Paper Remains King in the Electronic Age, Study Says

Despite electronic initiatives for government payment and document processes, paper remains a costly, cumbersome problem for tax collecting agencies.

by / June 8, 2010
Paper overflowing from computer screen Illustration by Tom McKeith

Regardless of the rise of the digital movement, government agencies can't seem to escape piles of paper. That's what The Association for Work Process Improvement (TAWPI) and International Accounts Payable Professionals (IAPP) found after they sent a 24-question survey to about 300 state, county and municipal tax collecting agencies.

About half of the agencies responded, but the study revealed that even with all the electronic initiatives for government payment and document processes, paper remains a costly, cumbersome problem.

"Despite all this talk about e-filing, the reality is that there is nearly as much paper as ever," said Tom Bohn, CEO of IAPP-TAWPI.

He pointed out one primary culprit: In recent years, state revenue departments have been morphing into shared service centers to make better use of IT infrastructure and streamline operations. On paper, it looks like a smart move, but such collaboration comes with greater document collection. And certain processes, such as updating financial records, don't currently have an e-filing system, Bohn said. About half of the state revenue agencies use the shared services model, he said, with another 30 percent of respondents on the road to deployment. That means more paper.

Compared to electronic systems, paper-based processes can cause delays, create mistakes and clog data storage, while hiking up costs. On the flipside, e-filing brings its own baggage of security fears. But the survey found that with technologies such as imaging and data capture, government agencies have been able to control operational costs by re-engineering business processes at a time when every penny counts.

"Where they have put into place various technology, they've seen increases in cost reduction and efficiencies," Bohn said. "But various components have been consolidated and, in those areas, they have not invested as heavily as they should. There's still a ton of paper out there."

Capital Constraints

The economic recession has put a serious stranglehold on budgets, Bohn said, impacting critical investments in new technology that might make government agencies more efficient.

"There's not really anything [governments] can do about it unless they can get a large cash infusion," he said.

Drastic budget cuts or zero growth have hindered the adoption of technology across the sector. While nearly half of all survey respondents said capital budgets for payments automation projects did not change, 17.9 percent stated that their 2010 capital budgets are slightly lower compared to 2009; 28.6 percent said their capital budgets are significantly lower. According to the study, tight budgets have similarly impacted document automation projects.

"If state, county and municipal government users are going to make improvements in their payments and document processing operations in 2010, they'll likely have to do it without the benefit of additional capital," wrote Mark Brousseau, president of Brousseau & Associates, a marketing and business development firm based in central Pennsylvania. "Clearly capital continues to be very tight for government operations."

As baby boomers retire from their specialized jobs, governments will need to explore strategies to do more with less. With the influx of young workers who don't understand or accept the traditional workday concept, that means creating greater flexibility and considering partnerships beyond public-sector circles, according to Jonathan Lyon, senior manager of tax technology for the Federation of Tax Administrators, a partner in the study.

"The ability of governments to invest in such solutions will be severely constrained in the short- to mid-term; but in the long term, have no doubt, they are highly valued, as we saw in the survey results," Lyon wrote. "We'll continue to see improvements and progress in mastering costly paper-based processes in state tax administration, and this will come not only with the evolution of payment and document technologies ... but with the assistance of private providers of services that deliver the benefits of such developments."

Emerging Technology

Despite the potential

cost-saving benefits of partnerships and outsourcing, Bohn said, an overwhelming majority of respondents said moving to a cloud-based model would be "highly unlikely." The reluctance, he added, comes mostly from security concerns and conventional ideas that the public and private sectors don't mesh.

"But at the end of the day, you have to wonder if in some cases, the private sector would be more effective for them in the long run," he said. "The whole city of Orlando [Fla.] just moved e-mail to a Google platform, but here's 70 percent of respondents saying that they wouldn't be willing to put document or payment automation in a cloud-based environment."

The good news is that, in some government agencies, the adoption of e-filing and lower labor requirements due to new technology have helped payments and document processing costs decrease. Noted systems include imaging, optical character recognition, integrated systems and automated mail opening and extraction.

Other key findings from the survey include:

  • 41.9 percent of all respondents indicated that they use Kodak scanners in their operations.
  • 28.2 percent said their organization uses proprietary application software for payments or document processing, the same percentage that use the most commonly identified application software -- J&B Software (now part of 3i Infotech).
  • 81 percent currently use intelligent character recognition and optical character recognition, making them the most commonly deployed recognition technologies.
  • 51.4 percent indicated that their payment returns were not automated; 48.6 percent said their payment returns process was automated.
  • Only 16.2 percent of all respondents currently use remote deposit capture.
  • Of the respondents that process tax payments, 57.1 percent indicated that they process their tax payments intermixed; 42.9 percent of survey respondents said they don't.

Find the complete study results at


Russell Nichols Staff Writer
Platforms & Programs