Oregon A/R and Collection Practices

1997 Secretary of State Audit, Opportunities to Improve #97-77

2004 Secretary of State Audit, Debt Collections #2004-24

2005 Secretary of State Audit, OUS Written-off Debt #2005-10

Chuck Hibner, Administrator, DHS’s Office of Payment Accuracy and Recovery

((former Director Oregon Audits Division (2006 – 2009))

1997 Audit – Opportunities to Improve Delinquent Debt Collection

• Audit Purpose – to identify and recommend ways in which the state could improve its processes for collecting delinquent debts.

Agencies Involved

Transportation – Weight-mile taxesHuman Service – Benefit overpayments Employment – Benefit overpayments and insurance taxesConsumer and Business Services – Workers’ comp taxes,

penalties and worker claim costsRevenue – Other Agency Account unit & Income Taxes

Scope

Represented $940 million in debt for CY 1995 Collected $100 million of the $940 during the calendar

year (11%).

Findings – Appendix A

Collection PercentageRevenue (OAA) = 2.4%Revenue (PIT) = 23.9%Human Services (benefits) =11.7%Employment (benefits) =14.4%Consumer & Business =6.3%Employment (taxes) : UnavailableEmployment (benefits) = 14.4%Transportation (weight-mile tax) = 13.7%

Findings

• In 1995 collection process decentralized.• State, federal laws and regulation grant unique collection

powers and impose restrictions on specific agencies.• Private firms’ small percentage of total occurs partly

because some state agencies believe their own efforts are more cost effective.

• Decentralized collection results limited information sharing regarding best practices and individual debtors.

Recommendations

• State agencies form a statewide collection committee to foster interagency coordination on collection issues and sharing of best practices.

Recommendations

• Establish a vendor offset program

Recommendations

• Request authority to perform administrative garnishments

Recommendations

• Use a statewide master contract to hire private collection firms

Recommendations

• Review autodialing system and determine whether use would be beneficial

Other Recommendations

• Pilot project to test how PCFs can be better utilized• Get approval to access “new hire” data• Expand use of technology

2004 Audit – Progress Made But Still Opportunities

Purpose – Follow up on the 1997 audit and; Determine if state agencies could improve their collection

of delinquent debt.

Agencies Involved

Transportation – Weight-mile taxesJudicial – Criminal fines and other feesHuman Service – Benefit overpayments Employment – Benefit overpayments and insurance

taxesEnvironmental Quality – Civil penaltiesConsumer and Business Services – Workers’ comp

taxesRevenue – Other Agency Account unit

Scope

Represented $237 million of the $1.2 billion in delinquent debt in fy 2002 (20%).

Collected $45 million of the $237 during the fiscal year (19%).

Three Primary Approaches

Agencies have their own internal debt collection units (Employment, Human Services, Transportation, and Consumer and Business Services)

Primarily use Revenue’s Other Agency Accounts UnitPrimarily contract for service of private collection

agencies.

Findings

Prior audit finding implemented with the exception of the vendor offset

Findings

Insufficient Staffing and Large Caseloads Prevent Timely Follow-upActivity = Collection

Revenue: Activity = 13% & Collection =9%Human Services: Activity = 43% & Collection =17%Employment (benefits): Activity = 82% & Collection =32%Consumer & Business: Activity = 92% & Collection =75%Employment (taxes) : Activity = 82% & Collection =32%

Findings

Direct Telephone Contact Could Improve Collection Results

General Accountability Office report concluded early telephone contact increased chances of collection, and more effective than billing statements.

Findings

Strengthen Oversight of Private Collection AgenciesLack of periodic review of accounts assigned to confirm

that adequate collection efforts are performed.

Findings

Questioned Cost Effectiveness of Further Assigning Debt After It Has Been Worked by an Internal Collection Unit

Cost to monitor a private collection firm may be more than the state’s return.

2005 Audit – OUS: Written-off Debt Review

Purpose – Determine if previously written-off debt should be

reassessed due to the changing income circumstances of the debtors.

Scope

• Written-off debt is debt determined to be uncollectable after all reasonable efforts to collect have been undertaken; and

• Note: the debt is still owed to the state.

Findings

• From FY 2004 data identified 4,700 debtors with over $1.12 million written-off that earned wages during the year.

Findings

• If a debt previously written-off becomes collectable, state law requires state agencies to proceed with collection.

Findings

• Revenue’s OAA could be helpful to Universities with collecting written-off debt .

Question?

Charles A. Hibner, CPA

Administrator, Office of Payment Accuracy and Recovery

Director, Office of Program Integrity

Oregon Department of Human Services

2850 Broadway Street NE

Salem , OR  97303

503-378-3584