\[Federal Register: July 18, 2002 (Volume 67, Number 138)\]

\[Rules and Regulations\]

\[Page 47258-47268\]

From the Federal Register Online via GPO Access \[wais.access.gpo.gov\]

\[DOCID:fr18jy02-7\]

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AGENCY FOR INTERNATIONAL DEVELOPMENT

**22** **CFR** **Part** **213**

Claims Collection

AGENCY: Agency for International Development (\`\`USAID\'\').

ACTION: Final rule.

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SUMMARY: USAID is revising its regulation on Claims Collection in its

entirety to incorporate applicable statutory and regulatory provisions

and to make other changes.

DATES: Effective Date: July 18, 2002.

FOR FURTHER INFORMATION CONTACT: Mr. Joe Keady, 202-712-5744.

SUPPLEMENTARY INFORMATION:

A. Background

USAID is revising its claim collection procedures to incorporate

changes made to the Federal Claims Collection Standards and the Debt

Collection Improvement Act of 1996. One principal change in the rule is

the provision for the mandatory referral of certain delinquent debt to

the Federal Management Service of the Department of the Treasury. The

changes will maximize the effectiveness of USAID\'s claim collection

procedures.

B. Regulatory Analysis

Executive Order 12866

USAID has determined that this regulation is not a significant

regulatory action as defined in Executive Order 12866 and, accordingly,

this regulation has not been reviewed by the Office of Management and

Budget.

Regulatory Flexibility Act

It is hereby certified that this regulation will not have a

significant economic impact on a substantial number of small entities.

Accordingly, a Regulatory Flexibility Analysis is not required.

Executive Order 13132

This regulation will not have a substantial direct effect on the

states, on the relationship between the national government and the

states, or on distribution of power and responsibilities among the

various levels of government. Therefore, in accordance with Executive

Order 13132, it is determined that this regulation does not have

sufficient federalism implications to warrant the preparation of a

Federalism Assessment.

Unfunded Mandates Reform Act of 1995

This regulation will not result in the expenditure by state, local

and tribal governments, in the aggregate, or by the private sector, of

\$100 million or more in any one-year, and it will not significantly or

uniquely affect small governments. Therefore, no actions were deemed

necessary under the provisions of the Unfunded Mandates Reform Act of

1995\.

Small Business Regulatory Enforcement Fairness Act of 1996

This rule is not a major rule as defined by section 251 of the

Small Business Regulatory Enforcement Act. 5 U.S.C. 804. This rule will

not result in an annual effect on the economy of \$100 million or more;

a major increase in costs or prices; or significant adverse effects on

competition, employment, investment, productivity, innovation, or on

the ability of United States-based companies to compete with foreign-

based companies in domestic or export markets.

Executive Order 12988\--Civil Justice Reform

USAID has conducted the reviews required by section 3 of Executive

Order 12988 and has determined that, this rule meets the applicable

standards in section 3 to mitigate litigation, eliminate ambiguity and

reduce burden.

Paperwork Reduction Act

This rule does not contain information collection requirements that

require approval by the Office of Management and Budget under the

Paperwork Reduction Act (44 U.S.C. 3507 et seq.).

List of Subjects in **22** **CFR** **Part** **213**

Administrative practice and procedure, Claims, Federal employees,

Fraud, Penalties, Privacy.

Authority and Issuance

For the reasons set out in the preamble, **part** **213** of Title
**22** is

revised as follows:

**PART** **213**\--CLAIMS COLLECTION

Subpart A\--General

Sec.

**213**.1 Purpose and scope.

**213**.2 Definitions.

**213**.3 Loans, guarantees, sovereign and interagency claims.

**213**.4 Other remedies.

**213**.5 Fraud claims.

**213**.6 Subdivision of claims not authorized.

**213**.7 Omission not a defense.

Subpart B\--Collection

**213**.8 Collection\--general.

**213**.9 Written notice.

**213**.10 Review requirements.

**213**.11 Aggressive collection actions; documentation.

**213**.12 Interest, penalty and administrative costs.

**213**.13 Interest and charges pending waiver or review.

**213**.14 Contracting for collection services.

**213**.15 Use of credit reporting bureaus.

**213**.16 Use and disclosure of mailing addresses.

**213**.17 Liquidation of collateral.

**213**.18 Suspension or revocation of eligibility for loans and loan

guarantees, licenses or privileges.

**213**.19 Installment payments.

Subpart C\--Administrative Offset

**213**.20 Administrative offset of non-employee debts.

**213**.21 Employee salary offset\--general.

**213**.**22** Salary offset when USAID is the creditor agency.

**213**.23 Salary offset when USAID is not the creditor agency.

\[\[Page 47259\]\]

Subpart D\--Compromise of Debts

**213**.24 General.

**213**.25 Standards for compromise.

**213**.26 Payment of compromised claims.

**213**.27 Joint and several liability.

**213**.28 Execution of releases.

Subpart E\--Suspension or Termination of Collection Action

**213**.29 Suspension\--general.

**213**.30 Standards for suspension.

**213**.31 Termination\--general.

**213**.32 Standards for termination.

**213**.33 Permitted action after termination of collection activity.

**213**.34 Debts that have been discharged in bankruptcy.

Subpart F\--Discharge of Indebtedness and Reporting Requirements

**213**.35 Discharging indebtedness\--general.

**213**.36 Reporting to IRS.

Subpart G\--Referrals to the Department of Justice

**213**.37 Referrals to the Department of Justice.

Subpart H\--Mandatory Transfer of Delinquent Debt to Financial

Management Service (FMS) of the Department of Treasury

**213**.38 Mandatory transfer of debts to FMS\--general.

**213**.39 Exceptions to mandatory transfer.

Authority: Section 621(a) of the Foreign Assistance Act of 1961,

as amended, **22** U.S.C. 2381(a).

Subpart A\--General

Sec. **213**.1 Purpose and scope.

This **part** prescribes standards and procedures for the United States

Agency for International Development\'s (USAID) collection and disposal

of claims. These standards and procedures are applicable to all claims

and debts for which a statute, regulation or contract does not

prescribe different standards or procedures. This **part** covers
USAID\'s

collection, compromise, suspension, termination, and referral of claims

to the Department of Justice.

Sec. **213**.2 Definitions.

\(a\) Administrative offset means the withholding of money payable by

the United States to, or held by the United States for, a person to

satisfy a debt the person owes the Government.

\(b\) Administrative Wage Garnishment means the process by which

federal agencies require a private sector employer to withhold up to

15% of an employee\'s disposable pay to satisfy a delinquent debt owed

to the federal government. A court order is not required.

\(c\) Agency means the United States Agency for International

Development (USAID).

\(d\) Claim means an amount of money, funds, or property that has

been determined by an agency official to be due the United States from

any person, organization, or entity, except another Federal agency. As

used in this **part**, the terms debt and claim are synonymous.

\(e\) CFO means the Chief Financial Officer of USAID or a USAID

employee or official designated to act on the CFO\'s behalf.

\(f\) Creditor agency means the Federal agency to which the debt is

owed, including a debt collection center when acting on behalf of a

creditor agency in matters pertaining to the collection of a debt.

\(g\) Debtor means an individual, organization, association,

corporation, or a State or local government indebted to the United

States or a person or entity with legal responsibility for assuming the

debtor\'s obligation.

\(h\) Delinquent claim means any claim that has not been paid by the

date specified in the agency\'s bill for collection or demand letter for

payment or which has not been satisfied in accordance with a repayment

agreement.

\(i\) Disposable pay means that **part** of current basic pay, special

pay, incentive pay, retired pay, retainer pay, or in the case of an

employee not entitled to basic pay, other authorized pay remaining

after the deduction of any amount required by law to be withheld (other

than deductions to execute garnishment orders) in accordance with 5
**CFR**

parts 581 and 582. Among the legally required deductions that must be

applied first to determine disposable pay are levies pursuant to the

Internal Revenue Code (Title 26, United States Code) and deductions

described in 5 **CFR** 581.105 (b) through (f). These deductions
include,

but are not limited to: Social security withholdings; Federal, State

and local tax withholdings; health insurance premiums; retirement

contributions; and life insurance premiums.

\(j\) Employee means a current employee of the Federal Government

including a current member of the Armed Forces or a Reserve of the

Armed Forces.

\(k\) Employee Salary Offset means the administrative collection of a

debt by deductions at one or more officially established pay intervals

from the current pay account of an employee without the employee\'s

consent.

\(l\) Person means an individual, firm, partnership, corporation,

association and, except for purposes of administrative offsets under

subpart C and interest, penalty and administrative costs under subpart

B of this **part**, includes State and local governments and Indian
tribes

and components of tribal governments.

\(m\) Recoupment is a special method for adjusting debts arising

under the same transaction or occurrence. For example, obligations

arising under the same contract generally are subject to recoupment.

\(n\) Waiver means the cancellation, remission, forgiveness or non-

recovery of a debt or debt-related charge as permitted or required by

law.

\(o\) Withholding order means any order for withholding or

garnishment of pay issued by USAID or a judicial or administrative

body. For the purposes of this **part**, wage garnishment order and

garnishment order have the same meaning as withholding order.

Sec. **213**.3 Loans, guarantees, sovereign and interagency claims.

This **part** does not apply to:

\(a\) Claims arising out of loans for which compromise and collection

authority is conferred by section 635(g)(2) of the Foreign Assistance

Act of 1961, as amended;

\(b\) Claims arising from investment guaranty operations for which

settlement and arbitration authority is conferred by section 635(I) of

the Foreign Assistance Act of 1961, as amended;

\(c\) Claims against any foreign country or any political subdivision

thereof, or any public international organization;

\(d\) Claims where the CFO determines that the achievement of the

purposes of the Foreign Assistance Act of 1961, as amended, or any

other provision of law administered by USAID require a different course

of action; and

\(e\) Claims owed USAID by other Federal agencies. Such debts will be

resolved by negotiation between the agencies.

Sec. **213**.4 Other remedies.

\(a\) This **part** does not supersede or require omission or
duplication

of administrative proceedings required by contract, statute, regulation

or other Agency procedures, e.g., resolution of audit findings under

grants or contracts, informal grant appeals, formal appeals, or review

under a procurement contract.

\(b\) The remedies and sanctions available to the Agency under this

**part** for collecting debts are not intended to be exclusive. The
Agency

may impose, where authorized, other appropriate sanctions upon a debtor

for inexcusable, prolonged or repeated failure to pay a debt. For

example, the Agency may stop doing business with a grantee, contractor,

borrower or lender; convert the method of payment under a grant or

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contract from an advance payment to a reimbursement method; or revoke a

grantee\'s or contractor\'s letter-of-credit.

Sec. **213**.5 Fraud claims.

\(a\) The CFO will refer claims involving fraud, the presentation of

a false claim, or misrepresentation on the **part** of the debtor or any

party having an interest in the claim to the USAID Office of Inspector

General (OIG). The OIG has the responsibility for investigating or

referring the matter, where appropriate, to the Department of Justice

(DOJ), and/or returning it to the CFO for further action.

\(b\) The CFO will not administratively compromise, terminate,

suspend or otherwise dispose of debts involving fraud, the presentation

of a false claim or misrepresentation on the **part** of the debtor or
any

party having an interest in the claim without the approval of DOJ.

Sec. **213**.6 Subdivision of claims not authorized.

A claim will not be subdivided to avoid the \$100,000 limit on the

Agency\'s authority to compromise, suspend, or terminate a debt. A

debtor\'s liability arising from a particular transaction or contract is

a single claim.

Sec. **213**.7 Omission not a defense.

Failure by USAID to comply with any provision of this **part** is not

available to a debtor as a defense against payment of a debt.

Subpart B-Collection

Sec. **213**.8 Collection\--general.

\(a\) The CFO takes action to collect all debts owed the United

States arising out of USAID activities and to reduce debt

delinquencies. Collection actions may include sending written demands

to the debtor\'s last known address. Written demand may be preceded by

other appropriate action, including immediate referral to DOJ for

litigation, when such action is necessary to protect the Government\'s

interest. The CFO may contact the debtor by telephone, in person and/or

in writing to demand prompt payment, to discuss the debtor\'s position

regarding the existence, amount or repayment of the debt, to inform the

debtor of its rights (e.g., to apply for waiver of the indebtedness or

to have an administrative review) and of the basis for the debt and the

consequences of nonpayment or delay in payment.

\(b\) The CFO maintains an administrative file for each debt and/or

debtor which documents the basis for the debt, all administrative

collection actions regarding the debt (including communications to and

from the debtor) and its final disposition. Information on an

individual may be disclosed only for purposes that are consistent with

this **part**, the Privacy Act of 1974 and other applicable law.

Sec. **213**.9 Written notice.

\(a\) When the billing official determines that a debt is owed USAID,

he or she provides a written notice in the form of a Bill for

Collection or demand letter to the debtor. Unless otherwise provided by

agreement, contract or order, the written notice informs the debtor of:

\(1\) The amount, nature and basis of the debt;

\(2\) The right of the debtor to inspect and copy records related to

the debt;

\(3\) The right of the debtor to discuss and propose a repayment

agreement;

\(4\) Any rights available to the debtor to dispute the validity of

the debt or to have recovery of the debt waived (citing the available

review or waiver authority, the conditions for review or waiver, and

the effects of the review or waiver request on the collection of the

debt);

\(5\) The date on which payment is due which will be not more than 30

days from the date of the bill for collection or demand letter;

\(6\) The instructions for making electronic payment;

\(7\) The debt is considered delinquent if it is not paid on the due

date;

\(8\) The imposition of interest charges and, except for State and

local governments and Indian tribes, penalty charges and administrative

costs that may be assessed against a delinquent debt;

\(9\) The intention of USAID to use non-centralized administrative

offset to collect the debt if appropriate and, if not, the referral of

the debt 90 days after the Bill for Collection or demand letter to the

Financial Management Service in the Department of Treasury who will

collect their administrative costs from the debtor in addition to the

amount owed USAID and use all means available to the Federal Government

for debt collection including administrative wage garnishment, use of

collection agencies and reporting the indebtedness to a credit

reporting bureau (see Sec. **213**.14);

\(10\) The address, telephone number, and name of the person

available to discuss the debt;

\(11\) The possibility of referral to the Department of Justice for

litigation if the debt cannot be collected administratively.

\(b\) USAID will respond promptly to communications from the debtor.

Response generally will be within 30 days of receipt of communication

from the debtor.

Sec. **213**.10 Review requirements.

\(a\) For purposes of this section, whenever USAID is required to

afford a debtor a review within the agency, USAID shall provide the

debtor with a reasonable opportunity for an oral hearing when the

debtor requests reconsideration of the debt and the agency determines

that the question of the indebtedness cannot be resolved by review of

the documentary evidence, for example, when the validity of the debt

turns on an issue of credibility or veracity.

\(b\) Unless otherwise required by law, an oral hearing under this

section is not required to be a formal evidentiary hearing, although

USAID will carefully document all significant matters discussed at the

hearing.

\(c\) This section does not require an oral hearing with respect to

debt collection systems in which a determination of indebtedness rarely

involves issues of credibility or veracity and the agency has

determined that review of the written record is ordinarily an adequate

means to correct prior mistakes.

\(d\) In those cases when an oral hearing is not required by this

section, USAID shall accord the debtor a \`\`paper hearing,\'\' that is,
a

determination of the request for reconsideration based upon a review of

the written record.

Sec. **213**.11 Aggressive collection actions; documentation.

\(a\) USAID takes actions and effective follow-up on a timely basis

to collect all claims of the United States for money and property

arising out of USAID\'s activities. USAID cooperates with other Federal

agencies in their debt collection activities.

\(b\) All administrative collection actions are documented in the

claim file, and the basis for any compromise, termination or suspension

of collection actions is set out in detail. This documentation,

including the Claims Collection Litigation Report required in

Sec. **213**.34, is retained in the appropriate debt file.

Sec. **213**.12 Interest, penalty and administrative costs.

\(a\) Interest. USAID will assess interest on all delinquent debts

unless prohibited by statute, regulation or contract.

\(1\) Interest begins to accrue on all debts from the payment due

date established in the initial notice to the debtor. USAID will assess

an annual rate of interest that is equal to the rate of the current

value of funds to the United States Treasury (i.e., the Treasury tax

and loan account rate)

\[\[Page 47261\]\]

unless a different rate is necessary to protect the interest of the

Government. USAID will notify the debtor of the basis for its finding

that a different rate is necessary to protect the interest of the

Government.

\(2\) The rate of interest, as initially assessed, remains fixed for

the duration of the indebtedness. If a debtor defaults on a repayment

agreement, interest may be set at the Treasury rate in effect on the

date a new agreement is executed.

\(3\) Interest will not be assessed on interest charges,

administrative costs or late payment penalties. However, where a debtor

defaults on a previous repayment agreement and interest, administrative

costs and penalties charges have been waived under the defaulted

agreement, these charges can be reinstated and added to the debt

principal under any new agreement and interest charged on the entire

amount of the debt.

\(b\) Administrative costs of collecting overdue debts. The costs of

the Agency\'s administrative handling of overdue debts including charges

assessed by Treasury in cross-servicing USAID debts, based on either

actual or average cost incurred, will be charged on all debts except

those owed by State and local governments and Indian tribes. These

costs include both direct and indirect costs.

\(c\) Penalties. As provided by 31 U.S.C. 3717(e)(2), a penalty

charge will be assessed on all debts, except those owned by State and

local governments and Indian tribes, more than 90 days delinquent. The

penalty charge will be at a rate not to exceed 6% per annum and will be

assessed monthly.

\(d\) Allocation of payments. A partial payment by a debtor will be

applied first to outstanding administrative costs, second to penalty

assessments, third to accrued interest and then to the outstanding debt

principal.

\(e\) Waivers. (1) USAID will waive the collection of interest and

administrative charges on the portion of the debt that is paid within

30 days after the date on which interest begins to accrue. The CFO may

extend this 30-day period on a case-by-case basis where he determines

that such action is in the best interest of the Government. A decision

to extend or not to extend the payment period is final and is not

subject to further review.

\(2\) The CFO may (without regard to the amount of the debt) waive

collection of all or **part** of accrued interest, penalty or

administrative costs, where he determines that\--

\(i\) Waiver is justified under the criteria of Sec. **213**.24;

\(ii\) The debt or the charges resulted from the Agency\'s error,

action or inaction, and without fault by the debtor; or

\(iii\) Collection of these charges would be against equity and good

conscience or not in the best interest of the United States.

\(3\) A decision to waive interest, penalty charges or administrative

costs may be made at any time.

Sec. **213**.13 Interest and charges pending waiver or review.

Interest, penalty charges and administrative costs will continue to

accrue on a debt during administrative appeal, either formal or

informal, and during waiver consideration by the Agency; except, that

interest, penalty charges and administrative costs will not be assessed

where a statute or a regulation specifically prohibits collection of

the debt during the period of the administrative appeal or the Agency

review.

Sec. **213**.14 Contracting for collection services.

USAID has entered into a cross-servicing agreement with the

Financial Management Service (FMS) of the Department of Treasury. FMS

is authorized to take all appropriate action to enforce collection of

accounts referred to FMS in accordance with applicable statutory and

regulatory requirements. The FMS fee ranges from 3% to 18% of the funds

collected and will be collected from the debtor along with the original

amount of the indebtedness. After referral, FMS will be solely

responsible for the maintenance of the delinquent debtor records in its

possessions and for ensuring that accounts are updated as necessary. In

the event that a referred debtor disputes the validity of the debt or

any terms and conditions related to any debt not reduced to judgment,

FMS may return the disputed debt to USAID for its determination of debt

validity. FMS may take any of the following collection actions on

USAID\'s behalf:

\(a\) Send demand letters on U. S. Treasury letterhead and telephone

debtors;

\(b\) Refer accounts to credit bureaus;

\(c\) Skiptracing;

\(d\) Purchase credit reports to assist in the collection effort;

\(e\) Refer accounts for offset, including tax refund, Federal

employee salary, administrative wage garnishment, and general

administrative offset under the Treasury Offset Program.

\(f\) Refer accounts to private collection agencies;

\(g\) Refer accounts to DOJ for litigation;

\(h\) Report written off/discharged debts to IRS on the appropriate

Form 1099;

\(i\) Take any additional steps necessary to enforce recovery; and

\(j\) Terminate collection action, as appropriate.

Sec. **213**.15 Use of credit reporting bureaus.

Delinquent debts owed to USAID are reported to appropriate credit

reporting bureaus through the cross-servicing agreement with FMS.

\(a\) The following information is provided to the credit reporting

bureaus:

\(1\) A statement that the claim is valid and is overdue;

\(2\) The name, address, taxpayer identification number and any other

information necessary to establish the identity of the debtor;

\(3\) The amount, status and history of the debt; and

\(4\) The program or pertinent activity under which the debt arose.

\(b\) Before referring claims to FMS and disclosing debt information

to credit reporting bureaus, USAID will have:

\(1\) Taken reasonable action to locate the debtor if a current

address is not available; and

\(2\) If a current address is available, notified the debtor in

writing that:

\(i\) The designated USAID official has reviewed the claim and has

determined that it is valid and overdue;

\(ii\) That 90 days after the initial billing or demand letter if the

debt is not paid, USAID intends to refer the debt to FMS and disclose

to a credit reporting agency the information authorized for disclosure

by this subpart; and

\(iii\) The debtor can request a complete explanation of the claim,

can dispute the information in USAID\'s records concerning the claim,

and can file for an administrative review, waiver or reconsideration of

the claim, where applicable.

\(c\) Before information is submitted to a credit reporting bureau,

USAID will provide a written statement to FMS that all required actions

have been taken. Additionally, FMS will, thereafter, ensure that

accounts are updated as necessary during the period that FMS holds the

account information.

\(d\) If a debtor disputes the validity of the debt, the credit

reporting bureau will refer the matter to the appropriate USAID

official. The credit reporting bureau will exclude the debt from its

reports until USAID certifies in writing that the debt is valid.

Sec. **213**.16 Use and disclosure of mailing addresses.

\(a\) When attempting to locate a debtor in order to collect or

compromise a debt,

\[\[Page 47262\]\]

the CFO may obtain a debtor\'s current mailing address from the Internal

Revenue Service.

\(b\) Addresses obtained from the Internal Revenue Service will be

used by the Agency, its officers, employees, agents or contractors and

other Federal agencies only to collect or dispose of debts, and may be

disclosed to other agencies and to collection agencies only for

collection purposes.

Sec. **213**.17 Liquidation of collateral.

Where the CFO holds a security instrument with a power of sale or

has physical possession of collateral, he may liquidate the security or

collateral and apply the proceeds to the overdue debt. USAID will

exercise this right where the debtor fails to pay within a reasonable

time after demand, unless the cost of disposing of the collateral is

disproportionate to its value or special circumstances require judicial

foreclosure. However, collection from other businesses, including

liquidation of security or collateral, is not a prerequisite to

requiring payment by a surety or insurance company unless expressly

required by contract or statute. The CFO will give the debtor

reasonable notice of the sale and an accounting of any surplus proceeds

and will comply with any other requirements of law or contract.

Sec. **213**.18 Suspension or revocation of eligibility for loans and
loan

guarantees, licenses or privileges.

Unless waived by the CFO, USAID will not extend financial

assistance in the form of a loan or loan guarantee to any person

delinquent on a nontax debt owed to a Federal agency. USAID may also

suspend or revoke licenses or other privileges for any inexcusable,

prolonged or repeated failure of a debtor to pay a claim. Additionally,

the CFO may suspend or disqualify any contractor, lender, broker,

borrower, grantee or other debtor from doing business with USAID or

engaging in programs USAID sponsors or funds if a debtor fails to pay

its debts to the Government within a reasonable time. Debtors will be

notified before such action is taken and applicable suspension or

debarment procedures will be used. The CFO will report the failure of

any surety to honor its obligations to the Treasury Department for

action under 31 **CFR** 332.18.

Sec. **213**.19 Installment payments.

\(a\) Whenever feasible, and except as otherwise provided by law,

debts owed to the United States, together with interest, penalty and

administrative costs, as required by Sec. **213**.11, will be collected
in

a single payment. However, where the CFO determines that a debtor is

financially unable to pay the indebtedness in a single payment or that

an alternative payment mechanism is in the best interest of the United

States, the CFO may approve repayment of the debt in installments. The

debtor has the burden of establishing that it is financially unable to

pay the debt in a single payment or that an alternative payment

mechanism is warranted. If the CFO agrees to accept payment by

installments, the CFO may require a debtor to execute a written

agreement which specifies all the terms of the repayment arrangement

and which contains a provision accelerating the debt in the event of

default. The size and frequency of installment payments will bear a

reasonable relation to the size of the debt and the debtor\'s ability to

pay. The installment payments will be sufficient in size and frequency

to liquidate the debt in not more than 3 years, unless the CFO

determines that a longer period is required. Installment payments of

less than \$50 per month generally will not be accepted, but may be

accepted where the debtor\'s financial or other circumstances justify.

\(b\) If a debtor owes more than one debt and designates how a

voluntary installment payment is to be applied among the debts, that

designation will be approved if the CFO determines that the designation

is in the best interest of the United States. If the debtor does not

designate how the payment is to be applied, the CFO will apply the

payment to the various debts in accordance with the best interest of

the United States, paying special attention to applicable statutes of

limitations.

Subpart C\--Administrative Offset

Sec. **213**.20 Administrative offset of non-employee debts.

This subpart provides for USAID\'s collection of debts by

administrative offset under the Federal Claims Collection Standards,

other statutory authorities and offsets or recoupments under common

law. It does not apply to offsets against employee salaries covered by

Secs. **213**.21, **213**.**22** and **213**.23 of this subpart. USAID
will collect

debts by administrative offsets where it determines that such

collections are feasible and are not otherwise prohibited by statute or

contract. USAID will decide, on a case-by-case basis, whether

collection by administrative offset is feasible and that its use

furthers and protects the interest of the United States.

\(a\) Standards. (1) The CFO collects debts by administrative offset

only after the debtor has been sent written notice in the form of a

Bill for Collection or demand letter outlining the type and amount of

the debt, the intention of the agency to use administrative offset to

collect the debt, and explaining the debtor\'s rights under 31 U.S.C.

3716\.

\(2\) Offsets may be initiated only after the debtor has been given:

\(i\) The opportunity to inspect and copy agency records related to

the debt;

\(ii\) The opportunity for a review within the agency of the

determination of indebtedness;

\(iii\) The opportunity to make a written agreement to repay the

debt.

\(3\) The provisions of paragraphs (a)(1) and (2) of this section may

be omitted when:

\(i\) The offset is in the nature of a recoupement;

\(ii\) The debt arises under a contract as set forth in Cecile

Industries, Inc. v. Cheney, 995 F.2d 1052 (Fed. Cir. 1993) (notice and

other procedural protections set forth in 31 U.S.C. 3716(a) do not

supplant or restrict established procedures for contractual offsets

accommodated by the Contracts Disputes Act); or

\(iii\) In the case of non-centralized administrative offsets

conducted under paragraph (g) of this section, USAID first learns of

the existence of the amount owed by the debtor when there is

insufficient time before payment would be made to the debtor/payee to

allow for prior notice and an opportunity for review. When prior notice

and an opportunity for review are omitted, USAID shall give the debtor

such notice and an opportunity for review as soon as practicable and

shall promptly refund any money ultimately found not to have been owed

to the USAID.

\(4\) When USAID previously has given a debtor any of the required

notice and review opportunities with respect to a particular debt,

USAID need not duplicate such notice and review opportunities before

administrative offset may be initiated.

\(b\) Interagency offset. The CFO may offset a debt owed to another

Federal agency from amounts due or payable by USAID to the debtor, or

may request another Federal agency to offset a debt owed to USAID. The

CFO through the FMS cross-servicing arrangement may request the

Internal Revenue Service to offset an overdue debt from a Federal

income tax refund due. The FMS may also garnishment the salary of a

private sector employee where reasonable attempts to obtain payment

have failed. Interagency offsets from employee\'s salaries will be made

in accordance with the procedures contained in Secs. **213**.**22** and
**213**.23.

\[\[Page 47263\]\]

\(c\) Statutory bar to offset. Administrative offset will not be made

more than 10 years after the Government\'s right to collect the debt

first accrued, unless facts material to the Government\'s right to

collect the debt were not known and could not have been known through

the exercise of reasonable care by the officer responsible for

discovering or collecting the debt. For purposes of offset, the right

to collect a debt accrues when the appropriate USAID official

determines that a debt exists (e.g., contracting officer, grant award

official, etc.), when it is affirmed by an administrative appeal or a

court having jurisdiction, or when a debtor defaults on a payment

agreement, whichever is latest. An offset occurs when money payable to

the debtor is first withheld or when USAID requests offset from money

held by another agency.

\(d\) Alternative repayment. The CFO may, at the CFO\'s discretion,

enter into a repayment agreement with the debtor in lieu of offset. In

deciding whether to accept payment of the debt by an alternative

repayment agreement, the CFO may consider such factors as the amount of

the debt, the length of the proposed repayment period, past Agency

dealings with the debtor, documentation submitted by the debtor

indicating that an offset will cause undue financial hardship, and the

debtor\'s financial ability to adhere to the terms of a repayment

agreement. The CFO may require financial documentation from the debtor

before considering the repayment arrangement.

\(e\) Review of administrative determination of debt\'s validity. (1)

A debt will not be offset while a debtor is seeking either formal or

informal review of the validity of the debt under this section or under

another statute, regulation or contract. However, interest, penalty and

administrative costs will continue to accrue during this period, unless

otherwise waived by the CFO. The CFO may initiate offset as soon as

practical after completion of review or after a debtor waives the

opportunity to request review.

\(2\) The debtor must provide a written request for review of the

decision to offset the debt no later than 15 days after the date of the

notice of the offset unless a different time is specifically

prescribed. The debtor\'s request must state the basis for the request

for review.

\(3\) The CFO may grant an extension of time for filing a request for

review if the debtor shows good cause for the late filing. A debtor who

fails timely to file or to request an extension waives the right to

review.

\(4\) The CFO will issue, no later than 60 days after the filing of

the request, a written final decision based on the evidence, record and

applicable law.

\(f\) Multiple debts. Where moneys are available for offset against

multiple debts of a debtor, it will be applied in accordance with the

best interest of the Government as determined by the CFO on a case-by-

case basis.

\(g\) Non-centralized administrative offset. (1) Generally, non-

centralized administrative offsets are ad hoc case-by-case offsets that

creditor agencies conduct, at the agency\'s discretion, internally or in

cooperation with the agency certifying or authorizing payments to the

debtor. Unless otherwise prohibited by law, when centralized

administrative offset is not available or appropriate, past due,

legally enforceable nontax delinquent debts may be collected through

non-centralized administrative offset. In these cases, a creditor

agency may make a request directly to a payment authorizing agency to

offset a payment due a debtor to collect a delinquent debt.

\(2\) Before requesting a payment authorizing agency to conduct a

non-centralized administrative offset, USAID\'s regulations provides

that such offsets may occur only after:

\(i\) The debtor has been provided due process as set forth in

paragraph (a) of this section; and

\(ii\) The payment authorizing agency has received written

certification from the creditor agency that the debtor owes the past

due, legally enforceable delinquent debt in the amount stated, and that

the creditor agency has fully complied with its regulations concerning

administrative offset.

\(3\) USAID as a payment authorizing agency will comply with offset

requests by creditor agencies to collect debts owed to the United

States, unless the offset would not be in the best interests of the

United States with respect to USAID\'s program, or would otherwise be

contrary to law.

\(4\) When collecting multiple debts by non-centralized

administrative offset, USAID will apply the recovered amounts to those

debts in accordance with the best interests of the United States, as

determined by the facts and circumstances of the particular case,

particularly the applicable statute of limitations.

\(h\) Requests to OPM to offset a debtor\'s anticipated or future

benefit payments under the Civil Service Retirement and Disability

Fund. Upon providing OPM written certification that a debtor has been

afforded the procedures provided in paragraph (a) of this section,

USAID may request OPM to offset a debtor\'s anticipated or future

benefit payments under the Civil Service Retirement and Disability Fund

(Fund) in accordance with regulations codified at 5 **CFR** 831.1801

through 831.1808. Upon receipt of such a request, OPM will identify and

\`\`flag\'\' a debtor\'s account in anticipation of the time when the
debtor

requests, or becomes eligible to receive, payments from the Fund. This

will satisfy any requirement that offset be initiated prior to the

expiration of the time limitations referenced in paragraph (a)(4) of

this section.

Sec. **213**.21 Employee salary offset-general.

\(a\) Purpose. This section establishes USAID\'s policies and

procedures for recovery of debts owed to the United States by

installment collection from the current pay account of an employee.

\(b\) Scope. The provisions of this section apply to collection by

salary offset under 5 U.S.C. 5514 of debts owed USAID and debts owed to

other Federal agencies by USAID employees. USAID will make every effort

reasonably and lawfully possible to administratively collect amounts

owed by employees prior to initiating collection by salary offset. An

amount advanced to an employee for per diem or mileage allowances in

accordance with 5 U.S.C. 5705, but not used for allowable travel

expenses, is recoverable from the employee by salary offset without

regard to the due process provisions in Sec. **213**.**22**. This
section does

not apply to debts where collection by salary offset is explicitly

provided for or prohibited by another statute.

\(c\) References. The following statutes and regulations apply to

USAID\'s recovery of debts due the United States by salary offset:

\(1\) 5 U.S.C. 5514, as amended, governing the installment collection

of debts;

\(2\) 31 U.S.C. 3716, governing the liquidation of debts by

administrative offset;

\(3\) 5 **CFR** **part** 550, subpart K, setting forth the minimum

requirements for executive agency regulations on salary offset; and

\(4\) 31 **CFR** parts 900 through 904, the Federal Claims Collection

Standards.

Sec. **213**.**22** Salary offset when USAID is the creditor agency.

\(a\) Due process requirements\--Entitlement to notice, hearing,

written response and decision. (1) Prior to initiating collection

action through salary offset, USAID will first provide the employee

with the opportunity to pay in full the amount owed, unless

\[\[Page 47264\]\]

such notification will compromise the Government\'s ultimate ability to

collect the debt.

\(2\) Except as provided in paragraph (b) of this section, each

employee from whom the Agency proposes to collect a debt by salary

offset under this section is entitled to receive a written notice as

described in paragraph (c) of this section.

\(3\) Each employee owing a debt to the United States that will be

collected by salary offset is entitled to request a hearing on the

debt. This request must be filed as prescribed in paragraph (d) of this

section. The Agency will make appropriate hearing arrangements that are

consistent with law and regulations. Where a hearing is held, the

employee is entitled to a written decision on the following issues:

\(i\) The determination of the Agency concerning the existence or

amount of the debt; and

\(ii\) The repayment schedule, if it was not established by written

agreement between the employee and the Agency.

\(b\) Exceptions to due process requirements\--pay and allowances. The

procedural requirements of paragraph (a) of this section are not

applicable to overpayments of pay or allowances caused by the

following:

\(1\) Any adjustment of pay arising out of an employee\'s election of

coverage or a change in coverage under a Federal benefits program (such

as health insurance) requiring periodic deductions from pay, if the

amount to be recovered was accumulated over four pay periods or less.

However, if the amount to be recovered was accumulated over more than

four pay periods the full procedures prescribed under paragraph (d) of

this section will be extended to the employee;

\(2\) Routine intra-agency adjustment in pay or allowances that is

made to correct an overpayment of pay attributable to clerical or

administrative errors or delays in processing pay documents, if the

overpayment occurred with the 4 pay periods preceding the adjustment

and, at the time of such adjustment, or as soon thereafter as

practical, the employee is provided written notice of the nature and

amount of the adjustment; or

\(3\) Any adjustment to collect a debt amounting to \$50 or less, if

at the time of such adjustment, or as soon thereafter as practical, the

employee is provided written notice of the nature and amount of the

adjustment.

\(c\) Notification before deductions begin. Except as provided in

paragraph (b) of this section, deductions will not be made unless the

employee is first provided with a minimum of 30 calendar days written

notice. Notice will be sent by mail and must include the following:

\(1\) The Agency\'s determination that a debt is owed, including the

origin, nature, and amount of the debt;

\(2\) The Agency\'s intention to collect the debt by means of

deductions from the employee\'s current disposable pay account;

\(3\) The amount, frequency, proposed beginning date and duration of

the intended deductions. (The proposed beginning date for salary offset

cannot be earlier than 30 days after the date of notice, unless this

would compromise the Government\'s ultimate ability to resolve the

debt);

\(4\) An explanation of the requirements concerning interest, penalty

and administrative costs;

\(5\) The employee\'s right to inspect and copy all records relating

to the debt or to request and receive a copy of such records;

\(6\) If not previously provided, the employee\'s right to enter into

a written agreement for a repayment schedule differing from that

proposed by the Agency where the terms of the proposed repayment

schedule are acceptable to the Agency. (Such an agreement must be in

writing and signed by both the employee and the appropriate USAID

official and will be included in the debt file);

\(7\) The right to a hearing conducted by a hearing official not

under the control of USAID, if a request is filed;

\(8\) The method and time for requesting a hearing;

\(9\) That the filing of a request for hearing within 15 days of

receipt of the original notification will stay the assessment of

interest, penalty and administrative costs and the commencement of

collection proceedings;

\(10\) That a final decision on the hearing (if requested) will be

issued at the earliest practical date, but no later than 60 days after

the filing of the request, unless the employee requests and the hearing

official grants a delay in the proceedings;

\(11\) That any knowingly false or frivolous statements,

representations or evidence may subject the employee to\--

\(i\) Disciplinary procedures under 5 U.S.C. chapter 75 or any other

applicable statutes or regulations;

\(ii\) Criminal penalties under 18 U.S.C. 286, 287, 1001 and 1002 or

other applicable statutory authority; or

\(iii\) Penalties under the False Claims Act, 31 U.S.C. 3729-3731, or

any other applicable statutory authority;

\(12\) Any other rights and remedies available to the employee under

statutes or regulations governing the program for which the collection

is being made; and

\(13\) Unless there are applicable contractual or statutory

provisions to the contrary, amounts paid or deducted for the debt which

are later waived or found not owed to the United States will be

promptly refunded to the employee.

\(d\) Request for hearing. An employee may request a hearing by

filing a written, signed request directly with the Deputy Chief

Financial Office, M/FM, United States Agency for International

Development, Ronald Reagan Building, 1300 Pennsylvania Avenue NW.,

Washington, DC 20523-4601. The request must state the basis upon which

the employee disputes the proposed collection of the debt. The request

must be signed by the employee and be received by USAID within 15 days

of the employee\'s receipt of the notification of proposed deductions.

The employee should submit in writing all facts, evidence and witnesses

that support his/her position to the Deputy Chief Financial Officer

within 15 days of the date of the request for a hearing. The Deputy

Chief Financial Officer will arrange for the services of a hearing

official not under the control of USAID and will provide the hearing

official with all documents relating to the claim.

\(e\) Requests for hearing made after time expires. Late requests for

a hearing may be accepted if the employee can show that the delay in

filing the request for a hearing was due to circumstances beyond the

employee\'s control.

\(f\) Form of hearing, written response and final decision. (1)

Normally, a hearing will consist of the hearing official making a

decision based upon a review of the claims file and any materials

submitted by the debtor. However, in instances where the hearing

official determines that the validity of the debt turns on an issue of

veracity or credibility which cannot be resolved through review of

documentary evidence, the hearing official at his discretion may afford

the debtor an opportunity for an oral hearing. Such oral hearings will

consist of an informal conference before a hearing official in which

the employee and the Agency will be given the opportunity to present

evidence, witnesses and argument. If desired, the employee may be

represented by an individual of his/her choice. The Agency shall

maintain a summary record of oral hearings provided under the

procedures in this section.

\(2\) Written decisions provided after a request for hearing will, at

a minimum, state the facts evidencing the nature and origin of the

alleged debt; and the

\[\[Page 47265\]\]

hearing official\'s analysis, findings and conclusions.

\(3\) The decision of the hearing official is final and binding on

the parties.

\(g\) Request for waiver. In certain instances, an employee may have

a statutory right to request a waiver of overpayment of pay or

allowances, e.g., 5 U.S.C. 5584 or 5 U.S.C. 5724(i). When an employee

requests waiver consideration under a right authorized by statute,

further collection on the debt will be suspended until a final

administrative decision is made on the waiver request. However, where

it appears that the Government\'s ability to recover the debt may be

adversely affected because of the employee\'s resignation, termination

or other action, suspension of recovery is not required. During the

period of the suspension, interest, penalty charges and administrative

costs will not be assessed against the debt. The Agency will not

duplicate, for purposes of salary offset, any of the procedures already

provided the debtor under a request for waiver.

\(h\) Method and source of collection. A debt will be collected in a

lump sum or by installment deductions at established pay intervals from

an employee\'s current pay account, unless the employee and the Agency

agree to alternative arrangements for payment. The alternative payment

schedule must be in writing, signed by both the employee and the CFO

and will be documented in the Agency\'s files.

\(i\) Limitation on amount of deduction. The size and frequency of

installment deductions generally will bear a reasonable relation to the

size of the debt and the employee\'s ability to pay. However, the amount

deducted for any period may not exceed 15 percent of the disposable pay

from which the deduction is made, unless the employee has agreed in

writing to the deduction of a greater amount. If possible, the

installment payments will be in amounts sufficient to liquidate the

debt in three years or less. Installment payments of less than \$50

normally will be accepted only in the most unusual circumstances.

\(j\) Duration of deduction. If the employee is financially unable to

pay a debt in a lump sum or the amount of the debt exceeds 15 percent

of disposable pay, collection will be made in installments. Installment

deductions will be made over the period of active duty or employment

except as provided in paragraph (a)(1) of this section.

\(k\) When deductions may begin. (1) Deductions to liquidate an

employee\'s debt will begin on the date stated in the Agency\'s Bill for

Collection or demand letter notice of intention to collect from the

employee\'s current pay unless the debt has been repaid or the employee

has filed a timely request for hearing on issues for which a hearing is

appropriate.

\(2\) If the employee has filed a timely request for hearing with the

Agency, deductions will begin after the hearing official has provided

the employee with a final written decision indicating the amount owed

the Government. Following the decision by the hearing official, the

employee will be given 30 days to repay the amount owed prior to

collection through salary offset, unless otherwise provided by the

hearing official.

\(l\) Liquidation from final check. If the employee retires, resigns,

or the period of employment ends before collection of the debt is

completed, the remainder of the debt will be offset from subsequent

payments of any nature due the employee (e.g., final salary payment,

lump-sum leave, etc.).

\(m\) Recovery from other payments due a separated employee. If the

debt cannot be liquidated by offset from any final payment due the

employee on the date of separation, USAID will liquidate the debt,

where appropriate, by administrative offset from later payments of any

kind due the former employee (e.g., retirement pay). Such

administrative offset will be taken in accordance with the procedures

set forth in Sec. **213**.20.

\(n\) Interest, penalty and administrative cost. USAID will assess

interest, penalties and administrative costs on debts collected under

the procedures in this section. Interest, penalty and administrative

costs will continue to accrue during the period that the debtor is

seeking either formal or informal review of the debt or requesting a

waiver. The following guidelines apply to the assessment of these costs

on debts collected by salary offset:

\(1\) Interest will be assessed on all debts not collected by the

payment due date specified in the bill for collection or demand letter.

USAID will waive the collection of interest and administrative charges

on the portion of the debt that is paid within 30 days after the date

on which interest begins to accrue.

\(2\) Administrative costs will be assessed if the debt is referred

to Treasury for cross-servicing.

\(3\) Deductions by administrative offset normally begin prior to the

time for assessment of a penalty. Therefore, a penalty charge will not

be assessed unless deductions occur more than 90 days from the due date

in the bill for collection or demand letter.

\(o\) Non-waiver of right by payment. An employee\'s payment under

protest of all or any portion of a debt does not waive any rights that

the employee may have under either the procedures in this section or

any other provision of law.

\(p\) Refunds. USAID will promptly refund to the employee amounts

paid or deducted pursuant to this section, the recovery of which is

subsequently waived or otherwise found not owing to the United States.

Refunds do not bear interest unless specifically authorized by law.

\(q\) Time limit for commencing recovery by salary setoff. USAID will

not initiate salary offset to collect a debt more than 10 years after

the Government\'s right to collect the debt first accrued, unless facts

material to the right to collect the debt were not known and could not

have been known through the exercise of reasonable care by the

Government official responsible for discovering and collecting such

debts.

Sec. **213**.23 Salary offset when USAID is not the creditor agency.

\(a\) USAID will use salary offset against one of its employees that

is indebted to another agency if requested to do so by that agency.

Such a request must be accompanied by a certification by the requesting

agency that the person owes the debt (including the amount) and that

the procedural requirements of 5 U.S.C. 5514 and 5 **CFR** **part** 550,

subpart K, have been met. The creditor agency must also advise USAID of

the number of installments to be collected, the amount of each

installment, and the commencement date of the first installment, if a

date other than the next established pay period.

\(b\) Requests for salary offset must be sent to the Chief Financial

Officer, Office of Financial Management (M/FM), United States Agency

for International Development, Ronald Reagan Building , 1300

Pennsylvania Avenue NW., Washington, DC 20523-4601.

\(c\) Processing of the claim by USAID. (1) Incomplete claims. If

USAID receives an improperly completed request, the requesting

(creditor) agency will be requested to supply the required information

before any salary offset can be taken.

\(2\) Complete claims. If the claim procedures in paragraph (a) of

this section have been properly completed, deduction will begin on the

next established pay period. USAID will not review the merits of the

creditor agency\'s determinations with respect to the amount or validity

of the debt as stated in the debt claim form. USAID will not assess a

handling or any other

\[\[Page 47266\]\]

related charge to cover the cost of its processing the claim.

\(d\) Employees separating from USAID before a debt to another agency

is collected. (1) Employees separating from Government service. If an

employee begins separation action before USAID collects the total debt

due the creditor agency, the following actions will be taken:

\(i\) To the extent possible, the balance owed the creditor agency

will be liquidated from subsequent payments of any nature due the

employee from USAID in accordance with Sec. **213**.**22**;

\(ii\) If the total amount of the debt cannot be recovered, USAID

will certify to the creditor agency and the employee the total amount

of USAID\'s collection; and

\(iii\) If USAID is aware that the employee is entitled to payments

from the Civil Service Retirement and Disability Fund, the Foreign

Service Retirement Fund, or other similar payments, it will provide

such information to the creditor agency so that it can file a certified

claim against the payments.

\(2\) Employees who transfer to another Federal agency. If an USAID

employee transfers to another Federal agency before USAID collects the

total amount due the creditor agency, USAID will certify the total

amount of the collection made on the debt. It is the responsibility of

the creditor agency to ensure that the collection is resumed by the new

employing agency.

Subpart D\--Compromise of Debts

Sec. **213**.24 General.

USAID may compromise claims for money or property where the

principal balance of a claim, exclusive of interest, penalty and

administrative costs, does not exceed \$100,000. Where the claim exceeds

\$100,000, the authority to accept the compromise rests solely with DOJ.

The CFO may reject an offer of compromise in any amount. Where the

claim exceeds \$100,000 and USAID recommends acceptance of a compromise

offer, it will refer the claim with its recommendation to DOJ for

approval. The referral will be in the form of the Claims Collection

Litigation Report (CCLR) and will outline the basis for USAID\'s

recommendation. USAID refers compromise offers for claims in excess of

\$100,000 to the Commercial Litigation Branch, Civil Division,

Department of Justice, Washington, DC 20530, unless otherwise provided

by Department of Justice delegations or procedures

Sec. **213**.25 Standards for compromise.

\(a\) USAID may compromise a claim pursuant to this section if USAID

cannot collect the full amount because the debtor does not have the

financial ability to pay the full amount of the debt within a

reasonable time, or the debtor refuses to pay the claim in full and the

Government does not have the ability to enforce collection in full

within a reasonable time by enforced collection proceedings. In

evaluating the acceptability of the offer, the CFO may consider, among

other factors, the following:

\(1\) Age and health of the debtor;

\(2\) Present and potential income;

\(3\) Inheritance prospects;

\(4\) The possibility that assets have been concealed or improperly

transferred by the debtor;

\(5\) The availability of assets or income which may be realized by

enforced collection proceedings; or

\(6\) The applicable exemptions available to the debtor under State

and Federal law in determining the Government\'s ability to enforce

collection.

\(b\) USAID may compromise a claim, or recommend acceptance of a

compromise to DOJ, where there is significant doubt concerning the

Government\'s ability to prove its case in court for the full amount of

the claim, either because of the legal issues involved or a bona fide

dispute as to the facts. The amount accepted in compromise in such

cases will fairly reflect the probability of prevailing on the legal

issues involved, considering fully the availability of witnesses and

other evidentiary data required to support the Government\'s claim. In

determining the litigative risks involved, USAID will give

proportionate weight to the likely amount of court costs and attorney

fees the Government may incur if it is unsuccessful in litigation.

\(c\) USAID may compromise a claim, or recommend acceptance of a

compromise to DOJ, if the cost of collection does not justify the

enforced collection of the full amount of the debt. The amount accepted

in compromise in such cases may reflect an appropriate discount for the

administrative and litigative costs of collection, taking into

consideration the time it will take to effect collection. Costs of

collection may be a substantial factor in the settlement of small

claims, but normally will not carry great weight in the settlement of

large claims. In determining whether the cost of collection justifies

enforced collection of the full amount, USAID may consider the positive

effect that enforced collection of the claim may have on the collection

of other similar claims.

\(d\) To assess the merits of a compromise offer, USAID may obtain a

current financial statement from the debtor, executed under penalty of

perjury, showing the debtor\'s assets, liabilities, income and expense.

\(e\) Statutory penalties, forfeitures or debts established as an aid

to enforcement and to compel compliance may be compromised where the

CFO determines that the Agency\'s enforcement policy, in terms of

deterrence and securing compliance (both present and future), will be

adequately served by accepting the offer.

Sec. **213**.26 Payment of compromised claims.

The CFO normally will not approve a debtor\'s request to pay a

compromised claim in installments. However, where the CFO determines

that payment of a compromise by installments is necessary to effect

collection, a debtor\'s request to pay in installments may be approved.

Sec. **213**.27 Joint and several liability.

When two or more debtors are jointly and severally liable,

collection action will not be withheld against one debtor until the

other or others pay their proportionate share. The amount of a

compromise with one debtor is not precedent in determining compromises

from other debtors who have been determined to be jointly and severally

liable on the claim.

Sec. **213**.28 Execution of releases.

Upon receipt of full payment of a claim or the amount compromised,

USAID will prepare and execute a release on behalf of the United

States. In the event a mutual release is not executed when a debt is

compromised, unless prohibited by law, the debtor is still deemed to

have waived any and all claims and causes of action against USAID and

its officials related to the transaction giving rise to the compromised

debt.

Subpart E\--Suspension or Termination of Collection Action

Sec. **213**.29 Suspension\--general.

The CFO may suspend or terminate the Agency\'s collection actions on

a debt where the outstanding debt principal does not exceed \$100,000.

Unless otherwise provided by DOJ delegations or procedures, the CFO

refers requests for suspension of debts exceeding \$100,000 to the

Commercial Litigation Branch, Civil Division, Department of Justice,

for approval. If prior to referral to DOJ, USAID

\[\[Page 47267\]\]

determines that a debt is plainly erroneous or clearly without legal

merit, the agency may terminate collection activity regardless of the

amount involved without obtaining DOJ concurrence. The CFO may waive

the assessment of interest, penalty charges and administrative costs

during the period of the suspension. Suspension will be for an

established time period and generally will be reviewed at least every

six months to ensure the continued propriety of the suspension.

Sec. **213**.30 Standards for suspension.

\(a\) The CFO may suspend collection action on a debt when:

\(1\) The debtor cannot be located;

\(2\) The debtor\'s financial condition is expected to improve; or

\(3\) The debtor has requested a waiver or review of the debt.

\(b\) Based on the current financial condition of the debtor, the CFO

may suspend collection activity on a debt when the debtor\'s future

prospects justify retention of the claim for periodic review, and:

\(1\) The applicable statute of limitations has not expired; or

\(2\) Future collection can be effected by offset, notwithstanding

the 10-year statute of limitations for administrative offsets; or

\(3\) The debtor agrees to pay interest on the debt and suspension is

likely to enhance the debtor\'s ability to fully pay the principal

amount of the debt with interest at a later date.

\(c\) The CFO will suspend collection activity during the time

required for waiver consideration or administrative review prior to

agency collection of a debt if the statute under which the request is

sought prohibits USAID from collecting the debt during that time. The

CFO will ordinarily suspend collection action during the pendency of

his consideration of a waiver request or administrative review where

statute and regulation preclude refund of amounts collected by the

Agency should the debtor prevail.

\(d\) The CFO may suspend collection activities on debts of \$100,000

or less during the pendency of a permissive waiver or administrative

review when there is no statutory requirement where he determines that:

\(1\) There is a reasonable possibility that waiver will be granted

and the debtor may be found not owing the debt (in whole or in
**part**);

\(2\) The Government\'s interest is protected, if suspension is

granted, by the reasonable assurance that the debt can be recovered if

the debtor does not prevail; or

\(3\) Collection of the debt will cause undue hardship to the debtor.

\(e\) The CFO will decline to suspend collection where he determines

that the request for waiver or administrative review is frivolous or

was made primarily to delay collection.

Sec. **213**.31 Termination\--general.

The CFO may terminate collection actions including accrued

interest, penalty and administrative costs, where the debt principal

does not exceed \$100,000. If the debt exceeds \$100,000, USAID obtains

the approval of DOJ in order to terminate further collection actions.

Unless otherwise provided for by DOJ regulations or procedures,

requests to terminate collection on debts in excess of \$100,000 are

referred to the Commercial Litigation Branch, Civil Division,

Department of Justice, for approval.

Sec. **213**.32 Standards for termination.

A debt may be terminated where the CFO determines that:

\(a\) The Government cannot collect or enforce collection of any

significant sum from the debtor, having due regard for available

judicial remedies, the debtor\'s ability to pay, and the exemptions

available to the debtor under State and Federal law;

\(b\) The debtor cannot be located, there is no security remaining to

be liquidated, and the prospects of collecting by offset are too remote

to justify retention of the claim;

\(c\) The cost of further collection action is likely to exceed the

amount recoverable;

\(d\) The claim is determined to be legally without merit or

enforcement of the debt is barred by any applicable statute of

limitations;

\(e\) The evidence necessary to prove the claim cannot be produced or

the necessary witnesses are unavailable and efforts to induce voluntary

payment have failed; or

\(f\) The debt against the debtor has been discharged in bankruptcy.

Sec. **213**.33 Permitted actions after termination of collection

activity.

Termination of collection activity ceases active collection of the

debt. Termination does not preclude the agency from retaining a record

of the account for purposes of:

\(a\) Selling the debt if the CFO determines that such sale is in the

best interests of USAID;

\(b\) Pursuing collection at a subsequent date in the event there is

a change in the debtor\'s status or a new collection tool becomes

available;

\(c\) Offsetting against future income or assets not available at the

time of termination of collection activity; or

\(d\) Screening future applicants for prior indebtedness.

Sec. **213**.34 Debts that have been discharged in bankruptcy.

USAID generally terminates collection activity on a debt that has

been discharged in bankruptcy regardless of the amount. USAID may

continue collection activity, however, subject to the provisions of the

Bankruptcy Code for any payments provided under a plan of

reorganization. The CFO will seek legal advice by the General Counsel\'s

office if he believes that any claims or offsets may have survived the

discharge of a debtor.

Subpart F\--Discharge of Indebtedness and Reporting Requirements

Sec. **213**.35 Discharging indebtedness\--general.

Before discharging a delinquent debt (also referred to as a close

out of the debt), USAID will make a determination that collection

action is no longer warranted and request that litigation counsel

release any liens of record securing the debt. Discharge of

indebtedness is distinct from termination or suspension of collection

activity and is governed by the Internal Revenue Code. When collection

action on a debt is suspended or terminated, the debt remains

delinquent and further collection action may be pursued at a later date

in accordance with the standards set forth in this **part**. When a debt
is

discharged in full or in **part**, further collection action is
prohibited

and USAID must terminate debt collection action.

Sec. **213**.36 Reporting to IRS.

Upon discharge of an indebtedness, USAID will report the discharge

to the IRS in accordance with the requirements of 26 U.S.C. 6050P and

26 **CFR** 1.6050P-1. USAID may request FMS to file such a discharge
report

to the IRS on the agency\'s behalf.

Subpart G\--Referrals to the Department of Justice

Sec. **213**.37 Referrals to the Department of Justice.

\(a\) The CFO, through the FMS cross-servicing agreement and by

direct action, refers to DOJ for litigation all claims on which

aggressive collection actions have been taken but which could not be

collected, compromised, suspended or terminated. Referrals are made as

early as possible, consistent with aggressive agency collection action,

and within the period for bringing a timely suit against the debtor.

Unless otherwise provided by DOJ

\[\[Page 47268\]\]

regulations or procedures, USAID refers for litigation debts of more

than \$2,500 but less than \$1,000,000 to the Department of Justice\'s

Nationwide Central Intake Facility as required by the Claims Collection

Litigation Report (CCLR) instructions. Debts of over \$1,000,000 shall

be referred to the Civil Division at the Department of Justice.

\(b\) The CFO will clearly indicate on the CCLR the actions the DOJ

should take on the referred claim.

Subpart H\--Mandatory Transfer of Delinquent Debt to Financial

Management Service (FMS) of the Department of Treasury

Sec. **213**.38 Mandatory transfer of debts to FMS\--general.

\(a\) USAID\'s procedures call for transfer of legally enforceable

debt to FMS 90 days after the Bill for Collection or demand letter is

issued. A debt is legally enforceable if there has been a final agency

determination that the debt, in the amount stated, is due and there are

no legal bars to collection action. A debt is not considered legally

enforceable for purposes of mandatory transfer to FMS if a debt is the

subject of a pending administrative review process required by statute

or regulation and collection action during the review process is

prohibited.

\(b\) Except as set forth in paragraph (a) of this section, USAID

will transfer any debt covered by this **part** that is more than 180
days

delinquent to FMS for debt collection services. A debt is considered

180 days delinquent for purposes of this section if it is 180 days past

due and is legally enforceable.

Sec. **213**.39 Exceptions to mandatory transfer.

USAID is not required to transfer a debt to FMS pursuant to

Sec. **213**.37(b) during such period of time that the debt:

\(a\) Is in litigation or foreclosure;

\(b\) Is scheduled for sale;

\(c\) Is at a private collection contractor;

\(d\) Is at a debt collection center if the debt has been referred to

a Treasury-designated debt collection center;

\(e\) Is being collected by internal offset; or

\(f\) Is covered by an exemption granted by Treasury

Dated: July 8, 2002.

Linda Porter,

Authorized Representative, Agency for International Development.

\[FR Doc. 02-17608 Filed 7-17-02; 8:45 am\]

BILLING CODE 6116-01-P