the ins and outs of using data in audit operations...the ins and outs of using data in audit...
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![Page 1: The Ins and Outs of Using Data in Audit Operations...The Ins and Outs of Using Data in Audit Operations Joseph Carzo, Director, Audit Division Kristin Dence, Director, Income Franchise](https://reader035.vdocuments.mx/reader035/viewer/2022062606/5fe1484339818a491e1b7555/html5/thumbnails/1.jpg)
The Ins and Outs of Using Data in Audit Operations
Joseph Carzo, Director, Audit Division
Kristin Dence, Director, Income Franchise Desk Audit Bureau
NESTOA - 2019
September 10, 2019
![Page 2: The Ins and Outs of Using Data in Audit Operations...The Ins and Outs of Using Data in Audit Operations Joseph Carzo, Director, Audit Division Kristin Dence, Director, Income Franchise](https://reader035.vdocuments.mx/reader035/viewer/2022062606/5fe1484339818a491e1b7555/html5/thumbnails/2.jpg)
Overview
Data and audit operations• Volumes and results• Desk audit and field audit• Selection• Management• Adjustments
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Audit Division
Bureau Staff Number of Audits Collections*($000)
Income/Franchise Field 372 4,480 1,212,209
Transaction Field 446 5,539 552,058
Income/Franchise Desk 296 614,830 1,011,254
Transaction Desk 143 33,703 109,449
* FY’19
![Page 4: The Ins and Outs of Using Data in Audit Operations...The Ins and Outs of Using Data in Audit Operations Joseph Carzo, Director, Audit Division Kristin Dence, Director, Income Franchise](https://reader035.vdocuments.mx/reader035/viewer/2022062606/5fe1484339818a491e1b7555/html5/thumbnails/4.jpg)
Audit Division
Bureau Staff Number of Audits Collections*($000)
Income/Franchise Field 372 4,480 1,212,209
Transaction Field 446 5,539 552,058
Income/Franchise Desk 296 614,830 1,011,254
Transaction Desk 143 33,703 109,449
* FY’19
![Page 5: The Ins and Outs of Using Data in Audit Operations...The Ins and Outs of Using Data in Audit Operations Joseph Carzo, Director, Audit Division Kristin Dence, Director, Income Franchise](https://reader035.vdocuments.mx/reader035/viewer/2022062606/5fe1484339818a491e1b7555/html5/thumbnails/5.jpg)
Audit selection
Case Identification and Selection System (CISS)• Business rules• Predictive models
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Predictive models
Earned Income Tax Credit/Dependent Care Credit model • Used in CISS rules to select prior to refund being issued• Detects questionable returns and assigns a score• Looks at many factors:
− Type of income− Dependents− Dependent relationships− Preparer information− Past filings− Audit history
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Predictive models
Aggregate model • Uses cluster analysis and over 60 metrics to detect unusual or
hidden patterns compared to all other clusters• Generates weekly reports for the Fraud Analysis and Selection
Team (FAST) and the Identity Verification Unit (IVU)• FAST and IVU detect schemes quickly and prevent loss• Results are used to refine reports and business rules
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Inventory management
Peak processing planning• Risk• Staff hours• Projected response rates• Completion time
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Inventory management
Peak processing monitoring• Letters sent• Responses received• Aging
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Inventory management
Planning for next year• Evaluate audit results• Edit business rules• Refine predictive model scoring• Legislative changes
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Audit Division
Bureau Staff Number of Audits Collections*($000)
Income/Franchise Field 372 4,480 1,212,209
Transaction Field 446 5,539 552,058
Income/Franchise Desk 296 614,830 1,011,254
Transaction Desk 143 33,703 109,449
* FY’19
![Page 12: The Ins and Outs of Using Data in Audit Operations...The Ins and Outs of Using Data in Audit Operations Joseph Carzo, Director, Audit Division Kristin Dence, Director, Income Franchise](https://reader035.vdocuments.mx/reader035/viewer/2022062606/5fe1484339818a491e1b7555/html5/thumbnails/12.jpg)
Audit Division
Bureau Staff Number of Audits Collections*($000)
Income/Franchise Field 372 4,480 1,212,209
Transaction Field 446 5,539 552,058
Income/Franchise Desk 296 614,830 1,011,254
Transaction Desk 143 33,703 109,449
* FY’19
![Page 13: The Ins and Outs of Using Data in Audit Operations...The Ins and Outs of Using Data in Audit Operations Joseph Carzo, Director, Audit Division Kristin Dence, Director, Income Franchise](https://reader035.vdocuments.mx/reader035/viewer/2022062606/5fe1484339818a491e1b7555/html5/thumbnails/13.jpg)
Audit selection
Selection criteria applied to processed returns• Reviewed manually by experienced staff• Recommendations reviewed by managers• Cases created and assigned• Candidates not selected available for further
screening
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Return on resourcesC
olle
ctio
ns
Time/Resources
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Return on resourcesC
olle
ctio
ns
Time/Resources
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Return on resourcesC
olle
ctio
ns
Time/Resources
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Understanding results
Applying analytics to improve selection• Resources committed to achieve results• Repeating successes, not mistakes• Identifying compliance is a good thing
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Operational data
Applying analytics to improve performance• Optimal interactions
− Field time / Block scheduling− Elevation− Agreeing to disagree
• Balancing staff
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Work in progress§ Refining candidate scoring§ Concluding lower-value audits§ Impact on other Divisions§ Impact on taxpayers
• Certainty• Consistency/Fairness
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Efficiency ● Integrity ● Fairness