More Institutions Affected by Treasury Offset Program
January 11, 2013
Recently, more colleges and universities have been hit with federal debt offsets following the Department of Veterans Affairs' move to collect debts stemming from new GI Bill payments. Although the offset system is not new, some institutions have not been impacted before.
The Treasury Offset Program (TOP), administered by the U.S. Department of the Treasury, Financial Management Service (FMS), collects delinquent debts owed to federal agencies and, by reciprocal agreement, some states. Before an eligible federal payment is disbursed to a payee, disbursing officials compare the payment information with debtor information in the FMS delinquent debtor database. If a payee's name and tax identification number (TIN) match the name and TIN of a debtor, the disbursing official offsets the payment, in whole or in part, to satisfy the debt to the extent legally allowed. The System for Awards Management (SAM) operated by the General Services Administration also checks the database and will flag entities with debts and put a hold on grant awards.
Institutions and systems often find it challenging to track down and match a debt to the offset. There are a number of factors, described below, that contribute to this.
First come, first offset. Once a debt is referred by a federal agency to Treasury for collection, the next payment from the federal government to the debtor organization will be offset. TOP makes no attempt to match sources or purpose of funds, except to identify some types of payments, such as Title IV student aid and VA benefits, which are exempt from offset.
Add $17. When trying to reconcile debts to offsets, it is important to know that Treasury adds a $17 administrative fee to each offset. TOP is required to collect fees sufficient to cover its costs of operations.
TIN is key. Some college and university systems share the same TIN across all campuses, and, in a few states, all state entities use the same TIN. An offset will occur when the TIN of an entity receiving a payment is the same as the TIN of another entity owing the debt. This means that if two or more entities are using the same TIN when interacting with the federal government, TOP will offset any eligible payment to any of those entities to pay any eligible debt owed by another of those entities to the federal government.
Notice? What notice? When an offset occurs, TOP mails a letter notifying the entity of the offset. These letters may take a week or more to arrive. Generally, this notice is sent to the address connected to the payment that was offset. If no payment address is available (not uncommon with ACH payments), it will be sent to the entity owing the debt. This means that sometimes a department expecting a payment will not know who to contact when a payment has been offset for a debt that is owed by another department, office, or campus. Further, the address on file may simply be a generic address for the campus which may further slow its receipt by the appropriate office.
And repeat. A number of colleges and universities have reported to NACUBO that the same debt was offset two, or even three, times from different payments. Luckily, this doesn't happen very often. The problem is because not all federal payments are made by the Treasury Department. There are a number of non-Treasury disbursement officials, notably including the Department of Defense and the Center for Medicare and Medicaid Services, as well as a number of states which have entered into reciprocal agreements with Treasury to offset payments. Each of these organizations checks the debtor list before making a payment, so if multiple payments are being processed around the same time by different agencies, one debt may get offset more than once. When this happens, TOP will notify the creditor agency (VA for GI Bill debts) to repay the excess amount.
Full stop for Fedwire. Recently, some states, universities, and colleges have discovered they are not able to draw down or receive their federal payments through the Fedwire system. Federal agencies are blocked from using Fedwire as a payment mechanism if the payee owes a delinquent debt to a federal agency that has been submitted to TOP. The reason for the Fedwire block is that Fedwire payments currently are not processed through the TOP system. As a result, payments may be temporarily delayed. Once a debt is paid or otherwise resolved in the TOP system, the Fedwire block is removed the next day. Entities that have a Fedwire block are not barred from receiving their payments; they can still be processed by alternate means through the automated clearinghouse (ACH) network. These payments will be made available to the TOP system for offset if the delinquent debt balances have not been resolved at the time of payment processing.
The TOP Call Center can be reached at 800.304.3107 and should be able to provide information on any offsets on a case-by-case basis. It should be noted, however, that Treasury does not receive detailed information about debts that are sent to it by creditor agencies and can do nothing to help resolve issues concerning those debts.
Treasury's FMS has agreed to expand a pilot program for states to colleges and universities. FMS will provide states or institutions with a report to help alleviate the burden of locating these debts and assist with their resolution. Upon request, at the beginning of each month FMS will provide a report of the debts in TOP owed by the institution, along with the appropriate creditor agency contact information, to assist with reconciliation of offsets against the payments received.
To receive this report, the Treasury Offset Division (TOD), the group responsible for the management of TOP, needs to receive a written authorization from the state controller or appropriate campus business official allowing TOD to release this information. The authorization should provide a central point of contact's name, address, telephone number, and email address. NACUBO suggests that someone from the controller's office with responsibility for institution-wide receivables and payables be given this role. If a system uses a single TIN for more than one institution, either someone at the system level should take it on or one campus should take the lead.
For additional information about this service and the assistance TOD can provide, please contact Sheila Moss at 202-874-6937 or firstname.lastname@example.org.
Vice President, Regulatory Affairs
- IRS Releases Final Report on College and University Compliance Project
- NACUBO Seeks Input on Ethics, Fraud, and Controls
- FY13 Implementation Reminder for Independent Institutions
- CAO and CBO Collaborations: Leveraging Institutional Capacity to Impact Effectiveness
August 5-6, 2013
- 2013 Planning and Budgeting Forum
September 16-17, 2013
- WEBCAST: Improve Your NFP Audit and Accounting Guide IQ
Wednesday, June 26, 2013 1:00 PM ET
- ON-DEMAND: The Higher Education Accounting Forum Online
- ON-DEMAND: OD: The Cashless and Paperless Business Office
- ON-DEMAND: Affordable Care Act: Implementation Roadmap for Colleges and Universities
- A Guide to College and University Budgeting: Foundations for Institutional Effectiveness, 4th ed. - by Larry Goldstein
- NACUBO's Guide to Unitizing Investment Pools - by Mary S. Wheeler
- Managing and Collecting Student Accounts and Loans - by David R. Glezerman and Dennis DeSantis