modernizing government debt collection symposium
DESCRIPTION
Modernizing Government Debt Collection Symposium. Overview of Statewide Debt Collections - by the Numbers - through the Process - Then to Now. Oregon’s Assets ~ Comparisons Growth of Revenues Versus “Net” Receivables Receivables = A/R, Interest, Interfund and Taxes Receivable. - PowerPoint PPT PresentationTRANSCRIPT
November 1, 2013 IMG Collection Symposium 1
Modernizing Government Debt Collection Symposium
November 1, 2013 IMG Collection Symposium 2
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1995 1996 1997 1998 1999
RevenuesReceivables
Oregon’s Assets ~ ComparisonsGrowth of Revenues Versus “Net” Receivables
Receivables = A/R, Interest, Interfund and Taxes Receivable
Billions of $
Source: Oregon’s Comprehensive Annual Financial Reports NASC PresentationMarch 2001
November 1, 2013 IMG Collection Symposium 3
$ In Billions
Intel Micro-soft
Oregon(w/ taxes)
Gannet Nike
Revenue $29.39 $22.96 $13.21 $5.26 $9.00Receivables $ 3.70 $ 3.25 $2.22 $.88 $1.57
A/R as a %of Revenue
12.6% 14.2% 16.8% 16.8% 17.4%
Avg. DaysOutstanding
46 52 61 61 64
Oregon’s Assets ~ ComparisonsState versus Private ~ “Net” Receivables Ratio
Source: Annual Financial Statements NASC PresentationMarch 2001
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$ In Billions
ID AZ CA OR WA UT NVRevenue $4.10 $13.8 $116. $13.2 $24.6 $6.61 $4.35
Net A/R $0.24 $1.55 $13.2 $2.22 $4.32 $1.31 $0.87
A/R % ofRevenue
5.9% 11.3% 11.4% 16.8% 17.6% 19.7% 20.1%
Avg. DaysOutstanding
22 41 42 61 64 72 73
Oregon’s Assets ~ ComparisonsOregon Versus Other Western States
“Net” Receivable Ratios
Source: Western State’s Comprehensive Annual Financial Reports NASC PresentationMarch 2001
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Oregon’s Assets ~ ComparisonsOregon Versus Other Western States
Tax Collection Sources
State: ID AZ CA WA OR UT NV
Property Tax
No Yes Yes Yes No No Yes
Income Tax
Yes 1.6-7.8%
Yes 2.9-5.0%
Yes 1.0-9.3%
No
Yes 5.0-9.0%
Yes 2.3-7.0%
No
Sales Tax
Yes 5.0%
Yes 5.6%
Yes 6.0%
Yes 6.5%
No Yes 4.75%
Yes 6.5%
Population 1.3m 5.3m 34.5m 6.0m 3.5m 2.3m 2.1m
Source: Federation of Tax Administrators/US Census AGA Winter Conference
February 2004
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Statewide Financial ServicesSWARM Analysis
$0
$200
$400
$600
$800
$1,000
$1,200
2000 2001 2002 2003 2004
5 Year Cumulative Collection Summary
Agencies
OAA
PCF
Source: LFO Reports
OAA - Dept. of Revenue’s Other Agency Accounts Unit
PCF – Private Collection Firms
In ThousandsIn Thousands
BAM PresentationJanuary 2006
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Statewide Financial ServicesSWARM Analysis
0%
20%
40%
60%
80%
100%
2000 2001 2002 2003 2004
Inventory of Accounts in Dollars
PCFs
OAA
Agencies
Source: LFO Reports
OAA - Dept. of Revenue’s Other Agency Accounts Unit
PCF – Private Collection Firms
BAM PresentationJanuary 2006
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Oregon’s Assets ~ ComparisonsGrowth of Revenues Versus “Net” Receivables
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2008 2009 2010 2011 2012
Billi
ons
of $
Revenue
A/R
Source: Oregon’s Comprehensive Annual Financial Reports
Fiscal Years 2008 - 2012
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Oregon’s Assets ~ ComparisonsGrowth of Revenues Versus “Net” Receivables
With Liquidated and Delinquent Debt Included
$0
$5
$10
$15
$20
$25
$30
2008 2009 2010 2011 2012
Billi
ons
of $
Revenue
A/R
L&D
Source: Oregon’s Comprehensive Annual Financial Reports / LFO Reports
Fiscal Years 2008 - 2012
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General Funds
Federal Funds
Other Funds
Lottery Funds
Other Funds -Pass Through
Source: LFO ReportRevised August 2013
Oregon’s Assets ~ ComparisonsLiquidated & Delinquent Debt by Fund Type
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Collection of the State's Liquidated and Delinquent Accounts Totals for All State Agency Actions:
Total Inventory of Accounts 2008 2009 2010 2011 2012r1 Beginning Inventory $1,575,615,079 $1,747,978,308 $1,983,318,754 $2,150,842,072 $2,449,052,3482 Additions $587,422,281 $658,144,254 712,594,874 $778,465,984 $874,978,4643 Total Available for Collection $2,163,037,360 $2,406,122,562 $2,695,913,628 $2,929,308,056 $3,324,030,812
4 Ending Inventory $1,747,633,841 $1,983,335,024 $2,150,469,669 $2,456,824,790 $2,672,257,978
5 State Agency Inventory (NET) $1,067,020,686 $1,353,363,664 $1,550,129,775 $1,508,234,897 $1,483,351,080State Agency Inventory 61.06% 68.24% 72.08% 61.39% 55.51%Total Account Collections
6 State Agency Collections (NET) $287,521,321 $291,646,457 $309,514,631 $311,131,832 $369,693,443
State Agency Collections 87.71% 89.60% 88.47% 88.32% 89.53%
7 Total State Collections $327,795,578 $325,492,893 $349,845,577 $352,271,297 $412,930,585
8 All Collection Sources 15.15% 13.53% 12.98% 12.03% 12.42%
9 State Agency Collections (NET) 23.31% 22.38% 18.13% 17.35% 20.45%
Breakdown for Other Agency Accounts - Department of RevenueOther Agency Accounts Inventory
10 Beginning Inventory $170,699,153 $209,152,125 $254,174,338 $271,355,355 $328,589,81511 Additions 143,679,040 185,428,410 184,152,839 181,076,931 106,711,91812 Total Available for Collection $314,378,193 $394,580,535 $438,327,177 $452,432,286 $435,301,733
13 OAA Ending Inventory $208,425,479 $255,290,226 $271,370,909 $330,173,972 $256,304,011OAA % Inventory to Total State Inventory 11.93% 12.87% 12.62% 13.44% 9.59%Other Agency Accounts Collections
14 OAA Collections for the State $28,714,962 $24,526,261 $30,128,186 $33,196,037 $28,429,697OAA % of State Collections 8.76% 7.54% 8.61% 9.42% 6.88%
15 Percentage Collected 9.13% 6.22% 6.87% 7.34% 6.53%
Private Collection Firms Inventory 2008 2009 2010 2011 2012r16 Beginning Inventory $449,508,653 $472,216,933 $358,827,625 $328,968,985 $650,465,55017 Additions 165,649,937 236,280,248 191,792,120 354,589,728 430,547,36018 Total Available for Collection $615,158,590 $708,497,181 $550,619,745 $683,558,713 $1,081,012,910
19 PCF Ending Inventory $472,187,676 $374,681,134 $328,968,985 $618,415,921 $932,602,887PCF % Inventory to Total State Inventory 27.02% 18.89% 15.30% 25.17% 34.90%Private Collection Firms Collections
20 PCF Collections for the State $11,559,295 $9,320,175 $10,202,760 $7,943,428 $14,807,445PCF % of State Collections 3.53% 2.86% 2.92% 2.25% 3.59%
21 Avg Historical Cost of Collections $2,311,859 $1,864,035 $2,040,552 $1,588,686 $2,961,489
22 Percentage Collected 1.88% 1.32% 1.85% 1.16% 1.37%
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Collection ProcessesFollowing All The Laws
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US Constitutional Due Process Clause: 5th Amendment ~ Directed at Federal Agencies 14th Amendment ~ Directed at State Agencies
No one shall be . . . “deprived of life, liberty, or property without due process of law.”
Same eleven words in both Constitutional Amendments.
Oregon Constitutional Clauses: Article I, § 10:
“Every man shall have remedy by due course of law for injury done him in his person, property, or reputation.”
Article I, § 19: “There shall be no imprisonment for debt, . . . “
Collection ProcessesFollowing All The Laws
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Due Process Means: Notification ~
Notice properly contemplated to effect the attention of the person(s) affected as to the nature and gravity of the case . . . .
Opportunity to be heard ~ Remedy by due course of law – having one’s day in
court. Purpose ~
“…to prevent the arbitrary use of government power” - AmJur
Upon achieving due process, the account becomes “liquidated.”
Add procedurals statutes to Due Process and Liquidation can go from relatively easy to pretty complicated . . .
Collection ProcessesFollowing All The Laws
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Collection ProcessesFollowing All The Laws ~ The Easy Way
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Civil PenaltiesAgency hasCivil Penalty
Authority
Civil Penalty Statute
ORS 183.090
Numerous state agencies have Civil Penalty authority. Their particular authorizing statues offers limitations on penalty amounts and methods of imposition.
This statute provides basic procedures. It addresses when the penalty would be due, hearings, final orders, legally recording orders, etc.
Notification and Hearing
ORS 183.413-.415
These statutes address the notification and hearing process. The hearing is conducted as a contested case hearing. Without application within the time frame, no hearing is required.
Review?ORS 183.480-.497
This statute indicates that the finding of the contested case hearing may be appealed to the state’s Court of Appeals, and provides time limitations.
Recording LienORS 183.090ORS 205.125
These statute show the operation of recording the final order in the County Clerk Lien Record. This has the “attributes and effects” of a judgment.
InterestORS 82.010(2)
Interest may be collected on the judgment at the statutory rate of 9 percent.
Disposition of Funds Collected [Agency Statute]
Some agency statutes that authorize civil penalties also require the amounts collected to be deposited into the state’s general fund.
No
Civil_PenaltyV1.2 1/31/02
1
22
33
44
55
HearingRequested?
Contested Case HearingORS 183.413
Yes
No
Yes
Appeal?ORS 183.500
2.520
This statutes indicate that the finding of the state’s Court of Appeals may be appealed to Oregon’s Supreme Court.
77
66
88
No
Yes
Order Becomes Final
99
1010
An order becomes final when the appeal process is exhausted or the period for filing appeals has elapsed.
Renewal of County Clerk
Lien
Within 10 years of a recording in the County Clerk Lien Record, an agency has a one-time renewal of the lien. This keeps the lien valid for another 10 years.
Observe ORS 183.413 for Contested Case hearings and see the note at ORS 183.470 ~ Hearings Officer Panel. Also note ORS 183.502, the Alternative Dispute Resolution process.
“Procedural due process is not intended to promote efficiency or accommodate all possible interests; instead, it is intended to protect the particular interests of the person whose possessions are about to be taken.” Fuentes v. Shevin407 U.S. 67, 92 S.Ct. 1983
Collection Processes
Following All The Laws ~ The Hard Way ~
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Collection ProcessesFollowing All The Laws
The Oregon Accounting Manual OAM Policy 35.30.50
101. Agency management must ensure that agency personnel employ appropriate and lawful practices in the collection of accounts receivable.
102. State agencies must comply with the Oregon Unlawful Debt Collection Practices statute, ORS 646.639, related to consumer debt. Agency staff undertaking letter collections must read, understand, and comply with the provisions of ORS 646.639.
103. State employees who collect debt during the performance of their official duties are specifically exempt from coverage under the Federal Debt Collections Practices law (15 U.S.C. §§1692a (6)(C)). This law does not bind state employees whose specific job entails collecting debt; however, the State of Oregon sees the value of the Federal Debt Collections Practices law and recommends that all agencies voluntarily comply. Many provisions of the state and federal laws overlap.
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Dealing with the Debts - Terminology; Adjustments – resolution of an improper billing –
I.e. you billed the wrong amount, adjust the dollar amount.
Compromise / Settlement – I.e. resolution of a liability through an amicable
agreement. Cancel, Release, Discharge –
I.e. the extinguishments of all legal liability. Bankruptcy –
When concluded by the court, “[s]uch debts are not ‘uncollectible;’ rather, such debts are nonexistent.”
Write-Off – A bookkeeping removal of debt, not a removal of legal
liability.
Collection ProcessesFollowing All The Laws & Definitions
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Action Accounting Legal
Write-Off Yes
Adjust-Off
Cancel
NoRemove from books. Remains a legal liability
Yes YesLiability is adjusted.Books are adjusted.
Yes Yes*Liability is extinguished.Remove from books.
* The cancellation or forgiveness of debt can have tax consequences.
Collection ProcessesFollowing All The Laws & Definitions
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Collection ProcessesObstacles & Opportunities
Cost of Due Process Collections Staffing – having the knowledge, skills, & abilities to
follow the law and deal with debtors in a sometimes hostile environment
Credit & Collection Manager Salary: $68,250 - $99,000 (PEMF – R35)*
Credit & Collection Clerk Salary: $34,250 – $45,750 (RA2 – R19)*
Processing – IT systems that track debtor transactions, account balances, contact information, interactions, monitors payment plans, generates letters, etc.
Administrative – consider the costs of overhead. Collect penalties and interest when imposed as opposed to manually adjusting away them to promote a concession for payment.
Cost of hearings – in some cases, the costs associated with the due process hearings born by the agency can exceed the civil penalty action that generated the hearing.
Establishing and enforcing adequate internal controls to protect the payment path from the debtor to the bank.
*Source : Robert Half 2013 Salary
Guide
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Collection ProcessesObstacles & Opportunities
Accepting & Banking the Funds: Take payments in all forms:
Credit & Debit Cards Cash & Checks
Process payments using multiple methods: On-line & In-line payments
Establish an e-Commerce presence Check conversion
At the counter ~ ACH (e-checks) Payments In the back-office ~ thru OED – Online Electronic Deposit
Pay by Phone M-Commerce (Mobile Commerce) IVR – Interactive Voice Response
Third party processing Lockbox Kiosks
If you have not “updated” your agency banking for the 21st century, you need to contact the Oregon State Treasury.
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@ @ @ ‘An Event
Goods/ServicesBilling Method(Creates A/R)
Questions & Disputes& Appeals
Payment orResolution
Billing/Payment Cycle:
Past DuePoint
@
Area of LFO ReportingConsequence...
...Point of Sale...
Collection ProcessesObstacles & Opportunities
To reduce the number and amount of accounts receivable owed to the state, it is important to look at the way the state does business and when payment for services or goods is required. To improve the collection process, the state must consider what options are offered to pay for a service. If the customer is given options regarding payment for services such as cash, credit card, check, ACH, or online, it enhances the agency’s ability to obtain a payment. Delinquent debt issues would not exist if funds were collected at the point of sale. It is also important to note that most often, state agencies do not have the option to deny services or to perform pre-debt credit checks on customers.
Source: ARCC Strategic Plan
November 1, 2013 IMG Collection Symposium 23
Collection ProcessesObstacles & Opportunities
Debtor Demographics State agencies don’t perform credit checks, and some
cannot deny services – how do people pay? Unbanked and Underbanked – 2011 Survey1 Results:
8.2% of the US households were unbanked – this number has increased since 2009.
20.1% of US households were underbanked. 29.3% of US households have no savings account. 10.0% of US households do not have a checking account. 67% of US households have both a savings account and
checking account. 25% of US households have used AFS products (non-bank
check cashing, payday loans, etc.) in the past year. 10% of US Households have used two or more AFS products. 12% of US households have used an AFS in the past 30 days.
(1) 2011 FDIC National SurveyAFS – Alternative Financial Services
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Collection ProcessesObstacles & Opportunities
Unemployment Rate vs. Collection Dollars Note that the dashed line represents what the FY 2008 collections would have been without the $42 million in Kicker offsets. The chart only reflects a history with the annual unemployment rate as high as 8.1%, as of February 2009 Oregon’s unemployment rate was already 10.8% (preliminary) and expected to go higher. The impact of a potential double digit annual unemployment rate on collections is unknown.
Source: ARCC Strategic Plan March 2009
This is what OAA can do for you – how about the Federal offset?
November 1, 2013 IMG Collection Symposium 25
Collection ProcessesObstacles & Opportunities
I.T.
Fiscal Program
Improving agency collection numbers will take a holistic , agency-wide approach.
• I.T. will need to deliver secure technology that may also include telephony solutions (VOIP),
• Fiscal will need to provide guidance on accounting, payment processing, and internal controls,
• Program personnel will need to evaluate their customer needs and requirements to improve agency collection processes.
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Collection of the State's Liquidated and Delinquent Accounts Totals for All State Agency Actions:
Total Inventory of Accounts 2008 2009 2010 2011 2012r1 Beginning Inventory $1,575,615,079 $1,747,978,308 $1,983,318,754 $2,150,842,072 $2,449,052,3482 Additions $587,422,281 $658,144,254 712,594,874 $778,465,984 $874,978,4643 Total Available for Collection $2,163,037,360 $2,406,122,562 $2,695,913,628 $2,929,308,056 $3,324,030,812
4 Ending Inventory $1,747,633,841 $1,983,335,024 $2,150,469,669 $2,456,824,790 $2,672,257,978
5 State Agency Inventory (NET) $1,067,020,686 $1,353,363,664 $1,550,129,775 $1,508,234,897 $1,483,351,080State Agency Inventory 61.06% 68.24% 72.08% 61.39% 55.51%Total Account Collections
6 State Agency Collections (NET) $287,521,321 $291,646,457 $309,514,631 $311,131,832 $369,693,443
State Agency Collections 87.71% 89.60% 88.47% 88.32% 89.53%
7 Total State Collections $327,795,578 $325,492,893 $349,845,577 $352,271,297 $412,930,585
8 All Collection Sources 15.15% 13.53% 12.98% 12.03% 12.42%
9 State Agency Collections (NET) 23.31% 22.38% 18.13% 17.35% 20.45%
Breakdown for Other Agency Accounts - Department of RevenueOther Agency Accounts Inventory
10 Beginning Inventory $170,699,153 $209,152,125 $254,174,338 $271,355,355 $328,589,81511 Additions 143,679,040 185,428,410 184,152,839 181,076,931 106,711,91812 Total Available for Collection $314,378,193 $394,580,535 $438,327,177 $452,432,286 $435,301,733
13 OAA Ending Inventory $208,425,479 $255,290,226 $271,370,909 $330,173,972 $256,304,011OAA % Inventory to Total State Inventory 11.93% 12.87% 12.62% 13.44% 9.59%Other Agency Accounts Collections
14 OAA Collections for the State $28,714,962 $24,526,261 $30,128,186 $33,196,037 $28,429,697OAA % of State Collections 8.76% 7.54% 8.61% 9.42% 6.88%
15 Percentage Collected 9.13% 6.22% 6.87% 7.34% 6.53%
Private Collection Firms Inventory 2008 2009 2010 2011 2012r16 Beginning Inventory $449,508,653 $472,216,933 $358,827,625 $328,968,985 $650,465,55017 Additions 165,649,937 236,280,248 191,792,120 354,589,728 430,547,36018 Total Available for Collection $615,158,590 $708,497,181 $550,619,745 $683,558,713 $1,081,012,910
19 PCF Ending Inventory $472,187,676 $374,681,134 $328,968,985 $618,415,921 $932,602,887PCF % Inventory to Total State Inventory 27.02% 18.89% 15.30% 25.17% 34.90%Private Collection Firms Collections
20 PCF Collections for the State $11,559,295 $9,320,175 $10,202,760 $7,943,428 $14,807,445PCF % of State Collections 3.53% 2.86% 2.92% 2.25% 3.59%
21 Avg Historical Cost of Collections $2,311,859 $1,864,035 $2,040,552 $1,588,686 $2,961,489
22 Percentage Collected 1.88% 1.32% 1.85% 1.16% 1.37%
November 1, 2013 IMG Collection Symposium 27
Jon DuFrene
Jon DuFrene
Modernizing Government Debt Collection Symposium