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NASA Procedures and Guidelines

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NPR 9610.1A
Eff. Date: October 29, 2015
Cancellation Date:

Accounts Receivable, Billing, and Collection

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Chapter 5 Delinquent Debt

5.1 General

5.1.1 This section applies to public debt. Delinquent intragovernmental balances should be processed in accordance with TFM Volume I, Part 2, Section 4706.15b Dispute Resolution of Intragovernmental Transaction Differences.

5.1.2 NASA shall take aggressive action, with effective follow-up, to collect all claims of the United States for monies or property arising out of NASA activities, and to cooperate with other Federal agencies, in debt collection activities. Details for NASA collections are codified in 14 CFR pt. 1261.4.

5.2 Identifying Delinquent Debts

5.2.1 Identifying Delinquency. A public debt becomes delinquent when not paid by the date specified in the initial written notification or applicable contractual agreement (unless other satisfactory payment arrangements have been made by that date) or if, at any time thereafter, the debtor fails to satisfy obligations under a payment agreement. A debt is not delinquent if the debtor has entered into a repayment agreement and all payments are current in accordance with the new agreement. Otherwise, the date of delinquency is the payment due date.

5.2.2 Contract overpayments, refunds receivable, fines, penalties, and other debts are delinquent when the debtor does not repay or resolve the debt within 30 days after the day notification of the debt is mailed to the debtor (within 30 days of the payment due date for contractual agreements).

5.2.3 The NSSC shall use NASA's accounting system to support the identification of delinquent debts by:

a. Recording all financial data related to the debts accurately within the accounting month the data becomes available.

b. Tracking the status of requests for compromise, suspension, waiver, termination, write-off, or close-out of debts.

5.2.4 Contact with the debtor. NSSC shall promptly respond to any communication from a debtor within 30 days, whenever feasible, and will advise debtors who dispute the debt to furnish available evidence to support their contentions.

5.3 Demand Letters

5.3.1 If delinquency is not resolved after the initial contact with the debtor, NSSC shall notify the debtor of the debt's delinquent status through a demand letter. Appropriate written demands will be made promptly to a debtor of the United States in terms that inform the debtor of the consequences of failure to cooperate with NASA to resolve the debt.

5.3.2 Initial demand letter. The first demand letter will be issued no later than 30 days after delinquency and at least 60 days prior to referring a delinquent debt to Treasury for cross-servicing. The initial demand letter will repeat the statement in the initial bill describing the follow-on actions that NASA will take to collect the debt if it is not paid within 30 days, as well as the actions that NASA will take, such as referral to Treasury, after the debt is over 120 days delinquent. Among other requirements, demand letters should state the current balance of the debt, that the debt is overdue, the basis of indebtedness, any interest, administrative charges, and penalties, and the name, address, and telephone number where payment and questions can be sent, and the debtor's response to the initial contact. Refer to Treasury BFS Managing Federal Receivables Guide, Appendix 8, Demand Letter Checklist for additional information that will be provided to the debtor. Delivery of demand letter. NSSC shall ensure that the demand letter is sent or delivered on the same day it is dated.

5.3.3 Second Demand Letter. If a response is not received within 30 days of the initial demand letter, a second demand letter may be sent that requests immediate payment. The second demand letter will also remind the debtor of the actions and timeframes that were identified in the initial demand letter. Except in rare circumstances, NASA should not send more than two demand letters, no more than 30-days apart. The second demand letter will inform the debtor that the account is delinquent and will be referred to Treasury for collection or DOJ for further action, unless:

a. Full payment of the entire outstanding balance is received within 30 calendar days of the date of the notice.

b. The debtor provides written disclaimer information within 30 calendar days of the date of the notice.

5.3.4 NASA should terminate the process of sending demand letters at any time that it determines that the letters are no longer serving a useful purpose. All demand letters should contain the information required by the Treasury BFS Managing Federal Receivables Guide, Appendix 8, Demand Letter Checklist.

5.3.5 Bankruptcy. Centers should seek legal advice from the local supporting legal counsel if they believe they have claims or offsets that may survive the discharge of a debtor through bankruptcy. Generally, when a debtor files for bankruptcy protection, NASA is prohibited from pursuing further collection action unless funds are available in the debtor's estate to pay some of the debtor's debts. Offset and recoupment rights may survive the discharge of the debtor in bankruptcy and, under some circumstances, claims also may survive the discharge. For example, if NASA is a known creditor of a debtor, a NASA claim may survive a discharge if NASA did not receive formal notice of the proceedings. Therefore, NASA should file a Proof of Claim form when allowed to do so by the bankruptcy court. The appropriate form may be found at www.uscourts.gov/bankform.

5.4 Determining Interest, Penalty and Administrative Charge Amounts

5.4.1 Debtors are expected to adhere to payment terms stated in a contract, debt instrument, or notice of indebtedness (demand letter). Interest, administrative charges, and penalties will be assessed on all overdue payments, unless a waiver is granted or except as otherwise provided in a specific statute. These charges will continue to accrue until the debt is paid in full or otherwise resolved through compromise, termination, or waiver of the charges.

5.4.2 Interest Penalties. NASA shall charge interest on debts as follows: Interest will accrue from the date on which a notice of the debt and the interest requirements is first delivered to the debtor, using the most current address available. If a bill is mailed before the debt is actually due, it should include the required notification, and interest may not start to accrue before the debt is actually owed. Unless otherwise established in a contract, repayment agreement, or by statute, the rate of interest charged will be the rate established annually by the Department of Treasury in accordance with 31 U.S.C. § 3717. Pursuant to 31 U.S.C. § 3717, NASA may charge a higher rate of interest if it reasonably determines that a higher rate is necessary to protect the rights of the United States. NASA should document the reason for its determination that the higher rate is necessary. The minimum annual rate of interest to be charged is established by the Treasury as an average of the current value of funds to Treasury and is published in the Federal Register each year by October 31st, with an effective date of January 1st. If revised, the new rate will be published in a Treasury's TFM Bulletin on or around the end of the first month of the calendar quarter, and is to be applied to overdue payments arising during the succeeding calendar quarter. The current rate may be obtained from Treasury Bureau of Fiscal Service website. The rate of interest, as initially charged, will remain fixed for the duration of the indebtedness. When a debtor defaults on a repayment agreement and seeks to enter into a new agreement, NASA may require payment of interest at a new rate that reflects the current value of funds to the Treasury at the time the new agreement is executed. Interest should not be compounded; that is, interest will not be charged on interest, penalties, or administrative charges required by this section. If, however, a debtor defaults on a previous repayment agreement, charges that accrued but were not collected under the defaulted agreement will be added to the principal under the new repayment agreement.

5.4.3 Penalty Charges. A penalty charge, not to exceed 6 percent per annum, will be assessed on any portion of the debt more than 90 days delinquent (31 U.S.C. § 3717(e)(2)). Accruing from the date of delinquency, the penalty charge is assessed on any portion of a debt that is outstanding for more than 90 days, including interest and administrative charges. Penalty payments should be assessed unless a statute, regulation, required by a statute, loan agreement, or contract prohibits charging interest, or assessing charges, or explicitly fixes the interest rate or charges. Penalty payments should be reported to the IRS to ensure debtors are prevented from using such penalty payments as a business expense, thereby reducing their tax liability. Amounts received as partial or installment payments will be applied first to accrued penalties, then to accrued administrative charges, then to accrued interest, and finally to the principal, unless otherwise provided in a statute or regulation.

5.4.4 Administrative Charges. Administrative charges should cover the additional costs incurred in processing and handling delinquent debts such as staffing and resource costs, and other costs associated with using various collection tools to enforce recovery, including, but not limited to, the costs of obtaining a credit report and collection fees charged by BFS, DOJ and private collection agencies. The amount charged should be based on actual costs incurred or on cost analysis, which established average actual additional costs. NSSC shall determine the average cost of collecting delinquent accounts by identifying the direct and indirect costs incurred in collecting debts from the time they become delinquent until the time collections are made or agency collection efforts cease. For those accounts that are successfully litigated, DOJ post-judgment cost should be determined separately and added to the average cost of collection previously determined. NSSC costs incurred prior to an account becoming delinquent should not be included in the fee determination since there is no statutory authority to recover these costs.

5.4.5 Late Charge Accumulation. NASA shall continue assessing the interest, penalty, and administrative charges at the rates established until final payment is received, unless debt collection activity is suspended or terminated, the debt is compromised, the late charges are waived, or the late charges are altered as a result of a court judgment.

5.4.6 Waiver for Late Charges. NSSC shall assess late charges, unless a waiver has been received from Treasury. Any request for such waiver will be sent to the Agency OCFO Director, Financial Management Division, NASA Headquarters, for submission to Treasury.

5.4.7 Use of a Consumer Reporting Agency. The Debt Collection Improvement Act (DCIA) requires NASA to develop and implement procedures for reporting delinquent debts to credit bureaus. The terms and conditions for this are found in 31 CFR §901.4.

5.5 Installment Payments.

5.5.1 Whenever feasible, and except as otherwise provided by law, debts owed to NASA together with interest, penalties, and administrative costs as required, should be collected in full in one lump sum. This is true whether the debt is being collected by administrative offset or by another method, including voluntary payment. However, if the debtor is financially unable to pay the indebtedness in one lump sum, payment may be accepted in regular installments. The NASA Center obtains a financial statement from debtors who represent they are unable to pay in one lump sum. In order to independently verify such representations, the Center sends the financial statements to the local supporting legal counsel for validation, (31 CFR § 901.8.a). The installment agreement will be a legally enforceable written agreement which specifies all the terms and conditions of the arrangement, including those governing the assessment of financing interest and late charges and which also contains a provision accelerating the debt in the event the debtor defaults.

5.5.2 The size and frequency of installment payments should bear a reasonable relation to the size of the debt and debtor's ability to pay. The installment agreement should provide for as large an initial lump sum payment as the debtor can afford. If possible, the installment payments should be sufficient in size and frequency to liquidate NASA's claim in three years or less (14 CFR pt. 1261.411).

5.5.3 If the debtor owes more than one debt and designates how a voluntary installment payment is to be applied to those debts, that designation will be followed. If the debtor does not designate the application of the payment, the payment should be applied to the various debts in accordance with the best interests of the United States, as determined by the facts and circumstances of the particular case, paying special attention to applicable statutes of limitations (14 CFR pt. 1261.411).

5.6 NASA Internal Administrative Offset

5.6.1 Written and Oral Hearings. Prior to initiating any collection tools to collect the debt (i.e. cross-servicing, offset, and garnishment, etc.) the NSSC shall affirm proper written notice was given to the debtor. Moreover, NSSC will coordinate with the local supporting legal counsel to determine if NASA is required to afford a debtor a hearing or review within NASA and to assure all rights of the debtor and legal requirements are honored. In those cases where an oral hearing is not required, NASA will nevertheless accord the debtor a paper hearing, that is, NASA will make its determination on the request for waiver or reconsideration based upon a review of the written record.

5.6.2 Administrative Offset (Internal Offset). Administrative offset occurs when NASA withholds or intercepts money due to, or held by the government for, a person who owes money to NASA. The NSSC should, unless specifically prohibited, offset future NASA payments to the delinquent debtors, until the debt has been paid in full. 14 CFR pt.1261.5 sets the requirements for administrative offset of claims. NSSC shall determine whether collection by administrative offset is feasible and legal. The determination will be made on a case-by-case basis, in the exercise of sound discretion. NSSC should consider not only whether administrative offset can be accomplished, both practically and legally, but also whether offset is best-suited to further and protect the entire Government's interests. In appropriate circumstances, NSSC may give due consideration to the debtor's financial condition and is not required to use offset in every instance in which there is an available source of funds. NSSC may also consider whether offset would tend to substantially interfere with or defeat the purposes of the program authorizing the payments against which offset is contemplated.

5.6.3 Salary Offset for NASA Employees. If a debt owed by a NASA employee becomes delinquent, the initial demand letter will include a statement that if payment is not received within 30 days, NASA will take action to collect the debt by offset of the employee's salary. Offsets of NASA salary payments are limited to 15 percent of a debtor's disposable pay. In such a situation, NSSC shall comply with the requirements of 14 CFR pt.1261.603.

5.7 Referring Public Debt to Treasury

5.7.1 The DCIA of 1996 authorized Treasury to provide delinquent debt collection services for all Government agencies in order to minimize the Government's debt collection costs. NSSC shall make maximum use of the Cross-Servicing Debt Collection Program offered by Treasury. Under this program, the Treasury makes use of all available collection options to collect debts on behalf of Federal agencies.

a. Greater than 120 days. The Data Accountability and Transparency Act (DATA Act) amends 31 U.S.C. § 3716(c)(6) and now requires NASA to refer delinquent, nontax debts that are over 120 days to Treasury for administrative offset - 60 days earlier than the previous requirement set forth by the DCIA of 1996.

b. Less than 120 days. Debt may be referred to Treasury earlier than 120 days if a second demand letter has been sent to the debtor at least 60 days prior to the referral, and the debtor does not respond within 30 days of the date of the second demand letter.

5.7.2 Before closing-out a delinquent debt NASA shall take all appropriate steps to collect the debt in accordance with 31 U.S.C. § 3711(g), including, administrative offset, tax refund offset, Federal salary offset, referral to Treasury, Treasury-designated debt collection centers or private collection contractors, credit bureau reporting, wage garnishment, litigation, and foreclosure.

5.7.3 NASA's policy is to refer public delinquent debts of $25 or more to Treasury's BFS when the debt is delinquent more than 120 days. The NSSC shall promptly refer delinquent non-Federal debts, other than reimbursable agreement debts, to Treasury BFS when required, or earlier if appropriate, to enhance the probability of collection. Prior to forwarding non-Federal reimbursable debts the Treasury BFS for collection NSSC will consult the applicable Center. After debts are referred to Treasury, BFS will take appropriate action to enforce collections in accordance with applicable statutes and NSSC should terminate collection activities on referred accounts. A debt is eligible for referral to BFS for cross-servicing if it meets all of the following conditions. The debt is:

a. Past due.

b. Legally enforceable.

c. Owed by an individual or entity (including a state or local government) other than a Federal agency.

d. $25 or more (including interest, penalties and administrative costs).

5.7.4 Mandatory Actions. At least 60 days before a debt can be submitted to Treasury BFS, NASA shall send the debtor at least one demand letter explaining the debtor's rights and notification that the debt will be referred to Treasury for collection. Additional demand letter information is found in the Treasury BFS Managing Federal Receivables, Appendix 8. Therefore, NASAwill send the final demand letter to the debtor no later than 120 days after the date of delinquency in order to be eligible for cross-servicing.

5.7.5 Debts less than $100. Refer to Treasury BFS Debt Management Service Cross-Servicing Implementation Guide for requirements when referring debt less than $100.

5.7.6 Exceptions from Mandatory Referral of Delinquent Debt to Treasury for Servicing. NASA is not required to refer a debt to BFS for cross-servicing if the debt is:

a. Not past due or legally enforceable.

b. Owed by a debtor who has died.

c. Owed by a debtor who has filed for bankruptcy protection or the debt has been discharged in a bankruptcy proceeding.

d. Owed by a Federal agency.

e. The subject of an administrative appeal, until the appeal is concluded and the amount of the debt is fixed.

f. Less than $25 (including interest, penalties, and administrative costs).

g. Delinquent for 120 days or less (however, NASA may send such debts to BFS if they are otherwise eligible for referral).

h. In litigation, that is, the debt has either been referred to DOJ for litigation, or is the subject of proceedings pending in a court of competent jurisdiction, including bankruptcy and post-judgment matters.

i. Scheduled for sale within one year under an asset sales program approved by OMB.

j. At a PCA with the approval of BFS.

k. At a Treasury-designated debt collection center.

l. Expected to be collected from payments issued to the debtor by NASA within three years of the date of delinquency (commonly referred to as "internal offset").

m. Less than $100 and NASA is unable to obtain the debtor's TIN.

n. Otherwise exempt from the statutory referral requirement by law or official action of Treasury.

5.7.7 Additionally, in accordance with instructions for the TROR, debts where collection efforts have been suspended because of circumstances that include, but are not limited to, the following are not eligible to be forwarded to Treasury for collection:

a. Bankruptcy.

b. Forbearance.

c. In foreclosure, that is, the debt is secured by collateral that is being foreclosed, either through a court proceeding or non-judicially.

d. Formal appeals.

5.8 Other available collection methods.

5.8.1 The following collection methods are available to Federal agencies; however, it is NASA's policy to make use of the Treasury's cross-servicing program for debt collection. If NSSC believes that use of one of the following methods is appropriate, NSSC shall contact the Agency OCFO Financial Management Division for prior approval. Use of a Collection Agency. NASA has authority to turn over collection of debt to a PCA. When possible, NASA should refer a public delinquent debt to Treasury BFS for referral to an eligible PCA. However, if NASA contracts directly with a PCA, the terms and conditions in which this authority can be used are found in 31 CFR pt.901.5. Administrative Wage Garnishment. Garnishment is a process whereby NASA issues a wage garnishment order to a delinquent debtor's non-Federal employer. Notwithstanding any provision of state law, the head of an executive, judicial, or legislative agency that administers a program that gives rise to a delinquent non-tax debt owed to the United States by an individual may, in accordance with 31 U.S.C. § 3720 D, garnish the disposable pay of the individual to collect the amount owed if the individual is not currently making required repayment in accordance with any agreement between the agency head and the individual. NASA officials shall coordinate with the local supporting legal counsel to determine the legality of garnishment. Generally, NASA may refer delinquent debt to Treasury BFS to initiate garnishment or NASA may implement garnishment directly if the appropriate procedures are in place as described in the Treasury BFS Managing Federal Receivables Guide, Chapter 6. Suspension or Revocation of Eligibility for loans, licenses, permits, or privileges; Liquidation of Collateral. In seeking the collection of statutory penalties, forfeitures, or debts provided for as an enforcement aid or for compelling compliance, NASA will give serious consideration to the suspension or revocation of licenses or other privileges for any inexcusable, prolonged, or repeated failure of a debtor to pay such a claim. (31 CFR pt. 901.6-7)

5.9 Referral to Department of Justice

5.9.1 In consultation with the local supporting legal counsel, Centers shall:

a. Promptly refer delinquent debts to the Department of Justice (DOJ) as soon as there is evidence that the debt is collectible and that full or partial recovery of the debt will be best achieved through litigation.

b. Send claims to DOJ when all efforts and administrative processes are completed and the debt remains delinquent and legally enforceable.

c. Set up a system to ensure that each CCLR prepared by the Center includes:

(1) Name of debtor, address, Tax Identification Number (TIN), current place of employment, and salary of debtor, all of which has been verified within six months of the referral (e.g., by financial statement or credit report).

(2) Evidence that the debtor has ability to pay a judgment (employment data, property, other income), or the potential to repay and a judgment is needed to protect the Government's interest (an exception is the referral of cases solely to obtain clear title to a property that has no possibility for repayment).

(3) A certificate of indebtedness.

(4) A credit report, for each debtor, that is less than six months old at the time of referral.

(5) Copies, not originals, of the relevant account information.

d. In consultation with the DOJ, establish a system to account for cases referred to and returned from DOJ. The TIN will be the common identifier for each debt in referring cases to DOJ. DOJ will use the TIN number for case tracking and reconciliation. Periodic follow-ups should be made with DOJ to ascertain the status of litigation.

e. Participate in the DOJ private attorney program by identifying and then accelerating case referrals through DOJ's Central Intake Facility to those districts where the U.S. Attorney offices contract with private law firms. Upon receipt of the CCLR, a U.S. Attorney is to file suit within 45 days unless the debtor has come forward with a voluntary payment. Collection efforts should cease once a case has been referred DOJ. The appropriate U.S. Attorney, or DOJ attorney, will be notified of exceptions and permit continued collection activity by an agency. "Continued collection activity" does not include agency attorneys appointed Special Assistant United States Attorneys. The DOJ will notify the referring Center within 60 days of the closing of a case.

f. Stop the use of any collection activities and refrain from further contact with the debtor once a claim has been referred to DOJ, unless the DOJ agrees to allow the debtor(s) to remain in Treasury Offset Program or offset while the DOJ pursues other legal remedies. Centers shall notify NSSC of all decisions to refer debt to DOJ and keep NSSC informed of the status of all debts referred to DOJ.

g. Centers shall promptly notify the DOJ of any payments received on a debtor's account after referral of the claim for litigation.

5.9.2 In consultation with the local supporting legal counsel, if, prior to referral to DOJ, a Center determines that a debt is plainly erroneous or clearly without legal merit, the Center may terminate collection activity regardless of the amount involved without obtaining DOJ concurrence.

5.9.3 In consultation with the local supporting legal counsel, if the Center believes that suspension, compromise, or termination of any debt greater than $100,000 may be appropriate, the Center shall refer the debt to the Civil Division or other appropriate litigating division in DOJ, using the CCLR. The referral should specify the reasons for NASA's recommendation.

5.9.4 Debts may be referred to DOJ in accordance with the provisions of 31 CFR pt. 904, OMB Circular No. A-129, and the authorities cited in 14 CFR pt. 1261.402. In consultation with NASA Office of General Counsel, cases of fraud may be sent to DOJ at any time. Debts referred to Treasury for collection will be referred to DOJ by Treasury. DOJ will only accept debt that is at least $2,500. The Short Form CCLR may be used for referring claims between $2,500 and $5,000, including interest, penalties, and administrative costs. Centers have the option of referring delinquent Federal employee accounts to DOJ to obtain a judgment in accordance with Section 124 of Public Law 97-276. This provision allows DOJ to collect 25 percent of the employee's salary after a judgment is obtained, as compared to the 15 percent limit under the salary off-set authority.

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