We determined that offset totaling $1,019,525 could have been taken in 121 of the 522 receivables which were not submitted, or submitted untimely, to the Offset System.

Based on our sample of 1,000 receivables, we projected that potentially $13.5 million could have been recovered if agencies had submitted all eligible accounts receivable that exceeded $1,000 and were over one year old.

Eighteen sample cases with debt totaling over $684,000 could not be submitted to the Offset System due to a lack of an identification number.

Legislative Audit Commission Resolution Number 110 directed the Auditor General to determine whether the ten agencies with the largest amount of net receivables in 1996 were placing all eligible debts in the Offset System. At each of the ten agencies, we randomly sampled 100 receivables over $1,000 and more than a year old.

Our review of the 1,000 receivables, which totaled $35.7 million, found the following:

• 478 of the receivables reviewed (48 percent), totaling $29.6 million, complied with the provisions of the State Collection Act or Administrative Code. Of these 478 receivables,

  • 191 were placed by the State agency in the Offset System within the required one year period, and

  • 287 were exempt or not eligible for offset (for example, a deferred payment plan had been established).

In 121 of the 522 receivables not properly submitted, over $1 million in receivables may have been recovered had the debts been properly submitted to the Offset System. A large portion of the amount that may have been recovered, $947,000, was related to 32 accounts not submitted by the Department of Children and Family Services. In early 1998, DCFS began using its internal offset system to adjust payments to these providers and reported recovering $675,000 of the $947,000.

We also identified instances where the amounts of certain receivables maintained in the Offset System were not accurate. The University of Illinois erroneously submitted $4.8 million of claims that were already in the Offset System. The Department of Transportation submitted a debtor twice for the same claim and had double offsets taken. Almost $624,000 in child support receivables were incorrectly entered into the Offset System due to an error on a tape submitted by the Department of Public Aid. Comptroller personnel corrected the accounts in April 1998. Inaccuracy in the amount of a debt in the System increases the risk that too much or too little is recovered when a warrant is paid to a debtor of the State.

In the audit, we also found the following:

• In 77 of the receivables sampled there was at least a $1,000 difference in the balance of the receivable in agency records and the balance reported in the Offset System. If the balances in the Offset System are not correct, this increases the risk that the incorrect amount of funds may be withheld.
• The University of Illinois and the Department of Revenue had instances where receivable amounts reported to the Comptroller were either understated or overstated. Correct receivable information is important to accurately portray the financial position of the State.
• Eighteen receivables totaling over $684,000 could not be submitted to the Offset System due to a lack of a social security number or employer identification number.

Legislative Audit Commission Resolution Number 110 directed the Auditor General to conduct a special audit of the 10 agencies with the largest amount of net receivables, as identified in the Comptroller’s Receivables Report for 1996. The Resolution asked the Auditor General to determine whether all eligible debts have been placed in the Comptroller’s Offset System as required by law (see Appendix A).

The Offset System is a collection tool used to intercept payments to debtors who owe the State money. The intercepted payment is then used to offset the debt owed to the State. The Comptroller reported recovering $7.1 million through the Offset System in calendar year 1997. The 10 agencies in the scope of the special audit included:

ACCOUNTS RECEIVABLE IN ILLINOIS

State agencies may use the Comptroller’s Offset System . . . for the collection of debts owed to the agency. All debts that exceed $1,000 and are more than 1 year past due shall be placed in the Comptroller’s Offset System, unless the State agency shall have entered into a deferred payment plan or demonstrates to the Comptroller’s satisfaction that referral for offset is not cost effective. [emphasis added]

AGENCY COMPLIANCE WITH OFFSET REQUIREMENTS

As shown in Digest Exhibit 3, over half of the receivables sampled from the University of Illinois, the Department of Revenue, and the Department of Children and Family Services had not been submitted to the Offset System. Teachers’ Retirement System (TRS) had no exceptions. Most of the TRS receivables sampled were Early Retirement Incentive payments which have statutory authority to be paid off over a period of five years.

Some agencies did not submit receivables to the Offset System while the receivables were with a collection agency or with the Attorney General for collection activities. Other agencies stated that it was not cost effective to submit all debts to the Offset System. Department of Revenue officials stated they do not refer all debts because of the resources (staff and computer time) needed to notify debtors and update balances in the Offset System. Rather, the Department obtains a commercial warrant tape and runs its accounts receivable against that listing. If there is a match, then they send that receivable to the Offset System.

 OFFSET RECOVERIES

We also analyzed our sample of receivables to determine how much might have been recovered if agencies had submitted the 192 untimely receivables in a timely manner or had submitted the 330 eligible receivables which were not submitted. We determined that offsets could have been taken in 121 of these 522 receivables (23 percent), for a potential recovery of $1,019,525.

Most of the potential recoveries, $1.006 million, were from 88 of the 330 receivables which were never submitted to Offset. The remaining $13,915 in potential recovery was lost because the 192 receivables were not submitted in a timely fashion. For 33 of the 192 receivables, payments were made to debtors between the time the receivable was one year old and the time when it was submitted to Offset. Had the receivables been submitted within one year, these payments would have been available for offset.

A large portion of the potential recoveries was associated with DCFS receivables. Thirty-two debts from DCFS that were not submitted to the Offset System or submitted after one year had State payments sufficient to recover $947,242 in debt owed to the State. In the OAG Compliance Audit for the two years ended June 30, 1996, DCFS was cited for failure to monitor contract advances and accounts receivable related to Board receivables. In early 1998, DCFS began using its internal offset system to adjust payments to these providers and reported recovering $675,000 of the $947,242.

However, a DCFS official noted that 12 providers to whom overpayments totaling more than $376,000 were made no longer do business with the Department. The Department is considering placing these receivables with the Comptroller’s Offset System.

Most of the State payments which could have been recovered were either from income tax refunds or commercial vendor payments processed by the Comptroller. However, there was an instance where a State employee could have had payroll dollars offset had DCFS submitted the receivable and an instance where a lottery winner would have had a $2,500 prize offset had the Department of Employment Security submitted the account receivable.

OTHER FINDINGS

• Lack of Identification Numbers: The ability of the Comptroller to offset State warrants is dependent upon having a valid debtor’s identification number (SSN or FEIN). Inability to provide an identification number makes the matching of warrants and debtors impossible. Eighteen sample cases with debt totaling over $684,000 could not be submitted to the Offset System due to a lack of an identification number. (Report pages 21-22)

• Offsets Against State Agencies: The Comptroller withheld funds for debts that were submitted to the Offset System by one State agency against another State agency in two of the cases sampled. The State Collection Act does not prohibit State agencies from using the Offset System to recover debts owed to them by another State agency. However, the Comptroller’s procedures which provide guidance to agencies regarding the referral of debt to the Offset System excludes claims against another State agency. Comptroller officials stated they saw no legal reason why offsets could not be taken against payments to other State agencies. The officials stated that they will be making some changes in the Comptroller’s administrative rules and will look at this issue. (Report page 23)

• Inaccurate Receivables Balances in the Offset System. The University of Illinois erroneously submitted $4.8 million of claims that were already in the Offset System. Almost $624,000 in child support receivables were incorrectly entered into the Offset System due to an error on a tape submitted by the Department of Public Aid. Comptroller personnel corrected the accounts in April 1998. Inaccuracy in the amount of a debt in the System increases the risk that too much or too little is recovered when a warrant is paid to a debtor of the State. (Report pages 26-28)

• Reporting of Receivables: The University of Illinois and the Department of Revenue had instances where receivable amounts reported to the Comptroller were either understated or overstated. Correct receivable information is important to accurately portray the financial position of the State. (Report pages 25-26)