© CGI GROUP INC. All rights reserved _experience the commitment TM Government Debt Collections Ted London, Vice President, CGI November 18, 2010

Confidential 2 Agenda Background and Context Collections Survey Overview Survey Results and Observations Current Trends in Collections

Background Government is under significant pressure to generate additional revenues without increasing taxes Collection of delinquent Accounts Receivable is a viable tactic for governments to utilize Substantial evidence from multiple jurisdictions indicates that effective collection strategies can: Generate a high ROI Be launched quickly Require little up front investment But……. Confidential 3

Challenge: Decentralized Collections Environment in Many Governments No economies of scale to automate and standardize processes Significant legacy applications Typical focus on providing government services, not collecting debts Limited resources constrain activities – often no full-time staff Not a core focus of the agency – little thought or management attention And…… Confidential 4

Challenge: Balancing Expectations Multiple stakeholder groups have different – sometimes competing expectations Revenue optimization Improve customer service Reduce cost of each collection action Increase customer fairness Minimize customer intrusion Increase voluntary compliance Confidential 5

6 Agenda Background and Context Collections Survey Overview Survey Results and Observations Current Trends in Collections

Confidential 7 NASACT and CGI Survey Research Objectives Gather information from the states on current debt collection strategies Analyze results to determine if collections improvements can be part of a solution to the current financial challenges Identify new and successful innovations that could be leveraged by others to increase collections Summarize findings and make them available to NASACT members

Confidential 8 Survey Methodology Survey sent to all NASACT members 21 members responded between March and May of questions Both multiple-choice and open-ended questions Budget Size >= $50B>= $30B & < $50B>= $10B & < $30B< $10B StateCalifornia Illinois New York Texas Georgia Massachusetts North Carolina Virginia Colorado Kentucky Missouri Oregon South Carolina Utah West Virginia Idaho Maine Montana Nebraska Nevada New Hampshire

Confidential 9 Key Topic Areas Explored Current Debt Management Strategies Organizational Approach Centralized vs. Decentralized vs. Hybrid Current Collection Strategies and Tools Improvement Opportunities and New Initiatives Effectiveness of Current Programs Recently Completed Projects Future Plans

Confidential 10 Agenda Background and Context Collections Survey Overview Survey Results and Observations Current Trends in Collections

Confidential 11 Summary of Key Findings and Trends Most states considering collection improvements, but… Each starting from a different level of maturity Other priorities taking precedence Half of states have recently begun new collection initiatives, the other half plan to do something soon Significant opportunities for improvement reported Over half believe their program effectiveness is just adequate A majority believe significant opportunities available A majority have plan to make program improvements A number report various constraints to becoming more effective (political, legal)

Confidential 12 Primary Approach to Manage Delinquent Debt? States currently use a variety of approaches to debt collection

Confidential 13 Have you initiated a new collection program recently? Almost half of the states surveyed have recently begun new programs to increase collections Likely based on need to increase revenues

Confidential 14 How effective are current collection processes? Most feel current processes working but can be improved Few believe current processes completely ineffective (1 = Extremely Ineffective, 5 = Extremely Effective)

Confidential 15 Specific techniques used to collect effectively? Offsets (8) Liens, levies, garnishments and license holds (if available) (7) Automated letters (4) Centralized collections (2) Collection agencies (2) Automated Collection software Electronic payments Imposition of penalties and interest Sufficient staffing

Confidential 16 Existing constraints? Insufficient AR data (2) No central collections (2) Insufficient legal authorities (2) Too many accounts without sufficient staff Third-party collection agencies Benefit overpayments are very hard to collect once issued Too many manual processes

Confidential 17 Are there additional opportunities to increase collections? Most states believe that there are opportunities to increase revenues This is despite recognition of impediments to moving forward Legislation Funding Resources

Confidential 18 Plan to initiate new collection programs? Most states plan to move forward with new collection programs Clear vision for the opportunity and need

Confidential 19 What about centralized collections? Most states perform collections in a de-centralized fashion States are beginning to think about this as a model to reduce costs and increase revenues May require legislation and other (possibly new) resources

Confidential 20 Agenda Background and Context Collections Survey Overview Survey Results and Observations Current Trends in Collections

Current Trends in Accounts Receivable Management Consolidation of Information Support for complex case-debt-debtor merging and cross referencing Consolidated taxpayer view of all debts Automated skip tracing Decision Analytics and Workflow Use of data warehouse and decision analytics for collections risk modeling and case treatment Automated identification and prioritization of collection cases based on risk Assets and Involuntary Collections Automated asset gathering Automation of involuntary collection actions Pursuit of responsible officers for business liabilities License holds or suspensions for debtors Confidential 21

Current Trends in Accounts Receivable Management Business Processes Combining strong customer service with robust compliance processes Increased usage of phone collections instead of field actions More sophisticated usage of private collection agencies (PCA) Pursuit of cases earlier in the lifecycle Payment and Self-Service Increased Payment Options Taxpayer self-service Technology Solutions Usage of mature collections case management systems Usage of sophisticated call centers and technology Confidential 22

Tools Data gathering  Bank  Wage  Skip Tracing Automated interfaces  Case consolidation  Debts and debtor information  Offsets Case management  Automated treatment paths  Automated collection actions  Automated correspondence  Third-party assignments as needed Cashiering/Accounting Confidential 23

Good News: Significant Collections Opportunities Likely Available A focused, directed, centralized function can likely achieve a 10-35% increase in delinquent receivables Automate data gathering for good addresses, phone numbers Provide authority to execute levies, garnishments and liens Consolidate debts from multiple departments Utilize statistical modeling to prioritize cases Governments could likely collect millions in additional revenues per year Local debt collection could be supported as well Confidential 24

Confidential 25 What does this mean for you? There are a number of ways to delivered enhanced collections for your jurisdiction Many of your colleagues have started – get good ideas from them While some approaches require (or are enhanced) by legislation and resources, many do not Through technology automation or business process changes, government can quickly realize significant increases in revenue Centralization of data and processes can provide significant economies of scale

Confidential 26 What does your Improvement List Look Like? How will you respond if asked to support closing a budget shortfall? Possible Options Expand Existing Programs Address Specific Operational Problems Or you can view this as a Broader opportunity Look for ways to develop your list through an operational review

One way to get started: Collections Debt Analysis What is it?  Review of debt collection practices at a number of agencies  Review to include: -Tools in use -Operational statistics -Statutory impediments  Assimilates the information and compares to best practice catalog Results  Estimate for level and timing of revenue increases  Identify opportunities and issues  Prioritize debt types for implementation LengthTypically 1-3 days/debt type Key Success Factor Requires buy-in from agencies or mandate to participate Confidential 27

Confidential 28 Contact Information About the Presenter 17 Years with CGI exclusively working with state, federal and local tax agencies Leader of CGI’s Global Tax, Revenue and Collections Practice Experience with more than 20 different tax agencies Experience with enhancing collections, audit and tax accounting systems and business processes Oversees estimation and measurement for CGI’s benefits funded tax projects Ted London Vice President Tax, Revenue and Collections Solutions (916) ISO 9001 Certified