Speaking for Nevada - September 2002

Pursuing Debts Owed the State

Nevada Leverages Integrated System

by Cathy Augustine

Changes in technology, process and law are converging to enable the state controller to identify and collect debt owed the state by businesses and individuals. That debt – currently estimated at $132 million – would more than offset the $121.5 million revenue shortfall anticipated over the course of the 2001-2003 biennium.

In 1997, a legislative audit report entitled Management and Collection of the State’s Accounts Receivable stated: "As state government is asked to do more with limited resources, the collection of amounts owed is more critical than ever. However, Nevada does not have a comprehensive system to effectively manage its accounts receivable to ensure it maximizes collections…agencies seldom share information on debtors."

Recommendations included, "The Department of Administration, with the assistance of the Offices of State Controller and Attorney General, should provide guidance and oversight to ensure agencies: maintain sufficient and reliable data on the effectiveness of collection efforts; establish policies and procedures for the management and collection of the state’s receivables; coordinate collection efforts; and obtain statutory authority to use effective collection techniques."

My office has aggressively undertaken the role of consolidating the collection of past-due receivables for all state agencies in order to maximize collections, ensure amounts owed are paid and establish a system for measuring, reporting and monitoring performance of agencies and vendors.

Several recent developments have facilitated this effort:

Technology: Nevada is in the midst of implementing an integrated financial system (IFS) that enables financial communication between agencies that did not exist before. Employees in 400 state agency divisions will be trained over the next year.

Process: The warrant-offset project identifies debtors who bill the state for goods or services. When a vendor owes the state, a hold status is activated so that any payment voucher processed to that vendor is rejected by the system. The amount of the intercepted payment is transferred to the agency owed. When fully functional, the Advanced Receivable features of the IFS will automate the warrant intercept process. Vendors may challenge the payment offset and request a hearing as to why the state controller should not make the garnishment.

Public-Private Partnerships: Last year, the Nevada State Board of Examiners approved contracts between the state controller and two private debt collection companies – OSI Collection Services, Inc. and RecoverMetrics. OSI, the largest provider of accounts receivable management in the United States, handles debts under $25,000. RecoverMetrics uses forensic loss-recovery techniques to recover corporate debts over $25,000. The forensic process includes following money trails, online asset searches to calculate past, as well as current, economic worth and a review of financial records to determine related parties, diverted funds, or commingled assets.

Laws: Legislation requested by the controller’s office has also contributed to streamlining debt collection for the state. The first law, passed in 1999, required all state agencies to report receivables to the controller’s office each quarter, making it possible for the first time to estimate total receivables due the state. The second measure, passed in 2001, standardized the management and collection of the state’s delinquent receivables.

 The bill included the authority to pass on the cost of collection to the debtor and required the controller’s office to prepare and maintain a list of debtors to the state for public inspection. It also established a consistent statewide returned check assessment and a pilot program between the controller’s office, the Department of Motor Vehicles and the Division of Wildlife designed to improve the collection of debts by restricting, or suspending, registrations, licenses and permits issued by the state until the debt is satisfied. The most significant section of this legislation authorized the controller’s office to act as the centralized point of collection for all state agencies. We now represent 14 agencies and/or boards through interagency agreements. Debts turned over to my office are evaluated, referred to the proper collection vendor and monitored. There is no fee for our service.

Nevada, while not as devastated as other states, is experiencing lagging revenues. Anticipating potential revenue problems, we began to implement these recovery efforts and became operational when our need became the greatest. Significant changes have also been made in the tracking and recovering of delinquent receivables. The Nevada State Controller’s Office will continue to act as the "watchdog" of our state finances, identifying and collecting debt owed the state and finding new ways to reduce spending, increase revenues, and make the controller’s office and state government more efficient.