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Treasury Offset Program: How Federal and State Partnerships Can Cost Effectively Maximize Debt Recoveries Modernizing Government Debt Collection Conference – PowerPoint PPT presentation

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Title: Oregon Conference

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

FY 2012 Key Fiscal Service Statistics
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.

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

Debt Collection Legal Authorities
  • The Federal Governments 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
  • Internal Revenue Code, Title 26 of the United
    States Code
  • Bankruptcy Code, Title 11 of the United States
  • Privacy Act of 1974, 5 U.S.C. 552a
  • Other statutes that apply to specific agencies,
    debt types or payment types
  • Treasury regulations, OMB policies,
    agency-specific regulations

Debt Collection Legal Authorities
  • Among other things, debt collection laws govern
  • Type of due process required for various debt
    collection remedies
  • Example 60 days notice required before a tax
    refund may be offset 30 days notice required for
    most other debt collection actions
  • The amounts allowed to be collected through each
  • 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
  • Example Debts that are subject to a stay under
    the Bankruptcy Code are not eligible for referral

Debt Collection Programs
  • DMS collects delinquent debts for federal and
    state agencies (non-tax and tax) primarily
    through two programs the Treasury Offset Program
    (TOP) and the Cross-Servicing Program.
  • DMS has collected a total of 7.02 billion as of
    September 2013 (an increase of 13.69 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)

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

The State of New York Recovers 51M in
Fraudulently Collected Unemployment Insurance
via 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
    dont deserve them, and who are in fact stealing
    from their fellow New Yorkers.

Andrew Cuomo, Governor State of New York
The State of Maryland
  • State Income Tax Program
  • Maryland is leading the way in collecting back
    taxes, said Comptroller Franchot. Given the
    fiscal challenges we face, its 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
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
    Administrations anti-fraud reforms and fiscal
    management practices will bring New Jerseys
    Unemployment Insurance Trust Fund into solvency
    next week and spare businesses drastic tax
  • 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 Americas families and
children. David A. Lebryk,
Commissioner Bureau of the
Fiscal Service
Treasury Offset Program (TOP)
Treasury Offset Program (TOP)
  • TOP is a centralized offset program administered
    by the U.S. Department of the Treasury, Bureau of
    the Fiscal Service, to collect delinquent debts
    owed to federal agencies and states.
  • TOP requires creditor agencies to provide debtors
    with due process, including proper notices and
    dispute opportunities, as well as the chance to
    repay debts over time.
  • TOP sends notices to debtors when payments are
    offset. For recurring payments, TOP sends
    warning notices.

TOP State Programs
  • State Income Tax Program (SIT) - TOP offsets
    federal tax refund payments to payees who owe
    delinquent state income tax obligations.
  • State Reciprocal Program (SRP) - TOP offsets
    federal vendor and other non-tax payments to
    payees who owe delinquent debts to state
    agencies. In return, states offset payments to
    payees who owe delinquent debts to federal
  • 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 persons
    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
  • Supplemental Nutritional Assistance Program - The
    Department of Agriculture-Food and Nutrition
    Service (FNS), in collaboration with state
    offices administering the Food Stamp Program,
    submit food stamp recipient debts to Treasury for
    offset of tax refund, federal vendor, salary,
    federal retirement, Social Security, Railroad
    Retirement, and state payments.

Treasury Offset Program State Programs
TOP Database
KEY SRP - State Reciprocal Program UIC -
Unemployment Insurance Compensation
Child Support Debt
Unemployment Insurance Compensation Debt
Child Support
Child Support
Federal Tax Refund Payments
Federal Non-Tax Payments (Vendor, Travel, Misc.)
State Income Tax Debt
State Income
Other State Debt
State Programs
State Payments (Vendor, State Tax Refunds, Other)
Federal Non-Tax Debt
Federal Programs
TOP State Delinquent Debt CollectionsFY 2008 -
2013 (in millions)
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
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
State Reciprocal ProgramFY 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
Why Join SRP? What are the Benefits?
  • Ability to collect millions of dollars in unpaid
    debt annually
  • Access to federal non-tax payment offsets for the
    UIC and state tax programs
  • Recovery of valuable funds for federally
    sponsored programs
  • Opportunity to maximize your states debt
    collection potential

States Participating in Income Tax, SRP, UIC
in 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
State Identified Challenges
  • Centralization
  • While centralizing a states 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
  • Funding Technology
  • States face challenges in funding new technology
    to connect with TOP in the current economic
  • TOP is exploring options for Fiscal Service to
    support states.

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

TOP Legislation/Regulation Checklist for States
  • Essential Items While states must abide by all
    the terms of the reciprocal agreement, the
    following are most often affected by state
  • 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
  • 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.

Whats New with TOP?
TOPs 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
  • Increases in payment streams that can be offset
  • Increases in debt volume that can be collected by
  • Improve matching logic
  • For TOP users this change will appear seamless,
    as the new TOP Web Client does not require any
    system changes of users.

Benefits of TOPs 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 TOPs new Web
    Client training at
  • www.fms.treas.gov/debt/training.

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
  • potential debt streams that may require statutory
    or regulatory changes
  • potential payment streams that may require
    statutory or regulatory change

Working with States to Help Them Understand
State Debts in TOP and How They Affect Federal
  • 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 states
    Comptroller is required for TOD to release this
    information at the beginning of each month.

Working with States to Help Them Understand
State Debts in TOP andHow They Affect Federal
Payments (2)
  • New Online information Provided for States
  • How to resolve debts owed to the federal
  • Frequently Asked Questions
  • A link to State Comptrollers on NASACTs website
  • Visit www.fms.treas.gov/debt/TOP_state_debts.
  • Working together with AGA, States and Federal
    Agencies to develop new pilots and solutions.

Increasing Communication and Soliciting Feedback
with States
  • TOP wants to hear directly from states about
    their challenges, experiences, best practices,
    and program recommendations for SRP. These are
    some of the new ways we are communicating with
  • Annual Report to the States
  • Offsets Matter TOPs bi-monthly news for
  • 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.ht

DMS/TOP Initiatives
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, OMBs 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

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
  • Arkansas, Illinois, Kansas, North Carolina,
    Texas, Washington, and Wisconsin
  • Programs included
  • Temporary Assistance for Needy Families
  • Child Care
  • Medicaid
  • Foster Care
  • Aid to Families with Dependent Children
  • One month of payment data (February 2011) from
    three federal sources
  • Federal income tax refunds (IRS)
  • Retirement payments (OPM 25)
  • Social security payments (SSA 15)

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

TOP State Programs Contact
  • David Burgess
  • Email stateoffsets_at_fms.treas.gov
  • Phone 202-874-7182
  • Website www.fms.treas.gov/debt/TOP_state_prog.htm

Do Not Pay Program
Do Not Pay Objectives
  • Tactical
  • Identify potentially improper payments by
    comparing agency payments to lists of ineligible
  • 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
  • Strategic
  • Provide agencies with centrally-provided,
    IPERIA-mandated agency-driven information that
    helps them avoid and reduce and recover improper

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 agencys
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.
  • Email donotpay_at_stls.frb.org
  • Website www.donotpay.treas.gov
  • Phone 1-855-837-4391

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