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Treasury Offset Program: How Federal and State Partnerships Can Cost Effectively Maximize Debt Recoveries Modernizing Government Debt Collection Conference.

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Presentation on theme: "Treasury Offset Program: How Federal and State Partnerships Can Cost Effectively Maximize Debt Recoveries Modernizing Government Debt Collection Conference."— Presentation transcript:

1 Treasury Offset Program: How Federal and State Partnerships Can Cost Effectively Maximize Debt Recoveries Modernizing Government Debt Collection Conference Salem, Oregon November 1, 2013

2 Bureau of the Fiscal Service Mission We exist to promote the financial integrity and operational efficiency of the federal government through exceptional accounting, financing, collections, payments, and shared services. Vision We will transform financial management and the delivery of shared services in the federal government. 2

3 FY 2012 Key Fiscal Service Statistics 3

4 Debt Management Services (DMS) Mission We exist to identify, prevent, collect and resolve debt owed to government agencies. Vision We will transform government financial management as the provider of choice for shared services related to improper payments, receivables management, and delinquent debt collection. 4

5 The Role of DMS  Assist federal and state agencies in the collection of delinquent child support obligations, supplemental nutrition assistance program (SNAP) debts, income tax debts, unemployment insurance compensation debts, and other federal and state debts.  Provides access to the Do Not Pay program for the purpose of preventing, identifying and recovering federally-funded improper payments. 5

6 Debt Collection Legal Authorities  The Federal Government’s administrative debt collection activities are governed by a number of Federal laws, including: Federal Claims Collection Act of 1966, Debt Collection Act of 1982, Debt Collection Improvement Act of 1996 and other laws, codified primarily in 5 U.S.C and 31 U.S.C et seq Internal Revenue Code, Title 26 of the United States Code Bankruptcy Code, Title 11 of the United States Code Privacy Act of 1974, 5 U.S.C. 552a Other statutes that apply to specific agencies, debt types or payment types Treasury regulations, OMB policies, agency-specific regulations 6

7 Debt Collection Legal Authorities  Among other things, debt collection laws govern: Type of due process required for various debt collection remedies o Example: 60 days notice required before a tax refund may be offset; 30 days notice required for most other debt collection actions The amounts allowed to be collected through each mechanisms: o Example: TOP can offset 100% of a tax refund payment, but no more than 15% of a Federal salary payment; veterans benefit payments are exempt from offset When debts may not be referred to Treasury for TOP o Example: Debts that are subject to a stay under the Bankruptcy Code are not eligible for referral 7

8 Debt Collection Programs  DMS collects delinquent debts for federal and state agencies (non-tax and tax) primarily through two programs: the Treasury Offset Program (TOP) and the Cross-Servicing Program. DMS has collected a total of $7.02 billion as of September 2013 (an increase of % as compared to the same period in FY 2012) o Treasury Offset Program - $6.86 billion as of September FY 2013 o Cross-Servicing Program - $169.9 million as of September FY 2013 Cumulative collections over $60 billion since inception (1997) 8

9 TOP State Success Stories 9

10 The State of Mississippi $7.4 Million in Unemployment Fraud Recouped in Seven Days – WLBT: Mississippi News Now WLBT, the Jackson, Mississippi, NBC affiliate aired a report in February 2012 concerning the increased collection of unemployment debts from those individuals collecting unemployment benefits fraudulently. WLBT reported that the Mississippi Department of Employment Security had collected $7.4 million in its first week participating in TOP. This means that Mississippi was able to recoup 12% of their UIC debts in just the first seven days of using the program. 10

11 The State of New York Recovers $51M in Fraudulently Collected Unemployment Insurance via TOP “Once again, New York is at the forefront of efforts to protect taxpayer dollars through preventing and collecting fraudulently- obtained government payments. Every dollar we recover through this program becomes available to eligible unemployed New Yorkers who are most in need of this vital economic safety net. We will continue to do everything we can to collect fraudulently- obtained benefits from people who don’t deserve them, and who are in fact stealing from their fellow New Yorkers.” 11 Andrew Cuomo, Governor State of New York

12 The State of Maryland State Income Tax Program “Maryland is leading the way in collecting back taxes,” said Comptroller Franchot.” Given the fiscal challenges we face, it’s critical we use all available resources to get any money owed to the state.” State Reciprocal Program “The offset program we conduct with the federal government is one of the most successful in the nation,” said Comptroller Franchot.“It keeps growing because were able to quickly certify more accounts to intercept.” 12 Peter Franchot, Comptroller State of Maryland

13 The State of New Jersey Christie Administration Saves NJ Employers from $211 Million in Tax Hikes – Unemployment Trust Fund Becomes Solvent – State of New Jersey, Office of the Governor, October 24, 2013 Governor Chris Christie announced that New Jersey employers will be saving $211 million because his Administration’s anti-fraud reforms and fiscal management practices will bring New Jersey’s Unemployment Insurance Trust Fund into solvency next week and spare businesses drastic tax increases. One of the reforms highlighted that the Administration acted on to protect and improve the Trust Fund was the Federal Treasury Offset Program (TOP) which: Recovered $1 million since the program was implemented in June 2013 With the Department of Labor, has offset unemployment insurance compensation that was illegally collected by individuals by seizing their federal income tax refund payments Is expected to net the fund more than $10 million over the next year.

14 TOP Annual Report to the States “We are proud of the work we do in collecting delinquent child support, in partnership with the U.S. Department of Health and Human Services, Office of Child Support Enforcement, and participating states. These funds – $2.2 billion in FY 2012 – are repaid to states or provided to meet the needs of America’s families and children.” David A. Lebryk, Commissioner Bureau of the Fiscal Service 14

15 Treasury Offset Program (TOP) 15

16 Treasury Offset Program (TOP)  TOP is a centralized offset program administered by the U.S. Department of the Treasury, Bureau of the Fiscal Service, to collect delinquent debts owed to federal agencies and states.  TOP requires creditor agencies to provide debtors with due process, including proper notices and dispute opportunities, as well as the chance to repay debts over time.  TOP sends notices to debtors when payments are offset. For recurring payments, TOP sends warning notices. 16

17 17 TOP State Programs  State Income Tax Program (SIT) - TOP offsets federal tax refund payments to payees who owe delinquent state income tax obligations.  State Reciprocal Program (SRP) - TOP offsets federal vendor and other non-tax payments to payees who owe delinquent debts to state agencies. In return, states offset payments to payees who owe delinquent debts to federal agencies.  Unemployment Insurance Compensation (UIC) Debts - In partnership with the U.S. Department of Labor, TOP offsets federal tax refund payments to payees who owe delinquent unemployment insurance compensation debts due to fraud or a person’s failure to report earnings.  Child Support Program - States submit delinquent child support obligations to the Office of Child Support Enforcement (OCSE), which in turn submits the debts to TOP for collection through the offset of federal tax refund and other eligible payments.  Supplemental Nutritional Assistance Program - The Department of Agriculture-Food and Nutrition Service (FNS), in collaboration with state offices administering the Food Stamp Program, submit food stamp recipient debts to Treasury for offset of tax refund, federal vendor, salary, federal retirement, Social Security, Railroad Retirement, and state payments.

18 18 Child Support Debt Federal Tax Refund Payments Federal Non-Tax Payments (Vendor, Travel, Misc.) State Payments (Vendor, State Tax Refunds, Other) Unemployment Insurance Compensation Debt State Income Tax Debt Other State Debt Federal Non-Tax Debt Treasury Offset Program State Programs TOP Database State Programs Federal Programs SRP Child Support UIC State Income Child Support SRP KEY SRP - State Reciprocal Program UIC - Unemployment Insurance Compensation 20

19 TOP State Delinquent Debt Collections FY (in millions) 19

20 “Top 10” State Income Tax FY 2013 State NameOffset Count Net Collection Amount New York109,450$78,399,646 California62,957$62,630,671 Georgia86,605$59,036,609 Maryland62,709$55,952,945 Illinois80,040$29,856,628 Ohio31,157$25,051,894 Louisiana41,368$23,478,935 New Jersey40,095$23,108,897 Missouri38,792$22,005,051 Alabama72,416$20,421,065 Total – 40 States and DC941,828$602,891,886 20

21 21 State NameOffset Count Net Collection Amount Illinois22,631$37,644,933 New York27,460$28,027,989 Arizona30,793$21,465,606 Missouri16,335$20,219,263 Florida24,833$19,640,827 Arkansas22,852$19,293,275 Pennsylvania8,813$16,926,715 Tennessee18,497$16,142,684 Minnesota7,018$15,315,890 Wisconsin17,825$13,335,308 Total – 35 States and DC325,632$326,211,590 “Top 10” UIC FY 2013

22 State Reciprocal Program FY 2013 Collection Totals State NameOffset Count Net Collection Amount District of Columbia4,876$9,776,616 Maryland4,190$8,884,482 Kentucky4,173$8,560,700 New York2,992$4,215,694 New Jersey2,725$2,852,626 Minnesota1,317$2,029,548 Wisconsin860$1,043,479 West Virginia584$529,840 Total – All States27,717$37,892,985 22

23 Why Join SRP? What are the Benefits?  Ability to collect millions of dollars in unpaid debt annually  Access to federal non-tax payment offsets for the UIC and state tax programs  Recovery of valuable funds for federally sponsored programs  Opportunity to maximize your states’ debt collection potential 23

24 States Participating in Income Tax, SRP, & UIC in FY State NameOffset Count Net Collection Amount Maryland78,073$77,394,401 Kentucky27,508$27,172,083 New York139,902$110,643,329 New Jersey43,555$27,002,632 Minnesota18,198$23,948,965 Wisconsin27,389$23,832,004 West Virginia17,067$12,209,690

25 State Identified Challenges 25

26 Centralization  While centralizing a state’s debt portfolio and payment streams is ideal, it is not a requirement for participation in the program. TOP works with states to find a way to make the program work for their agency. Legislation  Fiscal Service is committed to assisting states with the process of obtaining legislation. In doing so, we provide: Sample legislation and support from the Fiscal Service legal team a Legislative Forum for State Attorney Generals/staff Funding Technology  States face challenges in funding new technology to connect with TOP in the current economic climate.  TOP is exploring options for Fiscal Service to support states. 26

27 TOP Solutions for States 27

28 The TOP Partial Match Process  Partial match occurs when the social security number (SSN) or employer identification number (EIN) of a TOP debtor matches the SSN or EIN of a payee, but the debtor’s name does not match the payee’s name.  States can obtain a list of these matches by requesting a Debtor Locator Report (DLR) from TOP.  If your state can verify that the individual or entity receiving the payment is the same individual or entity who owed the debt, your state may add the newly identified name variation to TOP as an alias for future payment offset. 28

29 TOP Legislation/Regulation Checklist for States Essential Items: While states must abide by all the terms of the reciprocal agreement, the following are most often affected by state legislation: Authority to offset state tax refunds - If the state issues any tax refunds, they must be subject to offset to collect federal debts. Authority to offset other state payments - Legislative authority should be broad enough to include all state payments specified in the reciprocal agreement. Authority for appropriate state official to submit state debts to TOP - TOP generally only accepts one or two points of connection with a state; so the authorized official(s) should be the officials that are capable of submitting the debt. Authority for Fiscal Service to deduct a fee from offset collections - Federal law requires that Fiscal Service charge a fee to cover its costs of running the TOP program. Fiscal Service withholds a portion of each collection it makes from a federal payment for a state as its fee. States are free to add that fee amount to the debt balance, if state law authorizes it. No authority to charge Fiscal Service a fee - Federal law does not permit Fiscal Service to pay a fee to the states when the state offsets a payment to collect a federal debt. Due process - State law cannot require Fiscal Service or federal agencies to provide different due process from that set forth in the agreement and in 31 CFR

30 What’s New with TOP? 30

31 TOP’s New Web Client Coming December 2013!  DMS is developing a new system to replace the current 15-year old system that will improve TOP efficiencies and increase TOP collections by enabling: Increases in payment streams that can be offset Increases in debt volume that can be collected by offset Improve matching logic For TOP users this change will appear seamless, as the new TOP Web Client does not require any system changes of users. 31

32 Benefits of TOP’s New Web Client  The new web client version will include the following benefits for users: Newly Enhanced User Screens Ability to view debt/debtor information in one place to include: Offset Activity, Non Offset Activity, Agency Refund and Reversal Activity Access to information on the File Receipt, Processing Status and Processing Statistics for Creditor Agencies Ability to view captured information for bypassed payments fully matched to a debt Capability to set bypass and override at the payment agency level Sign up online for TOP’s new Web Client training at 32

33 Expanding SRP Program TOP is seeking to identify new debt and payment streams from states currently in the SRP and those planning to join. Specifically, to identify: potential debt streams that may require statutory or regulatory changes potential payment streams that may require statutory or regulatory change 33

34 Working with States to Help Them Understand State Debts in TOP and How They Affect Federal Payments  State Debts in TOP Process: TOP will offset a payment when the Taxpayer Identification Number (TIN) of a state agency receiving a payment is the same as the TIN of the state agency owing the debt. TOP sends a letter notifying the payee state agency of the offset, if available. If not, TOP will use the debtor agency address.  TOP Report Designed for States Treasury Offset Division (TOD) can provide your state with a report to help identify debts owed by state agencies, and assist you with the resolution and payment of these debts. A written authorization from your state’s Comptroller is required for TOD to release this information at the beginning of each month. 34

35  New Online information Provided for States: How to resolve debts owed to the federal government Frequently Asked Questions A link to State Comptrollers on NASACT’s website Visit:  Working together with AGA, States and Federal Agencies to develop new pilots and solutions. 35 Working with States to Help Them Understand State Debts in TOP and How They Affect Federal Payments (2)

36 Increasing Communication and Soliciting Feedback with States TOP wants to hear directly from states about their challenges, experiences, best practices, and program recommendations for SRP. These are some of the new ways we are communicating with states:  Annual Report to the States  Offsets Matter – TOP’s bi-monthly news for states  Quarterly Meetings with Participating States  Industry Conferences and Meetings  Individual State Executive Meetings  Enhanced Customer Relationship Engagement (Pre and Post Implementation) View Offsets Matter online at 36

37 DMS/TOP Initiatives 37

38 The Partnership Fund for Program Integrity, Innovation, and Recovery of Federal/State Funds via the TOP Pilot  Various laws authorize Treasury to collect debts on behalf of States. Limited authority to offset certain types of payments to collect debts owed to States, namely Federal income tax refunds and benefit payments.  In January 2011, state representatives were invited to join the team to develop potential pilot programs including how to utilize the Treasury Offset Program to aid in collection.  In June 2011, OMB’s Partnership Fund provided funding for the pilot to gather data for these programs from participating states. Purpose: To simulate and test the concept of collecting debts arising out of Federally funded, state managed program debts through the TOP by intercepting Federal tax refunds and other Federal payments to delinquent debtors prior to disbursement. 38

39 The Partnership Fund for Program Integrity, Innovation, and Recovery of Federal/State Funds via the TOP Pilot  Seven states were selected to participate in the simulation: Arkansas, Illinois, Kansas, North Carolina, Texas, Washington, and Wisconsin  Programs included: Temporary Assistance for Needy Families Child Care Medicaid Foster Care Aid to Families with Dependent Children  One month of payment data (February 2011) from three federal sources: Federal income tax refunds (IRS) Retirement payments (OPM; 25%) Social security payments (SSA; 15%) 39

40  No actual offsets were processed during the simulation  Contractor evaluated and validated the pilot methodology Reviewed TOP processes Extrapolated pilot results to develop nationwide, 10-year estimates for state- submitted debt collection  Contractor Report includes: Summary of results by state, program and payment type Estimated costs Projected offsets Projected recovery rates Projected potential savings in ranges with low, medium and high results over 1, 5 and 10 year periods  Interagency report is being developed to accompany the contractor report (expected release date: November 2013) The Partnership Fund for Program Integrity, Innovation, and Recovery of Federal/State Funds via the TOP Pilot 40

41 41 David Burgess Phone: Website: TOP State Programs Contact

42 Do Not Pay Program 42

43 Do Not Pay Objectives  Strategic Provide agencies with centrally- provided, IPERIA- mandated & agency-driven information that helps them avoid and reduce and recover improper payments  Tactical Identify potentially improper payments by comparing agency payments to lists of ineligible recipients Provide agencies with: −analytical insights about payments to potentially ineligible recipients to help them identify systemic sources of improper payment and/or potential fraud −information about patterns of improper payments to help them identify systemic sources of improper payment and/or potential fraud −analytical insights about the sources of future improper payments 43

44 Do Not Pay Solution Pre-Payment Re-Verify or Monitor Program Eligibility for Payments Research Matches Post-Payment Trending & Analytics Reporting Corrective Action Pre-Award Verify Federal Award Eligibility User submits data for entities receiving payments or being monitored & receives matching results. Data Analytics Services staff analyze the data and trends and provide reports to support agency investigation and recovery efforts. User submits data for entities under consideration & receives matching results. Do Not Pay can be incorporated into all parts of the payments stream. It can be aligned with existing business processes and an agency’s mission. 44

45 45 Website: Phone:

46 46


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