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New York State Accounting System User Procedures Manual

Volume Name
CONTROLS AND SPECIAL PROCEDURES
Volume
XI
Date
04/23/08
Section Name
Accounting for Federal Grants - Federal Treasury Offset Program
Section
5.0700


Purpose and Scope
To provide information to all State departments and agencies on the Federal Management debt collection procedures.

The Debt Collection Improvement Act of 1996 provides that any non-tax debt or claim owed to an agency of the Federal government that remains unpaid for a period of 180 days shall be referred to the U.S. Department of Treasury for appropriate action. The Department of Treasury is empowered to withhold of reduce certain federal payments for the purpose of collecting delinquent non-tax debts owed to the Federal government. This collection process is known as "administrative offset" or "offset".

Before referring a debt for collection by administrative offset, the Federal creditor agency must provide each debtor with: (a) a written notification of the nature and the amount of the debt, the intention of the agency to collect the debt through administrative offset, and an explanation of the debtor's rights; (b) an opportunity to inspect and copy the records of the agency; (c) an opportunity for review within the agency; and (d) an opportunity to enter into a written repayment agreement.

Background

All New York State agencies are required to provide the State's federal employer identification number (FEIN) or Taxpayer Identification number (TIN) when dealing with the Federal government. These numbers are used for billing purposes, grant award applications and drawdown of federal grant funds from the Department of Treasury.

The Department of Treasury –Financial Management Service established a centralized “Treasury Offset Program” (TOP) process that matches Federal payments to New York State against debts owed to the Federal government. Since billing records for services provided by Federal agencies to State agencies contain the same FEIN or TIN that is used to drawdown federal grant awards, when a TOP match occurs, the payment is “offset” against the state’s request for federal grant funds.

Department of Treasury offsets have been taken against federal grant award drawdowns needed to finance important and critical agency programs because a debt was owed to the Federal government by a second (uninvolved) State agency. Since the drawdown was reduced by the amount of the offset, funds to finance state payments were insufficient to pay vouchers scheduled for payment.

When the offset was taken, a notice was sent to the debtor State agency, but no notice was provided to OSC or the agency whose drawdown was reduced. As a result, a labor-intensive process was undertaken to identify the debtor state agency. Once the debtor was identified, OSC worked with the agency and the agency whose drawdown was reduced to reverse the impact of the drawdown reduction.

Agency Responsibility

Immediately upon receipt of an invoice for goods or services provided by a Federal government agency, State agencies should make every effort to make payment to the Federal government in a timely manner or contest the billing.

If a notice of unpaid debt is received by a State agency the notice will provide the amount, type of debt owed and the Federal agency who f=referred the debt to the Department of Treasury for collection. If you believe the debt collection notice was issued in error or is erroneous, then you should immediately contact the Federal agency that referred the debt for collection. The Department of Treasury or the State Comptroller’s Office cannot resolve issues regarding debts owed to federal agencies.

In the event that a Treasury offset is taken, a separate notice is sent to the debtor state agency notifying them that a payment was applied to the debt. A copy of this notice informing the debtor agency that an offset was taken, and a federal drawdown was reduced, must be immediately sent or Faxed to:

Office of the State Comptroller
Bureau of State Accounting Operations
110 State St. - 9th Floor
Albany , NY 12236
FAX: (518) 473-6836

Additional Information

Please visit the Department of Treasury-Financial Management Service website for more information about the Treasury Offset Program. Included on the website (under DMS guidance: Policies and Procedures) is a list of awards that are exempt for the Treasury Offset Program.

http://www.fms.treas.gov/debt/top.html.

Questions

Questions about State administered Federal drawdowns that have been reduced by the Treasury Offset Program, or questions about this procedure, may be referred to the Bureau of State Accounting Operations-Federal Payment Management Team at (518) 486-1241.