Controller, auditors say move debt collection to governor’s Finance Office

After more than 20 years of failure to collect debts owed the state, Controller Ron Knecht said Monday he agrees with executive branch auditors that turning the entire process over to the governor’s Finance Office makes much more sense.

Auditors headed by Steve Weinberger said agencies aren’t assigning debts to collectors. The list of debts they reviewed were on average 598 days past due and that, since 2009, that bottleneck has cost the state a bit over $86 million that is now uncollectable.

“Our position is that this is not about bureaucratic empire building,” said Knecht.

He said if moving debt collection effectively under the governor is a better option, “that’s fine with us.”

He agreed with the audit report that the governor has much more control over agencies to get the process running properly.

The audit report pointed out that the controller has only limited ability to enforce debt collection statutes and doesn’t have authority to audit agency debts.

“The governor appoints most agency directors and approves their budget requests, giving the governor greater ability to enforce collection statutes,” the audit report states. “Additionally, the governor’s Finance Office has auditors who can perform reviews to determine the extent of agencies’ compliance with debt collection statutes.”

Sandoval agreed, telling Knecht, “The big shift is from your office to mine, which, frankly, I’m fine with.”

In addition, Knecht pointed out that his office is in the process of terminating the $2.4 million contract with CGI to automate the debt collection process.

Chief Deputy Controller James Smack said there are problems with that contract that have resulted in a total impasse. Not the least of those problems is that the state’s IT division says the system can’t move forward because it makes available far too much personally identifiable information in violation of federal law.

Smack also said they are looking into an off-the-shelf automation system such as that used by Washoe County which he added would be a fraction of the cost of the CGI contract.

Auditor Vita Ozoude told the Executive Branch Audit Committee automating the system would produce a one-time benefit to the state of $30 million and ongoing benefits of about $5.3 million a year.

Sandoval asked why wait until the 2017 Legislature to make the change, moving debt collection to the finance office immediately. Smack said by statute, it’s still under the controller but that they are more than willing to “partner” with the governor’s office to begin the process now.

The five controller’s office employees who handle debt collection would likely transfer to the finance office, according to Smack.

Smack said the system contains debts that are, in too many cases, eight or more years old and that those should be written off because there’s almost no way to collect them now. He said he would be bringing an agenda item to the Board of Examiners to write off debts he said would total “in the eight figure” range.