Multilayered Treasury Department Takes Lead With E-Gov Initiatives

Multilayered Treasury Department Takes Lead With E-Gov Initiatives<@VM>Treasury Department<@VM>Who's Who of Treasury IT Spending

By Calli Schmidt

On Dec. 21, the U.S. Customs Service got a generous holiday gift from Congress: approval for the first $130 million to begin work on a long-awaited modernization project that is expected to cost $1.3 billion over the next five years.

Customs now can officially request proposals from contractors looking to construct and manage a piece of the Automated Commercial Environment contract, also know as the Customs Modernization contract.

The project will fundamentally change the way Customs does business, said Woody Hall, Customs assistant commissioner for information and technology and the agency's chief information officer.

The contract will modernize the systems and processes Customs uses to regulate the movement of trade goods across U.S. borders. In some cases, the agency hopes to do in minutes, if not seconds, what can now take hours.

The project is one of several important strategic information technology initiatives within the Treasury Department, the federal agency that oversees Customs, the Secret Service, the Bureau of Alcohol, Tobacco and Firearms, and the Internal Revenue Service.

The Treasury Department, which has an annual budget of more than $14 billion, expects to spend about $2.4 billion on new and ongoing IT initiatives in fiscal 2001, including $325 million on a massive IRS modernization project.

Treasury is taking the lead among federal agencies in e-government activities, Treasury Deputy Secretary Stuart Eizenstat told members of the Computer and Communications Industry Association last summer. The department's initiatives seek to expand government use of e-commerce while protecting privacy and security on the Internet.

The department, for example, is the world's largest issuer of stored-value "smart cards," many used instead of cash by service men and women at U.S. military installations worldwide. Treasury securities are now auctioned exclusively on an Internet-based system, and private citizens can purchase U.S. savings bonds online.

Last summer, the department unveiled, which collects fees, fines and taxes and allows a number of other government financial transactions over the Internet. It also launched SLGSafe, allowing banks and their state and local government customers to manage $160 billion in state and local government securities, or SLGS, through a secure Web site.

"We will continue to listen to our customers ? who range from individuals with as little as $25 to invest to the largest brokers and dealers ? and look for ways to improve our products and services to meet their needs," said Cynthia Springer, CIO for the Bureau of the Public Debt. This is the Treasury agency tasked with conducting the auctions of marketable securities such as Treasury bills, notes and bonds, to raise the money the government needs to pay for federal programs.

Recent budget surpluses also have allowed the agency to buy back securities from investors through reverse auctions, she said.

"Two of Public Debt's program goals are to provide quality customer service to investors in Treasury securities and minimize the cost of borrowing to the federal government," Springer said. "One of the ways we intend to accomplish both of these goals is by providing high-quality electronic access to our customers."

Other Treasury agencies also report new IT projects.

The ATF, for example, is working on an e-government initiative to gather over $13 billion a year in alcohol and tobacco taxes, and is preparing to refresh its seat management arrangement as it comes up on the three-year anniversary of the first enterprisewide seat management deal in government, said agency CIO Pat Schambach. The contract is held by Unisys Corp. of Blue Bell, Pa., and expires March 2004.

And through the Electronic Federal Tax Payment System, Treasury collects electronically more than $1.3 trillion, or $2 of every $3 of U.S. government revenue.

Treasury's Financial Management Services began developing the electronic tax payment system in the mid-1990s, when Congress charged Treasury with creating a way to allow corporations to pay their income taxes electronically. Anexsys LLC of Chicago developed and operates the system in the northern half of the United States.

The original 1995 mandate called for an electronic system for corporations that pay more than $200,000 a year in taxes, but the threshold has dropped to $50,000 since then, said Anthony Castellano, Anexsys chief operations manager. There are more than 4.5 million taxpayers enrolled in the system, 95 percent of them companies.

Under the program, customers make their regular tax payments through a touch-tone phone or by installing software on their PCs that enables them to connect to the government's system.

In addition to providing the technology to make electronic tax payment possible, Anexsys also provides call-center support for these corporate taxpayers, a critical component for successful transition to e-government, Castellano said.

Electronic payment transfers have improved error rates so that the digital solution is 20 times more accurate than a paper transfer and can be posted that day, instead of within five to seven days.

However, providing online service 24 hours a day, seven days a week is only the beginning of ensuring customer satisfaction with e-government initiatives, Castellano said. Taxpayers also want real-time answers to payment questions.

"An e-gov solution does not make service go away. It makes your service capability that much more critical and physical. If you don't have the ability to service that person, you're dead," he said.

As government agencies create call-center support, they also open another can of worms: privacy. The call center systems must be configured so that taxpayer confidentiality is protected, and so call-center employees only have access to specific payment information.

The payment and call center solution for the electronic tax payment system, Castellano said, "is able to do that balancing act on a high wire, safeguarding the safety and confidentiality of the taxpayer."

Anexsys is using its Treasury experience to market its products to other federal agencies and to state and local governments. The system "is like a beacon, an example of how government can re-engineer itself" by providing faster electronic solutions and customized call-center support, he said.

While pilot programs are in place, there remain obstacles to providing a similar service to private citizens.

About 8 percent of all households used some form of online banking service in 1999, but less than 1 percent of consumer bills were viewed and paid online, Treasury Undersecretary for Domestic Finance Gary Gensler told a group of financial analysts last spring.

"The market has not yet found a viable model" for consumer electronic bill payment systems, he said. And, when it happens, "it will create many challenges for the U.S. Postal Service. Bills and bill payments represent the bulk of first-class mail, one of the Postal Service's most important revenue streams," Gensler said.

Fits and starts have marked the IRS modernization project. Under the project, the agency is revamping its IT systems and business processes including customer service and tax collection. IRS is building a new IT architecture that will allow new and old systems to work together and share information.

The IRS earned praise for a new customer friendly Web site, which saw about 1.5 billion hits in 2000, and for the successful introduction of electronic return filing, which 2.4 million taxpayers took advantage of in 1999.

However, a fall 2000 IRS report found the agency had not adequately funded the modernization process.

Representatives from Computer Sciences Corp., El Segundo, Calif., which holds the IRS Prime contract to modernize IRS, would not comment for this story.

There are other challenges for Treasury Department CIOs. Charles Little, who headed up IT initiatives for the Office of the Inspector General before retiring this month, said he sees combating potential security breaches as a major focus for 2001. He credited Treasury CIO James Flyzik for efforts to focus agency leaders on security issues, which Little said are hard for some officials to see as a threat until something drastic happens.

"The delusion is, 'We don't have any information that anyone would be interested in, so why would anyone want to break into our system?' I believe this is a major hurdle to get these managers to understand that cyberterrorists will try to access government systems just because they are there," he said.

Another challenge Little noted is retention of qualified staff.

"I have experienced a continual erosion of staffing levels for IT support at the same time that IT components and networking technology have become increasingly complex. Remaining staff have continued to absorb the increasing work load," he said.

Treasury recognized the value of IT staff by supporting the increased salaries recently approved by the Office of Personnel Management, but salaries for experienced IT personnel remain higher outside of government, he said.

"It will become more and more difficult to retain highly qualified individuals. More and more demands from a diminishing staff level will cause further attrition of good staff," he said.

Treasury will have to grapple with the proper level of staffing, staff treatment and other issues involving retention of the people needed for a well-run organization, Little said.

At the Customs office, CIO Hall said his agency is ready to take the modernization plunge with the initial $130 million in funding.

"This first installment will double, and in full swing will triple our IT budget," Hall said.

The Automated Customs Environment system is expected to streamline commercial processing and allow both the government and private sector to make more money by providing early cargo release, reduced labor costs and provide easier payment options.

Right now, Customs collects more than $20 billion in revenue and processes more than 21 million entries as U.S. participation in the global economy continues to grow. However, the agency is hampered by a 17-year-old legacy system that increasingly can't keep up with demand.

IT officials have fast-tracked the award process as they struggle to keep the current system going. Not only are the components aging and increasingly unreliable, the system doesn't mirror the Customs work flow in the era of re-engineering government, Hall said. It doesn't easily allow for streamlined, uniform application of the myriad laws and regulations regarding import and export of goods and services.

"The process is not the way we do business anymore," he said.

ACE will allow Customs to "do business on a national basis, instead of port
to port," he said. "We're both
modernizing the technology as well as implementing much more improved,
efficient ways of doing business."

Another change: Customs wants to get into the habit of regularly scheduled upgrades in technology and away from ad hoc modernization "to institutionalize replacement of the infrastructure," Hall said. "Basically, we'd be putting it on a schedule. That will make a huge difference, long term."

The agency is hoping to attract a team of contractors to the new deal "to spread the risk and to make sure they've got the quality of skills to do this," Hall said. Teams lead by Accenture (formerly Andersen Consulting), Electronic Data Systems Corp., IBM Corp. and Logicon Inc. are competing for the contract.

Customs is following the lead of other agencies that have shortened the usual nine- to 12-month RFP process by cutting the amount of written documentation that needs to be examined and allowing for more oral presentations. It hopes to choose a team by early summer and field a new system in about two years, he said.

But in many ways, Customs modernization has been under way for several years, Hall said.

"We've already begun making better use of the Web. It's kind of the evolutionary process we're going through. Initially we wanted to help communication with the public by upgrading our Web site, adding lots of press releases" and other agency news, he said.
Treasury Department
Responsibilities: Manage government finances, collect income taxes, safeguard financial systems and regulate firearms and controlled substances

Major agencies: Internal Revenue Service; U.S. Customs Service; Bureau of Alcohol, Tobacco and Firearms; U.S. Secret Service; U.S. Mint

Secretary designee: Paul O'Neill

Employees: 162,100

Fiscal 2001 Budget: $14 billion

IT Budget: $2.4 billion

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