treasury offset program: how federal and state partnerships can cost effectively maximize debt...
TRANSCRIPT
Treasury Offset Program: How Federal and State Partnerships Can Cost
Effectively Maximize Debt Recoveries
Modernizing Government Debt Collection ConferenceSalem, Oregon
November 1, 2013
Bureau of the Fiscal Service
MissionWe exist to promote the financial integrity and operational efficiency of the federal government through exceptional accounting, financing, collections, payments, and shared services.
VisionWe will transform financial management and the delivery of shared services in the federal government.
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FY 2012 Key Fiscal Service Statistics
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Daily Cash Flow Managed $94.4 Billion
Funds Disbursed Annually Nearly $2.4 Trillion
Payments Disbursed Annually Over 1 Billion Payments
Payments Disbursed via EFT Nearly 974 Million (88.3%)
Payments Disbursed via Check Nearly 129 Million
Funds Collected Annually Nearly $3.16 Trillion
Funds Settled Annually via EFT Over $3.07 Trillion (97.15%)
Delinquent Debt Collected $6.2 Billion
Child Support Collected $2.3 Billion
Electronic Federal Tax Payment System (EFTPS) Collections
Over $1.89 Trillion (over 97.9 million transactions)
Pay.gov Collections Over $95 Billion (nearly 94 million transactions)
Intragovernmental Payments and Collections (IPAC)
Nearly $82 Trillion (over 1 million transactions)
Government Account Series Investments
Nearly $5 trillion
Loans to Federal Agencies Nearly $979 billion
Daily Cash Flow Managed $94.4 Billion
Funds Disbursed Annually Nearly $2.4 Trillion
Payments Disbursed Annually Over 1 Billion Payments
Payments Disbursed via EFT Nearly 974 Million (88.3%)
Payments Disbursed via Check Nearly 129 Million
Funds Collected Annually Nearly $3.16 Trillion
Funds Settled Annually via EFT Over $3.07 Trillion (97.15%)
Delinquent Debt Collected $6.2 Billion
Child Support Collected $2.3 Billion
Electronic Federal Tax Payment System (EFTPS) Collections
Over $1.89 Trillion (over 97.9 million transactions)
Pay.gov Collections Over $95 Billion (nearly 94 million transactions)
Intragovernmental Payments and Collections (IPAC)
Nearly $82 Trillion (over 1 million transactions)
Government Account Series Investments
Nearly $5 trillion
Loans to Federal Agencies Nearly $979 billion
Debt Management Services (DMS)
MissionWe exist to identify, prevent, collect and resolve debt owed to government agencies.
VisionWe will transform government financial management as the provider of choice for shared services related to improper payments, receivables management, and delinquent debt collection.
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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.
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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
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Debt Collection Legal Authorities
Among other things, debt collection laws govern:• Type of due process required for various debt
collection remedieso Example: 60 days notice required before a tax
refund may be offset; 30 days notice required for most other debt collection actions
• The amounts allowed to be collected through each mechanisms: o Example: TOP can offset 100% of a tax refund
payment, but no more than 15% of a Federal salary payment; veterans benefit payments are exempt from offset
• When debts may not be referred to Treasury for TOPo Example: Debts that are subject to a stay under
the Bankruptcy Code are not eligible for referral
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Debt Collection Programs DMS collects delinquent debts for federal and state agencies
(non-tax and tax) primarily through two programs: the Treasury Offset Program (TOP) and the Cross-Servicing Program.
• DMS has collected a total of $7.02 billion as of September 2013 (an increase of +13.69% as compared to the same period in FY 2012)o Treasury Offset Program - $6.86 billion as of September
FY 2013o Cross-Servicing Program - $169.9 million as of
September FY 2013• Cumulative collections over $60 billion since inception
(1997)
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TOP State Success Stories
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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.
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The State of New York Recovers $51M in Fraudulently
Collected Unemployment Insurance via
TOPwww.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.”
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Andrew Cuomo, GovernorState 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.”
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Peter Franchot, ComptrollerState of Maryland
The State of New JerseyChristie Administration Saves NJ Employers from $211 Million in Tax Hikes – Unemployment Trust
Fund Becomes Solvent– State of New Jersey, Office of the Governor, October 24, 2013
Governor Chris Christie announced that New Jersey employers will be saving $211 million because his Administration’s anti-fraud reforms and fiscal management practices will bring New Jersey’s Unemployment Insurance Trust Fund into solvency next week and spare businesses drastic tax increases.
One of the reforms highlighted that the Administration acted on to protect and improve the Trust Fund was the Federal Treasury Offset Program (TOP) which:
• Recovered $1 million since the program was implemented in June 2013
• With the Department of Labor, has offset unemployment insurance compensation that was illegally collected by individuals by seizing their federal income tax refund payments
• Is expected to net the fund more than $10 million over the next year.
TOP Annual Report to the States
“We are proud of the work we do in collecting delinquent child support, in partnership with the U.S. Department of Health and Human Services, Office of Child Support Enforcement, and participating states. These funds – $2.2 billion in FY 2012 – are repaid to states or provided to meet the needs of America’s families and children.”
David A. Lebryk, Commissioner Bureau of the Fiscal Service
www.fms.treas.gov/debtTOP_annual_report_to_States_fy12.pdf
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Treasury Offset Program (TOP)
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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.
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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.
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Child Support Debt
Federal Tax Refund Payments
Federal Non-Tax Payments
(Vendor, Travel, Misc.)
State Payments(Vendor, State Tax
Refunds, Other)
Unemployment Insurance
Compensation Debt
State Income Tax Debt
Other State Debt
Federal Non-Tax Debt
Treasury Offset ProgramState Programs
TOP Database
State Programs
Federal Programs
SRP
SRP
SRP
Child Support
UIC
State Income
Child Support
SRP
KEYSRP - State Reciprocal Program UIC - Unemployment Insurance Compensation
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TOP State Delinquent Debt Collections
FY 2008 - 2013 (in millions)
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PROGRAM FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013Income Tax $375.8 $368.1 $434.5 $475.5 $561.8 605.1$ State Reciprocal $27.7 $23.9 $15.9 $36.3 $53.8 37.9$ Unemployment Insurance Compensation Debts -- -- -- $25.9 $132.9 326.2$ Child Support $2,825.6 $2,181.1 $2,106.7 $2,312.9 $2,254.8 1,951.0$ SNAP $115.5 $89.8 $84.6 $102.5 $118.0 119.1$
Grand Totals: $3,344.6 $2,662.9 $2,641.7 $2,953.1 $3,121.3 3,039.3$
“Top 10” State Income Tax FY 2013
State Name OffsetCount
Net CollectionAmount
New York 109,450 $78,399,646
California 62,957 $62,630,671
Georgia 86,605 $59,036,609
Maryland 62,709 $55,952,945
Illinois 80,040 $29,856,628
Ohio 31,157 $25,051,894
Louisiana 41,368 $23,478,935
New Jersey 40,095 $23,108,897
Missouri 38,792 $22,005,051
Alabama 72,416 $20,421,065
Total – 40 States and DC 941,828 $602,891,886
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State Name OffsetCount
Net CollectionAmount
Illinois 22,631 $37,644,933
New York 27,460 $28,027,989
Arizona 30,793 $21,465,606
Missouri 16,335 $20,219,263
Florida 24,833 $19,640,827
Arkansas 22,852 $19,293,275
Pennsylvania 8,813 $16,926,715
Tennessee 18,497 $16,142,684
Minnesota 7,018 $15,315,890
Wisconsin 17,825 $13,335,308
Total – 35 States and DC 325,632 $326,211,590
“Top 10” UIC FY 2013
State Reciprocal ProgramFY 2013 Collection Totals
State Name OffsetCount
Net CollectionAmount
District of Columbia 4,876 $9,776,616
Maryland 4,190 $8,884,482
Kentucky 4,173 $8,560,700
New York 2,992 $4,215,694
New Jersey 2,725 $2,852,626
Minnesota 1,317 $2,029,548
Wisconsin 860 $1,043,479
West Virginia 584 $529,840
Total – All States 27,717 $37,892,985
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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
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States Participating in Income Tax, SRP, & UIC in FY 2013
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State Name OffsetCount
Net CollectionAmount
Maryland 78,073 $77,394,401
Kentucky 27,508 $27,172,083
New York 139,902 $110,643,329
New Jersey 43,555 $27,002,632
Minnesota 18,198 $23,948,965
Wisconsin 27,389 $23,832,004
West Virginia 17,067 $12,209,690
State Identified Challenges
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Centralization While centralizing a state’s debt portfolio and payment
streams is ideal, it is not a requirement for participation in the program. TOP works with states to find a way to make the program work for their agency.
Legislation Fiscal Service is committed to assisting states with the
process of obtaining legislation. In doing so, we provide:• Sample legislation and support from the Fiscal Service legal team• a Legislative Forum for State Attorney Generals/staff
Funding Technology States face challenges in funding new technology to
connect with TOP in the current economic climate. TOP is exploring options for Fiscal Service to support
states.
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TOP Solutions for States
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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.
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TOP Legislation/Regulation Checklist for StatesEssential 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.
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What’s New with TOP?
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TOP’s New Web ClientComing 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.
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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.
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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
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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.
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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.
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Working with States to Help Them Understand State Debts in TOP andHow They Affect Federal Payments
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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
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DMS/TOP Initiatives
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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.
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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%)
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No actual offsets were processed during the simulation
Contractor evaluated and validated the pilot methodology• Reviewed TOP processes
• Extrapolated pilot results to develop nationwide, 10-year estimates for state-submitted debt collection
Contractor Report includes:• Summary of results by state, program and payment type
• Estimated costs
• Projected offsets
• Projected recovery rates
• Projected potential savings in ranges with low, medium and high results over 1, 5 and 10 year periods
Interagency report is being developed to accompany the contractor report (expected release date: November 2013)
The Partnership Fund for Program Integrity, Innovation, and Recovery of Federal/State Funds via the TOP Pilot
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David BurgessEmail: [email protected]
Phone: 202-874-7182Website: www.fms.treas.gov/debt/TOP_state_prog.html
TOP State Programs Contact
Do Not Pay Program
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Do Not Pay Objectives
Strategic• Provide agencies
with centrally-provided, IPERIA-mandated & agency-driven information that helps them avoid and reduce and recover improper payments
Tactical• Identify potentially improper
payments by comparing agency payments to lists of ineligible recipients
• Provide agencies with:− analytical insights about
payments to potentially ineligible recipients to help them identify systemic sources of improper payment and/or potential fraud
− information about patterns of improper payments to help them identify systemic sources of improper payment and/or potential fraud
− analytical insights about the sources of future improper payments43
Do Not Pay Solution
User submits data for entities receiving payments or being monitored & receives matching results.
Data Analytics Services staff analyze the data and trends and provide reports to support agency investigation and recovery efforts.
User submits data for entities under consideration & receives matching results.
Do Not Pay can be incorporated into all parts of the payments stream. It can be aligned with existing business processesand an agency’s mission.
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