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Indian Health Service The Federal Health Program for American Indians and Alaska Natives


     Indian Health Manual
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Part 9

Chapter 4 - Debt Management


Title Section
Introduction 9-4.1
    Purpose 9-4.1A
    Authorities 9-4.1B
    Regulations 9-4.1C
    Guidance 9-4.1D
    Acronyms 9-4.1E
    Definitions 9-4.1F
    Policy 9-4.1G
    Objectives 9-4.1H
Responsibilities 9-4.2
  Headquarters 9-4.2A
    Area Offices 9-4.2B
    Service Units 9-4.2C
Managing Federal Receivables (Debt) 9-4.3
    Delegation of Authority to Compromise, Suspend, or Terminate a Debt 9-4.3A
    Due Process 9-4.3B
    Notice 9-4.3C
    Opportunity 9-4.3D
    Correct Name and Taxpayer Identification Number 9-4.3E
    Foreigners 9-4.3F
    Other Federal Agencies 9-4.3G
    Documenting Collection Actions 9-4.3H
    Office of Record 9-4.3I
    Records Disposition 9-4.3J
    Administrative Claim File 9-4.3K
    Communicating with Debtors 9-4.3L
    Right of Recovery from Third Party Insurers 9-4.3M
    Third Party Payments must be made Payable to the IHS 9-4.3N
    Assessing Interest, Penalties, and Administrative Cost 9-4.3O
Collection of Debt less than 180 Days Delinquent 9-4.4
Collecting Debt from IHS Employees 9-4.5
    Indian Health Service Employees 9-4.5A
    Grace Period (0-30 days) 9-4.5B
    Bill Collections (31-60 days) 9-4.5C
    Second Demand Letter 9-4.5D
    Third Demand Letter 9-4.5E
Collecting Debt from Non-IHS Employees 9-4.6
    Non-IHS Employees 9-4.6A
    Grace Period (0-30 days) 9-4.6B
    First Demand Letter (31-60 days) 9-4.6C
    Second Demand Letter 9-4.6D
    Third Demand Letter 9-4.6E
Collecting Debt from Service Unit Business Offices 9-4.7
    Service Unit Business Offices Transactions 9-4.7A
    Non-Beneficiaries, Third Party Insurers, or Guarantors 9-4.7B
    Grace Period (0-30 days) 9-4.7C
    First Demand Letter 9-4.7D
    Second Demand Letter 9-4.7E
    Third Demand Letter 9-4.7F
Other Debt Collection Tools 9-4.8
Compromise 9-4.9
    Compromise 9-4.9A
    Criteria 9-4.9B
    Non-Beneficiary Debt 9-4.9C
    Debt forwarded for Collection 9-4.9D
    Installment Agreements 9-4.9E
Suspension 9-4.10
    Termination 9-4.10A
    Collection Action 9-4.10B
    Debt forwarded for Collection 9-4.10C
    Termination Agreements 9-4.10D
Termination 9-4.11
    Termination 9-4.11A
    Debt Forwarded for Collection 9-4.11B
    Suspension Agreements 9-4.11C
Installment Payments 9-4.12
    Installment Payments 9-4.12A
    Installment Agreements 9-4.12B
Acceleration 9-4.13
Agency Work Group 9-4.14
Rescheduling 9-4.15
Take Action Against Co-Borrowers/Guarantors 9-4.16
Reporting Delinquent Debts to Credit Bureaus 9-4.17
Private Collection Agencies 9-4.18
Barring Delinquent Debtors 9-4.19
Revoking/Suspending Licenses or Eligibility 9-4.20
Administrative Wage Garnishment 9-4.21
Litigation 9-4.22
    Potentially Eligible Referrals 9-4.22A
    Potentially Ineligible Referrals 9-4.22B
Forwarding Debt to the Area Finance Office 9-4.23
    Forward Debt to the Area Finance Office 9-4.23A
    Bill of Collection 9-4.23B
Collection of Debt which are Over 180 Days Delinquent 9-4.24
    Exemptions 9-4.24A
    Debt Collection Center 9-4.24B
    Area Office Originating Debt 9-4.24C
    Director, Area Finance Office 9-4.24D
    Debt Forwarded to the PSC and the DFAS 9-4.24E
    Debt Collection Procedures - IHS Employees 9-4.24F
    Debt Collection Procedures - Non-IHS Employees 9-4.24G
Write-Off and Close Out 9-4.25
    Write-off 9-4.25A
    Write-off Approval Request 9-4.25B
    Close-out 9-4.25C

Manual Exhibits Description
Manual Exhibit 9-4-A,
Sample First Demand Letter
Manual Exhibit 9-4-B,
Sample Second Demand Letter
Manual Exhibit 9-4-C,
Sample Third Demand Letter
Manual Exhibit 9-4-D,
Sample Area Delegation of Authority
Manual Exhibit 9-4-E,
Department of Health and Human Services Installment Repayment Agreement for Transferring Personnel - Not to Exceed One Year

9-4.1  INTRODUCTION

  1. Purpose.  The purpose of this chapter is to establish the policy, responsibilities, and procedures to be followed for servicing and collecting debts owed to the Indian Health Service (IHS).  Collection procedures for all non-tax receivables and delinquent debt should be done in an efficient and effective manner to protect the value of the Federal Government’s assets.

  2. Policy.  It is IHS policy to aggressively collect all debts arising out of IHS activities.  Collection activities shall be undertaken promptly with follow-up action taken as necessary to ensure that financial operations comply with applicable laws, regulations, and Government-wide financial management requirements and standards relating to the collection of Federal receivables.

  3. Objectives.  The objectives of this policy are:

    1. Every effort is made to prevent future delinquencies by following appropriate screening standards and procedures for determination of creditworthiness.

    2. Informed and cost-effective decisions are made concerning debt portfolio management, including full consideration of contracting out for servicing or selling the debt portfolio.

    3. The full range of available techniques are used, as appropriate, to collect delinquent debts, including demand letters, administrative offset, salary offset, tax refund offset, private collection agencies, cross servicing by the Treasury, administrative wage garnishment, and litigation.

    4. Timely and accurate management and performance reporting data are submitted to the Office of Management and Budget (OMB) and the Department of the Treasury (Treasury) so that the Government’s credit management and debt collection programs and policies can be evaluated.

    5. Delinquent debts are written-off as soon as they are determined to be uncollectible.

  4. Authorities.

    1. Federal Claims Collection Act of 1966, as amended, Public Law (P.L.) 89-508

    2. Privacy Act of 1974, as amended, P.L. 93-579

    3. Indian Health Care Improvement Act of 1976, as amended, P.L. 94-437

    4. Debt Collection Act of 1982, P.L. 97-365

    5. Deficit Reduction Act of 1984, P.L. 98-369

    6. Cash Management Improvement Act of 1990, P.L. 101-453

    7. Chief Financial Officers (CFO) Act of 1990, as amended, P.L. 101-576

    8. Federal Debt Collection Procedures Act of 1990, P.L. 101-647

    9. Cash Management Improvement Act Amendments of 1992, P.L. 102-589

    10. Omnibus Budget Reconciliation Act of 1993, P.L. 103-66

    11. Department of Justice (DOJ) and Related Agencies Appropriation Act, 1994, P.L. 103-121

    12. Debt Collection Improvement Act of 1996, P.L. 104-134

    13. Health Insurance Portability and Accountability Act (HIPAA) of 1996, P.L. 104-191

    14. General Accounting Office Act of 1996, P.L. 104-316

    15. 31 United States Code (U.S.C.) 3701-3702, 3711-3717, 3719-3720E, Money and Finance, Subtitle III, "Financial Management," Chapter 37, "Claims," January 7, 2003, as revised

  5. Regulations.

    1. Office of Management and Budget Circular No. A-129, “Policies for Federal Credit Programs and Non-Tax Receivables,” as revised, dated November 29, 2000

    2. 5 Code of Federal Regulations (CFR) 550, Subpart K, Office of Personnel Management, “Collection by Offset From Indebted Government Employees,” as revised, dated June 25, 1997

    3. 31 CFR Part 285, “Debt Collection Authorities Under the Debt Collection Improvement Act of 1996,” as revised, June 25, 1997

    4. 31 CFR Parts 900, 901, 902, 903, and 904, “Federal Claims Collection Standards,” as revised, November 22, 2000

    5. 45 CFR Part 30, Department of Health and Human Services (HHS), “Claims Collection,” dated March 8, 2007

  6. Guidance.

    1. Indian Health Service, Delegation of Authority (DOA), Administrative No. 4, “Federal Claims Collection Act, as amended, 31 U.S.C. 3711,” dated December 1, 2006

    2. Part 5, Chapter 1,“Third-party Revenue Accounts Management and Internal Controls,” Indian Health Manual (IHM), Transmittal Notice (TN) 2005-12, dated November 21, 2005

    3. Indian Health Service, Financial Management Officer (FMO) Alert No. 03-04, “Treasury Requirements for Debt Management,” dated February 28, 2003

    4. Program Support Center, Payroll Services Letter No. PS 05-02, “Debt Management: Agency Administrative Salary Offset, ”dated April 17, 2005

    5. Program Support Center, Payroll Services Letter No. PS05 09, “Debt Management: Debt Collections,” dated April 17, 2005

    6. Department of the Treasury (hereinafter “Treasury,” Financial Management Service (FMS), “Guide to the Federal Credit Bureau Program:  A Companion to the Treasury Financial Manual Credit Supplement,” published October 2001, updated November 2005

    7. Treasury, FMS, “Managing Federal Receivables: A Guide for Managing Loans and Administrative Debt,” dated May 2005

    8. Treasury, FMS, Debt Management Services, Cross Servicing Division, “Cross Servicing Implementation Guide,” dated January 2005

  7. Acronyms.

    1. ACCO = Area Claims Collection Officer

    2. BOC = Business Office Coordinator

    3. CCO = Claims Collection Officer

    4. CEO = Chief Executive Officer

    5. CFR = Code of Federal Regulations

    6. CNC = Currently Not Collectible

    7. CORE = Core Accounting System

    8. DCIA = Debt Collection Improvement Act

    9. DFAS = Defense Finance and Account ting Service

    10. DOJ = Department of Justice

    11. EIN = Employer Identification Number

    12. FCCS = Federal Claims Collection Standards

    13. FDCPA = Fair Debt Collection Practices Act

    14. FMO = Financial Management Officer

    15. FMS = Financial Management Service

    16. FSS = Federal Supply Schedule

    17. GRS = General Records Schedule

    18. GSA = General Services Administration

    19. HIPAA = Health Insurance Portability and Accountability Act

    20. NARA = National Archives and Records Administration

    21. OFA = Office of Finance and Accounting

    22. OMB = Office of Management and Budget

    23. ORAP = Office of Resource Access and Partnerships

    24. PCA = Private Collection Agency

    25. PSC = Program Support Center

    26. TIN = Taxpayer Identification Number

    27. TOP = Treasury Offset Program

    28. Treasury = Department of the Treasury

    29. UFMS = Unified Financial Management System

    30. U.S.C. = United States Code

  8. Definitions.

    1. Active Collection.  Active collection means that the debt is being collected through the use of all appropriate debt collection remedies, including, but not limited to, demand letters, administrative offset, salary offset, tax refund offset, private collection agencies, cross servicing by the Treasury, administrative wage garnishment, and litigation; that informed and cost effective decisions are made concerning debt portfolio management, including full consideration of contracting out for servicing or selling the debt portfolio; that accurate debt management and performance reporting are submitted timely; and that delinquent debts are written off as soon as they are determined to be uncollectible.

    2. Adjustment.  An adjustment is not a debt. An adjustment could be a copay, deductible, non-covered service, over usual customary rate, or a request for payment, too late to file, except in the case of a non-beneficiary.

    3. Compromise.  An agency compromises a debt whenever it accepts less than the full amount of the outstanding debt in full satisfaction of the entire total.

    4. Close-out.  Close-out occurs when an authorized IHS official, after determining that additional future collection efforts on a debt are prohibited or would be futile, determines to cease all collection activities on the debt.  Close-out may occur concurrently with the write-off of an account, or at a later date, depending on the collection strategy (operational plan) and the ultimate determination that the debt has been discharged.  No collection actions may be taken after close-out of a debt.

    5. Debt.  An amount of non-tax money, funds, or property that the IHS has determined is owed to the IHS from any person, organization, or entity, except another Federal agency.  In this policy, “debt,” “claim,” and “Federal accounts receivable” have the same meaning.  An adjustment is not a debt.

    6. Delinquent Debt.  A debt becomes delinquent when payment is not made by the due date or by the end of the “grace period” as established in a loan or repayment agreement, in the case of a debt being paid in installments.  The date of delinquency is the payment due date.

    7. Guarantor.  The person or entity that is responsible for final payment.

    8. Non-Beneficiaries.  Certain categories of persons who do not come within the scope of the Indian Health Program as defined in Part 2, Chapter 4, “Other Beneficiaries,” IHM.

    9. Non-Tax Debt.  With respect to any debt other than a debt under the Internal Revenue Code of 1986.

    10. Passive Collection.  Passive collection means that debt is no longer being actively collected; that is, the debt remains secured by a judgment lien or other lien interest, has not been removed from the Treasury Offset Program (TOP) or is otherwise being collected by offset, and/or is scheduled for future sale.

    11. Suspension.  An agency suspends a debt whenever it decides to temporarily cease collection activities of the debt for a specific time.

    12. Termination.  An agency terminates a debt whenever it decides to cease active collection of the debt.

    13. Write-off.  A write-off is an accounting action that results in reporting a debt/receivable as having no value on the IHS’s financial and management reports.  A write-off occurs when an authorized IHS official determines, after using all appropriate collection tools, that it is more than 50 percent likely that a debt is uncollectible.  Active collection efforts on the account cease and the account is removed from the receivables.  Writing-off a debt does not preclude the IHS from taking advantage of offset possibilities or other cost effective means of passive collection should they become available.  Accounts may be written-off and maintained as inactive debt “currently not collectible.”

9-4.2  RESPONSIBILITIES

  1. Headquarters.

    1. Director, IHS.  The Director, IHS:

      1. administers the Federal credit program in accordance with Federal law, regulation, and policy;

      2. ensures that a debt management program is established within the IHS;

      3. ensures the full consideration of credit management and debt collection issues by all interested and affected IHS programs;

      4. establishes, as appropriate, boards to coordinate credit management and debt collection activities; and

      5. includes representation on those boards by the Chief Financial Officer (CFO) and the senior program officials with credit activities or non-tax receivables.

    2. Chief Financial Officer.  The CFO is responsible for directing, managing, and providing guidance and oversight of Agency financial management personnel, activities, and operations, including the implementation of asset management systems for credit management and debt collection.  This includes preparing, as part of the Agency CFO Financial Management Plan, a Credit Management and Debt Collection Plan for effectively managing credit extension, account servicing, portfolio management, and delinquent debt collection.  The CFO ensures that financial data for individuals are managed in accordance with the Privacy Act of 1974 and the HIPAA of 1996, as amended.  The CFO periodically evaluates credit programs to assure their effectiveness in achieving program goals.  The CFO shall also ensure that the IHS maximizes the use of available technology and systems to facilitate program operations.  In addition, the CFO shall ensure that debt management tools and techniques, appropriate for the type and size of IHS’ debts, are implemented.  Periodically, the CFO is responsible for monitoring the IHS Office of Finance and Accounting (OFA), programs compliance with conformance to this policy.

    3. Director, Division of System Review and Procedures.  The Director, Division of System Review and Procedures (DSRP), OFA, ensures that all IHS policies relating to debt management are maintained in accordance to changes in Federal law, regulation and policies.  The Director, DSRP, shall ensure that forms are updated in accordance with statutory and regulatory requirements.  The Director, DSRP, also works with the HHS Program Support Center (PSC) to ensure that timely and accurate financial management and performance data for Government wide reports are submitted to the OMB and the Treasury so the IHS’ debt collection programs and policies can be evaluated.  In addition, the Director, DSRP, shall ensure that the IHS provides for receivable reporting and account tracking systems to inform IHS management, the OMB, and the Treasury’s FMS of essential credit information and to ensure accurate financial reporting on the Treasury Report on Receivables.

    4. Director, Office of Resource Access and Partnerships.  The Director, Office of Resource Access and Partnerships (ORAP), provides leadership to IHS programs on IHS policies regarding the operation and management of their business office programs.  The Director, ORAP, is responsible for designing, implementing, and evaluating management control systems to mitigate risks in this functional area.  Periodically, the Director, ORAP, is responsible for monitoring the business office program’s compliance with this policy.

  2. Area Office.

    1. Area Director.  The Area Director is responsible for implementing and operating a debt management program in accordance with IHS policy.  The Area Director shall ensure that every effort is made to prevent future delinquencies; that the full range of available techniques are used, as appropriate, to collect delinquent debt, including but not limited to, demand letters, administrative offset, salary offset, tax refund offset, private collection agencies, cross servicing by the Treasury, administrative wage garnishment, and litigation; that informed and cost effective decisions are made concerning debt portfolio management, including full consideration of contracting out for servicing or selling the debt portfolio; that accurate debt management and performance reporting are submitted timely; and that delinquent debts are written off as soon as they are determined to be uncollectible.

    2. Area Financial Management Officer.  The Area FMO is responsible for providing overall direction of accounting for the Area debt management program.  The Area FMO shall develop, implement, and/or maintain processes and procedures for the timely recording and execution of all debt management accounting transactions into the accounts receivable accounting system i.e., CORE, Unified Financial Management System (UFMS).  The Area FMO is also responsible for receiving, reviewing, validating, consolidating, clearing, and reconciling all financial data/information.  This includes maintaining the proper documentation for audit/evaluation and the preparation of analyses, summaries, distributions, operating plans, and other reports as needed.  The Area FMO, in coordination with the Area Business Office Coordinator (BOC) and their field counterparts, provide expert advice and technical assistance, as required, on financial management policy and procedural matters.  The Area FMO shall ensure that delinquent debts are written off pursuant to procedures as identified in Section 9-4.25.

    3. Area Business Office Coordinator.  The Area BOC is responsible for overseeing the patient account management function in general and for providing instructions and guidance to the Service Units.  The Area BOC ensures that documented processes and procedures are in place for receiving and posting collections, making adjustments, refunds, unallocated cash, denials, and transfers between facilities.  The Area BOC provides coordination among the Chief Executive Officer (CEO), business offices, and the Area and/or local finance office(s) to facilitate reconciliation with the accounts receivable accounting system (i.e., UFMS) and to ensure that information is submitted on a timely basis and/or by established cutoff dates.  The Area BOC is responsible for providing procedures and best practices intended to safeguard revenue for health services that are provided and for advising management on all collection activities.  In addition, the Area BOC coordinates with their Service Unit counterparts and finance office managers to provide expert advice, training, and technical assistance, as required, on all business office operations.

    4. Area Claims Collection Officer.  The Area Claims Collection Officer (ACCO) is responsible for developing, implementing, and maintaining processes and procedures for the timely recording and execution of all accounting transactions as they relate to posting and reconciliation of debt collections.  The ACCO provides debt management training for Area Office and Service Unit staff.  The ACCO provides guidance and assistance to Service Unit finance and business office staff.  The ACCO is responsible for maintaining the debt management records for the Area Debt Management Office.

  3. Service Units.  Each Service Unit must implement and operate a debt management program.

    1. Chief Executive Officer.  The CEO is responsible for various forms of debt.  The debts can arise from various departments at each Service Unit and the debts range from quarters rent, report of survey, and travel advances, to salary advances.  The CEO is responsible for overseeing the revenue cycle for the Service Unit and for implementing procedures and practices that will safeguard the collection of amounts owed to the IHS for health services provided.  This includes developing location-specific procedures consistent with the requirements of this policy for patient registration, coding/data entry, billing, processing/claims follow-up, posting collections, denials, and adjustments and other processes pertinent to patient accounts.  The CEO is responsible for the accuracy of all transactions, computations, and numerical data for their respective organization; for the proper and timely preparation of detailed subsidiary transactions and summary reports; and for accurate and proper account balances.  The CEO must budget for and provide adequate staffing levels and ongoing training in all third-party revenue functions and related requirements of this policy.

    2. Financial Management Officer.  The FMO shall develop, implement, and maintain processes and procedures for the timely recording and execution of debts that range from third-party accounting transactions, quarters rent, report of survey, travel advances, to salary advances.  The FMO is also responsible for the input of the accounting transactions into the accounts receivable accounting system, i.e., CORE, UFMS.  The FMO is responsible for providing overall direction of accounting for the debt management program.  The FMO shall develop, implement, and/or maintain processes and procedures for the timely recording and execution of all third-party accounting transactions into the accounts receivable accounting system (i.e., CORE, UFMS).  The FMO is also responsible for receiving, reviewing, validating, consolidating, clearing, and reconciling all financial data/information.  This includes maintaining the proper documentation for audit/evaluation and the preparation of analyses, summaries, distributions, operating plans, and other reports as needed.  The Area FMO in coordination with the Area BOC and their field counterparts, provide expert advice and technical assistance, as required, on financial management policy and procedural matters.

    3. Business Office Manager.  The Business Office Manager (BOM), in conjunction with the CEO, are primarily responsible for the timely, accurate, and proper billing and collection of amounts owed to the IHS for all services provided, ensuring optimal reimbursement from third-party payers and non beneficiaries.  The BOM must ensure the efficient and accurate collection of all data/information related to patient services i.e., patient registration, admissions, eligibility, third-party resources, cost allocations, etc.) and make changes/improvements to Business Office operations as deemed necessary.  The BOM is responsible for implementing and maintaining processes and procedures that meet the specific needs of their facilities while ensuring compliance with all regulatory/policy requirements.  This includes establishing management controls and tracking tools to monitor assignments, tasks, and performance standards; directing the development and preparation of required financial, statistical and other summary management reports; researching variances within the financial information and providing documented explanations; identifying risks and suggesting solutions and/or making proper adjustments to subsidiary transactions as necessary; and maintaining reports and records for all third-party transactions.  The BOM must also develop and maintain productive and effective working relationships with administrative and clinical staff, providing expert advice and technical assistance, as required.  The BOM shall ensure that delinquent debts are written off pursuant to procedures as identified in Section 9-4.25 of this policy.

    4. Claims Collection Officer.  The Claims Collection Officer (CCO) is responsible for developing, implementing, and maintaining processes and procedures for the timely recording and execution of all accounting transactions as they relate to posting and reconciliation of debt collections.  The CCO is responsible for maintaining the debt management records for the Service Unit Debt Management Office.

9-4.3  MANAGING FEDERAL RECEIVABLES (DEBT)

  1. Delegation of Authority to Compromise, Suspend, or Terminate a Debt.  Pursuant to 31 United States Code (U.S.C.) Section 3711,the Director, IHS, has the authority to compromise, suspend, or terminate a debt up to $100,000, exclusive of interest.  Also, pursuant to the IHS Administrative DOA No. 4, Area Directors have the authority to compromise, suspend, or terminate a debt up to $20,000, exclusive of interest.  Area Directors may redelegate the authority to compromise, suspend, or terminate a debt up to $20,000, exclusive of interest.  For the efficient operation of the debt management program, this authority or specific limited authority needs to be redelegated to the ACCO and the CCO.  The Area FMO will submit a list of candidates, to serve in the roles of the ACCO and the CCO, to the Area Director for approval.

    See Manual Exhibit 9-4-D, “Sample Area DOA,” for the format used by Area Directors to redelegate their authority to the CCO.  Note in this sample Area DOA, CEOs are delegated the authority to compromise, suspend, or terminate a debt up to $5,000.  However, the BOM (or certain staff in the Business Office or Finance Management Office) could also be delegated certain limited authorities.  Also, the FMO needs to recommend the dollar amount to redelegate, as long as that amount is not greater than $20,000.  All original Area Director-approved DOAs must be processed by the Area Directives and Delegations Control Officer.

  2. Due Process.  Due process must be given to the debtor for the outstanding debt to be legally enforceable.  For a debtor to be given due process, notice must be given that a debt is owed and the debtor must be given the opportunity to dispute.  The IHS has the opportunity to extend the administrative process to give more time to a debtor if needed.  Issuing a demand letter to the last known address on file is considered sufficient notice.  The demand letter need not be sent by certified mail, however; it can be sent via standard mail delivery mail.

  3. Notice.  Notice informs the debtor of the following:

    1. the amount and type of debt; and

    2. actions the Agency might take to collect debt (including but not limited to, salary offset or garnishment, foreclosure of collateral, and credit bureau reporting).

  4. Opportunity.  The debtor must have the opportunity to pursue the following options:

    1. to inspect and copy IHS records related to the debt;

    2. to request a review with in the IHS to the determination of indebtedness; and

    3. to make a written repayment agreement to repay the debt.  (If prior approval is provided.)

  5. Correct Name and Taxpayer Identification Number.  Since the IHS may have to report outstanding debt to the Treasury or the cancelled or compromised debt to the Internal Revenue Service (IRS), the IHS should obtain a debtor’s correct name and Taxpayer Identification Number (TIN) at the time the debt is incurred.  If the TIN is not obtained before a debt is incurred, and is needed to report to the Treasury, the IRS, or other agencies, then the IHS may utilize IRS Form Number W-9 to request this information from the debtor.  If the debtor is a minor, the Social Security Number of the parents or legal guardian should be obtained.

  6. Foreigners.  If the non-U.S. citizen has a TIN, collection attempts can be attempted.  If not, it may be subject to write-off.

  7. Other Federal Agencies.  Debt owed by another Federal agency is exempt from debt referral and should not be referred to the PSC or to the Treasury.  Rather, each Service Unit shall have a working relationship with Federal agencies to settle debt issues.

  8. Documenting Collection Actions.  During the debt collection process the CCO should continue to support a delinquent debt by documenting all actions taken.  It is essential that the CCO document all contacts with a debtor and actions taken to enforce collection in order to protect the Government’s interests.  Proper documentation is critical if the Office of the General Counsel decides to pursue litigation and for subsequent decisions to write-off and ultimately close-out the debt.

  9. Office of Record.  The Office of Record is the office where all original documents regarding the debt are kept.  Debt can originate at the Service Unit or the Area Office.  It is essential that all originals are kept at the Office of Record.  If a debt originates at the Service Unit, and the debt is being forwarded to the Area Office, then copies should be sent to the Area Office and the Service Unit should retain the original documents.  The only circumstance under which an original document should be removed from the Office of Record is following a written request for the original documentation, in cases such as litigation, under those circumstances, the Office of Record should retain a copy.

  10. Records Disposition.  The most recent updated versions of either the IHS Records Disposition Schedule or the National Archives and Records Administration (NARA) General Records Schedule (GRS), which lists of Federal records and retention requirements, shall be used to determine how long to retain debt management records.  The Web site address for this listing is: http://www.archives.gov/recordsmgmt/ardor

  11. Administrative Claim File.  All documentation must be kept in an Administrative Claim File (or debt file).  The Service Unit Finance Office, Service Unit Business Office, and the Area Office Debt Management Office staff shall keep adequate records and files of all their outstanding debts, including those referred to the Treasury.  The Administrative Claim File (or debt file) contains documentation substantiating the debt and all collection actions taken, including communications to and from the debtor, and disposition of the debt(s).  Information from an Administrative Claims File (or debt file) relating to an individual may be disclosed only for purposes consistent with the Privacy Act of 1974 (5 U.S.C. Section 552a(b)(12), Conditions of Disclosure) and the HIPAA Privacy Rule (45 Code of Federal Regulations (CFR), Section 164.502(a)(2)(ii), 45 CFR Section 164.506(a), and 45 CFR Section 164.506(c)(3).  The primary documents found in the Area Office and Service Unit Debt Management Offices are “Administrative Claims Files.”  The disposition as found in the NARA GRS, under Schedule 6, Accountable Officers’ Accounts Records is as follows:

    1. Claims by the United States subject to the Federal Claims Collection Standards and 28 U.S.C. §2415 or 31 U.S.C. §3716(c)(1).  Records relating to claims for money or property that were administratively determined to be due and owing to the United States and that are subject to the Federal Claims Collection Standards (4 CFR Chapter II), excluding claims covered under subparagraph b below.

      1. Claims that were paid in full or by means of a compromise agreement pursuant to 4 CFR Part 103,destroy when 6 years, 3 months old.

      2. Claims for which collection action has been terminated under 4 CFR Part 104.

        1. Claims for which the Government’s right to collect was not extended, destroy 10 years, 3 months after the year in which the Government’s right to collect first accrued.

        2. Claims (per 28 U.S.C. §2415) for which the Government is entitled to additional time to initiate legal action, destroy 3 months after the end of the extended period.

      3. Claims that the IHS administratively determines are not owed to the United States after collection action was initiated, destroy when 6 years, 3 months old.

    2. Claims files that are affected by a court order or that are subject to litigation proceedings, destroy when the court order is lifted, litigation is concluded, or when 6 years, 3 months old, whichever is later.

  12. Communicating with Debtors.  Contact with the debtor is essential because contact provides the debtor with notification of the existence of the debt and the amount if the debtor is otherwise unaware of such elements.  It also provides the debtor with the opportunity to repay the debt in full or to work out a satisfactory arrangement with the IHS.  Contact with the debtor also provides the debtor with information on IHS’ policies regarding interest, penalties and administrative costs.

    It also provides written evidence of the due process in compliance with demand letters advising the debtor of the intent to use certain debt collection tools.  This allows the debtor to exercise any rights to avoid the use of the debt collection tools.  Although Federal agencies are not subject to the Fair Debt Collection Practices Act (FDCPA), the regulations provide valuable guidance in communicating with debtors.  The following FDCPA rules of debt collection shall be followed by IHS employees.

    1. Do not contact the debtor at any unusual time or place, or a time or place that you should know is inconvenient to the debtor.  Generally, 8:00 A.M. through 9:00 P.M. (debtor’s time zone) is deemed convenient.

    2. Do not contact the debtor directly if you know the debtor is represented by an attorney.

    3. Do not contact the debtor at his or her place of employment if you think that the debtor's employer does not allow such calls.

    4. Do not threaten, use violence, or employ criminal means to convey threat or harm to the debtor or his or her property.

    5. Do not use obscene or profane language.

    6. Do not continue to verbally contact the debtor after the debtor has requested that you stop further communication or the debtor has stated in writing that he or she refuses to pay the debt.  You may, however, inform the debtor there will be no further contact or notify the debtor about specific collection actions to be taken.

    7. Do not discuss the debtor’s matter with anyone other than the debtor unless otherwise authorized by the debtor in writing.  When leaving a message or talking to an answering machine, leave your name and number only.

    8. Do not continuously contact the debtor by telephone or written communication, utilize the telephone for harassment, or threaten action or actions that cannot be legally taken or are not intended to be taken.

    9. Do not accept a debtor’s postdated check or a check that is not payable to the IHS.

  13. Right of Recovery from Third-party Insurers.  Debts include all recovery from third-party insurers.  The Indian Health Care Improvement Act (IHCIA), 25 U.S.C. §1621e gives the United States the right to recover from third-party insurers.  The IHCIA, as amended, gives the United States the right to recover “the reasonable expenses incurred by the Secretary.. .in providing health services, through the Service,. ..” to eligible Native Americans and Alaska Natives to the same extent as the individual or a non-governmental provider would be eligible for reimbursement if:

    1. the health care had been provided by a non-governmental provider and

    2. the individual had been required to pay for the care and had in fact paid.

    Thus, third-party insurers must reimburse the IHS for health care services that the IHS provides to Native Americans and Alaska Natives, who are covered under the third-party’s health plan, just as the IHS would have to reimburse the third-party insurers for services that it may provide to these patients.  States are only required to reimburse the IHS, however, when an injury, illness, or disability is covered by a worker’s compensation law or a no-fault automobile accident insurance plan or program.  Under the IHCIA, as amended, the definition of a State does not encompass a political subdivision or an entity that is an arm of the State.  See U.S. ex rel. Norton Sound Health Corporation v. Bering Straight School District, 138 F. 3d 1281 (9th Cir. 1998), cert denied, Bering Straight School District v. U.S., 525 U.S. 962 (1998).

  14. Third-Party Payments must be made Payable to the IHS.  A claim is not paid, until the IHS receives payment.  A claim is not paid if the third-party insurer sends the payment to the patient.  The IHS will continue to pursue collection actions, including reporting unpaid claims to the State Insurance Commission, against the third-party insurers until payment is received by the IHS.

  15. Assessing Interest, Penalties, and Administrative Costs.  The Debt Collection Act of 1982, as amended, requires agencies, unless expressly prohibited or restricted by statute or contract, to assess three separate and distinct types of late charges on all delinquent debts, including debts owed by State and local governments.  Late charges are categorized as interest, penalties, and administrative costs.

    1. Interest.  Interest compensates the Government for the loss of the use of funds when the debt is not paid timely.  At a minimum, the interest rate will be set at the same rate as the Treasury’s Current Value of Funds Rate for the period in which the debt became delinquent.  However, the law allows for agencies to assess a higher rate to protect the government’s interest.  The HHS has, by 45 CFR Section 30.18, set an annual rate of interest as fixed by the Secretary of the Treasury after taking into consideration private consumer rates of interest prevailing on the date the IHS becomes entitled to recovery.  Thus, the prevailing interest rate is the higher of either the Treasury’s Current Value of Funds Rate or the rate provided on the Treasury’s Web site at:

      (http://www.fms.treas.gov/cvfr/index.html).

      The Treasury's certified quarterly annual rate of interest for the HHS is available at the following Web site address:

      (http://www.fms.treas.gov/prompt/rates.html),

      as published in the Federal Register.  This is derived from the Federal Reserve Board's "Interest Rates on Selected Consumer Installment Loans at Reporting Commercial Banks" rounded to the nearest 1/8 percentage point.  The interest rate is fixed throughout the delinquency based upon the prevailing rate at the time the debt was incurred.

    2. Penalties.  A penalty charge of 6 percent a year will be assessed on a debt, a payment, or any portion thereof that is more than 90 days overdue.  Late payment penalty charges will accrue from the date the debt or portion thereof, became overdue, and will continue until the overdue amount is paid.  These penalty charges will be assessed monthly, or per payment period, as appropriate.

    3. Administrative Costs.  Delinquent debtors will be assessed the administrative costs incurred by the IHS as a result of handling and collecting the overdue debts, based on either actual or average costs incurred.  These costs are in addition to costs incurred for others to handle these debts.  For example, the HHS PSC assesses $30.00 for each transaction forwarded to it.

9-4.4  COLLECTION OF DEBT LESS THAN 180 DAYS DELINQUENT

Each Service Unit is responsible for creating a Service Unit-specific operational plan regarding debt management.  An Operational plan is an organized plan of action incorporating the various collection tools to be used to recover debt.  Since the Debt Collection Improvement Act (DCIA) requires all debt over 180 days delinquent to be referred to the Treasury, the Service Unit operational plan should be limited to collection actions undertaken within the first 180 days of the delinquency.  At a minimum, a Service Unit must issue a demand letter.  Procedures for demand letters are different for debt originating from the Finance Office or the Business Office.

The Finance Office handles various forms of debts.  The debts can arise from various departments at each Service Unit and the debts range from quarters rent, report of survey, and travel advances, to salary advances.  The examples are not all inclusive and different events will occur to create a debt.

9-4.5  COLLECTING DEBT FROM IHS EMPLOYEES

  1. Indian Health Service Employees.  Collecting debt from an IHS employee is handled differently than Non-IHS employees.  The steps to collect a debt from an IHS employee are:

    1. Grace Period,

    2. Bill of Collection,

    3. Second Demand Letter, and

    4. Third Demand Letter,

  2. Grace Period (0-30 days).  Normally, a 30 day grace period from the travel date, date of salary advance, quarters rent due date, or date of report of survey determination will allow an IHS employee sufficient time to repay the debt owed.  If payment is made during the grace period, no interest or administrative fees will accrue.

  3. Bill of Collection (31-60 days).  If payment for an overdue debt is not made during the grace period, then the IHS Financial Management Specialist shall prepare a Bill of Collection.  The Bill of Collection is then accounted for in the Accounting System as an account receivable.  The Bill of Collection is then sent to the employee for payment and serves the same purpose as the First Demand Letter.  The Bill of Collection must describe what actions IHS may take in case the debt is not paid, i.e., salary offset, etc.  The Financial Management Specialist shall apply appropriate interest and administrative costs to the outstanding balance as explained in Section 9-4.3O of this policy.  The Bill of Collection shall include the following information:

    1. Name of debtor.

    2. Type of debt (e.g., report of survey, salary or travel advance, etc.).

    3. Date(s) of service.

    4. Social Security Number.

    5. Indicate whether the employee is a Civil Service employee or a United States Public Health Service Commissioned Corps Officers.

    6. Debt total.

    7. Debt account number.

    8. Copy of the source document, i.e., travel order/voucher, salary advance request, lease agreement, or report of survey determination.

  4. Second Demand Letter.  If payment has not been made within 30 days after the date of the Bill of Collection, then the Finance Office shall send the IHS employee a Second Demand Letter.  (61-90 days, see Manual Exhibit 9-4-B).  The Finance Office shall apply appropriate interest and administrative costs to the outstanding balance as explained in 9-4.3O of this policy.

  5. Third Demand Letter.  If payment has not been made within 30 days after the date of the Second Demand Letter, then the Finance Office shall send the IHS employee a Third Demand Letter (91-120 days, see Manual Exhibit 9-4-C).  The Finance Office shall apply appropriate interest, administrative costs, and penalties to the outstanding balance as explained in 9-4.3O of this policy.

9-4.6  COLLECTING DEBT FROM NON-IHS EMPLOYEES

  1. Non-IHS Employees.  The procedure for collecting a debt from a non-IHS employee debtor is:

    1. Grace Period,

    2. First Demand Letter,

    3. Second Demand Letter, and

    4. Third Demand Letter.

  2. Grace Period.  Normally, a grace period (0-30 days) from the travel date, quarters rent due date, or transaction date will allow a non-IHS employee time to repay.  If payment is made during the grace period, no interest or administrative fees will accrue.

  3. First Demand Letter.  If payment has not been made within 30 days, then the Finance Office shall send the a non-IHS employee a First Demand Letter (31-60 days, see Manual Exhibit 9-4-A).  The Finance Office shall apply appropriate interest and administrative costs to the outstanding balance as explained in 9-4.3O of this policy.

  4. Second Demand Letter.  If payment has not been made within 30 days after the date of the First Demand Letter, then the Finance Office shall send the non-IHS employee a Second Demand Letter (61-90 days, see Manual Exhibit 9-4-B).  The Finance Office shall apply appropriate interest and administrative costs to the outstanding balance as explained in 9-4.3O of this policy.

  5. Third Demand Letter.  If payment has not been made within 30 days after the date of the Second Demand Letter, then the Finance Office shall send the non-IHS employee a Third Demand Letter (91-120 days, see Manual Exhibit 9-4-C).  The Finance Office shall apply appropriate interest, administrative costs, and penalties to the outstanding balance as explained in 9-4.3O of this policy.

9-4.7  COLLECTING DEBT FROM SERVICE UNIT BUSINESS OFFICES

  1. Service Unit Business Offices Transactions.  The business office typically handles three types of transactions that could become receivables:

    1. Non-Beneficiaries,

    2. Third-Party Insurers, and/or

    3. Guarantors.

  2. Non-Beneficiaries, Third-party Insurers, and/or Guarantors.  Procedures for collecting debt from Non-Beneficiaries, Third-party Insurers, and/or Guarantors are:

    1. Grace Period,

    2. First Demand Letter,

    3. Second Demand Letter,

    4. Third Demand Letter,

    5. Forwarding Debt to the ACCO.

  3. Grace Period (0-30 days).  Normally, a grace period (0-30 days) from the date of service will allow Non-Beneficiaries, Third-party Insurers, and/or Guarantors sufficient time to repay the cost of IHS-provided health care.  If payment is made during the grace period, no interest or administrative fees will accrue.

  4. First Demand Letter.  If payment has not been made within 30 days, then the Business Office shall send the Non-Beneficiaries, Third-party Insurers, and/or Guarantors a First Demand Letter (31-60 days, see Manual Exhibit 9-4-A).  The Business Office shall apply appropriate interest and administrative costs to the outstanding balance as explained in 9-4.3O of this chapter.

  5. Second Demand Letter.  If payment has not been made within 30 days after the date of the First Demand Letter, then the Business Office shall send the Non-Beneficiaries, Third-party Insurers, and/or Guarantors a Second Demand Letter (61-90 days, see Manual Exhibit 9-4-B).  The Business Office shall apply appropriate interest and administrative costs to the outstanding balance as explained in 9-4.3O of this policy.

  6. Third Demand Letter.  If payment has not been made within 30 days after the date of the Second Demand Letter, then the Business Office shall send the Non-Beneficiaries, Third-party Insurers, and/or Guarantors a Third Demand Letter (91-120 days, see Manual Exhibit 9-4-C).  The Business Office shall apply appropriate interest, administrative costs, and penalties to the outstanding balance as explained in 9-4.3O of this policy.

9-4.8  OTHER DEBT COLLECTIONS TOOLS

Other debt collection tools include: compromise, negotiation, installment payments, acceleration, Agency workout groups, rescheduling, taking action against co-borrowers/guarantor, reporting delinquent debt to a credit bureau, barring delinquent debtors, revoking/suspending licenses or eligibility, administrative wage garnishment, litigation, and forwarding debt to the Area Finance Office.

9-4.9  COMPROMISE

  1. Compromise.  The Agency compromises a debt whenever it accepts less than the full amount of the outstanding debt in full satisfaction of the entire amount.  Within their delegated authority, the ACCO and the CCO may compromise a debt.  Area Directors may compromise a debt not greater than $20,000, exclusive of interest.  The Director, IHS, may compromise a debt not greater than $100,000, exclusive of interest.  The IHS does not have authority to compromise a debt over $100,000.  The Department of Justice (DOJ) has the authority to compromise a debt over $100,000.  Regardless of the amount, when the IHS has a debt arising from fraud, false statements, or misrepresentations, the IHS must ask the DOJ for authority to compromise such a debt.

  2. Criteria.  A compromise may be considered, but is not required, when one or more of the following criteria apply:

    1. The debtor is unable to pay the debt within a reasonable time as verified through credit reports or other financial information.

    2. The IHS is unable to collect the debt in full within a reasonable time by enforcing collections proceedings.

    3. The cost of collecting the debt does not justify enforced collection of the full amount.

    4. There is substantial doubt concerning the IHS’s ability to prove its case in court.

    For more detailed information, see “Managing Federal Receivables:  A Guide for Managing Loans and Administrative Debt,” Chapter 7, issued by the Treasury’s FMS.  The chapter can be accessed at this Web site:

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

  3. Non-Beneficiary Debt.  A compromise shall not be considered when a debt is incurred by a non-beneficiary.  A compromise cannot be used as an inducement for employment, continued employment, or as a benefit of IHS employment.

  4. Debt Forwarded for Collection.  The IHS may not compromise a debt after it is sent to the PSC or to the Defense Finance and Accounting Service (DFAS).  All such requests need to be made to the PSC or the DFAS directly, not the IHS.

  5. Installment Agreements.  All compromise agreements shall be in writing and signed by the debtor and the IHS employee with appropriate authority to issue a compromise.  The IHS discourages the use of installment agreements to pay compromises.  The compromise agreement should state that the IHS is not authorized to release the debtor from any other liabilities owed to the United States, including tax liability which may be incurred on the compromised amount.

9-4.10  SUSPENSION

  1. Suspension.  An agency suspends a debt whenever it decides to temporarily cease collection activities of the debt for a specific time.

    1. Within their delegated authority, an ACCO or CCO may suspend a debt.

    2. Area Directors may suspend a debt up to $20,000, exclusive of interest.

    3. The Director, IHS may suspend a debt up to $100,000, exclusive of interest.

    4. The IHS does not have authority to suspend a debt over $100,000.

    5. The DOJ has the authority to suspend a debt over $100,000.  Regardless of the amount, when the IHS has a debt arising from fraud, false statements, or misrepresentations, the IHS must ask the DOJ for authority to suspend such a debt.

  2. Collection Action.  Collection action should be suspended only when the IHS has reason to believe that the suspension will enhance chances of recovery, or, at minimum, will not endanger the recovery of the debt.  A suspension should be considered when:

    1. The IHS cannot locate the debtor.

    2. There is a reasonable expectation that the debtor’s financial condition will improve.

    3. The debtor has requested a waiver or administrative review of the debt.

    4. The debtor has filed a petition in bankruptcy.

    For more detailed information, see “Managing Federal Receivables:  A Guide for Managing Loans and Administrative Debt,” Chapter 7, issued by the Treasury’s FMS.  The chapter can be accessed at this Web site:

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

  3. Debt Forwarded for Collection.  The IHS may not suspend a debt after it is sent to the PSC or to the DFAS.  All such requests need to be made to the PSC or to the DFAS directly, not to the IHS.

  4. Suspension Agreements.  All suspensions shall be in writing and signed by the IHS employee who has the appropriate suspension authority.  The suspension shall also specify the time period in which the suspension will be in effect.  The reasons for the suspension shall be stated and any justifying documentation attached.

9-4.11  TERMINATION

  1. Termination.  An agency terminates a debt whenever it decides to cease active collection of the debt.  Within their delegated authority, the ACCO or CCO may terminate a debt.  Area Directors may terminate a debt not greater than $20,000, exclusive of interest.  The Director, IHS, may terminate a debt not greater than $100,000, exclusive of interest.  The IHS does not have authority to terminate a debt over $100,000.  The DOJ has the authority to terminate a debt over $100,000.

    Regardless of the amount, when the IHS has a debt arising from fraud, false statements, or misrepresentations, the IHS must ask the DOJ for authority to terminate such a debt.  Termination may be considered when:

    1. The IHS is unable to collect any substantial amount through its own efforts or through the efforts of others.

    2. The Agency is unable to locate the debtor.

    3. Costs of collection are anticipated to exceed the amount recoverable.

    4. The debt is legally without merit or enforcement of the debt is barred by applicable statute of limitations.

    5. The debt cannot be substantiated.

    6. The debt against the debtor has been discharged in bankruptcy.

    For more detailed information, see Chapter 7, "Managing Federal Receivables:  A Guide for Managing Loans and Administrative Debt,"the Treasury's FMS.  Chapter 7 may also be accessed at the following Website:

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

  2. Debt Forwarded for Collection.  The IHS may not terminate a debt after it is sent to the PSC or to the DFAS.  All such requests need to be made to the PSC or to the DFAS directly, not IHS.

  3. Termination Agreements.  All terminations shall be in writing and signed by the IHS employee with the appropriate termination authority.  The reasons for the termination shall be stated and with any justifying documentation attached.

9-4.12  INSTALLMENT PAYMENTS

  1. Installment Payments.  Whenever possible, Service Units should collect an overdue debt in a single lump sum payment.  In the event that the debtor claims financial inability to repay the debt in a single lump sum payment, Service Units may determine that the overdue debt may be paid in installments.  Service Units should enter into such agreements only when there is evidence the debtor has:  (1) a willingness to abide by the terms of the agreement, including the repayment schedule; and (2) an ability to make the agreed upon payments.

  2. Installment Agreements.  When (1) and (2) above are met, then:

    1. All installment agreements shall be in writing and signed by the debtor and the Service Unit FMO, Service Unit BOM, or the CCO.

    2. All installment payments must be recovered within 180 days from the date of delinquency.  For example, if the debtor waits until the 60th day of delinquency to enter into an installment agreement, then only a maximum of 120 days remain to pay off the debt.

    3. Installment agreements over 180 days, but not to exceed more than 3 years, need to be approved and signed by the Area FMO.

    4. Executed installment agreements will not be sent to the PSC as long as the installment agreement is being met.  Note that installment payments are not the same as a compromise; the amount of the principal debt owed does not change when the debtor enters into an installment agreement.

    5. Interest rates must be charged on all installment agreements at a rate as described in 9-4.3O of this policy.

    6. The written installment agreement should provide for the acceleration of the debt (declaring the full amount of debt due and payable) in the event that the debtor defaults.

9-4.13  ACCELERATION

Acceleration of a debt occurs when the IHS deems the full amount of the debt due and payable.  This type of debt collection tool is most appropriate when a debtor has failed to repay a debt in accordance with a written installment agreement.  When a debt is accelerated the debtor pays the entire amount due, including the non-delinquent portion of the debt.  The entire debt total is then considered delinquent and will be forwarded to the PSC for collection.

9-4.14  AGENCY WORK GROUP

Agency Work Groups are established at the Area Office and/or Service Unit for the sole purpose of resolving unusual cases related to outstanding debts, primarily loans.  As such, the workgroups should have the authority to determine appropriate actions to maximize debt recovery, including rescheduling debt, as well as developing case-specific strategies when there are no specific policies that outline options for handling unique debt problems.

9-4.15  RESCHEDULING

Rescheduling signifies a change in the existing terms of a loan.  The IHS should consider rescheduling a debt when it has been determined to be in the best interest of the Government and that recovery of all or a portion of the debt is reasonably assured.  As with any repayment arrangement, the terms and conditions of the rescheduling, including the acceleration clause specified in 9-4.13 above, must be in writing and signed by the debtor.  In addition there should be established standard policies, procedures, and criteria for rescheduling for each program area.

9-4.16  TAKE ACTION AGAINST CO BORROWING/GUARANTORS

When it becomes apparent that the primary debtor cannot or will not repay a debt, the IHS will take action to recover a debt from secondary debtors (co-borrowers or guarantors).  The same debt collection tools is used in pursuing secondary debtors as primary debtors.

9-4.17  REPORTING DELINQUENT DEBTS TO CREDIT BUREAUS

The DCIA requires all Federal agencies to report to credit bureaus information on all delinquent Federal consumer loans.  This is an essential part of debt collection efforts.  This requirement has been incorporated into OMB Circular A-129 and the Federal Claims Collection Standards.

9-4.18  PRIVATE COLLECTION AGENCIES

As mandated by the DCIA, the IHS may use the service of a private collection agency (PCA) in its efforts to recover a delinquent debt.

9-4.19  BARRING DELINQUENT DEBTORS

As required by the DCIA, a delinquent debtor is ineligible for Federal financial assistance until the delinquency that triggers the bar is resolved.  Federal financial assistance includes any Federal loan, loan insurance, or loan guarantee.  This eligibility requirement applies to all Federal loan programs, including the IHS Scholarship Program and the IHS Loan Repayment Program.

9-4.20  REVOKING/SUSPENDING LICENSES OR ELIGIBILITY

The IHS should consider working with appropriate Federal agencies to suspend or revoke Federal licenses (for example, pilot licenses, concession licenses, etc.)  The IHS may also enter into agreements with State agencies to withhold or revoke State-issued licenses, such as, doctors or attorneys, to the extent allowed by law.  This collection tool should be considered particularly for prolonged or repeated failures to repay a debt.

9-4.21  ADMINISTRATIVE WAGE GARNISHMENT

As authorized by the DCIA, the IHS has the authority to impose administrative wage garnishment.  Administrative wage garnishment is the process of withholding amounts from an employee’s pay and paying those amounts to the IHS in satisfaction of a withholding order sent to the individual’s employer.  The procedures for administrative wage garnishments are stated in 45 CFR Part 32 and are incorporated herein by reference.  Administrative wage garnishments are used for non-IHS employees.

9-4.22  LITIGATION

The IHS shall promptly refer to the DOJ to litigate debts for which aggressive collection activities have already been undertaken that cannot be compromised, or on which collection activity cannot be suspended (CFR 31 903.2 ) or terminated (CFR 31 903.3).  Debts shall be referred as early as possible, consistent with aggressive collection activity and the observance of the standards contained in 31 CFR Parts 900 through 904.  Debts for which the principal amount is over $1,000,000, or any amount as the Attorney General may direct, exclusive of interest and penalties, should be referred to the DOJ Civil Division or the branch responsible for litigating such debts at the DOJ following consultation with the Office of the General Counsel, General Law Division.  Debts for which the principal amount is less than $1,000,000, exclusive of interest and penalties, shall be referred to the DOJ Nationwide Central Intake Facility as required by the Claims Collection Litigation Report.  The IHS shall make every effort to refer a debt to the DOJ within 1 year of the date that the debt became delinquent.  In the case of guaranteed or insured loans, the IHS should make every effort to refer these to the DOJ also within 1 year from the date that the loan was presented to the Agency for payment or re-issuance.

Because the DOJ has exclusive jurisdiction over the debts referred to it pursuant to 31 CFR, Chapter 9, Sec. 904.1 (b), the IHS shall immediately terminate any ongoing administrative collection activities at the time that it refers a debt to the DOJ, including the referral of debts to the TOP.  The IHS should also refrain from further contact with the debtor, once the Agency has referred a debt claim and shall refer all debt collection inquiries concerning the debt to the DOJ.  The IHS shall immediately notify the DOJ of any payments it has credited to the debtor’s account after referral of the debt.

  1. Potentially Eligible Referrals.  Examples of potentially eligible referrals are:

    1. Debts in which third-party insurers state that they do not pay Government providers, without taking into account the IHS statutory right of recovery from third-party insurers.

    2. Debts in which third-party insurers state, on a consistent basis, that they never received a claim form.

    3. Debts subject to a withholding order (Administrative Wage Garnishment) sent to a debtor’s employer in which the employer did not comply.

  2. Potentially Ineligible Referrals.  Examples of potentially ineligible referrals:

    1. Debts less than $2,500, unless,

      1. after consultation with the DOJ, officials of the IHS determine that litigation to collect a small claim is important to ensure compliance with IHS policies and procedures;

      2. the debt is being referred solely for the purpose of securing a judgment against the debtor; or

      3. the debtor has the clear ability to pay the debt and the Government can effectively enforce payment.

    2. The statute of limitations for initiating litigation has expired.

    3. The debt has been written off/closed out and collection action has terminated.

    4. It is unlikely that litigation will result in full or partial recovery of the amount owed.

    5. All available assets have been liquidated and the debtor is unemployed, unless the IHS believes that the debtor's financial situation will substantially improve and/or the statute of limitations is about to expire.

    6. The current address of the debtor cannot be verified, except in rare circumstances where, after consultation with the DOJ, the IHS deems it advisable to commence litigation to preserve the IHS' claim.

    7. The documentation necessary to prove that the debtor is liable for the debt or otherwise support the litigation effort cannot be provided.

    8. The estimated costs of pursuing litigation will probably exceed the amount recoverable.

9-4.23  FORWARDING DEBT TO THE AREA FINANCE OFFICE

  1. Forward Debt to the Area Finance Office.  The last collection action to be taken in the Service Unit operational plan is to forward debt to the Area Finance Office, no sooner than 120 days and no later than 180 days.  If payment has not been made after performing all collection actions listed in the Service Unit operational plan, then the CCO shall prepare a Bill of Collection and send it to the ACCO with copies of demand letters, bills, and supporting documents.

  2. Bill of Collection.  The Bill of Collection shall include the following information:

    1. Name of debtor.

    2. Type of debt (e.g., report of survey, salary or travel advance. etc.).

    3. Date(s) of service.

    4. Social Security Number.

    5. Indicate whether the debtor is a Civil Service employee, or a United States Public Health Service Commissioned Corps Officer, or a non-IHS employee.

    6. Debt total.

    7. Debt account number.

    8. Copy of the source document, i.e., travel order/voucher, salary advance request, lease agreement, or report of survey determination.

9-4.24  COLLECTION OF DEBTS WHICH ARE OVER 180 DAYS DELINQUENT

  1. Exemptions.  The Debt Collection Improvement Act of 1996 requires agencies to transfer debts over 180 days delinquent to the Treasury.  This requirement does not apply to any debt that:

    1. is in litigation or foreclosure;

    2. will be disposed of through an approved asset sale program within 1 year;

    3. has been referred to a PCA for a period of time acceptable to the Secretary of the Treasury;

    4. is at a Treasury designated "Debt Collection Center" for a period of time acceptable to the Secretary of the Treasury;

    5. will be collected under internal offset procedures within 3 years after the debt first becomes delinquent; or

    6. is exempt from this requirement based on a determination by the Secretary of the Treasury that exemption for a certain class of debt is in the best interest of the United States.

  2. Debt Collection Center.  The PSC is a Treasury designated “Debt Collection Center.”

  3. Area Office Originating Debt.  The procedures for collecting Area Office originating debt are similar to the Service Unit Finance Office procedures. (See Section 9-4.7.)

  4. Director, Area Finance Office.  The Director, Area Finance Office, may voluntarily transfer debts to the PSC no sooner than 120 days and no later than 180 days delinquent.  The Director is responsible for:

    1. transferring all outstanding debt to the PSC and to the DFS; and

    2. monitoring and posting into the accounting system all the necessary entries for establishing and eliminating the accounts receivable balances.

  5. Debt forwarded to the PSC and the DFAS.  Different procedures based on whether the debtors are IHS employees or whether the debtors are non-IHS employees must be followed for a debt that is being forwarded to the PSC and to the DFAS.  All debts which are 180 days delinquent shall be transferred to the PSC.

    1. If the debtors are IHS employees, the debt shall be transferred to the DFAS for salary offset.

    2. The accounts receivable related to the debts transferred to the PSC or to the DFAS will remain on the Area books (CORE/UFMS) until advised by the PSC or DFAS as described in Section 9-4.25.

  6. Debt Collection Procedures - IHS Employees.  Collecting a debt from an IHS employee may include, but is not limited to; travel advances, salary advances (Employee Emergency Payment Request), quarters rental, non-beneficiary bills, or report of survey.

    1. Posting.  Travel and salary advances are already posted into the accounting system.  If the debt was for some other debt like quarters rental or report of survey, then a Bill of Collection shall be posted into the accounting system as a receivable so that the debt can be tracked and monitored.

    2. Debt Log.  Create a spreadsheet that contains the following:

      1. Debt account number

      2. Date of Bill for Collection

      3. Social Security Number

      4. Full Name

      5. Address

      6. Invoice date or transaction date

      7. Principle dollar amount

      8. Interest charge amount

      9. Administrative fees

      10. Late fees

      11. Interest rate

      12. Date interest is calculated through

      13. Type of debt

      14. Date of demand letter

      15. Service Unit debt originated

      16. Date submitted to the PSC

    3. Certification.  Prior to sending the debt to the PSC, the debt has to be certified by the Area FMO.

    4. Defense Finance and Accounting Service.  Forward the debt to the DFAS for salary offset by submitting DD Form 2481, “Request for Recovery of Debt Due the United States by Salary Offset.”  The following documents should be attached when forwarding the debt to PSC:

      1. Bill for collection

      2. Copies of billings, travel order, salary advance to substantiate debt

      3. Copy of demand letters

      4. Debt log (can be sent electronically)

      5. Copy of the Area FMO certification letter

  7. Debt Collection Procedures -Non-IHS Employees.  Non-IHS employee debt could include Non-Beneficiary Bills.

    1. Posting.  The debt shall be posted into the accounting system as a receivable using a Bill of Collection as documentation.

    2. Debt Log.  Create a spreadsheet that contains the following information:

      1. Debt account number

      2. Date of bill for collection

      3. Social Security Number

      4. Full Name

      5. Address

      6. Invoice date or transaction date

      7. Principal dollar amount

      8. Interest charge amount

      9. Administrative fees

      10. Late fees

      11. Interest rate

      12. Date interest is calculated through

      13. Type of debt

      14. Date of demand letter

      15. Service Unit debt originated

      16. Date submitted to the DFS

    3. Certification.  Prior to sending the debt to the DFAS, the debt has to be certified by the Area FMO.

    4. Program Support Center.  Forward the debt to the PSC for the TOP.  The following documents should be attached when forwarding the debt to PSC:

      1. Bill for collection

      2. Copies of billings, travel order, salary advance to substantiate debt

      3. Copy of demand letters

      4. Debt log (can be sent electronically)

    5. Reports.  The ACCO shall send debt management reports to the Service Units for ongoing reconciliation.

    6. Reconciliation.  Each month the ACCO shall issue a report of outstanding Bills for Collection to the Area FMO and BOC.  The Area FMO and BOC shall forward this information to the Service Unit FMO and BOM.

9-4.25  WRITE-OFF AND CLOSE-OUT

  1. Write-off.  A write-off is an accounting action that results in reporting debt/receivable as having no value on the IHS financial and management reports.  A write-off occurs when an authorized IHS official determines, after using all appropriate collection tools, that it is more than 50 percent likely that a debt is uncollectible.  Active collection efforts on the account cease and the account is removed from the receivables.  Writing off a debt does not preclude the IHS from taking advantage of offset possibilities or other cost effective means of passive collection should they become available.  Accounts may be written off and maintained as inactive debt “Currently Not Collectible” (CNC).

    Generally, a write-off is mandatory for delinquent debt older than 2 years, unless documented and justified to the OMB in consultation with the Treasury.  However, in those cases where material collections can be documented to occur after 2 years, debt cannot be written off until the estimated collections become immaterial.  A write-off may occur before, concurrently with, or after the Agency determines that collection action should be terminated.  Pursuant to OMB Circular A-129, all debt must be adequately reserved for in an allowance account.  All write-offs must be made through the allowance account.  Under no circumstances are debts to be written off directly to expense.

    At the time the debt is written-off, the IHS must determine whether or not collection action should continue.  The written-off debt is either classified as CNC or as Close-Out.  The IHS defines CNC to mean that the IHS has determined that debt collection efforts should remain ongoing.  During the period debts are classified as CNC, cost effective passive collection efforts should continue until:

    1. the debt is paid;

    2. the debt is closed out;

    3. all collection actions are legally precluded;

    4. the debt is sold; or

    5. the IHS determines it is no longer cost effective to pursue collection.

  2. Write-off Approval Request.  The IHS does not require DOJ approval to write-off a debt since the IHS is only adjusting its accounting records.  Pursuant to Part 5, Chapter 1, Section 5-1.4H, IHM, Area Directors have the authority to write-off a debt up to $20,000.  In the IHS, write-off authority shall coincide with the DOA to compromise, suspend, or terminate a debt.  For example, if the Area Director delegates the authority to compromise, suspend, or terminate a debt of $5,000 to a CEO, then that CEO also has the authority to write-off debt up to $5,000.  Compromise, suspension, and termination are legal procedures, which are separate and distinct from the accounting procedure of “write-offs.”

  3. Close-Out.  Close-out occurs when an authorized IHS official, after determining that additional future collection efforts on a debt are prohibited or would be futile, determines to cease all collection activities on the debt. Close-out of a debt may occur concurrently with the write-off of a debt, or at a later date, depending on the collection strategy (operational plan) and the ultimate determination that the debt has been discharged.  No collection actions (active or passive) may be taken after close-out of a debt.  When debt is nearing expiration of the 10 year statute of limitations for offset by the Treasury, or at any time after write-off with supporting documentation, authorized IHS officials shall make a close-out determination.  The administrative costs to collect small dollar amounts is not feasible, therefore, debts of less than $25.00 shall be written-off and closed-out.  However, the $25.00 threshold shall not apply to current IHS employees since the outstanding debt can be collected through salary offset.

    In the IHS, close-out authority shall coincide with the DOA to compromise, suspend or terminate a debt.  For example, if the Area Director delegates the authority to compromise, suspend, or terminate a debt of $5,000 to a CEO, then that CEO also has the authority to close-out debt up to $5,000.

    The decision to classify debt as closed-out triggers the need to determine if the debt must be reported to the IRS as potential income to the debtor on IRS Form 1099 C. Section 6050P(a) of the IRS requires the submission of IRS Form 1099C for discharges of indebtedness of $600 or more.  Also included are amounts of debt totals of $600 or more that have been discharged as part of a compromise agreement.  For more specific information, see the instructions for the IRS Form 1099 C found at the IRS Web site.  Copies of IRS Form 1099 C must be forwarded to the individual whom the debt was written-off and copies must be retained for at least 4 years by the IHS.


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