platts this hearing of the subcommittee on government organization efficiency and financial management will come to order first i want to apologize to my colleagues our witness and others for the delay in starting we typically have about an hour and forty hour and forty five minute commute today it was about two forty two forty five thankfully i hope all the individuals who were in the accidents that i passed are safe and glad i was not in them but apologize for keeping you waiting but we are glad to be here today for this important oversight hearing to thank our witness for being here today to discuss efforts to collect delinquent debt owed to the federal government while this is certainly a financial management issue it also is an accountability issue part of accountability is making sure that people fulfill their obligations whether those obligations are to pay a fine a penalty or to repay a federal loan or to pay child support each and every day the people at treasurys debt management service do all they can to demand accountability while being sensitive to the rights and circumstances of debtors this hearing coincides with the release with the release of the fiscal year two thousand and ten annual debt report which provides a detailed look at treasurys activities we look forward to discussing that report as well as some of the proposals in the presidents budget are honored here today to have mister david lebryk with us commissioner lebryk is commissioner of the united states department of the treasurys financial management service as commissioner he provides leadership policy direction and guidance for financial management programs including payments collections debt collection and government wide accounting and financing reporting commissioner lebryk i appreciate your submitting your written testimony here today and i have had the chance to review that as well as the report  leader of this subcommittee as well as on a number of efforts as you reference in your statement colleagues also want to thank you for your service in general as one who believes in the ideals of public service appreciate what you give back to our country and our fellow citizens the ranking member and i look forward to working with you along with our chairman and thank you for arranging this hearing as this congress continues to debate the nations budget we are looking to identify sensible cost cutting measures and ways to increase revenue to the federal government this hearing considers the collection of debt owed to the government which is an important revenue stream in these tough economic times i thank the chairman for holding this hearing collection of federal government and state debt is an essential way to help fund government operations maintain key programs and help reduce the federal deficit it is also an extremely effective method of collecting delinquent child support obligations to help meet the needs of the children who depend on that support in the years since this subcommittee began examining debt collection there has been great improvement the treasury department has taken the tools that the congress provided in the debt collection improvement act of one thousand nine hundred and ninety six and has expanded its reach to increase the volume of delinquent debt the government recoup result compared to the collection level before one thousand nine hundred and ninety six treasury continues to improve its offset and cross servicing programs fms has ramped up its efforts in collecting delinquent tax and non tax debt owed by federal employees the doctors and hospitals who receive medicare payments and federal contractors are working on identifying other payments that the government can target for collection there is more than six hundred and twenty five dollars billion in outstanding debt to the government we are actively collecting four hundred and twenty two dollars billion of that spend a moment and pay our respects to him for the efforts that he did we had a lot of spirited conversations with chairman horn during those early years and we all shared a very common objective and that was to make sure we were doing the best interest of the american taxpayer was quite a champion of this act and the work that we are doing at fms and we are very much appreciative of that this marks the th anniversary of the debt collection improvement act and a lot has been accomplished in that time i want to thank you again for holding this hearing to demonstrate congress interest in the federal governments activities i also want to commend the leadership of you chairman platts and mister towns for your interest in our operations we look forward to that continued partnership and working together to improve the things that we do we are proud of the role that we play  providing this essential service to the federal government and to the citizens that we serve we take that responsibility quite seriously and we place a great deal of importance on demonstrating value to the american public in carrying out our responsibilities fms collects delinquent debt on behalf of federal and state agencies in accordance with the debt collection improvement act and other applicable laws we embrace the goals of the dcia to maximize collections while minimizing the cost to the government in that effort we carry out the statutory responsibilities effectively and efficiently with centralization of collection of debt owed to the federal government and i will go into a little bit later some of those efforts that we have ongoing right now to do even better than what we have been doing in the past the dcia requires agencies to refer most of their debts to fms with one hundred and eighty days  we encourage agencies to refer debts to us sooner we have two major mechanisms with which we collect the debt one is something called the treasury offset program which is effectively a means of matching federal payments against delinquent debt files so it is a highly automated highly efficient process the premise being that we shouldnt be making payments to someone who owes debt to the federal government the attempt is to intercept those payments before they are actually made and as i mentioned that is a highly efficient mechanism the second mechanism that we use is called their debts and debtors are provided the appropriate due process rights allowed to repay debts over time we take great care to protect the privacy rights of individuals and have robust measures in place to guard the security and sensitivity of financial and private data also part of our very core mission in our values within our organization is that we treat debtors as we like to be treated ourselves and that is something that permeates all of our workers and the process of their efforts we recognize that we have to be serious and tough at times but we also realize we need to treat delinquent child support in fact that child support is something that while we are quite pleased to help the federal agencies and the united states government it does give us some sense of strong purpose of what we do is important and adds value to the american families and children we are also on track this year to strategy plan in order to increase those collections which i would like to get into a little bit later and we expect a strong period of sustained growth we also have a couple legislative proposals in place which in totality will bring an additional five dollars billion in collections to the federal government over the course of the next ten years also most recently based on legislation passed by congress are working to collect state unemployment compensation debts where there has either been overpayments or fraud in the unemployment program new york was one of the first programs to sign on to the program recently and in the first two days of the fraud in various programs that are out there i mentioned the seven point strategy that we have at fms to increase collections over the course of the coming years those strategies i think include increasing our call center capability last year we handled four point three million calls from debtors trying to resolve debts we are implementing state of the art collection tools we are increasing the effectiveness and efficiency of our debt collection processes and we are also reaching out and establishing an agency council with which we can work with our sister agencies to improve and look at best practices and sharing of more information to improve government wide collections with that i see i have just hit exactly seven minutes so i will end where i started to once again thank you  for allowing me to testify in front of you i want to emphasize again that we are very proud of the role that we play in providing essential services to the people and to the federal government and we place great importance on demonstrating value to the american people and fulfilling these responsibilities and we very much look forward to working with this committee to fulfill those responsibilities thank you mister platts thank you commissioner appreciate your testimony as well as again your written information you provided i will start seven years so why would they be able to pursue it much longer than the government mister lebryk well in many cases the government for example on student loan debt it does not ever get extinguished so the capability exists for the federal government to continue to pursue that debt really through the life of a debtor and as a result we often talk about if we are not able to collect that debt during the working years as one reaches social security we have the ability to offset social security payments up to a certain level to continue to collect on those debts so those debts stay on the books for a long time there are some debts that are actually and there is maybe some distinction here the federal government will write a debt off and that is really an accounting entity it basically in accounting purposes you are required as an entity to say what is the fair value of an asset or a liability on your books it doesnt mean that we stop collecting the debt okay so there is a distinction there which is you can write something off and show on your books that it has a value of lets say ten cents on the dollar on the other hand we as the federal government will continue to collect on that debt and hopefully collect one hundred cents on the dollar unless it has been written off entirely as not collectible so a fairly small percentage of the number so if you look at the numbers i think it is roughly twenty five dollars billion has been written off but only about four dollars fifty cents billion has been considered not collectible and truly extinguished as no longer being pursued small business loans and support for farmers but what i dont understand and maybe you can explain to me is the type of debt that is owed to social security happening is social security will work those improper payments up to a point when they no longer have a sense that they can collect it up to that point they will refer it to us and it becomes a delinquent debt so there are situations where social security has to have systems which look at if you have been making a payment to someone for years on end they are required to get that information and to stop those you are required to report that information immediately sometimes that doesnt happen areas of concern first of all could you just let me know what area for fms provides the most challenge the greatest challenge in terms of debt collection is there any one area that is more difficult than another has really we have had a success there in terms of agencies now referring debts to us for the most part at the one hundred and eighty days we also in some of the early years had challenges getting all the payment streams in so dod makes payments and the postal service makes payments and we had challenges making sure those payment streams were being offset that process now i think is working very very well i wouldnt necessarily point in any one particular area except to say that i think that we are not as sophisticated in the government as we should be with respect to how we are looking at delinquent debt the private sector is much further along than we are right now in looking at how you work debts in the portfolio so when i mentioned the seven strategies earlier about where fms thinks that we need to go we need to do a better job of analyzing the debts and which that it is probably as widespread across government that that is their core mission so i think that there is a lot of opportunity to do a better on that and that pre one hundred and eighty for obvious purposes the sooner you try to collect the debt the better chances you have of collecting it  sense of the word written off means is a fairly small percentage and that is usually in the case of either bankruptcy or the entity doesnt exist anymore and you cant really go after anything anymore mister guinta but that is happening roughly at the two year mark for that uncollectible written lebryk i dont know this for certain but my guess is if you really went back and looked it is probably happening further out than two years that agencies are continuing to hold these things for a long period of time and really doing everything that they can and really probably in a much longer period of time  it is for us and for the agency for that collection at those different periods mister lebryk one of the seven strategies is for us to have better analytical capability in looking at the debts and we have some rough information about that but not information that gives me a lot of confidence that i can say that this is the percentage that we are doing at one hundred and eighty to three hundred and sixty i think we need to do more work in that area and that is one of the areas that we are applying more resources within fms to really help agencies understand that better yes thank you i kind of want to go back to what you said to my colleague mister guinta the cross servicing program is used by agencies required to report that delinquent debt to the treasury for recovery efforts  for a variety of reasons we dont use cross servicing on the full amount and part of that is there are a number of exemptions that apply that dont allow us to do cross servicing on all the debts that are referred to us and that is the active working of those de and we are oftentimes the last resort of people getting loans that they cant get someplace else so the collectibility on that portfolio is much lower than it would be if you had a better quality of debt for example consumer debt in many ways has a higher collectibility than much  debt that we have given the nature of our debtors mister gosar isnt there a way that we can report that then i mean it seems to me like you want to itemize this if i am looking at delinquencies i want to look at if i have a payment plan shouldnt i have a number that i am looking at that are  into the other areas of the problem and it seems to me like the advantage would be to share all this information start to finish not at one hundred and eighty days am i right mister lebryk sharing the information w many hands make light work mister gosar yes mister lebryk and that is one of the reasons why when we go through our seven strategies in terms of analytical tools this is some area which i think there is a lot of work that can be done within the federal government that we are pursuing and that is looking at that portfolio  which debt has a greater likelihood of collectibility than another debt also i think a very important set of tools that we have in place right now or we are putting in place right now is we have something called partial matches if a debt comes in that says john q public that lives on main street and the payment file says john s public on main street we kick that debt out because we are not one hundred percent sure it is the same person we now have more automated tools in which we can say john q and john s living at this same address are probably the same person so we should be doing that offset rather than what we are doing right now is returning that debt to the agency and saying you need to clean it up so the centralized value of that is that fms can be doing a better job of that in the front end last year there were close to one hundred and fifty thousand partial matches we are estimating that if we were able to clean those partial matches up that we would have one hundred to two hundred dollars million more in collections simply by doing that the one thing i would say on that last point is we are very proud of this statistic which is for every dollar that we spend on debt collection we return fifty three dollars in collections that is the efficiency element that we are very proud of which is a pretty good return  debt has grown too so there is an element there of there is more volume to go against but i also think it really speaks to this is why i think we are really at a stage to go to another level now i think that we have a very strong infrastructure in place to do what we need to do and number of specific legislative proposals both pretty straight forward both on the one hundred percent collection you know on basically vendor payments federal contractors medicare providers and then also  what would you say would be the biggest opposition to those proposals and what have you heard if anything for those who dont support either of those mister lebryk the legislative process is never easy and one of the things that we have learned over the years is that we have frequently submitted legislative proposals in multiple years and they ultimately get done but they tend to get done over time so i really would be surprised if there would be a lot of opposition to either of those two except from those who are delinquent on their medicare or contractor obligations because they do make a lot of sense mister platts and i agree and again we look forward to working with you and your office on trying to speed up that legislative process a little highlight any of those additional proposals that we should have on our radar in addition to the ones specifically in the two thousand and twelve proposal mister lebryk one of the things is dealing with incentives i think for the most part right now platts on the fee that is what type of fee amount roughly is it a percentage of the debt mister lebryk there are two fees that potentially could be attached to that one would be our offset fee which is roughly seventeen dollars per and you continue to work with nonparticipating agencies to encourage i guess my question is why isnt everyone participating why arent they taking advantage of this opportunity to has a there is a sense right or wrong that you need to go to a court in order to get that garnishment one of the things the dcia did was say that the federal government can do an administrative wage garnishment without a court now you have to allow a hearing if someone wants to appeal the amount owed or whether their when he was talking about the administrative wage garnishment provision and i think there is a lot of validity to that that we should be doing more as the federal government the other thing what has happened right now is that we have left administrative wage garnishment with each agency so they have to put a relate to student loans but another smaller department or agency having small amount of debt or not that often perhaps to have their own administrative hearing process versus a centralized i think that is some where treasury could play an important role and that we get everybody participating mister lebryk and there is a second piece on that that we have found in our own dealings is that if a file doesnt have good information in it it is hard for the agency to track that information down so if you are looking for a good phone number you are looking for a good address and one of the areas where we think we can provide a more centralized service is providing that service to agencies saying if you are looking for a debtor you can run it through our process so that you can find that person get a just thinking in terms of the social security overpayment i guess the first thing would you need additional legislation to support above and beyond what you have already proposed and reason i ask that question why couldnt we ask the undertaker to give the social security number when a person expires mister lebryk social security does maintain a death database or a post death database  the data to a database and they did a pilot a couple years ago in which they actually paid the funeral homes for the information every time they submitted the information i think what they found at that point was that they didnt have the money to continue with that and that if in fact it was required you could have a more getting to your point you could have a much better database a more perfect database which would go a long way toward avoiding those payments to someone who shouldnt be getting it  private sector has done a lot more with segmentation of the portfolio different mechanisms and tools that are more effective than others of how you actually reach certain debtors but also more i think to the point is that business intelligence tools and looking at databases and mining those databases for certain characteristics is an area that the private sector is doing a lot more of than what we are doing in the federal government and it is an area which i think has a lot of opportunity for us to be doing better so it is really looking at these databases and looking at lots of different data and saying there are certain debtors here with certain characteristics that would lead us to believe that we have more collectibility on one kind of debt or another it is also those automated tools i mentioned to you before about when a debt comes in and the information may not be perfect can you in a highly automated way clean that data up more effectively about addresses and phone numbers and those kinds of things within the file and the private sector is much more advanced i would also say that with respect to our working in the cross servicing side that we should be more systematic in scripts that we are using so that when a collector is working a list of  debts that they are given the information in automated fashion so when the automated phone call is made or the automated outreach is made that they have based on that debt they have scripts that they are using to be more efficient on how they are collecting the debts they are not spending ten minutes on a debt that the referenced kentucky being the newest one and how quickly they reaped the benefits of participating i wanted to make sure i understood the process states beyond the four that are currently signed up are we still collecting debts for any that are not signed up to help us collect federal debt mister lebryk our terminology gets complicated but we are made that it can be offset and given back to a state the state reciprocal program gets a little bit more narrow and allows i am sorry it broadens the types of payments that we can offset so we include vendor payments at that point  that if they were participating in the state reciprocal program using vendor payments i think that they could collect an additional twenty nine dollars million to thirty dollars million a year based on that program i do believe and my staff can correct me if i am wrong though that we are actually  that is something we need to look at legislatively and saying that you can go to the state saying as of a year from now we are not going to be able to help you unless you help us something maybe we want to look  that what type of debt would be owed us by a foreign sovereign and what type of payment would we be making that we couldnt then attach even though they owe us money mister lebryk i will have to get back to you on that one i dont know addressed a little bit earlier but in determining i mean obviously some death you know the person is deceased the debt is not going to be collected but in other ones where you reference financial hardship or other collection effort information to you mister lebryk the good news is we feel pretty good that we are getting most of the debts that are referred to us i think it is hard for us to say that we are getting one hundred percent because every now and then we learn about some budget for one hundred percent now at first blush that seems par for the course you know they are doctors they ought to be able to pay their t s on the other hand there is huge concern in the congress about the rapid attrition of physicians even willing to see medicare and again on the face of it the fairness of it is clear but what do you think that would do for doctors who in fact are medicare so much so that some elderly are willing in order to keep their physicians when they jettison medicare to pay for the entire amount themselves underlying program issues as we ms norton why was it at fifteen percent that didnt work did the fifteen percent which does seem to be a fairly low amount why w has a delinquency they would be notified and have the ability to either have a hearing or some sort of discussion about whether that is the appropriate amount which they are being charged they also have in most cases the ability to say whether there is financial hardship whether they have the ability to repay and whether ther he nevertheless because he is delinquent have to abide by the one hundred percent mister lebryk at fms for example when these debts are referred to us we do oftentimes have compromise authority in which we work with the agencies to say you know is there a better way to collect this debt is there a more reasonable to have either repayment agreements or some sort of mechanism to make sure that we have better collectibility and the process has to be working with the debtor to do that with respect to the impact on the program one of the things which we dont have a lot of expertise in because there are so many programs out there is the underlying purpose of a program and the underwriting standards that are given so why a payment is made under what circumstances is not something finally gets on this list the only way he can get the money is to get on this list to get one hundred percent from you mister lebryk yes and so when the debt is referred to us at one hundred and eighty days we will do a variety of things we will then do a process of our own in terms of contacting the debtor and  a good or whatever income but is not paying back those loans once that is discovered medicare can say you are getting paid by the taxpayers we are going to take some of that to pay off that debt you owe that would be an example of a delinquent debt that state because of certain restrictions we no longer can actually pursue that debt or the state can no longer pursue that debt against someone who has moved from lets say pennsylvania to new york and so the provision that we are asking for is that you can in fact continue to pursue that person if they move to another jurisdiction mister towns the last part of that is you know in some instances people might not have the resources to pay at a given point but then at a later date they come in to a lot of money or something how do you deal with that mister lebryk that is one of the reasons why very few debts are extinguished in our process and why they stay in the database for a long period of time and will continue to be worked for a long period of time thank you we are going to keep the record open for seven days and i know two specific issues one with the defense debt that mister towns referenced and then my inquiry on the foreign sovereigns and what type of debt we would be talking there versus payments that we are making to these foreign sovereigns and if there is any other materials that you think would be relevant i will conclude with one again appreciation for your patients and my colleagues patience with my late