Treasury Offset Program - Institute for Modern Government

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Treasury Offset Program: How Federal and State
Partnerships Can Cost Effectively Maximize
Debt Recoveries
Modernizing Government Debt Collection Conference
Salem, Oregon
November 1, 2013
Bureau of the Fiscal Service
Mission
We exist to promote the financial integrity and operational
efficiency of the federal government through exceptional
accounting, financing, collections, payments, and shared
services.
Vision
We will transform financial management and the delivery of
shared services in the federal government.
2
FY 2012 Key Fiscal Service Statistics
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
3
Debt Management Services (DMS)
Mission
We exist to identify, prevent, collect and resolve debt
owed to government agencies.
Vision
We will transform government financial management as the
provider of choice for shared services related to improper
payments, receivables management, and delinquent debt
collection.
4
The Role of DMS

Assist federal and state agencies in the collection of
delinquent child support obligations, supplemental
nutrition assistance program (SNAP) debts, income tax
debts, unemployment insurance compensation debts,
and other federal and state debts.

Provides access to the Do Not Pay program for the
purpose of preventing, identifying and recovering
federally-funded improper payments.
5
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
6
Debt Collection Legal Authorities

Among other things, debt collection laws govern:
• Type of due process required for various debt collection
remedies
o Example: 60 days notice required before a tax refund
may be offset; 30 days notice required for most other
debt collection actions
• The amounts allowed to be collected through each
mechanisms:
o Example: TOP can offset 100% of a tax refund
payment, but no more than 15% of a Federal salary
payment; veterans benefit payments are exempt from
offset
• When debts may not be referred to Treasury for TOP
o Example: Debts that are subject to a stay under the
Bankruptcy Code are not eligible for referral
7
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 2013
o Cross-Servicing Program - $169.9 million as of
September FY 2013
• Cumulative collections over $60 billion since
inception (1997)
8
TOP State Success Stories
9
The State of Mississippi
$7.4 Million in Unemployment Fraud
Recouped in Seven Days
– WLBT: Mississippi News Now
WLBT, the Jackson, Mississippi, NBC affiliate aired a report in
February 2012 concerning the increased collection of
unemployment debts from those individuals collecting
unemployment benefits fraudulently.
WLBT reported that the Mississippi Department of Employment
Security had collected $7.4 million in its first week participating
in TOP. This means that Mississippi was able to recoup 12% of
their UIC debts in just the first seven days of using the program.
10
The State of New York
Recovers $51M in Fraudulently Collected
Unemployment Insurance via TOP
www.governor.ny.gov
“Once again, New York is at the forefront of efforts to protect
taxpayer dollars through preventing and collecting fraudulentlyobtained 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 fraudulentlyobtained benefits from people who don’t deserve them, and who
are in fact stealing from their fellow New Yorkers.”
Andrew Cuomo, Governor
State of New York
11
The State of Maryland
State Income Tax Program
“Maryland is leading the way in collecting back taxes,” said
Comptroller Franchot.” Given the fiscal challenges we face, it’s
critical we use all available resources to get any money owed to
the state.”
State Reciprocal Program
“The offset program we conduct with the federal government is
one of the most successful in the nation,” said Comptroller
Franchot.“It keeps growing because were able to quickly certify
more accounts to intercept.”
Peter Franchot, Comptroller
State of Maryland
12
The State of New Jersey
Christie Administration Saves NJ Employers from $211 Million in
Tax Hikes – Unemployment Trust Fund Becomes Solvent
– State of New Jersey, Office of the Governor, October 24, 2013
Governor Chris Christie announced that New Jersey employers will be
saving $211 million because his Administration’s anti-fraud reforms
and fiscal management practices will bring New Jersey’s
Unemployment Insurance Trust Fund into solvency next week and spare
businesses drastic tax increases.
One of the reforms highlighted that the Administration acted on to
protect and improve the Trust Fund was the Federal Treasury Offset
Program (TOP) which:
• Recovered $1 million since the program was implemented in June
2013
• With the Department of Labor, has offset unemployment
insurance compensation that was illegally collected by individuals
by seizing their federal income tax refund payments
• Is expected to net the fund more than $10 million over the next
year.
TOP Annual Report to the States
www.fms.treas.gov/debtTOP_annual_report_to_States_fy12.pdf
“We are proud of the work we do in
collecting delinquent child support, in
partnership with the U.S. Department of
Health and Human Services, Office of
Child Support Enforcement, and
participating states. These funds – $2.2
billion in FY 2012 – are repaid to states
or provided to meet the needs of
America’s families and children.”
David A. Lebryk, Commissioner
Bureau of the Fiscal Service
14
Treasury Offset Program (TOP)
15
Treasury Offset Program (TOP)

TOP is a centralized offset program administered by the
U.S. Department of the Treasury, Bureau of the Fiscal
Service, to collect delinquent debts owed to federal
agencies and states.

TOP requires creditor agencies to provide debtors with
due process, including proper notices and dispute
opportunities, as well as the chance to repay debts over
time.

TOP sends notices to debtors when payments are offset.
For recurring payments, TOP sends warning notices.
16
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.
17
Treasury Offset
Program
State Programs
TOP Database
KEY
SRP - State Reciprocal Program
UIC - Unemployment Insurance Compensation
Child Support Debt
Unemployment
Insurance
Compensation Debt
Federal Tax Refund
Payments
State
Income
State Income Tax
Debt
State Programs
Other State Debt
Federal Programs
Federal Non-Tax
Debt
20
SRP
SRP
Federal Non-Tax
Payments
(Vendor, Travel,
Misc.)
State Payments
(Vendor, State Tax
Refunds, Other)
18
TOP State
Delinquent Debt Collections
FY 2008 - 2013
(in millions)
PROGRAM
FY 2008
FY 2009
FY 2010
FY 2011
FY 2012
FY 2013
Income Tax
$375.8
$368.1
$434.5
$475.5
$561.8 $
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
19
“Top 10” State Income Tax
FY 2013
State Name
Offset
Count
Net Collection
Amount
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
941,828
$602,891,886
Total – 40 States and DC
20
“Top 10” UIC
FY 2013
State Name
Offset
Count
Net Collection
Amount
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
8,813
$16,926,715
Tennessee
18,497
$16,142,684
Minnesota
7,018
$15,315,890
Wisconsin
17,825
$13,335,308
325,632
$326,211,590
Pennsylvania
Total – 35 States and DC
21
State Reciprocal Program
FY 2013 Collection Totals
State Name
Offset
Count
Net Collection
Amount
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
27,717
$37,892,985
Total – All States
22
Why Join SRP?
What are the Benefits?




Ability to collect millions of dollars in unpaid debt annually
Access to federal non-tax payment offsets for the UIC and
state tax programs
Recovery of valuable funds for federally sponsored
programs
Opportunity to maximize your states’ debt collection
potential
23
States Participating in Income Tax,
SRP, & UIC in FY 2013
State Name
Offset
Count
Net Collection
Amount
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
24
State Identified Challenges
25
Centralization

While centralizing a state’s debt portfolio and payment
streams is ideal, it is not a requirement for participation in the
program. TOP works with states to find a way to make the
program work for their agency.
Legislation

Fiscal Service is committed to assisting states with the process
of obtaining legislation. In doing so, we provide:
• Sample legislation and support from the Fiscal Service legal team
• a Legislative Forum for State Attorney Generals/staff
Funding Technology


States face challenges in funding new technology to connect
with TOP in the current economic climate.
TOP is exploring options for Fiscal Service to support states.
26
TOP Solutions for States
27
The TOP Partial Match Process



Partial match occurs when the social security number
(SSN) or employer identification number (EIN) of a TOP
debtor matches the SSN or EIN of a payee, but the debtor’s
name does not match the payee’s name.
States can obtain a list of these matches by requesting a
Debtor Locator Report (DLR) from TOP.
If your state can verify that the individual or entity receiving
the payment is the same individual or entity who owed the
debt, your state may add the newly identified name
variation to TOP as an alias for future payment offset.
28
TOP Legislation/Regulation Checklist for States
Essential Items: While states must abide by all the terms of the reciprocal agreement, the
following are most often affected by state legislation:
• Authority to offset state tax refunds - If the state issues any tax refunds, they must be subject to
offset to collect federal debts.
• Authority to offset other state payments - Legislative authority should be broad enough to include
all state payments specified in the reciprocal agreement.
• Authority for appropriate state official to submit state debts to TOP - TOP generally only accepts
one or two points of connection with a state; so the authorized official(s) should be the officials that are
capable of submitting the debt.
• Authority for Fiscal Service to deduct a fee from offset collections - Federal law requires that
Fiscal Service charge a fee to cover its costs of running the TOP program. Fiscal Service withholds a
portion of each collection it makes from a federal payment for a state as its fee. States are free to add
that fee amount to the debt balance, if state law authorizes it.
• No authority to charge Fiscal Service a fee - Federal law does not permit Fiscal Service to pay a fee
to the states when the state offsets a payment to collect a federal debt.
• Due process - State law cannot require Fiscal Service or federal agencies to provide
different due process from that set forth in the agreement and in 31 CFR 285.6.
29
What’s New with TOP?
30
TOP’s New Web Client
Coming December 2013!

DMS is developing a new system to replace the current
15-year old system that will improve TOP efficiencies and
increase TOP collections by enabling:
• Increases in payment streams that can be offset
• Increases in debt volume that can be collected by offset
• Improve matching logic
For TOP users this change will appear seamless, as the new TOP
Web Client does not require any system changes of users.
31
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.
32
Expanding SRP Program
TOP is seeking to identify new debt and payment streams
from states currently in the SRP and those planning to join.
Specifically, to identify:
• potential debt streams that may require statutory or regulatory
changes
• potential payment streams that may require statutory or
regulatory change
33
Working with States to Help Them
Understand State Debts in TOP and
How They Affect Federal Payments

State Debts in TOP Process:
• TOP will offset a payment when the Taxpayer Identification Number
(TIN) of a state agency receiving a payment is the same as the TIN
of the state agency owing the debt.
• TOP sends a letter notifying the payee state agency of the offset, if
available. If not, TOP will use the debtor agency address.

TOP Report Designed for States
• Treasury Offset Division (TOD) can provide your state with a report
to help identify debts owed by state agencies, and assist you with
the resolution and payment of these debts.
• A written authorization from your state’s Comptroller is required for
TOD to release this information at the beginning of each month.
34
Working with States to Help Them
Understand State Debts in TOP and
How They Affect Federal Payments (2)

New Online information Provided for States:
• How to resolve debts owed to the federal government
• Frequently Asked Questions
• A link to State Comptrollers on NASACT’s website
Visit: www.fms.treas.gov/debt/TOP_state_debts.html

Working together with AGA, States and Federal Agencies to
develop new pilots and solutions.
35
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
36
DMS/TOP Initiatives
37
The Partnership Fund for Program Integrity, Innovation,
and Recovery of Federal/State Funds via the TOP Pilot

Various laws authorize Treasury to collect debts on behalf
of States.
•
Limited authority to offset certain types of payments to collect debts owed to
States, namely Federal income tax refunds and benefit payments.

In January 2011, state representatives were invited to join
the team to develop potential pilot programs including how
to utilize the Treasury Offset Program to aid in collection.

In June 2011, OMB’s Partnership Fund provided funding
for the pilot to gather data for these programs from
participating states.
•
Purpose: To simulate and test the concept of collecting debts arising out of
Federally funded, state managed program debts through the TOP by intercepting
Federal tax refunds and other Federal payments to delinquent debtors prior to
disbursement.
38
The Partnership Fund for Program Integrity, Innovation,
and Recovery of Federal/State Funds via the TOP Pilot

Seven states were selected to participate in the simulation:
•


Arkansas, Illinois, Kansas, North Carolina, Texas, Washington, and Wisconsin
Programs included:
•
Temporary Assistance for Needy Families
•
Child Care
•
Medicaid
•
Foster Care
•
Aid to Families with Dependent Children
One month of payment data (February 2011) from three
federal sources:
•
Federal income tax refunds (IRS)
•
Retirement payments (OPM; 25%)
•
Social security payments (SSA; 15%)
39
The Partnership Fund for Program Integrity, Innovation,
and Recovery of Federal/State Funds via the TOP Pilot

No actual offsets were processed during the simulation

Contractor evaluated and validated the pilot methodology


•
Reviewed TOP processes
•
Extrapolated pilot results to develop nationwide, 10-year estimates for statesubmitted 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)
40
TOP State Programs Contact
David Burgess
Email: [email protected]
Phone: 202-874-7182
Website: www.fms.treas.gov/debt/TOP_state_prog.html
41
Do Not Pay Program
42
Do Not Pay Objectives
 Strategic
•
Provide agencies
with centrallyprovided, IPERIAmandated &
agency-driven
information that
helps them avoid
and reduce and
recover improper
payments
 Tactical
• Identify potentially improper payments by
comparing agency payments to lists of
ineligible recipients
• Provide agencies with:
− analytical insights about payments to
potentially ineligible recipients to help
them identify systemic sources of
improper payment and/or potential
fraud
− information about patterns of
improper payments to help them
identify systemic sources of improper
payment and/or potential fraud
− analytical insights about the sources
of future improper payments
43
Do Not Pay Solution
Do Not Pay can be incorporated
into all parts of the payments
stream. It can be aligned with
existing business processes
and an agency’s mission.
Pre-Payment
• Re-Verify or
Monitor Program
Eligibility for
Payments
• Research Matches
Pre-Award
• Verify Federal
Award Eligibility
User submits data for
entities under consideration
& receives matching results.
Post-Payment
• Trending & Analytics
• Reporting
• Corrective Action
Data Analytics Services staff analyze
the data and trends and provide reports
to support agency investigation and
recovery efforts.
44
User submits data for entities
receiving payments or being
monitored & receives matching
results.
Email: [email protected]
Website: www.donotpay.treas.gov
Phone: 1-855-837-4391
45
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