State Controller Guidance
Effective Date: 09/30/2020
Approved by: Robert Jaros, CPA, MBA, JD, Colorado State Controller
Agency Guidance & Helpful Hints for Fiscal Rule 10: Collection of Debts Due to the State
How do I choose which method of collection works best for my agency?
Method | Pros | Cons |
|---|---|---|
Private Collection Agency | PCA Does the Work. Very little effort for state | Gets complex if using multiple methods (timing) |
State Tax Offset | Effective collection from January – March | TIN Matching, daily file updates with DOR |
Federal Offset | Effective collection from January – March | TIN Matching, daily file updates with TOPS |
Vendor Offset | Effective all year | Setup with OSC |
Internal Collection | Full control of collection activities | Staff time. Timing if using multiple methods. Requires thorough knowledge of collection practices |
Multiple Methods | Brings in the most money | Adds complexities of timing and staff oversight. If over-collection happens refunds are required and this will use spending authority (and upset debtors) |
Agencies that collect debt internally will need to outline their procedures in the State Agency Account Receivable Collections plan in section 1 of this fiscal rule.
Agencies who have limited resources may want to consider utilizing one of the OSC / SPCO state Price Agreements to collect their debt for them. Agencies can simply select one or more * PCA’s to contract with. Simply put, they would require (securely) a spreadsheet with the information PCA’s ask for and they will start collecting for you. At the end of each month / cycle agreed upon the PCA should send the agency payment for the debt collected.
Or:
Agencies can leverage the department of Revenue’s (DOR) tax offset program first need to do / have done a “TIN Matching” process with the IRS before such debt can be submitted to DOR. Most offset collection happens between January and March of each year when individuals file for tax returns. DOR offset can also offset from Gambling and Lotto winnings as well.
However:
Agencies should be warned that if they pursue BOTH tax offset and PCA’s (or any other combination of collection methods) they will have to have a very timely process of communicating with the PCA & updating their DOR files daily as not to over-collect. Over-collections cause refunds which can be an administrative burden, unnecessarily use spending authority, upsets debtors and can also cause an issue with the PCA if for example both DOR and the PCA collected at the same time (it really does happen!) The agency could end up in a situation where the PCA wants commission, but the agency doesn’t want to pay it because DOR offset first. Regardless, the agency would have the money and would be issuing a refund. Agencies who attempt to leverage more than one collection method will experience more complications with the timing of debt being collected and having to “update” PCA’s or DOR files.
This is also true for agencies who would want to leverage TOPS or some other method in addition to other methods. The more entities the debt is distributed to the higher the risk of complications and over-collection.
Please note: If an agency selects more than one PCA, they probably don’t want to send them both the same debt so there isn’t confusion or over-collecting.
Methods of Collection
- Internally (by the state agency)
- Some items to consider:
- Staff will have access to a significant amount of FTI. Put documented measures and procedures in place to safeguard individual’s information.
- Cash or Credit Card information that is collected can also be compromised. Always have procedures in place so that collectors cannot somehow pocket or otherwise retain a debtors payment
- Agencies who attempt to collect on their own debt need to become thorough with ethical collection practices. They also need to be aware if an debtor is in a state of bankruptcy or some other condition where their debt cannot be collected to avoid potential lawsuits
- Some items to consider:
- Utilizing a Private Collection Agency (PCA)
- Agencies will want to select the right PCA for them. The OSC/SPCO price agreement has multiple awards. Different PCA’s are sometimes suited better for certain types of debt. When selecting a PCA agencies are encouraged to FIRST give the PCA some basic understanding of the type, volume and age of your debt. At the same time, agencies are encouraged to submit questions to the PCA to understand which PCA may have the best results collecting for them. Below are some sample questions agencies could ask PCA’s
Will you be dedicating staff to our accounts? If so, how many? If not, how will you distribute our debt to your collectors?
What is your commission on this debt (confirm with the Price Agreement that the percentage is not greater than what was quoted on the price agreement)?
Considering there will be a significant amount of FTI associated with this debt, what is the most effective way to provide data files?
What tools do you use to collect the debt? How do you prioritize what to collect? What is your methodology on our specific type of debt?
What sort of progress type reports are you able to provide? Can we get sample copies (no FTI please)
If / When our agency has questions about our debt are we able to leverage your resources for questions if necessary?
Can you describe your month end reconciliation process with your clients?
State tax offset through the Colorado Department of Revenue
Agencies may want to leverage the DOR’s state tax offset to collect debt. If so, Before debt can be submitted to DOR the IRS requires a “TIN Matching” process. PCA’s and other vendors are also able to conduct TIN matching for a fee. The IRS TIN matching process is outlined here on their webpage.
If agencies would like more information on DOR’s process to leverage tax offsets they will need to contact DOR at the following email address; DOR_MIRSupport@state.co.us.
Note: Before considering state tax offset, agencies will need to consider their technical bandwidth to manage the daily file transfer process with DOR
Federal tax offset using the Bureau of the Fiscal Service, Treasury Offset Program (TOP)
Agencies wishing to utilize federal tax offset will need to work with the Federal Treasury to set this up. Visit the Bureau of the Fiscal Service, Treasury Offset Program webpage for additional information.
Vendor Offset using the OSC’s Central Accounting and Vendor Operations
State agencies that wish to utilize the OSC’s vendor offset can do so by first reviewing the process for Vendor Intercept Guidance on the Central Accounting and Vendor Operations webpage. Additional questions can be sent to the following email address: state_centralapproval@state.co.us
Note: Before considering vendor offset, agencies will need to consider their technical bandwidth to manage the file transfer process with CORE
Other means of collection approved by the State Controller
If a state agency would like to utilize another means for collection they can simply email the state controller. When asking for approval please include a minimum of the following information:
- What the method of collection is
- What debt will be sent there (type and quantity in dollars and number of total accounts)
- If other methods of collection are already being utilized
- Any additional information relevant to the State Controllers approval