Treasury and HHS participated in conferences and workshops sponsored by the National Child
Support Enforcement Association, Office of Child Support Enforcement, and FMS’ Debt
Management Services. The various conferences and workshops provided a forum for educating
states on the benefits of the program, encouraging state participation, and discussing processing
and program issues. Treasury and HHS also met regularly to discuss policy and technical issues.
FMS and OCSE continue to work with the states to promote greater participation in
administrative offset.

OCSE Systems Redesign - In fiscal year 2001, OCSE initiated a redesign of its system that
interfaces with states, territories, FMS, the Department of State, and other federal agencies.
During the fiscal year, FMS participated in weekly conference calls, providing technical
expertise on the Treasury Offset Program.

Additional Payment Types Available for Offset - Delinquent child support obligations are
currently matched against tax refund payments, Treasury-disbursed vendor payments and Office
of Personnel Management civil service retirement payments. FMS has initiated a phased-in
centralized federal salary offset program as part of TOP, and federal salary payments are now
available for collection of delinquent child support obligations through TOP. OCSE is working
with the states to assess state participation in the centralized salary offset program.

Currently, federal law does not permit the offset of certain federal benefit payments (e.g., Social
Security) to collect delinquent child support obligations. The increase in child support collections
could be significant if federal benefit payments were to be offset to collect delinquent child
support debts. Collections of delinquent child support obligations are projected to increase $50
to $100 million per year if this payment type were offset in TOP. Treasury has determined that
the current federal law is an impediment to Treasury’s child support collection program.
Accordingly, Treasury will recommend that the Administration support legislation that would
permit offset of certain federal benefit payments to collect delinquent child support obligations.

Barring Delinquent Debtors — FMS met with federal program agencies, including credit
granting agencies, conducted surveys, and began the development of a system that would give
federal credit granting agencies access to information on delinquent debtors submitted to the
TOP database of delinquent debtors, to assist federal agencies in denying loans and loan
guaranties/insurance to those individuals who owe delinquent child support obligations.

FUTURE PLANS

e FMS will begin offsets of non-Treasury disbursed vendor payments as part of TOP in the
next fiscal year. FMS also will work to include in the centralized salary offset process the
delinquent child support obligations of those states that are interested in participating. These
actions will expand and increase the number of payments from which delinquent child
support obligations may be collected by administrative offset.

e Treasury will recommend that the Administration support legislation that would permit offset
of certain federal benefit payments to collect delinquent child support obligations. Should
this legislation be supported by the Administration and enacted into law, these payments will
be offset to collect delinquent child support obligations.

Annual Report to the President: Implementation of Executive Order 13019 3


KEY RESPONSIBILITIES UNDER THE EXECUTIVE ORDER

Treasury — Treasury’s Financial Management Service (FMS) is responsible for developing and
managing a centralized offset process to match federal payments against debts owed to the
federal government, states, and territories. This centralized process, known as the Treasury
Offset Program (TOP), provides for the offset of federal tax refund payments and non-tax federal
payments to collect delinquent child support obligations.

Department of Health and Human Services (HHS) — The Office of Child Support
Enforcement (OCSE) manages the Child Support Enforcement Program authorized under Title
IV-D of the Social Security Act (Title [V-D). OCSE is responsible for implementing the
procedures necessary to report to the Secretary information on past-due child support claims
referred to HHS by the states.

Department of Justice (Justice) — Justice issued guidance to federal agencies concerning the
minimum due process standards to be followed when federal agencies deny federal financial
assistance to delinquent child support debtors.

States — Child support programs are managed in each of the 50 states, Puerto Rico, the Virgin
Islands, Guam, and the District of Columbia. States and territories (hereafter referred to as
“states”) are responsible for collecting delinquent child support claims under federal and state
laws and regulations. States may, but are not required to, participate in Treasury’s non-tax
federal payment offset program to collect past-due child support. By contrast, states are required
to participate in Treasury’s federal tax refund offset program in order to receive federal funding
under Title IV-D.

ACCOMPLISHMENTS DURING THIS REPORTING PERIOD

Collections - FMS offsets federal tax refund payments and certain non-tax payments to collect
past due child support obligations under its TOP program. In fiscal year 2001, total TOP
collections for delinquent child support obligations from both tax and non-tax payments were
$1.64 billion, an increase of $250 million over fiscal year 2000 collections. Included in the
$1.64 billion figure are offsets of advance refunds of credit payments, i.e. - tax rebates, which
totaled $264 million in fiscal year 2001.

Collections from non-tax payments for fiscal year 2001 totaled $2.45 million, a 44% increase
over the $1.7 million collected in fiscal year 2000. This significant increase in collections can be
attributed to the increase in the number of cases and the total dollar amount of delinquent child
support obligations submitted by the states for non-tax payment offset.

State Participation - The number and dollar amount of cases submitted for offset significantly
increased in fiscal year 2001. A total of 3.6 million cases were submitted to FMS for non-tax
federal payment offset, a 50 percent increase over last year. The dollar amount of delinquent
child support debts referred to FMS for collection from non-tax federal payments has also
increased from $19.8 billion at the end of fiscal year 2000 to $29.4 billion at the end of fiscal
year 2001.

Annual Report to the President: Implementation of Executive Order 13019 2


e Inthe next fiscal year, FMS expects to complete implementation of a process for accessing
the TOP database of delinquent debtors, to assist federal credit granting agencies in denying
federal financial assistance (loans and loan guaranties/insurance) to those individuals who
owe delinquent child support obligations.

¢ OCSE will continue its system modification efforts, and FMS will continue to provide
technical support and guidance to OCSE.

CONCLUSION

Adding payment types to the offset process and encouraging states’ participation remain critical
to improving on the success of Executive Order 13019. Treasury and HHS have been and
remain committed to improving and enhancing systems and procedures to ensure that the
administrative offset program continues to be an effective tool for collecting delinquent child
support debts that complements the array of enforcement tools already available to state child

support enforcement agencies.

CHILD SUPPORT COLLECTIONS THROUGH TOP

Dollars in Billions

1998 1999 2000 2001
Fiscal Year

Annual Report to the President: Implementation of Executive Order 13019


SECRETARY OF THE TREASURY

DEPARTMENT OF THE TREASURY
WASHINGTON, D.C.

February 6, 2002

The President
The White House
Washington, DC 20500

Dear Mr. President:

Enclosed is the Department of the Treasury’s (Treasury’s) annual report concerning
the implementation of Executive Order 1301 9 — Supporting Families: Collecting Delinquent
Child Support Obligations. 1 am pleased to report that Treasury continues to collect
substantial amounts of delinquent child support debts through its Treasury Offset Program.

The Treasury Offset Program collects delinquent child support debts by intercepting
federal payments, a process known as “offset.” Treasury has been offsetting federal income
tax refunds to collect delinquent child support debts since the early 1980s. A key objective
of the Executive Order, issued on September 28, 1996. is to collect delinquent child support
obligations through the offset of non-tax federal payments. The Departments of the Treasury
and Health and Human Services work jointly. and with states and territories, to further this
goal.

In fiscal year 2001, Treasury collected $1.64 billion by offsetting tax and non-tax
payments. The $1.64 billion in child support collections is comprised of $1.377 billion from
offsetting tax refund payments, $264 million from offsetting advance refunds of credit
payments, i.e. — tax rebates, and $2.45 million from offsetting non-tax payments. The
$1.64 billion represents an increase in collections of $250 million over fiscal year 2000. and
an increase of $474 million over fiscal year 1998.

As these figures indicate. Treasury remains strongly committed to collecting .
delinquent child support obligations through the use of offset for both federal tax refunds and
non-tax payments. Treasury will continue to support the worthy goal of collecting these
past-due obligations.

Sincerely
Paul H. O'Neill

Enclosure

cc: The Honorable Tommy G. Thompson


ANNUAL REPORT TO THE PRESIDENT

IMPLEMENTATION OF
EXECUTIVE ORDER 13019

SUPPORTING FAMILIES:
COLLECTING DELINQUENT
CHILD SUPPORT OBLIGATIONS

October 2000 — September 2001

Department of the Treasury
January 2002



ANNUAL REPORT TO THE PRESIDENT

IMPLEMENTATION OF EXECUTIVE ORDER 13019 —
SUPPORTING FAMILIES: COLLECTING DELINQUENT
CHILD SUPPORT OBLIGATIONS

October 2000 — September 2001

PURPOSE

This report details the progress in implementing Executive Order 13019 (September 28, 1996) -
Supporting Families: Collecting Delinquent Child Support Obligations during the period
October 2000 through September 2001.

BACKGROUND

Since the early 1980’s, the Department of the Treasury (Treasury) has been offsetting federal tax
refund payments to collect delinquent child support obligations, as well as debts owed to the
federal government.

The Debt Collection Improvement Act of 1996 (DCIA), Public Law 104-134 (110 Stat. 1321-
358), enacted into law on April 26, 1996, as part of the Omnibus Consolidated Rescissions and
Appropriations Act of 1996, authorizes Treasury to offset certain non-tax federal payments to
collect delinquent child support debts being enforced by states and territories.

Executive Order 13019 requires the Secretary of the Treasury (Secretary), in consultation with
the Secretary of Health and Human Services (HHS), to develop and implement procedures
necessary for the Secretary to collect past-due child support debts through offset of federal non-
tax payments. Executive Order 13019 also establishes a federal policy to deny federal financial
assistance to individuals whose payments are subject to offset as a result of delinquent child
support obligations.

After the issuance of Executive Order 13019, HHS and Treasury established a Child Support
Work Group to improve interagency cooperation and facilitate implementation of the Executive
Order. With the administrative offset provisions of the Executive Order substantially
implemented, the Work Group continues to coordinate the activities and implement the
provisions of Executive Order 13019. Treasury and HHS work together extensively at all levels
— management, legal, program, technical, and operational and in conjunction with federal and
state staffs. Efforts include contacting states to review individual states’ abilities to participate in
the program and participating in regional and national conferences on child support enforcement.
The Work Group meets regularly to define and resolve issues and to evaluate progress in
implementing the program.

Annual Report to the President: Implementation of Executive Order 13019 1