UNITED STATES GOVERNMENT
National Labor Relations Board
Office of Inspector General
February 13, 2002
To: Karl E. Rohrbaugh
Finance Branch Chief
From: Jane E. Altenhofen
Subject: Inspection Report No. OIG-INS-17-02-01: Review of Agency Procedures for the Collection of Non-tax Delinquent Debt
The objective of this review was to evaluate the adequacy of Agency policies and procedures to collect debt owed to the Federal government. We identified several areas in which accounts receivable monitoring and debt collection activities need to be strengthened. These include: developing internal procedures for employees to challenge debt, including designating a hearing officer; implementing regulations and delegations of authority for compromising uncollectable receivables; fully implementing a cross-servicing program; increasing coordination between the Personnel and Finance Branches regarding amounts owed by current and former employees; notifying debtors of the due date for repayment of debt; and charging interest, penalties, and fees associated with the collection of delinquent debt.
This inspection was conducted in accordance with Quality Standards for Inspections between March 2001 and January 2002. We reviewed the Debt Collection Improvement Act of 1996 (DCIA), implementation guidance from the Department of Treasury, and Agency policies. We also interviewed personnel in the Finance Branch, Personnel Branch, Appellate Court Branch, and Contempt Litigation and Compliance Branch to gain an understanding of Agency procedures.
A. STATUTORY FRAMEWORK
Significant Congressional concern over the estimated $47-$100 billion in non-tax delinquent debt owed to the Federal Government resulted in enactment of DCIA, codified at 31 U.S.C. §§3701, 3702, and 3711-3720E. The Department of Treasury, through its Financial Management Service (FMS), is responsible for promulgating government-wide debt collection regulations implementing the provisions of the DCIA. The implementing regulations are codified at 31 C.F.R. 285, "Debt Collection Authorities under the Debt Collection Improvement Act of 1996."
Two key components of the DCIA include (1) mandatory referral of delinquent debt to FMS or an approved debt collection center for "cross-servicing" or collection, and (2) mandatory notification of delinquent debt to the Secretary of Treasury for purposes of administrative offset. Implementing regulations for cross-servicing and offset are contained in 31 C.F.R. 285.
The DCIA defines debt or claim to include "any amount of funds or property that has been determined by an appropriate official of the Federal Government to be owed to the United States by a person, organization, or entity other than another Federal agency . . . and includes, without limitation, . . . (D) any amount the United States is authorized by statute to collect for the benefit of any person." 31 U.S.C. § 3701(b)(1)(D).
31 C.F.R. 285.12(c)(1) requires the referral of "any debt that is more than 180 days delinquent to FMS for debt collection services", often referred to as cross-servicing. "A debt is considered 180 days delinquent if it is 180 days past due and is legally enforceable." 31C.F.R. 285.12(c)(3)(i). "A debt is past-due if it has not been paid by the date specified in the agency's initial written demand for payment or applicable agreement or instrument (including a post-delinquency payment agreement) unless other satisfactory payment arrangements have been made." Id. Further, "a debt is legally enforceable if there has been a final agency determination that the debt, in the amount stated, is due and there are no legal bars to collection action." Id. Exceptions to the mandatory referral requirement include debts that are in litigation, being collected by internal offset, or are covered by an exemption granted by the Secretary of the Treasury. 31 C.F.R. 285 (d).
In addition to cross-servicing, the DCIA mandates that agencies notify the Secretary of Treasury of all debts over 180 days delinquent for purposes of administrative offset. 31 U.S.C. § 3716(c)(6). Administrative offset is the "withholding of funds payable by the United States . . . to, or held by the United States for, a person to satisfy a claim." 31 U.S.C. § 3701(a)(1). To accomplish administrative offset, the FMS established the Treasury Offset Program (TOP). TOP matches Federal payments against reported debts owed to the Government. When a match occurs, the payment is intercepted and offset up to the amount of the debt. Amended OMB Circular No. A-129 (November 16, 2000) and 31 C.F.R. 285.
Prior to the mandatory referral for cross-servicing or the mandatory notice to the Secretary of Treasury for purposes of administrative offset, agencies are required to "try to collect a claim of the United States Government for money or property arising out of the activities of, or referred to, the agency." 31 U.S.C. § 3711(a)(1). Although an agency is permitted to discharge delinquent debts up to $100,000, agencies are required to take all appropriate steps, identified at 31 U.S.C. § 3711(g)(9), to collect such debt before discharging the debt.
An agency, however, may collect by administrative offset only after adopting, without change, regulations on collecting by administrative offset promulgated by the Department of Justice, the General Accounting Office, or the Department of Treasury; or prescribing regulations consistent with the regulations issued by the named entities. 31 U.S.C. §3716(b). The agency must provide the debtor:
(1) written notice of the type and amount of the claim, the intention of the head of the agency to collect the claim by administrative offset, and an explanation of the rights of the debtor under this section;
(2) an opportunity to inspect and copy the records of the agency related to the claim;
(3) an opportunity for a review within the agency of the decision of the agency related to the claim; and
(4) an opportunity to make a written agreement with the head of the agency to repay the amount of the claim.
31 U.S.C. § 3716(a). Agencies are required to charge interest, penalties, and costs associated with the collection of delinquent claims. 31 U.S.C. § 3717.
B. DEBTS OWED TO THE NLRB
Debts owed to the NLRB include: salary and benefits overpayments; vendor overpayments, including duplicate payments; travel related expenses, including unused airline tickets; court costs; and unpaid Freedom of Information Act (FOIA) fees. Back pay awarded to a discriminatee under provisions of the National Labor Relations Act was determined not to be debt subject to DCIA.
The accounts receivable as of September 30, 2001, consisted of the following categories and related balances.
|Travel (trip travel)||60||2,775.28|
|Travel (annual travel)||62||1,435.22|
1. Salary and Benefits Overpayments
The Personnel Branch is responsible for transmitting salary, benefit, and leave information to the National Finance Center (NFC) of the Department of Agriculture. NFC processes the Agency's payroll and generates employee leave and earnings statements. The Personnel Branch is also responsible for checking each transaction the next day to determine if the NFC system accepted the information.
The procedures for collecting debts owed by current Federal employees are set forth in 5 U.S.C. § 5514. Implementing regulations are codified in 5 C.F.R. 550.1101 through 550.1110. Salary overpayments that are a result of administrative error that may be collected within 4 weeks of the pay period in which the error occurred, and adjustments that amount to $50.00 or less are exempt from the provisions of the 5 U.S.C. § 5514(a)(3) and from the DCIA if the employee is provided written notice of the nature and amount of adjustment and a point of contact for contesting the adjustment. Agency regulations for collecting salary or benefits overpayments are codified at 29 C.F.R. 102.156 through 102. 167. Based upon information keyed in by the Agency, NFC will generate a bill and notify the debtor employee of intent to offset current salary to pay off the debt. NFC is responsible for keeping track of the debt amount and charging interest on delinquent debt owed by current and former Agency employees. The Agency does not take any measures to follow-up on NFC's attempt to collect the debt. NFC's Administrative Billings and Collection Manual describes NFC's participation in TOP to collect debts.
If an employee is placed on leave without pay, the Agency will notify the employee of his/her obligation to either terminate health care coverage or to make arrangements to pay his or her share of the premium directly to the Agency. If the employee does not elect one of the two options, the employee is notified that he/she will be incurring a debt and that the unpaid share will be offset from his/her salary once he/she returns to work. If an employee leaves employment with a negative leave balance, that employee's last paycheck will be offset to the extent of the negative leave balance. If the employee does not return to work and a debt remains that is not covered by a leave balance or final pay, the Agency will notify NFC and OPM that the employee is leaving Federal employment with an unpaid debt. NFC is then responsible for attempting to collect the debt.
Although required by 5 U.S.C.A. § 5514 and the Agency's own regulations, the Agency has not promulgated guidelines or instructions governing employee challenges to the "Notice of Intent to Offset Salary" from NFC. Personnel reported that only one employee requested a hearing to challenge a debt determination. The hearing was postponed, as was the offset, pending an arbitration award that will address the existence and amount of the debt.
In one instance an employee left the Agency owing money for advanced leave and was not notified of the balance due for over four years. A leave audit was performed, but the results were not forwarded for collection or offset against the employee's retirement account in a timely manner. The Personnel Branch, Personnel Operations Section Chief stated that this was an administrative oversight due to human error. To reduce the risk of a recurrence, the Section Chief stated that the leave audits were added to a checklist used for processing employee separations.
The Finance Branch is provided with a monthly Administrative Billings And Collections Status of Debtors Accounts (ABCO) report. The report contains three different agency codes: NL, 80, and 90. Code NL indicates that the receivable belongs to the NLRB. For these items, the NLRB's accounting records are updated electronically to reflect the current balance. Code 80 indicates the entry of a NFC record related to a recertified payroll transaction and is titled NFC Suspense Agency. Code 90 is used if NFC is unsure how to code the amount. An item coded 90 remains such until the amount is collected.
In one instance, we identified an employee that left the Agency with a large balance related to advanced leave. The balance was coded 90. The Finance Branch did not record the amount as an accounts receivable because it was not informed that this was a balance owed to the Agency. The Personnel Branch conducted a leave audit when the employee separated from the Agency and was aware of the amount owed. The Finance Branch Chief stated that if this balance was coded as owed to NLRB, the amount would have been recorded as an accounts receivable.
Agencies are also required to participate annually in a computer match of their delinquent debt records with records of Federal employees to identify those employees who are delinquent in repayment of those debts. 5 U.S.C.A. § 5514(a)(1). According to Personnel Branch representatives, NFC performs the annual computer matching.
The September 2001 accounts receivable report shows a total of $22,408.27 in salary and benefits overpayments receivable. Except for a very small amount, the balances are from FYs 2000 and 2001.
2. Debts Other Than Salary and Benefits Overpayments
Debts owed the Agency, other than salary and benefits overpayments totaled $19,638.35 as of September 30, 2001, and consisted of vendor overpayments, travel related expenses, court costs, and FOIA fees.
a. Vendor Overpayments
Vendor overpayments, including duplicative payments and payments for cancelled training, are identified by receipt of an "error" message generated by comparing obligations of funds against disbursement of funds. Once an error message is received, the underlying paperwork is reviewed to check whether an overpayment had occurred and, if so, the vendor is contacted, usually by telephone, and informed of the error. Usually within a month or two the vendor remits the overpayment. The September 2001 accounts receivable report shows a balance of $2,854.78 that included: one item from FY 1998 in the amount of $1,296.48 that was referred to TOP, one item from FY 2000 in the amount of $41.50, and three items totaling $1,516.80 from FY 2001.
b. Travel Related Expenses
Travel receivables include cancelled airline tickets, overpayments to employees or vendors, and reimbursements from non-Federal sources related to speaking engagements. Airline tickets are purchased using a centrally billed Government travel account card. Employees are responsible for canceling airline tickets for trips that they are not going to take. If the employee cancels the trip in a timely manner, the charge for the airline ticket and the credit for the cancelled trip show up on the same statement and require no accounting entry. If the employee does not cancel the ticket in a timely manner, the trip cancellation is discovered when reconciling the statement from the travel agent to travel vouchers submitted by employees for payment. In these instances a receivable is recorded and monitored for collection.
In order to collect reimbursed travel expenses from non-Federal sources for speaking engagements, the Finance Branch sends a letter to the entity sponsoring the speaking engagement setting forth the cost the Government would have incurred for the travel, hotel accommodations, and per diem. An account receivable is established for the amount the Agency requests the sponsoring entity to remit. These debts, like those incurred by cancelled air flight and vendor overpayments, are usually repaid within one or two months. The Finance Branch follows-up on amounts not paid within two months.
The September 2001 accounts receivable report shows a total of $4,916.11 in outstanding travel related debt owed to the Agency. Except for a very small amount, the balances were from FY 2001.
c. Court Costs
If a court awards court costs to the Agency, that award or "mandate" is sent to the Regional Office or Litigation Services Office and then forwarded to the Finance Branch to set up an account receivable. The Appellate Court Branch and the Fiscal Operations Section are responsible for tracking unpaid court costs. Instructions for processing court costs are found in Memorandums OM 82-30 and OM 85-30.
In compromising debt, the head of an executive Agency operates under regulations prescribed by the head of the Agency and standards that the Attorney General and Secretary of the Treasury may prescribe. We identified $4,446.97 in court costs receivable (39 items) that were compromised by the Agency since January 1997, even though Agency regulations do not address the compromise of debt and Agency officials could not produce written delegations of authority. Thirty-three receivables totaling $3,731.75 were authorized by the General Counsel under authority claimed to be granted through a memorandum from the Chairman in 1983. Agency management was not able to produce the memorandum for our review. Six items totaling $715.22 were improperly authorized to be written off by an employee in the Appellate Court Branch.
The September 2001 account receivable report shows $4,689.43 in outstanding court costs. This consisted of 38 items: 2 items from FYs 1993, 1995, 1996, 1997, 1998, and 1999; 3 items from FY 2000; and 23 items from FY 2001.
d. FOIA Fees
Unpaid FOIA fees are identified upon receipt of an invoice sent to FOIA requestors indicating an amount of money owed by the requester for the processing of the FOIA request. Upon receipt of the invoice, an account receivable is established for the amount indicated in the invoice. Amounts remitted by check are matched against the entry in the accounts receivable.
In May 2001, procedures strengthening the collection of unpaid FOIA fees were developed, but not fully implemented because the Agency had not adopted a letter informing parties owing money that they would be referred to Treasury for collection procedures (cross-servicing). Under the strengthened procedures, the Region will attach an invoice, if money is due, to the letter addressed to the FOIA requester and the Finance Branch will notify the FOIA debtor that the debt is past due. The letter was adopted in November 2001. A FOIA spreadsheet showing outstanding FOIA debtors will be available on the Agency intranet, and Agency FOIA processors are instructed to check the intranet to determine whether a FOIA requester has any outstanding FOIA debt. Prior to sending new material to a FOIA debtor, the processing office is instructed to attempt to first collect the debt. If the debt is not collected, the Agency requires payment in advance.
A number of FOIA fees were not paid timely, but were not written off after efforts to collect were exhausted. The September 2001 accounts receivable report showed a balance of $7,178.03 in outstanding FOIA fees from as far back as 1997. The balance included 38 fees mostly between $100 and $200.
3. Back Pay
We analyzed back pay to determine whether it should be treated as debt subject to the mandatory provisions of the DCIA, specifically cross-servicing and notification for offset through TOP. The DCIA exempts debts that are in litigation or in an appeals process. Agencies are directed to take all appropriate steps, including litigation, to collect debt. 31 U.S.C. 3711(g)(9)(H). Since the NLRB possesses the authority to pursue compliance with Board orders, including back pay awards, through litigation, these claims are not subject to the mandatory provisions of the DCIA. We also determined that the NLRB procedures were sufficient to ensure the monitoring and collection of back pay awards.
NLRB back pay awards may be collected through a variety of means, including the following five methods: (1) voluntary compliance with back pay awards issued by NLRB administrative law judges or the Board; (2) through settlement agreements; (3) through enforcement actions resulting in a judgment in favor of the Board's back pay award; (4) through the use of debt collection procedures under the Federal Debt Collection Procedure Act (FDCPA), 28 USCA §§ 3001 et seq.; and (5) through the provisions of the DCIA. The NLRB has successfully utilized the FDCPA as a means to collect back pay awards. See e.g., NLRB v. E.D.P. Medical Computer Systems, Inc., 6 F.3d 951 (2d Cir.1993). A successful use of offset prior to enactment of the DCIA occurred in Alaska Pulp Corp., 296 NLRB 1260 (1989), wherein under the provisions of the Debt Collection Act of 1982, 31 U.S.C. A. §§ 3700 et seq., the NLRB was able to intercept a payment by the U.S. Forest Service to Alaska Pulp in order to satisfy a back pay award. Agency guidance for the collection of back pay awards is set forth in Memorandum GC 98-4.
Pursuant to the purpose of the DCIA, the Agency entered into a debt collection services agreement with FMS. Although back pay awards were not identified as a debt the Agency would refer for cross-servicing, the Agency utilized TOP as an additional mechanism to obtain compliance with back pay awards.
No debts have been referred to FMS for cross-servicing. The Finance Branch Chief said that FMS had not provided a sample cross-servicing letter to the Agency despite repeated requests over the past 2 years. Without the sample letter, the Agency did not know whether it may be infringing on debtor rights by failing to notify them of required information prior to referral for cross-servicing. In September 2001 the Agency obtained a cross-servicing letter from another agency and submitted that letter for approval. Treasury stated that it did not need to approve the letter and suggested that the NLRB legal department work with Treasury's legal department to get a cross-servicing letter in place.
In November 2001, the Finance Branch, working with attorneys from the Divisions of Advice and Enforcement Litigation, developed and adopted a cross-servicing letter.
D. REFFERAL TO TOP
In addition to cross-servicing, the DCIA mandates that Treasury be informed of any delinquent debt for the purposes of administrative offset. A spreadsheet provided by the Finance Branch identified 59 items that were referred to TOP in FYs 1998 through 2001. This included 55 back pay awards, 3 employee salary and benefits overpayments, and one vendor overpayment. Past due FOIA fees and court costs were not referred to the TOP because, according to the Finance Branch Chief, TOP requires a taxpayer identification number (TIN) for each referral, and the Agency is unable to obtain a TIN for FOIA requestors and individuals charged with court costs.
E. INTEREST, PENALTIES, AND FEES
Interest and penalties are usually not assessed by the agency in debt collections nor are fees imposed to recoup the costs associated with collecting the debt. Interest is charged on delinquent back pay awards and NFC charges interest on debt associated with salary or benefits overpayments. We were unable to determine the amount of interest that should have been charged because the Agency does not indicate when it considers the debt due. For January 1, 2001, though December 31, 2001, the interest on overdue Federal Government receivables was 6 percent.
F. RESPONDING TO REQUESTS FROM OTHER FEDERAL AGENCIES
Under the DCIA and other statutory authorities, Federal agencies may effectuate a salary offset to pay off a debt of a current employee owed to another Federal agency. For example, the Department of Education may request the Agency to offset one of its employee's salaries to pay off an outstanding student loan. Also, the IRS may also direct the Agency to offset the salary of an employee to pay off delinquent taxes owed to the Government. The Agency has timely processed such requests.
We suggest that the Finance Branch Chief:
1. Coordinate with Agency officials to implement regulations and delegations of authority for compromising uncollectable receivables.
2. Coordinate with the Personnel Branch to be informed of debts owed to the NLRB from salary overpayments identified in leave audits of departing employees. This will provide the Finance Branch information necessary to record amounts due in the Agency's financial records and reports.
3. Coordinate with senior Agency officials to develop internal procedures for employees to challenge debt, including designating a hearing officer.
4. Fully implement cross-servicing provisions of the DCIA.
5. Notify debtors of the due date for repayment of debt and collect interest on delinquent debts.
6. Charge interest, penalties, and fees associated with the collection of delinquent debt.