, answer question 3 based on the evidence available when the initial inactivation
decision was made. If question 3a is answered “No”, do not answer the rest of the
Questionnaire.
Accuracy of Inactivation Determination at Time of Review
3. At the time of the review:
a. Is there sufficient documentation to support an inactivation decision?
Yes __ No __
(Statutory inactivation/termination after the required number of quarters lapse with no
reported wages is sufficient documentation to support a determination.)
b. Was the correct inactivation decision made?
Yes __ No __
4. At the time of the review, indicate whether the following account information was correctly
posted.
a. Last date of liability (last point in time when
employer is expected to file contribution returns)?
b. *Other ____________________________
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Yes
No __
Yes __ No __ NA __
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TAX PERFORMANCE SYSTEM
Status Sample Coding Sheet
Inactivated/Terminated Checklist
State: ___________
Case
Number
Period Covered: ____________
Date: ___________
Reviewer:____________________
Sample Type:
Acceptance
Expanded
Employer
Identification
Number
1
2
Questions 2a, 2b, 3a, 3b, 3c, 3d, and 4a are evaluative.
2a
2b
3a
3b
4a
Total Acceptable ___ of ___
4b
Pass/Fail
Y/N
Page __ of ___
TAX PERFORMANCE SYSTEM
Status - Sample Explanation Sheet
Inactivations/Terminations Checklist
State: _____________________ Period Covered: _______________ Date: _______________ Reviewer: _______________
Sample Type:
Case
Number
Employer
Identification Number
Acceptance
Expanded
Explanation
Page _____ of _____
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TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
INTRODUCTION
The Cashiering function consists of processing employer contribution payments, including
the following major tasks:
Receive employer contribution payments
Prepare contribution payments for deposit
Deposit contribution payments into clearing account(s)
Record all contribution payment deposit information
Post contribution payments to employer accounts
Transfer monies to the Unemployment Trust Fund (UTF)
PRIMARY OBJECTIVE
The primary objective of Cashiering is the prompt and accurate processing of employer
contribution payments. To achieve this, the Cashiering function must:
Accuracy
and
Completeness
Timeliness
1.
Process all contribution payments accurately and record deposit activities
accurately (Accuracy and Completeness)
2.
Deposit all contribution payments promptly and transfer monies to the
UTF timely (Timeliness)
To determine the accuracy and completeness of processing employer
contribution payments and recording deposit activities, a Program Review
will be conducted to determine the existence of necessary internal controls
and to determine whether or not such controls are functioning properly.
To assess the promptness with which the State deposits contribution payments
into the clearing account, an Estimation Sample will be conducted.
(Timeliness of the transfer of monies from the clearing account into the UTF
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CHAPTER FOUR
INTRODUCTION
will be gauged through another vehicle and will not be assessed through TPS)
REVIEW METHODOLOGIES
Because accuracy of posting of contribution payments will be evident through the Account
Maintenance Acceptance Samples for Contribution Report Processing, Debits/Billings and
Credits/Refunds, no Acceptance Sampling is required for the Cashiering function.
Program Review
The Program Review for Cashiering has two components: a Systems Review and an Estimation
Sample.
The Systems Review covers the following:
Recorded Information and Instructions
Training
Recording of Transactions and Events
Execution by Authorized Individuals
Systems to Assure Execution of Events
Review of Completed Work
Review UI Cashiering activities conducted by Non-State Entities (other
State Agency or Lockbox)
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CHAPTER FOUR
INTRODUCTION
REVIEW METHODOLOGIES
The Systems Review will identify the internal controls and quality assurance systems necessary
for an effective Cashiering operation, and indicate if such controls are in place. Most questions
in the Systems Review require a Verification Source (VS). However, because of the significance
of the Cashiering function, some review questions require small, stringent tests to confirm the
presence and effectiveness of the internal controls.
Verification Test (VT) instructions are provided when a verification test is needed. If a VT fails,
the reviewer must draw the conclusion that a risk exists in that area. (VTs that fail must be
repeated the following year.)
In addition to the review of the State Cashiering operation, a section has been designed for the
States that employ non-State, State Agencies (e.g. State Departments of Revenue) or banks
(lockboxes) to perform Cashiering activities. For States that employ either a non-State agency or
a bank lockbox for Cashiering activities, BOTH SYSTEMS REVIEWS ARE NECESSARY
because:
Rarely can all contribution payments and documents received at a non-State
cashiering site be processed exclusively at the site, and
The State Cashiering Systems Review includes questions dealing with recording
deposit information for which States have responsibility.
All references to Non-State State Agencies and Bank Lockbox Operations will be generically
referred to as Non-State Entities on all subsequent pages.
NOTE: If NO contribution payments are received by the State, some questions in the State
Cashiering Systems Review may not be applicable to your State's operations. The reviewer
should carefully examine each question in the State Cashiering Systems Review, document the
reason specific questions are not applicable and request Regional Office approval to record N/A
answers for those questions.
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CHAPTER FOUR
INTRODUCTION
REVIEW METHODOLOGIES
The Estimation Sample for Cashiering examines :
Employer Contribution Payments
In addition to the Systems Review, a sample of employer contribution payments will be
examined to measure the timeliness in which contribution payments are deposited into the State's
clearing account. The Estimation Sample will be selected from daily mail receipts during the
review period.
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PROGRAM REVIEW
COMPONENTS
SYSTEMS REVIEWS
State
Non-State Entities
ESTIMATION SAMPLES
State
Non-State Entities
SYSTEMS REVIEWS
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TAX PERFORMANCE SYSTEM
CHAPTER FOUR
CASHIERING
PROGRAM REVIEW
SYSTEMS REVIEW INTERVIEW SHEET
Function
Reviewer
Persons Interviewed
Date
Name:
Documents Reviewed
Title:
Title:
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CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW
Recorded Information and Instructions
In the State Cashiering operations, procedures should be set forth for receiving employer
contribution payments, preparing contribution payments for deposit, depositing
contributions into the clearing account, recording deposit activity, posting contribution
payments to the employers' accounts and transferring monies to the UTF.
The reviewer should examine recorded information, instructions and
procedures available to the staff and compare them to the laws and written
policies of the State to determine if they are current, accurate, and
complete. The reviewer should also observe the Cashiering process and
talk with employees to learn if the recorded information, instructions and
procedures are available to staff..
The operations of a non-State entity to process contribution payments for
the State, will not be included in this section of the review (See the NonState Entities Systems Review for a review of non-State State Agencies
and bank lockbox operations). However, residual work done by the State
will be included, e.g., procedures for sending and receiving work to and
from the non-State entity.
In the Narrative Section following the questions, explain "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If there are no
recorded instructions, describe in the narrative how the staff becomes
aware of the proper procedures to perform the tasks of the Cashiering
function.
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CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
1.
Does the State have recorded information and instructions to assist employees to perform
Cashiering functions in accordance with State laws and policies?
Yes
2.
No __
If yes, are all recorded information and instructions:
Yes
a.
b.
c.
d.
No
Current? .....................................................................................................................
Accurate? ...................................................................................................................
Complete? ..................................................................................................................
Readily available to staff?..........................................................................................
VS:(Questions 1 and 2
3.
)
If any of the preceding evaluative questions are answered "no", does the State have a
substitute or compensating control?
Yes
No
N/A __
If yes, describe in the narrative following these questions.
VS:(Question 3
)
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CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW
Training
The State needs to have systems and procedures to identify training needs and deliver
training to employees who perform duties within the Cashiering function. New employees
need to learn the procedures for processing and posting employer contribution payments.
Experienced employees benefit from periodic refresher courses and additional training
when procedures change and/or defects in quality occur at an unacceptably high rate.
The reviewer should become familiar with the methods and procedures the
State uses to identify and meet the training needs of employees involved
in cashiering activities.
In the Narrative Section following the questions, explain "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If there is no
formal training program, then describe how the staff learns of the laws and
written policies and the proper procedures to perform the Cashiering
duties.
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TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
1.
Does the State have methods or procedures to provide training for newly hired
employees?
Yes
No __
*If yes, identify the type of training:
Yes No
a.
b.
c.
d.
e.
*Formal Classroom Training? ...................................................................................
*On the Job Training?................................................................................................
*One-on-One Training? .............................................................................................
*Individual Self-guided Training?.............................................................................
*Other?.......................................................................................................................
Describe the type and frequency of training in the narrative.
2.
Does the State have methods or procedures to provide refresher training for experienced
employees?
Yes
No __
*If yes, identify the type of training:
Yes
a.
b.
c.
d.
e.
No
*Formal Classroom (e.g., refresher courses)? ...........................................................
*On the Job Training?................................................................................................
*One-on-One Training? .............................................................................................
*Individual Self-guided Training? . ..........................................................................
*Other?........................................................................ . .
...
Describe the type and frequency of training in the narrative.
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TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
3.
Does the State provide training when there are:
Yes No N/A
a.
b.
c.
d.
e.
f.
4.
State law changes? .....................................................................................................
Policy/procedure changes? ........................................................................................
Needs identified from review of finished work
(e.g., supervision, quality assurance review)? ...........................................................
Hardware/software changes? .....................................................................................
Peak processing periods? ...........................................................................................
*Other?.......................................................................................................................
Does the State have processes (e.g., back-up training or organizational flexibility) to
assure that staff absences will not disrupt operations?
Yes
No __
If yes, describe in the narrative following these questions.
VS: (Questions 1-4
)
IV - 18
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TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
5.
*In the opinion of the supervisor or manager, does the training meet the needs of the
Cashiering function? (e.g., Are sufficient resources available--training packages,
facilities, staff, etc.?)
Yes
6.
No __
If any of the preceding evaluative questions were answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If yes, describe in the narrative following these questions
VS:(Question 6
)
IV - 19
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A", and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
IV - 21
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW
Recording of Transactions and Events
The Cashiering function should have procedures and controls to assure that employer
contribution payments are accurately accounted for and that bank deposits are accurate
and reconciled. Whether the State system is automated or manual, an audit trail should
lead from source documents to State accounting records of receipts and to the transfer of
monies into the UI Trust Fund.
The reviewer must determine whether there are systems to assure that
records of receipt and processing of employer contribution payments are
kept accurately, completely, and up-to-date. An audit trail should be in
place leading to support documentation.
In the Narrative Section following the questions, explain "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If there is no
recording or reconciliation of the General Ledger Account, then explain
how the State is assured that the accounts are accurate.
IV - 23
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
1.
Does the State maintain an audit trail for the following types of transactions:
Yes No N/A
a.
b.
c.
d.
e.
f.
g.
h.
i.
2.
Receipt of employer contribution payments? . . . . . . .
Preparation of contribution payments for deposit? . . .
Deposits to the clearing account? . . . . . . . . . . . . . . ...
Deposit discrepancies? . . . . . . . . . . . . . . . . . . . . . ....
Posting to employer accounts? . . . . . . . . . . . . . . . . .
Transfer monies to the UI Trust Fund? . . . . . . . . . .
Balancing of contribution payments? . . . . . . . . . . . .
Information received via electronic media . . . . . . .
Dishonored contribution payments (NSFs)? . . . . . .
Does the State have a means to identify the source of discrepancies?
Yes
No __
*If yes, which are used:
Yes No
a.
b.
c.
d.
e.
f.
g.
*Deposit list/calculator tapes? ...................................................................................
*Batch lists/batch reconciliation? ..............................................................................
*Bank statements? .....................................................................................................
*Debit or credit notices from bank? (Dishonored checks
or discrepancies) .......................................................................................................
*Bank Statement Trial Balance?................................................................................
*State Treasurer's Report? .........................................................................................
*Other?.......................................................................................................................
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TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
3.
Are the information sources retained and accessible for State use?
Yes
VS:(Questions 1 – 3
4.
No __
)
If any of the preceding evaluative questions were answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If yes, describe in the narrative following these questions.
VS:(Question 4
)
IV - 26
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A", and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
IV - 27
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW
Execution by Authorized Individuals
The Cashiering unit handles negotiable items and cash. Access to these contribution
payments should be limited to authorized, assigned staff. This requirement provides
security for the contribution payments and assures that the cashiering functions are
performed by authorized, assigned individuals only.
The reviewer must examine the flow of contribution payments through the
State and identify the internal controls limiting access to and providing
accountability for the contribution payments. The reviewer must also
examine the authorizations and procedures governing the flow of
contribution payments from field offices and other sources to the Central
Cashiering unit.
In the Narrative Section following the questions, explain "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section.
IV - 29
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
1.
Does the State have the following controls to assure that the processing of contribution
payments is limited to assigned staff in the Central Office:
a.
Specific individual(s) assigned to assure that all mail is picked up or delivered
daily?
No __
Yes
b.
Specific individual(s) assigned to open and handle checks?
Yes
c.
No __
Area for opening and handling checks restricted to assigned individuals?
Yes
No __
d.
Specific individual(s) assigned to receive and prepare contribution payments for
deposit?
Yes
No __
e.
Area for preparing contribution payments for deposit restricted to assigned
individuals?
Yes
f.
No __
Specific individual(s) assigned to account for and forward contribution payments
to bank for deposit?
Yes
IV - 31
No __
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
1.
g.
Area for accounting of contribution payments to forward to the bank for deposit
restricted to assigned individual(s)?
Yes
h.
No __
Specific individual(s) assigned to deliver contribution payments to bank?
No __
Yes
i.
* Controls for receiving and depositing contribution payments other than those
listed above? (If yes, describe in the narrative).
Yes
VS:(Question 1
2.
No __
)
Does the State have the following internal controls to provide accountability for all
employer contribution payments received in other units in the Central Office and/or the
field:
a.
Specific individual(s) assigned and responsible for receiving and accounting for
contribution payments?
Yes
No __
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TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
b.
Procedures for controlling and forwarding contribution payments from collections
units, field units or other similar units to the Central Cashiering Unit?
Yes
No __
c.
Procedures to verify that contribution payments forwarded from collections units,
field units or other similar units were received by Central Cashiering Unit?
No __
Yes
VS: (Question 2
3.
)
Does the State have the following internal controls providing accountability for handling
currency (actual cash) received:
a.
Pre-numbered receipt books?
Yes
No __
(1)
If yes, is an internal audit (e.g., verifies who assigns the books, who
possesses them, that the proper number sequence is used, etc.) performed?
No __
Yes
(2)
*If yes to (1) above, indicate frequency of audit by checking all that apply:
(a) *Monthly ..................................................................................................
(b) *Quarterly ................................................................................................
(c) *Annually .................................................................................................
(d) *Other.......................................................................................................
IV - 33
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
VT: (Verification Test) Conduct the following test and annotate your findings in the space
below. Pull either the completed receipt books from the last four quarters or the records of
completed receipts for the last four quarters. Verify and track the use of pre-numbered receipt
books, correct numbering of the receipt books and that the receipts are used in sequence from the
books.
Verify that the currency received was deposited and accurately posted to the employer
account for 12 receipts. If the total number of receipts written is less than 12, verify the
deposit activity and accuracy of posting to the employer's account for all of them.
NOTE: If no receipt books were issued and/or no receipts were written during the review
period, contact your Regional Office for instructions.
4.
Are specific individual(s) assigned to transfer monies from the clearing account to the
UTF?
No __
Yes
VS:(Question 4
)
IV - 34
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
5.
If any of the preceding evaluative questions were answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If yes, describe in the narrative following these questions.
VS:(Question 5
)
IV - 35
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A", and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
IV - 37
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW
Systems to Assure Execution of Events
For Cashiering, controls are needed to reconcile balances of transactions and to identify
areas where exceptions are encountered.
The reviewer will determine if such controls have been built into the
Cashiering operations. It is beyond the scope of TPS to actually validate
balances in the general accounting system. The reviewers will only verify
that the State maintains a general accounting system and performs
reconciliations of all accounts (i.e., Accounts Receivables, Clearing,
Solvency Fund, Penalty and Interest).
A section has been designed for States that employ the services of NonState Entities to perform cashiering activities. Both sections must be
completed by States that use the services of Non-State Entities because
not all cashiering activities can be processed through the Non-State
Entities' operation.
In the Narrative Section following the questions, explain "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section.
IV - 39
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
1.
Does the State verify that the amount shown on the daily deposit records agrees with the
amount credited by the bank?
Yes
2.
Does the State verify that the amount credited by the bank agrees with the amount
recorded in the State's accounting system (i.e., general ledger account)?
Yes
3.
No __
Does the State have internal controls that assure that adjustments are made to the
accounting system to reflect discrepancies reported by the bank?
Yes
5.
No __
Does the State have internal controls in place to assure that discrepancies between its
deposit records and bank deposit records are routinely reconciled?
Yes
4.
No __
No __
Does the State have internal controls that assure that adjustments are made to employer
accounts to reflect the discrepancies reported by the bank?
Yes
IV - 41
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No __
ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
6.
7.
Does the state have internal controls to assure that the State accounting system is
adjusted to reflect dishonored-check contribution payments?
Yes
No __
Does the state have internal controls to assure that the employer's account is adjusted to
reflect dishonored-check contribution payments?
Yes
No __
VT: (Verification Test) For each bank used by the state, select a bank reconciliation statement(s)
(or statement from comptroller's office citing state banking activities) for one month from the past 12
months. Track all entries (e.g., deposits, debit for dishonored checks, credit memorandums resulting
from coding errors, or other adjustments to deposits) back to the deposit record to assure that all
appropriate action was taken. Exclude from this test transfer of funds, employer refund activity or
any benefit payment activity.
NOTE If the state does not receive a traditional bank statement, determine the means by which it
acquires a record of banking transactions. Consult with the Regional Office to develop an approach
to conducting the VT using the documents available.
IV - 42
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
8.
Does the State have procedures to assure timely deposit of all contribution payments?
Yes
VS:(Question 8
9.
No __
)
*Does the State sort contribution payments and source documents as follows?
Yes No
a.
b.
c.
d.
e.
f.
g.
10.
*Timely reports..........................................................................................................
*Untimely reports ......................................................................................................
*Reports with liability reported, payment enclosed ..................................................
*Reports with liability reported, no payment enclosed .............................................
*Reports with no wages, no liability due...................................................................
*Reports with excess wage only, no liability due......................................................
*Other items that can not be processed immediately
(e.g., Correspondence, etc.) .......................................................................................
*Does the State have procedures to give priority to depositing high dollar contribution
payments?
No __
Yes
If yes, describe in the narrative at the end of this section.
IV - 43
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
11.
Does the State have a procedure for problem items that require special handling (e.g.,
reports received with no employer account number, irregular contribution payments,
etc.), that assures prompt follow-up and deposit of payments? (Example: process to
place items in a suspense account/exception file for follow-up).
No __
Yes
a.
If yes, does the State have procedures to assure that items placed in the above
accounts/files are ultimately handled and posted as appropriate?
Yes
No __
VT: (Verification Test) Conduct the following test and note your findings in the space below.
At the beginning of the quarter, identify 12-15 employer contribution payments in the "suspense
account/exception file". At the end of the quarter, review the records to determine the
disposition of the items.
If an item has not yet been cleared, determine whether or not procedures have been
followed thus far.
For items that have been cleared, determine if procedures were followed correctly and
timely (e.g., payments were posted to the proper employers' accounts within the time
frame required by the State, or money was correctly refunded or transferred to the proper
State agency).
NOTE: Reviewers who cannot conduct this test because the State does not use exception
files/suspense accounts must contact their Regional Office for further instructions.
IV - 44
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
12.
Does the State have a procedure to assure prompt transfer of monies from the Clearing
Account into the UTF?
Yes
VS: (Question 12
13.
)
*Does the State accept Electronic Fund Transfers (EFT) for contribution payments?
Yes
14.
No __
Does the State have system procedures or internal controls to assure that employer
accounts are properly posted to reflect:
No N/A
Yes
a.
b.
Payments received in paper form (checks/cash)? ......................................................
Payments received via EFT?......................................................................................
(N/A is only appropriate if Question #13 is answered "No").
VS: (Question 14
15.
No __
)
*What is the estimated average time to credit (apply) monies to the appropriate employer
account?
Number of days ______
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
16. If procedures are automated, is a systems check performed every time a program is changed?
Yes __ No __
17.
If any of the preceding evaluative questions were answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If yes, describe in the narrative following these questions.
VS: (Question 16
)
IV - 46
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A", and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
IV - 47
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW
Review of Completed Work
For Cashiering function, the State should be conducting systematic reviews of completed
work to assure accuracy and timeliness. The review should include contribution payments
posted to employer accounts as well as deposit activity.
The reviewer will consider the kind of supervisory program and/or quality
assurance review the State uses to assess the Cashiering function. The
review procedure may differ for new employees.
In the Narrative Section following the questions, explain "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If there is no
supervisory and/or quality assurance review, describe how quality is
assured in the Cashiering unit.
IV - 49
R 04/03
For staff members involved in the Cashiering function, are the following components subject to some form of systematic review?
For Yes answers, enter a "Y" in the appropriate column(s). For Yes answers, also enter "Y" in column 6. If there are no reviews,
answer "N" for No in column 6. Column 6 is the only evaluative question.
Type of review
Component
a.
Timeliness of deposit of contribution payments.
b.
Reconciliation of bank statements and resolution of
discrepancies.
c.
Proper handling of NSF checks, including adjustments to State
deposit records and individual employer accounts.
d.
Timely and accurate clearance of items from
suspense/exception files.
e.
Accounting of TAX cash receipt books.
VS:
(Question 6
*Informational
*1
Supv
*2
Peer
*3
QR
(Qual.
Rev)
*4
Support
Clerical
*5
Other
6
Review
ConductedY/N
)
ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
7.
If any of the preceding evaluative questions are answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If yes, describe in the narrative following these questions.
VS: (Question 7
)
IV - 53
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A", and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
IV - 55
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
Additional Controls
1.
*Does the State have internal controls or quality assurance systems in the Cashiering
function which this review failed to identify?
Yes
No __
Yes
No __
If yes, describe below.
2.
* Are there any exemplary practices for the Cashiering function?
If yes, describe below.
IV - 57
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
Non-State Entities
CHAPTER FOUR
PROGRAM REVIEW
Review of Non-State Cashiering Activities
(Bank Lockbox or non-State Agency)
*THE STATE USES A BANK LOCKBOX OR NON-STATE AGENCY TO PERFORM
CASHIERING ACTIVITIES:
YES
NO ___
If yes, continue to the next page. If no, this concludes the Systems Review.
SYSTEMS REVIEW
Recorded Information and Instructions
The State should have a contract with the bank or non-State agency that performs its
Cashiering activities. The contract should specify all the procedures and controls that are
needed to assure that contribution payments are processed timely and accurately, that
information and unprocessed contribution payments and documents are forwarded to the
State, that deposits are made to the Clearing Account in a timely manner, and that
transfers are made to the UTF timely. The State should also have methods to verify that
the contractual requirements are being met.
The reviewer should review the contract and visit the location(s) where the Cashiering activity
takes place (bank or other agency) to determine that the operation is fulfilling the contract
requirements. The reviewer should also review the process to assure that contribution payments
are being processed timely and accurately and that information, unprocessed contribution
payments and documents are forwarded to the State.
In the Narrative Section following the questions, explain "Other" responses and "Compensating
Controls". Identify the question being explained by referencing the number and section.
IV - 59
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TAX PERFORMANCE SYSTEM
CASHIERING
Non-State Entities
IV - 60
CHAPTER FOUR
PROGRAM REVIEW
R 04/03
ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
Non-State Entities
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
1.
*Cashiering activities are performed by:
a.
b.
2.
* Bank .......................................................................................................................
* Non-State AGENCY (e.g., Dept. of Revenue) .......................................................
Does the Contract and/or related document(s) that detail services to be provided, contain
provisions for the following:
Yes No
a.
Frequency of deposit? ................................................................................................
b.
c.
d.
e.
f.
g.
h.
Security? ....................................................................................................................
Accuracy of data provided to State? ..........................................................................
Promptness of data provided to State?.......................................................................
Accessibility of records?............................................................................................
On-site review by State? ............................................................................................
Frequency of mail pick-up? .......................................................................................
*Disaster Recovery? ..................................................................................................
VS: (Question 2
3.
)
If any of the preceding evaluative questions were answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If yes, describe in the narrative following these questions
VS:(Question 3
)
IV - 61
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
Non-State Entities
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
IV - 63
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
Non-State Entities
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW
Recording of Transactions and Events
The contract should specify procedures and controls to assure that employer contribution
payments are accurately accounted for and that bank deposits are accurate and reconciled.
Whether the Non-State Entity system is automated or manual, it should provide an audit
trail that leads from source documents to records of receipts and to the deposit of monies
into the UTF.
The reviewer must determine whether there are systems to assure that
records of receipt and processing of employer contribution payments are
accurately and promptly recorded. An audit trail should be in place
leading to support documentation.
In the Narrative Section following the questions, explain "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If the Non-State
Entity does not provide a record of monies received by employers and a
record of deposit activities, explain how the State is assured that the
accounts are accurately maintained and how the State is assured that the
Non-State Entity is adhering to the contract requirements.
IV - 65
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
Non-State Entities
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
1.
Does the Non-State Entity have a method to prove untimely employer reporting, such as
retaining untimely envelopes or filming/imaging of the envelopes to document untimely
reports and payments?
Yes
VS: (Question 1
2.
No __
)
Does the State have procedures to verify that items forwarded to the State from the NonState Entity are received?
Yes
No __
VS: (Question 2
3.
)
Does the endorsement or other documentation on the checks contain information that
assists State staff with an audit trail for payments?
Yes
VS: (Question 3
No __
)
IV - 67
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
Non-State Entities
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
4.
Are copies of the contribution payments available to the State staff?
Yes
No __
VS: (Question 4
5.
)
Are controls in place to assure the accuracy of report and payment data?
Yes
No __
*If yes, which controls are used?
Yes No
*a.
*b.
*c.
*d.
*e
*f.
Calculator Tapes ........................................................................................................
Control Totals ...........................................................................................................
Key Verification ........................................................................................................
On-line Edits ..............................................................................................................
Batch Machine Printouts............................................................................................
Other ..........................................................................................................................
If other describe
VS: (Question 5
)
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CASHIERING
Non-State Entities
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
6.
*Does State receive magnetic media output of information from the Non-State Entity?
Yes
a.
No __
If yes, does the State have a method to verify the accuracy of the information?
Yes
VS: (Question 6a
7.
No __
.)
*If the State permits contribution payments via EFT, is the associated contribution report
required to be submitted to the Non-State Entity?
Yes
a.
No __
If yes, is there a written procedure to properly credit the employer's account with
the payment?
Yes
No __
If yes, describe the procedure in the narrative.
VS: (Question 7a.
)
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CHAPTER FOUR
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SYSTEMS REVIEW QUESTIONS
8.
*Does the Non-State Entity process contribution report data submitted:
Yes No
a.
b.
c.
9.
*On diskette? .............................................................................................................
*On magnetic tape ....................................................................................................
*Via Electronic Data Interchange (EDI)?..................................................................
If any of the preceding evaluative questions were answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If yes, describe in the narrative following these questions
VS:(Question 9
)
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Non-State Entities
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A", and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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SYSTEMS REVIEW
Execution by Authorized Individuals
Since the Cashiering function requires the handling of negotiable items and cash, access to
these items should be limited to authorized, assigned staff. This requirement provides
security for the contribution payments and assures that the cashiering functions are
performed only by authorized individuals.
The reviewer should examine the contract and the handling of
contribution payments by the Non-State Entity to identify the internal
controls limiting access to and providing accountability for the
contribution payments.
In the Narrative Section following the questions, explain "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section.
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SYSTEMS REVIEW QUESTIONS
1.
2.
3.
Is the mail opened in an area that is restricted to authorized individuals?
Yes
No __
Yes
No __
Is the mail sorted in an area that is restricted to authorized individuals?
Are deposits prepared in an area that is restricted to authorized individuals?
Yes
VS: (Questions 1, 2 & 3
4.
No __
)
Are specific individuals assigned and authorized to credit a deposit to the State's clearing
account?
No __
Yes
VS: (Question 4
)
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SYSTEMS REVIEW QUESTIONS
5.
Are specific individuals assigned and authorized to make adjustments to the State's
account (e.g., debit and credit memoranda, encoding errors and dishonored contribution
payments)?
No __
Yes
VS: (Question 5
6.
)
*Does the contract authorize bank or non-State personnel to transfer funds to the
UTF?
Yes
No __
If yes, are specific individuals authorized to make the transfer of money to the
UTF?
Yes
VS: (Question 6a.
No __
)
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Non-State Entities
CHAPTER FOUR
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SYSTEMS REVIEW QUESTIONS
7.
If any of the preceding evaluative questions were answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If yes, describe in the narrative following these questions
VS:(Question 7
)
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TAX PERFORMANCE SYSTEM
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Non-State Entities
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A", and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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CHAPTER FOUR
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SYSTEMS REVIEW
Systems to Assure Execution of Events
For Cashiering, controls are needed to assure that the Non-State Entity provides the
services detailed in the contract and that specific instructions are followed.
The reviewer will determine if such controls have been built into the
contract and if the Non-State Entity is adhering to the conditions of the
contract.
In the Narrative Section following the questions, explain "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section.
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Non-State Entities
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
1.
Does the Non-State Entity record the amount of mail received (e.g., 20 trays) and the
time the mail is received so that workload may be monitored?
Yes
VS: (Question 1
2.
*Is the mail:
Yes
a.
*delivered by the postal service? . . . . . . . . . . . . . . . . . . . .
b.
*picked up from the post office ? . . . . . . . . . . . . . . . . . . . .
3.
*Once opened, is the mail sorted in the following manner:
No__
)
No
Yes No
a.
*Timely reports? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b.
c.
d.
e.
f.
g.
h.
i.
*Untimely reports? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*Reports with liability reported, payments enclosed? . . .
*Reports with liability reported, no payment enclosed? . ..
*Reports with no wages, no liability due? . . . . . . . . . . . . .
*Reports with excess wage only, no liability due? . . . . . .
*Contribution payments that can't be processed? . . . . . . .
*Reports that can't be processed? . . . . . . . . . . . . . . . . . . .
*Other items that can't be processed?
(e.g., Correspondence, etc.) . . . . . . . . . . . . . . . . . . . . . . . . .
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SYSTEMS REVIEW QUESTIONS
4.
*Does the Non-State Entity perform any other sorts in the operation?
Yes
a.
5.
No __
If yes, describe
*Are large dollar contribution payments identified and given priority handling for
deposit?
Yes
a.
6.
No __
If yes, describe how (e.g., color coded envelopes, separate lockbox).
Are envelopes examined to assure that the entire contents of the envelope are
removed?
Yes
VS: (Question 6
No __
)
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CHAPTER FOUR
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SYSTEMS REVIEW QUESTIONS
7.
Is there a procedure for assuring that items that cannot be processed by the Non-State
Entity are forwarded to the State in a timely manner?
Yes
VS: (Question 7
No __
)
8.
*Are reports reviewed for completeness (e.g., employer identification, a comparison of
amount shown to the amount remitted, etc.)?
Yes
No __
9.
*Do the reports remain with the contribution payments until the batches are balanced?
10.
No __
Yes
No __
Is the clearing account credited on the day of deposit?
VS: (Question 10
11.
Yes
)
Is the State able to determine the available balance (checks deposited that have cleared)
and the book balance (available balance plus uncleared checks) at any given time during
the course of a business day?
No __
Yes
VS: (Question 11
)
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Non-State Entities
CHAPTER FOUR
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SYSTEMS REVIEW QUESTIONS
12.
If procedures are automated, is a systems check performed every time a program is changed?
Yes __ No __
13.
If any of the preceding evaluative questions were answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If yes, describe in the narrative following these questions
VS:(Question 12
)
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Non-State Entities
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A", and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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CHAPTER FOUR
PROGRAM REVIEW
Review of Completed Work
For States that use the services of Non-State Entities to perform Cashiering functions, a
review of completed work would include monitoring contract provisions. The State should
conduct systematic reviews of completed work by the Non-State Entity to assure accuracy
and timeliness of the information. The contract should specify the quality of work
expected by the State.
The reviewer will consider the kind of quality assurance review the State
uses to assess the quality of work completed for it by the Non-State Entity.
In the Narrative Section following the questions, explain "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If there is no
quality assurance review, describe how quality is assured by the State in
the Cashiering function.
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CHAPTER FOUR
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SYSTEMS REVIEW QUESTIONS
1.
Does the State monitor the performance of the contract?
Yes
a.
No __
*If yes, identify which provisions are monitored in the narrative following these
questions.
VS: (Question 1
2.
)
*Does State management consider the provisions of the contract adequate for the State's
payment processing needs?
Yes
a.
3.
No __
*If No, how is the contract deficient?
*Is the contract procured through a competitive bid process?
Yes
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SYSTEMS REVIEW QUESTIONS
4.
If any of the preceding evaluative questions were answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If yes, describe in the narrative following these questions.
VS:(Question 4
)
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Non-State Entities
CHAPTER FOUR
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A", and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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CHAPTER FOUR
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SYSTEMS REVIEW QUESTIONS
Additional Controls
1.
*Are there additional internal controls or quality assurance systems exercised by the
Non-State Entity that this review failed to identify?
Yes
No __
If yes, describe below.
2.
* Are there any exemplary practices by the Non-State Entity or by the State in the dealing
with the Non-State Entity?
Yes
No __
If yes, describe below.
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CHAPTER FOUR
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DEPOSIT PROMPTNESS OF CONTRIBUTION PAYMENTS
ESTIMATION SAMPLE INSTRUCTIONS
Purpose/Intent
To measure the timeliness in which States deposit
contribution payments into the Clearing Account.
Scope
The scope of the review will be the contribution payments
received during the second quarter review period.
Universe
The universe for the Estimation Sample should include all
paper payments (e.g., cash, checks) received during the
review period. A sample will be drawn from the universe
of paper payments to determine deposit promptness. A
sample size GOAL of 500 payments (see the Sampling
Table on page 111) will be selected from the paper
payment universe and listed on the TPS Cashiering Sample
Coding Sheet.
NOTE: In States that accept ELECTRONIC FUND TRANSFERS (EFTs), the reviewer must
determine the percent of contributions received via EFT. Sampling the EFT universe is not
necessary since all EFTs are deposited timely. A formula has been developed that combines the
measurements from the Estimation Sample (paper payment sample) and the entire EFT universe
to reflect overall deposit promptness (see Step 11).
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Timing/Frequency
The sample will be selected once per calendar year.
The sample selection period will cover the time during
which the state receives the "peak" or "bulk" mail for the
second quarter reports. (Typically, reports and payments
will be due on or around July 31).
Sampling Procedures
The following are steps for selecting sample items.
STEP 1. * The reviewer will estimate the time period
during which 90% of the receipts for the quarter are
anticipated. This could be as long as five weeks in some
states. From that time period, the reviewer should
determine the five days during which the greatest amount
of mail receipt is anticipated. The five days selected
should be based on historical mail receipt data and the
reporting due date. Reviewers must be able to support their
decision. Sample items are to be selected from each of
these five days. The samples may be chosen from five
consecutive days or from five days chosen at random over
the course of the mail receipt period. If the cashiering
function is performed at a lock box, or other agency site, or
located one or more hours from the state agency, the
number of sampling days may be reduced to three days
(with RO approval). The sample size will remain at 500
items, increasing the number of sample items to be selected
each day to 167 items. (Although this modification will be
accepted, it is not preferable because it reduces the
representativeness of the sample items.) Note: If 90% or
more of the receipts for the quarter are expected to arrive
within five days or less, samples must be taken each day.
* Please refer to last page of Estimation Sample Instructions if lockbox is used.
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Sampling Procedures contd. STEP 2. Notify Regional Office of Sample Period.
Reviewers must apprise the Regional Office of the days selected for
sampling and provide information to support the selection,
including an estimate of the percentage of total dollar amount that
will be received during the selected period.
STEP 3. Determine if mail is presorted.
Determine if checks are sorted for special handling prior to opening
the envelopes based on predeterimined indicators such as color
coded envelopes or a separate mailing address for large employers.
a. If yes, see instructions and explanation in Appendix A
for adjustment required before going to step 4.
b. If no, go to step 4.
STEP 4. Determine which sample selection method will be used.
The state may use either one of the following sampling
methodologies: a. Check Interval, b. Mail Tray.
For either method, the goal is to select 100 sample items in each of
the 5 days. This requires the reviewer to estimate the number of
mail trays or amount of mail to be received per day and to establish
a sample interval or the number of sample items to be selected per
tray for that day. Either method can be used for selecting samples;
however, the Mail Tray Method may be easiest to estimate. Once a
method is selected, it should be used for all of the 5 days. Do not
switch back and forth between methods. At the end of the first day,
100 sample items should have been selected, at the end of the
second day, a total of 200 items should have been selected, etc.
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Sampling Procedures contd.
When less than 100 items are selected on any given day, the
difference between the number of sample items actually selected
and 100 must be added to the goal for the following day. For
example, if 90 sample items are selected on Day 1, 110 items
should be selected on Day 2, for a total of 200 items within 2 days.
Sample selection should be discontinued at the end of the 5th day,
even if less than 500 total items have been selected.
When more than 100 items are pulled on a day and there is still
more mail from which samples could be selected, the reviewer
should continue to pull samples using the same sampling interval,
and then reduce the number of samples selected the following day.
For example, if 120 items are selected on Day 1, only 80 items
should be selected on Day 2, for a total of 200 sample items within
2 days. If the 500 items target is reached during the 5th day and
more mail remains, the reviewer should continue to select sample
items at the same interval, until all mail received for the day has
been sampled.
In some state agencies, mail is received round the clock or is
received before or after the reviewer is on site. Under these
circumstances, the reviewer must make a “best guess” of how much
mail will be received while he or she is available and select 100
sample items from mail incoming during that time period. For
example, the reviewer is on site 7:00 AM to 4:00 PM. The reviewer
would select items from each mail delivery between 7:00 AM to
4:00 PM, for a total of 100 items for the day. If the number of items
selected during the time the reviewer is on site is not 100, the
following day’s sample selection would be adjusted to make up the
difference.
To use the Check Interval Method:
(1) Project the total number of contribution payments (less EFT
payments) to be received during the designated time frame by one
of
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Sampling Procedures contd
the following methods and enter the number in the appropriate place
on the Summary Sheet.
(a) Use last year’s total number of receipts (items) for the
second quarter, OR
(b) Use the number of employers expected to report during
the sample period. (Total number of active
employers minus anticipated number of late filers).
(2) Divide the projected number of contribution payments (items) y
500 to determine the Check Interval Number (Nth number).
(3) Determine the Random Starting Number for the sample. (See
instructions in Appendix A, TPS Handbook). This will be
the first sample item selected.
(4) From the Random Starting Number, count the envelopes until
the Nth item is selected. Each successive item to be selected is
determined by adding the Nth number to the number of the most
recently selected item. (NOTE: It is permissible to measure the
distance between the random start number item and the Nth item
within a mail tray to select each subsequent sample item.)
To use the Mail Tray Method:
(1) Estimate the number of mail trays to be received during the peak
period using historical data from the Cashiering Unit and/or the
Mail Room.
(2) Determine the number of sample items to be selected from each
tray by dividing 500 by the number of trays that you expect to
receive.
EXAMPLE: If forty (40) trays of mail are expected during
the sampling time frame, divide 500 by 40. The result is
12.5 contribution payments per tray. Alternately, make a
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ESTIMATION SAMPLE INSTRUCTIONS
Sampling Procedures contd
random selection of 12 items from the first tray and 13 from the
next tray during the course of the sample selection time frame.
STEP 5. Select sample contribution payments.
On each of the days of the sampling time frame, the TPS reviewer
(or alternate) will go to the area where the mail is received, opened
(by machine) and transferred to mail trays. The samples for the
day will be selected from these trays by the method selected.
NOTE: It is more important to maintain a consistent sampling
technique than it is to pull exactly 500 items. Once the sampling
technique is established, do not alter it. Example: if you are
pulling every 10th item and the 20th item contains no payment, do
not record that account as part of the sample, but continue to count
to the 30th item which will be the next item recorded as part of the
sample. The sampling table on page 113 will adjust the percentage
needed to determine the value-to-pass.
STEP 6. Record identifying information for each sampled
payment.
For each sample contribution payment, complete Columns B, C,
and D on Coding Sheet as follows.
a.
Column B:
Enter the date that the mail was received by the State
or Non-State Entity.
b.
Column C:
Enter the employer account number assigned by the
State. If an account number is not available, enter
the employer's name or business name as shown on
the report or payment.
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Sampling Procedures contd.
NOTE: Even when the account number is available, it may
be useful to record the employer's name to assure accurate
identification. This column may also be used at the
discretion of the reviewer to record any other information
that would be helpful in identifying the account or tracking
the payment.
c.
Column D:
Enter the amount of the payment.
STEP 7. Replace sample item.
Return each payment to approximately the same spot from
which it was removed. There should be nothing that would
indicate which payments are part of the sample except the
information recorded on the Coding sheet.
STEP 8. Determine the review date.
Determine the date it is reasonable to assume that all
contribution payments received during the selection period
are deposited and the information is posted to the employers
file. Enter the date in the appropriate blank on the Summary
Sheet. Hold the list of sample contribution payments until
the sample review date.
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Sampling Procedures contd.
STEP 9. Review sample payments for timeliness.
Each sample payment listed on the Coding Sheet will be
reviewed for timeliness of deposit.
Review appropriate records to determine the date that all
payments listed were deposited (e.g., deposit slips, batch
listings, cash transmittal log, employer's record, etc.).
STEP 10. Complete Coding Sheet.
For each sample contribution payment, complete the
Coding Sheet as follows:
a.
Column E:
Enter the date that each payment listed was
deposited.
b.
Columns F, G, H and I:
For each payment listed, complete the appropriate
column (Columns F through I), using the following
process.
(1) Determine the number of banking days
between date the payment was received and the
date the payment was deposited (do not include
weekends and holidays). NOTE: Payments
received one day and deposited the next day
are considered to be deposited within one day,
regardless of the TIME of day received or the
TIME of day deposited.
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Sampling Procedures contd.
(2) Based on the number of days between receipt and
the date of deposit, enter the dollar amount of the
sample payment either column F, G, H, or I, as
follows:
Column F represents within 1 day for deposit.
Column G represents within 2 days for deposit.
Column H represents within 3 days for deposit.
Column I represents within 4 or more days for
deposit.
c.
For each page of the coding sheet, total amounts of
each column and enter the total amount of the column on,
Total Dollar This Page (line 21). The total amount of
Columns F, G, H, and I should equal the total of column D.
d.
For each page of coding sheet, count the number of
items in each column and enter total on, Total Items This
Page (line 22). The Total items of each column should
equal the total number of completed lines of the Coding
Sheet (cannot exceed 20 per sheet).
Complete the coding sheet for all sample items.
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Sampling Procedures contd.
e.
Complete Part II of the Summary page of the Coding
Sheet as follows:
(1) Total amounts of Columns D, F, G, H and I from
coding sheets used in sample selection.
(2) Enter column total amount on corresponding
columns of Summary Coding Sheet on line 1,
columns D, F, G, H and I.
(Total amounts of columns F, G, H, and I should
equal total of line 1, column D).
(3) Total items for columns D, F, G, H and I for all
coding sheets used in the sample selection.
(4) Enter column total items on corresponding
columns of Summary Coding Sheet on line 2,
columns D, F, G, H and I.
(Total number of items for column F, G, H and I should
equal total of line 2, column D).
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Sampling Procedures contd.
f.
Complete Part III of the Summary Page. This will
give the percentage for timeliness and amounts deposited.
(1) To compute the percent of amounts deposited:
Divide the total dollar amounts of each column (F
through I) from Part II, line 1 by the total dollars
column D, line 1, then Multiply the result by 100 and
round to the nearest, one decimal place.
(2) Enter the percentages in Part III, line 3, in
corresponding column (F, G, H or I).
(3) To compute the percentage of items deposited:
Divide the total item count of each column (F
through I) from Part II, line 2 by the total item count
from column D, line 2, then Multiply the result by
100 and round to the nearest, one decimal place.
(4) Enter the percentages in Part III, line 4, in
corresponding column (F, G, H and I).
NOTE: The percentages of items deposited (f (3) & f (4)
above) are only to aid the reviewer and State management in
analyzing the level of effort in the deposit activity (items vs.
dollars). No Federal requirements pertain to the number of
items deposited. Federal requirements relate to dollar
amounts only.
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Sampling Procedures contd.
g.
Complete Part IV, Summary Recap of the Summary
Page. This will demonstrate the percentage of dollars
deposited by day.
(1) From Part III, line 3 enter the percentages from
the corresponding columns into the percentage line.
(2) From Part II, line 1, columns F, G, H, and I,
enter amounts into corresponding column in Part IV.
(3) Add the percentages and amounts deposited
within 3 days (lines 5, 6, and 7 of Summary Recap)
and enter on line 8.
(4) Total percent column and amount column.
Percentage total should be 100%. Total of amount
should balance with Part II line 1, Column D total.
h.
Enter the actual number of contribution payments
received during the designated time frame in the appropriate
blank of Part I on the Summary.
i.
Subtract the projected number of payments (or trays)
from the actual number of payments (or trays) and enter the
difference on the designated line in Part I of the Summary
Sheet.
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Sampling Procedures contd.
j.
Divide the difference by the projected number of
payments, and multiply the result by 100. Round to the
nearest, one decimal place and enter on the space in Part I of
the Summary Sheet for % of Deviation. This information
should be taken into account for estimating contribution
payments for the next Deposit Timeliness sample.
EXAMPLE:
Projected number of payments = 15,000
Actual number of payments = 18,000
Difference = 18,000 - 15,000 = 3,000
Percent Deviation = 3,000/15,000 = 1/5 or .20
.20 * 100 = 20%
STEP 11. Calculating Electronic Fund Transfers (EFTs).
(If no EFTS are received, go to Drawing Conclusions).
All EFTs from employers for contributions (do NOT include
penalty and interest payments) received during the quarter,
will be counted as being deposited timely. The following
formula should be used by States that receive both paper
payments and EFTs to determine overall timeliness of
deposit.
P= (w * 100) + [(1-w)*p]
where w is the proportion of funds deposited electronically
and p is the percentage of the paper payments received by
the agency or sent to the lockbox that were deposited within
3 banking days (line 8 from Summary Recap).
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CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
ESTIMATION SAMPLE INSTRUCTIONS
Sampling Procedures contd.
EXAMPLE: If 10 percent of dollars are deposited
electronically and 92 percent of dollars received as paper
payments are deposited within 3 banking days, the weighted
combined estimate is:
P= (.1 * 100) + (.9 * 92)
P= 10 + 82.8 = 92.8 percent
If the percent of EFT dollars is expected to be 50% or
greater, the sample size and value to pass will change.
Reference the Sampling Table under Drawing Conclusions.
NOTE: While the percent of paper payments deposited in a
timely manner is based on the Estimation Sample, the
percent of contributions received via EFT should be based
on actual EFT payments for the quarter.
Drawing Conclusions
To draw conclusions about timeliness, do the following.
Identify the size of the sample from Part II, line 2, column D
of the Summary Coding sheet (Total Items).
Refer to the following Sampling Table to determine the
value to pass.
TIMELINESS STANDARD: 90% or more dollars
deposited within 3 days or less.
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CHAPTER FOUR
PROGRAM REVIEW
ESTIMATION SAMPLE INSTRUCTIONS
Drawing Conclusions contd.
If the percentage of the total dollar amount deposited within
3 banking days (line 8 of Summary Sheet), is equal to or
greater than the value to pass percentage, then the reviewer
will conclude that 90% of the dollar amount of employer
contribution payments have been deposited timely.
If the percentage of the total dollar amount deposited within
3 banking days is less than the "value-to-pass" percentage,
then the reviewer must conclude that timely deposit of
employer contribution payments cannot be confirmed.
The value to pass figure is lower than the 90% timeliness
standard in order to lessen the probability of “Type I Error”.
Type I Error is the appearance of failure when in fact, the
sample passes.
SAMPLING TABLE
# of Sample Items
375 - 405
406 - 441
442 - 481
482 - 527
528 - 579
580 - 640
IV - 111
Value to Pass
87.5%
87.6%
87.7%
87.8%
87.9%
88.0%
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CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
ESTIMATION SAMPLE INSTRUCTIONS
Drawing Conclusions, contd.
EFT SAMPLING TABLE
% EFT
Sample Size
50 – 54.9
55 – 59.9
60 – 64.9
65 – 69.9
70 – 74.9
75 – 79.9
80 – 84.9
85 – 89.9
90 - 100
400
400
400
300
300
200
200
200
0
Value to Pass
77.4
75.1
72.2
68.1
63.2
55.6
45.5
29.1
N/A
If the State receives no EFTs, then this conclusion will be
based solely on the outcome of the Estimation Sample. If
EFTs are accepted by the agency, the conclusion will be
based on a combination of the Estimation Sample results
and the EFTs received by the agency. (See Step 11).
For all untimely deposits, the reviewer must provide an
explanation on the Acceptance Sample Explanation Sheet.
Documentation
All electronic and paper documentation gathered to review
samples (which does not include checks) must be kept until
review completion and Regional Office approval of the
Annual Report. This documentation should be maintained,
unless the State is able to recreate the identical information
used in the review.
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CASHIERING
CHAPTER FOUR
PROGRAM REVIEW
ESTIMATION SAMPLE INSTRUCTIONS
Lockboxes
All States should make all reasonable attempts to follow the
above instructions. If, however, lockboxes are not in the
same geographical location as the reviewer AND it is not
possible for the reviewer (or alternate) to pull the sample for
the entire "peak" period, OR there are other circumstances
that make it impossible to follow the instructions (i.e.,
around the clock processing), a modified sampling
methodology may be used with the advance approval
through the Regional Office.
The State must request approval through the Regional
Office and give the reason for the request. Based on the
information provided, the Regional Office and National
Office will develop a modified sampling methodology for the
State.
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TAX PERFORMANCE SYSTEM
Cashiering Estimation Sample Explanation Sheet
State: _____________________ Period Covered: _______________ Date: _______________ Reviewer: _______________
Identification Number
Explanation
Page _____ of _____
TPS CASHIERING SAMPLE CODING SHEET
STATE_______________________________
YEAR AND QUARTER OF REVIEW_____________________
EMPLOYER ACCOUNT
A.
REVIEWER__________________________
AMOUNT OF PAYMENT
DEPOSIT
RECEIVED
AMOUNT ($)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
OLLAR AMOUNT THIS PAGE
AMOUNT ($)
DAY 4+
AMOUNT ($)
TOTAL ITEMS THIS PAGE
*Payments received one day and deposited the same day or any time the next day, are considered to be deposited within one day.
TPS CASHIERING SUMMARY SHEET
STATE______________
PART I
___
YEAR AND QUARTER OF REVIEW________________
PREPARATION
CHECK SAMPLE INTERVAL
RANDOM STARTING NUMBER____________
___
REVIEWER__________________
SAMPLE SELECTION START DATE
SAMPLE SELECTION END DATE____________________
EFT(%)
PART II SUMMARY FOR DOLLARS & ITEM COUNT (Sample Data)
MOUNT OF PAYMENT
AMOUNT OF PAYMENTS
DAY 1
AMOUNT
1
AL DOLLAR AMOUNT
2
TOTAL ITEMS
PART III SUMMARY FOR PERCENTAGES
3
PERCENTAGE BY CATEGORY ($)
4
OVERALL PERCENTAGE (ITEMS)
PART IV SUMMARY RECAP
Line 1, Column F) ___________% (Line 3, Column F)
Line 1, Column G) ___________% (Line 3, Column G)
Line 1, Column H) ___________% (Line 3, Column H)
% DEPOSITED WITHIN 3 DAYS
Line 1, Column I)
___________% (Line 3, Column I)
100%
% VALUE NEEDED TO PASS (from chart)
DAY 2
AMOUNT
DAY 3
AMOUNT
DAY 4+
AMOUNT
====
CHAPTER V
REPORT DELINQUENCY
COMPONENTS
INTRODUCTION
COMPUTED MEASURES
PROGRAM REVIEW
INTRODUCTION
ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
REPORT DELINQUENCY
CHAPTER FIVE
INTRODUCTION
The Report Delinquency function consists of the efforts to assist employers to comply with
State laws and regulations for employment reporting, and to resolve delinquent reports. The
major tasks are:
Identify delinquent employer accounts
Notify delinquent employers
Resolve delinquency by securing reports, determining non-liable,
or assessing estimated monetary liability
PRIMARY OBJECTIVE
The primary objective of the Report Delinquency function is to promote compliance with State
reporting requirements and secure delinquent reports timely. To accomplish this, the Report
Delinquency function will need to meet two sub-objectives:
Increase the percentage of employers filing quarterly reports by promoting
voluntary compliance (Completeness)
Take all reasonable actions to secure delinquent reports within an acceptable
time period (Timeliness and Completeness)
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CHAPTER FIVE
INTRODUCTION
PRIMARY OBJECTIVE
Timeliness
and
Completeness
To assess State effectiveness in promoting employer compliance,
and in securing delinquent reports, Computed Measures will be
generated based on data routinely reported by States. These data elements
will be converted into six indicators by the TPS ADP system.
To determine whether the State is taking all reasonable actions to
secure/resolve report delinquencies, a Program Review will be conducted to
ascertain the existence of necessary internal controls and to determine
whether or not such controls are functioning properly.
REVIEW METHODOLOGIES
Computed Measures
Computed Measures will provide indicators to measure how effective the State is in securing
delinquent reports timely and in resolving delinquent reports. There are three indicators which will
be used to measure contributory employers and the same three indicators will be used to measure
reimbursing employers:
A. Percent of reports filed timely.
B. Percent of reports secured by the end of following quarter.
C. Percent of reports secured plus delinquencies resolved within 180
days (i.e., two following quarters)
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CHAPTER FIVE
INTRODUCTION
REVIEW METHODOLOGIES
Program Review
The Program Review to be conducted for Report Delinquency has two components: a Systems
Review and an Acceptance Sample.
The Systems Review covers the following topics:
Recorded Information and Instructions
Training
Recording of Transactions and Events
Systems to Assure Execution of Events
Review of Completed Work
The Systems Review will be used to identify the internal controls and quality assurance systems
necessary for an effective Report Delinquency operation and to verify if the State has such controls
in place.
The Acceptance Sample examines the following:
Employer Accounts Identified as Delinquent
In conjunction with the Systems Review, Acceptance Samples of delinquent report notices will be
examined to confirm that the States system of controls is ensuring proper and timely delinquent
report processing.
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COMPUTED MEASURES
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TAX PERFORMANCE SYSTEM
REPORT DELINQUENCY
CHAPTER FIVE
COMPUTED MEASURES
COMPUTED MEASURES
Computed measures will provide indicators for how effective the State is in securing delinquent
contribution reports timely and resolving delinquent wage reports. These measures will be generated
based on data elements reported by States through routine quarterly reports. Upon implementation
of the TPS program, the TPS reviewer must ensure that the State ADP system captures these data
elements as defined so that the ADP system can produce output reports based on these elements.
Whether the State accumulates the data elements required for delinquency computed measures
through ADP or manually, it is important that the records be maintained from the beginning. Upon
full implementation of TPS, data for delinquency indicators will replace the data reported on the
ETA 581 for this function. The plan is to gather the data needed from the system used to
electronically report the current ETA 581 data. Appendix B explains the technical process for
gathering this information.
Report Delinquency Indicators
The six indicators to measure how effective the State is in securing delinquent reports timely and
resolving delinquent reports are described below:
For Contributory Employers
1.
Percent of reports filed timely.
2.
Percent of reports secured by end of following quarter.
3.
Percent of reports secured plus delinquencies resolved within 180 days (i.e.,
two following quarters).
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CHAPTER FIVE
COMPUTED MEASURES
COMPUTED MEASURES
For Reimbursing Employers
4.
Percent of reports filed timely.
5.
Percent of reports secured by end of following quarter.
6.
Percent of reports secured plus delinquencies resolved within 180 days (i.e.,
two following quarters).
Indicators 1 & 4 - Timely Employers (Contributory & Reimbursing)
(The percent of employers filing reports timely).
Rationale. This indicator reflects the percent of voluntary reporting compliance. It is
intended to provide a measure of State efforts to promote voluntary filing through effective
publications/forms, educational programs and/or utilization of enforcement tools. Timely
reports include all reports filed on or before the delinquent date established by the State for
the calendar quarter.
Formula.
The average number of contributory/reimbursing employers filing
reports timely for four (581) report quarters .
The average number of active contributory/reimbursing employers for
four (581) report quarters ending one quarter earlier
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CHAPTER FIVE
COMPUTED MEASURES
COMPUTED MEASURES
Data Elements.
The number of employers filing reports timely is reported on the ETA 581, item #6
for contributory employers and item #9 for reimbursing employers.
Active employers are those employers registered and required to file reports under
the State unemployment compensation law. The number for each quarterly period
should be the same as currently reported on form ETA 581. The average of the four
581 report quarters is used because reporting is based on timely reports for the
quarter ending one quarter earlier.
Indicator 2 & 5 - Secured Reports (Contributory & Reimbursing)
(The percent of quarterly reports secured by the last day of the following quarter).
Rationale. This indicator measures the percent of employer reporting compliance by the
level of secured reports for the preceding quarter. The "secured" definition combines
voluntary employer reporting and State-influenced reporting. It excludes report
delinquencies which are resolved by assessment, thereby maintaining emphasis on employer
compliance and on the effect of State efforts to secure delinquent reports. This indicator is
similar to the one used by Quality Appraisal as a DLA for Report Delinquency, and when
analyzed with Indicator (1), Timely Employers, it should be possible to determine the
effectiveness of State reporting enforcement efforts.
Formula.
The average number of contributory/reimbursing employers whose reports had
been secured by the last day of the four (581) report quarters
.
Average number of active contributory/reimbursing employers for the four (581)
report quarters ending one quarter earlier
Data Elements.
The number of employers whose reports have been secured by the last day of the following quarter
is reported on the ETA 581, item #7 for contributory and item # 10 for reimbursing.
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CHAPTER FIVE
COMPUTED MEASURES
COMPUTED MEASURES
The number of employer reports secured for the quarter are the number of
contributory employers, or the number of reimbursable employers who by the end of
the next quarter had submitted contribution reports which were due for the preceding
quarter. An example would be an employer who did file a report for the first quarter
by June 30, this employer would be included in the secured count for this indicator.
Employers who have been issued estimated assessments for contributions due or for
whom substitute contribution reports may have been generated or are found to be no
longer liable, are not considered as secured.
The number of active employers is the same as Indicator 1.
Indicator 3 & 6 - Resolution of Report Delinquencies (Contributory & Reimbursing)
(The percent of reports secured plus delinquencies resolved by the last day of the
second reporting period (i.e., within 180 days of the quarter ending date, or within
180 days of the date delinquency discovered for newly established accounts).
Rationale. To effectively manage accounts receivable it is important that amounts
determined to be due are established on a timely basis. This indicator is intended to bridge
the gap between Report Delinquency and Collections, and in effect is an indicator of "tax
report delinquency" resolved via establishing a legally due and collectable amount due.
Considering that for most States reports are delinquent if not filed within 30 days after the
quarter ending date, and adding an additional 150 days (i.e., 60 days of the following quarter
plus the 2nd following quarter), 180 days was selected as a reasonable goal for resolution of
report delinquencies.
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TAX PERFORMANCE SYSTEM
REPORT DELINQUENCY
CHAPTER FIVE
COMPUTED MEASURES
COMPUTED MEASURES
Formula.
The average number of contributory/reimbursing employers whose report
delinquencies were resolved within 180 days (two quarters)
for four (581) report quarters
.
Average number of active contributory/reimbursing employers for the four
(581) report quarters ending two quarters earlier
Data Elements.
The number of employers whose report delinquencies were resolved within 180 days
of the quarter ending date is reported on the ETA 581 as item #8 for contributory
employers and item #11 for reimbursing employers.
NOTE: Report Delinquencies are to be considered resolved upon securing reports,
determining non-liable for reporting (e.g., the employer was found not to be subject,
or the State decided to inactivate an active employer, or to "write off" the employer's
delinquency status), or establishing a "final" assessment that is legally due and
collectible. "Final" assessments are to be reported as Amounts Determined
Receivable.
The number of active employers is defined the same as for Indicators 1 and 2.
Because reporting is for the number of report delinquencies resolved within 180 days
(six months), the average number of active employers is the four quarters ending two
quarters earlier.
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TAX PERFORMANCE SYSTEM
REPORT DELINQUENCY
CHAPTER FIVE
COMPUTED MEASURES
COMPUTED MEASURES
Drawing Conclusions
An analysis of the results of Report Delinquency Computed Measures will provide the TPS reviewer
with an indication of how effective the State is in promoting voluntary filing and in resolving report
delinquency. The first and fourth indicators show the overall level of employer compliance in the
State, for contributory and reimbursing employers, the second and fifth indicators show the
combined effect of voluntary compliance and State-induced compliance. The third and sixth
indicators combine voluntary compliance, the delinquency unit's impact, and the State's use of other
methods to resolve delinquencies such as assessments or determinations of non-liability for
contributory and reimbursing employers.
The reviewer should be able to make observations as a result of these indicators that would be
reflected in the Systems Review. For example, the reviewer would expect that if the State had a
high percentage of voluntary compliance in report filing this would be reflected by some exemplary
practices. Likewise, if the number of reports resolved was low the TPS reviewer may find areas of
risk in the Systems Review which are causing the problem.
Findings or trends from computed measures should be considered with Systems Review and
Acceptance Sample findings in evaluating the effectiveness of the State's operations and be included
in the Annual Report.
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PROGRAM REVIEW
COMPONENTS
SYSTEMS REVIEW
ACCEPTANCE SAMPLES
blank
SYSTEMS REVIEW
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CHAPTER FIVE
REPORT DELINQUENCY
PROGRAM REVIEW
SYSTEMS REVIEW INTERVIEW SHEET
Function
Reviewer
Persons Interviewed
Date
Name:
Documents Reviewed
Title:
Title:
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TAX PERFORMANCE SYSTEM
REPORT DELINQUENCY
CHAPTER FIVE
PROGRAM REVIEW
SYSTEMS REVIEW
Recorded Information and Instructions
Recorded information and instructions for maintenance of delinquent employer accounts
should include the means by which delinquent accounts are identified, the conditions under
which the employers should be notified, and the resolution of such delinquencies.
The reviewer should examine recorded instructions available to the staff and
compare procedures to the laws and written policies of the State to determine
if the recorded information and instructions are current, accurate, and
complete. The reviewer should also observe the delinquent report process
and talk with employees to learn whether or not the recorded instructions are
available and being used.
In the narrative section following the questions, explain any "N/A"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If there are no
recorded instructions, describe in the narrative how the staff becomes aware
of the proper procedures to perform the tasks of the Report Delinquency
function.
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REPORT DELINQUENCY
CHAPTER FIVE
PROGRAM REVIEW
SYSTEM REVIEW QUESTIONS
1.
Does the State have recorded instructions to help staff process delinquent employer
information in accordance with State laws and written policies?
Yes
2.
If yes, are the recorded information and instructions:
a.
b.
c.
d.
Yes No
Current? .....................................................................................................................
Accurate? ...................................................................................................................
Complete? ..................................................................................................................
Readily available to staff?..........................................................................................
VS:(Questions 1 and 2
3.
No __
)
If any of the preceding evaluative questions were answered
"No", does the State have a substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following these questions.
VS:(Questio 3
)
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TAX PERFORMANCE SYSTEM
REPORT DELINQUENCY
CHAPTER FIVE
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
REPORT DELINQUENCY
CHAPTER FIVE
PROGRAM REVIEW
SYSTEMS REVIEW
Training
The State needs to have systems and procedures to identify training needs and deliver training
to employees who perform duties within the Report Delinquency function. New employees
need to learn the procedures for processing and recording delinquent reports. Existing
employees benefit from periodic refresher courses and additional training when procedures
change and/or quality defects occur at an unacceptably high rate.
The reviewer should respond to the following questions after discussing with
management the training systems used for Report Delinquency staff, and
examining the training packages utilized.
In the narrative section following the questions, explain any "N/A"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If there are no
formal training systems, then describe how the staff knows the laws and
written policies and the proper procedures to perform the Report
Delinquency function duties.
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CHAPTER FIVE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
1.
Does the State have methods or procedures to provide training for newly hired employees?
Yes
No __
*If yes, identify the type of training:
a.
b.
c.
d.
e.
Yes No
*Formal Classroom Training? ...................................................................................
*On the Job Training?................................................................................................
*One-on-One Training? .............................................................................................
*Individual Self-guided Training?.............................................................................
*Other?.......................................................................................................................
Describe the type and frequency of training in the narrative.
2.
Does the State have methods or procedures to provide refresher training for experienced
employees?
Yes
No __
*If yes, identify the type of training:
Yes No
a.
b.
c.
d.
e.
*Formal Classroom (e.g., refresher courses)? ...........................................................
*On the Job Training?................................................................................................
*One-on-One Training? .............................................................................................
*Individual Self-guided Training?.............................................................................
*Other?.......................................................................................................................
Describe the type and frequency of training in the narrative.
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CHAPTER FIVE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
3.
Does the State provide training when there are:
Yes No N/A
a.
b.
c.
d.
e.*
4.
State law changes? .....................................................................................................
Policy/procedure changes? ........................................................................................
Needs identified from review of finished
work (e.g., supervision, quality assurance
review)? .....................................................................................................................
Hardware/software changes? .....................................................................................
Other?.........................................................................................................................
Does the State have processes (e.g., back-up training or organizational flexibility) to assure
that staff absences will not disrupt operations?
Yes
No __
If yes, describe in the Narrative Section.
VS: (Questions 1-4
)
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TAX PERFORMANCE SYSTEM
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CHAPTER FIVE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
5.
*In the opinion of the supervisor or manager, does the training meet the needs of the Report
Delinquency function? (e.g., Are sufficient resources available--training packages, facilities,
staff, etc.)
Yes
6.
No __
If any of the preceding evaluative questions were answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following these
questions.
VS:(Question 6
)
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TAX PERFORMANCE SYSTEM
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CHAPTER FIVE
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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CHAPTER FIVE
PROGRAM REVIEW
SYSTEMS REVIEW
Recording of Transactions and Events
The Report Delinquency function should have procedures and controls to assure that
notifications, enforced and/or stayed delinquency resolution action (such as subpoenas, court
orders and final assessments) are recorded. The source information should be readily
available for examination. Whether the State system is manual or automated, an audit trail
should lead from the Report Delinquency data recorded in the employer account record to the
information source upon which the Report Delinquency action was based.
The reviewer should become familiar with the various types of Report
Delinquency actions which require an audit trail leading to the supporting
documentation.
In the narrative section following the questions, explain any "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If the State does not
maintain source documents or an audit trail, describe how it assures that
correct/appropriate Report Delinquency actions have been taken.
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CHAPTER FIVE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
1. Does the State have procedures to assure that all enforced and/or stayed Report Delinquency
actions can be traced to a source document (e.g., subpoenas, assessments, and court orders)?
Yes
2.
No __
Can the following be identified through the audit trail:
Yes No
a.
b.
c.
d.
e.
When and how the employer was contacted
to secure the delinquent report? .................................................................................
Enforced or stayed delinquency resolution actions
taken? .........................................................................................................................
Date enforced or stayed delinquency resolution
actions were initiated? ...............................................................................................
Whether money was received with the delinquent
report? ........................................................................................................................
The date the delinquent report was received?............................................................
VS:(Questions 1 – 2
3.
)
In those instances when the staff resolves a delinquent report without money does the State
have a procedure that assures enforced collection action can be initiated?
Yes
VS:(Question 3
No __
)
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TAX PERFORMANCE SYSTEM
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CHAPTER FIVE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
4.
Are information sources retained and accessible for State use?
Yes
VS:(Question 4
5.
No __
)
If any of the preceding evaluative questions were answered "NO" does the State have a
substitute or compensating control?
Yes
No
N/A ___
If Yes, describe in the Narrative Section following these questions.
VS:(Question 5
)
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TAX PERFORMANCE SYSTEM
REPORT DELINQUENCY
CHAPTER FIVE
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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REPORT DELINQUENCY
CHAPTER FIVE
PROGRAM REVIEW
SYSTEMS REVIEW
Systems To Assure Execution of Events
For Report Delinquency, controls should be built in to assure the execution of events for
processing delinquent employer account information. Such controls may include automated
or manual checks of active employer accounts to accounts for which contribution reports have
been received, and program checks to assure that delinquent employers are properly
identified, and that delinquency notices are mailed in a timely manner.
The reviewer should become familiar with the various systems used by the
State to assure execution of events for processing delinquent employer
account information.
In the narrative section following the questions, explain any "N/A"
responses, and "Compensating Controls". Identify the question being
explained by referencing the number and section. If the State does not have
internal controls or safeguards, describe how it assures that delinquent
employers are properly identified and notified.
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REPORT DELINQUENCY
CHAPTER FIVE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
1.
Does the State have procedures and/or internal controls to assure that delinquent employers
are properly identified?
Yes
a.
*If yes, is there an automated system indicator to identify accounts that are
delinquent?
(1)
Yes
No __
Yes
No __
If yes, is a system check performed every time a
program is changed?
VS:(Question 1
2.
No __
)
Does the State have a method to confirm the accuracy of the number of delinquent accounts
identified (e.g., compare the number of active accounts against the number of reports
processed, or total the number of employers that filed timely with the number of
delinquency notices printed and compare it to the number of active employers on the same
date )? If yes, describe in the narrative section.
Yes
No __
Yes
No __
a. If yes, does the State resolve discrepancies found?
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CHAPTER FIVE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
3.
Does the State have procedures and/or internal controls to assure that delinquent employers
are properly notified?
a.
Yes
No __
Yes
No __
Yes
No __
*If yes, is the procedure for issuing delinquency notices automated?
(1)
If yes, is a system check performed every time a
program is changed?
VS:(Question 2 & 3
4.
)
Is there a method to suppress delinquency notices in cases of contested coverage?
Yes ___ No ___
5.
Is there a method to suppress delinquency notices for accounts that have unprocessed
contribution reports "in house"?
Yes
VS:(Question 4 & 5
No __
)
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CHAPTER FIVE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
6.
Is there a method to identify and control those delinquent employers in bankruptcy to assure:
Yes No
a.
b.
c.
Reports are secured in sufficient time to file
a claim for the taxes due? ..........................................................................................
Those employers continuing in business are
monitored to ensure reports are filed timely? ............................................................
Upon bankruptcy being closed, are unresolved
delinquencies reassigned for further action? .............................................................
VS:(Question 6
7.
)
Does the State have procedures and/or internal controls to assure that follow-up actions are
taken to obtain prior quarter delinquencies that are identified during current quarter
processing?
Yes
VS:(Question 7
No __
)
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TAX PERFORMANCE SYSTEM
REPORT DELINQUENCY
CHAPTER FIVE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
8.
Does the State have controls which assure that staff resolve delinquent reports within
specified time periods?
Yes
VS:(Question
9.
8
)
Does the State have procedures that provides notification to the appropriate staff members
when a delinquent report is received?
No
N/A __
Yes
VS:(Question 9
10.
No __
)
If any of the preceding evaluative questions were answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following these questions.
VS:(Question 10
)
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TAX PERFORMANCE SYSTEM
REPORT DELINQUENCY
CHAPTER FIVE
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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CHAPTER FIVE
PROGRAM REVIEW
SYSTEMS REVIEW
Review of Completed Work
For the Report Delinquency function, supervisory and/or quality assurance reviews are
necessary to ensure that system procedures and internal controls used in identifying and
notifying delinquent employers are working, and that records of report delinquency resolution
activities are being maintained.
A review of completed work should be done on a regular basis for all staff
members involved in processing delinquent employer account information.
This review may be done on an individual basis for each staff member, or by
sampling work done throughout the entire unit. The following questions are
designed to determine how these reviews are conducted.
The reviewer should become familiar with the kind of review program the
State uses to assess the work performed by the Report Delinquency function.
In the narrative section following the questions, explain any "other"
responses. Identify the question being explained by referencing the number
and section. If there is no review performed, describe how the State has
reasonable assurance that delinquencies are being properly identified,
notified, and resolved.
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For staff members involved in the Report Delinquency process, are the following components subject to some form of systematic review? For
Yes answers enter a "Y" in the appropriate column(s). For Yes answers, also enter "Y" in column 6. If there are no reviews, answer "N" for
No in column 6. Column 6 is the only evaluative question.
Type of review
Component
a.
That the delinquent employer is being contacted timely?
b.
That a history of report delinquency resolution activities is
being maintained?
c.
That State report delinquency enforcement tools are being
appropriately utilized?
d.
That multiple quarter delinquencies are being worked toward
being resolved.
e.
That specific requests (e.g., subpoena request, employer
account updates, written requests for assistance, or notices of
bankruptcy) are acted upon timely?
VS:
(Question
6
*Informational
*1
Supv
*2
Peer
*3
QR
(Qual.
Rev)
*4
Support
Clerical
*5
Other
6
Review
ConductedY/N
)
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CHAPTER FIVE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
7.
If any of the preceding evaluative questions are answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following these questions.
VS: (Question 7
)
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TAX PERFORMANCE SYSTEM
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CHAPTER FIVE
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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CHAPTER FIVE
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
ADDITIONAL CONTROLS
1.
*Does the State have internal controls or quality review systems
in the Report Delinquency function which this review failed to identify?
Yes
No __
Yes
No __
If yes, describe below:
2.
*Are there any exemplary practices for the Report Delinquency
function?
If yes, describe below:
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ACCEPTANCE SAMPLES
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REPORT DELINQUENCY
CHAPTER FIVE
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Purpose/Intent
To determine if the State accurately identifies delinquent
employer accounts.
To assure that delinquent employers are notified properly.
To determine if the State takes appropriate action to resolve
delinquencies.
Scope
The scope of the review will focus on those employers who
are currently delinquent for the first quarter (prior quarter
delinquencies are not to be included.)
Universe
The universe to be identified for the Report Delinquency
Acceptance Sample will include:
1.
Employers whose delinquency is newly established
for the 1st calendar quarter during the *processing
period.
2.
All accounts identified as delinquent once the State
has passed its delinquency cut off date (both
contributing and reimbursing employers).
3.
Select 60 cases, or if universe is small, select the
number of cases based on Table in Appendix A-III.
Note: *The processing period is the State time period during which the quarterly reports and
contributions are processed.
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ACCEPTANCE SAMPLE INSTRUCTIONS
Timing/Frequency
The universe will be identified once per calendar year.
The universe should be identified prior to mailing first quarter
report delinquency notices.
The sample should not be selected until the fourth quarter
(approximately Nov.-Dec.), and review should not begin
before November 15th of the calendar year being reviewed.
Sampling Procedures
The following steps must be taken to establish the universe and select
the sample accounts:
1.
List or identify the location or create a transaction file
of accounts that are determined to be delinquent.
2.
Identify the population of delinquent employers after
the quarterly processing period has ended for the 1st
calendar quarter. (Approximately May 15)
3.
During the 4th quarter (Nov. - Dec.), select the
sample of 60 accounts from the population identified
after the end of the 1st quarter processing cycle.
4.
The sample should be selected just prior to
conducting the review. The review should be
completed no later than December 31.
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ACCEPTANCE SAMPLE INSTRUCTIONS
Sampling Procedures
cont.
Reviewing Samples
5.
If the system is automated, the Reviewer must
work closely with the IT unit to ensure a thorough
understanding of what, when and how the samples should be
selected.
6.
Appendix A describes what action needs to be taken for
sampling both manual and automated systems.
Assemble the following information for each of the cases
selected for review:
1.
A copy of the original delinquency notice or a
facsimile generated from the electronic data that
created the original delinquency notice (at a minimum
it must include the employer name, account number,
address, and quarter/year delinquent).
2.
The electronic or paper account information related to
the report delinquency in the state's employer account
record.
Compare all electronic and paper source documents with the
information in the employer's account record.
To answer question #1 the reviewer will need to know what
cut off date the state used. The reviewer will then compare
the date the employer's wage report was received by the state
against the cut off date to ensure it was properly identified as
delinquent.
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CHAPTER FIVE
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ACCEPTANCE SAMPLE INSTRUCTIONS
Reviewing Samples
For purposes of answering question 2b. "suppressed"
refers to a restrictive action taken by the State that
intentionally prevents a normal work flow from being
completed (e.g., not mailing a delinquency notice to an
employer due to a pending appeal, or an employer that is in
bankruptcy and State procedures that do not allow notices to
be mailed).
Drawing Conclusions
Using this information, answer the questions on the Acceptance
Sample Questionnaire.
The following questions are evaluative:
1.
2.a
Proper identification of delinquent employer.
Was the delinquent notice for the correct quarter and
year.
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Drawing Conclusions
cont.
2b.
Was the notice suppressed in accordance with State
procedures.
3.
Appropriate State staff notified.
4.b(1) Was the assessment filed timely.
5.
Appropriate action taken to resolve delinquency in
accordance with State procedures.
A "No" answer to question #1, 2a, 2b, 3, 4b(1) or 5 means the
sampled report delinquency case was not handled correctly
and is not considered acceptable.
Of the 60 cases, if three or more are found to be
unacceptable, then the reviewer must conclude that the State
does not have reasonable assurance that employers are being
properly identified and notified as being delinquent or that
such delinquencies are being resolved in accordance with
State procedures.
For all unacceptable cases, the reviewer must provide an
explanation for the unacceptable case on the Acceptance
Sample Explanation Sheet.
Documentation
All source documentation (gathered to review samples) must
be kept until the completion and Regional Office approval of
the Annual Report. Either hard copy documentation or (in
some highly automated systems) the ability to recreate the
identical information used in the review must be maintained.
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CHAPTER FIVE
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ACCEPTANCE SAMPLE QUESTIONNAIRE
Identification
1. Based on the available information by the review date,
did the State identify the employer's
account properly as being delinquent?
Yes
No ___
If “Yes”, answer questions #2-#5.
If “No”, skip #2 and #3, and answer #4 and #5.
Notification
2.
Did the State issue a delinquent report notice?
Yes
No ___
Yes
No ___
If “Yes”, answer 2a.
If “No”, answer 2b.
a.
b.
Was the delinquent notice for the correct quarter\year?
Was the notice suppressed in accordance with State procedures?
Yes
No
____
3.
Were appropriate State staff notified, in accordance with established procedures, that the
employer was delinquent (e.g., Field Staff, Delinquency Unit Staff or the Assessment Unit
Staff)?
Yes
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ACCEPTANCE SAMPLE QUESTIONNAIRE
Resolution of Delinquency
4.
*Was the report delinquency resolved?
Yes
No ___
If “Yes”, was the delinquency resolved by:
Yes No N/A
*a.
*b.
*c.
*d.
*e.
*f.
securing a contribution report? ..................................................................................
assessing taxes for the delinquent quarter?................................................................
(1)
If yes, was the assessment made within
the time period prescribed by the State?........................................................
inactivating the account? ...........................................................................................
posting the report, which had previously
been posted to an incorrect account number,
to the correct account number? ..................................................................................
changing the liability effective date?
other? .........................................................................................................................
Describe
5.
Was appropriate action taken to resolve the report delinquency
in accordance with State laws and policies?
Yes
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TAX PERFORMANCE SYSTEM
Report Delinquency Sample Coding Sheet
State: ________________ Period Covered: _______________ Date: ______________ Reviewer: _______________________
Sample Type:
Case
Number
Employer
Identification
Number
1
2
2a
Questions 1, 2a, 2b, 3, 4b1, and 5 are evaluative.
2b
Acceptance
3
4
4a
Expanded
4b
4b-1
4c
4d
4e
4f
5
Pass/Fail
Y/N
Total Acceptable _______ of _______
Page _______ of _______
TAX PERFORMANCE SYSTEM
Report Delinquency Sample Explanation Sheet
State: _________
Case
Number
Period Covered: ______________
Sample Type:
Employer
Identification Number
Date: ________________
Acceptance
Expanded
Reviewer: ____________________
Explanation
Page _______ of _______
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CHAPTER FIVE
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CHAPTER VI
COLLECTIONS
COMPONENTS
INTRODUCTION
COMPUTED MEASURES
PROGRAM REVIEW
INTRODUCTION
ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
COLLECTIONS
CHAPTER SIX
INTRODUCTION
The Collections function consists of efforts to assist employers to comply with state laws and
regulations, promote voluntary payment compliance, collect past due amounts from
employers, and manage accounts receivable. The major tasks are:
Take action to collect past due payments
Suspend collection efforts on uncollectible amounts
PRIMARY OBJECTIVE
The primary objective of Collections is to promote payment compliance and manage accounts
receivable. To accomplish this objective, Collections will need to meet two sub-objectives:
1.
Increase the percentage of amounts due paid voluntarily (Completeness)
2.
Take all reasonable actions to manage accounts receivable (Timeliness and
Completeness)
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Timeliness
and
Completeness
CHAPTER SIX
INTRODUCTION
To assess state effectiveness in managing accounts receivable,
Computed Measures will be generated based on data routinely
reported by states. These elements will be converted into indicators
by the TPS ADP system.
To determine whether the state is taking all reasonable actions to collect
accounts receivable, a Program Review will be conducted to ascertain the
existence of necessary internal controls and to determine whether or not such
controls are functioning properly.
REVIEW METHODOLOGIES
Computed Measures
Computed Measures will provide indicators of state effectiveness in promoting payment compliance
and management of accounts receivable. Indicators measuring contributory employers will also be
used to measure reimbursing employers:
1.
Percent of amounts due paid timely
2.
Receivables declared uncollectible and/or ruled doubtful - The percent of
tax due declared uncollectible and/or ruled doubtful
3.
Accounts receivable at the end of the report period as a percent of tax due
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CHAPTER SIX
INTRODUCTION
REVIEW METHODOLOGIES
Program Review
The Program Review to be conducted for Collections has two components - a Systems Review and
an Acceptance Sample.
The Systems Review covers the following topics:
Recorded Information and Instructions
Training
Recording of Transactions and Events
Execution By Authorized Individuals
Systems to Assure Execution of Events
Review of Completed Work
The Systems Review will be used to identify the internal controls and quality assurance systems
necessary for an effective Collections operation and to verify if the State has such controls in place.
The Acceptance Samples examine the following:
Employer Accounts Identified with Accounts Receivable
In conjunction with the Systems Review, Acceptance Samples of completed collection accounts will
be examined to confirm that States system of controls is ensuring its established procedures are
being followed.
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COMPUTED MEASURES
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COLLECTIONS
CHAPTER SIX
INTRODUCTION
COMPUTED MEASURES
Computed Measures will provide indicators of state effectiveness in promoting payment compliance
and management of accounts receivable. These measures will be generated based on data elements
reported by states through routine quarterly reports. The TPS reviewer must ensure that the state
ADP system captures these data elements as defined so that the ADP system can produce output
reports based on these elements.
Whether the state accumulates the data elements required for Collections computed measures
through ADP or manually, it is important that the records be kept from the beginning. The data is
gathered from the system used to electronically report the current Form ETA 581 data. Appendix B
explains the technical process for gathering this information.
Collection Indicators (Contributory)
The indicators for contributing employers that measure how effective the state is in promoting
payment compliance and management of accounts receivable are described below:
1.
Percent of amounts due paid timely.
2.
Receivables declared uncollectible and/or ruled doubtful - The percent of tax
due declared uncollectible and/or ruled doubtful.
3.
Accounts receivable at the end of the report period as a percent of tax due.
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INTRODUCTION
Collection Indicators (Reimbursing)
The indicators for reimbursing employers that measure how effective the state is in promoting
payment compliance and management of accounts receivable are described below:
1.
Percent of amounts due paid timely.
2.
Receivables declared uncollectible and/or ruled doubtful - The percent of tax
due declared uncollectible and/or ruled doubtful.
3.
Accounts receivable at the end of the report period as a percent of tax due.
The same computed measures will be used for each type of employer, contributory or
reimbursing.
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COMPUTED MEASURES
Indicator 1 - Amounts Paid Timely
(The percent of amounts due that were paid timely)
Rationale. This indicator measures the extent of employer voluntary payment compliance.
It is intended to provide a measure of state efforts to promote payment compliance through
effective publications/forms, educational programs and/or utilization of enforcement tools.
It also reflects the relative magnitude of non-compliance, and provides a perspective of how
much risk is involved.
Formula
Amounts Determined Receivable for four (581) report quarters.
Tax Due: Annual dollar Amounts Deposited plus Amounts
Determined Receivable minus Receivables Liquidated.
Example:
1,000,000 (Determined Receivable) = 1 - 10% = 90%
10,000,000 (Tax Due)
Data Elements.
The Amounts Determined Receivable should result in the four quarter total of
amounts reported on ETA 581 #22 for contributory and on ETA 581 #34 for
reimbursing. The amount to be included is the amount of unpaid contributions
initially determined to be past due during the report quarter based on delinquent
contribution reports received, audit findings, legally collectible estimates and final
assessments. For reimbursable employers, the amount is the reimbursements initially
determined to be past due during the report quarter based on billings to reimbursing
employers which are unpaid.
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COMPUTED MEASURES
Tax Due is defined as the annual amounts of dollars deposited (ETA 2112 line 11 for
contributory and lines 18, 19, and 20 for reimbursable) plus Amounts Determined
Receivable (ETA 581 #22 for contributory, ETA 581 #34 for reimbursing) minus
Receivables Liquidated (ETA 581 #23 for contributory, ETA 581 #35 for
reimbursing). This formula is recommended because it provides a more consistent
and accurate picture year-to-year of amounts actually due than amounts reported as
due on ES 202 reports.
Indicator 2 - Receivables Declared Uncollectible.
(Percent of tax due declared uncollectible)
Rationale. While a low percentage of amounts declared uncollectible is desirable,
an increasing percentage may also be an important indicator of efforts to perfect
accounts receivable inventories and write-off amounts that states have no means of
collecting.
Formula
Receivables Declared Uncollectible and/or Ruled Doubtful for four (581) report quarters
Tax Due: Annual dollar Amounts Deposited plus Amounts
Determined Receivable minus Receivables Liquidated.
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COMPUTED MEASURES
Data Elements.
Receivables Declared Uncollectible include all amounts of past due contributions
for which the agency is no longer actively seeking collection. Such amounts have
been written off or moved to a suspense file and are not included in the active
accounts receivable file. The amounts to be included should be the sum of the four
quarters reported on ETA 581 #24 for contributory, and ETA 581 #36 for
reimbursing. Receivables Ruled Doubtful include all receivables reported on the
ETA 581 beyond two years. The amounts to be included should be the sum of the
four quarters reported on the ETA 581 #25 for contributory and ETA 581 #37 for
reimbursing.
Tax Due was previously defined and should be the same as for Indicator #1.
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COMPUTED MEASURES
Indicator 3 - Unpaid Contributions/Reimbursements Due.
(Percent of accounts receivable at end of the report period to tax due).
Rationale. This indicator provides a measure of overall compliance effectiveness. To
equitably assess the effectiveness of state compliance and collection efforts, a
comprehensive measure will contain the amount of past due dollars as they relate to the total
amount due. Long term trends due to the rise and fall in employment, wage base, and tax
rates all impact the size of accounts receivable. While the fluctuations of total amounts due
may be outside the state's control, the state is responsible for collecting the proportion of
dollars which becomes past due. This measure will indicate the true significance of a state's
accounts receivable by showing what proportion of tax is past due. Also, the rise and fall of
past due amounts can be better understood when reviewed in relation to the rise and fall of
total UI dollars due.
Formula
Tax Due:
Receivable Balance at end of (581) report quarter
Annual dollar Amounts Deposited plus Amounts Determined
Receivable minus Receivables Liquidated
Data Elements.
The Receivable Balance is the total amount on the ETA 581 report quarter ended date. The
amounts should be the same as reported on ETA 581 #26 for contributory and ETA 581 #38
for reimbursing employers.
Tax Due was previously defined, and should be the same amount as used for Indicators 1
and 2.
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CHAPTER SIX
INTRODUCTION
COMPUTED MEASURES
The denominator for all accounts receivable indicators is recommended to be the most
recently completed calendar year tax due. The reasons follow:
The same denominator means all accounts receivable indicators are
comparable, both within a state as well as across states.
The indicator reports can be generated for any time period but it requires
FOUR (4) quarters.
"Drift" due to inflation, or the trend of decreasing effective tax rates which
reduces the amount of tax due is eliminated.
A more consistent picture of accounts receivable management is provided
from year-to-year.
Computations will be made annually by the National Office for each indicator, for both
contributory and reimbursable accounts receivable.
Drawing Conclusions.
An analysis of these results will provide an overview of how effectively the state is
managing its accounts receivable. Each of the indicators should be examined separately and
in relationship to the others. The TPS reviewer will find that a change in one indicator will
have a particular effect on another indicator (e.g., is a decrease in accounts receivable the
result of an increase in amounts written off or is that change reflected in amounts liquidated).
The TPS reviewer will determine from this analysis whether the state is effectively using the
collection tools at their disposal (e.g., if the turnover ratio is high does the sample reviewed
reflect timely contact of employers, are liens and enforced collection action being utilized?).
Findings or trends from Computed Measures should be considered with Systems Review
and Acceptance Sample findings in evaluating the effectiveness of the state's operation and
be included in the Annual Report.
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PROGRAM REVIEW
COMPONENTS
SYSTEMS REVIEW
ACCEPTANCE SAMPLES
SYSTEMS REVIEW
ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
CHAPTER SIX
COLLECTIONS
PROGRAM REVIEW
SYSTEMS REVIEW INTERVIEW SHEET
Function
Reviewer
Persons Interviewed
Date
Name:
Documents Reviewed
Title:
Title:
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COLLECTIONS
CHAPTER SIX
PROGRAM REVIEW
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COLLECTIONS
CHAPTER SIX
PROGRAM REVIEW
SYSTEMS REVIEW
Recorded Information and Instructions
In the State Collections operations, procedures should be set forth for charging/non-charging
of penalties, enforced collection actions, stayed collection actions, and declaring accounts
uncollectible.
The reviewer should examine recorded instructions available to the staff and
compare procedures to the laws and written policies of the State to determine
if the recorded information and instructions are current, accurate, and
complete. The reviewer should also observe the Collections process and talk
with employees to learn whether or not the recorded instructions are
available and being used.
In the narrative section following the questions, explain any "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If there are no
recorded instructions, describe in the narrative how the staff becomes aware
of the proper procedures to perform the tasks of the Collections function.
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SYSTEMS REVIEW QUESTIONS
1.
Does the State have recorded information and instructions to assist employees to perform
Collections functions?
Yes
No __
2.
If yes, are all the recorded information and instructions:
Yes No
a. Current?..............................................................................................................................
b. Accurate? ...........................................................................................................................
c. Complete? ..........................................................................................................................
d. Readily available to staff?..................................................................................................
VS:(Questions 1and 2
3.
)
If any of the preceding evaluative questions are answered "No", does the State have a
substitute or compensating control?
Yes
VS: (Question 3
No
N/A __
)
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COLLECTIONS
CHAPTER SIX
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
COLLECTIONS
CHAPTER SIX
PROGRAM REVIEW
SYSTEMS REVIEW
Training
New employees need to learn the State laws, written policies and procedures for collecting
account receivable, suspending collection actions when warranted, and for declaring certain
accounts uncollectible. Existing employees benefit from periodic refresher courses, and need
additional training when changes occur, and when quality defects or a significant number of
errors appear in a particular area.
The reviewer should respond to the following questions after discussing with
management the training methods and systems used to identify and meet the
Collections unit training needs.
In the narrative section following the questions, explain any "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If there are no
formal training systems, then describe how the staff knows the laws and
written policies and the proper procedures to perform the Collections
function.
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SYSTEMS REVIEW QUESTIONS
1.
Does the State have methods or procedures to provide training for newly hired employees?
Yes
No __
*If yes, identify the type of training:
Yes No
a. *Formal Classroom Training? ...........................................................................................
b. *On the Job Training?........................................................................................................
c. *One-on-One Training? .....................................................................................................
d. *Individual Self-guided Training?.....................................................................................
e. *Other?...............................................................................................................................
Describe the type and frequency of training in the Narrative Section following these
questions.
2.
Does the State have methods or procedures to provide refresher training for experienced
employees?
Yes
No __
*If yes, identify the type of training:
Yes No
a. *Formal Classroom (e.g., refresher courses)?....................................................................
b. *On the Job Training?........................................................................................................
c. *One-on-One Training? .....................................................................................................
d. *Individual Self-guided Training?.....................................................................................
e. *Other?...............................................................................................................................
Describe the type and frequency of training in the Narrative Section following these
questions.
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SYSTEMS REVIEW QUESTIONS
3.
Does the State provide training when there are:
Yes No N/A
a. State law changes? ............................................................................................................
b. Policy/procedure changes? ...............................................................................................
c. Needs identified from review of finished work
(e.g., supervision, quality assurance
review)? .............................................................................................................................
d. Hardware/software changes? ............................................................................................
e. *Other?...............................................................................................................................
4.
Does the State have processes (e.g., back-up training or organizational flexibility) to assure
that staff absences will not disrupt operations?
Yes
No __
If yes, describe in the narrative.
VS: (Questions 1-4
)
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SYSTEMS REVIEW QUESTIONS
5.
*In the opinion of the supervisor or manager, does the training meet the needs of the
Collections function? (e.g., are sufficient resources available--training packages, facilities,
staff, etc.)
Yes
6.
No __
If any of the preceding evaluative questions were answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following these questions.
VS:(Question 6
)
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TAX PERFORMANCE SYSTEM
COLLECTIONS
CHAPTER SIX
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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COLLECTIONS
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PROGRAM REVIEW
SYSTEMS REVIEW
Recording of Transactions and Events
The Collections function should have procedures and controls to assure that notifications,
enforced and/or stayed Collections actions such as lien filing, license revocation, attachments
of funds, seizure of assets, successor liability, employer prosecutions, and/or bankruptcy
actions are recorded and that the source information is readily available for examination.
Whether the State system is manual or automated, an audit trail should lead from the
Collections data recorded in the employer account record to the information source upon
which the Collection action was based.
The reviewer should become familiar with the various types of Collections
actions which require an audit trail leading to the supporting documentation.
In the narrative section following the questions, explain any "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If the State does not
maintain source documents or an audit trail, describe how it assures that
correct/appropriate Collections actions have been taken.
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TAX PERFORMANCE SYSTEM
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SYSTEMS REVIEW QUESTIONS
1.
Does the State have methods to assure that enforced and/or stayed collection actions can be
traced to their source (e.g., request to take enforced action, letter of appeal, notice of
bankruptcy)?
Yes
No ___
2.
Can the following be identified through the audit trail:
a.
b.
c.
d.
3.
Yes No
Employer notification(s)? ..........................................................................................
Amount(s) included in tax liens? ...............................................................................
Enforced and/or stayed Collections actions? .............................................................
Date(s) of Collections actions? ..................................................................................
Are original and amended information sources, including electronic source documentation,
retained and accessible for State use?
Yes
VS:(Questions 1 – 3
No__
)
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4.
CHAPTER SIX
PROGRAM REVIEW
If any of the preceding evaluative questions were answered "No", does the State have a
substitute or compensating control?
No
N/A __
Yes
If Yes, describe in the Narrative Section following these questions.
VS:(Question 4
)
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TAX PERFORMANCE SYSTEM
COLLECTIONS
CHAPTER SIX
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
COLLECTIONS
CHAPTER SIX
PROGRAM REVIEW
SYSTEMS REVIEW
Execution by Authorized Individuals
The Collections function should have systems procedures or internal controls to assure that
determinations for charging/non-charging of penalties, adjustments to receivable amounts,
enforced and/or stayed collection actions are taken by authorized individuals.
The reviewer must become familiar with the manner in which authority is
restricted and responsibility assigned to Collection staff members.
In the narrative section following the questions, explain any "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If the State does not
require authorization for adjustments to accounts and/or initiation of enforced
collection actions, and waivers of penalties, etc., describe how it prevents
inaccurate/inappropriate actions.
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TAX PERFORMANCE SYSTEM
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PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
1.
Is authorization restricted to certain designated individuals for:
a.
b.
c.
d.
e.
f.
Yes No N/A
Penalty waivers? ........................................................................................................
Adjustments of amount due? .....................................................................................
Enforced collection actions?......................................................................................
Classification to stayed? ............................................................................................
Classification to uncollectible?
*Other?.......................................................................................................................
VS:(Question 1
2.
)
If any of the preceding evaluative questions were answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following these questions.
VS:(Question 2
)
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TAX PERFORMANCE SYSTEM
COLLECTIONS
CHAPTER SIX
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
COLLECTIONS
CHAPTER SIX
PROGRAM REVIEW
Systems to Assure Execution of Events
For Collections, controls should be in place to assure that cases are assigned and worked
according to State priorities and procedures, liens are filed timely and accurately, other
enforced collections actions are taken properly, stayed collection actions are handled correctly,
and cases meeting appropriate criteria are declared uncollectible.
The reviewer must determine if such program management systems have
been built into the Collections operation, and become familiar with
automated and/or manual controls which assure collection actions are
properly taken.
In the narrative section following the questions, explain any "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If the State does not
have internal controls or safeguards, describe how it assures the
appropriateness of collection actions.
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TAX PERFORMANCE SYSTEM
COLLECTIONS
CHAPTER SIX
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
1.
Does the State have systems procedures for:
Yes No
a.
b.
c.
d.
e.
Tracking case assignments?.......................................................................................
Controlling lien filing dates? .....................................................................................
Monitoring collection activity, i.e.,
identifying cases with minimal/no activity? ..............................................................
Controlling installment payment plans? ....................................................................
Ensuring that collection results (i.e.,
adjustments, changes, etc.) are posted
properly to the employers account file?.....................................................................
VS:(Question 1
2.
)
If procedures are automated, is a systems check performed every time a program is
changed?
Yes __ No __ N/A__
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SYSTEMS REVIEW QUESTIONS
3.
Are Bankruptcy cases controlled to assure:
Yes No
a.
b.
c.
Claims are filed accurately and timely?.....................................................................
Are those employers continuing in business
monitored to ensure payments are made timely?.......................................................
Unpaid cases are reassigned for appropriate
collection action upon bankruptcy closing? ..............................................................
VS:(Question 3
4.
)
If any of the preceding evaluative questions were answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following these questions.
VS: (Question 4
)
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ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
COLLECTIONS
CHAPTER SIX
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
COLLECTIONS
CHAPTER SIX
PROGRAM REVIEW
SYSTEMS REVIEW
Review of Completed Work
For the Collections function, the State should be conducting systematic review of collections
cases. The information received and the action taken should be checked against the
information recorded in the employer's account. A review of completed work should be done
on a regular basis for all staff members involved in the collections operations. This review
may be done on an individual basis for each staff member, or by sampling work done
throughout the entire unit. The following questions are designed to determine how these
reviews are conducted.
The reviewer must become familiar with the kind of review program the
State uses to assess the work performed by the Collections function.
In the narrative section following the questions, explain any "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If there is no
supervisory and/or quality assurance review, describe how quality is assured
in the Collections unit.
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For staff members involved in the Collections process, are the following components subject to some form of systematic review. For Yes
answers, enter a "Y" in the appropriate column(s). For Yes answers, also enter "Y" in column 6. If there are no reviews, answer "N" for
No in column 6. Column 6 is the only evaluative question.
Type of review
Component
*1
Supv
*2
Peer
*3
QR
(QualRev)
a.
That the employer is being contacted timely?
b.
That a history of collection activities is being maintained?
c.
That State collection enforcement tools are being
appropriately utilized?
d.
That liens and enforced collection actions are filed properly
against the correct ownership structure (i.e., sole proprietor,
partnership, corporation)?
e.
That specific requests (e.g., the filing of liens, employer
account updates, written requests for collection assistance,
etc.) are acted upon timely?
f.
When the debt is satisfied, there is a review to ensure the
release of the enforced collection action?
VS:
(Question 6
* Informational
*4
Support
(Clerical)
*5
Other
6
Review
Conducted
)
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TAX PERFORMANCE SYSTEM
COLLECTIONS
CHAPTER SIX
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
7.
If any of the preceding evaluative questions are answered "No" does the State have a
substitute or compensating control?
Yes
VS: (Question 7
No
N/A __
)
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TAX PERFORMANCE SYSTEM
COLLECTIONS
CHAPTER SIX
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
COLLECTIONS
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PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
ADDITIONAL CONTROLS
1.
*Does the State have internal controls or quality assurance systems in the Collections
function that this review failed to identify?
Yes
No __
Yes
No __
If yes, describe below:
2.
Are there any exemplary practices for the Collections function?
If yes, describe below:
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ACCEPTANCE SAMPLES
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COLLECTIONS
CHAPTER SIX
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Purpose/Intent
To assure that Accounts Receivable are being managed in
accordance with State's established procedures.
Scope
The scope of the review will focus on collection cases of
$100.00 or more which are more than 30 days old. Day 1 of
the 30 day count can begin the day after the account
receivable was established. Do not include accounts
declared legally uncollectible.
Universe
The universe for the Collections Acceptance Sample will
include:
Timing/Frequency
1.
Accounts that have been established for at least 30
days. (See Note above.)
2.
All accounts with $100.00 or more in unpaid UI tax
(or the State's established benchmark figure, if
higher). This universe should be identified between
February 1 and June 30.
3.
Select 60 cases, or if universe is small, select the
number of cases based on Table in Appendix A-III
The sample will be selected once per calendar year.
The population should be identified any day in the period
between February 1 and June 30 (a single snapshot of the day
selected).
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ACCEPTANCE SAMPLE INSTRUCTIONS
Sampling Procedures
The following steps must be taken to establish the universe
and to select the sample accounts:
1.
Identify the universe of all employer account
receivables over 30 days old with tax due in the
amount of 100.00 or more (or the State's established
benchmark, if higher). Rounding up or down is
permitted. The debt (or a portion) should have been
created in the past two calendar years or less. This
universe should be identified between February 1 and
June 30.
2.
In order to give the State time to follow its collections
procedures, select the sample of 60 cases six months
after identifying the universe.
3.
Any case that was a part of the previous years'
sample, whether passed or failed, must be removed
from the current review. However, if new debt had
been created since the previous year’s snapshot date,
the case can remain in the sample.
4.
The review should be completed no later than March
31 of the following year.
If the system is automated, the Reviewer must work closely
with the IT unit to ensure a concise understanding of what,
when and how the samples should be selected.
Appendix A describes what action needs to be taken for
sampling in both manual and automated systems.
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CHAPTER SIX
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Reviewing Samples
Assemble the following information from the employer's account:
1.
All electronic and paper information the State has in its possession
relating to the collection history of the selected account including
copies of liens, enforced collection action and other supporting
documents. Electronic information includes data from sources such
as: the employer account file, imaged files, and data in magnetic
media.
2. The employer account information on the State's computer files.
Review actions taken with the preceding 2 calendar years plus current
year only.
Review timeliness of contacts for most recent quarter of liability only.
The “most recent quarter” is the most recent quarter of liability preceding
the “snapshot date” (any day between February 1 and June 30 of the year
under review).
If multiple receivables have been established during the preceding 2
calendar years and current year time frame; review actions taken and
resolutions applied towards the most recently established receivables.
(Up to a maximum of the ten most recently established receivables are to
be reviewed.)
When full payment is received, further review of collection action may
be necessary to see if any enforced collection action was properly
released.
Uncollectible accounts will be reviewed up to the point they are declared
uncollectible, and to determine if they are properly written off.
Accounts in bankruptcy status will be reviewed up to the point where a
claim is filed in bankruptcy court, unless the bankruptcy has already been
discharged or closed. (Question #8)
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ACCEPTANCE SAMPLE INSTRUCTIONS
Drawing Conclusions
Using this information, answer the questions on the Acceptance
Sample Questionnaire.
The following questions are evaluative:
#1.
#2.
#3.
#4.
#5.
#5a.
#6.
#6a.
#7
#8.
#10.
Is the account correctly classified.
Were successor liability procedures followed.
Were initial written notices sent timely.
Was the employer contacted other than through initial
written notice.
Was an assessment filed properly.
If yes, was the employer properly notified.
Was a lien(s) filed properly.
If yes, was the employer properly notified
Were other actions taken properly.
Was a proof of claim filed timely if employer was in
bankruptcy.
Was enforced collection action properly released.
A "NO" answer to any evaluative question must result in
failure of the sampled case.
The following questions are non-evaluative:
#4a.
#4b.
#4c.
#4d.
#9.
Was telephone contact made after written notice was
mailed.
Was the employer contacted in person.
Was the employer contacted by mail.
Other contacts.
Were any payments received.
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CHAPTER SIX
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ACCEPTANCE SAMPLE INSTRUCTIONS
Drawing Conclusions
cont
A "NO" answer to any evaluative question for a collection
sample case will mean that the State's rules and procedures
were not followed, and the case will not be considered
acceptable.
If the completed review of 60 Acceptance Sample cases
includes three or more unacceptable cases, then the reviewer
must conclude that employer accounts receivables are not
being managed in accordance with State's established
procedures.
For each unacceptable case, the reviewer must provide an
explanation on the Acceptance Sample Explanation Sheet.
Questions that can be answered INA require attention. See
"NOTE".
Documentation
All source documentation gathered to review samples must be
kept until the completion and Regional Office approval of the
Annual Report. Either hard copy documentation or (in some
highly automated systems) the ability to recreate the identical
information used in the review must be maintained.
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CHAPTER SIX
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ACCEPTANCE SAMPLE INSTRUCTIONS
NOTE: States provide a full range of collection techniques to be used by State staff "as
appropriate", and it may be difficult for a reviewer to determine whether the staff made the correct
judgment about which technique to use. In addition, actions necessary to collect vary with the
amount of indebtedness and the willingness/ability of the debtors to pay. The reviewer must
recognize the discretion that is given to professional staff in making decisions on the appropriate
tool to use. The reviewer should give the benefit of the doubt to the decision made unless the record
is clear that the decision is in violation of the State's procedures. If the case warranted an enforced
action and one was taken within the State's guidelines, then the objective of the question is satisfied
and the reviewer should answer "yes" to the question.
The reviewer will need to exercise care in answering Acceptance Sample questions N/A. The State's
established written procedures are the primary control in determining whether the case fails or
passes the review. The case is to be reviewed against State collection procedures through the point
where money is received.
If for example a payment was received after only one phone call and no enforced collection action
was necessary, the subsequent Acceptance Sample question dealing with assessment, liens, enforced
actions and bankruptcy can be answered N/A. However, if State procedures call for a certain action
to take place after a specific number of days regardless if payment is made, the reviewer must
determine if this procedure was followed.
There may be situations where the documentation is not clear cut enough to warrant a "Yes" answer.
It is the responsibility of the reviewer when answering questions "INA" to make a determination if
that action did occur based on circumstantial facts or evidence. If such evidence does not convince
the reviewer the answer should be "No".
If the Account Receivable, identified in the universe, was set up in error and was subsequently
determined not to be an accounts receivable, the reviewer should answer question # 1 "No" and not
answer the rest of the questions. (The A/S case would fail.) However, if at the time of the review,
the Account Receivable which was set up in error had been determined not to be a receivable, and
the error was corrected due to the State's own controls in finding the error and not due to the
employer bringing it to their attention, the case should not fail, and Question 1 would be answered
“Yes”.
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CHAPTER SIX
PROGRAM REVIEW
ACCEPTANCE SAMPLE QUESTIONNAIRE
Identification
1.
At the time of review was the account correctly classified
"uncollectible", "liquidated" or in "bankruptcy status")?
(e.g., "collectible",
Yes
2.
No __
If there was a successor, were successor liability procedures followed?
Yes
No
N/A __
Notification
3.
Were initial written notice(s) and follow up notices sent timely for the most recent quarter of
liability?
Yes
4.
No
N/A
INA __
Was the employer contacted other than through the "initial written notice" for the most
recent quarter of liability?
Yes
No
N/A __
If yes :
Yes No N/A INA
a.
Were telephone contact(s) made?
b.
Was the employer contacted in person?
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ACCEPTANCE SAMPLE QUESTIONNAIRE
Notification cont.
Yes No N/A INA
c.
Was the employer contacted by mail?
d.
Other contact(s)? If yes, describe
on sample explanation sheet.
Actions Taken
5.
Was an assessment(s) filed properly?
a. If filed, was the employer properly notified?
Yes
Yes
No
No
N/A __
N/A __
6.
Was a lien filed properly?
a. If filed, was the employer properly notified?
Yes
Yes
No
No
N/A __
N/A __
7.
Were any other enforcement actions taken properly?
Yes
No
N/A __
If the employer has filed a petition for bankruptcy, were
appropriate actions taken to file a claim?
Yes
No
N/A __
8.
Resolution
9.
Did the State receive any payments for the receivables or adjustments to
the receivables under review?
Yes
10.
If enforced collection action (including, but not limited to tax liens)
was initiated, was that properly released in accordance with State
policy and procedures?
No
Yes
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N/A __
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TAX PERFORMANCE SYSTEM
Collections Sampling Coding Sheet
State: _________
Period Covered: ______________
Date: ________________
Reviewer: ____________________
(6 months prior to review)
Case
#
Employer
Id.
Number
Tot.
Amt Due
# Qtrs
w/Liab
1
2
3
4
4a
4b
4c
4d
5
5a
6
6a
.
Questions 1, 2, 3, 4, 5, 5a, 6, 6a, 7, 8, and 10 are evaluative.
Total Acceptable _______ of _______
7
8
9
10
Pass/Fail
Y/N
Page _______ of _______
TAX PERFORMANCE SYSTEM
Collections - Sample Explanation Sheet
State: _____________________ Period Covered: _______________ Date: _______________ Reviewer: _______________
Sample Type:
Case
Number
Employer
Identification Number
Acceptance
Expanded
Explanation
CHAPTER VII
FIELD AUDIT
COMPONENTS
INTRODUCTION
COMPUTED MEASURES
PROGRAM REVIEW
INTRODUCTION
ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
FIELD AUDIT
CHAPTER SEVEN
INTRODUCTION
The Field Audit operation examines employer records to assist employers in their effort to
comply with State law and regulations and to determine if wages and taxes have been reported in
accordance with the law and agency policies. The major tasks performed by the Field Audit
function are:
Select employers for audit
Audit employer records
Process and record all information (Account Maintenance)
Handle appeals as appropriate
PRIMARY OBJECTIVE
The primary objective of the Field Audit function is to promote and verify employer compliance
with State laws, regulations and policies. Successful completion of this objective may be
accomplished through achievement of four sub-objectives:
1.
Identify employer noncompliance (Accuracy)
2.
Direct audit selection at noncompliance (Accuracy)
3.
Maintain a defined level of audit production (Completeness)
4.
Ensure that the Field Audits meet the key requirements of the Field Audit
Function section of the ES Manual (Completeness)
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Accuracy
To evaluate the achievement of Sub-objectives 1, 2, and 3, Computed
and
Measures will be generated based on data routinely reported by States.
Completeness These data elements will be converted into three indicators by the TPS ADP
system.
Completeness The effectiveness of Sub-objective 4 will be assessed through findings from a
Program Review designed to measure State conformity to ETA audit policy as
defined by the Employment Security Manual (ESM). A Program Review will
assess how closely the State has followed ETA audit policy.
REVIEW METHODOLOGIES
Computed Measures
Computed measures will provide indicators for analysis of improper employer reporting and
audit penetration by both number and size of employer. The three indicators which will be used
are:
1.
Percent of change in total wages resulting from audit
2.
Percent of contributory employers audited
3.
Percent of total wages audited. (Annualized)
Program Review
The Program Review to be conducted for Field Audit has two components - a Systems Review
and an Acceptance Sample.
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REVIEW METHODOLOGIES
Program Review cont.
The Systems Review covers the following topics:
Recorded Information and Instructions
Training
Recording of Transactions and Events
Systems to Assure Execution of Events
Review of Completed Work
The Systems Review will be used to examine the controls and quality assurance systems known
to be required for a quality field audit operation and to determine if the State has such controls.
A State's utilization of these controls should result in a quality field audit operation.
The Acceptance Sample examines the following:
Completed Audits
In conjunction with the Systems Review, an Acceptance Sample of completed field audits will
be examined using the Field Audit Acceptance Sample Checklist. The Field Audit Acceptance
Sample Checklist, containing questions on key audit policy requirements, will aid the reviewer
in determining if the sampled audits conform to the requirements. It is presumed that States
which do well on the Program Review (i.e., have an adequate system of internal controls and
pass the Acceptance Sample) have a quality audit program.
Through the use of computed measures to assess productivity, and a Program Review to assess
quality, TPS will gather data on what constitutes an effective audit program. TPS analysis of
this data should indicate where States may need to improve operations or be aware of
vulnerabilities they may have in their program.
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COMPUTED MEASURES
Computed measures in the Field Audit function will provide for analysis of improper employer
reporting and audit penetration by both number and size of employer. These measures will be
generated by using data elements reported by States through routine reports currently submitted.
Some States accumulate the data elements required for the Field Audit measures through ADP
systems. Other States keep manual records. Either way it is important that accurate records be
kept from the beginning. Upon implementation of the TPS program, the State TPS reviewer
must ensure that the State ADP system captures these data elements as defined so that the
National Office ADP system can produce accurate reports based on these data elements. The
data needed will be automatically extracted from the system currently used to electronically
transmit these reports from the States to the National Office. Appendix B explains the technical
process for gathering this information.
Field Audit Indicators. Three indicators have been developed for Field Audit:
1. Percent of change in total wages resulting from audit
2. Percent of contributory employers which are audited
3. Percent of total wages audited (Annualized)
Indicator 1 - Total Wage Change. The percent of change in total wages resulting from audit
for a given calendar year.
Rationale. The objective is to encourage the search for misclassified workers and to
assess whether States are targeting their audits to maximize the discovery of improper employer
reporting. The State will be able to compare results when changes in the audit selection
parameters are made that accommodate the identified areas of noncompliance.
COMPUTED MEASURES
To minimize differences among States in wage and salary levels, the audit change measure is
being computed by taking the ratio of the audit-found change in total wages to the pre-audit total
wages originally reported by the audited firms reviewed in a specified calendar year. (The
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numerator for the following formula includes total wages overreported (ETA 581 # 56) and total
wages underreported (ETA 581 # 53). The denominator, total wages audited - pre-audit, is
reported on the ETA 581 # 49.)
It should be noted that the absolute value of all changes (i.e., both underreported and
overreported wage changes) will be used in the numerator. This is to ensure that all mistakes are
valued in the indicator. Although net audit yield may be preferable from a cost-benefit
standpoint, it does understate the extent of employer reporting errors, and the need to take
remedial action to improve voluntary compliance.
Formula
Total wages overreported (581 #56) + total wages underreported(581 #53)
Total wages audited - Pre-Audit (581 # 49)
Data Elements
The total wages underreported and the total wages overreported are the amounts
of total wages reported in error by employers as discovered by audit. These
amounts should be the same as currently reported on Form ETA 581 #53 and #56
respectively.
The denominator, total wages audited, is the pre-audit total wages originally
reported by audited accounts. These amounts are reported on the Form ETA 581
# 49.
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COMPUTED MEASURES
Indicator 2- Employers Audited. The percent of contributory employers which are audited for
the calendar year under review.
Rationale. This indicator reflects the percent of contributory employers which are
audited for a specified calendar year. It is intended to provide a measure of State audit
production. Because audits of employer records are an effective means of not only determining
the extent of employer non-compliance, but also of ensuring employer compliance, it is
important that States perform such audits.
Audit production has been measured by the number of audits completed relative to the number of
contributory employers (penetration rate) and judged against a desired level of achievement
(DLA). The current formula of measuring audit production will be similar, but with a slightly
different period of review. The desired percentage of contributory employers audited, will
depend upon the performance enhancement indicator established by the State's annual plan of the
audit program quality measure sub-objectives.
Formula
Number of audits completed during the four (581) report quarters
Number of Contributory Employers at end of the (581)report quarter
two quarters prior to the four quarters in which the audits were performed
Data Elements
Numerator - The number of audits completed during the four (ETA 581 # 47)
report quarters is the total number of audits completed by the State during the
specified four quarter period. This should be the same number as the sum of
Form ETA 581 # 47 for the four quarters of a given calendar year.
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COMPUTED MEASURES
Denominator - The number of contributory employers at the end of the report quarter two
quarters prior to the four quarters in which the audits were completed. The total number
of known contributory employers for a given period should be the same number as Form
ETA 581 #1 for the end of the quarter two quarters prior to the four quarters in which the
audits were completed. In other words, this is the number of contributory employers at
the end of September prior to the calendar year in which the audits were completed.
Indicator 3 - Wages Audited. The annualized percent of total wages audited for the calendar
year under review.
Rationale. Because it is simpler and less time-consuming to audit small employers, a
simple employer penetration rate measure encourages small employer audits. However, noncompliance among large employers may have a greater impact on the State's trust fund. To
encourage audits of larger firms, TPS has an additional penetration measure: the percent of total
wages audited.
The following formula gives a fairly precise estimate of annualized audit penetration of total
wages using available data.
Formula
(Total Wages Audited Post-Audit (#50) for four (581) report quarters/Total
Quarters Audited (#48) for four (581) report quarters) x
Total number of Audits (#47) for four (581) report quarters x 4 quarter
Total Wages of Contributory Employers for prior four quarters (ES 202)
EQUALS (=) annualized percent (%) of total wages audited
(total wage penetration rate)
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COMPUTED MEASURES
Calendar year instead of fiscal year is used in this formula the same as for the employer
penetration rate formula. This formula provides a measure of wage penetration based on
average wages per quarter audited from which a comparison of audit production could be
drawn.
Available data indicates that the average audit consists of slightly over four quarters. As
a result the average audit contains wages of more than one calendar year. Averaging the
quarters compensates for this fact and gets a comparable percentage of quarterly wage
penetration. Multiplying it by four quarters in a year annualizes the audited payroll.
Multiplying this result by the total number of audits in the year results in the numerator
(annualized total payroll audited).
Dividing this numerator by a denominator of total wages of contributory employers for
the target year expresses wage penetration as the annualized percent of total wages
audited.
To further illustrate how this formula compensates for audits with wages outside the
target year, see the example below:
Available data indicated that the State completed 1000 audits, covering 5000 quarters and
$10,000,000 gross payroll and total wages of contributory employers for prior year (ES
202) $200,000,000.
If we apply the proposed wage penetration formula, it becomes easier to understand how
the formula minimizes the effect of audited wages outside the target year. In this case the
National Office would make the following calculation:
$10,000,000 = $2000 (average quarterly gross payroll audited)
5000
$2,000 X 4 X 1000 audits = $8,000,000 (annual gross payroll audited)
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COMPUTED MEASURES
= 2% penetration rate
$8,000,000
Total wages of contributory employers
for prior year (ES 202) $160,000,000
Since most of the audits will be of a given target year, the fact that some wages of other
years may be included in some of the audited quarters will be minimized. The
penetration figure resulting from the formula will be comparable from year to year and
the impact of wages outside the target year will be diminished over time by this
averaging. Inflation in the total wage picture will also help offset the effects of wages
outside the target year. As wages in the numerator that are outside the target year would
normally tend to suppress the denominator (i.e., the percent of wage penetration for the
target year should be greater because the numerator is inflated by wages outside the
target year), the suppression is offset by inflationary effects on the wages of the target
year in the denominator. (i.e., wages tend to rise from year to year due to inflation and
the inflated wages in the denominator divided into the less inflated non-target year wages
in the numerator will lower the percent of wage penetration)
Data Elements
Numerator - For audited wages, the measure should be total wages-post audit per audited
quarter, times the number of audits conducted. To analyze a year, the quarterly gross
payroll audited for the calendar year should be divided by the numbers of quarters
audited for the calendar year, then multiplied times 4 to annualize the data, then
multiplied times the number of audits conducted for the calendar year.
Denominator - For total wages, the measure should be total wages per employer (ES 202
quarterly total wages for the prior four quarters).
Indicator - The indicator would be the ratio of annualized audited gross payroll to total
wages for the year.
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COMPUTED MEASURES
Drawing Conclusions.
An analysis of the results of the Field Audit Computed Measures will reveal how well the
State is managing its Field Audit program. Looking at trends of the three indicators can
indicate the degree of "penetration" into both the number of employers and amount of
total wages being audited and whether this "penetration" is productive in revealing the
amount of misreported wages.
Findings or trends from these Computed Measures should be considered along with
findings in the Systems Review and Acceptance Sample for evaluating the effectiveness
of the State's Field Audit program and be included in the TPS Annual Report.
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PROGRAM REVIEW
COMPONENTS
SYSTEMS REVIEW
ACCEPTANCE SAMPLES
SYSTEMS REVIEW
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TAX PERFORMANCE SYSTEM
CHAPTER SEVEN
FIELD AUDIT
PROGRAM REVIEW
SYSTEMS REVIEW INTERVIEW SHEET
Function
Reviewer
Persons Interviewed
Date
Name:
Documents Reviewed
Title:
Title:
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Recorded Information and Instructions
For Field Audit, the recorded information and instructions should include requirements
for unemployment insurance coverage and procedures for conducting field audits. As a
general rule, TPS will consider a State's recorded instructions to be current, accurate and
complete if it contains, as a minimum, the requirements specified in the ESM as it appears
in the appendix of this handbook and presents the State's unemployment insurance
coverage rules. While ESM 3683 requires a formal Field Audit manual, this requirement
may be met by handbooks, desk aids, computerized help screens, etc. that include the
specified requirements.
The reviewer should examine recorded information and instructions
available to employees involved with performing Field Audit functions.
Compare the procedures to the laws and written policies of the State.
In the narrative section following the questions, explain "other" responses,
and describe "compensating controls". Identify the question being
explained by referencing the number and section. If there are no recorded
instructions, describe in the narrative how personnel know the laws and
written policies and procedures to perform their assigned tasks.
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SYSTEMS REVIEW QUESTIONS
1.
Are the State's recorded instructions:
Yes
a.
b.
c.
d.
2.
No
Current? .....................................................................................................................
Accurate? ...................................................................................................................
Complete? ..................................................................................................................
Readily available to staff?..........................................................................................
Does the State have recorded instructions to assist the auditor in understanding the Field
Audit requirements of the (ESM) in sufficient detail to properly complete a Field Audit?
Yes
No ___
If yes, do the instructions explain to the auditor how to perform the following:
Yes No
a.
How to complete a pre-audit discussion and who
should be involved in the discussion?........................................................................
b.
How to verify the existence of the business?.............................................................
c.
How to verify the ownership of the business? ...........................................................
d.
How to perform tests to verify the accuracy and
completeness of reported payroll and how to
record the findings? ...................................................................................................
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e.
Yes No
How to perform tests to search for misclassified
workers and hidden wages and how to record the
findings?.....................................................................................................................
f.
How to determine the minimum number of
consecutive calendar quarters necessary to
constitute an audit and how to record in the
audit when the minimum or tolerance guidelines
are disregarded? .........................................................................................................
g.
How to conduct a post-audit discussion and who
should be involved in the discussion?........................................................................
h.
How to resolve the collection of the debt incurred
by the audit?...............................................................................................................
i.
How to properly prepare adjustment reports and
the routing of the adjustment reports when the
audit resulted in change?............................................................................................
VS:(Questions 1 and 2________________________________________________________)
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3.
If any of the preceding evaluative questions are answered "no", does the State have a
substitute or compensating control?
Yes
No
N/A ___
If Yes, describe in the Narrative Section following these questions.
VS: (Question 3
)
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SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation Of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "if yes, describe", and "Other":
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Training
New employees need to learn the requirements for unemployment insurance coverage and
the procedures for conducting field audits. Existing employees benefit from periodic
refresher courses and need additional training when changes occur, and when quality
defects or a significant number of errors appear in a particular area.
The reviewer should become familiar with methods and systems used to
identify and meet field audit training needs.
In the narrative section following the questions, explain "other" responses
and describe "compensating controls". Identify the question being
explained by referencing the number and section. If there are no training
programs, describe in the narrative how personnel know the laws and
written policies and procedures to perform their assigned tasks.
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SYSTEMS REVIEW QUESTIONS
1.
Does the State have methods or procedures to provide training for newly hired
employees?
Yes
No __
*If yes, identify the type of training:
Yes No
a.
b.
c.
d.
e.
*Formal Classroom Training? ...................................................................................
*On the Job Training?................................................................................................
*One-on-One Training? .............................................................................................
*Individual Self-guided Training?.............................................................................
*Other?.......................................................................................................................
Describe the type and frequency of training in the narrative.
2.
Does the State have methods or procedures to provide refresher training for experienced
employees?
Yes
No __
*If yes, identify the type of training:
Yes No
a.
b.
c.
d.
e.
*Formal Classroom (e.g., refresher courses)? ...........................................................
*On the Job Training?................................................................................................
*One-on-One Training? .............................................................................................
*Individual Self-guided Training?.............................................................................
*Other?.......................................................................................................................
Describe the type and frequency of training in the narrative.
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3.
Does the state provide training when there are:
Yes No N/A
a.
b.
c.
d.
e.
State law changes?. . . . . . . . . . . . . . . . . . . . . . . . . . .
Policy/procedure changes?. . . . . . . . . . . . . . . . . . . . . .
Needs identified from review of finished work
(e.g., supervision, quality assurance review)?. . . . . . . . .
Hardware/software changes?. . . . . . . . . . . . . . . . . . . .
*Other?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VS: (Questions 1-3
4.
)
Does the state have processes (e.g., back-up training or organizational flexibility) to
assure that staff absences will not disrupt operations?
Yes
No __
If Yes, describe in the Narrative Section
5.
*In the opinion of the supervisor or manager, does the training meet the needs of the
Field Audit function? (e.g., are sufficient resources available--training packages,
facilities, staff, etc.)
Yes
6.
No __
If any of the preceding evaluative questions were answered "No", does the state have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section
VS: (Questions 4 and 6
)
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SYSTEMS REVIEW NARRATIVE
Question Explanation Of "N/A" and "Compensating Controls"
Number (when deemed necessary)
Question
Number
Answers to "if yes, describe", and "other":
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Recording of Transactions and Events
The State should have procedures and controls to assure that at a minimum, completion of
the basic requirements of a Field Audit are recorded in the completed audit. Whether the
State’s system is automated or manual, an audit trail should exist. It is reasonable to
assume that events of a completed audit should be sufficiently documented to enable
persons such as supervisors, reviewers or subsequent auditors to understand the reason for
the audit and to understand the audit procedure, findings and conclusions. It is also
reasonable to assume that if these procedures or internal controls are in place, the audits
have an increased probability of being of acceptable quality.
An effective audit should document the major steps entailed, such as preaudit interview, and tests of the employer's payroll records, and tests to
search for misclassified workers and hidden wages. Documentation in the
form of work paper(s) for each test should contain the test performed,
employer name and account number, and the period under review. These
instructions are to be considered as a minimum and each State should
develop their own work paper format and their respective method for
organizing the work papers. It can take the shape of a check list of actions
taken or a description in narrative form.
In the section following the questions, explain "other" responses, and
describe "compensating controls". Identify the question being explained
by referencing the number and section.
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SYSTEMS REVIEW QUESTIONS
1.
Does the State have a method to assure that Field Audit findings and conclusions can be
traced to their information sources?
No __
Yes
2.
Can the following be identified through the audit trail:
a.
Yes No
The name and title of employer or designated
representative involved in pre-audit discussion? .......................................................
b.
How the auditor verified the existence of the
business? ....................................................................................................................
c.
How the auditor verified the ownership of the
business? ....................................................................................................................
d.
The tests performed to verify the accuracy and
completeness of reported payroll? .............................................................................
e.
The employer records that were examined to search
for misclassified workers and hidden wage? .............................................................
f.
That four consecutive calendar quarters were
audited or that an acceptable explanation was
provided? ...................................................................................................................
g.
The name, title, and telephone number of employer
or an identified designated representative
involved in the post-audit discussion? .......................................................................
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Yes No N/A
3.
h.
When the audit resulted in the employer owing
additional tax, that the auditor either collected
it or provided an acceptable explanation why the
monies were not collected? (If the State policy
does not require the auditor to attempt collection,
answer "N/A" to the question.) ..................................................................................
i.
The adjustment reports prepared and submitted
(when an audit results in a change)?..........................................................................
Are Field Audit support documents retained and accessible for State use?
Yes
4.
No __
Are the Field Audit completion date and results retained and accessible for State use?
Yes
No __
VS: (Questions 1 – 4
5.
)
If any of the preceding evaluative questions were answered "no", does the State have a
substitute or compensating control?
Yes
If yes, describe in the "Narrative" section following these questions.
VS:(Question 5
No
N/A __
)
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SYSTEMS REVIEW NARRATIVE
Question
Number
Question
Number
Explanation Of "N/A" and "Compensating Controls"
(when deemed necessary)
Answers to "if yes, describe", and "other":
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Systems to Assure Execution of Events
A central or district office control system for assigning and monitoring field audit
assignments serves as a management tool. It provides the State with a means of monitoring
the number of audit assignments, to whom the assignments are made, the State of work in
progress, the completion of audit assignments and if they were completed timely. It also
gives the State control over certain requirements for audit assignments such as four
quarter scope and any criteria for audit selection the State may use.
The reviewer should become familiar with the systems used by the State
for completing field audits.
In the narrative section following the questions, explain "other" responses,
and describe "compensating controls". Identify the question being
explained by referencing the number and section. If there are no internal
controls or safeguards, describe how it assures accurate and timely
completion of work.
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SYSTEMS REVIEW QUESTIONS
1.
Does the State have a control system for assigning and monitoring field audit
assignments?
Yes
No __
a. If yes, does the control system:
Yes No
(1). Indicate the issue date of the assignment? .........................................................
(2). Identify the office/individual receiving
the assignment?...................................................................................................
(3). Indicate the actual assignment completion
date? .....................................................................................................................
b. If yes, (to question 1 above), is the control system:
(1).* Automated? ..................................................................................................... .
(2).* Located in the central office?............................................................................
(3).* Located in a district/regional office? ................................................................
(4).* Located elsewhere? (Describe in narrative)......................................................
VS: (Question 1
)
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2.
*Are individual auditors allowed to select employer accounts to audit and/or convert nonaudit assignments into audits?
Yes
No __
If yes, does the State:
a.
Have standards to determine whether an auditor may select an employer account
to audit and/or convert non-audit assignments into audits?
Yes
b.
Require that the auditor's reason for selecting an employer account for audit
and/or converting non-audit assignments into audits, be recorded in the audit
report?
Yes
3.
No __
Does the State have a system or procedure to assure that audit results (i.e., adjustments,
changes, corrections, etc. to the employer's account file) are properly prepared?
No __
Yes
VS: (Question 2 and 3
4.
No __
)
*Following the completion of the audit, are employers contacted concerning the conduct
of the audit?
Yes
No __
If yes, describe the procedure in the narrative. If correspondence is used, obtain a sample
if possible.
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5.
If procedures are automated, is a systems check performed every time a program is changed?
Yes __ No __
6.
If any of the preceding evaluative questions were answered "no", does the State have a
substitute or compensating control?
Yes
No
N/A __
If yes, describe in the "Narrative" section following these questions.
VS:(Question 6
)
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SYSTEMS REVIEW NARRATIVE
Question
Number
Question
Number
Explanation Of "N/A" and "Compensating Controls"
(when deemed necessary)
Answers to "if yes, describe", and "other":
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CHAPTER SEVEN
PROGRAM REVIEW
SYSTEMS REVIEW
Review of Completed Work
Ongoing supervisory review to ensure the quality of individual audits improves the quality
of the entire Field Audit function. The review process may vary from reviewing all audits
without exception to random sampling of audits in order to detect problem areas. The
review may also take the form of a periodic Statewide review which measures the quality of
the overall audit program. Utilization of these review processes helps the State meet the
requirement of ESM 3691.
A system of post-audit verification also helps management assess the audit program by
providing a method of feedback from audited employers on how the audit was conducted.
Other feedback systems on quality trends may provide information to field audit
supervisors with which they could compare audit quality between their office and other
offices in the State.
At a minimum, field audits should be reviewed to assure they meet the
requirements as set forth in the Field Audit section of the ESM. As well
as meeting the ESM requirements, field audits should be reviewed to
assure they meet the minimum level of documentation as defined in the
section on Recorded Instructions.
In the narrative section following the questions, explain "other" responses,
and describe "compensating controls". Identify the question being
explained by referencing the number and section. If there is no review of
completed audits, describe how the State ensures that accurate and
complete field audits are being conducted.
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For staff members involved in processing Field Audit documents, are the following components subject to some form of systematic review?
For Yes answers, enter a "Y" in the appropriate column(s). For Yes answers, also enter "Y" in column 6. If there are no reviews, answer
"N" for No in column 6. Column 6 is the only evaluative question.
Type of review
Component
a.
That a pre-audit discussion was held?
b.
That the existence of the business was verified?
c.
That the ownership of the business was verified?
d.
That payroll record tests were performed?
e.
That a search for hidden wages was made?
f.
That 4 consecutive calendar quarters were audited?
g.
That a post-audit discussion was held?
h.
That money was collected or an explanation was
documented?
i.
That adjustments were properly prepared?
VS:
(Question 6
* Informational
*1
Supv
*2
Peer
*3
QR
(Qual.
Rev.)
*4
Support
(Clerical)
*5
Other
6
Review
Conducted?
Y/N
)
ET HANDBOOK NO. 407
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CHAPTER SEVEN
FIELD AUDIT
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
7.
Is a periodic Statewide review of completed field audits performed to ensure uniform
quality throughout the State?
Yes, all audits
Yes,
% of audits No __
VS: (Question 7
8.
)
* If field audits are reviewed, is a different review procedure used for large employers or
other special audits?
Yes
No
N/A __
If yes, describe the review procedure in the narrative section following these questions.
9.
* Are field audit supervisors informed about quality trends between their offices and
other offices within the State?
Yes
10.
No __
If any of the preceding evaluative questions were answered "no", does the State have a
substitute or compensating control?
Yes
No
N/A __
If yes, describe in the "Narrative" section following these questions.
VS:(Question 10
)
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FIELD AUDIT
CHAPTER SEVEN
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Question
Number
Explanation Of "N/A" and "Compensating Controls"
(when deemed necessary)
Answers to "if yes, describe", and "other":
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SYSTEMS REVIEW QUESTIONS
Additional Controls
1.
* Does the State have internal controls or quality assurance systems in the Field Audit
function which this review failed to identify?
Yes
No __
Yes
No __
If yes, describe below.
2.
* Are there any exemplary practices for the Field Audit function?
If yes, describe below.
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ACCEPTANCE SAMPLES
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FIELD AUDIT
CHAPTER SEVEN
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Purpose/Intent
To assess the degree to which completed audits meet the
requirements of the Employment Security Manual.
To assess the accuracy of posting audit results in the State's
employer records.
Scope
Due to TPS end-of-year workload concerns, reviewers may
select one of the following options: audits completed in the
four quarters of the calendar year under review, or audits
completed the fourth quarter of the previous calendar year
and first, second, and third quarters of the calendar year
under review.
Universe
There is one universe to be identified for the Field Audit
Acceptance Sample:
Timing/Frequency
1.
All audits completed on Contributory Employers
during the period selected for TPS review.
2.
60 completed audits will be selected.
The samples will be selected once per calendar year.
The population of transactions will be identified after the
end of the fourth or third quarter, depending on the period
selected for TPS review.
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Sampling Procedures
The following describes the steps to be taken to build the
universe for the samples:
1.
Identify all contributory employers audited during
the period selected for TPS review. These should be
the same employer accounts that are being reported
as Total Audits on the ETA 581.
2.
Select a sample of 60 cases.
3.
The sample should be selected after the fourth or
third quarter ends, depending on the period selected
for TPS review.
Appendix A describes what action needs to be taken for
sampling in both manual and automated systems.
If the system is automated, the reviewer must work closely
with the IT unit to ensure a thorough understanding of
what, when, and how the samples should be selected.
Reviewing Samples
Assemble the following information for each of the
completed audits selected for review.
1.
The complete audit report.
2.
The supporting documentation containing any
additional information to support the audit
decisions. This could be in paper or electronic
format such as work papers or notations on a
computerized audit program.
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Reviewing Samples
cont.
Drawing Conclusions
3.
Any adjustment forms needed due to changes
resulting from the audit.
4.
The account information on the State's computer
files.
Using this information, answer the questions on the
Acceptance Sample Questionnaire for each audit selected.
1.
A pass/fail question has been added to the
Acceptance Sample Questionnaire. "Was this
assignment correctly identified as an audit in
conformity with ETA audit policy as defined in the
Employment Security Manual?" A "No" answer
will fail the entire case. By answering no, the rest
of the questions in the Acceptance Sample
Questionnaire would not need to be answered. Note
that cases failing under this criterion are a
potentially serious problem as the data being
reported on the ETA 581 are skewed. These
failures will need to be written up as part of the
findings of the Annual Report.
2 a.
A score of 80 points or more on the nine (9)
acceptance sample questions is required for a case
to pass.
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Drawing Conclusions Cont.
b.
If any of the cases score less than 80 points, it
means that the reviewer must conclude that the
audit is not an acceptable audit for this review.
c.
Of the 60 cases, if three or more are not acceptable,
then the reviewer must conclude, that quality in the
State's audits cannot be confirmed.
For all unacceptable cases, the reviewer must provide an
explanation for the unacceptable case on the Acceptance
Sample Explanation Sheet.
Documentation
All source documentation (gathered to review samples)
must be kept until the completion and Regional Office
approval of the Annual Report. Either hard copy
documentation or (in some highly automated systems) the
ability to recreate the identical information used in the
review must be maintained.
NOTE: For each of the 60 Audit cases both a review of adherence to ESM requirements and (if
the audit resulted in any change or adjustment to the information on the employer's account), a
review of posting accuracy must be completed. It is important to verify that the posting of field
audit adjustments is accurate in order to ensure the State is processing the information provided
by the field audit unit. The purpose of TPS is not to find fault with any particular unit, but to
identify strengths and weaknesses within a system regardless of what unit is responsible for the
execution of the process.
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ACCEPTANCE SAMPLE INSTRUCTIONS
For each case that passes the initial question of "Is this an Audit?", all Acceptance Sample
questions must be answered, even for those cases where it is apparent early in the review that the
case will not have sufficient points to pass. This is necessary to pinpoint any other areas of
weakness regarding the quality of the State field audit program.
Furthermore, for question 5 in the Acceptance Sample, if no records or partial records are
maintained by the employer, the auditor must document that in the report. The audit is not to fail
simply because the employer does not maintain all of the records listed in question 5. Such an
audit would only fail if the auditor did not document that necessary records were not maintained.
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ACCEPTANCE SAMPLE RATIONALE
Pass/Fail Initial Question
Prior to answering the Acceptance Sample Questionnaire to award points for the
quality of the audit, the case should be reviewed to ascertain that it was correctly
identified as an audit in conformity with ETA audit policy as defined in the
Employment Security Manual (ESM). (Pass/Fail)
RATIONALE: The ESM defines a field audit as well as identifying the scope. Some cases will
not meet the criteria to be included in the Audit Universe (e.g., Assignments issued to resolve
report and money delinquency, blocked claims and status assignments should not be routinely
converted or expanded to audits). In all instances the cases will need to be reviewed to ascertain
if they meet the criteria of an audit.
DOCUMENTATION: If the completed audit was a converted or expanded assignment issued to
resolve report and/or money delinquency, blocked claim(s) or status issue it must contain
documentation to identify the problem and/or conditions, not apparent when the assignment was
made, that warrant the expansion or conversion of the assignment to include an audit.
After determining the case passes the initial question of "Is this an Audit?", the following
Acceptance Sample Questions will be used to assess the quality of the audits.
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The following questions assess the quality of completed Field Audits. For each question, a
score and a rationale are given. The "Documentation" section presents examples of
acceptable documentation to confirm that a particular audit activity has been performed.
Work papers can range from checklists of actions taken and documents reviewed to a
narrative by the auditor. The total score for a case of acceptable quality is 80.
1.
A pre-audit discussion concerning the purpose of the audit must be held with the
employer or an identified designated representative. (10 points)
RATIONALE: A preliminary discussion must be held with the employer or an identified
designated representative, in which the purpose of the visit and any pre-audit questions are
discussed. At a minimum, the owner, a partner, or a corporate officer should be advised in
person, by telephone or letter that an audit is to be performed and have the opportunity for a
meeting.
DOCUMENTATION: The completed audit must record the name and title of the individual
involved in discussion. If the employer designated a representative, record the name and title of
the designated representative, and also record the name and title of the employer who designated
the representative.
2.
An acceptable explanation will be given as to how the auditor verified the existence
of the business. (5 points)
RATIONALE: Conducting the audit at the employer's place of business is the best way to verify
its existence. Otherwise, the business entity must be verified in accordance with State audit
procedures to ensure it is a bona fide operating establishment and not part of a fictitious
employer scheme.
DOCUMENTATION: The completed audit must contain documentation of an on site visit,
personal knowledge of the business, or other sources of verification in accordance with State
audit procedures (e.g., business license, business advertisement in yellow pages).
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3.
An acceptable explanation must be given as to how the auditor verified the ownership
of the business. (5 points)
RATIONALE: The current status of the business must be verified each time an audit is performed.
If there has been a change of which the state was not aware, information on the change must be reported
by the auditor in accordance with the state's policies and procedures.
DOCUMENTATION: The completed audit must contain confirmation that the auditor examined documents
regarding partnership agreement, articles of incorporation, corporate charter, income tax returns and their
findings (the type of income tax returns should be identified - e.g., 1120S - Sub-Chapter S Corp. 1040-Schedule
C - Individual Ownership, 1065 - Partnership, 1120 – Corp.), business license, verification with the Secretary of
State, or other sources of verification in accordance with state audit procedures.
4.
Tests of employer's payroll records must be performed to verify the accuracy and completeness of
reported payroll. (25 points)
RATIONALE: To establish that the auditor can rely on payroll data reported to the state, a minimum of four
tests are required. To begin, the auditor must confirm reliance on the accuracy and completeness of the
employer’s payroll system, and this is done through Test “a” which requires verification that amounts paid were
properly posted to the employer’s payroll records. Then, as further checks on the accuracy of reported wages,
Test “b” involves reconciliation of audited total payroll to reported total wages; Test “c” requires computation of
total taxable payroll; and Test “d” involves reconciliation of total taxable payroll to reported total taxable wages.
(Note that reconciliations may not always be exact due to tolerance levels, rounding and other state-established
procedures. In these situations, the reviewer will determine whether state-established procedures have been
followed. Minor mathematical or typographical errors discovered by the reviewer, such as errors that do not
prevent identification of the employer or of potential UI claimants, should not cause the audit to fail, however,
they should be noted in TPS findings.)
These tests will not be possible for employers or employing units that have not reported wages or have not
registered. Procedures for auditing such employers are described at the end of Question Four.
DOCUMENTATION: The audit must include documentation which confirms that each test was conducted and
supports conclusions drawn from the tests. Any discovered discrepancies greater than state-established tolerance
levels between reported and audited payroll must be documented, reconciled and properly adjusted in order to
pass Question Four. Such documentation could take the form of an annotated calculator tape, or include copies of
records, or consist of work papers, or be notations on a computerized audit program.
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Test a. Verification that amounts paid were properly posted to the employer’s payroll records.
There are two methods to verify that payroll was properly posted to the employer’s payroll system.
Provide documentation showing that the audit verified the gross payroll by adding all payments of the
individual gross wages from source document(s) (e.g., paper or electronic check stubs, cash
disbursements journal, check register, etc.) for the quarter and compared that total to the total gross wages
reported on the state's records. Documentation may be in the form of an annotated calculator tape or
computer printout showing quarter or year and source documents used. Comparison may be for a single
quarter (or more) or annual.
or
Provide documentation showing that the auditor verified at least one employee's wages for one quarter
from evidence of payment through to the employer’s copy of the quarterly contribution and wage report
or to the wages posted in state records. If the auditor is supplied with detailed wage information from
state records prior to conducting the audit, then the wage data of the individual must be traced through the
employer’s payroll system to the state’s records for that quarter.
Most basic evidence of payment, such as timecards, check stubs, check registers, cancelled checks or
copies of automated clearing house (ACH) transactions should be used when available. If such basic
evidence is not available, other records may be utilized, but this situation must be documented in the audit
report. Other acceptable documents include paper and cash payment vouchers. If the employee is paid by
direct deposit, evidence may include employee earnings statements, electronic check stubs, records of
direct deposit, or electronic fund transfer tracking numbers.
Records used in the audit that show only net amounts (e.g., cancelled checks, non-detailed check stubs,
records of direct deposit, or ACH transactions showing only net amounts) must be reconciled for at least
one employee; with supporting evidence of the gross wage amounts paid to the employee such as found in
individual payroll or earnings records.
Work paper(s) for each individual traced must contain the identity of the record examined, name, SSN (all
or part), amount of pay, and dates of payments.
Test b. Reconciliation of audited total payroll to reported total wages.
Work paper(s) must show that the auditor compared quarterly totals of payroll records for all employees
to the total wages on the employer's copy of the UI contribution report, or to the amount posted to the
state's records. Payroll records used for this test could be in the form of individual earnings records,
payroll journals or ledgers, payroll summaries, W2s, W3(s), 941s or 940s. For example: Each quarter’s
payroll summaries are totaled for the entire year, along with a comparison of the total gross annual payroll
to the W2 totals. For an individual’s trace, if W2s are used, the totals for the remaining, untested quarters
for the employee traced in Test “a” must be added and reconciled with the employee’s W2.
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The comparison of audited total wages to reported total wages may be annual or by quarter, and must
include the entire audit test period. If discrepancies are identified which cannot be explained, the auditor
will perform an analysis for each quarter in the audit test period.
Work paper(s) for the reconciliation must include identity of the payroll records examined, calculation of
total payroll, and an explanation of variances/differences.
Test c. Computation of total taxable payroll.
Work paper(s) must include identity of the payroll record used in the calculation and also record the
calculations to verify the total taxable payroll. This computation may be by quarter or annual, and must
include the entire audit test period. Annual records such as W2s that have been validated in Tests “a” and
“b” may be used for the computation i.e., the total gross wages from the W2s equal the total of the gross
annual wages from the source used in Test “b”.
Test d. Reconciliation of total taxable payroll to reported total taxable wages.
The reconciliation can be performed by comparing the verified total taxable payroll figure arrived at in
Test “c” to total taxable wages recorded on the employer's copy of the UI contribution report, or to the
amount posted to the state's records. The comparison may be by quarter or annual and must include all
quarters of the audit test period. If discrepancies are identified which cannot be explained, the auditor
will perform an analysis for each quarter in the audit test period.
Work paper(s) for the reconciliation must contain summary calculations and an explanation of
variances/differences.
AUDITS OF EMPLOYERS WITH NO REPORTED WAGES
Audits of employers/employing units who have no wages reported or have not registered are acceptable under
certain conditions. Approval to conduct such audits must follow guidelines found in Part V, Section 3689 of the
ESM, and should contain explanation for the decision to conduct the audit.
In these situations, the auditor must create quarterly tax reports, sometimes using sources such as blocked claims
affidavits, lists of gifts, records of cash payments, check stubs, time sheets, payroll deductions taken as expenses
on income tax returns, evidence of cash bank withdrawals if employees were paid in cash, evidence of electronic
transfers along with any accounting records available such as W2s, 1099 forms, income tax returns, individual
payroll or earnings records. To qualify as an “audit”, evidence of the payment of wages must be documented in
audit work papers.
The audit must also contain detailed documentation such as calculator tapes or spreadsheet details showing the
methodology followed in preparation of the contribution and wage reports or annual adjustment forms. Such
documentation must include copies or descriptions of records used by the auditor to determine wage for each
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employee as well as evidence of the auditor’s computations of total wages, taxable wages, and contributions due.
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5.
Other employer records must be examined to search for misclassified workers and
hidden wages. (25 points)
RATIONALE: Misclassified workers and hidden wages are the most significant areas of
noncompliance among registered employers. Auditors must examine all appropriate documents
or records of original entry as are available or maintained by employer to determine whether
non-wage payments to acknowledged employees were properly classified and whether persons
not in covered employment who received payments for services were properly classified. TPS
has divided employer records into four types that will be examined for the discovery of hidden
wages or misclassified workers. If no records or partial records are maintained by the employer,
the auditor must document that in the report. The audit is not to be penalized when the employer
does not maintain all of the records described on the next page.
The auditor must examine the nature and extent of the employer's business to identify and
resolve any issues of noncompliance. The nature of the business may identify a type of business
with a historical pattern of noncompliance. In this case, the nature of the business may alert the
auditor to perform a detailed investigation of specific accounting records.
Likewise, the extent of the business may indicate multi-State employment, and may require that
the auditor's investigation ensure the employer reported employees to the appropriate State.
DOCUMENTATION: There are, at a minimum, four types of employer records that must be
examined. Each should be considered as a separate source of potential information. Included in
the completed audit file should be auditor-prepared documentation that is the principal record of
the four separate examinations for this test. The documentation must present the evidence
discovered through the test.
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a. The essential test which must be conducted and its required documentation is described
below. If the records deemed essential/necessary to conduct the audit are kept by the employer
they must be examined by the auditor. If no records or partial records are maintained by the
employer, the auditor must document that in the report. There are at a minimum four types of
employer records that must be examined (i.e., contract labor, cash disbursements, detailed
general ledger and miscellaneous reports and accounts). The audit is not to be penalized when
the employer does not maintain all of the records described below.
(1)
Examination of the records of contract labor. These records include, but are not
limited to: 1099s MISC and 1096 summaries, and master vendor files.
(2)
Examination of the cash disbursements. These records include, but are not
limited to: cash disbursements journal, petty cash journal, check register and
canceled checks/check stubs.
(3)
Examination of the detailed general ledger and, if available, any directories of
subsidiary ledgers such as a chart of accounts which may lead to other sources of
misclassified workers and hidden wages.
(4)
Examination of miscellaneous reports and accounts. These records include, but
are not limited to: State tax returns, federal income tax returns, financial
Statements, corporate minutes and records, and federal adjustment reports.
b. Potential outcomes of the test are (1) no suspicion of additional wages, (2) suspicion of
additional wages, and (3) payment(s) of wages not previously identified. If, through one or more
of the tests performed, wages are suspected or found, the audit papers must contain such
information.
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(1)
For Part I (examination of records of contract labor): If there is no suspicion
(payment not suspected to be wages) or the payment was identified and examined
elsewhere in the audit, documentation should contain classification of categories
of payment (e.g., 1099s MISC, and/or
1096, and/or master vendor files) and a brief description of why there was no
suspicion of misclassified workers and/or hidden wages.
For Parts (2), (3), and (4): If there is no suspicion (payment not suspected to be
wages) or the payment was identified and examined elsewhere in the audit, the
documentation will contain a checklist or summary Statement of accounts
reviewed and findings.
(2)
If, initially, wages were suspected, but payment was subsequently not found to be
wages, documentation will contain the number of individuals, the labor categories
examined which turned out to be exempt or non-subject, explanation of evidence
that payments do not constitute wages, and conclusions.
(3)
If payment to individual(s) was found to constitute wages, work paper(s) for each
individual found must contain the audit period, name of payee, total quarterly
amount, explanation of evidence that payments were wages, and findings. Also
acceptable is a summary Statement that the suspect amount was found and can be
traced to a specified account, referencing another work paper. Adjustment reports
can be used as part of the supporting documentation when the reviewer can trace
each individual discovered to the resulting increases and decreases in total wages
and taxable wages. Adjustment reports must be supported by narrative or other
documented sources before they can be used as part of the supporting evidence to
wage changes.
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6. The audit must cover four consecutive calendar quarters or an acceptable explanation
must be provided. (5 points)
RATIONALE: To preserve the integrity of the audit program and to enhance the capability of
the auditor to verify taxable wages, the scope of the audit must be at least four consecutive
calendar quarters. A tolerance level for error in reporting taxable wages and/or tax must have
been established by the State as a guide for justification in extending an audit beyond the four
quarter scope. A State may establish reasons other than monetary for expanding an audit in
which case the auditor will record the reason in the audit report.
DOCUMENTATION: When the auditor elects to extend the audit, the audit file must contain an
explanation for the expansion which conforms to the State's tolerance level guidelines. If the
auditor elects to disregard the established tolerance guidelines, an explanation will be given in
the audit report. When the audit is less than four quarters, the completed audit file must also
contain an explanation.
7. A post-audit discussion concerning the results of the audit must be held with the
employer or an identified designated representative. (10 points)
RATIONALE: Upon completion of the audit, a meeting must be held to discuss the audit
findings and conclusions. Any discrepancies or issues of non-compliance must be discussed
with the employer or designated representative who has authority to make changes in the
organization's reporting procedures. This is also a time when the auditor must inform employers
of their rights and responsibilities regarding the audit. If the auditor does not follow this
procedure, an acceptable explanation must be given.
DOCUMENTATION: The completed audit must contain the name, title, and telephone number
of the individual involved in the post-audit discussion.
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8. If the audit resulted in the employer owing additional tax, the auditor either must
collect it or provide an acceptable explanation why the collection was not accomplished. (5
points)
RATIONALE: The auditor must contact a person authorized to make payment for the business
being audited and attempt to obtain payment of all contributions found to be due as a result of
the audit. If the auditor is unable to collect, an explanation must be provided in the audit report.
If the audit under review is a no-change audit and question 8 is not applicable, the reviewer will
answer the question "NA" and the points will be awarded as though the question had been
answered "Yes". If the audit is a change audit resulting in additional tax due and State policy
does not require the auditor to attempt collection, the reviewer will answer question 8 as "NA"
and system will award the points. However, record of such State policy must be documented
and contained in the TPS systems review narrative.
DOCUMENTATION: The completed audit file must record the amount collected. If the auditor
does not collect the balance due, an explanation as to why the collection was not accomplished
must be recorded in the completed audit file.
9. If discrepancies or unreported wages and tax were found, adjustments must be made in
accordance with the completed audit. If the audit is being appealed, adjustment reports
must be made in accordance with the completed audit. (10 points)
RATIONALE: Establishing a system to ensure the proper accounting of audit results is an
important component of a State's tax operation. The State has a fundamental obligation to
guarantee the accuracy of the posting to ensure the employer is given the correct tax rate;
subsequent billings are correct and that the collection unit is provided with timely information to
process indisputable legal documents.
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By assessing the accuracy of the posting of Field Audit adjustments, the reviewer will have
sufficient information to confirm the existence of a system which assures that audit results are
properly posted. If discrepancies are found, the reviewer will note this in the Annual Report.
Posting errors of non-material nature such as typographical mistakes, minor misspelling, leaving
off middle initials, or other errors that generally do not influence proper administration of an
employer’s account, will not result in the loss of points for this question. In cases of uncertainly,
benefit of the doubt should be given. Points will also be granted, if discrepancies or unreported
wages and tax were found that did not require adjustment according to established State
procedures.
If the audit under review is a no-change audit and question 9 is not applicable, the reviewer will
answer the question "NA" and the points will be awarded as though the question had been
answered "Yes".
DOCUMENTATION: Adjustments to employer's account, quarter and year, total wages,
taxable wages, and tax/contribution due, resulting from the completed audit must be posted
accurately.
In addition, if the audit is being appealed and actual posting is not made, the completed audit file
must contain a copy of the adjustment forms when prepared manually. The form(s) must record
title of report, the audit period, name and account number of employer, and findings.
If computer-assisted, a printout of the adjustments which includes the audit period, name of
employer, and findings will be sufficient documentation.
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TAX PERFORMANCE SYSTEM
FIELD AUDIT
CHAPTER SEVEN
PROGRAM REVIEW
ACCEPTANCE SAMPLE QUESTIONNAIRE
The initial question Pass/Fail, must be a Pass, before the audit needs to be reviewed on
Questions 1 thru 9. (For details, see the Initial Question Rationale)
If answers to Questions 1 thru 9 are not documented in the completed audit file, then the
answers to those questions must be "No." (For details on the level of required
documentation, see Acceptance Sample Rationales.)
Pass/Fail
1.
Was the assignment correctly identified as an audit in conformity with the ETA
audit policy as defined in the ESM?
Fail __
Pass
Was a pre-audit discussion, concerning the purpose of the audit, held with the employer
or an identified designated representative? (Was the name and title of the employer or
designated representative documented? If a representative was designated, was the name and
title of the designator documented?) (10 points)
Yes
2.
No __
Was an acceptable explanation documented as to how the auditor verified the existence
of the business? (e.g., audit performed at the employer's place of business, partnership
agreement, personal knowledge, business license, telephone directory, etc.) (5 points)
Yes
No __
3. Was an acceptable explanation documented as to how the auditor verified the ownership
of the business? (e.g., partnership agreements, articles of incorporation, corporation charter,
income tax returns, business license, verification with Secretary of State) (5 points)
Yes
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No __
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FIELD AUDIT
CHAPTER SEVEN
PROGRAM REVIEW
ACCEPTANCE SAMPLE QUESTIONNAIRE
4.
Does the audit contain documentation to show that the following four payroll record tests
were performed: (25 points)
a.
b.
c.
d.
Verification of gross payroll posting system?
Yes
No __
Yes
No __
Yes
No __
Yes
No __
Reconciliation of total payroll to total wages?
Computation of total taxable payroll?
Reconciliation of total taxable payroll to total
reported taxable wages?
Note: You must answer "Yes" to a, b, c and d to score 25 points.
5.
Does the audit documentation indicate: (a) that the following employer records, if
available, were examined to search for misclassified workers and hidden wages, and (b)
the findings from the examinations conducted in the audit? (25 points)
a.
Were the following employer records, if available, examined:
(1)
(2)
(3)
(4)
Records of contract labor
Cash disbursements
Detailed general ledger
Miscellaneous reports and accounts
Yes
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No __
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FIELD AUDIT
CHAPTER SEVEN
PROGRAM REVIEW
ACCEPTANCE SAMPLE QUESTIONNAIRE
b.
Did the audit contain the findings from the records examined:
(1)
If payment was not suspected to be wages or was examined elsewhere in
the audit, the audit must contain a checklist or summary Statement of
accounts reviewed and findings.
(2)
If payment was suspected, but found not to be wages, the audit must
contain the number of individuals examined, labor categories examined,
and explanation of evidence that payment does not constitute wages.
(3)
If payment was found to be wages, the audit must contain for each
individual: the amount paid, name of payee, total quarterly amount,
explanation of evidence and findings. A summary Statement that can be
traced to specific accounts, referencing other work papers can also be
used. Adjustment reports can act as supporting documents if each
individual discovered can be traced to the resulting changes in wages.
Yes
No __
Note: You must answer "Yes" to both a and b to score 25 points.
6.
Were four consecutive calendar quarters audited or was an acceptable explanation
documented when the audit is less than four quarters or expanded beyond four quarters?
(5 points)
Yes
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No __
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TAX PERFORMANCE SYSTEM
FIELD AUDIT
CHAPTER SEVEN
PROGRAM REVIEW
ACCEPTANCE SAMPLE QUESTIONNAIRE
7.
Was a post-audit discussion concerning the results of the audit held with the employer or
an identified designated representative, and documented in the field audit? (The name,
title, and telephone number of the individual involved should be recorded.) (10 points)
Yes
8.
If the audit resulted in the employer owing additional tax, did the auditor either collect it
and record the amount collected or document an acceptable explanation why the
collection was not accomplished? (5 points)
Yes
9.
No __
No
N/A __
If discrepancies or unreported wages and tax were found or a credit is established, was
the adjustment (monetary or non-monetary) posted in accordance with the State
requirements. If the audit is under appeal, adjustment reports should be made in
accordance with State policy. (10 points)
Yes
VII - 77
No
N/A __
R04/03
TAX PERFORMANCE SYSTEM
Field Audit Sample Coding Sheet
State: _________
Period Covered: ______________
Sample Type: Acceptance
Expanded
Case
Number
Employer
Identification
Number
Is this an
audit?
Pass/Fail
1
(10)
Audits passing the initial "Is this an audit" are subject to scoring
Audits scoring 80 or more points are acceptable.
Date: ________________
2
(5)
3
(5)
4
(25)
5
(25)
Reviewer:____________________
6
(5)
7
(10)
8
(5)
9
(10)
Total
Points
Total Acceptable ______ of ______
Page ______ of ______
TAX PERFORMANCE SYSTEM
Field Audit
Sample Explanation Sheet
State: _____________________
Period Covered: _______________
Sample Type:
Case
Number
Employer
Identification Number
Date: ___________
Acceptance
Reviewer: _______________
Expanded
Explanation
Page _____ of _____
CHAPTER VIII
ACCOUNT MAINTENANCE
COMPONENTS
INTRODUCTION
PROGRAM REVIEW
INTRODUCTION
ET HANDBOOK NO.407
TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
INTRODUCTION
The Account Maintenance function involves receiving, processing and producing data from
other units within the tax program. The following are some of the tasks included in Account
Maintenance:
Receive status determinations (new and successor changes)
Process quarterly contribution reports
Establish and issue debit and credit notices
Charge or non-charge employer accounts for benefits paid
Produce employer charge notices periodically
Produce employer tax rate notices
PRIMARY OBJECTIVE
The primary objective of the Account Maintenance function is to maintain employer accounts
accurately and timely. To accomplish this, the Account Maintenance function will need to achieve
four sub-objectives:
1.
Maintain employer status information accurately (Accuracy)
2.
Maintain quarterly contribution information accurately and timely
(Accuracy and Timeliness)
3.
Maintain accuracy in benefit charging (Accuracy)
4.
Maintain employer experience rating information accurately (Accuracy)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
INTRODUCTION
Accuracy
To determine the accuracy of State Account Maintenance operations, a
Program Review will be conducted to ascertain the existence of necessary
internal controls and to determine whether or not such controls are
functioning properly. Due to the complexity of the Account Maintenance
function and the likelihood that various portions of the function are
performed by different units in the State, the review has been divided into the
following five components: (1) Contribution Report processing, (2)
Employer Debits/Billings, (3) Employer Credits/Refunds, (4) Benefit
Charging, and (5) Employer Tax Rates.
Timeliness
To assess State effectiveness in processing quarterly contribution information
timely, the Acceptance Sample for delinquent reports will ascertain whether
or not the report was identified properly as being delinquent (e.g, a
contribution report which was received timely but was not processed timely,
would be erroneously identified as being delinquent).
REVIEW METHODOLOGIES
Program Review
The Program Review to be conducted for the Account Maintenance functions has two sections, a
Systems Review and an Acceptance Sample.
The Systems Review covers the following topics:
Recorded Information and Instructions
Training
Recording of Transactions and Events
Systems to Assure Execution of Events
Review of Completed Work
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ACCOUNT MAINTENANCE
CHAPTER EIGHT
INTRODUCTION
REVIEW METHODOLOGIES
Program Review cont.
The Systems Reviews will be used to identify the internal controls and quality assurance systems
necessary for effective Account Maintenance functions, and to verify that the State has such controls
in place.
Acceptance Samples examine the following:
60 Active Contributory Accounts
60 Accounts with Contributions due
60 Accounts with Reimbursable Amounts due
60 Accounts with Credits/Refunds due
60 Accounts with Benefit Charges
60 Experience Rated Accounts
In conjunction with the Systems Reviews, Acceptance Samples for each component will be
examined to determine the effectiveness of the controls, and confirm the accuracy of the State's
outputs.
The completed Program Review will identify areas of risk or systems that may need improvements.
The TPS Program Review should also identify information about exemplary practices which may be
shared with other States.
NOTE: Although various components of the Account Maintenance function are closely related and
may impact each other, each component is to be assessed independently for the TPS Annual
Report.
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ACCOUNT MAINTENANCE
CONTRIBUTION REPORT PROCESSING
PROGRAM REVIEW
COMPONENTS
SYSTEMS REVIEW
ACCEPTANCE SAMPLES
SYSTEMS REVIEW
ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Report processing
SYSTEMS REVIEW INTERVIEW SHEET
Function
Reviewer
Persons Interviewed
Date
Name:
Documents Reviewed
Title:
Title:
Form#:
ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Report processing
CHAPTER EIGHT
PROGRAM REVIEW
ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Report processing
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW
Recorded Information and Instructions
In the State Contribution Report processing operation, recorded information and instructions
should include procedures for processing updates to employer accounts from contribution
reports and adjustments to contribution reports in accordance with State laws and written
policies.
The reviewer should examine recorded instructions available to the staff and
compare procedures to the laws and written policies of the State to determine
if the recorded information and instructions are current, accurate, and
complete. The reviewer should also observe the Contribution Report process
and talk with employees to learn whether or not the recorded instructions are
available and being used.
In the narrative section following the questions, explain "Other" responses,
and describe "Compensating Controls". Identify the question being
explained by referencing the number and section. If there are no recorded
instructions, describe in the narrative how the staff becomes aware of the
proper procedures to perform the tasks of the Contribution Report processing
function.
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Report processing
SYSTEMS REVIEW QUESTIONS
1.
Does the State have recorded information and instructions to assist employees processing
contribution reports in accordance with State laws and written policies?
Yes __ No __
2.
If yes, are all the recorded information and instructions:
Yes
a.
b.
c.
d.
Current? .....................................................................................................................
Accurate? ...................................................................................................................
Complete? ..................................................................................................................
Readily available to staff?..........................................................................................
VS:(Questions1&2
3.
No
)
If any of the preceding evaluative questions are answered "no", does the State have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following the questions.
VS:
(Question3
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Report processing
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A", and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Report processing
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW
Training
The State needs to have systems and procedures to identify training needs and deliver training
to employees who perform duties within the Contribution Report processing function. New
employees need to learn the procedures for processing and recording employer remittances.
Existing employees benefit from periodic refresher courses and additional training when
procedures change and/or quality defects occur at an unacceptably high rate.
The reviewer should respond to the following questions after discussing with
management the training systems used for Contribution Report processing
staff, and after examining the training packages utilized.
In the narrative section following the questions, explain "Other" responses,
and describe "Compensating Controls". Identify the question being
explained by referencing the number and section. If there are no formal
training systems, then describe how the staff knows the laws and written
policies and the proper procedures to perform the Contribution Report
processing function duties.
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Report processing
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
1.
Does the State have methods or procedures to provide training for newly hired employees?
Yes
No ____
*If yes, identify the type of training:
Yes No
a.
b.
c.
d.
e.
*Formal Classroom Training? ...................................................................................
*On the Job Training?................................................................................................
*One-on-One Training? .............................................................................................
*Individual Self-guided Training?.............................................................................
*Other?.......................................................................................................................
Describe the type and frequency of training in the narrative.
2.
Does the State have methods or procedures to provide refresher training for experienced
employees?
Yes
No __
*If yes, identify the type of training:
Yes
a.
b.
c.
d.
e.
No
*Formal Classroom (e.g., refresher courses)? ...........................................................
*On the Job Training?................................................................................................
*One-on-One Training? .............................................................................................
*Individual Self-guided Training?.............................................................................
*Other?.......................................................................................................................
Describe the type and frequency of training in the narrative.
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
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CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
3.
Does the State provide training when there are:
a.
b.
c.
d.
e.
4.
Yes No N/A
State law changes? .....................................................................................................
Policy/procedure changes? ........................................................................................
Needs identified from review of finished work
(e.g., supervision, quality assurance review)? ...........................................................
Hardware/software changes? .....................................................................................
*Other?.......................................................................................................................
Does the State have processes (e.g., back-up training or organizational flexibility) to assure
that staff absences will not disrupt operations?
Yes
No __
If yes, describe in the narrative section.
VS:
(Questions1-4
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Report processing
SYSTEMS REVIEW QUESTIONS
5.
*In the opinion of the supervisor or manager, does the training meet the needs of the
Contribution Report processing function? (E.g., are sufficient resources available--training
packages, facilities, staff, etc.)
Yes
6.
No __
If any of the preceding evaluative questions were answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following these questions.
VS: (Question 6
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Report processing
VIII - 24
CHAPTER EIGHT
PROGRAM REVIEW
R 10/09
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Report processing
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Report processing
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW
Recording of Transactions and Events
The State should have a method to assure that updates* to employer account records (e.g.,
updates to taxable wages, updates to tax due, application of payments) are recorded and that
the source information (e.g., contribution reports, audit reports, investigations, etc.) is readily
available for examination. Whether the State system is automated or manual, an audit trail
should lead from the wage, tax and payment data in the employer account record to the
information source upon which the update was made.
The reviewer must become familiar with the types of updates to employer
records that require an audit trail and the types of source documents used by
the State to update employer accounts.
In the narrative section following the questions, explain "Other" responses,
and describe "Compensating Controls". Identify the question being
explained by referencing the number and section. If there is no audit trail
maintained, then explain how the State is assured that the employer account
records are accurate.
*Note: Update is a transaction that either increases or decreases the
employers' account balance and/or payroll amounts.
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ACCOUNT MAINTENANCE
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CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
1.
Does the State have a method to assure that updates to employer accounts can be traced to
their source (even if source is via electronic media)?
Yes
No __
2.
Does the audit trail identify:
Yes No
a.The type update made to the employer account?…………………………….
b.The date of the update? .......................................................................................................
c.The State employee(s) who authorized and
entered the update? ....................................................................................................
3.
Is source documentation required to support updates to employer accounts?
Yes
VS: (Questions 1 – 3
No __
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Report processing
SYSTEMS REVIEW QUESTIONS
4.
*Which of the following source documents does the State use to identify updates to
employer accounts:
Yes No
a.
b.
c.
d.
e.
f.
g.
5.
*Contribution reports? ...............................................................................................
*Supplemental reports?..............................................................................................
*Field Audit change notices?.....................................................................................
*Other adjustment reports? ........................................................................................
*Batch control files? ..................................................................................................
*Electronic media? ………………………………………………………………..
*Other?.......................................................................................................................
Are original and amended information sources, including electronic source documentation,
retained and accessible for State use?
Yes
No __
VS: (Question 5
6.
)
If any of the preceding evaluative questions are answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If yes, describe in the Narrative section following these questions.
VS:
(Question-6
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
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CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Report processing
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW
Systems to Assure Execution of Events
Built-in reviews should be in place to assure the execution of events such as mailing
contribution reports to employers who are to receive such reports, or updating and testing of
the State’s electronic reporting system in preparation for employer reporting; and accurate
and prompt processing of information received from employers. The review may be
automated (e.g., quarter and year edits, math computation edits) or manual (e.g., pre-audit or
post-audit procedures).
The reviewer must become familiar with the types of built-in checks used by
the State to assure employers are notified of reporting requirements (e.g.,
mailing of contribution reports, notification of requirements, instructions on
electronic reporting procedures), and that all quarterly report and payment
information is processed accurately and promptly when received.
In the narrative section following the questions, explain "Other" responses,
and describe "Compensating Controls". Identify the question being
explained by referencing the number and section.
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
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CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
1.
Does the state have procedures and/or controls to assure that each system of reporting
contributions and wages (e.g., paper reporting, internet filing, telephone filing, third party
electronic filing) is updated with accurate employer data at the start of each filing period?
Yes ___ No ___
Yes No N/A
a. Does the state reconcile the count of reports that should be mailed to the
number of reports that will be mailed? (E.g., subtract the number of reports
suppressed from printing (electronic and third party filers, seasonal employers)
from the number of active employers and compare that number to the count of
mailed reports.)
Yes No N/A
b * Before mass mailing or before electronic reports are due, does the state
review the data file used to print paper reports and/or used to populate webbased sites to ensure accuracy and correct record layout? (E.g,, correct quarter,
year, due date)
Yes No N/A
c. Is a small sample of employer accounts from the data file used to print paper
reports and/or used to populate web-based sites reviewed to ensure employer
specific data are accurate? (E.g., correct name, address, pre-printed social
security numbers, tax rate)
VS: (Questions 1a and c
2.
)
Does the State have systems procedures and/or internal controls to assure accurate
processing of employer contribution reports?
Yes
No __
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
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CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
2.
a.
What automated internal controls does the State use to assure that employer
contribution reports are posted accurately:
Yes No
(1)
(2)
(3)
(4)
(5)
Edit for correct math computation? ...............................................................
Employer account number edit? ....................................................................
(e.g., hash totals, check digits)
Quarter/year edit? ..........................................................................................
Report totals balance with wage detail listing? .............................................
*Other ............................................................................................................
VS: (Question 2
)
3.
4.
Does the State have system procedures or internal controls to assure that quarterly
contribution reports are posted promptly to prevent the mailing of delinquent employer
notices or assigning to the field?
Yes
No __
Yes
No __
Does the State have a method for handling system rejects?
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
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CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
4.
a.
If yes, is an error suspense file used?
Yes
No __
Yes
No __
(1) If yes, is the suspense file aged?
VS: (Questions 3 and 4
5.
)
Does the State have systems, procedures, or internal controls to verify that contribution
report information (including account adjustments) received from employers, field auditors
or other State units has been completed and the work can be tracked by:
a.
b.
c.
Yes No
Following up on field investigations?........................................................................
Keeping a work flow log?..........................................................................................
*Other?.......................................................................................................................
VS: (Question 5
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Report processing
SYSTEMS REVIEW QUESTIONS
6.
Are verification procedures in place to assure that updates to quarterly report information are
accurate ("in house" review of account transactions)?
Yes
No __
VS: (Question 6
7.
)
*Does the State have an automated report processing system?
Yes __ No __
a. If Yes, is a system check performed every time a program is changed?
Yes __ No __ N/A __
VS: (Question 7a________________________________________________________________)
8.
If any of the preceding evaluative questions are answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If yes, describe in the Narrative section following these questions.
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
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CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Explanation of "N/A", and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
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CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW
Review of Completed Work
For the Contribution Report processing function, the State should be conducting systematic
reviews of the accuracy of the Contribution Report information being posted to the employer's
account. The information received and the action taken should be checked against the
information recorded in the employer's account.
The reviewer must consider the kind of supervisory program and/or quality
assurance review the State uses to assess the Contribution Report processing
Unit. Is the review procedure different for new employees? If the State uses
a quality assurance review, who (position and organizational location)
performs it? A review of completed work should be done on a regular basis
for all staff members involved in processing documents for the employer's
account. This review may be done on an individual basis for each staff
member, or by sampling work done throughout the entire unit.
In the narrative section following the questions, explain "Other" responses,
and describe "Compensating Controls". Identify the question being
explained by referencing the number and section. If there is no supervisory
and/or quality assurance review, describe how quality is assured in the
Contribution Report processing function.
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For all staff members involved in Contribution Reports processing, are the following components subject to some form of systematic
review. If review is performed, enter a "Y" in the appropriate column(s). For Yes answers, also enter "Y" in column 6. If there are no
reviews, answer "N" for No in column 6 which is the evaluative question.
Type of review
Component
a.
The mailing of the Contribution Reports?
b.
The posting of the Contribution Reports?
c.
Adjustments made to Contributions Reports?
VS:
(Question 6
* Informational
*1
Supv
*2
Peer
*3
QR
Qual.Rev.
*4
Support
(Clerical)
*5
Other
6
Review
Conducted?
)
ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Report processing
SYSTEMS REVIEW QUESTIONS
7.
If any of the preceding evaluative questions are answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following the questions.
VS: (Question 7
)
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ACCOUNT MAINTENANCE
Report processing
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CHAPTER EIGHT
PROGRAM REVIEW
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Report processing
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A", and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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CHAPTER EIGHT
PROGRAM REVIEW
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Report processing
SYSTEMS REVIEW QUESTIONS
Additional Controls
1.
*Does the State have internal controls or quality assurance systems in the Contribution
Reports function which this review failed to identify?
Yes
No __
If yes, describe below:
2.
*Are there any exemplary practices for the Contribution Reports function?
Yes
No __
If yes, describe below:
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ACCEPTANCE SAMPLES
ET HANDBOOK NO. 407
TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Report Processing
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Purpose/Intent
To assure that the contribution report processing function is
accurately processing the quarterly contribution reports.
To confirm that the State maintains accurate quarterly
contribution information.
To determine that employers who do not file timely are being
properly identified.
Scope
Universe
The scope of the review will focus on:
1.
The processing of the returns received from
employers.
2.
The identification of employers who should have filed
a return, but failed to do so.
The universe to be identified for the Contribution Report
processing function will include all contributory employers
who are active on the date the universe is identified.
The universe will exclude all reimbursing employers.
Note: Employers added to the State's master files after the
universe has been identified will not be added to the universe.
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Report Processing
CHAPTER EIGHT
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ACCEPTANCE SAMPLE INSTRUCTIONS
Timing/Frequency
The universe will be identified once during the calendar year.
The universe will be identified after January 31 and prior to
March 31. (Single snapshot on the date selected.)
Sampling Procedures
The following described the steps to establish the universe
and select the sample accounts:
1.
Select universe identification date.
This will be any day after January 31 and prior to
March 31.
2.
Identify the universe.
The universe will include all Contributory Employers
who are active on the date selected to identify the
universe.
Excluded from the universe are all Reimbursing
employers.
3.
Select 60 samples.
The samples should be selected between May 1 and
June 30. Date of selection should be after the first
quarter report delinquency notice run.
a. If an employer submitted reports for more than one
quarter only the 1st quarter report will be used.
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Report Processing
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Sampling Procedures cont.
Appendix A describes what action needs to be taken for
sampling in both manual and automated systems.
If the system is automated, the Reviewer must work closely
with IT staff. A thorough understanding of what the universe
includes and excludes and when the samples are to be
selected is essential.
Reviewing Samples
Assemble the following information for the employer's
account: Contribution report, payment, and any additional,
related information.
1.
A copy of the originally filed paper or electronic
contribution report or wage detail, and any adjustment
forms affecting the report. Source documents could also
include images; or screen copies or unformatted/ flat
files of electronic reports; or line items of employer’s
allocation in magnetic media/diskettes. (Also see Ch. II19 R04/03.)
2.
A copy of the payment associated with this quarterly
contribution report. Source documents could include:
check images or cancelled checks; or line items of
employer’s payment on magnetic media/ diskettes; or
employer payment confirmations that are specifically
associated with the sampled employer; or line items or
unformatted/ flat files of payment allocation as noted in
bank deposit records; or copies of ACH deposits from
the state’s depository bank.
3.
Any additional paper or electronic information related to
the employer’s account.
The review should be completed as soon as possible after
selecting the sample, and no later than September 30.
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ACCOUNT MAINTENANCE
Report Processing
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Drawing Conclusions
Using this information, answer the questions on the Acceptance
Sample Questionnaire.
If no report was received by the review date, the only
evaluative question to be answered is:
#2.
Identification of the employer as failing to file a
timely report. (NOTE: Use N/A if no report is owed,
e.g,, employer was inactivated/terminated.)
If a report was received, the following questions are
evaluative:
#3a
Accuracy of the employer account number.
#3b
Accuracy of the quarter and year.
#3c
Accuracy of the amount of money remitted.
#3d
Accuracy of the total gross and/or taxable wages.
#5
Accuracy of the computation of tax due.
A "No" answer to question 2, 3(a-d), or 5 will mean that the
sampled account was not processed accurately and is not
considered an acceptable case.
If payment was made by the TPS review date, payment
posting accuracy must be examined regardless of whether the
payment accompanied the employer’s report or was submitted
separately. Payment should have been applied to the proper
quarter, based on the state’s procedure.
Of the 60 cases, if three or more are not acceptable, then the
reviewer must conclude that accuracy in the State's
processing of Contribution Reports cannot be confirmed.
For all unacceptable cases, the reviewer must provide an
explanation for the unacceptable case on the Acceptance
Sample Explanation Sheet.
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Report Processing
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Documentation
All documentation (which was gathered to review samples)
must be kept until the completion and Regional Office
approval of the TPS Annual Report. Either hard copy
documentation or (in some highly automated systems) the
ability to recreate the identical information used in the review
must be maintained.
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Report processing
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE QUESTIONNAIRE
Identification of Delinquent Employers
1.
*Was a Contribution Report received for
the account by the TPS review date?
Yes____ No ____
If No, answer question #2, and end review
2.
Was the account appropriately identified
as delinquent?
Yes____ No ____ N/A ____
Accuracy and Timeliness of Posting
3.
Was the following Contribution Report and payment information posted
accurately:
a.
b.
c.
d.
4.
the employer account number?
the quarter and year?
the amount of money remitted?
the total gross and/or taxable wages?
(Depending on State posting requirements)
* Was the Contribution Report processed promptly according to State
policy and procedures?
Yes ___
Yes
No
____
____
____
____
____
____
____
____
No ___
Accuracy of Computations
5.
Did the State correctly compute the tax
due on the report?
VIII - 59
Yes ___ No ___
R 10/09
TAX PERFORMANCE SYSTEM
Account Maintenance Sampling Coding Sheet
Quarterly Contribution Report processing - Checklist #1
State: _________
Case
Number
Period Covered: ______________
Date: ________________
Reviewer: ____________________
Sample Type:
Acceptance
Expanded
Employer
Identification
Number
1
Questions 2, 3a,3b, 3c, 3d, and 5 are Evaluative
2
3a
3b
3c
Total Acceptable _______ of _______
3d
4
5
Pass/
Fail
Y/N
Page _______ of _______
TAX PERFORMANCE SYSTEM
Account Maintenance - Sample Explanation Sheet
Quarterly Contribution Report processing
State: _____________________ Period Covered: _______________ Date: _______________ Reviewer: _______________
Sample Type:
Case
Number
Employer
Identification Number
Acceptance
Expanded
Explanation
Page _____ of _____
ACCOUNT MAINTENANCE
EMPLOYER DEBITS/BILLINGS
PROGRAM REVIEW
COMPONENTS
SYSTEMS REVIEW
ACCEPTANCE SAMPLES
SYSTEMS REVIEW
ET HANDBOOK NO.407
TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Debits/Billings
SYSTEMS REVIEW INTERVIEW SHEET
Function
Reviewer
Persons Interviewed
Date
Name:
Documents Reviewed
Title:
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Title:
Form#:
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ACCOUNT MAINTENANCE
Debits/Billings
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CHAPTER EIGHT
PROGRAM REVIEW
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Debits/Billings
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW
Recorded Information and Instructions
For employer billings, recorded information and instructions should include procedures
for assuring that employer accounts with unpaid tax balances are properly billed. The
procedures should be in accordance with State laws and written policies.
The reviewer should examine the recorded information and instructions
available to the employees involved in the employer billing process and
compare them to the laws and written policies.
The reviewer should also observe the employer billing process and talk
with employees to learn whether or not recorded instructions are available
and being used.
In the narrative section following the questions, explain "Other"
responses, and describe any "Compensating Controls". Identify the
question being explained by referencing the number and section. If there
are no recorded instructions, describe in the narrative how the staff
becomes aware of the proper procedures to perform the tasks of the
Employer Debit/Billing function.
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Debits/Billings
SYSTEMS REVIEW QUESTIONS
1.
Does the State have recorded instructions to help employees properly bill employers in
accordance with State laws and policies?
Yes
2.
No __
If yes, are all the recorded information and instructions:
Yes
a.
b.
c.
d.
No
Current? .....................................................................................................................
Accurate? ...................................................................................................................
Complete? ..................................................................................................................
Readily available to staff?..........................................................................................
VS:(Questions 1 and 2
3.
)
If any of the preceding evaluative questions are answered "no", does the State have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following the questions.
VS: (Question 3
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Debits/Billings
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Debits/Billings
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW
Training
New employees need to learn the requirements for processing employer accounts that
create debits and the methods used to establish employer billings. Experienced employees
benefit from periodic refresher courses and need additional training when changes occur,
and when quality defects or a significant number of errors appear in a particular area.
The reviewer should respond to the following questions after discussing
with management the training systems used for the Employer
Debits/Billing function, and examining the training packages utilized.
In the narrative section following the questions, explain "Other"
responses, and describe "Compensating Controls". If there are no formal
training systems, describe how the staff knows the laws and written
policies and the proper procedures to perform the Employer Debit/Billing
Function. Identify the question being explained by referencing the
number and section.
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Debits/Billings
SYSTEMS REVIEW QUESTIONS
1.
Does the State have methods or procedures to provide training for newly hired
employees?
Yes
No __
*If yes, identify the type of training:
Yes No
a.
b.
c.
d.
e.
*Formal Classroom Training? ...................................................................................
*On the Job Training?................................................................................................
*One-on-One Training? .............................................................................................
*Individual Self-guided Training?.............................................................................
*Other?.......................................................................................................................
Describe the type and frequency of training in the comments.
2.
Does the State have methods or procedures to provide refresher training for experienced
employees?
Yes
No __
*If yes, identify the type of training:
Yes No
a.
b.
c.
d.
e.
*Formal Classroom (e.g., refresher courses)? ...........................................................
*On the Job Training?................................................................................................
*One-on-One Training? .............................................................................................
*Individual Self-guided Training?.............................................................................
*Other?.......................................................................................................................
Describe the type and frequency of training in the narrative.
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CHAPTER EIGHT
PROGRAM REVIEW
Debits/Billings
SYSTEMS REVIEW QUESTIONS
3.
Does the State provide training when there are:
a.
b.
c.
d.
e.
4.
Yes No N/A
State law changes? .....................................................................................................
Policy/procedure changes? ........................................................................................
Needs identified from review of finished work
(e.g., supervision, quality assurance review)? ...........................................................
Hardware/software changes? .....................................................................................
*Other?.......................................................................................................................
Does the State have processes (e.g., back-up training or organizational flexibility) to
assure that staff absences will not disrupt operations?
Yes
No __
If yes, describe in the narrative.
VS: (Questions 1-4)
.
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ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Debits/Billings
SYSTEMS REVIEW QUESTIONS
5.
*In the opinion of the supervisor or manager, does the training meet the needs of the
Employer Billing function? (e.g., Are sufficient resources available--training packages,
facilities, staff, etc.)
Yes
6.
No __
If any of the preceding evaluative questions were answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following these questions.
VS:(Question 6
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Debits/Billings
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Debits/Billings
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW
Recording of Transactions and Events
The State should have a method to assure that notices of employer debt (billing notices) are
recorded and that the source information (e.g., contribution reports, audit reports,
adjustments) is readily available for examination. Whether the Stats system is automated
or manual, an audit trail should lead from the wage, tax and payment data in the employer
account record to the information source upon which the update was made.
The reviewer should become familiar with the types of updates to
employer records that require an audit trail and the types of source
documents used by the State to update employer accounts.
In the narrative section following the questions, explain "Other"
responses, and describe "Compensating Controls". If there are no
recording or reconciliation of the Employer Account's Receivables,
explain how the State staff is assured of the account's accuracy. Identify
the question being explained by referencing the number and section.
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Debits/Billings
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW QUESTIONS
1.
Does the State have a method to assure that debits posted to employer accounts can be
traced to their source (even if source is via electronic media)?
Yes
2.
No __
Does the audit trail identify:
Yes No
a. The type of update made to the employer account?...........................................................
b. The date the debit was established?...................................................................................
c. The State employee(s) who authorized and
entered the update? ....................................................................................................
3.
Is source documentation required to support the debit posted to employer accounts?
Yes
VS: (Questions 1 – 3
No __
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Debits/Billings
SYSTEMS REVIEW QUESTIONS
4.
*Which of the following source documents does the State use to identify the posting of
debits to employer accounts?
a.
b.
c.
d.
e.
f.
g.
5.
Yes No
*Contribution reports? ...............................................................................................
*Supplemental reports?..............................................................................................
*Field Audit change notices?.....................................................................................
*Other adjustment reports? ........................................................................................
*Wage Record detail? ................................................................................................
*Electronic media? ....................................................................................................
*Other?……………………………………………………………………………..
Are original and amended information sources, including electronic source
documentation, retained and accessible for State use?
Yes
No __
VS: (Questions 5
6.
)
If any of the preceding evaluative questions are answered "No," does the State have a
substitute or compensating control?
No
N/A __
Yes
If yes, describe in the "Narrative" section following these questions.
VS:(Question 6
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Debits/Billings
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Debits/Billings
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW
Systems to Assure Execution of Events
Systems should be in place to assure the execution of events such as establishing tax debits,
issuing billings, suppressing billings, and reconciling employer account unpaid balances to
the State's Account Receivables.
The reviewer should become familiar with the systems used by the State
to assure that employer debits/billings are being issued accurately.
In the narrative section following the questions, explain "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section.
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Debits/Billings
SYSTEMS REVIEW QUESTIONS
1.
Does the State have system procedures and/or internal controls to identify all employers
that have unpaid balances?
Yes
No __
VS (Question 1
2.
)
Does the State apply a tolerance level to differences between amounts due and received?
(If the amount unpaid is within a certain dollar amount, is it considered not a
receivable?)
Yes
No __
a. *If yes, which type tolerance is used?
Yes No N/A
(a)
(b)
(c)
3.
*Dollar amount? ......................................................................................
......................................................................................................
*Percent? *Other?.......................................................................................................................
*Does the State have an automated billing system?
Yes
a.
No __
If yes, is a system check performed every time a program is changed?
Yes
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No __
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ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Debits/Billings
SYSTEMS REVIEW QUESTIONS
4.
Is there a method by which to suppress bills/notices?
Yes
No __
VS: (Questions 2, 3 and 4
5.
)
Is there a reconciliation of the sum of employer account unpaid balances to the State's
Accounts Receivable control total (e.g., General Ledger)?
Yes
a.
No __
*If yes, indicate frequency. (Check all that apply).
(1)
(2)
(3)
(4)
(5)
(6)
(7)
*Daily ..........................................................................................
*Weekly ......................................................................................
*Monthly .....................................................................................
*Quarterly ...................................................................................
*Semi-annually ...........................................................................
*Annually ....................................................................................
*Other..........................................................................................
VS: (Questions 5
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Debits/Billings
SYSTEMS REVIEW QUESTIONS
6.
If any of the preceding evaluative questions are answered "No," does the State have a
substitute or compensating control?
Yes
No
N/A __
If yes, describe in the "Narrative" section following these questions.
VS:(Questions 6
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Debits/Billings
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Debits/Billings
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW
Review of Completed Work
For the Employer Billing process, the State should be conducting systematic reviews of the
accuracy of the debit being established and the accuracy of the notice being mailed to the
employer. A review of this information should be done during each billing cycle. The
following questions are designed to determine how these reviews are conducted.
The reviewer must consider the kind of supervisory program and/or
quality assurance review the State uses to assess the Employer Billing
processing Unit. Is the review procedure different for new employees? If
the State uses a quality assurance review, who (position and
organizational location) performs it? A review of completed work should
be done on a regular basis for all staff members involved in processing
debits established for the employer's account. This review may be done
on an individual basis for each staff member, or by sampling work done
throughout the entire unit.
In the narrative section following the questions, explain "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If there is no
supervisory and/or quality assurance review, describe how quality is
assured in the Employer Debit/Billing function.
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For all staff members involved in the Employer Debits/Billing process, are the following components subject to some form of
systematic review. If review is performed, enter a "Y" in the appropriate column (s). For Yes answers, also enter "Y" in column 6. If
there are no reviews, answer "N" for No in column 6. Column 6 is the evaluative question.
Type of review
Component
a.
Comparing source documents to the
information on the employer's account?
b.
Billing notices prior to mailing.
c.
If yes to (b), is the information on the billing
notice compared to the employer's file?
VS: (Question 6
* Informational
*1
Supv
*2
Peer
*3
QR
Qual.Rev.
*4
Support
(Clerical)
*5
Other
6
Review
Conducted?
)
ET HANDBOOK NO.407
TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Debits/Billings
SYSTEMS REVIEW QUESTIONS
7.
If any of the preceding evaluative questions are answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following the questions.
VS: (Question 7
)
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ACCOUNT MAINTENANCE
Debits/Billings
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Debits/Billings
SYSTEMS REVIEW QUESTIONS
Additional Controls
1.
*Does the State have internal controls or quality assurance systems
in the Employer Debit/Billing function which this review failed to identify?
Yes
No __
If yes, describe below:
2.
*Are there any exemplary practices for the Employer Debit/Billing function?
Yes
No __
If yes, describe below:
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ACCEPTANCE SAMPLES
ET HANDBOOK NO.407
TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Debits/Billings
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Purpose/Intent
To assure accuracy in the establishment of employer
underpayments (debits).
To assure that the State maintains employer debit (accounts
receivable) information accurately and timely.
To assure that the State accurately issues debit
memorandums or billing notices to employers for underpayments of UI contributions due.
Scope
The scope of the review will focus on:
1.
Debits for contributory employers established
during the processing period which remain unpaid
at the end of the processing period.
2.
Debits for reimbursing employers for benefits
paid during the selected time period which remain
unpaid at the end of the processing period.
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ACCOUNT MAINTENANCE
Debits/Billings
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Universe
There are two universes to be identified.
CONTRIBUTORY EMPLOYERS
1.
All contributory employers who have an unpaid
debit that was established during the processing
period and remains unpaid at the end of the
processing period. The debit may relate to any
quarter, but must have been established during the
processing period for the quarter selected.
The processing period is defined as the time period
during which the quarterly reports and contributions
are processed after the selected quarter has ended.
E.g., if the 2nd quarter is selected for review, the
processing period would begin July 1 and end on
the cut off date the State uses to identify delinquent
employer reports, approximately August 20. This
definition is for the sole purpose of defining the
time frame from which the universe of debits
established for contributory employers is to be
drawn.
2.
The debit is for unpaid UI contributions. (The debit
may include interest and penalty.)
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Universe cont.
3.
Excluded from this universe are:
a.
Contributory Employers with only interest
and/or penalty due.
b.
Contributory Employers with only other
State mandated taxes due, e.g., State
Disability Withholdings, etc.
c.
Contributory Employers with debits
established and cleared during the
processing period.
d.
Contributory employers with debits within
tolerance level established by State
(amounts that State does not issue debit
memorandums for).
e.
All Reimbursing Employers
REIMBURSING EMPLOYERS
1.
All reimbursing employers who have an unpaid
debit balance for benefits paid during the period
selected. The balance may include interest and
penalty.
Debits for reimbursing employers are limited to
those debits which are past due. This does not
include the debits initially established on the benefit
charging Statement or the initial request for
payment which allows an established period of time
for the reimbursing employer to pay.
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Universe Cont.
2.
Timing/Frequency
Excluded from this universe are:
a.
Reimbursing Employers with only interest
and/or penalty due.
b.
Reimbursing Employers with only other
State mandated taxes due., e.g., State
Disability Withholdings, etc.
c.
Reimbursing Employers who paid their
charges within the "grace period."
d.
Reimbursing Employers within a tolerance
level for which State does not issue debit (or
charge) notices
e.
All Contributory Employers.
The two samples will be selected once per calendar year.
The universe of contributory employers quarter will cover
the processing period for either the 1st, 2nd or 3rd quarter
and will be identified immediately at the end of the
processing period.
The universe of reimbursing employers covers one of the
time periods shown in step one of the Sampling Procedures
below and will be identified immediately at the end of the
period of time allowed for the employer to pay from the
first notice, e.g., the charge Statement.
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Sampling Procedures
The following describes the steps to establish the universe and
select the sample accounts:
1.
Select period for review
For Contributory Employers, this will be either
the 1st, 2nd, or 3rd quarter.
For Reimbursing Employers, the time period will
be either:
2.
a.
The entire year, if the State bills its
reimbursing employers only once a year.
b.
Either the 1st, 2nd, or 3rd quarter if the State
bills its reimbursing employers quarterly.
c.
Three consecutive months of charges if the
State bills its reimbursings employer more
frequently than quarterly, e.g., monthly,
biweekly. (It may be possibly to use only
one month of charges. Contact N.O. for
instructions.)
Identify Universes.
The universe for contributory employers will be
identified immediately at the end of the processing
period for the quarter selected.
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Sampling Procedures Cont.
The universe for reimbursing employers will be
identified immediately at the end of the "grace
period" for payment of reimbursing charges.
States who do not build the universes as debits are
established, and whose automated systems
overwrite the pertinent fields, may find it necessary
to identify the populations of each type employer at
the beginning of the applicable period and again at
the end of the period and then compare the two
populations to isolate those employers who had a
debit increase established during the applicable
period that remains unpaid. These employers
constitute the sampling universes.
3.
Select 60 cases, or if universe is small, select the
number of cases based on Table in Appendix A-III
Reviewers must investigate billing procedures and
identify the appropriate sample selection date. We
recommend the following:
For contributory employers, the samples should
be selected 30 days after the universe is identified.
For reimbursing employers, the samples should be
selected 30 days after the universe is identified.
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Sampling Procedures
Cont.
If the State bills reimbursing employers more
frequently than quarterly, the State should discuss
sampling procedures with the Regional Office
Representative.
In some States, the entire universe of reimbursing
employers may be very small. In these cases, see
Appendix A for number to be reviewed.
If the system is automated, the Reviewer must work closely
with IT. A thorough understanding of what the universe
includes and excludes and when the samples are to be
selected is essential.
Appendix A describes what action needs to be taken for
sampling in both manual and automated systems.
Reviewing the Samples
Assemble the following information for the employer's
account:
1.
A copy or image of the original debit memorandum/
billing notice or a facsimile generated from the
electronic data that created the original notice, and a
copy or image of any payment history.
2. The original or imaged source documentation of
information in the state’s files that created the debit/
billing e.g., contribution reports, adjustment reports,
benefit charges, rate changes, etc.
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Reviewing the Samples
Cont.
3.
The electronic or paper account information related
to the debit/billing in the state’s employer file.
Compare all electronic and paper source documents with
the information on the employer's account record.
The review should be completed within 45 days after the
samples are selected.
Drawing Conclusions
Using this information, answer the questions on the Acceptance
Sample Questionnaire.
The following questions on the Acceptance Sample
Questionnaire are evaluative:
#1.
#2.
#4.
#5.
Establishing to proper account.
Accuracy of dollar amount and time frame.
Accuracy of the billing notice.
Accurate processing of the debit established.
A "No" answer to 1, 2, 4, or 5 will mean that the sampled
account was not processed accurately and is not an
acceptable case.
An inaccurate penalty or interest assessment will not cause
the case to fail.
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Of the 60 cases, if three or more are not acceptable, then
the reviewer must conclude that accuracy in the Employer
debit/billing processing function cannot be confirmed.
For all unacceptable cases, the reviewer must provide an
explanation on the TPS Sample Explanation Sheet.
Documentation
All documentation (gathered to review samples) must be
kept until the completion and Regional Office approval of
the Annual Report. Either hard copy documentation or (in
some highly automated systems) the ability to recreate the
identical information used in the review must be
maintained.
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CHAPTER EIGHT
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ACCEPTANCE SAMPLE QUESTIONNAIRE
Accuracy of Debit
Yes
No N/A
1.
Was the debit established on the proper employer's account?
If No, case fails, do not proceed with Questionnaire.
2.
Was the debit for the correct:
a.
Dollar Amount?
____
____
b.
____
____
Quarter(s) and Year?
____ ____
Accuracy of Billing Notices
3.
*Was an employer billing notice issued for
the debit?
____ ____
If Yes, answer question #4.
If No, answer question #5
4.
5.
Did the billing notice accurately reflect
the dollar amount receivable?
____ ____
Was the billing notice withheld in accordance
with State's established procedures? (e.g., State policy,
State law, bankruptcy status, etc.)
____ ____ ____
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TAX PERFORMANCE SYSTEM
Account Maintenance Sample Coding Sheet
Employer Debits/Billings - Checklist #2
State: _________
Period Covered: ______________
Employer Type:
Contributory
Case
Number
Employer
Identification
Number
Date: ________________
Reimbursing
Questions 1, 2a, 2b, 4, and 5 are evaluative
1
Reviewer: ____________________
Sample Type:
2a
2b
3
Acceptance
4
5
Expanded
Pass/
Fail
Y/N
Total Acceptable ______ of ______
Page ______ of ______
TAX PERFORMANCE SYSTEM
Account Maintenance - Sample Explanation Sheet
Employer Debits/Billings
State: _____________________ Period Covered: _______________ Date: _______________ Reviewer: _______________
Sample Type:
Acceptance
Expanded
Case
Number
Employer
Identification Number
Explanation
Page _____ of _____
ACCOUNT MAINTENANCE
CREDITS/REFUNDS
PROGRAM REVIEW
COMPONENTS
SYSTEMS REVIEW
ACCEPTANCE SAMPLES
SYSTEMS REVIEW
ET HANDBOOK NO.407
TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Credits/Refunds
SYSTEMS REVIEW INTERVIEW SHEET
Function
Reviewer
Persons Interviewed
Date
Name:
Documents Reviewed
Title:
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CHAPTER EIGHT
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SYSTEMS REVIEW
Recorded Information and Instructions
For employer credits/refunds, recorded information and instructions should include
procedures for assuring that employer accounts with overpayments are properly credited
and monies refunded when applicable. The procedures should be in accordance with State
law and written policies.
The reviewer should examine recorded instructions available to the staff
and compare procedures to the laws and written policies of the State to
determine if the recorded information and instructions are current,
accurate, and complete. The reviewer should also observe the
Credit/Refund process and talk with employees to learn whether or not the
recorded instructions are available and being used.
In the narrative section following the questions, explain "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If there are no
recorded instructions, describe in the narrative how the staff becomes
aware of the proper procedures to perform the tasks of the Employer
Credits and Refunds function.
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Credits/Refunds
SYSTEMS REVIEW QUESTIONS
1.
Does the State have recorded information and instructions to assist employees processing
employer credits/refunds reports in accordance with State laws and written policies?
Yes
2.
No __
If yes, are all the recorded information and instructions:
Yes
a.
b.
c.
d.
Current? .....................................................................................................................
Accurate? ...................................................................................................................
Complete? ..................................................................................................................
Readily available to staff?..........................................................................................
VS:(Questions 1 and 2
3.
No
)
If any of the preceding evaluative questions are answered "No", does the State have a
substitute or compensating control?
Yes
VS: (Question 3
No
N/A __
)
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SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW
Training
Employees involved in processing employer credits/refunds should be given training to
properly perform required tasks such as determining the amount of overpayments and
issuing credit memorandums and/or refunds. New employees need to learn the procedures
for processing employer overpayments, and existing employees benefit from periodic
refresher courses and additional training when procedures change and/or quality defects
occur at an unacceptably high rate.
The reviewer should respond to the following questions after discussing
with management the training systems used for the Employer
credits/refunds processing staff, and after examining the training packages
utilized.
In the narrative section following the questions, explain any "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If there are no
formal training systems, then describe how the staff knows the laws and
written policies and the proper procedures to perform the credits and/or
refunds function duties.
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Credits/Refunds
SYSTEMS REVIEW QUESTIONS
1.
Does the State have methods or procedures to provide training for newly hired
employees?
No __
Yes
*If yes, identify the type of training:
Yes No
a.
b.
c.
d.
e.
*Formal Classroom Training? ...................................................................................
*On the Job Training?................................................................................................
*One-on-One Training? .............................................................................................
*Individual Self-guided Training?.............................................................................
*Other?.......................................................................................................................
Describe the type and frequency of training in the comments.
2.
Does the State have methods or procedures to provide refresher training for experienced
employees?
Yes
No __
*If yes, identify the type of training:
Yes No
a.
b.
c.
d.
e.
*Formal Classroom (e.g., refresher courses)? ...........................................................
*On the Job Training?................................................................................................
*One-on-One Training? .............................................................................................
*Individual Self-guided Training?.............................................................................
*Other?.......................................................................................................................
Describe the type and frequency of training in the narrative.
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SYSTEMS REVIEW QUESTIONS
3.
Does the State provide training when there are:
a.
b.
c.
d.
e.
4.
Yes No N/A
State law changes? .....................................................................................................
Policy/procedure changes? ........................................................................................
Needs identified from review of finished work
(e.g., supervision, quality assurance review? ............................................................
Hardware/software changes? .....................................................................................
*Other?.......................................................................................................................
Does the State have processes (e.g., back-up training or organizational flexibility) to
assure that staff absences will not disrupt operations?
Yes
No __
If yes, describe in the narrative.
VS: (Questions 1-4
)
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Credits/Refunds
SYSTEMS REVIEW QUESTIONS
5.
*In the opinion of the supervisor or manager, does the training meet the needs of the
Employer Credits/Refunds function? (e.g., Are sufficient resources available--training
packages, facilities, staff, etc.)
Yes
6.
No __
If any of the preceding evaluative questions were answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following these questions.
VS: (Question 6
)
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Credits/Refunds
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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CHAPTER EIGHT
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SYSTEMS REVIEW
Recording of Transactions and Events
The State should have a method to assure that notices of employer credits and refunds
(e.g., credit memos, letters, etc.) are recorded and that the source information (e.g.,
contribution reports, adjustments, etc.) is readily available for examination. Whether the
State system is automated or manual, an audit trail should lead from the wage, tax and
payment data in the employer account record to the information source upon which the
update was made.
The reviewer must become familiar with the types of updates to employer
records that require an audit trail and the types of source documents used
by the State to update employer accounts.
In the narrative section following the questions, explain any "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If there is no
audit trail maintained, then explain how the State is assured that the
employer credits and/or refunds are accurate.
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SYSTEMS REVIEW QUESTIONS
1.
Does the State have a method to assure that credits (overpayments) posted to employer
accounts can be traced to their source (even if source is via electronic media)?
Yes
2.
No __
Does the audit trail identify:
Yes
No
a. The type of update made to the employer account?...........................................................
b. The date the credit was established?..................................................................................
c. The State employee(s) who authorized and
entered the update? .......................................................................................................
3.
Is source documentation required to support the credits posted to employer accounts?
Yes
VS: (Questions 1 – 3
No __
)
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CHAPTER EIGHT
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SYSTEMS REVIEW QUESTIONS
4.
*Which of the following source documents does the State use to identify the posting of
credits to employer accounts:
Yes No
a.
b.
c.
d.
e.
f.
g.
5.
*Contribution reports? ...............................................................................................
*Supplemental reports?..............................................................................................
*Field Audit change notices?.....................................................................................
*Other adjustment reports? ........................................................................................
*Wage record detail? .................................................................................................
*Electronic media?…………………………………………………………………
*Other?.......................................................................................................................
Does the State have a method to assure that refunds issued to an employer can be traced
to their source?
Yes
6.
No __
Does the audit trail identify:
Yes No
a.
b.
c.
The type of update made to the employer account? ..................................................
The date the refund was issued? ................................................................................
The State employee(s) who authorized the refund? ..................................................
VS: (Questions 5 – 6
.
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SYSTEMS REVIEW QUESTIONS
7.
Are original and amended information sources, including electronic source documents,
retained and accessible for State use?
Yes
VS: (Question 7
8.
No __
)
If any of the preceding evaluative questions are answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If yes, describe in the "Narrative" section following these questions.
VS: (Question 8
.
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CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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SYSTEMS REVIEW
Systems to Assure Execution of Events
Built in systems should be in place to assure the execution of events such as establishing tax
credits and issuing memorandums and/or refunds.
The reviewer must become familiar with the types of built-in checks used
by the State to assure the accurate processing of all employer
overpayments, and the issuing of proper credits and/or refunds to such
employers.
In the narrative section following the questions, explain "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section.
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Credits/Refunds
SYSTEMS REVIEW QUESTIONS
1.
Does the State have system procedures and/or controls to identify all employers who
have overpaid taxes?
Yes
No __
VS: (Question 1
2.
)
*Does the State issue Credit Memorandums to the employers?
Yes
No
N/A __
If Yes, answer questions 3 & 4.
If No, continue to question 5.
VS: (Question 2
)
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Credits/Refunds
SYSTEMS REVIEW QUESTIONS
3.
Does the State issue Credit Memorandums via an automated system?
Yes
No
N/A __
If Yes, when there is a change to a program in the automated system, is the new program
tested for accuracy?
Yes
No __
VS: (Question 3
4.
)
Prior to issuing credit memorandums, is a review done to determine if:
Yes No
a.
b.
c.
N/A
Math computations are accurate? ..............................................................................
All tax due has been paid? .........................................................................................
Other?.........................................................................................................................
VS: (Question 4
)
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CHAPTER EIGHT
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Credits/Refunds
SYSTEMS REVIEW QUESTIONS
5.
Does the State issue Refunds to employers?
Yes
6.
No __
*Indicate below which method of refunds your State uses:
a.
b.
c.
Automatically issues refunds .....................................................................................
Issues refunds on request ...........................................................................................
Both............................................................................................................................
If both methods are used, explain the criteria for each method.
7.
*Does the State issue refunds via an automated system?
Yes
No __
a. If Yes, when there is a change to a program in the automated system, is the new
program tested for accuracy?
Yes
VS: (Questions 5 and 7a
No __
)
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Credits/Refunds
SYSTEMS REVIEW QUESTIONS
8.
Prior to issuing refunds, is an internal reconciliation done to determine if:
Yes No
a.
b.
c.
d.
Math computations are accurate? ..............................................................................
All tax due has been paid? .........................................................................................
Required contribution reports have been
received? ....................................................................................................................
Other?.........................................................................................................................
VS: (Question 8
9.
N/A
)
If any of the preceding evaluative questions are answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If yes, describe in the "Narrative" section following these questions.
VS: (Question 9)
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CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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SYSTEMS REVIEW
Review of Completed Work
For the Credits/Refunds function, the State should be conducting systematic reviews of the
accuracy of the credit being established and the accuracy of the notice/refund being mailed
to the employer. A review of this information should be done during each processing cycle.
The following questions are designed to determine how these reviews are conducted.
The reviewer must consider the kind of supervisory program and/or
quality assurance review the State uses to assess the Credits/Refunds
processing unit. Is the review procedure different for new employees? If
the State uses a quality assurance review, who (position and
organizational location) performs it? A review of completed work should
be done on a regular basis for all staff members involved in processing
documents for the employer's account. This review may be done on an
individual basis for each staff member, or by sampling work done
throughout the entire unit.
In the narrative section following the questions, explain "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If there is no
supervisory and/or quality assurance review, describe how quality is
assured in the Employer Credits/Refunds function.
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For all staff members involved in Employer Credits/Refunds process, are the following components subject to some form of
systematic review. For Yes answers, enter a "Y" in the appropriate column(s). For Yes answers, also enter "Y" in column 6. If there
are no reviews, answer "N" for No in column 6 which is the evaluative question.
Type of Review
Component
a.
Credits established on the
employer's account?
b.
Credit memorandums mailed to
the employers?
c.
Refunds mailed to the employer?
VS: (Question 6)
* Informational
*1
Supv
*2
Peer
*3
QR
Qual.Rev.
*4
Support
(Clerical)
*5
Other
6
Review
Conducted?
7
N/A
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SYSTEMS REVIEW QUESTIONS
7.
If any of the preceding evaluative questions are answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following the questions.
VS: (Question 7
)
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CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Credits/Refunds
SYSTEMS REVIEW QUESTIONS
Additional Controls
1.
*Does the State have internal controls or quality assurance systems in the Employer
Credits/Refunds function which this review failed to identify?
Yes
No __
If yes, describe below:
2.
*Are there any exemplary practices for the Employer Credits/Refunds function?
Yes
No __
If yes, describe below:
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ACCEPTANCE SAMPLES
ET HANDBOOK NO.407
TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Credits/Refunds
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Purpose/Intent
To assure accuracy in the establishment of employer
overpayments (credits/refunds).
To assure that the State maintains employer overpayment
(credit/refund) information accurately and timely.
To assure that the State accurately issues credit
memorandums and/or refunds to employers for
overpayments.
Scope
The scope of the review will focus on credits established
during the processing period that are still outstanding (not
refunded or applied to a liability) on the date the universe is
identified.
Universe
The universe for employer overpayments (credits/refunds)
will include all contributory employers who have
overpayments (credits) established during the processing
period of the selected quarter that remains outstanding at
the end of the processing period.
The overpayments may relate to any quarter but must have
been established during the processing period for the
quarter selected for the review.
The credit is for overpaid contributions. (The credit may
include penalty and interest monies overpaid.)
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Credits/Refunds
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Universe Cont.
Timing/Frequency
The universe will exclude the following:
1.
All contributory employers who had an
overpayment (credit) that was established during
the processing period, but that was cleared by the
end of the processing period, either through refund
or application to a liability.
2.
All contributory employers with credits within the
tolerance level for which the State neither refunds
nor issues credit refunds.
3.
All reimbursing employers.
The sample will be selected once per calendar year.
The universe covers the processing period for either the 1st,
2nd, or 3rd quarter and will be identified immediately at the
end of the processing period.
Sampling Procedures
The following describes the steps to identify the universe and
select the sample accounts:
1.
Select the quarter to review.
This will be either the 1st, 2nd, or 3rd quarter.
2.
Identify the universe.
The universe includes all contributory employers
who:
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ACCOUNT MAINTENANCE
Credits/Refunds
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Sampling Procedures
Cont.
a.
Have an overpayment for any quarter (current or
prior) which was established during the processing
period, and
b.
The credit remains outstanding (not refunded or
applied to a debit) at the end of the processing
period.
The processing period is defined as the State time
period during which the quarterly reports and
contributions are processed after the selected
quarter has ended. (e.g., if the 1st quarter is
selected for review, the processing period would
begin April 1 and end approximately June 30. This
definition is for the sole purpose of defining the
time frame from which the universe of credits
established is to be drawn.
States who do not build the universe as credits are
established, or whose automated systems make it
difficult or impossible to locate the targeted credits
may find it necessary to identify the population of
all contributory employers at the beginning of the
processing period and again at the end of the period
and then compare the two populations to isolate
those employers who had a credit balance
established (or increased) during the defined
processing period. These employers constitute the
sampling universe.
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ACCOUNT MAINTENANCE
Credits/Refunds
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Sampling Procedures
Cont.
3.
Select 60 cases, or if universe is small, select the
number of cases based on Table in Appendix A-III
Note: The reviewer will have to investigate
procedures for issuing credits/refunds and then
identify the appropriate sample selection date. (e.g.,
in some States there may be a lag time of 90 - 180
days before refunds are issued, etc. - thus the
sample selection date would be after the 90 - 180
day time lag period.)
If the system is automated, the Reviewer must work closely
with IT. A thorough understanding of what the sample
includes and when it is to be extracted is essential.
Appendix A describes what action needs to be taken for
sampling in both manual and automated systems.
Reviewing the Samples
Assemble the following information for each of the cases
selected for review:
1.
A copy or image of the original credit memorandum
or a facsimile generated from the electronic data
that created the original notice (or advisement, such
as a line item on the electronic or paper contribution
report); or a copy of the cancelled check if a refund
was issued; or a computer generated listing showing
the employer account number, check amount, mail
date and address.
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Credits/Refunds
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Reviewing the Samples
cont.
2.
The original or imaged source documentation of
information in the state's files that created the
credit/refund e.g., contribution reports, remittance,
adjustment reports, wage detail adjustments, rate
changes, etc.
3.
The electronic or paper account information related
to the credit/refund in the state’s employer file.
Compare all electronic and paper source documents with
the information on the employer's account record.
The review should be completed within 45 days after the
sample is selected.
Drawing Conclusions
Using this information, answer the questions on the Acceptance
Sample Questionnaire.
The following questions are evaluative:
#1.
#2
#4.
#5.
#6.
#7.
Establishment to proper account.
Accuracy of dollar amount and time frame.
Accuracy of the credit memorandum or refund.
Accurate processing of the established credit.
Credit memorandum/refund issued to correct
address
Accuracy of withholding credit
memorandum/refund
A "No" answer to #1, 2, 4, 5, 6 or 7 will mean that the
sampled account was not processed accurately and is not
considered an acceptable case.
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Credits/Refunds
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Drawing Conclusions
Note that when a credit or refund is due, in excess of Contd.
established tolerance limits, the employer must be given the
opportunity to request a refund, or to apply the credit to
future tax obligations, or to automatically receive a credit or
refund. If the sampled case indicates that the state did not
fulfill this obligation (for instance, no attempt was made to
advise the employer of credit or refund due, or no
credit/refund adjustments were made), question 7 would be
answered “No,” and the case would fail.
Of the 60 cases, if three or more are not acceptable, then
the reviewer must conclude that accuracy in the
Credit/Refund processing function cannot be confirmed.
For all unacceptable cases, the reviewer must provide an
explanation for the unacceptable case on the Acceptance
Sample Explanation Sheet.
Documentation
All documentation (gathered to review samples) must be
kept until the completion and Regional Office approval of
the Annual Report. Either hard copy documentation or (in
some highly automated systems) the ability to recreate the
identical information used in the review must be
maintained.
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Credits/Refunds
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE QUESTIONNAIRE
Yes No
Establishment of Credit
1. Was the credit established on the proper employer's account?
If No, case fails, do not proceed with Questionnaire.
2.
____ ____
Was the credit for the correct:
a.
Dollar amount?
____ ____
b.
____ ____
Quarter(s) and year?
Accuracy of Credit Memorandum/Refund
3.
*Was a memorandum/refund issued for the credit?
____ ____
If Yes, answer questions #4, 5, and 6.
If No, answer question #7.
4.
5.
6.
7.
Did the credit memorandum/refund accurately
reflect the amount of the credit?
____ ____
Was the credit memorandum/refund issued to
the correct entity? (e.g., if 3rd party refund
involved, was check made out to 3rd party)
____ ____
Was credit memorandum/refund issued to
correct address?
____ ____
Was the credit memorandum/refund withheld in
accordance with the State's established procedures?
(e.g., The credit designated for future tax, etc.)
____ ____
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ACCOUNT MAINTENANCE
Credits/Refunds
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CHAPTER EIGHT
PROGRAM REVIEW
R 04/03
TAX PERFORMANCE SYSTEM
Account Maintenance Sampling Coding Sheet
Employer Credits/Refunds - Checklist #3
State: ___________
Case
Number
Period Covered: ____________
Sample Type:
Employer
Identification
Number
1
Questions 1, 2a, 2b, 4, 5, 6 and 7 are evaluative.
2a
Date: ___________ Reviewer: ____________________
Acceptance
Expanded
2b
3
4
Total Acceptable _______ of _______
5
6
7
Pass/
Fail
Y/N
Page _______ of _______
TAX PERFORMANCE SYSTEM
Account Maintenance - Sample Explanation Sheet
Credits and Refunds
State: _____________________ Period Covered: _______________ Date: _______________ Reviewer: _______________
Sample Type:
Case
Number
Employer
Identification Number
Acceptance
Expanded
Explanation
Page _____ of _____
ACCOUNT MAINTENANCE
BENEFIT CHARGING
PROGRAM REVIEW
COMPONENTS
SYSTEMS REVIEW
ACCEPTANCE SAMPLES
SYSTEMS REVIEW
ET HANDBOOK NO.407
TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Benefit Charging
SYSTEMS REVIEW INTERVIEW SHEET
Function
Reviewer
Persons Interviewed
Date
Name:
Documents Reviewed
Title:
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Title:
Form#:
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Benefit Charging
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CHAPTER EIGHT
PROGRAM REVIEW
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Benefit Charging
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW
Recorded Information and Instructions
Recorded information and instructions should include procedures to assure that employer
accounts are accurately charged for benefits paid to claimants. The procedures should be
in accordance with State laws and written policies.
The reviewer should examine recorded instructions available to the staff
and compare procedures to the laws and written policies of the State to
determine if the recorded information and instructions are current,
accurate, and complete. The reviewer should also observe the Benefit
Charging process and talk with employees to learn whether or not the
recorded instructions are available and being used.
In the narrative section following the questions, explain "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If there are no
recorded instructions, describe in the narrative how the staff becomes
aware of the proper procedures to perform the tasks of the Benefit
Charging function.
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ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Benefit Charging
SYSTEMS REVIEW QUESTIONS
1.
Does the State have recorded information and instructions to assist employees in
processing the benefit charges properly in accordance with State laws and written
policies?
Yes
2.
No __
If yes, are all the recorded information and instructions:
Yes
a.
b.
c.
d.
Current? .....................................................................................................................
Accurate? ...................................................................................................................
Complete? ..................................................................................................................
Readily available to staff?..........................................................................................
VS:(Questions 1 and 2
3.
No
)
If any of the preceding evaluative questions are answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following these questions.
VS: (Question 3
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Benefit Charging
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Benefit Charging
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW
Training
The State needs to have systems and procedures to identify training needs and deliver
training to employees who perform duties within the Benefit Charging function. New
employees need to learn the procedures involved in charging employer accounts for
benefits paid to claimants. Existing employees benefit from periodic refresher courses and
additional training when procedures change and/or quality defects occur at an
unacceptably high rate.
The reviewer should respond to the following questions after discussing
with management the training systems used for Benefit Charging staff,
and after examining the training packages utilized.
In the narrative section following the questions, explain "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If there are no
formal training systems, then describe how the staff knows the laws and
written policies and the proper procedures to perform the Benefit
Charging function duties.
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ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Benefit Charging
SYSTEMS REVIEW QUESTIONS
1.
Does the State have methods or procedures to provide training for newly hired
employees?
Yes
No __
*If yes, identify the type of training:
Yes No
a.
b.
c.
d.
e.
*Formal Classroom Training? ...................................................................................
*On the Job Training?................................................................................................
*One-on-One Training? .............................................................................................
*Individual Self-guided Training?.............................................................................
*Other?.......................................................................................................................
Describe the type and frequency of training in the narrative.
2.
Does the State have methods or procedures to provide refresher training for experienced
employees?
Yes
No __
*If yes, identify the type of training:
Yes No
a.
b.
c.
d.
e.
*Formal Classroom (e.g., refresher courses)? ...........................................................
*On the Job Training?................................................................................................
*One-on-One Training? .............................................................................................
*Individual Self-guided Training?.............................................................................
*Other?.......................................................................................................................
Describe the type and frequency of training in the narrative.
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ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Benefit Charging
SYSTEMS REVIEW QUESTIONS
3.
Does the State provide training when there are:
a.
b.
c.
d.
e.
4.
Yes No N/A
State law changes? .....................................................................................................
Policy/procedure changes? ........................................................................................
Needs identified from review of finished work
(e.g., supervision, quality assurance review)? ...........................................................
Hardware/software changes? .....................................................................................
*Other?.......................................................................................................................
Does the State have processes (e.g., back-up training or organizational flexibility) to
assure that staff absences will not disrupt operations?
Yes
No __
If yes, describe in the narrative section.
VS: (Questions 1-4
)
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ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Benefit Charging
SYSTEMS REVIEW QUESTIONS
5.
*In the opinion of the supervisor or manager, does the training meet the needs of the
Benefit Charging function? (e.g., Are sufficient resources available--training packages,
facilities, staff, etc.)
Yes
6.
No __
If any of the preceding evaluative questions were answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following these questions.
VS:(Question 6
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Benefit Charging
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Benefit Charging
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW
Recording of Transactions and Events
The State should have methods that benefit charging information (including but not
limited to the decision to charge or non-charge, amount of benefits charged, the date of the
charge, the claimant to whom benefits were paid, the individual who made the decision to
charge, appeals, etc.) is accurately recorded and that the source information is readily
available for examination. Whether the State system is automated or manual, an audit
trail should lead from the benefit charging data in the employer's account record to the
source document upon which the charge was based.
The reviewer must become familiar with the systems and procedures the
State uses to track benefit charges to the source documents (e.g., claimant
separation information, notice of charge or non-charge, benefit payment
and overpayment records, adjustments to charges, appeal notices, etc.)
In the narrative section following the questions, explain "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If there is no
audit trail maintained, then explain how the State is assured that the
employer benefit charging records are accurate.
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Benefit Charging
SYSTEMS REVIEW QUESTIONS
1.
Does the State have a method to track benefits charged to employer accounts for the
claimant to whom benefits were paid?
Yes
2.
No __
Does the audit trail identify:
Yes No
a. The amount of charges or credits (including electronic media)?.......................................
b. The date of the charge or credit? .......................................................................................
c. The State employee(s) who made the decision
to non-charge the employer?......................................................................................
d. The documentation to support denial of
the non-charging? ......................................................................................................
e. The documentation to support the allocation
of charges or credits to employers? ...........................................................................
3.
Is source documentation required to support updates to employer accounts?
Yes
VS: (Questions 1 – 3
No __
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Benefit Charging
SYSTEMS REVIEW QUESTIONS
4.
*Which of the following source documents does the State use to identify changes to
benefit charges:
Yes No
a.
b.
c.
d.
e.
f.
g.
h.
5.
*Claimant Separation Information?...........................................................................
*Notice of Charge or Non-charge? ............................................................................
*Benefit Payment Records?.......................................................................................
*Benefit Overpayment Notices? ................................................................................
*Monetary Redeterminations? ...................................................................................
*Appeal Notices? .......................................................................................................
*Electronic media?…………………………………………………………………
*Other Adjustment records? ......................................................................................
Are original and amended information sources, including electronic source
documentation, retained and accessible for State use?
Yes
No __
VS: (Question 5
6.
)
If any of the preceding evaluative questions are answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If yes, describe in the Narrative section following these questions.
VS: (Question 6
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Benefit Charging
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Benefit Charging
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW
Systems to Assure Execution of Events
Systems should be in place to assure the execution of events such as accurately charging to
the employer's account or the pool account benefits paid to claimants. Systems should also
be in place to assure the reconciliation of benefits charged with benefits paid. The systems
may be automated or manual.
The reviewer must become familiar with the types of built-in checks used
by the State to assure the accurate charging to employer accounts for all
benefits paid.
In the narrative section following the questions, explain "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section.
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ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Benefit Charging
SYSTEMS REVIEW QUESTIONS
1.
*Does the State use an automated benefit charge system to apply charges to employer
accounts or the pool account?
Yes
a.
If yes, is a review performed every time a program change is made?
Yes
2.
No __
No __
Are verification procedures in place to assure that benefit charges are correctly made by
comparing information sources to employer account transaction records?
Yes
No __
VS: (Question 1 (a) and 2
3.
)
Does the State reconcile benefits charged with benefits paid? (e.g., Is the State
accounting for all benefits paid by charging either the employer account or the pool
account?)
Yes
No __
If Yes, answer 3a - 3d.
If No, go to question 4.
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ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Benefit Charging
SYSTEMS REVIEW QUESTIONS
3.
a.
*Is the reconciliation performed by individual Social Security number (e.g., all
benefit checks issued to a claimant are reconciled with the benefit charges that are
charged to the claimant's employer(s) account(s) or the pool account)?
Yes
*If Yes,
b.
Frequency
*Are aggregate benefit charges reconciled with aggregate benefits paid?
If Yes,
c.
No __
Yes
No __
Yes
No __
Frequency
*Other?
In the Narrative Section, describe the method the State uses to reconcile out-of-balance accounts
(e.g., discrepancies charged to the general pool account or the overpayment accounts, etc. or
does State track each discrepancy in order to balance the accounts).
d.
*Provide the following data for the most recently completed calendar year (or
quarter) if available:
(1)
(2)
Amount of charges not reconciled to benefits paid:
Total Benefits Paid:
VS: (Question 3
)
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ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Benefit Charging
SYSTEMS REVIEW QUESTIONS
4.
If any of the preceding evaluative questions are answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If yes, describe in the Narrative section following these questions.
VS: (Question 4
)
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ACCOUNT MAINTENANCE
Benefit Charging
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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ACCOUNT MAINTENANCE
Benefit Charging
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW
Review of Completed Work
For the Benefit Charging function, the State should be conducting systematic reviews for
accuracy of the benefit charge information being posted to the employer's account.
A review of completed work should be done on a regular basis for all staff
members involved in processing benefit charges for the employer's
account. This review may be done on an individual basis for each staff
member, or by sampling work done throughout the entire unit. The
following questions are designed to determine how these reviews are
conducted.
The reviewer must become familiar with the kind of review program the
State uses to assess the work performed by the staff processing the
employer's benefit charges.
In the narrative section following the questions, explain "other" responses,
and describe compensating controls. Identify the question being explained
by referencing the number and section. If there is no review performed,
describe how quality is assured in the Employer Benefit Charging
function.
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For all staff members involved in Employer Benefit Charging process, are the following components subject to some form of
systematic review. For Yes Answers, enter "Y" in the appropriate column(s). For Yes answers, also enter "Y" in column 6. If there
are no reviews, answer "N" for No in column 6 which is the evaluative question.
Type of review
Component
a.
Benefits charged to the employer's account?
b.
Benefits charged to the general pool account?
c.
Balancing of the benefits paid to the benefits
charged?
VS: (Question 6)
* Informational
*1
Supv
*2
Peer
*3
QR
Qual.Rev.
*4
Support
(Clerical)
*5
Other
6
Review
Conducted?
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Benefit Charging
SYSTEMS REVIEW QUESTIONS
7.
If any of the preceding evaluative questions are answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following these questions.
VS: (Question 7
)
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ACCOUNT MAINTENANCE
Benefit Charging
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Benefit Charging
SYSTEMS REVIEW QUESTIONS
Additional Controls
1.
*Does the State have internal controls or quality assurance systems
for Employer Benefit Charging which this review failed to identify?
Yes
No __
If yes, describe below:
2.
*Are there any exemplary practices for the Employer Benefit Charging
function?
Yes
No __
If yes, describe below:
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ACCEPTANCE SAMPLES
ET HANDBOOK NO.407
TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Benefit Charging
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Purpose/Intent
To assure accuracy of benefit charges posted to employer
accounts.
To assure that the State accurately maintains all data used
to determine benefit charges for an employer's account.
To assure that the State accurately issues benefit charge
Statements to employers.
Scope
The scope of the review will focus on benefit charges or
benefit credits posted to employer accounts during the
designated time period.
Where a non monetary decision has been issued on the
selected UI claim, the TPS review will focus on
implementation of the decision as it affects charging of the
selected employer. For instance, if a decision was made to
charge the employer – was that employer charged? The
decision itself or its merits will not be evaluated.
Universe
The universe to be identified for the Benefit Charging
Acceptance Sample will include:
1.
All employers with benefits charges posted to their
account, and
2.
All employers with credits issued for prior charges
posted to their account.
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CHAPTER EIGHT
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ACCEPTANCE SAMPLE INSTRUCTIONS
Timing/Frequency
The universe will be identified once during the calendar
year.
The universe covers either:
Sampling Procedures
1.
The 1st, 2nd, or 3rd quarter, if the State issues
benefit charge Statements on a quarterly basis, or
2.
A year, if the State issues benefit charge Statements
on a yearly basis or,
3.
A month if the State issues benefit charge
Statements on a monthly basis.
The following describes the steps to identify the universe and
select the sample accounts:
1.
Select the time period to review.
This will be either the 1st, 2nd, or 3rd quarter, or
the month or year. See Timing/Frequency above.
2.
Identify the universe.
The universe includes all employers who have
benefit charges and/or credits posted to their
account for the selected time period.
The universe will be identified immediately after all
benefit charges (or credits issued) have been posted
to the employer's account for the applicable time
period.
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Benefit Charging
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Sampling Procedures
Cont.
3.
Select 60 samples.
The samples will be selected immediately after the
Benefit Charge Statements are produced for the
selected time period.
If the system is automated, the Reviewer must work closely
with ADP. A thorough understanding of what the sample
includes and when it is to be selected is essential.
Appendix A describes actions for sampling in both manual
and automated systems.
Reviewing the Samples
Assemble the following information for the employer's
account:
1.
A copy of the original benefit charge Statement or a
facsimile created from the ADP file that created the
original Statement.
2.
A print-out of the selected claimant's pay history.
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ACCOUNT MAINTENANCE
Benefit Charging
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Reviewing the Samples
Cont.
The claimant will be selected as follows:
a.
If there are credits on the employer's charge
Statement, select the last claimant with a
credit;
b.
If there are only debits on the charge
Statement, select the last claimant.
3. The documentation for the decision to charge or credit
the employer's account. This documentation will
consist of whatever is used in the State to substantiate
the charge or credit, whether a “canned” decision, text
customized for the situation, discharge or quit
decisions, etc. Whatever is needed for the reviewer to
ensure that the appropriate charging action was taken.
Note that the decision itself or its merits will not be
evaluated.
4.
The employer's account information on the State's
files.
Compare all documentation with the information on the
employer's Master File.
The review should be completed approximately 45 days
after selecting the sample.
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ACCOUNT MAINTENANCE
Benefit Charging
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Drawing Conclusions
Using this information, answer the questions on the Acceptance
Sample Questionnaire.
The following questions are evaluative:
#1
Accuracy of the charge or credit to the employer's
account.
#2
Accuracy of
a.
the employer's account number.
b.
the claimant's social security number.
c.
the time period for the charge or credit.
d.
the dollar amount charged (or credited).
A "No" answer to question 1, 2a, 2b, 2c, or 2d will mean
that the sampled account was not charged (or credited)
accurately and is not considered an acceptable case.
Of the 60 cases, if three or more are not acceptable, then
the reviewer must conclude that accuracy in the Employer
Benefit Charging function cannot be confirmed.
For all unacceptable cases, the reviewer must provide an
explanation for the unacceptable case on the Acceptance
Sample Explanation Sheet.
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ACCOUNT MAINTENANCE
Benefit Charging
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Documentation
All documentation (gathered to review samples) must be
kept until the completion and Regional Office approval of
the Annual Report. Either hard copy documentation or (in
some highly automated systems) the ability to recreate the
identical information used in the review must be
maintained.
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ACCOUNT MAINTENANCE
Benefit Charging
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE QUESTIONNAIRE
Yes No
Accuracy of Charge or Credit
1.
Based upon the information available, did
the State properly charge or credit the employer's account?
____ ____
Accuracy of Charge Statement
2.
Did the charge Statement accurately reflect the correct:
a.
employer's account number?
b.
claimant's (former employee)
social security number?
c.
d.
the correct period of time for the
charge or credit? (e.g., were the charges for
benefits paid in August posted to the
3rd quarter charge Statement?)*
amount charged or credited for
benefits paid?
____ ____
____ ____
Yes
No NA
____ ____ ____
____ ____
*(Note: For CWC employers, time period
may not be that precise.)
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TAX PERFORMANCE SYSTEM
Account Maintenance Sampling Coding Sheet
Employer Benefit Charging - Checklist #4
State: ___________
Sample Type:
Case
Number
Period Covered: ____________
Date: ___________
Acceptance
Employer
Identification
Number
Questions 1, 2a, 2b, 2c, and 2d are evaluative.
Reviewer: ____________________
Expanded
1
2a
2b
2c
2d
Pass/
Fail
Y/N
Total Acceptable _______ of _______
Page _______ of _______
TAX PERFORMANCE SYSTEM
Account Maintenance - Sample Explanation Sheet
Benefit Charging
State: _____________________ Period Covered: _______________ Date: _______________ Reviewer: _______________
Sample Type:
Case
Number
Employer
Identification Number
Acceptance
Expanded
Explanation
ACCOUNT MAINTENANCE
EMPLOYER TAX RATES
PROGRAM REVIEW
COMPONENTS
SYSTEMS REVIEW
ACCEPTANCE SAMPLES
SYSTEMS REVIEW
ET HANDBOOK NO.407
TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Tax Rates
SYSTEMS REVIEW INTERVIEW SHEET
Function
Reviewer
Persons Interviewed
Date
Name:
Documents Reviewed
Title:
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Title:
Form#:
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Tax Rates
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW
Recorded Information and Instructions
For Employer Tax Rates, recorded information and instructions should include procedures
to assure that employer tax rates are accurately computed and assigned. The procedures
should be in accordance with current State laws and State policies.
The reviewer should examine recorded instructions available to the staff
and compare procedures to the laws and written policies of the State to
determine if the recorded information and instructions are current,
accurate, and complete. The reviewer must also observe the Employer
Tax Rate process and talk with employees to learn whether or not the
recorded instructions are available and being used.
In the narrative section following the questions, explain "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If there are no
recorded instructions, describe in the narrative how the staff becomes
aware of the proper procedures to perform the tasks of computing
employer tax rates.
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ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Tax Rates
SYSTEMS REVIEW QUESTIONS
1.
Does the State have recorded information and instructions to assist employees to properly
calculate and assign employer tax rates in accordance with State laws and State policies?
Yes
2.
No __
If yes, are the recorded information and instructions:
Yes No
a.
b.
c.
d.
Current? ......................................................................................................................
Accurate?....................................................................................................................
Complete?...................................................................................................................
Readily available to staff? ..........................................................................................
VS:(Questions 1 and 2
3.
)
If any of the preceding evaluative questions are answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following these questions.
VS: (Question 3
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Tax Rates
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Tax Rates
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW
Training
The State needs to have systems and procedures to identify training needs and deliver
training to employees who perform duties within the employer tax rate unit. New
employees need training to understand the procedures involved in computing and
assigning the tax rates. Experienced employees benefit from periodic refresher courses
and need additional training when changes occur, and when quality defects or a significant
number of errors appear in a particular area.
The reviewer should become familiar with the methods and procedures
the State uses to identify and meet training needs of employees
involved in computing employer tax rates.
In the narrative section following the questions, explain "other"
responses and exceptions to the questions. Identify the question being
explained by referencing the number and section. If there are no
training programs, describe how the staff know the laws, rules, written
policies and proper procedures to perform the Tax Rate process.
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ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Tax Rates
SYSTEMS REVIEW QUESTIONS
1.
Does the State have methods or procedures to provide
training for newly hired employees?
Yes
No __
*If yes, identify the type of training:
Yes No
a.
b.
c.
d.
e.
*Formal Classroom Training?....................................................................................
*On the Job Training? ................................................................................................
*One-on-One Training? .............................................................................................
*Individual Self-guided Training? .............................................................................
*Other? .......................................................................................................................
Describe the type and frequency of training in the narrative.
2.
Does the State have methods or procedures to provide
refresher training for experienced employees?
Yes
No __
*If yes, identify the type of training:
Yes No
a.
b.
c.
d.
e.
*Formal Classroom (e.g., refresher courses)?............................................................
*On the Job Training? ................................................................................................
*One-on-One Training? .............................................................................................
*Individual Self-guided Training? .............................................................................
*Other? .......................................................................................................................
Describe the type and frequency of training in the
narrative.
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Tax Rates
SYSTEMS REVIEW QUESTIONS
3.
Does the State provide training when there are:
Yes No N/A
a.
b.
c.
d.
e.
4.
State law changes? .....................................................................................................
Policy/procedure changes? .........................................................................................
Needs identified from review of finished work
(e.g., supervision, quality assurance review)?............................................................
Hardware/software changes?......................................................................................
*Other? .......................................................................................................................
Does the State have processes (e.g., back-up training or organizational flexibility) to
assure that staff absences will not disrupt operations?
Yes
No __
If yes, describe in the narrative.
VS: (Questions 1-4
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Tax Rates
SYSTEMS REVIEW QUESTIONS
5.
*In the opinion of the supervisor or manager, does the training
meet the needs of the employer tax rate function? (e.g., Are sufficient
resources available--training packages, facilities, staff, etc.)
Yes
6.
No __
If any of the preceding evaluative questions were answered
"No", does the State have a substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following these questions.
VS:(Question 6
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Tax Rates
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Tax Rates
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW
Recording of Transactions and Events
The State should have a method to assure that tax rates and tax rate changes are recorded
and the source of the information (including, but not limited to the data used for the tax
rate formula) is readily available for examination. Whether the State’s system is
automated or manual, an audit trail should lead from the tax rate recorded in the
employer's account record to the source document upon which the rate or rate change was
calculated.
The reviewer must become familiar with the systems and procedures
the State uses to trace the elements used in rate computations and rate
assignments to their source.
In the narrative section following the questions, explain "Other"
responses, and describe "Compensating Controls". Identify the
question being explained by referencing the number and section. If the
State does not maintain source documents or an audit trail, describe
how it assures that correct tax rate calculations have been made.
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Tax Rates
SYSTEMS REVIEW QUESTIONS
1.
Does the State have a method to assure that the elements used to compute or change tax
rates can be traced to their source (even if source is via electronic media)?
Yes
2.
Does the audit trail identify the following information:
a.
b.
c.
3.
No __
Yes No
The information used to calculate rates
(including surtax rates)? .............................................................................................
The date of the information used in tax
calculations? ...............................................................................................................
The State employee who authorized
changes to a tax rate? .................................................................................................
Is a source document required to support tax rate changes?
Yes
No __
VS: (Question 1-3
4.
)
Are original and amended tax rate information sources, including electronic source
documents, retained and readily accessible to support rate computations and assignments?
Yes
VS: (Question 4
No __
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Tax Rates
SYSTEMS REVIEW QUESTIONS
5.
If any of the preceding evaluative questions are answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following the questions.
VS: (Question 5
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Tax Rates
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Tax Rates
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW
Systems To Assure Execution of Events
Systems should be in place to assure that every employer tax rate is accurately computed
and assigned in accordance with State law and State policies. The checks may be manual
or automated. Systems should also be in place to assure the elements used to calculate tax
rates are maintained, and that employers are experience rated when they should be.
The reviewer must become familiar with built in systems and automated
or manual controls used by the State for computing and assigning of tax
rates.
In the narrative section following the questions, explain "Other"
responses, and "Compensating Controls". Identify the question being
explained by referencing the number and section. If the State does not
have internal controls or safeguards, describe how it assures the
correctness of tax rate calculations.
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Tax Rates
SYSTEMS REVIEW QUESTIONS
1.
*Does the State have an automated system for calculating employer tax rates?
Yes
a.
If Yes, is a system check performed every time there is a program change?
Yes
b.
No __
Is there a system check prior to mailing rate notices?
Yes
2.
No __
No __
Is there a check of the math computations used in tax rate calculations?
Yes
No __
VS: (Question 1 (a-b) and 2
3.
)
Is there a control to assure that accounts which are eligible to be experienced rated are
assigned an experience rate when applicable?
Yes
VS:(Question 3
No __
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Tax Rates
SYSTEMS REVIEW QUESTIONS
4.
If any of the preceding evaluative questions are answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following the questions.
VS: (Question 4
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Tax Rates
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Tax Rates
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW
Review of Completed Work
For the Employer Tax Rate function, the State should be conducting systematic reviews for
accuracy of the rate calculations, and of the changes made to employer tax rates.
The reviewer must consider the kind of supervisory program and/or
quality assurance review the State uses to assess the Employer Tax Rate
processing unit. Is the review procedure different for new employees? If
the State uses a quality assurance review, who (position and
organizational location) performs it? A review of completed work should
be done on a regular basis for all staff members involved in making
changes to employer tax rates. This review may be done on an individual
basis for each staff member, or by sampling work done throughout the
entire unit.
In the narrative section following the questions, explain "Other"
responses, and describe "Compensating Controls". Identify the question
being explained by referencing the number and section. If there is no
supervisory and/or quality assurance review, describe how quality is
assured in the Employer Tax Rate function.
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For all staff members involved in Employer Tax Rate process, are the following components subject to some form of systematic
review. For Yes answers, enter "Y" in the appropriate column(s). For Yes answers, also enter "Y" in column 6. If there are no
reviews, answer "N" for No in column 6 which is the evaluative question.
Type of review
Component
a.
Tax Rate notices issued to the employers?
b.
Changes made to employer tax rates?
VS: (Question 6
* Informational
*1
Supv
*2
Peer
*3
QR
Qual.Rev.
*4
Support
(Clerical)
*5
Other
6
Review
Conducted?
)
ET HANDBOOK NO.407
TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Tax Rates
SYSTEMS REVIEW QUESTIONS
7.
If any of the preceding evaluative questions are answered "No", does the State have a
substitute or compensating control?
Yes
No
N/A __
If Yes, describe in the Narrative Section following the questions.
VS: (Question 7
)
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Tax Rates
CHAPTER EIGHT
PROGRAM REVIEW
SYSTEMS REVIEW NARRATIVE
Question
Number
Explanation of "N/A" and "Compensating Controls"
(when deemed necessary)
Question
Number
Answers to "If yes, describe" and "Other":
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
CHAPTER EIGHT
PROGRAM REVIEW
Tax Rates
SYSTEMS REVIEW QUESTIONS
Additional Controls
1.
*Does the State have internal controls or quality assurance systems in the Employer Tax
Rate function which this review failed to identify?
Yes
No __
If yes, describe below:
2.
*Are there any exemplary practices for the Employer Tax Rate function?
Yes
No __
If yes, describe below:
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ACCEPTANCE SAMPLES
ET HANDBOOK NO.407
TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Tax Rates
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Purpose/Intent
........... ...........To assure accuracy of the computation of employer's tax
rate.
To assure that the State accurately maintains all data used in
computation of the employer's tax rate.
Scope
........... ...........The scope of the review will focus on tax rates assigned to
experienced rated employers who are active at the time the
universe is identified.
Universe
........... .........The universe to be identified for Employer Tax Rates will
include all active contributory employers who are
experience rated on the date the universe is identified.
The universe will exclude:
1. ........All reimbursing employers.
2. ........All non-experience rated contributory employers.
3. ........All employers who are not active on the date the
universe is identified.
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ACCOUNT MAINTENANCE
Tax Rates
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Timing/Frequency
........... .........The universe will be selected once during the calendar year.
.........The universe will be identified after processing is
completed for the tax rate notices to be issued during the
review year.
If the previous year’s samples of Tax Rates, Contribution
Reports and Benefit Charges passed TPS review, and there
have not been changes to the State’s tax rating system that
could have an impact on the accuracy of rate computation,
the next examination of Tax Rates can take place at any
time during the next four calendar years. Tax Rates are
subject to TPS review some time within a four-year cycle.
If one or more of the above mentioned tax functions do not
pass TPS review, the Tax Rate sample must be conducted
the following year.
Sampling Procedures ........... .........The following describes the steps to establish the universe
and select the sample accounts.
1. ........Determine the date the universe can be identified.
This date will vary from State to State. It will be after all
the factors required to calculate the tax rates are available.
2. ........Identify the universe.
The universe includes all active contributory experience
rated employers who will receive tax rate notices issued
during the calendar year being reviewed by TPS. The tax
rate notices may be for the current year or for the following
year.
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ACCOUNT MAINTENANCE
Tax Rates
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Sampling Procedures
Cont.
........... ........... ...........E. g., During a 2010 TPS review, in a State which
issues 2010 tax rate notices in January, 2010, a
sample of the 2010 notices issued in January would
be selected and reviewed. For a State which issues
2011 tax rate notices in November, 2010, a sample
of the 2011 notices issued in November, 2010
would be selected and reviewed.
3. ........Select 60 samples.
The samples will be selected from the universe immediately
after the rate notices are prepared.
.........If the system is automated, the Reviewer must work closely
with IT. A thorough understanding of what the sample
includes and when it is to be extracted is essential.
.........Appendix A describes what action needs to be taken for
sampling in both manual and automated systems.
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TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Tax Rates
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Reviewing Samples
........... .........Identify which of the following items are included in the
State's rate computation formula:
a..........total benefit charges? ........................................_____
b. ........total benefit wages? ......................................... _____
c..........total taxable wages?.........................................._____
d. ........taxes paid? ........................................................_____
e..........total payroll wages? .........................................._____
f. .........reserve balance?................................................_____
g. ........other? (describe) ..............................................._____
.........Assemble the following information for the employer's
account:
1. ........Copies of the electronic or paper contribution
reports and any adjustments to these reports used in
the tax rate calculation for the most recent four
quarters of the calculation period (or more
depending on the calculation period). Electronic
source documents could include screen images or
unformatted flat files of electronic reports.
2. ........The benefit charges used in the tax rate calculation
for the most recent four (or more) quarters of the
calculation period.
3. ........Electronic or paper information from the employer's
data file used in the tax rate calculation.
4. ........The State's experience rate factor (e.g., tax table,
schedule, ratio, etc.).
5. ........Any other factors used by the State to calculate the
employer’s tax rate.
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ACCOUNT MAINTENANCE
Tax Rates
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Reviewing Samples
Cont.
.........Compare all documentation with the information on the employer's
account record.
.........The review should be completed within 60 days after
selecting the sample.
Drawing Conclusions
Using this information, answer the questions on the
Acceptance Sample Questionnaire. Note that the reviewer
will not evaluate the accuracy of the contribution report
data, only the accurate compilation and computation of the
data.
Questions #1, 2, and 3 are all evaluative.
#1. ......Accuracy of the computation.
#2. ......Accuracy of the experience rate factor.
#3. ......Accuracy of any solvency surtax the State may use.
A "No" answer to question #1, 2, or 3 will mean that the
sampled account was not processed accurately and is not
considered an acceptable case.
Of the 60 cases, if three or more are not acceptable, the
reviewer must conclude that accuracy in the Employer Tax
Rate function cannot be confirmed.
For all unacceptable cases, the reviewer must provide an
explanation for the unacceptable case on the Acceptance
Sample Explanation Sheet.
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ET HANDBOOK NO.407
TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Tax Rates
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE INSTRUCTIONS
Documentation
........... ...........All documentation (gathered to review samples) must be
kept until the completion and Regional Office approval of
the Annual Report. Either hard copy documentation or (in
some highly automated systems) the ability to recreate the
identical information used in the review must be
maintained.
VIII - 300
R 04/03
ET HANDBOOK NO.407
TAX PERFORMANCE SYSTEM
ACCOUNT MAINTENANCE
Tax Rates
CHAPTER EIGHT
PROGRAM REVIEW
ACCEPTANCE SAMPLE QUESTIONNAIRE
Accuracy of Annual Tax Rate Notice
Yes No N/A
1.
2.
3.
Were all employer specific items
(e.g, wages, benefits, reserve
balance, etc.,) accurately
reflected on the tax rate notice?
____ ____
Were all the State specific items,
(e.g., tax table, schedule, ratio, etc.)
accurately reflected on the tax
rate notice?
____ ____
If there is a solvency surtax charge,
were the correct figures for the
surcharge accurately reflected on
the annual tax rate notice?
____ ____ ____
VIII - 301
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TAX PERFORMANCE SYSTEM
Account Maintenance Sample Coding Sheet
Employer Tax Rates - Checklist #5
State: _________
Period Covered: ______________
Sample Type:
Date: ________________
Reviewer: ____________________
Acceptance
Case
Number
Employer
Identification
Number
All Questions are evaluative.
Expanded
1
2
3
Pass/
Fail
Y/N
Total Acceptable _______ of ______
Page _______ of ______
TAX PERFORMANCE SYSTEM
Account Maintenance - Sample Explanation Sheet
Employer Tax Rates
State: _____________________ Period Covered: _______________ Date: _______________ Reviewer: _______________
Sample Type:
Case
Number
Employer
Identification Number
Acceptance
Expanded
Explanation
| File Type | application/pdf |
| File Modified | 2012-04-10 |
| File Created | 2010-02-23 |