offered by

DUA Did Not Intercept Over $18 Million in Payments Made by the Commonwealth to State Contractors Who Had Delinquent UI Contributions.

DUA did not use the Payment Intercept Program to ensure that an employer with debt owed to DUA would not be able to receive funds from the Commonwealth via an approved contract.

Table of Contents

Overview

DUA did not use the Commonwealth’s ability to intercept payments such as tax refunds or state contractual payments due employers registered as state contractors who had outstanding UI contributions. DUA had not created an interface with the Payment Intercept Program to ensure that an employer with debt owed to DUA would not be able to receive funds from the Commonwealth via an approved contract. As a result, DUA lost the opportunity to collect millions of dollars in revenue for the Commonwealth.

Specifically, using data analytics we identified employers who owed UI contributions to DUA as of December 31, 2016 and also functioned as contractors with Commonwealth agencies. During our audit period, these 1,260 vendors received $18,356,028 in payments from state agencies, none of which was intercepted, even though DUA was aware that these contractors had delinquent UI contributions.

Non-Intercepted Payments Made to State Contractors

Outstanding Balance

Number of Employers

Amount Eligible for Intercept

$100,000 +

26

$   8,112,811

$50,000–$99,999.99

35

     2,402,267

$10,000–$49,999.99

241

     4,892,666

$1,000–$9,999.99

785

     2,890,094

$10.01–$999.99

173

           58,190

Total

1,260

$ 18,356,028

In addition, although it was outside our audit period, using data analytics we determined that if DUA had participated in the Payment Intercept Program, it could have intercepted, from 2010 to the beginning of our audit period, up to an additional $6.4 million in delinquent UI contributions from 285 contractors who were on its list of delinquent accounts. From our audit period, we also found open liens and an additional 33 employers with delinquent accounts totaling $31,650, none of which DUA included in its accounts receivable or its UI Microsoft Access database of collectible accounts.11

Authoritative Guidance

As a first step in maintaining a collection process for accounts receivable balances, 815 CMR 9.03(4), promulgated by OSC, states,

(c)  Dunning Notices. If the initial bill is not paid in full by the Debtor by the payment due date, and the Debt has not been disputed by the Debtor, a Billing Entity must demonstrate diligent efforts to collect the Debt. Diligent efforts shall include at a minimum, but shall not be limited to, three written billing and Dunning Notices in addition to the initial billing, and a final notice.

“Final notice” is defined in 815 CMR 9.03(4)(d) as follows:

5.   Final Notice. A final notice (usually when 90 days past due) that the Debt is eligible for immediate referral to Intercept and may also be submitted to a Collection Agency for Collection, and may be subject to Late Fees and Collection Charges.

Reasons for Noncompliance

Although the Payment Intercept Program is in place statewide to prohibit taxpayers indebted to the state from receiving revenue from the state, DUA had not established an interface with this program. DUA officials told us that they had been exploring using the program but had not gotten around to taking the measures necessary to begin using it.

Recommendations

DUA should engage with the Payment Intercept Program and put in place an interface with that program to ensure that employers with delinquent UI contributions owed to DUA cannot receive funds from the Commonwealth via approved contracts.

Auditee's Response

It is the position of DUA’s legal department that CMR 815 9.00 et seq. does not assign authority for intercepting employer tax returns and/or other payments at the state level and without its own authority DUA cannot intercept via the comptroller’s office under the regulations. DUA has an explicit grant of authority in G.L. c. 151A, § 69B to intercept claimants’ tax refunds. Under principles of statutory interpretation, if a specific grant of authority is given as to one group, others not specifically included are excluded. Thus, DUA concluded, it did not have statutory authority to intercept payments from employers via a state tax intercept.

The Comptroller’s regulations [in 815 CMR 9.01(2)] state “[a]bsent separate statutory authority, no State Department Billing Entity may intercept payments owed Debtors, or enter into a contract for Debt Collection Services except as provided under 815 CMR 9.00.”

DUA will review, update and make enhancements to current policies and procedures to promote collection of outstanding UI debt, and leveraging options for pursuing aged debt. This includes but is not limited to receiving offsets of federal tax refunds and participating in the federal [Treasury Offset Program].

Auditor's Reply

DUA incorrectly interprets 815 CMR 9.01(2) as precluding it from using OSC’s Intercept Program. The “except as provided” language indicates that DUA shall follow 815 CMR 9.00 absent separate statutory authority to do otherwise. Further, 815 CMR 9.02 allows but does not require state agencies with separate statutory debt collection authority to use the Payment Intercept Program if they so choose:

The Collection of certain Revenues with separate Debt Collection authority, including taxes, lottery operations, State investments, federal grants and reimbursements, Medicaid vendor overpayments are not included under 815 CMR 9.00 unless the Billing Entity chooses to use the Statewide Debt Collection Agency Contract or Intercept to collect these Debts.

Even with separate statutory authority to do otherwise, 815 CMR 9.00 allows DUA to follow either process.

In addition, Section 15A of Chapter 151A of the General Laws applies if there is a notice to satisfy a judgment, which is a court order. In the event that some of this money is pursuant to a court judgment, this section applies. Otherwise, DUA would proceed under 815 CMR 9.00. Specifically, Section 15A of Chapter 151A of the General Laws states,

(c)  If any employer fails to pay any amount required under this chapter within ten days from the date notice to satisfy a judgment has been mailed to such employer, the commissioner or the commissioner’s agent may file a notice of levy with any agency or instrumentality of the commonwealth or with any political subdivision of the commonwealth, with a copy of said notice being mailed to the employer and when so filed the levy shall be an attachment upon any payment due the employer from said agency, instrumentality or political subdivision. Upon filing of the notice of levy said agency, instrumentality or political subdivision shall forward to the commissioner or the commissioner's agent any payment owed the employer until the liability out of which the levy arose is satisfied or becomes unenforceable by reason of lapse of time. The notice of levy shall lapse if not satisfied within six months from the date of service of the notice on the agency, instrumentality or political subdivision.

Therefore, DUA could have implemented, but did not implement, the Payment Intercept Program to collect the more than $18 million in payments made by the Commonwealth to state contractors who had delinquent UI contributions.  

11. Although not on DUA’s current list of UI collectibles, these employers were found via liens in two Registry of Deeds databases. There was no indication that any of the funds they owed had been collected by DUA.

Date published: June 15, 2018
Feedback