Treasury Offset Program: How Federal and State Partnerships Can Cost Effectively Maximize Debt Recoveries National Association of State Auditors, Comptrollers, and Treasurers NASACT/TOP Training Webinar September 18, 2013 1

Opening Remarks Speaker Ronda Kent Speaker Alyssa Riedl Bureau of the Fiscal Service U.S. Department of the Treasury Speaker Alyssa Riedl Bureau of the Fiscal Service U.S. Department of the Treasury Moderator R. Kinney Poynter Executive Director NASACT Speaker James Keifer Compliance Administration District of Columbia Speaker Carol Marshall Collection Division State of Minnesota

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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.

FY 2012 Key Fiscal Service Statistics

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.

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.

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. 5514 and 31 U.S.C. 3701 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

Debt Collection Legal Authorities Among other things, debt collection laws govern: Type of due process required for various debt collection remedies 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: 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 Example: Debts that are subject to a stay under the Bankruptcy Code are not eligible for referral

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 $6.87 billion as of August 2013 (an increase of +13.68% as compared to the same period in FY2012) Treasury Offset Program - $6.72 billion as of August FY2013 Cross-Servicing Program - $153.5 million as of August FY2013 Cumulative collections over $60 billion since inception (1997)

TOP FY2013 Debt Collection Breakdown of $6.87B as of August 31, 2013 Tax Refund/Nontax Federal Debt $2.7 billion Administrative Offset/Nontax Federal Debt $587.6 million Tax Refund/Child Support Tax Refund/Unemployment Insurance Compensation Tax Refund/Other State Debts $1.9 billion $324.7 million $596.3 million Administrative Offset/State Debts (incl. child support) $43.3 million Tax Levy $555.3 million

TOP State Success Stories

The State of Mississippi $7 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.

The State of New York Recovers $51M in Fraudulently Collected Unemployment Insurance via TOP www.governor.ny.gov “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.” Andrew Cuomo, Governor State of New York

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.” Peter Franchot, Comptroller State of Maryland

Fiscal Year 2012 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 www.fms.treas.gov/debtTOP_annual_report_to_States_fy12.pdf

Treasury Offset Program (TOP) Alyssa Riedl Director, Debt Collection Program Management Directorate

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.

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.

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

TOP State Delinquent Debt Collections FY 2008 - 2013 (in millions) PROGRAM FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013* Income Tax $375.8 $368.1 $434.5 $475.5 $561.8 $596.6 State Reciprocal $27.7 $409.3 $22.5 $37.5 $53.8 $35.2 Unemployment Insurance Compensation Debts -- $25.8 $132.9 $324.8 Child Support $2,825.6 $2,181.1 $2,106.7 $2,312.8 $2,254.8 $1,932.0 SNAP $115.5 $89.8 $84.6 $102.5 $118.0 $117.7 Grand Totals: $3,344.6 $3,048.3 $2,648.3 $2,954.1 $3,121.3 $3,006.3 *As of August 31, 2013

“Top 10” State Income Tax CY 2012 State Name Offset Count Net Collection Amount California 71,672 $73,302,490 New York 93,657 $66,140,756 Maryland 67,859 $59,100,165 Georgia 33,008 $26,280,418 Louisiana 41,739 $25,990,030 Ohio 32,281 $25,667,138 Illinois 53,325 $23,528,935 Alabama 62,347 $19,492,688 Missouri 32,549 $19,383,596 New Jersey 31,808 $19,247,543 Total – 40 States and DC 850,065 $559,799,270

UIC CY 2012 Collection Totals State Name Offset Count Net Collection Amount Total Of Debt Referred Percent Collected Alabama 4,972 $3,631,792 $18,100,039 20.07% Arizona 8,978 $5,372,569 $85,618,651 6.27% Arkansas 346 $257,840 $65,688,581 0.39% Connecticut 1,653 $1,058,452 $24,119,445 4.39% District of Columbia 296 $358,513 $8,360,871 4.29% Georgia 243 $188,384 $15,508,863 1.21% Illinois 21,142 $21,142 $210,897,837 16.81% Louisiana 46 $63,392 $24,033,005 0.26% Maryland 11,426 $16,468,152 $99,551,103 16.54% Michigan 2,175 $5,591,231 $104,487,236 5.35% Minnesota 65 $106,288 $111,926,750 0.09% Mississippi 23,049 $14,579,094 $47,787,611 30.51% New Hampshire 25 $21,856 $8,234,002 0.27% New York 29,230 $29,848,406 $145,135,869 20.57% Pennsylvania 4,092 $9,534,640 $49,790,488 19.18% South Carolina 8 $4,903 $38,940,953 0.01% South Dakota 112 $72,651 $2,742,377 2.65% Tennessee 145 $128,234 $42,790,488 0.30% West Virginia 370 $223,761 $4,749,148 4.71% Wisconsin 8,068 $11,674,318 $87,298,004 13.37% Total – All States 116,441 $134,631,777 $1,195,674,226 11.26%

State Reciprocal Program CY 2012 Collection Totals State Name Offset Count Net Collection Amount Kentucky 2,846 $7,144,856 Maryland 2,587 $9,563,463 Minnesota 589 $1,184,011 New Jersey 2,600 $3,187,655 New York 2,472 $5,432,868 Wisconsin 861 $1,598,761 Total – All States 11,955 $28,111,615

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

States Participating in Income Tax, SRP, & UIC in CY2012 Name Offset Total Net Collection Maryland 81,872 $85,131,780 Minnesota 11,076 $8,016,527 New York 125,359 $101,422,030 Wisconsin 16,742 $21,035,244

State Identified Challenges

Centralization Legislation Funding Technology Other 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. Other

TOP Solutions for States

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.

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 285.6.

What’s New with TOP?

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.

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 www.fms.treas.gov/debt/training.html.

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

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.

Working with States to Help Them Understand State Debts in TOP and How They Affect Federal Payments (2) 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: www.fms.treas.gov/debt/TOP_state_debts.html Working together with AGA, States and Federal Agencies to develop new pilots and solutions.

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 www.fms.treas.gov/debt/offsetsmatter.html

The District of Columbia James Keifer Deputy Director, Compliance Administration

The District of Columbia TOP participant since 1997 Implemented the Reciprocal Offset Process in March 2013 at a cost of $401,695 Certified 43,845 Non-income tax debts, as new offset candidates, valued at $63 million $15.6 million collected in the first six months of participation

Debt Types Added Previously certified with TOP for Refund Offset were Individual Income Tax, Corporate Income Tax and Un-Incorporated Franchise Tax debts. Non-Income Tax Debts added for Administrative Offset: Sales and Use Tax Withholding Tax Personal Property Tax Motor Fuel Tax The District’s Ballpark Fee Specialized Events and Specialized Sales

Working Towards … Certifying debts for Administrative Offset for the following City Agencies: Employment Security Administration Central Collections Unit Adding additional offset eligible payment sources for the State Payment Offset

Why the District of Columbia was Interested in Participating in TOP Enhanced the District’s ability to resolve liabilities where 40% of its outstanding tax debt resides beyond its borders. The State Reciprocal Program, unlike TOP, is not limited to collecting from residents living within its legal borders, it allows collecting from debtors regardless of where they reside. The Federal Government is the District’s largest employer. We witnessed the pilot program successes of neighboring Maryland.

What the District of Columbia was Doing In the fall of 2009, the District had an automated tax refund offset process to satisfy city government debts, and … We participated in TOP The District did not have an automated intercept program to capture internal D.C. Government payments.

What a Closer Look Found Our internal intercept programs were inadequate. We did not have the necessary legislative support and did not have an adequate IT platform to identify and process intercepts The Treasury Offset Program (TOP) IT platform would need a complete re-design to accommodate the additional debt types and processing schedules The City-wide vendor payment accounting system, in its current state, was not capable of processing payment offsets.

With So Much to Consider – the District of Columbia Ran a Test TOP suggested that we provide them a file of debts eligible under the program guidelines In April, 2010, we submitted a limited file with a debt balance of $21 million TOP matched our debt file against their January 2010 payment file, and the unexpected result … 1,596 payment offsets valued at $4,001,978.63 A strong argument for DC to participate in the program

District of Columbia Addresses the Challenges Amended the District Tax Code to permit D.C. Treasury Offsets Developed an automated levy process to capture City contract payments to satisfy tax debts Realizing additional collections of $2 million annually

District of Columbia Addresses the Challenges (2) Introduced legislation to allow the District to participate in Treasury’s State Reciprocal Program. A Bill was drafted and sent to the City Council in November 2010 to amend chapter 1 of title 47 of the D.C. Official Code to provide authority for collecting debts through the United States Treasury Offset Program; authorizing the Chief Financial Officer to enter into an agreement with the Secretary of the Treasury, specifying reduction and offset of payments for collection of debt; authorizing payment of a fee to the Secretary of the Treasury; authorizing agency participation. Used Maryland’s legislative code as a model D.C. Code Section 47-143 became effective on April 8, 2011.

District of Columbia Addresses the Challenges (3) Program(s) Development Two accounting systems Tax based processing system (TAS) Debt management Tax refund processing Citywide System of Accounting and Reporting (SOAR) R*STARS Contract Vendor payment distributions

District of Columbia Addresses the Challenges (4) Identify all of the players Multiple City Agencies Multiple Administrations within each Agency Dedicated programming resources within each Agency Conflicting priorities and vision

TAS Development Modified the current TOP file process Retired the weekly debt recertification Installed new database tables to track and report changes Modernized our file transmission service Expanded TOP site I.D.s for improved payment controls Included non-income tax debts Modified the process of issuing tax refunds Delayed the refund approval by one day to allow for the notification cycle to complete Attached a review item to each potential refund to allow the refund to be identified but not issued Installed an auto release for each item to prevent a stalled refund request Modified the automated carry-over for FMS overpayments

Notice Redevelopment Modified our existing Enforcement Notice (certified mail) to include the Administrative Offset language Developed Offset Notification letters for payments captured for Federal Agencies Developed a Due Process notice, sent to every taxpayer with an outstanding District tax liability 103K notices mailed Unexpected but necessary cost

Due Process Notice

TAS Development (2) Payment Processing Dedicated bank accounts established to send and receive offsets Reports modified to reconcile accounts Funds distribution protocols developed

SOAR Development New liability offset subsystem developed Process to extract data from eligible payments, create a vendor extract file and transmit the file to Fiscal Service New rules for determining eligible payments based on vendor profiles, type and source of the payment Applications designed to process a match file of federal debts received from Fiscal Service Installed new payment work tables, liability match tables, escrow tables and a process for payment liquidations and transfers to escrow accounts

SOAR Development (2) Process to release escrowed payments Initiating payment release transactions Creating and transmitting to Fiscal Service the Vendor Update file Programs to process the FMS acknowledgement file Updating the liability tables, escrow tables and release tables Drafting entrees on the Notice of Payment Offset file that is forwarded to TAS for printing

SOAR Development (3) Reports Federal Liability Offset Capture Control report Auto Release to Vendor Control report Federal Liability Offset Vendor Release Control report Vendor Match File Detail Error report TOP Acknowledgment File Detail Error report Online references modified Existing online processing and inquiry applications were updated, new online screens added and training courses developed

What Could the District of Columbia Have Done Better What Could the District of Columbia Have Done Better? Recommendations for States Identify the players Define the requirements Limit the changes to the requirements Manage the late developing processes

The State of Maryland, As a Model

Maryland in the State Reciprocal Program (SRP) Offset Pilot After an August 2005 conference call with TOP, Maryland agreed to participate in the State Reciprocal Program pilot. The State has been a TOP participant since 1996. Implementation Timeline Tax based processing: 18 months Contract Vendor payment, R*STARS: 12 months Implementation Costs $1,314,629 contract costs plus other internal costs Recurring cost; for in-house personnel and maintenance

Maryland SRP Offset Pilot (2) Legislative process Comptroller worked with FMS to draft the initial legislation Passed without modifications Expanded debt file included Withholding Tax Corporate Income Tax Sales and Use Tax Admissions and Amusement Tax DLLR, Employment Security CCU, Central Collections Unit

Maryland in the SRP Offset Pilot (3) -- The Successful Results Reciprocal Offset Collections for the first 6 months, July through December 2007 was $12,508,452.45 In 2008, tax collections increased by about a factor of 8 while vendor offsets decreased by a factor of 3. Second year collections for the program exceeded $11 million. Vendors became aware of the process, continuing liabilities were being satisfied Total Reciprocal Offset receipts - $63,834,007

Maryland in the SRP Offset Pilot (4) – A Look Back at Important Project Notes The Comptroller had a well defined project plan with support from top level administrators As one of only two States in the project pilot, Maryland relied on FMS to guide them through the legal and regulatory issues The tax based system was modified by in-house developers while R*STARS required contractual assistance Refund offset processing was implemented first. The State vendor payment offset process experienced issues with batch process timing and was delayed. In the first full year, Maryland captured 6,345 State Income Tax refunds for Federal debts totaling $2,833,591.

Maryland’s Suggestion for Your State’s Success Ensure the project has a strong Project Manager that implements following established system development life cycle methodologies.

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Carol Marshall Revenue Tax Supervisor, Collection Division The State of Minnesota Carol Marshall Revenue Tax Supervisor, Collection Division

Minnesota Participation in TOP TOP Collection Totals in 2012 Department of Revenue (DOR) State Income Tax – 2001 State Reciprocal – May 2012 Department of Employment & Economic Development (DEED) Unemployment Insurance Compensation – Sept 2012 Department of Health & Human Services (DHS) Child Support

Minnesota Treasury Offset Programs FY2013 (July 2012 thru June 2013) State Income Tax (SIT) – (source DOR) $8.0 M State Reciprocal (SRP) – (source DOR) $1.8 M federal offsets/pay state debts (goal 3.8M) $9.6 M state offsets/pay federal debts $369,000 state offset fees/charged to debtor January thru July 2013 Unemployment Insurance Compensation (UIC) – (source Fiscal Service) $15.0 M

Minnesota Legislation State Reciprocal Program 2011 Special Legislative Session July 2011 State of Minnesota shutdown Enacted into law July 21, 2011 Section 270C.41 Subd. 2.Reciprocal offset agreements https://www.revisor.mn.gov/statutes/?id=270C.41 May charge an offset fee of $20 per transaction Offset cost from debtor Implement by April 23, 2012 Actual May 31, 2012 Collection Goals: FY 2012 - $500,000 and FY 2013 - $3.8 M = $4.3 M Option: Contingency Fee Agreement with a non-state vendor

Minnesota SRP Key Points Good Support by Legislature to implement law change SRP offsets federal payments for businesses too New Centralized Accounting Systems Department of Revenue – Gentax (FAST Enterprises) Replaced more than a dozen legacy systems Minnesota Management & Budget (MMB) – SWIFT Upgrade from Connect: Enterprise to Connect: Direct Manual to Automated Key Contacts Internally and Externally DOR MMB Fiscal Service

Minnesota SRP Challenges Identified Legislative Goals Implementation Date – April 23, 2012 Actual May 30, 2013 (goal $500,000) FY 2012 ended June 30, 2013 Formed a TOP “SRP” Team Business & Technical Project Managers Separate sub-teams to develop DOR and MMB process Intent to Offset Letters (60 day notice) Mailed prior to actual implementation

Minnesota SRP Challenges Identified (2) TAG Manual – Federal Agency vs. State Agency Information SRP Agreement, Security Agreement and MOU Definitions & Terms - Ex: Vendor Legal Taxpayer Rights Advocate New Accounting Systems – Delayed Implementation Systems – Conversion to Connect: Direct Delayed Needed key contacts for purchase, implement and test FMS/BPD Consolidation

Minnesota SRP Challenges Identified (3) Reversal Process for Invalid Offsets and Non-Liable Claims No prior testing - Process not clearly defined DOR acts as broker between Fiscal Service and MMB System limitations Identify Subject Matter Experts/Resources Collection – Legal – Technical – Security Agreement

Minnesota Recommendations/Solutions for States Provide more education Federal and state statutes Terminology/Definitions offsets, intercept, revenue recapture Understand all the processes (all stakeholders) Ongoing education of staff Establish clearly defined processes with all parties Disputes Hardship claims Non-liable spouse claims Reversal of claims

Minnesota Recommendations/Solutions for States (2) Certified Mail Requirement – Income Tax claims Eliminate this requirement and reduce our cost Currently $3.56 per letter 60,000 letters = $213,600 Refund of Overpayments State transmits updates daily – Fiscal Service pays weekly Recommend Fiscal Service pays more frequently Full refunds – we also refund Fed Offset fee - DOR General Budget

Minnesota Recommendations/Solutions for States (3) Partial Match Process Handled by TOP Staff Must participate in UIC (UIC managed by DEED not DOR) DOR does not currently have capability for aliases Have TOP staff handle for DOR DOR to research enhancing their system/process Testing More Testing Testing is Critical

Minnesota DOR Collection Division Established “Offset Program” Team – they’re the TOPS! Adjustments, reversals and refunds Non-liable spouse claims Disputes and hardship claims Subject matter experts Key contacts for staff, legal, TRA and FMS DOR refund process Refunds held 2 days pending a match to TOP federal file Businesses – majority of federal vendors with DOR debts Good collections results on non-Minnesota businesses Majority of state offsets for US Dept of Education debts Highest volume of non-liable spouse claims

Minnesota DOR Collection Division (2) Federal definition of “vendor” not clear Complaints from debtors, TRA office and legal regarding offsets of federal travel reimbursements Plain Language Initiative Declared by State of Minnesota Governor Mark Dayton All State Agencies DOR - Each Division has a Team Focus on Highest Volume Letters Top Priority – Intent to Offset letters sent by Collections September 5, 2013 first printing

Ronda Kent Deputy Assistant Commissioner, Debt Management Services DMS/TOP Initiatives Ronda Kent Deputy Assistant Commissioner, Debt Management Services

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.

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%)

The Partnership Fund for Program Integrity, Innovation, and Recovery of Federal/State Funds via the TOP Pilot 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)

Do Not Pay Program

Do Not Pay Objectives Tactical 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

Do Not Pay Solution 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. 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. User submits data for entities under consideration & receives matching results. Data Analytics Services staff analyze the data and trends and provide reports to support agency investigation and recovery efforts.

Questions? Speaker Ronda Kent Speaker Alyssa Riedl Bureau of the Fiscal Service U.S. Department of the Treasury Speaker Alyssa Riedl Bureau of the Fiscal Service U.S. Department of the Treasury Moderator R. Kinney Poynter Executive Director NASACT Speaker James Keifer Compliance Administration District of Columbia Speaker Carol Marshall Collection Division State of Minnesota

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District of Columbia Contact: James Keifer Email: James.Keifer@dc.gov Phone: 202-442-6800 Email: donotpay@stls.frb.org Website: www.donotpay.treas.gov Phone: 1-855-837-4391 88

State of Minnesota TOP State Programs Contact: Carol Marshall Email: Carol.Marshall@state.mn.us Phone: 218-365-8331 TOP State Programs Contact: David Burgess Email: stateoffsets@fms.treas.gov Phone: 202-874-7182 Website: www.fms.treas.gov/debt/TOP_state_prog.html