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

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

3. FY 2012 Key Fiscal Service Statistics

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

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

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

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

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

9. TOP State Success Stories

10. The State of Mississippi $7
The State of Mississippi $7.4 Million in Unemployment Fraud Recouped in Seven Days – WLBT: Mississippi News Now
WLBT, the Jackson, Mississippi, NBC affiliate aired a report in February 2012 concerning the increased collection of unemployment debts from those individuals collecting unemployment benefits fraudulently.
WLBT reported that the Mississippi Department of Employment Security had collected $7.4 million in its first week participating in TOP. This means that Mississippi was able to recoup 12% of their UIC debts in just the first seven days of using the program.

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

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

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

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

15. Treasury Offset Program (TOP)

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

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

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

19. TOP State Delinquent Debt Collections FY 2008 - 2013 (in millions)

20. “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
Total – 40 States and DC
941,828
$602,891,886

21. “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
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

22. 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
Total – All States
27,717
$37,892,985

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

24. 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

25. State Identified Challenges

26. Centralization Legislation Funding Technology
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.

27. TOP Solutions for States

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

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

30. What’s New with TOP?

31. TOP’s New Web Client Coming December 2013!
DMS is developing a new system to replace the current 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.

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

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

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

35. 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:
Working together with AGA, States and Federal Agencies to develop new pilots and solutions.

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

37. DMS/TOP Initiatives

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

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

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

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

42. Do Not Pay Program

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

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

45. Website: www.donotpay.treas.gov
Website:
Phone: 45