1.35.17 Estimating Trust Fund Costs

Manual Transmittal

July 27, 2016

Purpose

(1) This transmits new IRM 1.35.17, Financial Accounting, Estimating Trust Fund Costs.

Material Changes

(1) IRM 1.32.7, Servicewide Travel Policies and Procedures, Estimating Trust Fund Costs, dated February 22, 2012, has been superseded. Current guidance previously found in IRM 1.32.7, Servicewide Travel Policies and Procedures, Estimating Trust Fund Costs, has been moved to this IRM, which has been renumbered.

(2) IRM 1.35.17.2 (4), Background, removed references to monthly processing.

(3) IRM 1.35.17.5, Definitions, deleted definition for Direct Costs and added definition for Corporate Overhead Rate.

(4) IRM 1.35.17.6, Acronyms, the following acronyms were changed:

  1. Removed Bureau of Public Debt

  2. Removed Communication and Liaison

  3. Added Collection Information System

  4. Added Communications and Stakeholder Outreach

  5. Added Fiscal Service

  6. Changed MITS to IT

(5) IRM 1.35.17.7.2, Associate Chief Financial Officer for Financial Management, added paragraph a) and removed paragraph c) to clarify responsibilities.

(6) IRM 1.35.17.7.4, Director, Cost Accounting Office, revised wording in paragraph a) to clarify responsibilities.

(7) IRM 1.35.17.7.5, Director, Beckley Finance Center, revised wording on paragraph d) to clarify responsibilities.

(8) IRM 1.35.17.8, General Methodology, added language to paragraph (1) to clarify methodology.

(9) IRM 1.35.17.9.1.1, Small Business/Self-Employed, revised wording in paragraph (1) e) through g) to update methodology.

(10) IRM 1.35.17.9.1.1, Small Business/Self-Employed, revised wording in paragraph (2) d) through f) to update methodology.

(11) IRM 1.35.17.9.1.1, Small Business/Self-Employed, (3) added a) and revised wording in d) through f) to update methodology.

(12) IRM 1.35.19.9.1.1, Small Business/Self-Employed, (4) added paragraph a) to update methodology.

(13) IRM 1.35.17.9.1.1, Small Business/Self-Employed, revised wording in paragraph (7) a) through d) to update the restructuring of Communication, Liaison and Disclosure to Communications and Stakeholder Outreach.

(14) IRM 1.35.17.9.1.2, Wage and Investment, revised wording in paragraph (3) b) to update methodology.

(15) IRM 1.35.17.9.1.4, Large Business and International, revised wording in paragraph (1) b) to update methodology.

(16) IRM 1.35.17.9.1.4, Large Business and International, deleted paragraph (2) to remove a process no longer necessary.

(17) IRM 1.35.17.9.1.7, Criminal Investigation, revised wording on paragraph (1) a) through e) to update methodology.

(18) IRM 1.35.17.11, Annual and Ten-Year Trust Funds Forecast Report, added language to paragraph (2) to clarify that the report is being completed in Beckley.

(19) IRM 1.35.17.13, Supporting Documentation and Periodic Reviews, inserted new paragraphs (1), (2), and (7) and deleted old paragraph (2) to clarify who is performing the review.

(20) Minor editorial changes have been made throughout the document.

Effect on Other Documents


IRM 1.32.7 Estimating Trust Fund Costs, dated February 22, 2012, is superseded.

Audience


Business unit finance offices responsible for estimating Unemployment, OASDHI, and Black Lung Disability Trust Fund Costs.

Effective Date

(07-27-2016)


Ursula S. Gillis
Chief Financial Officer

Overview

  1. This Internal Revenue Manual (IRM) provides policies and procedures for estimating costs associated with providing services to the Unemployment, Old-Age, Survivors, Disability and Health Insurance (OASDHI), and Black Lung Disability Trust Funds.

  2. The Chief Financial Officer (CFO), Financial Management (FM) Unit, Cost Accounting Office (CA) develops and maintains this IRM.

Background

  1. The IRS provides tax administration and support for the following trust fund programs:

    1. The OASDHI Programs. The Social Security Act (SSA) of 1935 established the Old-Age Survivors Insurance (OASI) program; subsequent amendments to the SSA in 1956 and 1965 established the Disability Insurance and Health Insurance programs, respectively. To fund these programs, the Federal Insurance Contributions Act (FICA) authorized the levying of payroll taxes to be paid by both employees and employers. The Social Security Administration and the Department of the Treasury (Treasury) share the responsibility for administering the FICA tax system.

    2. The Federal/State Unemployment Compensation (UC) Program. Titles III, IX, and XII of the SSA of 1935 and the Federal Unemployment Tax Act (FUTA) of 1939 provide the program's framework. The UC program is funded through FUTA taxes paid by employers, the proceeds of which are to compensate persons who are unemployed. The Department of Labor (DOL) and Treasury share responsibility for administering the FUTA tax system.

    3. The Black Lung Program. The Black Lung Benefits Revenue Act of 1977 established the Black Lung Disability Trust Fund within the Treasury. It imposed an excise tax on operators of coal mines to fund monthly payments and medical benefits to coal miners disabled as the result of black lung disease. The DOL and Treasury share the responsibility for administering the Black Lung Disability Trust Fund.

  2. Within Treasury, the Bureau of the Fiscal Service (Fiscal Service) is responsible for the administration, maintenance, and investment of trust fund monies. The IRS is responsible for the following activities related to FICA, FUTA, and Black Lung taxes:

    1. Processing returns.

    2. Processing payments.

    3. Providing accounts management.

    4. Collecting unpaid assessments.

    5. Examining returns.

    6. Assessing penalties and interest.

    7. Performing document matching.

    8. Providing appeal services.

    9. Conducting criminal investigations.

  3. On a quarterly basis, Treasury requires IRS to provide a report on the costs incurred for FICA, FUTA, and Black Lung related services. On an annual basis, IRS provides a ten-year forecast of its costs to support the OASDHI, UC, and Black Lung programs.

  4. On a quarterly basis, the Secretary of the Treasury (Secretary) pays the Treasury General Fund for IRS’ estimated costs of supporting the OASDHI and UC programs. For the Black Lung Program, the Secretary pays the Treasury General Fund for the estimated expenses for examining returns up to a limit of $356,000 per year.

Authorities

  1. Social Security Act, Pub. L. No. 74-271.

  2. 42 USC 401, Trust Funds.

  3. 42 USC 1104, Unemployment Trust Fund.

  4. 26 USC 9501, Black Lung Disability Trust Fund.

  5. Treasury Directive 32-06, Administrative Expenses for Trust Funds.

Related Resources

  1. Federal Accounting Standards Advisory Board Accounting Concepts and Standards, Standard No. 4, Managerial Cost Accounting.

  2. IRM. 1.35.16, Managerial Cost Accounting.

Definitions

  1. In this IRM, the terms below have the following meanings:

    1. Benefit Rate - The rate calculated by dividing the total benefit costs of the organization by the total salary costs (permanent and temporary salaries) of the organization. The rate is applied to estimated salary costs for a particular program to determine the benefit costs for that program.

    2. Corporate Overhead Rate - The rate annually calculated by the Cost Accounting Office and applied to total labor and benefits costs to determine the full cost of providing services.

    3. Direct Hours - Labor hours incurred by IRS employees that can be specifically identified with or assigned to a program, activity, or output.

    4. Direct Staff Years - Direct hours converted to staff years using the appropriate compensable hours for the fiscal year.

    5. Federal Insurance Contributions Act - A U.S. payroll tax or employment tax imposed by the Federal Government on both employees and employers to fund Social Security and Medicare.

    6. Full Cost - All costs used in generating the outputs, including all direct and indirect costs.

    7. Full Time Equivalent - The total number of regular hours worked and approved leave taken by employees, divided by the number of compensable hours applicable to each fiscal year.

    8. Federal Unemployment Tax Act - A U.S. payroll tax or employment tax imposed by the Federal Government on employers to fund Unemployment Compensation.

    9. Indirect Hours - Total available hours for an organization less the direct hours spent on programs.

    10. Trust Fund - An account established to record receipts used to finance specific purposes or program under a trust agreement or statute.

Acronyms

  1. The following chart contains acronyms that are used throughout this IRM.

    Acronym Description
    ACDS Appeals Centralized Database System
    ACS Automated Call Sites
    BMF Business Master File
    BFC Beckley Finance Center
    CA Cost Accounting Office
    CAS Customer Account Services
    CAWR Combined Annual Wage Reporting
    CI Criminal Investigation
    CIMIS Criminal Investigation Management Information System
    COINS Collection Information System
    CSO Communications and Stakeholders Outreach
    DET Direct Exam Time
    DOL Department of Labor
    DSY Direct Staff Years
    FICA Federal Insurance Contributions Act
    Fiscal Service Bureau of the Fiscal Service
    FMP Financial Management Policy Office
    FTD Federal Tax Deposit
    FTE Full Time Equivalent
    FUTA Federal Unemployment Tax Act
    HI Health Insurance
    IFS Integrated Financial System
    IT Information Technology
    LB&I Large Business and International
    OASDHI Old-Age, Survivors, and Disability and Health Insurance
    SB/SE Small Business/Self Employed
    SETTS Summary Examination Time Transmission System
    SSA Social Security Act
    TE/GE Tax Exempt and Government Entities
    TDA Taxpayer Delinquent Account
    TDI Taxpayer Delinquency Investigation
    UC Unemployment Compensation
    UTF Unemployment Trust Fund
    W&I Wage and Investment
    WP&C Work Planning and Control

Responsibilities

  1. This section provides responsibilities for:

    1. Chief Financial Officer.

    2. Associate Chief Financial Officer for Financial Management.

    3. Director, Financial Management Policy Office.

    4. Director, Cost Accounting Office.

    5. Director, Beckley Finance Center.

    6. Business Unit Finance Offices Responsible for Estimating Trust Fund Costs.

Chief Financial Officer

  1. The Chief Financial Officer (CFO) is responsible for overseeing the policy for estimating trust fund costs.

Associate Chief Financial Officer for Financial Management

  1. The Associate Chief Financial Officer (ACFO) for FM, is responsible for:

    1. Establishing policies, procedures, standards, and controls for estimating trust fund costs.

    2. Ensuring compliance with policies and procedures for estimating trust fund costs.

    3. Approving the Report on Quarterly Costs, the Annual and Ten-Year Trust Funds Forecast Report, and the Fiscal Year-End Trust Fund Report.

Director, Financial Management Policy Office

  1. The Director, Financial Management Policy Office (FMP), is responsible for reviewing and publishing this IRM.

Director, Cost Accounting Office

  1. The Director, Cost Accounting Office (CA), is responsible for:

    1. Developing and communicating policies and standards for estimating trust fund costs, including this IRM.

    2. Reviewing, validating, and approving the methodology for estimating trust fund costs.

    3. Calculating the corporate overhead rate to be applied to labor and benefits costs, to determine the full cost to support the trust funds.

    4. Reviewing and providing oversight for the Report on Quarterly Trust Fund Costs, Cost Analysis Percent of Change Report, the Annual and Ten-Year Trust Funds Forecast Report, and the Fiscal Year-End Trust Fund Report.

    5. Providing oversight for the reviews of business unit supporting documentation and calculations.

    6. Annually, reviewing Treasury Directive 32-06, Administrative Expenses for Trust Funds, for changes and/or updates.

Director, Beckley Finance Center

  1. The Director, Beckley Finance Center (BFC), is responsible for:

    1. Developing the quarterly costs templates and providing them to the business units.

    2. Consolidating business unit cost reports.

    3. Preparing the Report on Quarterly Trust Fund Costs and the Annual and Ten-Year Trust Funds Forecast Report, based on business unit submissions.

    4. Preparing the Cost Analysis Percent of Change Report, obtaining and validating justifications for variances of ten percent or more, and adjusting the quarterly trust fund report as appropriate.

    5. Creating the billing document for the Quarterly Estimate of Trust Fund Expenses.

    6. Briefing and receiving approval from the ACFO for FM for the Report on Quarterly Trust Fund Costs, the Annual and Ten-Year Trust Funds Forecast Report, and the Fiscal Year-End Trust Fund Report and retaining the approval for a minimum of three years.

    7. Submitting the approved Quarterly Estimate of Trust Fund Expenses to the Fiscal Service.

    8. Conducting reviews of the supporting documents and calculations provided by the business units on a revolving schedule and briefing management on the results of the review.

    9. Providing feedback to the business units based on the results of reviews.

    10. Maintaining a detailed audit file that includes original source documents received from the business units and calculations used to compile reports, for a minimum of three years.

Business Unit Finance Offices Responsible for Estimating Trust Fund Costs

  1. The business unit finance offices are responsible for:

    1. Capturing the cost associated with supporting the trust funds.

    2. Completing Quarterly Cost Templates, which detail the labor and benefits costs expended by each organization providing services to the trust funds for processing returns, enforcing taxpayer compliance, and providing customer service, within 25 days of the end of each quarter.

    3. Providing BFC with justifications for variances in cost of ten percent or more presented in the Cost Analysis Percent to Change Report.

    4. Reviewing supporting documentation to ensure trust fund costs are accurately estimated.

    5. Maintaining a detailed audit file that includes the original source documents and electronic files used to prepare the Quarterly Cost Templates, for a minimum of three years.

    6. Providing information to BFC annually for the preparation of the Annual and Ten-Year Trust Funds Forecast Report for the next fiscal year and subsequent ten budget years.

General Methodology

  1. The business units utilize their respective timekeeping systems, subject matter experts, and IFS to estimate labor and benefits costs for providing support to the trust funds. Costs include administrative and management support of trust fund activities.

  2. BFC applies the corporate overhead unit rate to the business units' costs to determine the full cost of providing services to the trust funds.

Report on Quarterly Trust Fund Costs

  1. The following table summarizes the tasks performed sequentially:

    Responsible Organization Tasks
    CA Reviews methodology for estimating trust fund costs, annually.
    Calculates overhead rate, annually.
    BFC Develops and distributes Quarterly Cost Template to business units.
    Business unit finance office Prepares, reviews, and submits Quarterly Cost Templates and justifications for significant variances in the Cost Analysis Percent to Change Report to BFC.
    BFC Compiles the business units' Quarterly Cost Templates into the Report on Trust Fund Costs. Analyzes the data for significant variances between the reporting quarter and the same quarter of the prior year and corresponds with the business units for explanations of variances. Adjusts the Report on Trust Fund Costs as appropriate and prepares the Quarterly Estimate of Trust Fund Expenses.
    CA Reviews compilation of the Report on Trust Fund Costs, Cost Analysis Percent to Change Report, and Quarterly Estimate of Trust Fund Expenses.
    ACFO for FM Reviews and approves the Report on Trust Fund Costs, Cost Analysis Percent to Change Report, and Quarterly Estimate of Trust Fund Expenses.
    BFC Submits Report on Quarterly Estimate of Trust Fund Expenses to Fiscal Service.

Quarterly Cost Worksheet Procedures

  1. The business unit finance offices develop quarterly estimates for labor and benefits costs to support the trust funds and complete the Quarterly Cost Template by:

    1. Determining direct hours used to perform trust fund work.

    2. Increasing direct hours to full time equivalent (FTE) by including the appropriate rate of indirect hours.

    3. Applying salary and benefit rates to those hours, to determine the total labor and benefits costs to support the trust funds.

  2. Specific procedures to develop quarterly cost estimates for each business unit are provided in this section.

Small Business/Self-Employed Trust Fund Cost Estimates
  1. Small Business/Self-Employed (SB/SE) develops the labor and benefits costs for field collection for balance due FICA and FUTA returns by:

    1. Obtaining the direct labor hours for revenue officers from the Collection Activity Reports (CAR) included in the Collection Information System (COINS) for total direct hours worked on Tax Delinquency Investigations (TDI), Tax Delinquent Accounts (TDA) and Federal Tax Deposit (FTD) Alerts during the quarter (determining the rate for TDA, TDI, and FTD Alert dispositions per direct hour).

    2. Multiplying the TDA and TDI disposition per hour rate by a ratio determined by Subject Matter Experts (SME), which allocates total time among income tax withholding, FICA and FUTA when working employment tax cases to arrive at estimated FICA and FUTA, TDA, and TDI direct time rates.

    3. Converting direct hours to direct staff years (DSY) by dividing direct hours by the appropriate compensable hours for the current fiscal year.

    4. Converting DSY to FTE by dividing the DSY by the direct time rate.

    5. Obtaining non-Revenue Officer support time ratio and multiplying by the total FTE.

    6. Calculating the total cost per FTE by adding the total cost of labor and benefits, then dividing the sum by the total FTE for the activity type.

    7. Multiplying the FTE by the total cost per FTE.

  2. SB/SE develops the labor and benefits costs for Automated Call Sites (ACS) collection of balance due FICA and FUTA returns by:

    1. Obtaining the direct labor hours for ACS employees for the employment-related Business Masterfile (BMF) ACS cases.

    2. Multiplying the hours by a ratio determined by SMEs, which allocates total time among income tax withholding, FICA, and FUTA, when working employment tax cases to arrive at estimated FICA and FUTA hours.

    3. Converting direct hours to DSY by dividing direct hours by the appropriate compensable hours for the current fiscal year.

    4. Converting DSY to FTEs by dividing the DSY by the direct time rate, which includes supervision and support.

    5. Calculating the total cost per FTE by adding the total cost of labor and benefits, then dividing the sum by the total FTE for the activity type.

    6. Multiplying the FTE by the total cost per FTE.

  3. SB/SE develops the labor and benefits costs for field and campus examinations of FICA, FUTA, and Black Lung Disability returns by:

    1. Confirming all Summary Examination Time Transmission System (SETTS) and Work Planning and Control (WP&C) System codes for all FICA, FUTA, and Black Lung Disability returns.

    2. Obtaining the revenue agent technical hours devoted to FICA, FUTA, and Black Lung Disability issues on cases worked during the quarter from SETTS and WP&C.

    3. Converting direct hours to DSY by using the appropriate compensable hours for the current fiscal year.

    4. Converting DSY to FTEs by dividing the DSY by the direct time rate, which includes supervision and support.

    5. Calculating the total cost per FTE by adding the total cost of labor and benefits then, dividing the sum by the total FTE for the activity type.

    6. Multiplying the FTE by the total cost per FTE.

  4. SB/SE develops the labor and benefits costs for the campus FUTA units that perform document matching activities by:

    1. Confirming all WP&C codes for all FUTA returns.

    2. Obtaining the direct labor hours for the campus FUTA units from the WP&C System for FUTA programs.

    3. Converting the direct hours to DSY by using the appropriate compensable hours for the current fiscal year.

    4. Converting DSY to FTE by dividing the DSY by the direct time rate, which includes supervision and support.

    5. Calculating the total cost per FTE by adding the total cost of labor and benefits, then dividing the sum by the total FTE for the activity type

    6. Multiplying the FTEs by the total cost per FTE.

  5. SB/SE develops the labor and benefits costs for Combined Annual Wage Reporting (CAWR) units in the SB/SE campuses related to FICA document matching activities by:

    1. Obtaining the direct labor hours for the campus CAWR units from the WP&C System for the appropriate programs.

    2. Converting the direct hours to DSY by using the appropriate compensable hours for the current fiscal year.

    3. Converting DSY to FTE by dividing the DSY by the direct time rate, which includes supervision and support.

    4. Calculating the total cost per FTE by adding the total cost of labor and benefits, then dividing the sum by the total FTE for the activity type.

    5. Multiplying the FTEs by the total cost per FTE.

  6. SB/SE develops the labor and benefits costs for headquarters FICA and FUTA program oversight by:

    1. Obtaining the labor and benefit costs for the headquarters FICA and FUTA analysts. SB/SE ensures supervision and support hours are included in the labor and benefits costs.

  7. SB/SE develops the labor and benefits costs for Communications and Stakeholder Outreach (CSO) costs related to FICA by:

    1. Obtaining the percentage of stakeholder liaison outreach events that include FICA issues from the CSO calendar for the prior fiscal year.

    2. Dividing the prior fiscal yearly rate by four to obtain the current fiscal year quarterly rate.

    3. Determining the number of FTEs by multiplying the quarterly rate of outreach events by the number of stakeholder liaison employees as of the end of the quarter.

    4. Calculating the total cost per FTE by adding the total cost of labor and benefits, then dividing the sum by the total FTE for the activity type.

    5. Multiplying the FTE by the total cost per FTE.

Wage and Investment Trust Fund Cost Estimates
  1. Wage and Investment (W&I) develops the labor and benefits costs for campus processing of paper and electronic forms related to FICA and FUTA by:

    1. Confirming all WP&C codes for all FICA and FUTA returns.

    2. Obtaining the volume of the forms processed during the quarter from the WP&C System identified by the codes for FICA and FUTA returns.

    3. Multiplying the volume by the rate per thousand, as described in IRM 3.30.10, Work Cost Estimate Reference, to determine total staff hours. These hours should include specific non-pipeline hours, quality assurance, and overhead with management and supervision.

    4. Adjusting the hours for FICA returns to only account for the income tax withholding fields on FICA returns.

    5. Multiplying staff hours by the quarterly rate for submission processing personnel.

    6. Adding the cost of personnel benefits by applying the business unit benefits rate to the labor costs.

  2. W&I develops the labor and benefits costs for FUTA customer account calls and correspondence by:

    1. Determining the total percentage of FUTA on original 940-series forms to total original forms processed that could produce BMF adjustment and/or taxpayer relations workload at the BMF campus locations for the most recent planning period or quarter.

    2. Multiplying the total Accounts Management (AM) hours, which includes administrative and management time, by the percentage of original returns processed due to FUTA.

    3. Multiplying the AM BMF remote call site total hours by the combined campus percentage.

    4. Adding these hours together to determine the total hours related to FUTA returns.

    5. Converting the direct hours to FTEs using an appropriate indirect ratio.

    6. Multiplying the FTEs by the average labor rate for customer service representatives as of the latest pay period.

    7. Adding the cost of personnel benefits by applying the business unit benefits rate to the labor costs.

  3. W&I develops the labor and benefits costs for campus FICA customer account calls and correspondence by:

    1. Determining the total percentage of FICA all 941, 943, 944, and 945 series forms to total original forms processed that could produce BMF adjustment and/or taxpayer relations workload at the BMF campus locations for the most recent planning period or quarter.

    2. Adjusting the percentage to reflect calls and correspondence related to income tax withholding versus FICA tax issues.

    3. Multiplying the total AM hours by the percentage of original returns processed due to FICA. The hours are increased to include administrative and management time associated with AM employees.

    4. Multiplying the AM BMF remote call site total hours by the combined campus percentage.

    5. Adding these hours together to determine the total hours related to FICA returns.

    6. Converting the direct hours to FTEs using the most recent conversion ratio established during the strategic planning process.

    7. Multiplying the FTEs by the average labor rate for customer service representatives as of the latest pay period.

    8. Adding the cost of personnel benefits by applying the business unit benefits rate to the labor costs.

  4. W&I develops the labor and benefits costs for headquarters FICA and FUTA program oversight by:

    1. Obtaining the labor and benefits costs for the headquarters Submission Processing analysts.

    2. Obtaining the labor and benefits costs for the headquarters Accounts Management analysts.

    3. Ensuring supervision and support hours are included in the labor and benefits costs.

Appeals Trust Fund Cost Estimates
  1. Appeals develops the labor and benefits costs for technical employees for cases involving FICA and FUTA taxes by:

    1. Obtaining the total direct hours applied to FICA and FUTA cases by Appeals Officer employees from the Appeals Centralized Database System (ACDS).

    2. Calculating the management and support hours by applying the appropriate percentage to direct Appeals Officer time.

    3. Converting the direct hours to FTEs by applying the indirect time percentage.

    4. Calculating the cost per FTE by adding the total cost of labor and benefits then, dividing the sum by the total FTE for the activity type.

    5. Multiplying the FTE by the total cost per FTE.

Large Business and International Trust Fund Cost Estimates
  1. Large Business and International (LB&I) develops the labor and benefits costs for examination of FICA, FUTA, and Black Lung Disability returns by:

    1. Obtaining the number of technical hours applied to FICA, FUTA, and Black Lung Disability tax returns on cases worked during the quarter from SETTS.

    2. Converting technical exam hours to DSY by dividing by the appropriate compensable hours in the current fiscal year.

    3. Converting from DSY to FTEs by dividing by the direct exam time percentage calculated for the current quarter.

    4. Calculating the cost per FTE by adding the total cost of labor and benefits, then dividing by the sum of the total FTE for the activity.

    5. Multiplying the FTE by the total cost per FTE.

Tax Exempt and Governmental Entities Trust Fund Cost Estimates
  1. Tax Exempt and Governmental Entities (TE/GE) develops the labor and benefits costs for examination of FICA and FUTA returns by:

    1. Obtaining the number of technical hours applied to FICA and FUTA tax returns on cases worked during the quarter from the Web-Based Employee Technical Time System.

    2. Converting direct exam time (DET) hours to standard exam hours using the most recent DET ratio established in the strategic planning process.

    3. Converting the standard hours to FTEs by dividing the standard hours by the appropriate compensable hours for the current fiscal year.

    4. Calculating the total cost by multiplying the FTE by the labor cost per FTE and multiplying the result by the benefits percentage.

  2. TE/GE develops the labor and benefits costs for supervision and support costs for examination of FICA and FUTA by:

    1. Calculating the ratio of total exam FTEs to revenue agent exam FTEs by division.

    2. Multiplying the ratio by the revenue agent FTEs for the quarter to calculate the supervision and support FTEs.

    3. Multiplying the supervision and support FTEs by the average rate for a non-revenue agent as of the latest pay period by division.

    4. Adding the cost of personnel benefits by applying the division's benefits rate to the labor costs.

  3. TE/GE uses the Integrated Financial System (IFS) to determine the labor and benefits costs of the Federal, State, and Local Government Division, which is 100 percent devoted to employment tax issues.

Chief Counsel Trust Fund Cost Estimates
  1. Chief Counsel develops the labor and benefits costs for case work that includes FICA and FUTA return issues worked by Counsel's LB&I, SB/SE, and Procedure and Administration offices by:

    1. Obtaining the direct hours devoted to employment tax issues on cases worked through the quarter from the Counsel Case System by employment category.

    2. Multiplying the direct hours devoted to employment tax issues by a ratio predetermined by a SME to determine the direct hours for FICA and FUTA tax issues.

    3. Converting the direct hours for FICA and FUTA tax issues to standard hours using predetermined indirect ratios by employment category.

    4. Multiplying the total standard hours by the current average salary rate for each of the respective employment categories.

    5. Adding support costs using Counsel's general support rates.

    6. Applying the most recent benefit rate.

  2. Chief Counsel develops the labor and benefits costs for cases that include FICA and FUTA return issues worked by Counsel's TE/GE offices by:

    1. Obtaining the salary and benefit costs for Counsel's TE/GE Employment Branches from IFS.

    2. Multiplying the salary and benefit costs by a percentage predetermined by a SME to obtain the estimated portion of the Employment Branches' work involving FICA and FUTA issues.

    3. Obtaining salary and benefit costs for TE/GE Counsel field employees working FICA and FUTA related issues from IFS.

    4. Calculating the indirect costs by applying the indirect TE/GE rate to the costs.

    5. Adding support and benefits costs by applying Counsel's general support rate and most recent benefit rates.

Criminal Investigation Trust Fund Cost Estimates
  1. Criminal Investigation (CI) develops the labor and benefits costs for CI time that relates to FICA return issues in employment tax investigations by:

    1. Determining the percentage of direct investigative time spent on employment tax cases from the National Summary by Program Area Report. This report is prepared from the Criminal Investigation Management Information System (CIMIS) data.

    2. Obtaining the labor and benefit costs associated with the most current pay period reported in the IFS Payroll Accounting Report.

    3. Multiplying the percentage of time spent on FICA by the total labor and benefits costs for the quarter.

Quarterly Reports

  1. Three trust fund reports are created quarterly and briefed to and approved by management:

    1. Report on Trust Fund Costs.

    2. Cost Analysis Percent of Change Report.

    3. Quarterly Estimate of Trust Fund Expenses.

  2. CA reviews the quarterly reports.

  3. ACFO for FM approves the quarterly reports.

Report on Trust Fund Costs

  1. This report summarizes the business unit trust fund costs for the quarter.

    1. Quarterly, BFC compiles the business unit Quarterly Cost Templates into the Report on Trust Fund Costs.

Cost Analysis Percent of Change Report

  1. This analysis compares the business unit quarterly costs (excluding corporate overhead) to the prior year quarter’s costs and identifies variances greater than ten percent.

    1. Quarterly, BFC prepares the Cost Analysis Percent of Change Report .

    2. BFC forwards the results to the business units.

    3. Business units review and provide specific details to justify cost variances of ten percent or more for each quarter. If errors are found during this review the business units submit revised quarterly costs.

    4. BFC reviews and substantiates business unit justifications and updates the Report of Trust Fund Costs as needed.

    5. BFC briefs the results and business unit justifications to CA and the ACFO for FM.

Quarterly Estimate of Trust Fund Expenses

  1. This report is the memo notifying Fiscal Service how much should be billed to the trust funds for the upcoming quarter.

    1. Quarterly, BFC prepares the Quarterly Estimate of Trust Fund Expenses which details the estimate of costs for the upcoming quarter and the adjustment for prior quarter costs.

    2. The adjustment is the difference between the prior quarter estimate and the prior quarter actual costs.

    3. If there are other adjustments attributed to prior periods the adjustment is included in the current memo.

    4. Once approved, BFC sends the memo via e-mail to Fiscal Service.

    5. BFC submits the Quarterly Estimate of Trust Fund Expenses to Fiscal Service by the last day of each quarter.

Annual and Ten-Year Trust Funds Forecast Report

  1. This report details the forecasted trust fund expenses for the next year by quarter and annually for the following ten years.

  2. BFC prepares the Annual and Ten-Year Forecast OASDHI, Unemployment, and Black Lung Trust Funds Reports. To prepare the forecast, BFC:

    1. Determines the methodology to estimate future costs by considering current cost trends.

    2. Determines the appropriate labor inflation factor based on the latest OMB projections for federal pay increases.

    3. Updates data to account for prior period adjustments.

    4. Obtains information from business units related to expected workload changes for the upcoming years.

    5. Applies those factors to the baseline costs and projects the following ten years.

  3. CA reviews the Annual and Ten-Year Forecast Trust Fund Report.

  4. ACFO for FM approves the Annual and Ten-Year Forecast Trust Fund Report.

  5. BFC submits the Annual and Ten-Year Forecast Trust Fund Report to Fiscal Service by December 1 each year.

Fiscal Year-End Trust Fund Report

  1. This report summarizes the costs reported in the Quarterly Trust Fund Cost Reports.

    1. BFC compiles a Fiscal Year-End Trust Fund Report.

    2. CA reviews the Fiscal Year-End Trust Fund Report.

    3. ACFO for FM approves the Fiscal Year-End Trust Fund Report.

    4. BFC submits the Fiscal Year-End Trust Fund Report to the Fiscal Service by January 1 of the following fiscal year.

Periodic Reviews

  1. BFC conducts reviews of the supporting documents and the calculations provided by the business units on a revolving schedule to ensure the business unit template submission was prepared in accordance with the approved methodology.

  2. The revolving schedule ensures each business unit is reviewed at least once every two years.

  3. The business units' finance offices maintain detailed audit files for a minimum of three years. The files contain the source documents used for providing cost information related to trust funds.

  4. Data from IFS obtained to support average salary rates, average benefit rates, and other aspects of the methodology should be downloaded into Excel files and maintained in the supporting documents.

  5. If discrepancies are noted, BFC calculates the adjustment. If the adjustment is material, the business unit resubmits the corrected template. BFC includes the adjustment on the current Quarterly Estimate of Trust Fund Expenses.

  6. BFC prepares a white paper documenting itsreview and the results of the review.

  7. To improve future performance, BFC briefs the business unit finance office on the results and recommendations of the review.

  8. BFC briefs the ACFO for FM and the CA on the results of the reviews.

  9. BFC maintains the documents supporting reviews in its audit files.