UNCLASSIFIED (U)

4 FAM 490

DEBT COLLECTION

(CT:FIN-449;   05-30-2019)
(Office of Origin:  CGFS/FPRA/FP)

4 FAM 491  GENERAL

4 FAM 491.1  Purpose

(CT:FIN-378;   05-03-2006)

This subchapter contains policies and procedures for the Department of State for the collection of claims owed to the United States Government.  These policies and procedures supplement the regulations contained in 22 CFR 34.

4 FAM 491.2  Authority

(CT:FIN-434;   11-06-2013)

a. Under the provisions of the Federal Claims Collection Act of 1966, 31 U.S.C. 3701 - 3720E, as amended through the Debt Collection Improvement Act of 1996 (Public Law 104-134), the Department of State must try to collect claims of the United States for money or property arising out of the activities of or referred to the Department of State.

b. Other key guidance and regulations related to debt collection include:

(1)  Office of Management and Budget (OMB) Circular A-129; and

(2)  Federal Claims Collection Standards (FCCS).

c.  The Department’s regulations relating to the collection of debts owed to the Department of State are found at 22 CFR 34.

4 FAM 491.3  Definitions

(CT:FIN-444;   11-30-2017)

The following terms are used in debt management at the Department of State.  Additional terms are identified in 22 CFR 34.4.

Accounts Receivable:  Office within the Bureau of the Comptroller and Global Financial Services that manages and collects debts owed to the Department of State.

Administrative costs:  The expenses associated with processing and handling a debt from the date of the delinquency.

Advance decision:  A determination as to the propriety of a debt collection action requested from and rendered by an authorized official prior to the action being taken.

Bankruptcy:  A legal proceeding in Federal court for dealing with debt problems of individuals and businesses.

Close-out:  The accounting classification that reflects the discharge of a debt after the Department of State determines that further debt collection actions are prohibited (for example, a debt released from liability in bankruptcy court) or that it does not plan to take any future actions (either active or passive) to try to collect the debt.

Currently not collectible (CNC):  The accounting classification for writing-off a debt that indicates that the Department of State will continue debt collection actions after write-off.

Day:  Calendar day.

Debt (or claim):  An amount of money that has been determined to be owed to the Department of State from any person as defined in 22 CFR 34.4.

Initial notice:  The first demand letter from the management, financial management, or program/grants officer at the post, bureau, or office responsible for the allotment, activity or program under which the debt arises notifying an individual, vendor, or a Federal assistance award recipient of a debt owed to the Department of State.  The notice informs the debtor of their due process/rights in accordance with 22 CFR 34.8.

Discharge:  A release of a debtor from personal liability for a debt or, in the context of compromise, part of a debt.

Employee:  A current employee of the Department of State, including members of the Civil Service, Foreign Service, and Locally Employed Staff.

Interest:  A charge assessed under 31 U.S.C. 3717 that compensates the Government for the loss of use of funds when the debt is not paid timely.  It accrues from the date of the delinquency.

Penalty:  An amount assessed under 31 U.S.C. 3717 on the amount due on a claim that is delinquent for more than 90 days to discourage delinquencies and encourage early payment of the delinquent debt in full.

Principal officer:  The officer in charge of a diplomatic mission, a consular mission (other than a consular agency), or other Foreign Service post.

Settlement:  A resolution to litigation or to an administrative grievance, complaint or claim preceding that is mutually agreed upon by the parties involved rather than imposed by a judge or other deciding official.

Suspension:  The temporary cessation of collection action in accordance with the FCCS at 31 CFR 903.2.

Termination:  The cessation of active and/or passive collection action on a debt in accordance with the FCCS at 31 CFR 903.3.

Write-off:  An accounting procedure that results in reporting a debt or receivable as having no value on the agency’s accounting and financial reports.

4 FAM 492  DEBT MANAGEMENT

4 FAM 492.1  Debt Determinations

(CT:FIN-444;   11-30-2017)

a. The management, financial management, or program/grants officer at the post, bureau, or office responsible for the allotment, activity or program under which the debt arises is responsible for:

(1)  Determining whether a debt exists, and if so the amount owed;

(2)  Undertaking appropriate initial collection measures in accordance with 4 FAM 493.1;

(3)  Maintaining records of the debt and monitoring uncollected debts (i.e., open receivables) until the debt is referred to Accounts Receivable;

(4)  Timely referral under 4 FAM 493.1 of uncollected debts with the necessary documentation to Accounts Receivable;

(5)  Referring the debt to the appropriate official under 4 FAM 494 for compromise, suspension, termination of collection, advance decision, settlement and/or waiver of claims; and

(6)  Paying for any required outside hearing costs.

b. The Office of Inspector General may provide findings to the Department of State that indicates a debt may exist.  All initial debt determinations, however, must be made by the post, bureau, or office within the Department of State responsible for the allotment, activity or program under which the debt arises.  A post, bureau, or office may determine that a debt exists irrespective of the outcome of any disciplinary action or criminal prosecution.

c.  Once a debt is determined to exist, any further decision regarding compromise, suspension, termination of collection, advance decision, settlement and/or waiver of the debt or any part thereof may only be made by an appropriate official under 4 FAM 494.

4 FAM 492.2  Types of Debt

(CT:FIN-444;   11-30-2017)

Examples of debt include, but are not limited to:

(1)  Loss or damage related to shipments of supplies and equipment (see 14 FAM 500 and 600);

(2)  Loss, damage, or destruction of Government property (see 14 FAM 500 and 600);

(3)  Overpayment to an employee of pay or allowances;

(4)  Overpayment to an annuitant under the Foreign Service Retirement and Disability System or the Foreign Service Pension System;

(5)  Overpayment or refund of travel, transportation and relocation expenses or allowances;

(6)  Contractual claims, such as an overpayment, as determined by a contracting officer, and any interest, administrative charge, or penalty relevant to the contract from which the claim arose (41 U.S.C. Chapter 71);

(7)  Any negotiable instrument (e.g., check) proffered to the Department of State for any reason (e.g., accommodation exchange, loan or advance repayment, refund or reimbursement of services, or simple check cashing) that is returned as non-negotiable by a financial institution or that creates a debit voucher to U.S. disbursing officer accountability;

(8)  Any claim against an individual (i.e., U.S. citizen, Government employee, contractor) for a service, advance, overpayment or loan (i.e., nonpayment of rent, utilities, telephone charges, medical payments or services, repatriation loans, emergency evacuation assistance to private citizens) where a payment has been made by the U.S. Government that requires the individual to repay or reimbursement to the Government;

(9)  Any claim based on a fiscal irregularity; or

(10) A determination by the program/grants officer that the expenditure made by a Federal assistance award recipient were not authorized, and are therefore disallowed; that expenditures were outside the authorized period of performance, and are therefore not allowed; that the scope of work was not completed, and authorized funds for that portion of the program must be repaid; or that unused funds must be returned.

4 FAM 493  COLLECTION ACTIONS

4 FAM 493.1  Notices to Debtors

4 FAM 493.1-1  Initial Notices

(CT:FIN-444;   11-30-2017)

a. All debtors must be notified of their indebtedness.  The management, financial management, or program/grants officer at the post, bureau, or office responsible for the allotment, activity or program under which the debt arises must take the initial collection effort.  The promissory note associated with a repatriation loan, an evacuation, or an emergency medical and dietary assistance loan must be forwarded immediately to Accounts Receivable for processing and collection.

b. The debtor is provided initial notice in accordance with the provisions of 22 CFR 34.8.  See 4 FAM Exhibit 493, Template for Initial Notices of Indebtedness.  Notices issued by post should also conform to local law in cases of debts owed by local entities (i.e., foreign nationals, individuals, contractors, and vendors).

c.  When the Department of State accepts a written installment repayment schedule, the responsible office should ensure that the written arrangement reflects an acknowledgment of the debt and a promise to pay it in full in accordance with the installment schedule (22 CFR 34.7).  The responsible office should also ensure that the size and frequency of installment payments bear a reasonable relation to the size of the debt and ability of the debtor to repay.

d. Repayment agreements should include administrative costs, if appropriate, and the accrual of interest.  In accordance with 22 CFR 34.7, repayment agreements should be written so as to fully collect the debt in no more than 3 years (36 months) if possible.

4 FAM 493.1-2  Follow-Up Notices

(CT:FIN-444;   11-30-2017)

a. Overseas:  If payment has not been recovered within 30 days after the initial notice, the management or financial management or program/grants officer at post must (except as specified in paragraph b, below) send a second notice.  In addition, the post may contact the debtor by personal visit or telephone.  The responsible officer must document all contacts (i.e., personal visits, telephone) made and send a follow-up letter to the debtor noting the interest due on the debt.

b. As an alternative, post may forward the debt and supporting documentation to Accounts Receivable for further collection activity.  Whether or not the post issues the second notice depends on factors such as the location of the debtor.  If, for example, the debtor is not at post and is a U.S. citizen employee, the debt should be referred to Accounts Receivable.  On the other hand, if the debtor is a host country national or vendor, post is in a better position to collect the debt and should send a second notice.

4 FAM 493.1-3  Referral for Further Action

(CT:FIN-444;   11-30-2017)

a. Overseas:  Except in cases where post referred the debt to Accounts Receivable, if the debtor does not respond to follow-up notices and telephone calls within 60 days of the initial notice, the post management or financial management officer will send a third notice to the debtor restating the information previously provided, including the cumulative interest, administrative charges, and penalties.  The program/grants officer will defer to the post management or financial management officer in sending the third notice.  The third notice will inform the debtor that all further collection action will be undertaken by Accounts Receivable.  If the debtor does not respond within 10 days after the mailing of the third notice, the post management or financial management officer must forward the debt to Accounts Receivable for further collection action.  In no case should a debt delinquent for more than 90 days remain with post for collection.

b. Domestically:  If payment has not been received within 30 days after the initial notice, the bureau or office management, financial management officer, or program/grants officer must forward the debt to Accounts Receivable.

4 FAM 493.2  Referral to Accounts Receivable Office for Collection

(CT:FIN-444;   11-30-2017)

a. Accounts Receivable is responsible for collection of debts referred by posts and domestic bureaus and offices.  Debt collection techniques used by Accounts Receivable are outlined in 22 CFR 34.10 and may include administrative offset, salary offset, administrative wage garnishment and/or referral to a private collection agency or to the U.S. Department of the Treasury.  Debt referral information should be sent to the Accounts Receivable Branch applicable e-mail address (salary/travel/SLRP/vendor/grant: ARSalaryDebts@state.gov; Medical: CGFSARMED@state.gov; REPAT Loans/EMDAs/evacuations: FMPARD@state.gov).  Only the Bureau of the Comptroller and Global Financial Services (CGFS) may use the methods of collection set forth in 22 CFR 34.10.

b. When a debt is referred to Accounts Receivable for collection or for negotiation of a repayment agreement, the bureau, office or post management, financial management, or program/grants officer submits the appropriate documentation with a cover memorandum to Accounts Receivable.  The bureau, office or post management, financial management, or program officer requests Accounts Receivable to set up a receivable account to monitor the collection or to process the claim for referral to the U.S. Department of the Treasury for collection.  All accounts/claims transferred to Accounts Receivable for collection must include:

(1)  All background documentation that verifies the debt;

(2)  Accounting data;

(3)  Social Security Number or Tax Identification Number of debtor (if applicable);

(4)  Amount to be collected;

(5)  Last known street address; and

(6)  A record of all efforts to recover the debt to date (including copies of all notices sent to the debtor and documentation of any responses received).

c.  If a post or domestic bureau or office receives an inquiry from a debtor, a debtor's representative, or a congressional office after a debt has been referred to Accounts Receivable, that inquiry must be directed to Accounts Receivable.  After the debt is referred to Accounts Receivable for collection, the officer who referred the debt may be contacted by CGFS for additional information.  If an issue arises that affects collection, the responsible officer must immediately inform Accounts Receivable.

d. For overseas/domestic Federal assistance awards/grants in accordance with 2 CFR 200.345, if payment from a Federal assistance/grant recipient has not been received within 90 days after the initial notice, the Federal agency may reduce the debt by an administrative offset against other requests for reimbursement; withholding advance payments otherwise due to the non-Federal entity; or other action permitted by Federal statute.

4 FAM 493.3  Assessment of Charges

4 FAM 493.3-1  Interest, Penalties, and Administrative Costs

(CT:FIN-444;   11-30-2017)

a. Accounts Receivable assesses interest, penalties, and administrative charges according to Federal debt collection regulations.  The bureau, office or post responsible for the allotment or program under which the debt arose may also assess these charges, if applicable, prior to referral to Accounts Receivable.  Even if the bureau, office, or post responsible for the initial notice under 4 FAM 493.1-1 will not be assessing these charges, the appropriate notice of these charges as per 22 CFR 34.8(b)(3)-(4) must be included in the initial notice.

b. Accounts Receivable will prepare a request to the Comptroller to waive interest, penalty, and administrative charges on a case-by-case basis in accordance with 31 CFR 901.9g.

c.  In the case of obligations covered by contracts, agreements, or other formal arrangements the terms of which govern the imposition of interest, penalties, and administrative costs, the initial notice under 4 FAM 493.1-1 will specify that interest and penalties will accrue and become payable from a stipulated due date established in accordance with those terms.

d. In the case of debtors with obligations not covered by contracts, Federal assistance awards agreements, or other formal arrangements, the initial notice under 4 FAM 493.1-1 will inform the debtor that if repayment is not made within 30 days of the date of the notice, the Department will assess and collect interest on the debt at the Treasury Department Current Value of Funds Rate (prescribed and published annually by the Secretary of the Treasury in the Federal Register and available on the Treasury website), penalties on the debt at the rate of 6 percent on any portion that is delinquent more than 90 days, and an administrative cost in accordance with 22 CFR 34.6.  The rate of interest remains fixed for the duration of the delinquency.  Although interest accrues from the date of delinquency, it will automatically be waived if the debt is paid in full within 30 days from the date of notification.

e. Accounts Receivable or the responsible post, bureau, or office in relation to delinquent debts that are not immediately referred to Accounts Receivable, will calculate the administrative costs of processing and handling a delinquent claim based on the actual costs incurred or upon estimated costs and add these costs to the debt.  Such costs may include, but are not limited to:

(1)  Obtaining a credit report;

(2)  Telephone, mail or cable costs; and/or

(3)  A fee paid to a collection service.

f.  Accounts Receivable will review all open receivables for which it maintains the receivable records, to ensure interest assessment, penalty, and payments are correctly noticed, computed, and applied.  Accounts Receivable will notify the debtor of any revisions or adjustments to their account(s).

g. In the case of obligations covered by Federal assistance award/grants, and in accordance with 2 CFR 200.345(b), except where otherwise provided by statutes or regulations, the Federal awarding agency will charge interest on the overdue debt in accordance with the Federal Claims Collection Standards (FCCS) (31 CFR Parts 900 through 999).  The date from which interest is computed is not extended by litigation or the filing of any form of appeal.

4 FAM 493.3-2  Charges Collected

(CT:FIN-434;   11-06-2013)

Amounts collected for interest, penalty, and administrative charges are credited as follows:

(1)  Interest, penalty, and administrative charges for repatriation loans are posted to 19X4107, Repatriation Loans, Financing Account, State or to 19X0600, Repatriation Loans, Liquidating Account, State; or

(2)  Interest, penalty, and administrative charges other than repatriation loans are posted to 19 3220, General Fund Proprietary Receipts, Not Otherwise Classified (NOC).

4 FAM 493.4  Internal Administrative Review

(CT:FIN-449;   05-30-2019)

a. If a debtor wishes to contest the existence or amount of the debt, he or she may request an internal administrative review of the debt.

b. Overseas, a post official at an appropriate level who was not involved in the initial debt determination must conduct an internal administrative review under 22 CFR 34.9 if such a review is requested prior to a debt being referred to Accounts Receivable.  If a debt is referred to Accounts Receivable after an internal administrative review is conducted, a copy of the decision memo and letter must be provided to Accounts Receivable.

c.  Domestically, the Comptroller or his or her designee must conduct internal administrative reviews under 22 CFR 34.9.  No one who was involved in the initial debt determination may be designated to conduct an internal administrative review.

d. Requests for an administrative review by the Comptroller should be submitted either by e-mail at ComptrollerDebtReviews@state.gov or by mail at Global Financial Service Center, 2010 Bainbridge Avenue, North Charleston, SC  29405.  Review requests should explain with reasonable specificity and brevity, the facts, evidence, and witnesses that are relevant to the existence or amount of the debt.

e. An administrative review may not be requested until after the debtor has received the initial notification of the debt under 4 FAM 493.1-1.

f.  All administrative review decisions are final.  Decisions may only be reconsidered upon the presentation of newly discovered or previously unavailable material evidence.

4 FAM 494  COMPROMISE, SUSPENSION, TERMINATION OF COLLECTION, ADVANCE DECISION, SETTLEMENT AND WAIVER OF CLAIMS

4 FAM 494.1  Delegation of Authority

(CT:FIN-444;   11-30-2017)

a. Delegation of Authority No. 354, signed April 23, 2013, delegated authority from the Under Secretary for Management for the compromise, suspension, termination of Department of State collection, advance decision, settlement and waiver of claims of or against debtors of the Department of State to the Department's Comptroller.

b. The Comptroller has delegated this full authority to the Associate Comptroller.

c.  The Comptroller has further delegated this authority to the principal officer at post to exercise these authorities for claims up to and including $500 arising at post.

d. This dollar threshold refers to the total amount owed, excluding interest, penalties and administrative costs.  This authority granted to principal officers may not be redelegated except by permission of the Comptroller.

e. All actions taken under Delegation of Authority No. 354 or any redelegation of the authorities therein must be recorded in writing.

f.  If a debtor requests a compromise, suspension, or termination the Department of State will follow the standards set forth in the Federal Claims Collection Standards (FCCS) 31 CFR Chapter IX Parts 900, 902, and 903 and in this subchapter.

4 FAM 494.2  Exceptions

4 FAM 494.2-1  Claims Over $100,000 and/or Debts Based on Fraud

(CT:FIN-434;   11-06-2013)

a. Unless otherwise provided by law, when the principal balance of a debt, exclusive of interest, penalties, and administrative costs, exceeds $100,000 or any higher amount authorized by the Attorney General, the authority to compromise, suspend or terminate collection rests with the U.S. Department of Justice (DOJ).

b. The Department of State does not need to refer a debt for concurrence for termination of collection action if the Department of State referred the debt to DOJ for litigation or if DOJ determines that litigation is not appropriate and returns the debt to the Department of State.  The Department of State will not refer debts to DOJ where it determines that the debt is legally without merit or cannot be substantiated.

c.  Compromise, suspension or termination of debts based on fraud, the presentation of a false claim, or misrepresentation on the part of the debtor or anyone having an interest in the claim must be approved by the Attorney General regardless of the dollar amount.

d. All debt collection related requests and referrals to DOJ must be submitted through the Office of the Legal Adviser.

e. Final authority for waiver of debts remains within the Department of State as set out in section 4 FAM 494.1 regardless of the dollar amount.

4 FAM 494.2-2  Authority to Relieve Accountable Officials and Agents From Liability

(CT:FIN-434;   11-06-2013)

Pursuant to 31 U.S.C. 3527 and 31 U.S.C. 3528, the Comptroller General or designee may relieve accountable officials from liability related to fiscal irregularities, which include the physical loss or deficiency of public money as well as illegal or improper payments.  In certain situations, the Department of State may be able to directly relieve accountable officials of liability without seeking a decision from the Comptroller General.  (Refer to: DOJ Order 2110.39A, dated November 15, 1995, “Legality of and liability for obligation and payment of government funds by Accountable Officers.”)  The Department’s policies and procedures concerning fiscal irregularities and the relief of accountable officials are contained in 4 FAM 370.

4 FAM 494.3  Suspension of Collection Activity Pending Waiver and Internal Administrative Review

(CT:FIN-444;   11-30-2017)

a. The Department of State official delegated the authority stated in 4 FAM 494 may suspend collection activity in accordance with 31 CFR 903.2.

b. When a debtor requests a waiver and/or internal administrative review of his or her debt, collection activity, including the accrual of interest, penalties, and administrative costs, will be suspended until a decision is rendered.  However, if an employee separates from the Department while a waiver and/or review request is pending, the amount of the employee’s indebtedness will be withheld from the employee’s final salary and lump sum annual leave payments in accordance with 4 FAM 494.9.  The Global Compensation Directorate in CGFS (CGFS/GC) will refund any amounts later waived or found not to be owed.

c.  Accounts Receivable, or post financial management office if collection is suspended by the principal officer, must retain permanent records of all suspended debts.

d. Accounts Receivable, or post as applicable, must periodically review all suspended debts, to determine if the debts should continue in a suspense status.

4 FAM 494.4  Compromise

(CT:FIN-434;   11-06-2013)

a. The Department of State official delegated the authority stated in 4 FAM 494 may compromise a debt in accordance with 31 CFR 902, upon determination that the full amount cannot be collected.

b. Accounts Receivable, or post financial management office if a debt is compromised by the principal officer at a post, must retain permanent records of all compromised debts.

c.  When the Department of State compromises a debt, Accounts Receivable determines if the portion of the debt the Department has agreed to discharge must be reported to the Internal Revenue Service (IRS) as potential income to the debtor under Section 6050P of the Internal Revenue Code (26 U.S.C. 6050P)If necessary, Accounts Receivable will report the portion of the debt that was discharged to the IRS as potential taxable income to the debtor as set forth in 4 FAM 495.2, paragraphs c through d.

4 FAM 494.5  Termination

(CT:FIN-434;   11-06-2013)

a. The Department of State official delegated the authority stated in
4 FAM 494 may terminate active and/or passive collection of the debt in accordance with 31 CFR 903.3.

b. Accounts Receivable, or post financial management office if collection is terminated by the principal officer, must retain permanent records of all terminations of active and/or passive collection of debts.

4 FAM 494.6  Waivers

(CT:FIN-449;   05-30-2019)

a. The Department of State official delegated the authority in 4 FAM 494 may waive a debt only as provided for in 22 CFR 34.18.  Specific waiver authority exists for debts arising out of:

(1)  Erroneous payments of pay and allowances (5 U.S.C. 5584);

(2)  Advances in pay (5 U.S.C. 5524a);

(3)  Advances in situations of authorized or ordered departures (5 U.S.C. 5522);

(4)  Advances of allowances and differentials for employees stationed abroad (5 U.S.C. 5922);

(5)  Employee training expenses (5 U.S.C. 4108);

(6)  Under-withholding of life insurance premiums (5 U.S.C. 8707(d));

(7)  Overpayments of the Foreign Service annuities (see 22 CFR Part 17); and

(8)  Student Loan Repayment Program service agreements (see 5 U.S.C. 5379).

b. Pursuant to the Secretary's authorities under 22 U.S.C. Sections 2669(c) and 3925, waiver standards under the provisions of Title 5 of the United States Code set forth in paragraph a, above, must be applied equally to all Civil Service, Foreign Service, and Locally Employed Staff.

c.  The debtor, his or her representative, or a Department of State official on behalf of the debtor must submit a request for waiver in writing to either the principal officer at post for debts up to and including $500 originating at post that have not yet been referred to Accounts Receivable or to the Comptroller for all other debts.  Requests for the Comptroller should be submitted either by e-mail at ComptrollerDebtReviews@state.gov or by mail at Global Financial Service Center, 2010 Bainbridge Avenue, North Charleston, SC  29405.

d. A waiver may not be requested by a debtor, or his or her representative, until after the debtor has received the initial notification of the debt under 4 FAM 493.1-1.

e. CGFS, and post financial management office as applicable, must retain permanent records of all waived debts.

f.  All waiver decisions are final.  Decisions may only be reconsidered upon the presentation of newly discovered or previously unavailable material evidence.

4 FAM 494.7  Actions for Suspension, Termination, Compromise, Advance Decision, Settlement, and Waiver of Claims

4 FAM 494.7-1  Overseas

(CT:FIN-444;   11-30-2017)

a. Claims not in excess of $500.  Decisions of the principal officer at post to approve the compromise, suspension, termination of Department of State collection, advance decision, settlement or waiver of claims of or against debtors of the Department of State not in excess of $500 must be in writing and contain:

(1)  The debtor’s name;

(2)  Amount of the claim;

(3)  Basis for the claim;

(4)  Brief statement of collection efforts;

(5)  Legal basis for the action taken (e.g., specific ground for Compromise under 31 CFR 902, Suspension or Termination under 31 CFR 903, settlement, or waiver under 5 U.S.C. 5584); and

(6)  Statement as to how the legal standard was met in this case.

b. The post management officer should request legal guidance as needed from the Office of the Legal Adviser to determine the legal basis and legal standard during a compromise, suspension, termination of Department of State collection, advance decision, settlement or waiver of claims of or against debtors of the Department of State.

c.  The post financial management office will maintain a record of all such requests and decisions.  Posts must report to CGFS on the number of each type, specific legal bases, and dollar amounts of the actions taken during each fiscal year.  These reports should be submitted no later than October 15 for the prior fiscal year by e-mail to:  CGFS Audit Requests.

d. Claims in excess of $500.  For debts over $500 that have not yet been referred to Accounts Receivable, the post management officer may recommend compromise, suspension, termination of collection, settlement or waiver by memorandum to the Comptroller at ComptrollerDebtReviews@state.gov.  The memorandum must at a minimum, include:

(1)  The debtor's name;

(2)  Amount of the claim;

(3)  Basis for the claim with supporting documentation;

(4)  Brief statement of collection efforts;

(5)  The action recommended (e.g., specific ground for Compromise under 31 CFR 902, Suspension or Termination under 31 CFR 903, settlement, or waiver under 5 U.S.C. 5584); and

(6)  Statement as to how the legal standard is met in this case.

4 FAM 494.7-2  Domestically

(CT:FIN-434;   11-06-2013)

For claims originating in the United States that have not yet been referred to Accounts Receivable, the bureau or office management officer may recommend compromise, suspension, termination of Department of State collection, advance decision, settlement or waiver by memorandum to the Comptroller at ComptrollerDebtReviews@state.gov.  Such memorandum should include complete documentation as outlined in 4 FAM 494.7-1, paragraph d.

4 FAM 494.8  Decision Notification and Refunds

4 FAM 494.8-1  Decision Notification

(CT:FIN-434;   11-06-2013)

The authorized official conducting an internal administrative review or issuing a decision regarding waiver of a debt must notify the debtor in writing of his or her decision.  If the debtor is due a refund based on the decision, the deciding official will initiate the refund to the debtor.

4 FAM 494.8-2  Refunds

(CT:FIN-444;   11-30-2017)

a. Where a partial or full refund is to be made to a debtor for repayment of a previously collected debt that was later waived or found not to be owed, CGFS or the post must make such refund as outlined below:

(1)  Current employees:  For refunds of repayments of pay and/or allowances, the office maintaining the employee’s pay records must process the refund on a subsequent regular payroll, or, if more convenient, on a supplemental payroll;

(2)  Separated employees:  For employees separated from the Department of State, CGFS/GC must process refunds of repayments of pay and/or allowances; and

(3)  Other than pay:  The Global Financial Operations Directorate in CGFS (CGFS/F) must process refunds of repayments of travel, transportation and relocation expenses, allowances and all other types of payments.

b. When a debtor is due a refund, it should be processed as follows:

(1)  Refunds must be charged to the appropriation and allotment to which the repayment was credited;

(2)  Refund amounts that exceed the original debt balance must be deposited into a Treasury receipt account and the refund must be returned to the debtor from that appropriation; and

(3)  Refunds should not be issued from the suspense account.  Collections that cannot be readily identified with the obligating appropriation and allotment must be deposited into a suspense account until the appropriation or receipt account is identified.  These collections can only be retained in the suspense account for no more than 30 days.

4 FAM 494.9  Employees Separating From the Government

(CT:FIN-444;   11-30-2017)

An employee separating from the government will have withheld from their final salary and lump sum annual leave payments any debts owed to the Department, including any amount of indebtedness involved in any pending debt cases.  The employee’s post of assignment, or the bureau or office executive office in the case of domestically assigned employees, will advise CGFS/GC and Accounts Receivable by memorandum of any pending indebtedness cases pertaining to employees who are to receive their final salary payment.  CGFS/GC will refund any amounts later waived or found not to be owed.

4 FAM 495  Write-off of Debt

(CT:FIN-444;   11-30-2017)

a. A write-off is an accounting procedure that results in reporting a debt or receivable as having no value on the agency’s accounting and financial reports.

b. The Department of State will follow the policies outlined in OMB Circular A-129, Policies for Federal Credit Programs and Non-Tax Receivables, and the Federal Claims Collection Standards (FCCS) (see 31 CFR 903.5) with regard to write-offs.

c.  Accounts Receivable is responsible for reviewing delinquent debt on a monthly basis and identifying debts for write-off.  CGFS may delegate authority to write-off delinquent debt to other domestic bureaus or offices or posts as appropriate.

d. In accordance with OMB Circular A-129, Accounts Receivable will write-off delinquent debts as soon as they are determined to be uncollectible.  Accounts Receivable will write-off any delinquent debt over two years old and classify it as currently not collectible (CNC) unless justified to OMB in consultation with Treasury.  Accounts Receivable will write-off the delinquent debt prior to two years if termination of collection has been authorized.

e. Before Accounts Receivable, other domestic office or post writes off a debt, the responsible officer(s) within the Department of State will take the appropriate steps to collect the debt in accordance with 31 U.S.C. 3711(g) and as outlined in 4 FAM 490.

f.  When Accounts Receivable, another domestic office or post writes off a debt, it must evaluate the probability of collecting on the delinquent debt and either classifies the debt as CNC or closed-out.

g. The office that writes off a debt must document and justify the reason(s) for write-off and enter the transactions for write-off.  In accordance with OMB Circular A-129, all write-offs must be made through an allowance account.  Under no circumstances are debts to be written off directly to expense.

4 FAM 495.1  Currently Not Collectible (CNC)

(CT:FIN-444;   11-30-2017)

a. CNC is the classification for writing-off a debt that indicates that the Department of State will continue debt collection actions after write-off.

b. Accounts Receivable should continue debt collection activities, such as referral to the Department of the Treasury’s Financial Management Service for collection action through cross-servicing or the Treasury Offset Program, for debts with a CNC classification.

4 FAM 495.2  Closed-Out

(CT:FIN-434;   11-06-2013)

a. A debt is classified as closed-out if the Department of State determines either that further debt collection actions are prohibited (for example, a debt released from liability in bankruptcy court) or when the Department of State does not plan to take any future actions (either active or passive) to try to collect the debt.  Once a debt is closed-out, it has been officially discharged meaning that no debt is owed.  The Department of State no longer maintains a claim against the individual or entity previously indebted.

b. Classification of a debt as closed-out may occur concurrently with the write-off of an account, or at a later date.

c.  To close out a debt, the debt must be written off for accounting purposes and collection terminated under an appropriate authority.  When the Department of State classifies the debt as closed-out, Accounts Receivable determines if the amount discharged must be reported to the Internal Revenue Service (IRS) as potential income to the debtor under Section 6050P of the Internal Revenue Code (26 U.S.C. 6050P).  If necessary, Accounts Receivable will report the amount of the discharged debt to the IRS on Form IRS-1099-C, Cancellation of Debt, as potential taxable income to the debtor.

d. If a Form IRS-1099-C is issued, the debtor must be notified and sent a copy by January 31 of the following year.  The IRS must receive its copy of the Form IRS-1099-C by February 28 of the same year in which the Form IRS-1099-C is sent to the debtor.

4 FAM 495.3  Bankruptcy

(CT:FIN-434;   11-06-2013)

a. When the Department of State is notified that a bankruptcy petition has been filed with respect to a debtor of the Department of State, in most cases the collection on that debt must be suspended.

b. When a notification is received from a bankruptcy court as to the disposition of a petition for bankruptcy, Accounts Receivable will notify the Office of the Legal Adviser immediately for guidance on how to handle the debt.  The Department of State’s particular claim may or may not be discharged based on the court’s disposition of the bankruptcy petition.

c.  When the Department of State claims are discharged in bankruptcy court, they do not need to be approved by DOJ or the appropriate Department of State official for termination prior to being closed-out.

4 FAM 496  THROUGH 499 UNASSIGNED


4 FAM Exhibit 490  
Basic Facts for Termination and Write Off of Debt

(CT:FIN-434;   11-06-2013)

The following charts provide basic information concerning termination of collection action, write-off, and the classification of debts as currently not collectible (CNC) and closed-out (see U.S. Treasury’s Managing Federal Receivables, Chapter 7, Termination of Collection Action, Write-Off and Close-Out/Cancellation of Indebtedness).  These are separate legal and accounting actions associated with debt.

DEBT COLLECTION PROCESS ACTION

 

Description

Authority

Timing

Comment

TERMINATION/ SUSPENSION OF COLLECTION ACTION

Termination: Agency stops all active debt collection action; may continue passive collection.

Suspension: Agency is likely to resume active collection action at a future time.

31 U.S.C. 3711(a)(3);

31 CFR Part 903

Not tied to write-off, but must occur before debt is closed-out.

Agency decision to terminate/sus-pend must comply with Federal Claims Collection Standards (31 CFR Part 903).  DOJ concurrence required for some debts.


ACCOUNTING ACTION

 

Description

Authority

Timing

Comment

WRITE-OFF

Agency reports debt as having no value on financial and management reports.

OMB Circular A-129

No later than 2 years after debt delinquency, unless approved by OMB; not tied to termination or suspension.

At time of write-off, agency must classify the debt as currently not collectible (CNC) or closed-out.

CURRENTLY NOT COLLECTIBLE

(CNC)

A classification after write-off when the agency has determined that debt collection efforts should continue.

OMB Circular A-129

Determined at the time the debt is written-off.

CNC classification does not affect agencies’ statutory and regulatory responsibilities to pursue debt collection.

 

CLOSE-OUT

 

A classification after write-off when the agency has determined that no further active or passive debt collection action will be taken.

 

OMB Circular A-129

 

Must occur after write-off and termination of collection action.  Can occur after CNC classification, if debt was initially classified as CNC at time of write-off.

 

Agency may not take any collection action after close-out; if required by Internal Revenue Code and regulation, agency must report closed-out debt to IRS on Form IRS-1099-C as potential income to the debtor.


4 FAM Exhibit 493  
Template for Initial Notices of Indebtedness

(CT:FIN-449;   05-30-2019)

The following template may be used by the responsible official under 4 FAM 493.1-1 as a basis for the initial notice of indebtedness.  All of the bracketed sections should be adapted as appropriate depending on the nature of the indebtedness.  Other modifications may be made, as long as they conform to the provisions of 22 CFR 34.8.  Notices issued by post should also conform to local law in cases of debt owed by local entities (i.e., foreign nationals, individuals, contractors, and vendors).

 

                                        NOTICE OF INDEBTEDNESS

 

The [POST, BUREAU, OR OFFICE WITHIN THE DEPARTMENT RESPONSIBLE FOR THE ALLOTMENT, ACTIVITY OR PROGRAM UNDER WHICH THE DEBT ARISES] has determined that you [were overpaid/are indebted to the Department of State] in the amount of [AMOUNT].  The Department's records indicate that this [erroneous payment/debt] resulted from [SPECIFIC REASON].  [Supporting documentation/An itemization of the amount owed] is provided for your reference.

 

The amount due must be paid no later than 30 days from the date of this letter in order to avoid the assessment interest at the Treasury Department Current Value of Funds Rate (prescribed and published annually by the Secretary of the Treasury in the Federal Register and available on the Treasury website), penalties at the rate of 6 percent on any portion that is delinquent more than 90 days, and an administrative cost in accordance with 22 CFR 34.6.

 

You may [return the erroneous payment/pay the amount due] by submitting a check made payable to the U.S. Department of State for [AMOUNT DUE] to:

 

                                [ADDRESS OF ENTITY SENDING THE LETTER

                                        OR

                                U.S. Department of State
                                Accounts Receivable Branch
                                PO Box 979005
                                St Louis MO  63197-9000
]

 

Please include with the check a copy of this letter.  Having this will expedite the process of correctly crediting your account.

 

You can also seek to establish a written agreement to set up a repayment schedule, under terms agreeable to the Department.  Requests to establish a written agreement or evidence of bankruptcy (if you have file bankruptcy and the automatic stay is in effect) should be sent along with a copy of this letter to:

 

                                [CONTACT INFO OF ENTITY SENDING THE LETTER

                                        OR

                                AR Chief, U.S. Department of State,
                                Accounts Receivable Branch
                               
2010 Bainbridge Avenue,
                               
North Charleston, SC  29405
                                Note:  The AR Chief can also be e-mailed at
                               
GFSCARChief@state.gov.]

 

It is your responsibility to notify the Department of any bankruptcy proceedings.

 

Please know that in the event of your failure to pay or otherwise resolve this debt, the Department may enforce collection by taking one or more of the following actions in accordance with its debt collection regulations at 22 CFR 34.10:

(i)     Offset from Federal payments otherwise due you, including income tax refunds, salary, certain benefit payments, retirement, vendor payments, travel reimbursement and advances, and other Federal payments due from the Department, other Federal agencies, or through centralized disbursing from the Department of the Treasury;

(ii)    Referral to a private collection agency

(iii)    Report to credit bureaus

(iv)   Administrative wage garnishment

(v)    Litigation by the Department of Justice

(vi)   Referral to the Financial Management Service of the Department of Treasury for collection

(vii)   Liquidation of collateral

(viii)  Other actions as permitted by the Federal Claims Collection Standards and applicable law

 

You have a right to inspect and copy the Department's records of this claim.  You can exercise this right by contacting [POINT OF CONTACT WITHIN ENTITY SENDING THE LETTER].

 

You also have right to an internal review with respect to the existence of the debt or the amount of the debt [and to request a waiver of this debt].  In order to exercise this right you must file a signed request with [NAME AND CONTACT INFO FOR APPROPRIATE REVIEWING OFFICIAL AS PER 4 FAM 493.4] within 30 days from the date of this letter.  Your request should [identify if you are requesting an internal review, waiver or both and] explain with reasonable specificity and brevity, the facts, evidence, and witnesses that you believe are relevant to the existence or amount of the debt [and/or explain how the applicable standard to waive the debt has been met in this case].  A copy of your debt notice should be included with your request.  Any amount paid on this debt which is later found not owed to the United States will be promptly refunded.

 

If you have any questions regarding this matter, please contact [POINT OF CONTACT WITHIN ENTITY SENDING THE LETTER].

UNCLASSIFIED (U)