performance audit report · r-11-008 performance audit report. accounts receivable: reviewing...

R-11-008

PERFORMANCE AUDIT REPORT

Accounts Receivable: Reviewing Agencies’ Efforts to Collect Amounts Owed to the State

A Report to the Legislative Post Audit CommitteeBy the Legislative Division of Post Audit

State of Kansas April 2011

Legislative Post Audit Committee Legislative Division of Post Audit

THE LEGISLATIVE POST Audit Committee and its audit agency, the Legislative Division of Post Audit, are the audit arm of Kansas government. The programs and activities of State government now cost about $13 billion a year. As legislators and administrators try increasingly to allocate tax dollars effectively and make government work more efficiently, they need information to evaluate the work of governmental agencies. The audit work performed by Legislative Post Audit helps provide that information.

We conduct our audit work in accordance with applicable government auditing standards set forth by the U.S. Government Accountability Office. These standards pertain to the auditor’s professional qualifications, the quality of the audit work, and the characteristics of professional and meaningful reports. The standards also have been endorsed by the American Institute of Certified Public Accountants and adopted by the Legislative Post Audit Committee.

The Legislative Post Audit Committee is a bipartisan committee comprising five senators and five representatives. Of the Senate members, three are appointed by the President of the Senate and two are appointed by the Senate Minority Leader. Of the Representatives, three are appointed by the Speaker of the House and two are appointed by the Minority Leader.

Audits are performed at the direction of the Legislative Post Audit Committee. Legislators

or committees should make their requests for performance audits through the Chairman or any other member of the Committee. Copies of all completed performance audits are available from the Division’s office.

The Legislative Division of Post Audit supports full access to the services of State government for all citizens. Upon request, Legislative Post Audit can provide its audit reports in large print, audio, or other appropriate alternative format to accommodate persons with visual impairments. Persons with hearing or speech disabilities may reach us through the Kansas Relay Center at 1-800-766-3777. Our office hours are 8:00 a.m. to 5:00 p.m., Monday through Friday.

LEGISLATIVE POST AUDIT COMMITTEE

Representative John Grange, ChairRepresentative Tom BurroughsRepresentative Ann MahRepresentative Peggy MastRepresentative Virgil Peck Jr.

Senator Mary Pilcher-Cook, Vice-ChairSenator Terry BruceSenator Anthony HensleySenator Laura KellySenator Dwayne Umbarger

LEGISLATIVE DIVISION OF POST AUDIT

800 SW JacksonSuite 1200Topeka, Kansas 66612-2212Telephone (785) 296-3792FAX (785) 296-4482E-mail: [email protected]: http://www.kansas.gov/postauditScott Frank, Legislative Post Auditor

HOW DO I GET AN AUDIT APPROVED?

By law, individual legislators, legislative committees, or the Governor may request an audit, but any audit work conducted by the Division must be approved by the Legislative Post Audit Committee, a 10-member committee that oversees the Division’s work. Any legislator who

would like to request an audit should contact the Division directly at (785) 296-3792.

LegisLature of Kansas

LegisLative Division of Post auDit

800 SouthweSt JackSon Street, Suite 1200topeka, kanSaS 66612-2212

telephone (785) 296-3792Fax (785) 296-4482

e-mail: [email protected]

April 21, 2011 To: Members, Legislative Post Audit Committee

Representative John Grange, Chair Representative Tom Burroughs Representative Ann Mah Representative Peggy Mast Representative Virgil Peck Jr.

Senator Mary Pilcher-Cook, Vice-Chair Senator Terry Bruce, Senator Anthony Hensley Senator Laura Kelly Senator Dwayne Umbarger

This report contains the findings, conclusions, and recommendations from our completed

performance audit, Accounts Receivable: Reviewing Agencies’ Efforts To Collect Amounts Owed to the State.

The report also contains an appendix containing a one-page profile for each of the six programs we reviewed in detail. These profiles provide specific information for each program, including a mission statement, a summary of collection best practices met, and a list of enforcement tools the program can use to collect delinquent recievables.

The report includes several recommendations for the Kansas Lottery, Kansas Department of Labor, Kansas Corporation Commission, and Department of Administration. We would be happy to discuss these recommendations or any other items in the report with any legislative committees, individual legislators, or other State officials.

Scott Frank Legislative Post Auditor

READER’S GUIDE

The Big Picture

Audit HighlightsThe highlights sheet,

inserted in each report, provides an overview of the

audit’s key findings

Conclusions and Recommendations

Located at the end of the audit questions, or at the

end of the report

Agency Response Included as the lastAppendix in the report

The Details

“At-a-Glance Box”

Table of Contents, and lists of figures and appendices

Lets the reader quickly locate key parts of the report

Used to describe key aspects of the audited agency;

generally appears in the first few pages of the main report

Side Headings Point out key issues and findings

Charts, Tables, and Graphs

Visually help tell the storyof what we found

Narrative Text BoxesHighlight interesting

information or provide detailed examples

This audit was conducted by Katrin Osterhaus, Amy Thompson, Lynn Retz, Joseph Cullen, and Julie Pennington. Justin Stowe was the audit manager. If you need any additional information about the audit’s findings, please contact Katrin Osterhaus at the Division’s offices.

Legislative Division of Post Audit800 SW Jackson Street, Suite 1200

Topeka, Kansas 66612

(785) 296-3792E-mail: [email protected]

Web: http://www.kansas.gov/postaudit

List of FiguresFigure 1-1: Summary of LPA Survey Responses Related to Agency Adherence for 10 Selected Best Practices ...............................................................................................page 06Figure 1-2: Summary of Accounts Receivable Information for Six State Agency Programs We Selected for Detailed Review ...........................................................................page 08Figure 1-3: Overall Assessment of How Well Six State Agency Programs Adhered to Collection Best Practices for Accounts Receivable .............................................................page 09

List of AppendicesAppendix A: Scope Statement .................................................................................................................page 21Appendix B: Profile Information for Six Audited Agency Programs ..........................................................page 22Appendix C: Agency Responses ..............................................................................................................page 29

Table of ContentsQuestion: Could State Agencies Improve the Collection of Delinquent Accounts Receivable?

Many State Agencies Could Improve Their Debt Collection Efforts. ....................................................... page 05

Three of the Four Programs With Poor Collection Efforts Also Had Inadequate Collection Policies. ................................................................................................................ page 10

Three out of the Four Poor-Performing Programs Did Not AdequatelyMonitor Accounts Receivable. ..................................................................................................................page 11

All Four Poor-Performing Programs Were Not Aggressively Pursuing Accounts Receivable. ...............................................................................................................................page 11

If the Four Programs Improved Their Collection Efforts, They May Be Able to Collect a Significant Amount of Additional Revenue. ............................................................. page 14

Not All of the $2 Billion In Accounts Receivable Shown on the States’ Financial Report Is Collectible. ................................................................................................................ page 15

Conclusion . ................................................................................................................................ page 17 Recommendations for Executive Action . ................................................................................ page 18

PERFORMANCE AUDIT REPORT:Legislative Division of Post AuditR-11-008 April 2011

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Accounts Receivable: Reviewing Agencies’ Efforts To Collect Amounts Owed to the State

Citizens expect the State to collect revenues in an efficient and timely manner. Accounts receivable are uncollected revenues such as taxes, fees, and fines that individuals, businesses, agencies, and other governmental agencies owe the State. Currently, various State agencies have accounts receivable that are overdue.

In 1981, Kansas established the Setoff Program in the Department of Administration to assist agencies in collecting delinquent accounts receivable. Through this program, the Director of Accounts and Reports can “set off” moneys the State owes debtors against moneys owed to the State. To accomplish this, the Setoff Program matches tax refund, payroll, and pension payments in process against debts owed to the State, and withholds those payments accordingly.

In 2008, the Washington State Auditor’s office found that in six state agencies, staff didn’t always follow collection best practices, and that doing so potentially could have generated $15.6 million a year in revenues.

Legislators have expressed interest in knowing the extent to which improving State agency collection practices could result in increased revenues for the State.

This performance audit answers the following question:

Could State agencies improve the collection of delinquent accounts receivable?

A copy of the scope statement for this audit approved by the Legislative Post Audit Committee is included in Appendix A.

To answer this question, we reviewed collections literature, talked to Department of Administration staff, reviewed applicable statutes, and identified a number of best practices and requirements related to accounts receivable collection efforts. We compared those practices to the collection policies and practices for six programs within five State agencies. As part of that work, we randomly selected a number of delinquent accounts receivable for each program and compared collection actions to certain best practices.

PERFORMANCE AUDIT REPORT:Legislative Division of Post Audit

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We also interviewed agency officials in charge of these programs’ accounts receivable, and reviewed their collection policies and procedures to evaluate whether the program had good collection practices in place, or whether it could improve its efforts.

Additionally, we reviewed the State’s accounts receivable information related to the State’s Comprehensive Annual Financial Report. Lastly, we surveyed officials from all State agencies about the amount and types of accounts receivable, and how they thought they incorporated certain best practices in their collection efforts. We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

We provided management letters to Kansas State University and the Kansas Lottery to convey minor findings not discussed in the report. Our findings begin on page 5, following a brief overview.


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Overview of the State’s Accounts Receivable System

State Agencies Individually Manage Their Accounts Receivable, But the Department of Administration Assists in Several Ways

For the State, accounts receivable represent moneys expected to be collected for unpaid taxes, overpayments, fines, or goods and services provided. According to the State’s financial report, the State was owed about $2 billion in accounts receivable as of June 30, 2010. Debts owed to the State fall into two general categories:

Debts owed by governmental entities z in the form of federal receivables, or grants and loans to other entities.

Debts owed by individuals, businesses, or other non-government zentities for taxes, benefit overpayments, fees, fines, or for unpaid goods and services.

The risk of not collecting money from non-government entities tends to be greater, which means evaluating collection activities becomes more important for programs with those types of receivables. As a result, this report focuses on programs with debts owed by individuals and businesses.

The State’s accounts receivable system is decentralized across State agencies. That’s because:

State agencies are individually responsible for managing and zcollecting the debts owed to them. With few exceptions, the responsibility for managing and collecting debts generally falls to agency fiscal and accounting staff. Consequently, debt collection processes vary across the State.

Few agencies currently use the State’s centralized accounting zsystem to track accounts receivable. Although agencies must use certain functions of the State’s central accounting system (SMART), the accounts receivable function is voluntary. According to the Division of Accounts and Reports, only 11 State agencies currently use SMART to manage their accounts receivable. That’s because:

Some agencies cannot use SMART because it isn’t federally ¾certified. For example, accounting systems for federal programs such as the Food Stamp or Child Care Assistance Program must be approved by the appropriate federal department.

Other agencies have sophisticated needs that SMART cannot ¾easily meet. For example, as the State’s main tax collection agency, the Department of Revenue has created a complex computer system to manage its large and complex accounts receivable.

Because much of the accounts receivable information doesn’t run through the State’s central system, the Department of Administration relies on agencies to individually report certain receivable information to compile the State’s financial report.


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The Division of Accounts and Reports provides Statewide policies and manages the Setoff Program to help agencies collect their accounts receivable. Both efforts are described below.

Current Division policy specifies how State agencies should zmanage and collect accounts receivable. State law makes the Department of Administration responsible for establishing Statewide collection policies and requirements for State agencies to follow. Specifically, those policies require that all accounts more than 30 days past due are subject to collection actions, and that records must be maintained for each action taken to collect an account.

The Division’s Setoff Program helps State agencies, courts, and zmunicipalities collect delinquent debts. Created by law in 1981, the program allows the State to match debts owed to the State against State payments such as income tax refunds, unclaimed property, vendor payments, payroll, or unemployment support. During the 1990s, the program became available to municipalities and district courts. More information can be found in the box below.

The Division of Accounts and Reports has published a policy to inform State agencies and others of the availability of the Setoff Program, but agency participation in the program is voluntary.

Accounts receivable are measured at a specific point in time. Each agency—depending on their type of accounts receivable—may have both current and delinquent accounts receivable. For this report, we generally focused on agencies’ efforts to collect delinquent accounts receivable, or those that are past due.

Kansas’ Setoff Program Creates Another Avenue for State and Local Entities To Collect Debts Owed to Them

Created in 1981, the Department of Administration’s Setoff Program allows State agencies, municipalities or district courts to register a debt with the State’s Setoff Program. This program matches and offsets these debts against State payments such as income tax refunds, payroll, or unemployment support.

To submit a debt to the Setoff Program, agencies must provide the debtor’s name, social security number, a brief description of the debt, and the amount owed. The Division’s computer system constantly searches for possible matches between any registered debts and any impending State payments from tax refunds, unclaimed property, payroll, unemployment benefits, payments to vendors, or Kansas Public Employee Retirement System checks.

When Division staff confirm a computer match, the debtor is notified of the pending setoff. At that time, the debtor may file an appeal if he or she believes the information is incorrect. If no appeal is made within the time allowed, the Division offsets the debt with the State payment. As part of its services, the Division charges a 17% administrative fee from the debt owed to State agencies to help fund the program. The Division informs the entity of the collection, at which point payments are applied to the debt and monies are transferred to the State agency. State agencies are responsible for adjusting the debtor’s record to reflect receipt of the full amount received from the Setoff Program.

Also, because multiple entities may register accounts receivable from one individual or business, Kansas law specifies which debtor will receive payment from set-off first.

In fiscal year 2010, the Setoff Program collected more than $37 million dollars on behalf of State agencies, municipalities, and district courts. According to Division officials, few states have such a program, and Kansas may be the only State that allows municipalities to participate.


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Question: Could State Agencies Improve the Collection of Delinquent Accounts Receivable?

ANSWER-IN-BRIEF: Many State agencies could improve their debt collection efforts by strengthening their policies and adopting or better implementing additional best practices. Overall, four of the six programs we reviewed in detail failed to meet many of the collection best practices applicable to their operations. Three of the four programs with poor collection efforts had inadequate collection policies and didn’t adequately monitor accounts receivable. All four poor-performing programs are not aggressively pursuing accounts receivable, and several programs failed to fully use outside collection options such as the State’s Setoff Program. If the four programs improved their collection efforts, they may be able to collect a significant amount of additional revenue.

We also found that not all of the $2 billion in accounts receivable shown on the State’s financial report is fully collectible because it includes many older debts that are unlikely to be paid to the State. These and related findings are discussed in the following sections.

Many State Agencies Could Improve Their Debt Collection Efforts

The longer it takes an agency to collect on a debt, the less likely it becomes that the debt will ever be collected. Therefore, it’s considered best practice for an agency to contact its debtors early, often, and in a variety of ways. Past audits in Washington, Arizona, and Kansas, as well as other collections literature, emphasize the relationship between use of best practices and collection success.

As mentioned in the Overview, the Division of Accounts and Reports’ policy requires State agencies to follow certain minimum collection procedures for delinquent accounts. That policy is designed to standardize collection efforts across State agencies.

We selected a total of 17 best practices for our review based on the Division’s policy and our review of prior audits and relevant literature. Best practices we identified generally fall into four categories:

Sufficient Policies and Procedures z – Includes a comprehensive written document that specifies how and when to take applicable collection actions.

Monitoring Actions z – Includes establishing reasonable case loads, and reviewing data on performance of internal and external collection efforts.


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Collection Actions z – Includes making early, regular, and varied contact with debtors, establishing flexible payment options and schedules, and using private collection agencies.

Enforcement Actions z – Includes filing liens, taking legal action, or revoking debtors’ licenses.

Most State agencies with a significant amount of accounts receivable could improve their debt collection practices. We asked all 53 executive and judicial branch agencies that reported having $10,000 or more in accounts receivable during our audit to assess their adherence to ten of the most widely relevant and applicable collection best practices. Figure 1-1 below summarizes our survey results.

Best Practices - Accounts Receivable CollectionResponding

Agencies(a)

1. Policies and Procedures 1.1 Establish Sufficient Collection Policies and Procedures 52

2. Monitoring Activities 2.1 Establish Reasonable Case Loads 50

2.2 Monitor Internal Collection Efforts 51

2.3 Use Aging Reports to Monitor Collection Results 51

3. Internal Collection Activities 3.1 Contact Debtor Within 30 Days of Delinquency 50

3.2 Make Periodic Contact In a Variety of Ways 50

3.3 Offer Flexible Payment Options and Schedules 51

4. Enforcement Activities 4.1 Take Legal Action 51

5. Outside Collection Activities (b) 5.1 Refer Debts to the State's Setoff Program 52

5.2 Use Private Collection Agencies 52

Figure 1-1Summary of LPA Survey Responses Related to Agency Adherence for 10 Selected Best Practices

(a) Several of the 52 responding State agencies indicated that certain best practices were non-applicable to them.(b) For these two best practices, we simply asked agencies whether they used these services or not.Source: LPA analysis of unaudtied survey responses from State agencies.

0% 20% 40% 60% 80% 100%

Response Rates

As the figure shows:

The most commonly cited areas of weakness were z developing sufficient collection policies and procedures and taking legal action.

About two-thirds of the agencies reported that they don’t currently use zprivate collection agencies.


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More than one-fourth of the agencies reported that they don’t currently zuse the State’s Setoff Program.

Based on our detailed review of six programs (discussed in the next section), it’s likely that these survey results are optimistic. That’s because half of the programs we reviewed reported doing much better on the survey than what we concluded based our detailed evaluation. See Appendix B for this comparison.

The two programs whose mission and operations depended on collecting delinquent receivables adhered to best practices, while the other four programs we reviewed did not. We selected six programs across five State agencies based on their total accounts receivable from businesses and individuals, the age of those receivables, and other potential risk factors. Figure 1-2 on the next page provides a short description of the programs we selected and their receivables, which totaled $263 million at the time of our review.

To determine how well each of these six programs adhered to 17 important best practices, we reviewed policies and procedures and held interviews with agency staff. We also performed a review of a number of randomly selected accounts receivable at each program. We randomly selected invoices to help ensure the results of our review were unbiased, and that selected invoices were generally representative of delinquent accounts for each program. Figure 1-3 on page 9 shows our overall results of that work. A check mark in that figure indicates that the program met best practice based on our review of collection policies and processes, and a detailed file review of randomly selected delinquent accounts.

As the figure shows:

Two programs complied with almost all relevant collection best zpractices. The Department of Revenue’s Retailers’ Sales Tax Program and the Kansas State University Student Receivables Program both have a vested interest in collecting debts:

The Department of Revenue’s primary mission is to collect taxes ¾ . Aside from complying with the best practices we evaluated, we noted the Department also uses innovative practices such as posting warrant information on their website to increase collection success.

Kansas State University depends heavily on tuition and other ¾student receivables to fund their operations. While collecting receivables is not its primary mission, a recently completed audit showed that about half of the University’s fiscal year 2009 expenditures were funded with tuition revenues.


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Delinquent Total

Unemployment Insurance Tax Program

Collects: State unemployment insurance taxes from employers.

Employers don't pay their quarterly unemployment insurance taxes on time, or employers for which misclassified workers have been identified through the agencies' field investigations.

$12,802,532 $12,802,532

Benefit Overpayments Program

Collects: Unemployment benefit overpayments to program beneficiaries.

Program beneficiaries receive more unemployment benefits than they should have. This can happen for several reasons, including inaccurate wage information, unreported employment, or fraud.

$43,701,063 $52,762,556

Department of Revenue

Retailers' Sales Tax

Collects: Sales taxes on tangible property and on certain services from retailers.

Taxes are due on all sales of applicable tangible property and services. $175,102,499 $175,102,499

KansasCorporationCommission

Conservation Program

Collects: Fees, fines, and penalties primarily related to oil wells.

A business fails to pay for oil wells plugged by the Kansas Corporation Commission on their behalf, or other fees and penalties related to the Conservation Program.

$926,806 $993,452

KansasLottery

Lottery Tickets

Collects: Money owed by retailers for lottery tickets they have sold, but haven't paid for.

Retailers that sell lottery tickets and fail to pay for lottery tickets they have sold. $585,675 $2,966,593

Kansas State University

Student Receivables

Collects: Money owed by students for services or goods they haven't paid for.

Students don't pay for tuition, or for other expenses such as housing and parking.

$15,278,032 $18,617,576

$248,396,607 $263,245,209Total Accounts Receivable (Non-Governmental)

Figure 1-2Summary of Accounts Receivable Information for Six State Agency Programs

We Selected for Detailed Review (a)

(a) Accounts receivable totals reflect amounts at the time of our review.(b) Excludes a $4.3 million accounts receivable from the State of Kansas.Source: LPA summary of agency interviews, documents, and accounts receivable data provided by agency officials.

Departmentof Labor

ReceivablesAgency Program Description How Receivables Are Incurred

(b)(b)

Four programs failed to meet about half of the collection best zpractices applicable to their operations. For these programs, collection of delinquent receivables is not central to their mission and has little adverse effect on the agencies’ overall operations. Programs that failed to adequately address collection best practices included the:

Kansas Lottery Ticket Sales ¾Department of Labor Unemployment Insurance Tax ¾Department of Labor Benefit Overpayments ¾Kansas Corporation Commission Conservation ¾


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Revenue KSU Labor Labor KCC Lottery

Retailers'Sales Tax

StudentReceivables

Unemploy-ment

InsuranceTax

Benefit Over-payments Conservation Ticket Sales

1 Policies and Procedures1.1 Establish Sufficient Collection Policies and Procedures

2 Monitoring Activities 2.1 Establish Reasonable Case Loads N/A

2.2 Monitor Internal Collection Efforts

2.3 Use Aging Reports to Monitor Collection Results

2.4 Monitor External Collection Agency N/A N/A

2.5 Maintain Adequate Collection Records

3 Internal Collection Activities 3.1 Contact Debtor Within 30 Days of Delinquency

3.2 Make Periodic Contact In a Variety of Ways

3.3a Offer Flexible Payment Options

3.3b Offer Flexible Payment Schedules

3.4 Document Collection Efforts (for those over $25) (b)

3.5 Deny Further Credit (after 60 days delinquent) N/A N/A N/A N/A

3.6 Identify High-Risk Debtors / Intensify Collection Actions

4 Enforcement Activities4.1 Take Legal Action

4.2 Revoke or Deny Debtors License or Contract N/A N/A N/A N/A

5 Outside Collection Activities5.1 Refer Debts to the State's Setoff Program

5.2 Use Private Collection Agencies N/A (a)

Total Applicable Best Practices Met 15 of 15(100%)

14 of 15(93%)

7 of 13(54%)

7 of 14(50%)

7 of 16(44%)

7 of 17(41%)

Total Applicable Best Practices Not Met 0 of 15(0%)

1 of 15(7%)

6 of 13(46%)

7 of 14(50%)

9 of 16(56%)

10 of 17(59%)

Note: N/A means the best practice was not applicable to this particular program.(a) The use of outside collection agencies isn't permissible by the U.S. Department of Labor for this program until all efforts are exhausted and receivables are written off. (b) The agency had obtained an exemption from the Department of Administration to document three collection attempts.Source: LPA analysis of specific account receivable data, review of policies and procedure documents, and agency interviews.

Figure 1-3Overall Assessment of How Well Six State Agency Programs Adhered to Collection Best Practices

for Accounts Receivable

Best Practice

Best Practices Met Agencies with Inadequate Collection Efforts

= Selected program met best practice, based on LPA evaluation.

Because the programs we reviewed at the Department of Revenue and Kansas State University generally complied with the best practices we evaluated, they are largely excluded from the problem findings in this report.


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Three of the Four Programs With Poor Collection Efforts Also Had Inadequate Collection Policies

Having comprehensive policies and procedures on how to handle accounts receivable collections establishes expectations and helps ensure agencies do things consistently, despite changes in staff or management. Nevertheless, we found problems in this area.

Three programs either had inadequate collections policies or no written policies at all. The Department of Labor’s Benefit Overpayments Program did not have a written policy. Officials explained that policies are verbally conveyed, and told us they have started creating a formal policy.

Similarly, the documents we received for the KCC’s Conservation Program included sections from their financial database manual, but lacked many key best practices. Commission officials told us they follow the policy published by the Division of Accounts and Reports, but these policies were not referenced in any of the programs documents—which increases the risk that they won’t be followed.

Finally, the Kansas Lottery’s policy was often too vague in specifying collection timelines and appropriate actions, thus giving the finance director too much discretion in handling delinquent accounts.

The same programs that had inadequate collection policies also didn’t adhere to many of the best practices we evaluated. Figure 1-3 on the previous page shows that the three programs without sufficient policies and procedures also performed poorly overall. In addition, the programs with inadequate policies also deviated from several of the good policies they actually had.

For example, the Kansas Lottery’s policies specified that certain accounts receivable should be sent to the agency’s legal division for further collection attempts, and that certain retailers should be required to post a financial surety bond. Officials explained these policies “are available,” but had not been followed. Likewise, for the KCC’s Conservation Program, repeat invoices often were not sent out, as specified in their policies.

In contrast, the two programs that had strong collection policies were more likely to follow them. Kansas State University and the Kansas Department of Revenue both had strong and comprehensive policies that generally included the best practice elements we were looking for. Our review of a sample of accounts receivable showed that they consistently followed those policies.


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Three out of the Four Poor-Performing Programs Did Not Adequately MonitorAccounts Receivable

In order to successfully collect delinquent accounts, officials need to have accurate accounts receivable information that can be tracked easily to evaluate collection trends, and must be proactive in their efforts to collect delinquent receivables. We found that three programs struggled in this area, as described below.

Two programs lack good management information because of zcomputer system limitations and a lack of electronic records. For example, the Department of Labor’s Benefit Overpayments Program has an outdated computer system which requires accounts receivable amounts over $9,999 to be recorded as split transactions because of field size limitations. This prevents officials from systematically identifying large debtors who could be candidates for civil actions. It also increases the risk that activities on the account may not be properly recorded or evaluated.

The Kansas Lottery tracks accounts receivable in paper files, making it difficult and time consuming to identify trends and outliers, or to conduct other forms of monitoring. Because the details of each account are kept in separate paper files, agency officials must search through each file in order to know the status of the account. In addition, Lottery officials don’t put together an aging schedule to help evaluate whether collection activities need to be adjusted.

The Kansas Corporation Commission’s Conservation Program zreceivables data was inaccurate. Across the 545 invoices with about $993,000 in outstanding receivables, we identified 17 invoices totaling $37,600 for which only the amount was known (i.e., the agency didn’t know who owed the money or why they owed it). Agency officials agreed those should be written off as uncollectible. Furthermore, 5 of 32 (16%) randomly selected invoices we reviewed in detail should have reflected a different amount owed, or been removed from the system entirely. For example, one invoice for $500 should have been reduced to $127 because the Commission received a payment from the Setoff Program.

All Four Poor-PerformingPrograms Were Not Aggressively Pursuing Accounts Receivable

As previously mentioned, best practices emphasize the necessity of aggressively pursuing delinquent receivables. That’s because the older a receivable becomes, the more likely it is that it will not be paid.

None of the four programs consistently contacted debtors early, often, and in varying ways. Our review of agencies efforts in this area revealed that:

Collection activities took too long for an initial contact and staff zdidn’t follow up frequently enough. Our review of randomly selected invoices found these issues to exist at both of the Department of Labor programs. Additionally, within KCC’s Conservation Program, 26 of the 32 randomly selected delinquent accounts receivables we reviewed


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showed contact wasn’t made timely or at all. In one case, staff sent a $400 invoice to the business with a due date of December 29, 2007. The next action took place on March 12, 2008, in form of a demand letter from the Commission’s legal department. No further action was taken.

Collection activities were not intensified for high-risk debtors. z Agencies should consider the amount of accounts receivable as well as the history of a debtor when deciding whether to intensify collection efforts. All four programs had problems in this area. For example, the Kansas Lottery continued to extend credit to retailers that had consistently failed to pay for lottery tickets they had sold. In one particular case, the Kansas Lottery allowed a vendor to amass more than $80,000 in debt over the course of 20 months while still allowing the vendor to sell lottery tickets. This situation is described in more detail in the profile box on the next page.

The Department of Labor’s Benefit Overpayments Program relied zon letters as a single method of communicating with debtors. Many of the clients who had received an overpayment of unemployment benefits are more mobile due to the financial instability and hardship they are experiencing. As result, the program’s periodic letters are often undeliverable. Expanding the forms of contact may be more successful.

Two programs did not use the enforcement tools available to them. Enforcement tools can include statutory provisions such as liens and warrants and other legal actions, or business actions such as revoking licenses or placing a hold on an account. Interviews with agency officials and our review of randomly selected invoices showed that two programs failed to use all of the tools at their disposal in collecting delinquent receivables, as shown below.

The Department of Labor’s Unemployment Insurance Tax Program zoften failed to impose liens, or take progressively harsher legal actions for employers who had been unresponsive to liens.

The Kansas Lottery consistently failed to revoke retailers’ contracts to zsell lottery tickets, even after repeated non-payments.

Several programs failed to make sufficient use of outside collection options. When agencies have exhausted internal efforts to collect, additional avenues to collect on receivables include submitting them to the State’s Setoff Program or to outside collection agencies. When those processes are successful, the agency receives a net amount from what was collected, after the other entity gets to keep some of it. Our evaluation of selected programs found that:

Two programs did not use the State’s Setoff Program sufficiently zor timely. KCC’s Conservation Program only sent 6 of 25 applicable invoices we reviewed to the Setoff Program. The Department of Labor’s Unemployment Insurance Tax Program did not submit 10 of 14 delinquent accounts receivable to the program. Officials told us this


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didn’t happen because the computer system’s automatic referral mechanism was disabled in response to a change in law that allowed a 90-day extension for tax payments. While that action was necessary and appropriate to avoid sending receivables to the Setoff Program prematurely, the delinquent cases we reviewed still hadn’t been sent to the Program after the 90-day extension had passed.

The Kansas Lottery Allowed One Retailer To Accumulate More than $80,000 in Accounts Receivable

Retailers pay for lottery ticket sales through weekly electronic fund sweeps from their checking accounts. Occasionally, those sweeps are unsuccessful because the account being swept has insufficient funds. In those cases, the Kansas Lottery contacts the retailer and begins the collections process. According to the Kansas Lottery’s policies, a retailer’s ability to sell tickets may be revoked after four unsuccessful sweeps.

We identified one case where a vendor was allowed to amass more than $80,000 in debt while still being allowed to sell lottery tickets. The following figure shows how the balance accumulated over nearly two years:

As the figure shows, this retailer accumulated 21 insufficient fund transactions between November 2005 and July 2007. In spite of eight small payments the retailer made throughout this period to reduce its balance, the business accumulated a high of $80,330 in credit for unpaid Lottery tickets. During that period, the retailer provided Lottery officials with several reasons for not paying the invoices, including the owner trying to sell the business. Lottery officials finally terminated their contract with this retailer in late June 2007.

In September 2007, the retailer entered into a payment plan with the Kansas Lottery and currently is making payments of $200 per month to try to pay off this debt. Because the retailer has a payment plan and is making payments, the account has not been sent to the Setoff Program or to a third party collection agency. At the time of our review, this retailer had made payments towards the debt owed totaling $18,434 (however, $5,000 of this was prize money the owners won in 2007). The remaining balance was $73,130 and will not be paid off until 2041 under the current payment schedule. The Lottery doesn’t charge the business any interest on the debt owed.

We saw similar, more recent, examples of credit being extended for long periods of time at the Lottery, although none were extended as long or for so much money as in this particular case.

Accumulating Balance Totals for the Hilltop Convenience StoreNovember 2005 - July 2007

(a) This payment was a result of the Lottery off-setting a $5,000 second chance drawing prize claimed by the retailer owner against the retailer's debt.Source: LPA analyses of Lottery's debt balance history for Hilltop Convenience Store.

$

$20,000

$40,000

$60,000

$80,000

Nov-05 Jul-07

Lottery contract revoked; $200 monthly payment plan started.

(a)


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The Department of Labor does not use a collection agency, even zthough we think it may be able to in certain situations. For both programs we reviewed, Department officials told us federal law prevents them from engaging an outside collection agency. While our limited review and discussions with federal officials generally supported this claim, it appears possible to use outside contractors for both programs in certain instances. This issue is especially important to explore because of Department staff shortages, and the quickly rising accounts receivable amounts in the Benefit Overpayments Program.

Similar to our findings, a federal audit found the Department of Labor’s Benefit Overpayments Program deficient in its prevention, detection, investigation, collection, and prosecution for overpayments. That review is described further in the profile box below.

A 2009 Federal Audit Cited the Department of Labor’s Benefit Overpayments Program For Problems with Timely and Effective Collection of Receivables

During our work, Department of Labor staff told us staff shortages and backlogs within the Benefit Overpayments Program are to blame for much of the problems we identified throughout our fieldwork. In addition, a 2009 review by the U.S. Department of Labor’s Employment and Training Administration concluded the program didn’t recover moneys timely and effectively, with debt collections delayed by four to six months. That was due in part to the program’s organizational and staffing issues. Among other things, that audit recommended that the State provide the Department of Labor with sufficient staff to better recover receivables, and to restructure the program to combine the investigations and collections unit under a single manager.

Within this program, benefit overpayments have grown from $38.5 million in June 2010 to $52.8 million by February 2011. This increase is a result of increasing unemployment claims, which has subsequently led to an increase in claim overpayments. Agency officials told us they recently have reorganized the program to combine several units under one supervisor, as suggested by the 2009 federal review. In addition, they said the program received three additional staff, and the Department initiated cross-training to help coverage during staff absences. Based on our inquiries about additional avenues to improve this programs’ performance, officials said they are exploring the use of the federal tax offset program through the IRS, streamlining daily functions, and better training and more accountability of their staff. Officials also told us that under the previous administration improving collections against claimants had not been a priority, and therefore hadn’t been implemented.

Hiring additional permanent State employees in this budget climate may not be a realistic way of addressing the problem with receivables. Officials from other states told us about other ways they’ve addressed the issue. In Missouri they’ve hired temporary staff to deal with workload issues. In Minnesota they have contracted out the collections for overpayments to the State’s Department of Revenue.

If the Four Programs Improved Their Collection Efforts, They May Be Able To Collect A Significant Amount Of Additional Revenue

As Figure 1-3 on page 9 showed, four of the six programs we reviewed could improve their collection efforts considerably. In this section we attempted to quantify the amount of money those four programs could have generated through better collection efforts.

It’s important to note that the four programs’ deficiencies in accounts receivable collections generally don’t affect the State General Fund directly. The Department of Labor’s accounts receivable situation negatively affects its Unemployment Security Trust Fund which is used to pay unemployment benefits to eligible Kansans. The Kansas


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Corporation Commission is a fee-funded agency, and the Kansas Lottery collects money mostly for the Economic Development Initiatives Fund.

If the four programs with significant collection deficiencies had collected just 5% more of their delinquent receivables, they would have generated almost $3 million in one-time revenues. We could not accurately estimate how much more our sample programs could have collected had better collections efforts been in place. However, to help put this issue in context, we calculated the financial impact of a modest increase in debt collection for applicable programs we reviewed. Most of this money comes from the sizable accounts receivable at the Department of Labor.

We think this 5% calculation is both reasonable and conservative. For example, the Kansas Lottery could have avoided about $117,000, or about 20% of its total delinquent accounts receivable, by following its own policies and placing a hold on a retailer’s ability to sell lottery tickets after several non-payments.

Not All of the $2 Billion In Accounts Receivable Shown on the State’s Financial ReportIs Collectible

OTHER FINDINGS

As mentioned in the Overview, staff within the Division of Accounts and Reports collect accounts receivable information from State agencies and assemble that information for the State’s annual financial report. Through our review, we identified several problems with that information.

The Division of Accounts and Reports doesn’t systematically determine how much of the State’s accounts receivable may be uncollectible. Generally, “doubtful” accounts are estimated and subtracted from accounts receivable to better reflect how much can realistically be collected. State financial auditors told us that agencies that account for the majority of the receivables reported in the State’s financial statements, such as the Department of Revenue and the Department of Health and Environment, exclude doubtful accounts from their reported receivables.

However, a number of State agencies do not consistently report aging or doubtful account information to the Division, and their receivables are not reviewed by the Division or the financial auditors to ensure they reflect only collectible assets for the purposes of the financial statement. Consequently, it’s likely that a portion of the reported $2 billion in accounts receivable is uncollectible.


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Our work showed much of the debt owed to State agencies is older, reducing the likelihood of actually collecting those aged accounts receivable. Our survey results of all State agencies, and our in-depth review of six programs, showed the following:

Agencies we surveyed reported that almost 80% of the more than z$1 billion of accounts receivables from businesses and individuals is at least 90 days old.

Five of our six programs we reviewed in detail reported that 70% zof their accounts receivable were more than one year old. The sixth program—Student Receivables at KSU—used different aging categories. Details on each programs’ aging of delinquent accounts receivable are shown in Appendix B.

Agencies’ ability to collect old receivables varies with the State programs they manage. For example, receivables from unemployed individuals likely take longer to collect than regularly scheduled retailer sales taxes from businesses. In other words, there is no standard point in time in which an old receivable becomes uncollectible.

Still, collections literature is clear: every day a debt goes unpaid increases the chance that it will never be collected. Consequently, the age of many of the State’s receivables is cause for concern.

Agencies have little incentive to write off uncollectible debts owed to them. When agencies write off accounts receivable, the asset is removed from the agency’s financial data and assigned to the Division of Accounts and Reports (this is different from the Setoff Program, in which the account will remain at the agency while also being tracked by the Division).

Any funds the Division collects from written-off accounts receivable are remitted to the State Treasurer for deposit in statutorily specified funds. Essentially, the agency loses control and receives no financial benefit if subsequent collection occurs.

Agencies may have other reasons for keeping accounts receivables on their books. For example, the Department of Revenue has certain statutory limitations for when receivables can be written off. At the Kansas Corporation Commission, officials told us they hope for changes in the federal law that would enable them to expand their collection efforts across State lines for its Transportation Program (not part of this audit).


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The estimated accounts receivable figures reported in the State’s financial report are missing debts owed to some agencies, and some of the amounts are not verified. Currently, Division staff do not ensure that all agencies report their accounts receivable as required. For example, through our survey we identified several agencies with receivables of at least $1 million that weren’t reported to the Division. Division officials also told us they do not verify any of the accounts receivable information agencies report to them.

The State’s financial auditors audit accounts receivable as part of the Statewide financial audit. The purpose of that audit is to provide reasonable assurance that the financial statements are fairly stated and free of material misstatements. Because the materiality level (i.e., how large an error has to be to affect the audit findings) for the Statewide financial audit is much greater than for this audit, the estimate of total accounts receivable in the State’s financial statements could be somewhat inaccurate without affecting the opinion of the financial auditors.

Conclusion: Because each agency is in charge of its own accounts receivable, collection practices do vary significantly from agency to agency. Our review of six programs showed that the policies and procedures adopted by management set the tone for how well the programs were equipped to collect delinquent accounts receivable. The programs that had comprehensive collections policies did a good job of monitoring, collecting, and using the enforcement tools available to them as necessary. Those without comprehensive policies struggled.

We also noted that debt collection is not the primary mission of most agencies, and isn’t often likely to negatively affect their operations. This increases the risk that collection efforts won’t be as aggressive or comprehensive as they should be.

Other than publishing policies on accounts receivable, the Division of Accounts and Reports does little to support agencies’ work in this area. Ultimately, State agencies are responsible for following through and making sufficient efforts to retrieve assets that belong to the State. As our findings show, failure to do so could lead to millions of dollars in lost revenues.


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Kansas Department of Labor:

4. To help ensure policies and procedures are in line with best practices and provide appropriate guidance to staff, the Department of Labor should:a. establish sufficient written policies and procedures for the

Benefit Overpayments Program, and ensure those policies include the best practices found to be deficient, as shown in Figure 1-3.

b. include policies on those best practices found to be deficient for the Unemployment Insurance Tax Program, as shown in Figure 1-3.

5. To help ensure that collection efforts occur timely and efficiently, the Department of Labor should:a. assess the staffing level throughout the Department and

determine what adjustments can be made with existing resources to help address backlogs in the Benefit Overpayments Program, and address collection activity issues within the Unemployment Insurance Tax Program. If current staffing levels are determined to be inadequate, the Department should request specific funding for temporary or permanent staffing from the Legislature.

Recommendations for Executive Action:

Kansas Lottery:

To help ensure its policies and procedures are in line with best 1. practices and provide appropriate guidance to staff, the Kansas Lottery should revise its policies to:

establish timely and firm deadlines for contacting retailers a. with delinquent payments, canceling retailer lottery contracts, and sending delinquent accounts to outside collection agencies (including the State’s Setoff Program).include policies on those best practices found to be deficient, b. as shown in Figure 1-3.

2. To help ensure agency officials have good management information to monitor and respond to retailers’ accounts receivable, the Kansas Lottery should establish an electronic collection tracking system and related aging reports and review the information periodically.

3. To help ensure credit is not extended to retailers with outstanding accounts, and that outstanding balances are collected more efficiently and timely, the Kansas Lottery should ensure existing policies (and necessary revisions) are enforced.


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b. prioritize collection receivables (in both programs), using the amount, age, previous payment history, or other indicators, to maximize the potential for collections to occur with limited resources.

c. address specific problems we cited related to its computer system to increase collection efficiencies within both programs. use the statutory enforcement tools available for employers d. neglecting or refusing to pay unemployment taxes including liens and levies.

e. refer delinquent employer unemployment tax receivables to the Division of Accounts and Reports Setoff Program.

f. explore when it might be appropriate to use private collection agencies with the Federal Department of Labor (both programs).

Kansas Corporation Commission:

6. To help ensure policies and procedures are in line with best practices and provide appropriate guidance to staff, the Kansas Corporation Commission should revise its policies to include those best practices found to be deficient, as shown in Figure 1-3.

7. To help ensure officials have good management information to monitor accounts receivable, the Kansas Corporation Commission should evaluate and verify all currently delinquent accounts receivable and write off debts that are uncollectible due to lack of information.

8. To help ensure that collection efforts occur timely and efficiently, the Kansas Corporation Commission should:a. make multiple and appropriate attempts to collect receivables.b. refer accounts receivables to the States’ Setoff Program as

well as its collections contractors when in-house collections efforts prove unsuccessful.

Department of Administration:

To help ensure State agencies are aware of, implement, and 9. follow Statewide policies and procedures for accounts receivable, the Department of Administration should:

periodically remind all State agencies about the policies and a. procedures to be followed on collection activities, and the availability of the Setoff Program.periodically provide training, workshops, or other b. informational sessions to help State agencies become more familiar and comfortable with proper accounts receivables management.


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periodically check State agencies’ adherence to the Division’s c. policies on collection activities.

10. To help ensure that the State’s annual financial report contains accurate accounts receivable information, the Department of Administration should:

annually remind a. all agencies to submit the proper forms to submit accounts receivable information and ensure all agencies submit the form.either require all agencies to fill out all information on the b. DA-32 form consistently so that the information can be used to build a more realistic and collectible accounts receivable asset, or reduce the amount of information the agencies have to provide.consider reviewing documentation to verify agencies’ reported c. accounts receivable on a sample basis.encourage agencies to write off debts when they determine d. that it is doubtful the debts will ever be collected.


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APPENDIX A

Scope Statement

This appendix contains the scope statement approved by the Legislative Post Audit Committee for this audit on November 18, 2010.

Accounts Receivable: Reviewing Agencies’ Efforts to Collect Amounts Owed to the State

Citizens expect the State to collect revenues in an efficient and timely manner. Currently, various State agencies have overdue accounts receivables. Receivables are uncollected revenues such as taxes, that private individuals, businesses, agencies or other governmental agencies owe the State.

In Kansas, agencies have accounts receivables in areas such as sales and income taxes, fees and dues, and fines and penalties. In 1981, Kansas established the Setoff Program in the Department of Administration to assist agencies in collection of delinquent accounts receivables. Through this Program, the Director of Accounts and Reports can “set off” moneys the State owes debtors against moneys owed to the State. To accomplish this, the Setoff Program matches tax refund, payroll, and pension payments in process against debts owed to the State, and withholds those payments accordingly.

In 2008, the Washington State Auditor’s office released a report examining receivables owed to six state agencies and those agencies’ collection practices. The audit found that agency staff didn’t always follow collection best practices, and that doing so potentially could have generated $15.6 million a year in revenues. Legislators have expressed interest in knowing the extent to which improving State agency collection practices could result in increased revenues for the State.

A performance audit in this area would address the following question:

1. Could State agencies improve the collection of delinquent accounts receivable? Toanswer this question, we would identify appropriate best practices and compare those practices to collection policies and practices for a selection of State agencies. For a sample of cases, we would evaluate whether collection efforts were timely, and whether they successfully recovered money owed to the State. We would review the age and amount of past due debts over time, as well as the percentage of successful collections to identify any trends. We would also review the results of the Setoff Program in terms of successful collection rates. We would conduct other work as necessary.

Estimated resources: 3 staff for 6-8 weeks (plus review)


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APPENDIX B

This appendix contains a one-page profile for each of the six programs we reviewed in detail. These profiles provide information such as agency mission statements, evaluation of best practices, and enforcement actions available. The programs we selected for review included:

Department of Revenue – Retailers’ Sales Tax Kansas State University – Student Receivables Department of Labor – Unemployment Insurance Tax Department of Labor – Benefit Overpayments Kansas Corporation Commission – Conservation Program Kansas Lottery – Lottery Tickets


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Current Accounts Receivable

DelinquentAccounts

Receivable

Total Accounts Receivable

$0 $175,102,499 $175,102,499

AgencyAssessment (a)

LPAAssessment

10 10

Business Enforcement Actions:

Place a Hold on the Account

Terminate License/Contract

Statutory Enforcement Actions:

Liens

Garnishments

Levies and Seizures

Tax Warrants/Civil Actions

ACCOUNTS RECEIVABLE FOR SELECTED PROGRAM, AS OF FEBRUARY 1, 2010

The mission of the Kansas Department of Revenue is to collect taxes and fees, administer the Kansas tax laws, issue a variety of licenses and provide assistance to Kansas citizens and units of government.

5.2 Use Private Collection Agencies

Program

Retailers' Sales Tax - A tax that businesses are required to charge on the retail sale of tangible personal property and on certain services, to be remitted to the State.

4.1 Take Legal Action

Kansas Department of Revenue - Retailers' Sales Tax Program

(a) Our survey required agencies to rate themselves on their overall adherence to these 10 best practices, while our LPA assessmentreflects our evaluation of the particular program we reviewed. Source: LPA analysis of agency records, statutes, interviews, and responses to our survey.

2.3 Use Aging Reports to Monitor Collection Results2.2 Monitor Internal Collection Efforts

3.1 Contact Debtor Within 30 Days of Delinquency3.2 Make Periodic Contact In a Variety of Ways

AGENCY MISSION

AGING OF $175,102,499 IN DELINQUENT ACCOUNTS RECEIVABLE AS OF FEBRUARY 1, 2011

ENFORCEMENT ACTIONS AVAILABLE

1.1 Establish Sufficient Collection Policies and Procedures

TOTAL

5.1 Refer Debts to the State's Setoff Program

COMPARISON OF SURVEY RESULTS AND LPA EVALUATION OF BEST PRACTICES

Best Practices

2.1 Establish Reasonable Case Loads

3.3 Offer Flexible Payment Options and Payment Schedules

2.0% 2.4% 1.1% 0.9% 1.6% 1.9%

90.2%

$0

$40,000,000

$80,000,000

$120,000,000

$160,000,000

$200,000,000

0 30days

31 60days

61 90days

91 120days

121150 days

151 180days

Over180 days


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DelinquentAccounts

Receivable


$3,339,544 $15,278,032 $18,617,576


LPAAssessment

N/A

8 9





Liens

Garnishments

Levies and Seizures




4.1 Take Legal Action3.3 Offer Flexible Payment Options and Payment Schedules



AGENCY MISSION


The mission of the Kansas State University is to provide higher education.

Students Receivable - Expenses incurred by a student for tuition, parking, housing, athletic tickets, health services and other services.

Program

Kansas State University - Student Receivables Program


2.3 Use Aging Reports to Monitor Collection Results3.1 Contact Debtor Within 30 Days of Delinquency

Best Practices


TOTALAGING OF $15,278,032 IN DELINQUENT ACCOUNTS RECEIVABLE

AS OF FEBRUARY 16, 2011ENFORCEMENT ACTIONS

AVAILABLE



18.6%25.6%

0.8% 0.9% 3.3% 2.5%

48.3%

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

0 30days

31 60days

61 90days

91 120days

121150 days

151 180days

Over180 days


25


Delinquent Accounts

Receivable


$0 $16,693,026 $16,693,026

Agency Assessment (a)

LPAAssessment

N/A (b)

8 4





Liens

Garnishments

Levies and Seizures



Best Practices


(a) Our survey required agencies to rate themselves on their overall adherence to these 10 best practices, while our LPA assessmentreflects our evaluation of the particular program we reviewed. However, Department of Labor officials were able to provide ratings at the program level in their assessment of best practices. (b) The use of outside collection agencies is not permissible by the U.S. Department of Labor for this program until the efforts are exhausted and the receivable is written off. Source: LPA analysis of agency records, statutes, interviews, and responses to our survey.




AVAILABLE


Kansas Department of Labor - Unemployment Insurance Tax Program

Program





The mission of the Kansas Department of Labor is to advance the economic well-being of all Kansans through responsive workforce services.

Unemployment Insurance Tax Program - The Kansas Department of Labor collects quarterly employment taxes from employers and assesses taxes on employers with misclassified workers.

AGENCY MISSION




29.6%

2.8% 5.6% 3.7%

58.2%

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

0 30 days 31 60 days 61 90 days 91 120 days Over 120days


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Delinquent Accounts

Receivable


$9,061,493 $43,701,063 $52,762,556


LPA Assessment

5 4





Liens

Garnishments

Levies and Seizures



Program





AGENCY MISSION



The mission of the Kansas Department of Labor is to advance the economic well-being of all Kansans through responsive workforce services.

Benefit Overpayments Program - This program is part of the claimant unemployment insurance program which provides benefits to eligible individuals. It focuses on the collection of benefit overpayments.

Kansas Department of Labor - Benefit Overpayments Program

(a) Our survey required agencies to rate themselves on their overall adherence to these 10 best practices, while our LPA assessmentreflects our evaluation of the particular program we reviewed. However, Department of Labor officials were able to provide ratings at the program level in their assessment of best practices. Source: LPA analysis of agency records, statutes, interviews, and responses to our survey.

2.3 Use Aging Reports to Monitor Collection Results3.1 Contact Debtor Within 30 Days of Delinquency3.2 Make Periodic Contact In a Variety of Ways

Best Practices




AVAILABLE


6.4% 6.5% 4.7% 6.5%

75.9%

$0

$7,500,000

$15,000,000

$22,500,000

$30,000,000

$37,500,000



27


DelinquentAccounts

Receivable


$66,646 $926,806 $993,452


LPAAssessment

7 4





Liens

Garnishments

Levies and Seizures




The mission of the Kansas Corporation Commission is to protect the public interest through impartial and efficient resolution of all jurisdictional issues associated with the rates, services, and safety of public utilities, common carriers, andmotor carriers. The agency regulates oil and gas production to protect correlative rights and environmental resources. Underground natural gas storage is regulated to ensure the safety of Kansans. The agency also promotes renewable energy and energy conservation.

Oil and Gas Conservation Program - Regulates the oil and gas industry.

Best Practices


AGENCY MISSION







TOTALAGING OF $926,806 IN DELINQUENT ACCOUNTS RECEIVABLE


AVAILABLE

Kansas Corporation Commission - Conservation Program

Program




4.2% 0.4% 0.4% 0.2%

94.8%

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000



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Delinquent Accounts

Receivable


$2,380,918 $585,675 $2,966,593


LPAAssessment

10 3





Liens

Garnishments

Levies and Seizures





5.1 Refer Debts to the State's Setoff Program5.2 Use Private Collection Agencies



AGENCY MISSION


The mission of the Kansas Lottery is to produce the maximum amount of revenue for the State of Kansas while ensuring the integrity of all games.

Lottery Tickets - The Kansas Lottery sells online and scratch off tickets

Program

Kansas Lottery - Lottery Tickets Program

(a) Our survey required agencies to rate themselves on their overall adherence to these 10 best practices, while our LPA assessmentreflects our evaluation of the particular program we reviewed. However, the Lottery only has accounts receivable for the Lottery Tickets Program.Source: LPA analysis of agency records, statutes, interviews, and responses to our survey.


Best Practices


TOTALAGING OF $585,675 IN DELINQUENT ACCOUNTS RECEIVABLE


AVAILABLE


7.6% 5.0% 5.3% 4.3% 0.5% 0.2%

77.2%

$0

$100,000

$200,000

$300,000

$400,000

$500,000

0 30days

31 60days

61 90days

91 120days

121 150days

151 180days

Over 180days


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APPENDIX C

Agency Response

On April 13, 2011 we provided copies of the draft audit report to the Departments of Administration, Labor, and Revenue, and to the Kansas Corporation Commission, Kansas Lottery, and Kansas State University. Their responses are included as this Appendix. The agencies generally concurred with the report’s findings, conclusions, and recommendations. We made minor changes or clarifications to the draft report as a result of the agencies’ review of the draft report.


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