[Federal Register Volume 59, Number 83 (Monday, May 2, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10219]
[[Page Unknown]]
[Federal Register: May 2, 1994]
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FEDERAL LABOR RELATIONS AUTHORITY
Farmers Home Administration
7 CFR Part 1951
RIN 0575-AB55
Offsets of Federal Payments to FmHA Borrowers
AGENCY: Farmers Home Administration, USDA.
ACTION: Proposed rule.
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SUMMARY: The Farmers Home Administration (FmHA) proposes to amend its
regulations on offsets of Federal payments to FmHA borrowers by
removing repetitious directions and ambiguous guidance used by FmHA
field offices to determine salary offset feasibility. The intended
effect of this action is to add further guidance on salary offset
eligibility criteria and to clarify the language of the regulation.
DATES: Comments must be submitted on or before July 1, 1994.
ADDRESSES: Submit written comments in duplicate to the Office of the
Chief, Regulations Analysis and Control Branch, FmHA, USDA, South
Building, room 6348, 14th and Independence Avenue, SW., Washington, DC
20250. All written comments made pursuant to this notice will be
available for public inspection during regular work hours at the above
address.
FOR FURTHER INFORMATION CONTACT: Jeanne Hudec, Financial Analyst, FmHA,
USDA, Ag Box 0724, Washington, DC 20250-0724, telephone (202) 720-4356.
SUPPLEMENTARY INFORMATION:
Classification
We are issuing this proposed rule in conformance with Executive
Order 12866, and we have determined that it is not a ``significant
regulatory action.'' Based on information compiled by the Department,
we have determined that this proposed rule: (1) Would have an effect on
the economy of less than $100 million; (2) would not adversely affect
in a material way the economy, a sector of the economy, productivity,
competition, jobs, the environment, public health or safety, or State,
local, or tribal governments or communities; (3) would not create a
serious inconsistency or otherwise interfere with an action taken by
another agency; (4) would not alter the budgetary impact of
entitlements, grants, user fees, or loan programs or rights and
obligations of recipients thereof; and (5) would not raise novel legal
or policy issues arising out of legal mandates, the President's
priorities, or principles set forth in Executive Order 12866.
Paperwork Reduction Act
The information collection requirements contained in this
regulation have been approved by the Office of Management and Budget
(OMB) under the provisions of 44 U.S.C. chapter 35 and have been
assigned OMB control number 0575-0119 in accordance with the Paperwork
Reduction Act of 1980 (44 U.S.C. 3507). This proposed rule does not
revise or impose any new information collection or recordkeeping
requirement from those approved by OMB. Please send written comments to
the Office of Information and Regulatory Affairs, OMB, Attention: Desk
Officer for USDA, Washington, DC 20503. Please send a copy of your
comments to Jack Holston, Agency Clearance Officer, USDA, FmHA, Ag Box
0743, Washington, DC 20250.
Environmental Impact Statement
This document has been reviewed in accordance with 7 CFR Part 1940,
Subpart G, ``Environmental Program.'' FmHA has determined that this
action does not constitute a major Federal action significantly
affecting the quality of the human environment and, in accordance with
the National Environmental Policy Act of 1969, Public Law 91-190, an
Environmental Impact Statement is not required.
Intergovernmental Review
The programs to which this regulation may apply are listed in the
Catalog of Federal Domestic Assistance under the following:
10.404 Emergency Loans
10.405 Farm Labor Housing Loans and Grants
10.406 Farm Operating Loans
10.407 Farm Ownership Loans
10.410 Low Income Housing Loans
(Section 502--Rural Housing Loans)
10.411 Rural Housing Site Loans
(Section 523 and 524 Site Loans)
10.414 Resource Conservation and Development Loans
10.415 Rural Rental Housing Loans
10.416 Soil and Water Loans (SW Loans)
10.418 Water and Waste Disposal Systems for Rural Communities
10.419 Watershed Protection and Flood Prevention Loans
10.420 Rural Self-Help Housing Technical Assistance
(Section 523--Technical Assistance)
10.421 Indian Tribes and Tribal Corporation Loans
10.422 Business and Industrial Loans
10.423 Community Facility Loans
10.428 Economic Emergency Loans
10.433 Housing Preservation Grants
10.434 Nonprofit Corporations Loan and Grant Program
10.435 Agricultural Loan Mediation Program
Programs listed under numbers 10.404, 10.406, 10.407, 10.410,
10.417, 10.421, 10.428, and 10.435 are not subject to the provisions of
Executive Order 12372 which requires intergovernmental consultation
with State and local officials. (7 CFR part 3015, subpart V, 48 FR
29115, June 24, 1983.)
Programs listed under numbers 10.405, 10.411, 10.414, 10.415,
10.416, 10.418, 10.419, 10.420, 10.422, 10.423, 10.427, 10.433, and
10.434 are subject to the provisions of Executive Order 12372 (7 CFR
part 3015, subpart V, 48 FR 29112, June 24, 1983; 49 FR 22675, May 31,
1984; 50 FR 14088, April 10, 1985.)
Civil Justice Reform
The proposed regulation has been reviewed in light of Executive
Order 12778 and meets the applicable standards provided in sections
2(a) and 2(b)(2) of that Order. Provisions within this part which are
inconsistent with state law are controlling. All administrative
remedies pursuant to 7 CFR part 1900 subpart B must be exhausted prior
to filing suit.
Regulatory Flexibility Act
The Administrator of Farmers Home Administration has determined
that this action will not have a significant economic impact on a
substantial number of small entities because it contains normal
business recordkeeping requirements and minimal essential reporting
requirements.
Background Information
FmHA has an obligation to protect the Government's interest by
collecting the maximum amount possible within a reasonable period of
time. Therefore, FmHA proposes to weigh the long-term collectibility of
the debt through offset against whether to accept a settlement offer
and release of an existing debt.
The current procedures to establish salary offset in FmHA
Instruction 1951-C, Sec. 1951.111 contain repetitious directions and
ambiguous guidance for FmHA field offices to determine salary offset
feasibility. Therefore, FmHA proposes to amend these instructions by
retaining the Authorities and Definitions paragraphs in Sec. 1951.111
and moving the remainder of this section to Secs. 1951.112 through
1951.117.
The same basic information that was in Sec. 1951.111, paragraphs
(c) through (s) will remain in the new sections. However, some
information will be deleted or reorganized. For example, the current
introduction includes a reference that if a Federal salary was listed
on the Farm and Home Plan for a farmer programs borrower and this
income used for purposes other than payment on the FmHA loan, salary
offset would not be considered. This reference is being deleted because
obtaining a salary offset would protect the Government's interest and
might eventually bring the loan current, thus helping the borrower
retain the farming operation.
List of Subjects in 7 CFR Part 1951
Account servicing, Loan programs--agriculture, Accounting, Credit,
Low and moderate income housing loans--servicing.
Therefore, Chapter XVIII, Title 7, Code of Federal Regulations is
proposed to be amended as follows:
PART 1951--SERVICING AND COLLECTIONS
1. The authority citation for part 1951 continues to read as
follows:
Authority: 7 U.S.C. 1989; 42 U.S.C. 1480; 5 U.S.C. 301; 7 CFR
2.23; 7 CFR 2.70.
Subpart C--Offsets of Federal Payments to FmHA Borrowers
2. Section 1951.101 is amended by adding a new fourth sentence to
read as follows:
Sec. 1951.101 General.
* * * However, offsets may not be sought against full-time active
duty members of the Armed Forces whose FmHA loans are covered by the
Soldiers' and Sailors' Civil Relief Act. * * *
3. Section 1951.103 is amended by revising paragraphs (b) and (d),
by adding new sixth and seventh sentences preceding the last sentence
of paragraph (e), and adding paragraph (i) to read as follows:
Sec. 1951.103 Procedures for FmHA-initiated administrative offset.
(a) * * *
(b) Before requesting offset from another Federal agency, the
debtor must have been given at least 30-days notice using FmHA Form
Letter 1951-C-1 and given the rights set out in this section. Also, to
be eligible for administrative offset, an FmHA borrower of a Farmer
Programs loan (as defined in 7 CFR 1951.906) must have completed all
primary servicing options available at the time of offset processing,
any appeals concerning that servicing have been concluded, and the
borrower's account has been accelerated. For borrowers other than
Farmer Programs borrowers, the debtor's account must have been
accelerated and all appeals concluded. A delinquent amount does not
have to be reduced to judgment or be undisputed before offset can be
used, and the payment does not have to be covered by an FmHA
instrument.
* * * * *
(d) Administrative offset will be used only where it is feasible.
Administrative offset can be determined feasible even though
collections by offset are less than the annual interest accrual.
Administrative offset is not feasible where, for example, the cost to
process the offset exceeds the amount collectible. Administrative
offset will not be requested for delinquent amounts of less than $100.
(e) * * * Federal Crop Insurance Corporation and its associated
insurance companies cannot honor administrative offset requests to
garnish crop insurance claims. Do not initiate administrative offset on
accounts that have been referred to the Department of Justice for
litigation. * * *
* * * * *
(i) The recovery potential from administrative offsets should be
considered when evaluating debt settlement options.
4. Section 1951.104 is amended by revising the reference ``FmHA
Instruction 2018-E'' to ``FmHA Instruction 2018-F'' in paragraph
(a)(1), revising the word ``ask'' to ``request'' and adding the words
``in writing'' after the word ``request'' in the introductory text of
paragraph (b), removing the word ``Request'' and inserting the phrase
``Make a request for'' in its place in paragraph (b)(2), adding the
words ``in writing'' after the word ``responds'' in the first sentence
of paragraph (e), revising the first sentence in the introductory text
of paragraph (a), and adding new sentences before and after the fourth
sentence of paragraph (g), and revising the word ``regulation'' to
``subpart'' in the first sentence and revising the second sentence of
paragraph (j) to read as follows:
Sec. 1951.104 Procedures for FmHA-initiated offset.
(a) The use of administrative offset will be initiated by sending
FmHA Form Letter 1951-C-1 to the debtor. * * *
* * * * *
(g) * * * The farm operating expenses listed in
Sec. 1962.17(b)(2)(ii) of subpart A of part 1962 of this chapter are
not included in this determination of essential family living expenses
for administrative offset purposes. * * * Where available, the County
Supervisor should get documentary evidence such as bills or receipts
from the borrower that support the hardship claim. * * *
* * * * *
(j) * * * The borrower may request a hearing if the borrower
believes the previous offset actions by FmHA are contrary to the
administrative offset procedures found in Secs. 1951.103 through
1951.104 of subpart C of part 1951 of this chapter.
5. Section 1951.105(b)(3) is amended by adding the words ``or
Exhibit L'' after the word ``Exhibit B'' in the second sentence and
adding a sentence at the end of the paragraph to read as follows:
Sec. 1951.105 Procedures for taking funds by administrative offset.
* * * * *
(b) * * *
(3) * * * Prepare FmHA Form Letter 1951-5 to request offset
refunds.
* * * * *
6. Section 1951.111 is amended by revising the introductory text,
paragraph (b)(1), introductory text of paragraph (b)(2)(ii), and
(b)(3), and removing paragraphs (c) through (s) to read as follows:
Sec. 1951.111 Salary offset.
Salary offset may be used by FmHA to collect delinquent debts from
borrowers or debtors who are Federal employees. It may also be used by
other Federal agencies to collect delinquencies or other debts owed to
them by FmHA employees, excluding County Committee members.
Administrative offset rather than salary offset, will be used to
collect money from Federal and military retirement benefits. Decisions
made under the following sections are not appealable under subpart B of
part 1900 of this chapter. This section establishes policies and
procedures to implement salary offset.
* * * * *
(b) Definitions--(1) Certifying Officials--State Directors; the
Assistant Administrator, Finance Office; and the Assistant
Administrator for Budget, Finance and Management, National Office.
(2) * * *
(ii) Other debts--An amount owed to the United States by an
employee for salary overpayments, underwithholding of amounts payable
for life and health insurance, etc. Also included are monetary losses
where the employee has been determined to be liable due to the
employee's negligent, willful, unauthorized or illegal acts, including
but not limited to:
* * * * *
(3) Defalcation account--An account established in the Finance
Office for other debts (see paragraph (b)(2)(ii) of this section) owed
the Federal government by an employee or former employee.
* * * * *
7. Sections 1951.112 through 1951.117 are added to read as follows:
Sec. 1951.112 Standards for initiating salary offset.
Salary offset will not be initiated until after all servicing
options available have been utilized. The debt does not have to be
reduced to judgment or be undisputed, and the payment does not have to
be covered by a security agreement.
(a) Feasibility of salary offset. Certifying Officials must
determine on a case-by-case basis if salary offset is feasible. If an
offset is feasible, review paragraph (b) of this section to determine
if a borrower is ineligible, and follow Sec. 1951.113 of this subpart
to establish the offset. If the Certifying Official determines that
salary offset is not feasible, the reasons supporting this decision
will be documented in the debtor's running case record in the case of
delinquent debt, or in the ``For Official Use Only'' file in cases of
other debt. An offset is feasible when the following situations apply:
(1) The cost to process the offset should not exceed the amount the
Certifying Official believes would be collectible by the use of salary
offset. Salary offset can be determined feasible even though
collections by offset are less than the annual interest accrual. County
Committee members are exempt from salary offset because the amount
collected by offset would be so small as to be impractical.
(2) The debt should be collected by lump-sum when possible.
(3) Payments may be made in installments not to exceed 15 percent
of the debtor's disposable pay, unless the debtor agrees to a larger
amount. If possible, the installment payment will be sufficient in size
and frequency to liquidate the debt in approximately 3 years. The
offset should bear a reasonable relation to the size of the debt and
the debtor's ability to pay.
(4) Installment payments of less than $25 per pay period or $50 per
month will be accepted only in the most unusual of circumstances.
(b) Borrowers ineligible for salary offset. All Federal employee
debtors are eligible for salary offset unless they meet one or more of
the following criteria:
(1) Account has been discharged in bankruptcy or is under the
jurisdiction of a bankruptcy court and the debt has not been
reaffirmed. Existence of a bankruptcy action pending flag is not a
determining factor.
(2) Account has been referred to OGC for foreclosure and, based on
the legal opinion required by Sec. 1951.103(c) of this subpart, a
collection by offset would jeopardize the litigation under State law.
Existence of a foreclosure action pending flag is not a determining
factor.
(3) Account has a delinquency workout agreement in effect and
payments under the agreement are current.
(4) The debtor is a Farmer Programs borrower and has not completed
all primary servicing options available at the time offset is
considered and/or any appeals concerning this servicing have not been
concluded.
(5) Account is under a moratorium.
(6) Account has been paid current, paid in full, or otherwise
satisfied.
(7) Rescheduling is in process.
(8) Borrower is an active duty member of the armed forces whose
FmHA loan is covered by the Soldiers' and Sailors' Civil Relief Act.
(9) Account is past due by less than $100, or if the debtor has
multiple loans, the net amount past due is less than $100.
(10) Account has a suspend code.
(11) Account is current under an SAA.
(12) Account has been referred to the Department of Justice for
litigation.
Sec. 1951.113 Procedures for initiating offset.
(a) Notice to debtor. After the Certifying Official determines that
salary offset is feasible, FmHA Form Letter 1951-C-4 will be sent
within 15 calendar days after that determination. This form letter will
notify the debtor of intended salary offset at least 30 days before the
salary offset begins. Personally deliver FmHA Form Letter 1951-C-4 to
the debtor or send by certified mail, return receipt requested. Also
send a copy by regular mail on the same day. If the certified mail
receipt is returned as being refused, the date the debtor received the
letter will be established and the time limits set out in FmHA Form
Letter 1951-C-4 will run from that date. If delivery by certified mail
is not accomplished, FmHA will assume that the debtor received the
letter by regular mail on the day the certified mail was refused or was
unable to be delivered. If both the certified and regular mail letters
are returned as undeliverable, contact the Financial and Management
Analysis Division (FMAD) at the National Office for guidance.
(b) Debtor's response to the notice.
(1) Review records. If a debtor responds to FmHA Form Letter 1951-
C-4 by asking to review and copy FmHA's records relating to the debt,
the Certifying Official will promptly respond by sending a letter which
tells the debtor the location of the debtor's FmHA files and that the
files may be reviewed and copied within the next 30 days. Copying costs
(see FmHA Instruction 2018-F available in any FmHA office) will be set
out in the letter, as well as the hours the files will be available
each day. If a debtor asks to have FmHA copy the records, a copy will
be made within 30 days of the request.
(2) Repay debt. If a debtor responds to FmHA Form Letter 1951-C-4
by offering to repay the debt, the offer may be accepted by the
Certifying Official, if it would be in the best interest of the
Government. FmHA Form Letter 1951-C-8 will be used if a repayment offer
for an FmHA loan or grant is accepted. Upon receipt of an offer to
repay, the Certifying Official will delay instituting salary offset
until a decision is made on the repayment offer. Within 60 days after
the initial offer to repay was made, the Certifying Official must
decide whether to accept or reject the offer. This decision will be
documented in the running case record or the ``For Official Use Only''
file, as appropriate, and the debtor will be sent a letter which sets
out the decision to accept or reject the offer to repay. If the offer
is rejected, it should be based upon a realistic budget or Farm and
Home Plan and according to the servicing regulations for the type of
loan(s) involved.
(3) Request hearing. If a debtor responds within 15 days from
receipt of FmHA Form Letter 1951-C-4 by asking for a hearing on FmHA's
determination that a debt exists and/or is due, or on the percentage of
net pay to be deducted each pay period, the Certifying Official will
notify the debtor in accordance with this subpart and request the
debtor's case file or the ``For Official Use Only'' file.
(4) Change offset payment amount. If a debtor wants to have more or
less than 15 percent of the disposable pay sent to FmHA, FmHA Form
Letter 1951-C-8 must be prepared and signed by the debtor, approved by
the Certifying Official, and a copy placed in the debtor's case file or
the ``For Official Use Only'' file. The original form letter will be
forwarded with FmHA Form Letter 1951-C-10 when requesting the salary
offset. (See Sec. 1951.115 (a) of this subpart.)
(5) Request debt settlement. A debtor who is an FmHA borrower may
request debt settlement at any time (the account does not have to be in
collection-only status or be an inactive account for which there is no
security). The Certifying Official must inform the borrower of how to
apply for debt settlement. Any application will be considered
independently of the salary offset. A salary offset should not be
delayed because the borrower applied for debt settlement.
(6) Time limits. The time limits set in FmHA Form Letter 1951-C-4
and in paragraphs (b)(1), (2), and (3) of this section run
concurrently. For example, if a debtor asks to review the FmHA file and
offers to repay the debt, the debtor cannot take 30 days to ask to
review the file and then take another 30 days to offer to repay. The
request to review the file and the offer to repay must both be made
within 30 days of the date the debtor receives the notification letter.
(7) Negotiated grievance procedure. If an employee is included in a
bargaining unit which has a negotiated grievance procedure that does
not specifically exclude salary offset proceedings, the employee must
grieve the matter in accordance with the negotiated procedure in lieu
of a hearing as set forth in Sec. 1951.114 of this subpart. Employees
who are not covered by a negotiated procedure must use the salary
offset proceedings as outlined in FmHA Form Letter 1951-C-4. The
employee must be informed, in writing, which procedure to follow and,
as appropriate, reference should be made to the appropriate sections of
the negotiated agreement.
Sec. 1951.114 Salary offset hearings.
(a) Debtor's request for a hearing. The debtor must file a written
petition requesting a hearing. This petition must have the original
signature of the debtor, be sent to the Certifying Official who issued
FmHA Form Letter 1951-C-4, and be received and date stamped at the
Certifying Official's office no later than 15 days after the debtor
received the form letter. Petitions received from debtors after the 15-
day time limitation expires will be accepted only if the debtor can
show the delay was caused by circumstances beyond his/her control.
(1) Valid reasons for a hearing. The debtor's petition must fully
identify and explain all the information and evidence that supports
his/her position. If the request is not valid, a hearing should not
occur. The debtor's request for a hearing must be based on the
following reasons only:
(i) The debtor challenges the existence of the debt;
(ii) The debtor challenges the amount of the debt; and/or
(iii) The debtor challenges the percentage of his/her disposable
pay to be deducted each pay period.
(2) Debtor notification. Certifying Officials are responsible for
determining if the debtor's petition for a hearing has been submitted
in a timely fashion and lists valid reasons for a hearing. Certifying
Officials are required to provide written notification to the debtor of
the acceptance or non-acceptance of the debtor's petition for a
hearing. An acceptance notice will state that the debtor's case file
has been forwarded to the National Office to be given to the hearing
officer and that acceptance of the petition for hearing will put a hold
on any offset collections until the results of the hearing are known.
Any payments collected in error due to untimely or delayed filing
beyond the debtor's control will be refunded unless there are
applicable contractual or statutory provisions to the contrary.
(3) Send hearing request to the National Office. If the Certifying
Official has accepted the debtor's petition for a hearing and has
notified the debtor of this acceptance, send a copy of the debtor's
case file, including the acceptance letter and the original letter
requesting the hearing to the National Office, FMAD.
(b) Hearing officers. The hearing must be conducted by a hearing
officer who is either an ALJ or someone who is not an employee of the
USDA. An ALJ is normally unavailable to handle salary offset hearings
in a timely manner. Therefore, FMAD will arrange for a hearing officer
when the debtor's case file is received. The hearing officer will
contact the debtor as to when and where the hearing will take place and
whether or not the hearing will be a documentary review of the case
file or in person.
(c) Hearings. (1) The hearing will be based on written submissions
and documentation provided by the debtor and FmHA unless:
(i) The debtor requests reconsideration of the debt and the hearing
officer determines that the question of the indebtedness cannot be
resolved by a review of the documentary evidence; for example, when the
validity of the debt turns on an issue of credibility or truth.
(ii) The hearing officer determines that an oral hearing is
appropriate.
(2) Oral hearings may be conducted by conference call at the
request of the debtor or at the discretion of the hearing officer. The
hearing officer's determination that the offset hearing is on the
written record is final and is not subject to review.
(3) The hearing officer will issue a written decision not later
than 60 days after the filing of the petition requesting the hearing,
unless the debtor requests and the Certifying Official grants a delay
in the proceedings. The written decision will state the facts
supporting the nature and origin of the debt, the hearing officer's
analysis, findings and conclusions as to the amount and validity of the
debt, and repayment schedule. Both the debtor and FmHA will be provided
with a copy of the hearing officer's written decision on the debt.
Sec. 1951.115 Procedures for requesting offset from an employing
agency.
(a) Offset request letter. FmHA Form Letter 1951-C-10 will be
prepared, signed and submitted by the Certifying Official to the
National Office, FMAD, for coordination and forwarding to the debtor's
employing agency if:
(1) The borrower does not respond to FmHA Form Letter 1951-C-4
within 30 days.
(2) The borrower responds to FmHA Form Letter 1951-C-4 and:
(i) Has had an opportunity to review the file, if requested within
30 days of receipt;,
(ii) Has received a hearing, if requested within 15 days of
receipt; and
(iii) A decision has been made by the hearing officer to uphold the
offset.
(b) Finance Office copy. A copy of FmHA Form Letter 1951-C-10 will
be sent to the Finance Office, St. Louis, MO 63103, Attn: Accounts
Settlement Unit.
(c) Monthly report. State Offices shall prepare a monthly report
showing salary offset activity. The report should list State, month,
debtor name, case number, date FmHA Form Letter 1951-C-4 was sent, date
a hearing was requested (if any), date FmHA Form Letter 1951-C-10 was
sent, date the offset started, and the average amount collected through
salary offset per month. The latter two items can be found on the on-
line history screen. After requesting an offset, periodically check to
see if the offset has started. Send the report by the 10th of the month
for the preceding month to the National Office, FMAD.
(d) Offset percentage. If the debtor and FmHA have agreed to have
more or less than 15 percent of the disposable pay sent to FmHA, a copy
of the debtor's letter (FmHA Form Letter 1951-C-8) authorizing this
must be attached to FmHA Form Letter 1951-C-10.
(e) Offset deductions. Deductions will be made only from basic pay,
incentive pay, retainer pay, or in the case of an employee not entitled
to basic pay, other authorized pay. If there is more than one salary
offset, the maximum deduction for all salary offsets against an
employee's disposable pay is 15 percent unless the employee has agreed
in writing to a greater amount.
(f) Payment notification. Field offices will be notified of
payments received from salary offset by referring to the on-line
history screen for that debtor.
(g) Application of payments, refunds and overpayments.
(1) If a debtor is delinquent or indebted on more than one FmHA
loan or debt, amounts collected by offset will be applied as determined
by FmHA. The check date will be used as the date of credit in applying
payments to the borrower's accounts.
(2) If a court or agency orders FmHA to refund the amount obtained
by salary offset, a refund will be requested promptly by the Certifying
Official in accordance with the order by sending FmHA Form Letter 1951-
5 to the Finance Office. Processing FmHA Form Letter 1951-5 in the
Finance Office will cause a refund to be sent to the debtor through the
County Office or other appropriate FmHA office. Unless required by law,
refunds shall not bear any interest.
(3) If a debtor does not request a hearing within the required time
and it is later determined that the delay was due to circumstances
beyond the debtor's control, any amount collected before the hearing
decision is made will be refunded promptly by the Certifying Official
in accordance with paragraph (g)(2) of this section.
(4) If FmHA receives money through an offset but the debtor is not
delinquent or indebted at the time or the amount received is in excess
of the delinquency or indebtedness, the entire amount or the amount in
excess of the delinquency or indebtedness will be refunded promptly to
the debtor by the Certifying Official in accordance with paragraphs (g)
(1) and (2) of this section.
(h) Adjustment in rate of repayment. (1) When an employee who is
indebted receives a reduction in basic pay that would cause the current
deductions to exceed 15 percent of disposable pay, and the employee has
not consented in writing to a greater amount, the offset will be
reduced to 15 percent of the new amount of disposable pay. Upon an
increase in basic pay which results in the current deductions to be
less than the specified percentage, the offset will be increased
accordingly. In either case, when a change is made the employee should
be notified in writing by the employing agency.
(2) When an employee is being offset and has an existing reduced
repayment schedule because of financial hardship, the creditor agency
may arrange for a new repayment schedule, taking into account the
offset amount.
(i) Interest, penalties and administrative costs. Additional
interest, penalties, and administrative costs will be assessed on
delinquent loans only in accordance with FmHA regulations permitting
such charges.
(j) Cancellation of offset. If a debtor's name has been submitted
to another agency for offset and the debtor's account is brought
current or otherwise satisfied, the Certifying Official will notify the
National Office, FMAD, that the offset is being canceled. The
Certifying Official will write a letter to the employer, at the address
confirmed by FMAD, identifying the debtor by name and social security
number and state that salary offset should be canceled. A copy of the
cancellation document will be sent to the debtor, the Finance Office,
Attn: Account Settlement Unit, and to FMAD.
(k) Liquidation from final checks. Upon the determination that an
employee owing a debt to FmHA is to retire, resign, or employment
otherwise ends, the Certifying Official should immediately telephone
FMAD with the appropriate employee identification and amount of the
debt. FMAD will request the debt be collected from final salary/lump
sum leave or other funds due the employee, and, if necessary, to put a
hold on the retirement funds. Collection from retirement funds will be
in accordance with the Administrative Offset procedures in
Secs. 1951.103 through 1951.105 of subpart C of part 1951 of this
chapter.
(l) Non-waiver of rights. An employee's involuntary payment of all
or any portion of the debt collected under 5 U.S.C. 5514 will not be
construed as a waiver of any rights which the employee may have under 5
U.S.C. 5514 or any other provision of contract or law, unless there are
statutory or contractual provisions to the contrary.
Sec. 1951.116 Establishing offsets for other debts of FmHA employees/
former employees.
(a) Agency/National Finance Center (NFC) responsibility for other
debts. (1) FmHA will inform NFC about other indebtedness by
transmitting to NFC FmHA Form Letter 1951-C-10. The NFC will process
the documents through the Payroll/Personnel System, calculate the net
amount of the adjustment and generate a salary offset notice. This
notice will be sent to the employee's employing office along with a
duplicate copy for the FmHA's records. The FmHA is responsible for
completing the necessary information and forwarding the employee's
notice to the employee.
(2) Other indebtedness falls into two categories:
(i) An agency-initiated indebtedness (i.e. improper personal
telephone calls, property damages, etc.).
(ii) An NFC-initiated indebtedness (i.e. duplicate salary payments,
etc.). The NFC will send the salary offset notice to the employing
office.
(b) Establishing employee or former employee defalcation accounts
and non-cash credits to borrower accounts. In cases where a borrower
made a payment on an FmHA account(s) and, due to theft, embezzlement,
fraud, negligence, or some other action on the part of an FmHA employee
or employees, the payment is not transmitted to the Finance Office for
application to the borrower's account(s), certain accounting actions
must be taken by the Finance Office to establish non-cash credits to
the borrower's account and an employee defalcation account.
(1) The Certifying Official will advise the Assistant
Administrator, Finance Office by memorandum to establish a defalcation
account. The memorandum must state the following information:
(i) Employee's name (or former),
(ii) Social Security Number (SSN),
(iii) Present or last known address,
(iv) Date of payment, and
(v) Amount of the defalcation account.
(2) If a non-cash credit to a borrower's account(s) is required,
the letter to the Finance Office will include:
(i) Borrower's name and case number,
(ii) Fund code and loan code,
(iii) Date and amount of missing payment,
(iv) Copy of receipt issued for the missing payment, and
(v) Name of employee who last had custody of the missing funds.
(3) To assist and assure proper accounting for defalcation accounts
and non-cash credits, the request should be made at the same time.
Should requests be made separately, be sure to identify appropriately.
(4) The Certifying Official shall furnish a copy of the memorandum
and supporting documentation for paragraphs (b)(1) and (2) of this
section to the Deputy Administrator for Management for distribution to
the FMAD and Employee Relations Branch, Personnel Division.
Sec. 1951.117 Procedures for salary offset against FmHA employees who
owe other Federal agencies.
(a)Coordination with other agencies. When an employee of FmHA owes
a debt to another Federal agency, salary offset may be used only when
the Federal agency certifies that the person owes the debt and that the
Federal agency has complied with its regulations. The request must
include the creditor agency's certification as to the indebtedness,
including the amount, and that the agency has satisfied the
requirements of 5 U.S.C. 5514 with regard to the employee. When a
request for offset is received, FmHA will notify the employee and NFC
and arrange for offset.
(b) Deductions by the NFC. The NFC will automatically deduct the
full amount of the delinquency or indebtedness if less than 15 percent
of disposable pay or 15 percent of disposable pay if the delinquency or
indebtedness exceeds 15 percent, unless the creditor agency advises
otherwise. Deductions will begin the second pay period after the 30-day
notification period has expired unless FmHA issues the notice. If FmHA
issues the notice, the NFC will begin deductions on the first pay
period after receipt of the Form AD-343, ``Payroll Action Request.''
8. Section 1951.121 is amended by revising the heading from
``Internal Revenue Service (IRS) offset'' to ``IRS offset.''
9. Section 1951.122 is amended by revising the reference ``FmHA
Instruction 1950-C'' to ``subpart C of part 1950 of this chapter'' in
paragraph (a)(7), adding a new second sentence in the introductory
text, removing paragraph (d), adding paragraphs (a)(9), (a)(10),
(c)(3), (c)(4), and revising paragraph (a)(8), introductory text of
paragraph (b), paragraph (b)(4), introductory text of paragraph (c),
and paragraph (c)(2) to read as follows:
Sec. 1951.122 Finance Office screening.
* * * Individuals owing other debts as described in Sec. 1951.111
(b)(2)(ii) of this subpart will be included. * * *
(a) * * *
* * * * *
(8) Account is current under an SAA.
(9) Account is current, paid in full, or otherwise satisfied.
(10) Account has been referred to the Department of Justice for
litigation.
(b) Single Family Housing borrowers. In addition to the criteria
set forth in Sec. 1951.122 (a), accounts of delinquent SFH borrowers
which meet the following criteria are not eligible for IRS offset:
* * * * *
(4) Account has a delinquency workout agreement in effect and the
borrower is current under the agreement.
(c) Farmer Programs borrowers. In addition to the criteria set
forth in Sec. 1951.122(a) of this subpart, accounts of delinquent FP
borrowers which meet the following criteria are not eligible for IRS
offset:
* * * * *
(2) Account is less than 180 days past due.
(3) Borrower has not completed all servicing options available
(including appeals) at the time of final offset screening by the field
and the borrower's account has not been accelerated.
(4) If the account was accelerated prior to instituting servicing
in 1987 in accordance with subpart S of part 1951 of this chapter, the
borrower's loans are being serviced under subpart S of part 1951, the
borrower requested an appeal under subpart S of part 1951 and the
appeal has not been concluded.
Sec. 1951.124 [Amended]
10. Section 1951.124 is amended in the first sentence by revising
the words ``FmHA Form Letter 1951-C-6'' to ``a due process notice.''
11. Section 1951.125 is amended in the first sentence by revising
the words ``FmHA Form Letter 1951-C-6'' to ``the due process notice,''
and adding a sentence at the end of the paragraph to read as follows:
Sec. 1951.125 Processing borrower's requests not to exercise IRS
offset.
* * * The County Supervisor's review decision is not appealable
under FmHA Instruction 1900-B.
Sec. 1951.134 [Amended]
12. Section 1951.134 is amended in the first sentence by revising
the words ``refund was'' to ``refunds were.''
13. Sections 1951.136 is added to read as follows:
Sec. 1951.136 Protection of IRS tax information.
This section explains the policies and procedures for the
protection of IRS tax information received from the IRS offset program.
The procedures contained in this section are in accordance with and
mandated by the Internal Revenue Code (IRC) and IRS Publication 1075,
Tax Information Security Guidelines. The FmHA will establish the
appropriate safeguards for the protection of IRS tax information
received under the IRS offset program. The FmHA must protect this
information from unauthorized disclosure and unauthorized use. The
procedures outlined in this section apply to all Federal tax
information regardless of the media on which it is recorded.
(a) Employee awareness. (1) All FmHA employees who have access to
IRS tax information must be briefed annually on the security procedures
outlined in this section.
(2) Each employee must be advised of the provisions of IRC, section
7213(a), which makes unauthorized disclosure of Federal returns or
return information a crime that may be punishable by a $5,000 fine, 5
years imprisonment, or both. The awareness program requires that copies
of the law must be provided to each employee.
(3) All FmHA employees who have access to Federal tax information
must also be advised annually of the provisions of the IRC, section
7431, which permits a taxpayer to bring suit for civil damages in the
U.S. District Court for unauthorized disclosure of returns and return
information. This section allows for punitive damages in case of
willful disclosure or gross negligence, as well as the cost of the
action. A copy of this law must also be given to each employee.
(4) The immediate supervisor is responsible for ensuring that all
FmHA employees who have access to Federal tax information receive
annual training. A certification of training must be maintained in the
office. Training materials and lesson plans can be obtained from the
Operational Security Staff, mail code FC-35B, in the Finance Office.
(b) Recordkeeping requirements. The FmHA is authorized under the
IRC, section 6103, to receive Federal tax information. This section
requires FmHA to establish a permanent system of standardized records
of requests made by or to FmHA for disclosure of Federal tax returns or
return information. These records must be maintained for 5 years. Each
FmHA office which receives Federal tax information will establish a
record that includes the following:
(1) The date the request was made.
(2) Who made the request.
(3) The reason for the request.
(4) What tax information was requested.
(5) Was a disclosure made.
(c) Minimizing access to Federal tax information. (1) To avoid
inadvertent disclosures to unauthorized persons, Federal tax
information must be kept separate from other information.
(2) Each FmHA office will maintain a separate file(s) for Federal
tax information. The file(s) will be clearly labeled to indicate that
the file(s) contains Federal tax information. All files containing
Federal tax information must be stored in a locked cabinet or safe.
(d) Magnetic media. After it has served its purpose, magnetic media
containing Federal tax data must not be made available for reuse by
other offices or released for destruction without first being subjected
to electromagnetic erasing. The FmHA will completely overwrite all data
tracks. If reuse is not intended, the tape should be destroyed by
cutting into lengths of 18 inches or less, or by burning to effect
complete incineration. The FmHA will ensure that all magnetic media
used for storage of Federal tax information will comply with the above
requirements when the information is no longer needed.
(e) Use of contractors. Disclosure of tax returns or return
information to contractors is prohibited by tax laws. Federal tax
information in identifiable form will not be released to contractors by
FmHA. All FmHA offices which use contractors will ensure that contract
employees do not have access to files containing Federal tax
information or the area/cabinet in which the files are stored.
(f) [Reserved]
(g) Physical protection of field offices. All field office
locations which receive Federal tax information must be structured so
public and non-public areas of the office are well defined as follows:
(1) Signs must be posted which state ``FmHA Authorized Personnel
Only.''
(2) Visitors to the office must be escorted while in the non-public
areas.
(3) All new leasing agreements must incorporate and implement the
following excerpts from the Finance Office, Solicitation for Offers for
Small Lease Packages. These should also be implemented under the
present leasing agreements, to the extent practical.
(i) All exterior walls and walls which border public access or
other agency space must be slab-to-slab construction.
(ii) All doors which border public access or exterior of the
building or other agency space shall, at a minimum, be constructed of
solid core wood. They shall have the hinges installed or modified so
that the pins of the hinges cannot be removed when the door is in the
closed position.
(iii) All locking devices on doors shall, at a minimum, be a five-
pin tumbler lockset with a deadlatch or deadbolt feature. Doors must
have an auxiliary deadbolt locking device which is capable of a 1-inch
throw of the bolt into a fully encased strike box. All wood doors must
be reinforced around the locking device.
(h) Need and use. The FmHA receives Federal tax information for use
in the IRS offset program as stated in Sec. 1951.121 of this subpart.
The FmHA will not use the information received for any purposes outside
of the offset program.
(i) Disposal of tax information upon completion of use. Federal tax
information must never be released to private contractors for
unsupervised destruction. Destruction of the information must be
witnessed by an FmHA employee in a manner to safeguard the information
from unauthorized disclosure. All FmHA offices will mail Federal tax
information which is no longer needed to the Operational Security
Staff, Finance Office, mail code FC-35B, for destruction. Label the
package ``Open By Addressee Only,'' but do not label that it contains
IRS information.
(j) Identification of Federal tax information. The following
reports contain Federal tax information and must be afforded the
protections outlined in this section.
(1) Form FmHA 389-764, ``Weekly Offset Report (Cash Collections)
IRS Offset,'' Report Code: 222-C.
(2) Form FmHA 389-763, ``Weekly Claims Report IRS Offset,'' Report
Code: 222-D.
Dated: November 20 1993
Bob J. Nash.
Under Secretary, Small Community and Rural Development.
[FR Doc. 94-10219 Filed 4-29-94; 8:45 am]
BILLING CODE 3410-07-U
