Chapter 1 General Government - The California Performance Review

GG 04Use Contracts InformationSystem to Increase DebtCollection Through OffsetsThe California Performance ReviewSummaryUntil recently, there has been no effective method for determining when money owed by astate agency to a vendor can be used to offset debt that the vendor owes to the state. This isbecause there has been no centralized listing of state vendor agreements. The recentlyimplemented State Contract and Procurement Registration System can provide thisinformation but there is no requirement to use it to determine if an offset against payments canbe made.BackgroundThe State Administrative Manual requires an agency owed money to send three written contactletters to request payment. If payment is not received, the agency may apply for a discharge ofaccountability (authority to stop pursuing the debt) with the State Controller’s Office. TheState Controller’s Office reviews the state agency’s application, which must contain an analysisof the costs and benefits of the following alternative collection actions:• Offset Procedure: An offset is the interception and collection of amounts owed by otherdepartments to the debtor.• Court Ordered Settlements: There may be situations where it is cost-effective to seekcourt judgments against debtors.• Collection Agencies: Departments may consider contracting with another departmentthat has a collection unit or with an private collection agency.• Sale of the Accounts Receivable: Departments are authorized to sell accounts receivablesto private persons or entities who then try to collect the debt. 1Until recently, there was no effective method of implementing the first collection alternative(offset procedure) because there was no centralized accounting system for the state’s vendoragreements. Effective July 1, 2003, however, all state agencies were required to enterinformation via the Internet for all purchases or contracts worth more than $5,000 into the StateContract and Procurement Registration System. 2 With a user identification number, thiscontract registration system can be used to identify contracts that have a vendor who owes thestate money. Although the information is now available, the system has never been utilized forthis purpose. Consequently, most agencies are not aware it is available.A Government for the People for a Change 21