Directive 494.1 

6/8/82 

 Collecting Debts Due the Federal Government 

 and Computing Late Payment Charges on Overdue Accounts 

 I PURPOSE 

 This Instruction sets forth procedures for: 

 A Collecting debts due the Federal Government including certain 

 types of debts owed by employees. 

 B Computing late payment charges on accounts billed and collected 

 in field offices and accounts maintained in Fiscal Operations and Systems 

 Branch, Financial Management (FM) Division. 

 II AUTHORITY 

 A Public Law 89-508, Federal Claims Collection Act of 1966, and the 

 Federal Claims Collection Standards issued jointly by the Comptroller General 

 and the Attorney of the United States (4 CFR Part 101-105) set forth 

 requirements on the collection of debts. 

 B Treasury Regulations (Treasury Fiscal Requirements Manual, Volume 

 1, Part 6, Chapter 8000) require that late payment charges be applied to 

 overdue payments for each 30-day period or less. 

 III POLICY 

 Agency billings, manual or automated, shall be issued to cover established 

 billing cycles - not more than monthly, except in cases where it is not cost 

 effective. If the actual value of the goods or services cannot be determined 

 on the day the billing is prepared, and 

 A The estimated value is less than $50,000, the billing shall be 

 accomplished within one workday after the actual value is determined. 

 B The estimated value is $50,000 or more, partial billing, 

 identified as such, shall be accomplished for not less than 75 percent of 

 the estimated value with a statement that the final billing will be completed 

 when the actual value is determined. 

 Bills shall be dated the date they are forwarded to debtors. 

 IV DEFINITIONS 

 A Billing date is the date the billing is prepared and mailed to the 

 debtor. 

 B Billing cycle means the period covered by the billing. 

 C Principal amount means the amount due agency, exclusive of 

 interest charges. 

 D Delinquent account means a debt owed the agency that is not paid 

 by the specified payment due date. For Divisions serviced by the National 

 Finance Center, (NFC), the due date is the 25th day of the month. The 

 specified payment due date shall not be more than 25 days from the date of 

 the initial notification. 

 E Claim means a delinquent account determined to be uncollectible 

 after diligent attempts to collect and/or is 150 days old. 

 F Uncollectible debt means an account receivable officially 

 determined to be uncollectible after diligent attempts to collect have been 

 made, and the claim process has been completed and the amount written off. 

 V NOTIFICATION TO DEBTOR 

 A Billings Covered by Contracts, Agreements, or Other Formal 

 Arrangements. 

 Divisions having contracts, agreements, or other formal arrangements which 

 will result in billings or final settlement, except those prohibited by 

 law, shall revise such documents to include: 

 1 A periodic billing cycle. 

 2 The provision for interest to be applied to the principal 

 amount if the billing is not paid by the specified due date. 

 B Billings Not Covered by Contracts, Agreements. or Other Formal 

 Arrange ments and Not Billed by NFC. Divisions shall notify, in writing, those 

 applicants not covered by contracts, agreements, or other formal arrangements 

 and who are not billed by NFC of: . 

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 1 The basis of indebtedness. 

 2 The payment due date. 

 3 The fact that interest will be applied to the principal 

 amount if the billing is not paid by the specified due date. 

 VI DETERMINING LATE PAYMENT CHARGES 

 A Billings performed by NFC. NFC will compute late payment charges 

 and maintain accounts for: 

 1 Federal Grain Inspection Service. 

 2 Dairy Division. 

 3 Meat Quality and Seed of Livestock, Meat, Grain, 

 and Seed Division. 

 4 Portion of Cotton Division. 

 5 Portion of Tobacco Division. 

 B Late payment charges shall be applied against all previously 

 billed principal amounts that are not fully paid by the specified payment 

 due date (25th day of the month for Divisions serviced by NFC). The 

 actual rate to be applied to past due account is determined quarterly by the 

 Department of Treasury (see Exhibit A, attached). Information on computing 

 late payment charges and a suggested worksheet are shown in Exhibit B, 

 attached. 

 1 For Divisions on a monthly billing cycle, the amount of 

 late payment charges will be 1/12th of one year's charge computed at the 

 prescribed rate. 

 2 For Divisions on a 28-day billing cycle, the amount of 

 late payment charges will be 1/13th of the year's charge computed at the 

 prescribed rate. 

 C Collections will be applied first to late payment charges and 

 then to the outstanding principal balance. 

 VII BILLINGS AND COLLECTIONS 

 A Billing Documents To Be Used. Divisions chose billing are 

 issued by NFC shall use BLCO billing documents. Divisions who do their own 

 billing shall use the billing documents specified in their Instructions. 

 Billing documents must include the following: 

 Chart for late payment charges is not available. 

 Please refer to the printed version. 

 Page 3 

 

 (VII) 

 B Collection Efforts To Be Made by Divisions Who Perform Their Own 

 Billing and by Fiscal Operations and Systems Branch, FM Division. Division 

 Directors shall take aggressive action, on a timely basis with effective 

 followup, to collect debts owed the Agency for services performed by the 

 Division. The Division shall make three progressively stronger written 

 demands for payment, at not more than 30-day intervals, unless response to 

 the first or second demands indicates that any additional demands would be 

 futile. 

 1 The first request - after 30 days, is the first billing 

 issued which includes late-payment charges for the delinquent account. This 

 will automatically occur on the next billing cycle (28th or 30th day) after 

 the first bill. Include this statement on the bill: "Your account is past 

 due - a late penalty has been applied - to avoid further penalty, the total 

 amount due must be paid by the due date." 

 2 The second request - after 60 days, shall contain the 

 following statement on the billing or on a sheet conspicuously attached to 

 the billing: 

 "A portion of your account has reached a delinquency of more 

 than 30 days. Late payment charges are being accumulated on 

 this delinquent amount monthly. Therefore, if any reason 

 exists why this amount should not be considered delinquent, 

 we must be notified immediately. Continued delinquency 

 could result in loss of service." 

 3 The third request - after 90 days, shall consist of a review 

 of the account and a consideration of one of the following: 

 a The total amount owed the Agency by the debtor is less 

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 than $10, and it is doubtful that the debtor will incur any 

 further obligation to the Agency. 

 b The debtor has agreed to make full payment within a 

 reasonable period of time. 

 c The response from the debtor to the first delinquent 

 notice indicated that further demand would be futile and/or 

 that prompt legal action may be necessary to effect 

 collection. 

 If the account does not meet any of the criteria in Items a, b, or c, above, 

 the following statement shall appear an the billing or on a sheet 

 conspicuously attached to the billing: 

 "According to U.S. Treasury guidelines, a billing is 

 delinquent if not paid by the due date. A portion of the 

 account has become delinquent more than 60 days. 

 Therefore, this account is being considered for 

 termination of service." 

 C Billings and Collections Performed by NFC. When billings and 

 collections are performed by NFC, the NFC will send debtors up to 

 three delinquent notices when accounts become past due. NFC will provide 

 only required billings to debtors. No direct contact will be made by NFC 

 with delinquent debtors. Those Divisions serviced by NFC shall monitor the 

 NFC billings sent to debtors, and shall followup with delinquent debtors to 

 expedite payment. 

 D Personal Interviews With Debtors. Divisions shall undertake 

 personal interviews with debtors, when feasible, considering the amount of 

 the billing involved and the proximity of the Division's representatives to 

 the debtor. 

 E Utilizing Administrative Collection Action. Divisions shall 

 utilize any other administrative action deemed feasible to collect delinquent 

 accounts. 

 VIII DOCUMENTATION 

 Divisions shall: 

 A Document administrative collection action taken and retain the 

 documentation in appropriate files. 

 B Maintain a detailed record of the basis for termination of 

 collection action. 

 C Place account in claims status if debt is not paid by the 

 150th day (see Section IX). 

 IX CLAIMS 

 A NFC will process all claims on delinquent accounts. A delinquent 

 account is considered a claim if: 

 1 Payment is not received within 150 days of the initial 

 billing; or 

 2 Responses to demand letters or personal contact indicated 

 that further demand would be futile, and debtor's response does not require 

 rebuttal; or 

 3 Notice is received that the debtor is in bankruptcy. 

 B Divisions shall: 

 1 Transfer to NFC the files of debtors identified as claims. 

 Send files to P.O. Box 60000, New Orleans, LA 70160, Attention; 

 Chief, Billings and Collections Branch. 

 Send files with copies of the following: 

 a Each unpaid bill with supporting documents. 

 b All correspondence and memorandums of telephone 

 conversations to and from the debtor relating to the debt. 

 c The late payment charges computation worksheet. 

 d Any other information about the financial status of 

 the debtor that may have been obtained from telephone or 

 personal contacts. 

 2 Withdraw future service to debtors in claim status, unless 

 prohibited by law or other regulation. (NFC becomes officially responsible 

 for collection efforts at this point.) NFC will mail a special claim letter 

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 to the debtor. If the debtor continues to withhold payment, NFC will notify 

 the Agency of the action to be taken to write off the uncollectible debt, and 

 refer the uncollectible debt to GAO or U.S. Attorney's office for litigation. 

 X ACTION TO BE TAKEN TO PREVENT FURTHER DELINQUENCIES AND DEFAULTS 

 Divisions shall establish necessary procedures to identify causes of 

 delinquencies and defaults, and to prescribe corrective action needed. 

 XI EMPLOYEE DEBTS 

 Employee debts shall be collected as follows; 

 A Overpayment of Pay. Procedures on the collection of debts for 

 salary overpayments are contained in AMS/FGIS Instruction 491-3, Reporting 

 and Collecting Amounts Owed the Government by Employees Due to Salary 

 Overpayments, and AMS/FGIS Instruction 491-2, Waiver of Claims for Erroneous 

 Overpayment of Pay or Allowance. Bargaining unit employees shall be 

 governed by the aforementioned instructions and applicable negotiated 

 agreements pertaining to such employees regarding overpayments of pay. 

 B Other Employee Indebtedness. 

 1 Deductions From Salary. 

 a With Consent of Employee. If the employee consents, 

 the debt will be collected by deduction from current salary 

 payment, or if the amount is substantial, the debt will be 

 collected over several pay periods in accordance with a 

 repayment agreement executed by the employee. 

 b Without Consent of Employee. Deductions may be made 

 without the consent of the employee to collect funds 

 advanced for travel delinquent Federal income taxes, 

 erroneous payments received other than salary, or 

 garnishment for child support and/or alimony, for 

 which the employee is indebted. 

 c At Time of Separation. If the employee is indebted at 

 the time of separation, the amount will be deducted from 

 his/her final salary or lump-sum payment. 

 2 Collection After Separation. If the full amount of the 

 debt cannot be collected from the final salary or 

 lump-sum payment, NFC will undertake collection as follows: 

 a Contact the former employee and request payment, or 

 b Arrange with the office of Personnel Management to flag 

 the employee's retirement record if collection cannot be 

 made by direct contact with the former employee, or 

 c Report the debt to GAO for collection action if 

 collection cannot be effected through retirement payments 

 due. 

 Irving W. Thomas 

 Deputy Administrator, Management 

 Attachments 

 AMS Instruction 494-1 

 Rev. 2 

 EXHIBIT A 

 6-20-85 

 TREASURY FISCAL REQUIREMENTS MANUAL FOR 

 GUIDANCE OF DEPARTMENTS AND AGENCIES 

 BULLETIN NO. 85-11 RETENTION: September 30, 1985 

 TO HEADS OF GOVERNMENT DEPARTMENTS, AGENCIES AND OTHERS CONCERNED: 

 1. PURPOSE 

 This bulletin notifies agencies of the percentage rate based on the 

 current value of funds to Treasury to be used (1) in assessing interest 

 charges for outstanding debts on claims owed the Government under I TFM 

 6-8020.20 "Charges for Late Payments" and the Debt Collection Act of 1982 

 (Pub. L. 97-365); and (2) as a comparison point in evaluating the cost- 

 effectiveness of a cash discount under I TFM 6-8040.30 "Cash Discounts." 

 2. RESCISSION 

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 This bulletin rescinds TFM Bulletin No. 85-05 (T/L 460). 

 3. RATE FOR CHARGES ON LATE PAYMENTS AND COMPARISON POINT FOR CASH 

 DISCOUNTS 

 The percentage rate to be applied during the period July 1 through 

 September 30, 1985, is 9.00 percent. 

 This annual percentage rate based on the current value of funds to 

 Treasury will be transmitted in a TFM bulletin each calendar quarter for 

 application to overdue payments and determination of the 

 cost-effectiveness of cash discounts during the succeeding calendar 

 quarter. 

 4. EFFECTIVE DATE 

 July 1, 1985. 

 5. INQUIRIES 

 Any questions concerning this bulletin should be directed to the Cash 

 Management Division, Financial Management Service, Department of the 

 Treasury, Treasury Annex No. 1, PB-711, Washington, DC 20226 (Telephone 

 202-634-5131). 

 William E. Douglas 

 Commissioner 

 Date: May 15, 1985 

 AMS/FGIS INSTRUCTION 494-1 

 Rev. 2 

 EXHIBIT B 

 Computing Late Payment Charges 

 The annual interest rate to be applied to past due accounts is established by 

 the Department of Treasury. The interest rate to be applied is the rate in 

 effect on the due date of the bill. 

 1 For billings issued on an established cycle (i.e., monthly or 

 every 28 days), the interest rate (to four decimal places) must be converted 

 to the billing cycle rate. For example: 

 Monthly: Annual Interest Rate 12 = Monthly Interest Rate 

 For Example: 18% 12 = 1.5000% 

 Computation: Principal x Rate = Late Payment Charges 

 For Example; $500 x 1.5000% = $7.50 

 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 

 28 Days: Annual Interest Rate 13 = Billing Cycle Rate 

 For Example: 20% 13 = 1.5385% 

 Computation: Principal x Rate = Late Payment Charges 

 For Example: $500 x 1.5385% = $7.69 

 2 For billings issued on a nonrecurring basis, a monthly interest 

 rate shall be applied when payment is not received by the due date. 

 NOTE: See Page 3 of this Exhibit for a Worksheet illustrating the 

 computing of late payment charges. It is recommended that a worksheet be 

 prepared for each debtor since late payment charges must be reported to the 

 debtor at the end of the year. The example illustrated involves the 

 computing of interest covering a 4-month period for one debtor. 

 Page 1 

 6-8-82 

 AMS/FGIS INSTRUCTION 494-1 

 Rev. 2 

 EXHIBIT B 

 Explanation of Entries on Worksheet 

 Headings Columns Entries 

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 1 Prior Balance - Enter the dollar 

 amount in Column 13 from the previous 

 billing cycle. 

 2 Current Charges - Enter dollar amount 

 for services performed. 

 3 Total - Add Columns 1 and 2. 

 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 

 Rate 4 Enter applicable rate. 

 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 

 Late Payment Charges 5 Brought Forward - Enter the dollar 

 amount in Column 12 from the previous 

 billing cycle. 

 6 Current - Multiply Column 1 by Column 4. 

 7 Total - Add Columns 5 and 6. 

 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 

 Total Billed 8 Add Columns 3 and 7. 

 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 

 Payment Received 9, 10, Enter payment in Column 11 and compare 

 with and Column 12. 

 11 If payment is less than Column 

 12, enter payment amount in Column 

 9 and reduce Column 12 

 accordingly. 

 If payment is greater than 

 Column 12, enter the late payment 

 charges in Column 9 and reduce 

 Column 12 accordingly, 

 The difference between the late 

 payment charges recorded in Column 

 9 and the payment recorded in Column 

 

 11 is entered in Column 10. The 

 principal (Column 13) is reduced by 

 this amount. 

 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 

 Outstanding Balance 12 Late Payment - Column 7 less Column 9. 

 13 Principal - Column 3 less Column 10. 

 14 Total - Add Columns 12 and 13. 

 Page 2 

FOR A COPY OF PAGE 3 OF EXHIBIT B, PLEASE CONTACT AMS, INFORMATION MANAGEMENT BRANCH. 

 

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