The value of recovery Tax recovery analytics provides assistance in identifying improper Federal tax payments

Abstract The Improper Payments Elimination and Recovery Act of 2010 mandates that federal agencies eliminate waste, fraud, and abuse of approximately $125 billion annually from federal programs. One issuing bank of the federal charge card program has engaged Deloitte to provide an analytics-driven approach for the bank to be able to identify and recover prior improper indirect tax payments. Challenge Tackling erroneous payments of indirect taxes In lean economic times, the federal government has increased its focus on ways to reduce and recover improper payments and other cost cutting measures. Improper payments by the U.S. government resulting from errors, inadequate controls, and even fraud totaled nearly $125 billion in 2010.1 Federal law mandates that the federal agencies reduce and eliminate waste, errors, and fraud in federal programs. Government agencies are working to more closely monitor payments and take the necessary steps to detect, prevent, and control overpayments of federal funds. Erroneous payments of indirect taxes (such as sales and use tax, gross receipts tax, fuel tax, telecommunications tax, etc.) may qualify as improper payments and are often overlooked by federal agencies. Although the federal government is exempt from state taxation, erroneous payments of taxes occur due to complexities of indirect taxes, point of sale practices and the extraordinarily high volume of federal spend. An opportunity exists to potentially recover these funds, and to identify and mitigate future tax overpayments. Solution Transaction tax recovery analytics Pursuant to the terms of a government contract, a large issuing bank of the federal charge card program engaged Deloitte to assist in providing tax recovery advisory services to its federal agency customers. Deloitte was selected because of its multidisciplinary knowledge and experience in providing an innovative technology-based tax recovery solution and its familiarity with the federal charge card program. As part of the initiative, the Deloitte team is currently assisting federal agencies in reclaiming indirect
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taxes that were incurred using the federal charge cards from issuing banks. The technology-driven solution leverages Deloittes tax experience, dedicated federal consulting practice, and federally-secured standard data analytics capabilities. A specific component of the solution, Deloittes Federal Technology Center (DFed), offers a secure infrastructure environment dedicated to federal government clients. Advanced analytics are at the heart of the transaction tax recovery solution. Using predictive and forensic analytics, Deloitte is advising and assisting the issuing bank in its efforts to scrutinize past activities, monitor current behavior, and anticipate potential future problems. Forensic analytics facilitate the analysis of large amounts of structured and unstructured data to find potential anomalies such as improper tax payments. Beyond the capability of traditional auditing techniques, forensic analytics can efficiently test virtually all of a population instead of just a sample. Results Processes improvements anticipated to speed recovery and help eliminate overpayments This first-to-market approach was introduced through a pilot program as part of a three-year engagement. Deloitte is now generating the first set of claims for the initial agency participating in the pilot program. Anticipated benefits include increased recovery value in a shorter timeframe and cost savings from the elimination of overpayments. Tax recovery analytics streamlines the claim identification and preparation process and increases the potential indirect tax recovery opportunity. The success of the initial pilot was recognized by the U.S. General Services Administration, resulting in new meetings with certain of the remaining issuing banks to propose a configurable tax recovery solution. For more information, please contact:
Suba Balasubramanian Senior Manager Deloitte Financial Advisory Services LLP + 1 214 840 1509 subalasubramanian@deloitte.com
1 http://paymentaccuracy.gov/

Linda ODonohue Tax Senior Manager Deloitte Tax LLP +1 703 251 1924 lodonohue@deloitte.com