The Recovery of Debt by the Inland Revenue

The National Audit Office (NAO) scrutinizes public spending on behalf of the UK Parliament. They are totally independent of Government. They audit the accounts of all government departments and agencies as well as a wide range of other public bodies, and report to Parliament on the economy, efficiency and effectiveness with which government bodies have used public money.

The NAO carry out sixty value for money studies each year and in the period 2003-2004 looked at the Recovery of Debt by the Inland Revenue

The Challenge
The Inland Revenue (IR) collect a total of around £200 billion of taxes and National Insurance Contributions. For a variety of reasons individuals and businesses owe the department money which is treated as debt and which they seek to recover. The Inland Revenue’s Receivables Management System (RMS) provides a “start to finish” debt management function.

The National Audit Office’s study had to examine:

• The Inland Revenue’s performance in collecting debt.
• Whether the Inland Revenue could collect and enforce debts more quickly and at lower cost.

The Solution
As part of the NAO study SIMUL8 was used to produce a simulation of the Receivables Management System (RMS).

The simulation work was carried out in two phases. The first phase built an “overall” simulation of the RMS to help the NAO further understand the RMS process. The second phase gathered appropriate data to extend that computer simulation to answer the following questions:

• Where do peaks of debt occur
• When do these occur during the year
• How long do these peaks take to clear

The simulation was initially based on a process map produced jointly by the NAO and the IR. A workshop session with IR staff was then carried out to validate the simulation structure and to involve them in the building process. Once validation was complete the simulation was ready to answer questions.

The Result
The simulation proved a great tool for assisting communication between NAO and Inland Revenue staff as it provided a common visualization of the process on which to base discussions. The simulation was also able to contribute to the final report to the British Parliament by the Comptroller and Auditor General.

The simulation showed that:

• peaks on some tax types build up during September, January and March and can take up to 10 weeks to clear.
• 50 additional staff would reduce those peaks and save around £2 million net a year.
• for some types of tax debt, nearly 90% of debt cases are cleared within 90 days. This compared favorably with the Utilities Sector (which was considered a similar industry and hence suitable for comparison)

Dave Ramsey,
Principal Transport Planner Hertfordshire Highways