[Federal Register Volume 67, Number 138 (Thursday, July 18, 2002)]
[Rules and Regulations]
[Pages 47258-47268]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-17608]


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AGENCY FOR INTERNATIONAL DEVELOPMENT

22 CFR Part 213


Claims Collection

AGENCY: Agency for International Development (``USAID'').

ACTION: Final rule.

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SUMMARY: USAID is revising its regulation on Claims Collection in its 
entirety to incorporate applicable statutory and regulatory provisions 
and to make other changes.

DATES: Effective Date: July 18, 2002.

FOR FURTHER INFORMATION CONTACT: Mr. Joe Keady, 202-712-5744.

SUPPLEMENTARY INFORMATION:

A. Background

    USAID is revising its claim collection procedures to incorporate 
changes made to the Federal Claims Collection Standards and the Debt 
Collection Improvement Act of 1996. One principal change in the rule is 
the provision for the mandatory referral of certain delinquent debt to 
the Federal Management Service of the Department of the Treasury. The 
changes will maximize the effectiveness of USAID's claim collection 
procedures.

B. Regulatory Analysis

Executive Order 12866

    USAID has determined that this regulation is not a significant 
regulatory action as defined in Executive Order 12866 and, accordingly, 
this regulation has not been reviewed by the Office of Management and 
Budget.

Regulatory Flexibility Act

    It is hereby certified that this regulation will not have a 
significant economic impact on a substantial number of small entities. 
Accordingly, a Regulatory Flexibility Analysis is not required.

Executive Order 13132

    This regulation will not have a substantial direct effect on the 
states, on the relationship between the national government and the 
states, or on distribution of power and responsibilities among the 
various levels of government. Therefore, in accordance with Executive 
Order 13132, it is determined that this regulation does not have 
sufficient federalism implications to warrant the preparation of a 
Federalism Assessment.

Unfunded Mandates Reform Act of 1995

    This regulation will not result in the expenditure by state, local 
and tribal governments, in the aggregate, or by the private sector, of 
$100 million or more in any one-year, and it will not significantly or 
uniquely affect small governments. Therefore, no actions were deemed 
necessary under the provisions of the Unfunded Mandates Reform Act of 
1995.

Small Business Regulatory Enforcement Fairness Act of 1996

    This rule is not a major rule as defined by section 251 of the 
Small Business Regulatory Enforcement Act. 5 U.S.C. 804. This rule will 
not result in an annual effect on the economy of $100 million or more; 
a major increase in costs or prices; or significant adverse effects on 
competition, employment, investment, productivity, innovation, or on 
the ability of United States-based companies to compete with foreign-
based companies in domestic or export markets.

Executive Order 12988--Civil Justice Reform

    USAID has conducted the reviews required by section 3 of Executive 
Order 12988 and has determined that, this rule meets the applicable 
standards in section 3 to mitigate litigation, eliminate ambiguity and 
reduce burden.

Paperwork Reduction Act

    This rule does not contain information collection requirements that 
require approval by the Office of Management and Budget under the 
Paperwork Reduction Act (44 U.S.C. 3507 et seq.).

List of Subjects in 22 CFR Part 213

    Administrative practice and procedure, Claims, Federal employees, 
Fraud, Penalties, Privacy.

Authority and Issuance

    For the reasons set out in the preamble, part 213 of Title 22 is 
revised as follows:

PART 213--CLAIMS COLLECTION

Subpart A--General
Sec.
213.1  Purpose and scope.
213.2  Definitions.
213.3  Loans, guarantees, sovereign and interagency claims.
213.4  Other remedies.
213.5  Fraud claims.
213.6  Subdivision of claims not authorized.
213.7  Omission not a defense.
Subpart B--Collection
213.8  Collection--general.
213.9  Written notice.
213.10  Review requirements.
213.11  Aggressive collection actions; documentation.
213.12  Interest, penalty and administrative costs.
213.13  Interest and charges pending waiver or review.
213.14  Contracting for collection services.
213.15  Use of credit reporting bureaus.
213.16  Use and disclosure of mailing addresses.
213.17  Liquidation of collateral.
213.18  Suspension or revocation of eligibility for loans and loan 
guarantees, licenses or privileges.
213.19  Installment payments.
Subpart C--Administrative Offset
213.20  Administrative offset of non-employee debts.
213.21  Employee salary offset--general.
213.22  Salary offset when USAID is the creditor agency.
213.23  Salary offset when USAID is not the creditor agency.

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Subpart D--Compromise of Debts
213.24  General.
213.25  Standards for compromise.
213.26  Payment of compromised claims.
213.27  Joint and several liability.
213.28  Execution of releases.
Subpart E--Suspension or Termination of Collection Action
213.29  Suspension--general.
213.30  Standards for suspension.
213.31  Termination--general.
213.32  Standards for termination.
213.33  Permitted action after termination of collection activity.
213.34  Debts that have been discharged in bankruptcy.
Subpart F--Discharge of Indebtedness and Reporting Requirements
213.35  Discharging indebtedness--general.
213.36  Reporting to IRS.
Subpart G--Referrals to the Department of Justice
213.37  Referrals to the Department of Justice.
Subpart H--Mandatory Transfer of Delinquent Debt to Financial 
Management Service (FMS) of the Department of Treasury
213.38  Mandatory transfer of debts to FMS--general.
213.39  Exceptions to mandatory transfer.

    Authority: Section 621(a) of the Foreign Assistance Act of 1961, 
as amended, 22 U.S.C. 2381(a).

Subpart A--General


Sec. 213.1  Purpose and scope.

    This part prescribes standards and procedures for the United States 
Agency for International Development's (USAID) collection and disposal 
of claims. These standards and procedures are applicable to all claims 
and debts for which a statute, regulation or contract does not 
prescribe different standards or procedures. This part covers USAID's 
collection, compromise, suspension, termination, and referral of claims 
to the Department of Justice.


Sec. 213.2  Definitions.

    (a) Administrative offset means the withholding of money payable by 
the United States to, or held by the United States for, a person to 
satisfy a debt the person owes the Government.
    (b) Administrative Wage Garnishment means the process by which 
federal agencies require a private sector employer to withhold up to 
15% of an employee's disposable pay to satisfy a delinquent debt owed 
to the federal government. A court order is not required.
    (c) Agency means the United States Agency for International 
Development (USAID).
    (d) Claim means an amount of money, funds, or property that has 
been determined by an agency official to be due the United States from 
any person, organization, or entity, except another Federal agency. As 
used in this part, the terms debt and claim are synonymous.
    (e) CFO means the Chief Financial Officer of USAID or a USAID 
employee or official designated to act on the CFO's behalf.
    (f) Creditor agency means the Federal agency to which the debt is 
owed, including a debt collection center when acting on behalf of a 
creditor agency in matters pertaining to the collection of a debt.
    (g) Debtor means an individual, organization, association, 
corporation, or a State or local government indebted to the United 
States or a person or entity with legal responsibility for assuming the 
debtor's obligation.
    (h) Delinquent claim means any claim that has not been paid by the 
date specified in the agency's bill for collection or demand letter for 
payment or which has not been satisfied in accordance with a repayment 
agreement.
    (i) Disposable pay means that part of current basic pay, special 
pay, incentive pay, retired pay, retainer pay, or in the case of an 
employee not entitled to basic pay, other authorized pay remaining 
after the deduction of any amount required by law to be withheld (other 
than deductions to execute garnishment orders) in accordance with 5 CFR 
parts 581 and 582. Among the legally required deductions that must be 
applied first to determine disposable pay are levies pursuant to the 
Internal Revenue Code (Title 26, United States Code) and deductions 
described in 5 CFR 581.105 (b) through (f). These deductions include, 
but are not limited to: Social security withholdings; Federal, State 
and local tax withholdings; health insurance premiums; retirement 
contributions; and life insurance premiums.
    (j) Employee means a current employee of the Federal Government 
including a current member of the Armed Forces or a Reserve of the 
Armed Forces.
    (k) Employee Salary Offset means the administrative collection of a 
debt by deductions at one or more officially established pay intervals 
from the current pay account of an employee without the employee's 
consent.
    (l) Person means an individual, firm, partnership, corporation, 
association and, except for purposes of administrative offsets under 
subpart C and interest, penalty and administrative costs under subpart 
B of this part, includes State and local governments and Indian tribes 
and components of tribal governments.
    (m) Recoupment is a special method for adjusting debts arising 
under the same transaction or occurrence. For example, obligations 
arising under the same contract generally are subject to recoupment.
    (n) Waiver means the cancellation, remission, forgiveness or non-
recovery of a debt or debt-related charge as permitted or required by 
law.
    (o) Withholding order means any order for withholding or 
garnishment of pay issued by USAID or a judicial or administrative 
body. For the purposes of this part, wage garnishment order and 
garnishment order have the same meaning as withholding order.


Sec. 213.3  Loans, guarantees, sovereign and interagency claims.

    This part does not apply to:
    (a) Claims arising out of loans for which compromise and collection 
authority is conferred by section 635(g)(2) of the Foreign Assistance 
Act of 1961, as amended;
    (b) Claims arising from investment guaranty operations for which 
settlement and arbitration authority is conferred by section 635(I) of 
the Foreign Assistance Act of 1961, as amended;
    (c) Claims against any foreign country or any political subdivision 
thereof, or any public international organization;
    (d) Claims where the CFO determines that the achievement of the 
purposes of the Foreign Assistance Act of 1961, as amended, or any 
other provision of law administered by USAID require a different course 
of action; and
    (e) Claims owed USAID by other Federal agencies. Such debts will be 
resolved by negotiation between the agencies.


Sec. 213.4  Other remedies.

    (a) This part does not supersede or require omission or duplication 
of administrative proceedings required by contract, statute, regulation 
or other Agency procedures, e.g., resolution of audit findings under 
grants or contracts, informal grant appeals, formal appeals, or review 
under a procurement contract.
    (b) The remedies and sanctions available to the Agency under this 
part for collecting debts are not intended to be exclusive. The Agency 
may impose, where authorized, other appropriate sanctions upon a debtor 
for inexcusable, prolonged or repeated failure to pay a debt. For 
example, the Agency may stop doing business with a grantee, contractor, 
borrower or lender; convert the method of payment under a grant or

[[Page 47260]]

contract from an advance payment to a reimbursement method; or revoke a 
grantee's or contractor's letter-of-credit.


Sec. 213.5  Fraud claims.

    (a) The CFO will refer claims involving fraud, the presentation of 
a false claim, or misrepresentation on the part of the debtor or any 
party having an interest in the claim to the USAID Office of Inspector 
General (OIG). The OIG has the responsibility for investigating or 
referring the matter, where appropriate, to the Department of Justice 
(DOJ), and/or returning it to the CFO for further action.
    (b) The CFO will not administratively compromise, terminate, 
suspend or otherwise dispose of debts involving fraud, the presentation 
of a false claim or misrepresentation on the part of the debtor or any 
party having an interest in the claim without the approval of DOJ.


Sec. 213.6  Subdivision of claims not authorized.

    A claim will not be subdivided to avoid the $100,000 limit on the 
Agency's authority to compromise, suspend, or terminate a debt. A 
debtor's liability arising from a particular transaction or contract is 
a single claim.


Sec. 213.7  Omission not a defense.

    Failure by USAID to comply with any provision of this part is not 
available to a debtor as a defense against payment of a debt.

Subpart B-Collection


Sec. 213.8  Collection--general.

    (a) The CFO takes action to collect all debts owed the United 
States arising out of USAID activities and to reduce debt 
delinquencies. Collection actions may include sending written demands 
to the debtor's last known address. Written demand may be preceded by 
other appropriate action, including immediate referral to DOJ for 
litigation, when such action is necessary to protect the Government's 
interest. The CFO may contact the debtor by telephone, in person and/or 
in writing to demand prompt payment, to discuss the debtor's position 
regarding the existence, amount or repayment of the debt, to inform the 
debtor of its rights (e.g., to apply for waiver of the indebtedness or 
to have an administrative review) and of the basis for the debt and the 
consequences of nonpayment or delay in payment.
    (b) The CFO maintains an administrative file for each debt and/or 
debtor which documents the basis for the debt, all administrative 
collection actions regarding the debt (including communications to and 
from the debtor) and its final disposition. Information on an 
individual may be disclosed only for purposes that are consistent with 
this part, the Privacy Act of 1974 and other applicable law.


Sec. 213.9  Written notice.

    (a) When the billing official determines that a debt is owed USAID, 
he or she provides a written notice in the form of a Bill for 
Collection or demand letter to the debtor. Unless otherwise provided by 
agreement, contract or order, the written notice informs the debtor of:
    (1) The amount, nature and basis of the debt;
    (2) The right of the debtor to inspect and copy records related to 
the debt;
    (3) The right of the debtor to discuss and propose a repayment 
agreement;
    (4) Any rights available to the debtor to dispute the validity of 
the debt or to have recovery of the debt waived (citing the available 
review or waiver authority, the conditions for review or waiver, and 
the effects of the review or waiver request on the collection of the 
debt);
    (5) The date on which payment is due which will be not more than 30 
days from the date of the bill for collection or demand letter;
    (6) The instructions for making electronic payment;
    (7) The debt is considered delinquent if it is not paid on the due 
date;
    (8) The imposition of interest charges and, except for State and 
local governments and Indian tribes, penalty charges and administrative 
costs that may be assessed against a delinquent debt;
    (9) The intention of USAID to use non-centralized administrative 
offset to collect the debt if appropriate and, if not, the referral of 
the debt 90 days after the Bill for Collection or demand letter to the 
Financial Management Service in the Department of Treasury who will 
collect their administrative costs from the debtor in addition to the 
amount owed USAID and use all means available to the Federal Government 
for debt collection including administrative wage garnishment, use of 
collection agencies and reporting the indebtedness to a credit 
reporting bureau (see Sec. 213.14);
    (10) The address, telephone number, and name of the person 
available to discuss the debt;
    (11) The possibility of referral to the Department of Justice for 
litigation if the debt cannot be collected administratively.
    (b) USAID will respond promptly to communications from the debtor. 
Response generally will be within 30 days of receipt of communication 
from the debtor.


Sec. 213.10  Review requirements.

    (a) For purposes of this section, whenever USAID is required to 
afford a debtor a review within the agency, USAID shall provide the 
debtor with a reasonable opportunity for an oral hearing when the 
debtor requests reconsideration of the debt and the agency determines 
that the question of the indebtedness cannot be resolved by review of 
the documentary evidence, for example, when the validity of the debt 
turns on an issue of credibility or veracity.
    (b) Unless otherwise required by law, an oral hearing under this 
section is not required to be a formal evidentiary hearing, although 
USAID will carefully document all significant matters discussed at the 
hearing.
    (c) This section does not require an oral hearing with respect to 
debt collection systems in which a determination of indebtedness rarely 
involves issues of credibility or veracity and the agency has 
determined that review of the written record is ordinarily an adequate 
means to correct prior mistakes.
    (d) In those cases when an oral hearing is not required by this 
section, USAID shall accord the debtor a ``paper hearing,'' that is, a 
determination of the request for reconsideration based upon a review of 
the written record.


Sec. 213.11  Aggressive collection actions; documentation.

    (a) USAID takes actions and effective follow-up on a timely basis 
to collect all claims of the United States for money and property 
arising out of USAID's activities. USAID cooperates with other Federal 
agencies in their debt collection activities.
    (b) All administrative collection actions are documented in the 
claim file, and the basis for any compromise, termination or suspension 
of collection actions is set out in detail. This documentation, 
including the Claims Collection Litigation Report required in 
Sec. 213.34, is retained in the appropriate debt file.


Sec. 213.12  Interest, penalty and administrative costs.

    (a) Interest. USAID will assess interest on all delinquent debts 
unless prohibited by statute, regulation or contract.
    (1) Interest begins to accrue on all debts from the payment due 
date established in the initial notice to the debtor. USAID will assess 
an annual rate of interest that is equal to the rate of the current 
value of funds to the United States Treasury (i.e., the Treasury tax 
and loan account rate)

[[Page 47261]]

unless a different rate is necessary to protect the interest of the 
Government. USAID will notify the debtor of the basis for its finding 
that a different rate is necessary to protect the interest of the 
Government.
    (2) The rate of interest, as initially assessed, remains fixed for 
the duration of the indebtedness. If a debtor defaults on a repayment 
agreement, interest may be set at the Treasury rate in effect on the 
date a new agreement is executed.
    (3) Interest will not be assessed on interest charges, 
administrative costs or late payment penalties. However, where a debtor 
defaults on a previous repayment agreement and interest, administrative 
costs and penalties charges have been waived under the defaulted 
agreement, these charges can be reinstated and added to the debt 
principal under any new agreement and interest charged on the entire 
amount of the debt.
    (b) Administrative costs of collecting overdue debts. The costs of 
the Agency's administrative handling of overdue debts including charges 
assessed by Treasury in cross-servicing USAID debts, based on either 
actual or average cost incurred, will be charged on all debts except 
those owed by State and local governments and Indian tribes. These 
costs include both direct and indirect costs.
    (c) Penalties. As provided by 31 U.S.C. 3717(e)(2), a penalty 
charge will be assessed on all debts, except those owned by State and 
local governments and Indian tribes, more than 90 days delinquent. The 
penalty charge will be at a rate not to exceed 6% per annum and will be 
assessed monthly.
    (d) Allocation of payments. A partial payment by a debtor will be 
applied first to outstanding administrative costs, second to penalty 
assessments, third to accrued interest and then to the outstanding debt 
principal.
    (e) Waivers. (1) USAID will waive the collection of interest and 
administrative charges on the portion of the debt that is paid within 
30 days after the date on which interest begins to accrue. The CFO may 
extend this 30-day period on a case-by-case basis where he determines 
that such action is in the best interest of the Government. A decision 
to extend or not to extend the payment period is final and is not 
subject to further review.
    (2) The CFO may (without regard to the amount of the debt) waive 
collection of all or part of accrued interest, penalty or 
administrative costs, where he determines that--
    (i) Waiver is justified under the criteria of Sec. 213.24;
    (ii) The debt or the charges resulted from the Agency's error, 
action or inaction, and without fault by the debtor; or
    (iii) Collection of these charges would be against equity and good 
conscience or not in the best interest of the United States.
    (3) A decision to waive interest, penalty charges or administrative 
costs may be made at any time.


Sec. 213.13  Interest and charges pending waiver or review.

    Interest, penalty charges and administrative costs will continue to 
accrue on a debt during administrative appeal, either formal or 
informal, and during waiver consideration by the Agency; except, that 
interest, penalty charges and administrative costs will not be assessed 
where a statute or a regulation specifically prohibits collection of 
the debt during the period of the administrative appeal or the Agency 
review.


Sec. 213.14  Contracting for collection services.

    USAID has entered into a cross-servicing agreement with the 
Financial Management Service (FMS) of the Department of Treasury. FMS 
is authorized to take all appropriate action to enforce collection of 
accounts referred to FMS in accordance with applicable statutory and 
regulatory requirements. The FMS fee ranges from 3% to 18% of the funds 
collected and will be collected from the debtor along with the original 
amount of the indebtedness. After referral, FMS will be solely 
responsible for the maintenance of the delinquent debtor records in its 
possessions and for ensuring that accounts are updated as necessary. In 
the event that a referred debtor disputes the validity of the debt or 
any terms and conditions related to any debt not reduced to judgment, 
FMS may return the disputed debt to USAID for its determination of debt 
validity. FMS may take any of the following collection actions on 
USAID's behalf:
    (a) Send demand letters on U. S. Treasury letterhead and telephone 
debtors;
    (b) Refer accounts to credit bureaus;
    (c) Skiptracing;
    (d) Purchase credit reports to assist in the collection effort;
    (e) Refer accounts for offset, including tax refund, Federal 
employee salary, administrative wage garnishment, and general 
administrative offset under the Treasury Offset Program.
    (f) Refer accounts to private collection agencies;
    (g) Refer accounts to DOJ for litigation;
    (h) Report written off/discharged debts to IRS on the appropriate 
Form 1099;
    (i) Take any additional steps necessary to enforce recovery; and
    (j) Terminate collection action, as appropriate.


Sec. 213.15  Use of credit reporting bureaus.

    Delinquent debts owed to USAID are reported to appropriate credit 
reporting bureaus through the cross-servicing agreement with FMS.
    (a) The following information is provided to the credit reporting 
bureaus:
    (1) A statement that the claim is valid and is overdue;
    (2) The name, address, taxpayer identification number and any other 
information necessary to establish the identity of the debtor;
    (3) The amount, status and history of the debt; and
    (4) The program or pertinent activity under which the debt arose.
    (b) Before referring claims to FMS and disclosing debt information 
to credit reporting bureaus, USAID will have:
    (1) Taken reasonable action to locate the debtor if a current 
address is not available; and
    (2) If a current address is available, notified the debtor in 
writing that:
    (i) The designated USAID official has reviewed the claim and has 
determined that it is valid and overdue;
    (ii) That 90 days after the initial billing or demand letter if the 
debt is not paid, USAID intends to refer the debt to FMS and disclose 
to a credit reporting agency the information authorized for disclosure 
by this subpart; and
    (iii) The debtor can request a complete explanation of the claim, 
can dispute the information in USAID's records concerning the claim, 
and can file for an administrative review, waiver or reconsideration of 
the claim, where applicable.
    (c) Before information is submitted to a credit reporting bureau, 
USAID will provide a written statement to FMS that all required actions 
have been taken. Additionally, FMS will, thereafter, ensure that 
accounts are updated as necessary during the period that FMS holds the 
account information.
    (d) If a debtor disputes the validity of the debt, the credit 
reporting bureau will refer the matter to the appropriate USAID 
official. The credit reporting bureau will exclude the debt from its 
reports until USAID certifies in writing that the debt is valid.


Sec. 213.16  Use and disclosure of mailing addresses.

    (a) When attempting to locate a debtor in order to collect or 
compromise a debt,

[[Page 47262]]

the CFO may obtain a debtor's current mailing address from the Internal 
Revenue Service.
    (b) Addresses obtained from the Internal Revenue Service will be 
used by the Agency, its officers, employees, agents or contractors and 
other Federal agencies only to collect or dispose of debts, and may be 
disclosed to other agencies and to collection agencies only for 
collection purposes.


Sec. 213.17  Liquidation of collateral.

    Where the CFO holds a security instrument with a power of sale or 
has physical possession of collateral, he may liquidate the security or 
collateral and apply the proceeds to the overdue debt. USAID will 
exercise this right where the debtor fails to pay within a reasonable 
time after demand, unless the cost of disposing of the collateral is 
disproportionate to its value or special circumstances require judicial 
foreclosure. However, collection from other businesses, including 
liquidation of security or collateral, is not a prerequisite to 
requiring payment by a surety or insurance company unless expressly 
required by contract or statute. The CFO will give the debtor 
reasonable notice of the sale and an accounting of any surplus proceeds 
and will comply with any other requirements of law or contract.


Sec. 213.18  Suspension or revocation of eligibility for loans and loan 
guarantees, licenses or privileges.

    Unless waived by the CFO, USAID will not extend financial 
assistance in the form of a loan or loan guarantee to any person 
delinquent on a nontax debt owed to a Federal agency. USAID may also 
suspend or revoke licenses or other privileges for any inexcusable, 
prolonged or repeated failure of a debtor to pay a claim. Additionally, 
the CFO may suspend or disqualify any contractor, lender, broker, 
borrower, grantee or other debtor from doing business with USAID or 
engaging in programs USAID sponsors or funds if a debtor fails to pay 
its debts to the Government within a reasonable time. Debtors will be 
notified before such action is taken and applicable suspension or 
debarment procedures will be used. The CFO will report the failure of 
any surety to honor its obligations to the Treasury Department for 
action under 31 CFR 332.18.


Sec. 213.19  Installment payments.

    (a) Whenever feasible, and except as otherwise provided by law, 
debts owed to the United States, together with interest, penalty and 
administrative costs, as required by Sec. 213.11, will be collected in 
a single payment. However, where the CFO determines that a debtor is 
financially unable to pay the indebtedness in a single payment or that 
an alternative payment mechanism is in the best interest of the United 
States, the CFO may approve repayment of the debt in installments. The 
debtor has the burden of establishing that it is financially unable to 
pay the debt in a single payment or that an alternative payment 
mechanism is warranted. If the CFO agrees to accept payment by 
installments, the CFO may require a debtor to execute a written 
agreement which specifies all the terms of the repayment arrangement 
and which contains a provision accelerating the debt in the event of 
default. The size and frequency of installment payments will bear a 
reasonable relation to the size of the debt and the debtor's ability to 
pay. The installment payments will be sufficient in size and frequency 
to liquidate the debt in not more than 3 years, unless the CFO 
determines that a longer period is required. Installment payments of 
less than $50 per month generally will not be accepted, but may be 
accepted where the debtor's financial or other circumstances justify.
    (b) If a debtor owes more than one debt and designates how a 
voluntary installment payment is to be applied among the debts, that 
designation will be approved if the CFO determines that the designation 
is in the best interest of the United States. If the debtor does not 
designate how the payment is to be applied, the CFO will apply the 
payment to the various debts in accordance with the best interest of 
the United States, paying special attention to applicable statutes of 
limitations.

Subpart C--Administrative Offset


Sec. 213.20  Administrative offset of non-employee debts.

    This subpart provides for USAID's collection of debts by 
administrative offset under the Federal Claims Collection Standards, 
other statutory authorities and offsets or recoupments under common 
law. It does not apply to offsets against employee salaries covered by 
Secs. 213.21, 213.22 and 213.23 of this subpart. USAID will collect 
debts by administrative offsets where it determines that such 
collections are feasible and are not otherwise prohibited by statute or 
contract. USAID will decide, on a case-by-case basis, whether 
collection by administrative offset is feasible and that its use 
furthers and protects the interest of the United States.
    (a) Standards. (1) The CFO collects debts by administrative offset 
only after the debtor has been sent written notice in the form of a 
Bill for Collection or demand letter outlining the type and amount of 
the debt, the intention of the agency to use administrative offset to 
collect the debt, and explaining the debtor's rights under 31 U.S.C. 
3716.
    (2) Offsets may be initiated only after the debtor has been given:
    (i) The opportunity to inspect and copy agency records related to 
the debt;
    (ii) The opportunity for a review within the agency of the 
determination of indebtedness;
    (iii) The opportunity to make a written agreement to repay the 
debt.
    (3) The provisions of paragraphs (a)(1) and (2) of this section may 
be omitted when:
    (i) The offset is in the nature of a recoupement;
    (ii) The debt arises under a contract as set forth in Cecile 
Industries, Inc. v. Cheney, 995 F.2d 1052 (Fed. Cir. 1993) (notice and 
other procedural protections set forth in 31 U.S.C. 3716(a) do not 
supplant or restrict established procedures for contractual offsets 
accommodated by the Contracts Disputes Act); or
    (iii) In the case of non-centralized administrative offsets 
conducted under paragraph (g) of this section, USAID first learns of 
the existence of the amount owed by the debtor when there is 
insufficient time before payment would be made to the debtor/payee to 
allow for prior notice and an opportunity for review. When prior notice 
and an opportunity for review are omitted, USAID shall give the debtor 
such notice and an opportunity for review as soon as practicable and 
shall promptly refund any money ultimately found not to have been owed 
to the USAID.
    (4) When USAID previously has given a debtor any of the required 
notice and review opportunities with respect to a particular debt, 
USAID need not duplicate such notice and review opportunities before 
administrative offset may be initiated.
    (b) Interagency offset. The CFO may offset a debt owed to another 
Federal agency from amounts due or payable by USAID to the debtor, or 
may request another Federal agency to offset a debt owed to USAID. The 
CFO through the FMS cross-servicing arrangement may request the 
Internal Revenue Service to offset an overdue debt from a Federal 
income tax refund due. The FMS may also garnishment the salary of a 
private sector employee where reasonable attempts to obtain payment 
have failed. Interagency offsets from employee's salaries will be made 
in accordance with the procedures contained in Secs. 213.22 and 213.23.

[[Page 47263]]

    (c) Statutory bar to offset. Administrative offset will not be made 
more than 10 years after the Government's right to collect the debt 
first accrued, unless facts material to the Government's right to 
collect the debt were not known and could not have been known through 
the exercise of reasonable care by the officer responsible for 
discovering or collecting the debt. For purposes of offset, the right 
to collect a debt accrues when the appropriate USAID official 
determines that a debt exists (e.g., contracting officer, grant award 
official, etc.), when it is affirmed by an administrative appeal or a 
court having jurisdiction, or when a debtor defaults on a payment 
agreement, whichever is latest. An offset occurs when money payable to 
the debtor is first withheld or when USAID requests offset from money 
held by another agency.
    (d) Alternative repayment. The CFO may, at the CFO's discretion, 
enter into a repayment agreement with the debtor in lieu of offset. In 
deciding whether to accept payment of the debt by an alternative 
repayment agreement, the CFO may consider such factors as the amount of 
the debt, the length of the proposed repayment period, past Agency 
dealings with the debtor, documentation submitted by the debtor 
indicating that an offset will cause undue financial hardship, and the 
debtor's financial ability to adhere to the terms of a repayment 
agreement. The CFO may require financial documentation from the debtor 
before considering the repayment arrangement.
    (e) Review of administrative determination of debt's validity. (1) 
A debt will not be offset while a debtor is seeking either formal or 
informal review of the validity of the debt under this section or under 
another statute, regulation or contract. However, interest, penalty and 
administrative costs will continue to accrue during this period, unless 
otherwise waived by the CFO. The CFO may initiate offset as soon as 
practical after completion of review or after a debtor waives the 
opportunity to request review.
    (2) The debtor must provide a written request for review of the 
decision to offset the debt no later than 15 days after the date of the 
notice of the offset unless a different time is specifically 
prescribed. The debtor's request must state the basis for the request 
for review.
    (3) The CFO may grant an extension of time for filing a request for 
review if the debtor shows good cause for the late filing. A debtor who 
fails timely to file or to request an extension waives the right to 
review.
    (4) The CFO will issue, no later than 60 days after the filing of 
the request, a written final decision based on the evidence, record and 
applicable law.
    (f) Multiple debts. Where moneys are available for offset against 
multiple debts of a debtor, it will be applied in accordance with the 
best interest of the Government as determined by the CFO on a case-by-
case basis.
    (g) Non-centralized administrative offset. (1) Generally, non-
centralized administrative offsets are ad hoc case-by-case offsets that 
creditor agencies conduct, at the agency's discretion, internally or in 
cooperation with the agency certifying or authorizing payments to the 
debtor. Unless otherwise prohibited by law, when centralized 
administrative offset is not available or appropriate, past due, 
legally enforceable nontax delinquent debts may be collected through 
non-centralized administrative offset. In these cases, a creditor 
agency may make a request directly to a payment authorizing agency to 
offset a payment due a debtor to collect a delinquent debt.
    (2) Before requesting a payment authorizing agency to conduct a 
non-centralized administrative offset, USAID's regulations provides 
that such offsets may occur only after:
    (i) The debtor has been provided due process as set forth in 
paragraph (a) of this section; and
    (ii) The payment authorizing agency has received written 
certification from the creditor agency that the debtor owes the past 
due, legally enforceable delinquent debt in the amount stated, and that 
the creditor agency has fully complied with its regulations concerning 
administrative offset.
    (3) USAID as a payment authorizing agency will comply with offset 
requests by creditor agencies to collect debts owed to the United 
States, unless the offset would not be in the best interests of the 
United States with respect to USAID's program, or would otherwise be 
contrary to law.
    (4) When collecting multiple debts by non-centralized 
administrative offset, USAID will apply the recovered amounts to those 
debts in accordance with the best interests of the United States, as 
determined by the facts and circumstances of the particular case, 
particularly the applicable statute of limitations.
    (h) Requests to OPM to offset a debtor's anticipated or future 
benefit payments under the Civil Service Retirement and Disability 
Fund. Upon providing OPM written certification that a debtor has been 
afforded the procedures provided in paragraph (a) of this section, 
USAID may request OPM to offset a debtor's anticipated or future 
benefit payments under the Civil Service Retirement and Disability Fund 
(Fund) in accordance with regulations codified at 5 CFR 831.1801 
through 831.1808. Upon receipt of such a request, OPM will identify and 
``flag'' a debtor's account in anticipation of the time when the debtor 
requests, or becomes eligible to receive, payments from the Fund. This 
will satisfy any requirement that offset be initiated prior to the 
expiration of the time limitations referenced in paragraph (a)(4) of 
this section.


Sec. 213.21  Employee salary offset-general.

    (a) Purpose. This section establishes USAID's policies and 
procedures for recovery of debts owed to the United States by 
installment collection from the current pay account of an employee.
    (b) Scope. The provisions of this section apply to collection by 
salary offset under 5 U.S.C. 5514 of debts owed USAID and debts owed to 
other Federal agencies by USAID employees. USAID will make every effort 
reasonably and lawfully possible to administratively collect amounts 
owed by employees prior to initiating collection by salary offset. An 
amount advanced to an employee for per diem or mileage allowances in 
accordance with 5 U.S.C. 5705, but not used for allowable travel 
expenses, is recoverable from the employee by salary offset without 
regard to the due process provisions in Sec. 213.22. This section does 
not apply to debts where collection by salary offset is explicitly 
provided for or prohibited by another statute.
    (c) References. The following statutes and regulations apply to 
USAID's recovery of debts due the United States by salary offset:
    (1) 5 U.S.C. 5514, as amended, governing the installment collection 
of debts;
    (2) 31 U.S.C. 3716, governing the liquidation of debts by 
administrative offset;
    (3) 5 CFR part 550, subpart K, setting forth the minimum 
requirements for executive agency regulations on salary offset; and
    (4) 31 CFR parts 900 through 904, the Federal Claims Collection 
Standards.


Sec. 213.22  Salary offset when USAID is the creditor agency.

    (a) Due process requirements--Entitlement to notice, hearing, 
written response and decision. (1) Prior to initiating collection 
action through salary offset, USAID will first provide the employee 
with the opportunity to pay in full the amount owed, unless

[[Page 47264]]

such notification will compromise the Government's ultimate ability to 
collect the debt.
    (2) Except as provided in paragraph (b) of this section, each 
employee from whom the Agency proposes to collect a debt by salary 
offset under this section is entitled to receive a written notice as 
described in paragraph (c) of this section.
    (3) Each employee owing a debt to the United States that will be 
collected by salary offset is entitled to request a hearing on the 
debt. This request must be filed as prescribed in paragraph (d) of this 
section. The Agency will make appropriate hearing arrangements that are 
consistent with law and regulations. Where a hearing is held, the 
employee is entitled to a written decision on the following issues:
    (i) The determination of the Agency concerning the existence or 
amount of the debt; and
    (ii) The repayment schedule, if it was not established by written 
agreement between the employee and the Agency.
    (b) Exceptions to due process requirements--pay and allowances. The 
procedural requirements of paragraph (a) of this section are not 
applicable to overpayments of pay or allowances caused by the 
following:
    (1) Any adjustment of pay arising out of an employee's election of 
coverage or a change in coverage under a Federal benefits program (such 
as health insurance) requiring periodic deductions from pay, if the 
amount to be recovered was accumulated over four pay periods or less. 
However, if the amount to be recovered was accumulated over more than 
four pay periods the full procedures prescribed under paragraph (d) of 
this section will be extended to the employee;
    (2) Routine intra-agency adjustment in pay or allowances that is 
made to correct an overpayment of pay attributable to clerical or 
administrative errors or delays in processing pay documents, if the 
overpayment occurred with the 4 pay periods preceding the adjustment 
and, at the time of such adjustment, or as soon thereafter as 
practical, the employee is provided written notice of the nature and 
amount of the adjustment; or
    (3) Any adjustment to collect a debt amounting to $50 or less, if 
at the time of such adjustment, or as soon thereafter as practical, the 
employee is provided written notice of the nature and amount of the 
adjustment.
    (c) Notification before deductions begin. Except as provided in 
paragraph (b) of this section, deductions will not be made unless the 
employee is first provided with a minimum of 30 calendar days written 
notice. Notice will be sent by mail and must include the following:
    (1) The Agency's determination that a debt is owed, including the 
origin, nature, and amount of the debt;
    (2) The Agency's intention to collect the debt by means of 
deductions from the employee's current disposable pay account;
    (3) The amount, frequency, proposed beginning date and duration of 
the intended deductions. (The proposed beginning date for salary offset 
cannot be earlier than 30 days after the date of notice, unless this 
would compromise the Government's ultimate ability to resolve the 
debt);
    (4) An explanation of the requirements concerning interest, penalty 
and administrative costs;
    (5) The employee's right to inspect and copy all records relating 
to the debt or to request and receive a copy of such records;
    (6) If not previously provided, the employee's right to enter into 
a written agreement for a repayment schedule differing from that 
proposed by the Agency where the terms of the proposed repayment 
schedule are acceptable to the Agency. (Such an agreement must be in 
writing and signed by both the employee and the appropriate USAID 
official and will be included in the debt file);
    (7) The right to a hearing conducted by a hearing official not 
under the control of USAID, if a request is filed;
    (8) The method and time for requesting a hearing;
    (9) That the filing of a request for hearing within 15 days of 
receipt of the original notification will stay the assessment of 
interest, penalty and administrative costs and the commencement of 
collection proceedings;
    (10) That a final decision on the hearing (if requested) will be 
issued at the earliest practical date, but no later than 60 days after 
the filing of the request, unless the employee requests and the hearing 
official grants a delay in the proceedings;
    (11) That any knowingly false or frivolous statements, 
representations or evidence may subject the employee to--
    (i) Disciplinary procedures under 5 U.S.C. chapter 75 or any other 
applicable statutes or regulations;
    (ii) Criminal penalties under 18 U.S.C. 286, 287, 1001 and 1002 or 
other applicable statutory authority; or
    (iii) Penalties under the False Claims Act, 31 U.S.C. 3729-3731, or 
any other applicable statutory authority;
    (12) Any other rights and remedies available to the employee under 
statutes or regulations governing the program for which the collection 
is being made; and
    (13) Unless there are applicable contractual or statutory 
provisions to the contrary, amounts paid or deducted for the debt which 
are later waived or found not owed to the United States will be 
promptly refunded to the employee.
    (d) Request for hearing. An employee may request a hearing by 
filing a written, signed request directly with the Deputy Chief 
Financial Office, M/FM, United States Agency for International 
Development, Ronald Reagan Building, 1300 Pennsylvania Avenue NW., 
Washington, DC 20523-4601. The request must state the basis upon which 
the employee disputes the proposed collection of the debt. The request 
must be signed by the employee and be received by USAID within 15 days 
of the employee's receipt of the notification of proposed deductions. 
The employee should submit in writing all facts, evidence and witnesses 
that support his/her position to the Deputy Chief Financial Officer 
within 15 days of the date of the request for a hearing. The Deputy 
Chief Financial Officer will arrange for the services of a hearing 
official not under the control of USAID and will provide the hearing 
official with all documents relating to the claim.
    (e) Requests for hearing made after time expires. Late requests for 
a hearing may be accepted if the employee can show that the delay in 
filing the request for a hearing was due to circumstances beyond the 
employee's control.
    (f) Form of hearing, written response and final decision. (1) 
Normally, a hearing will consist of the hearing official making a 
decision based upon a review of the claims file and any materials 
submitted by the debtor. However, in instances where the hearing 
official determines that the validity of the debt turns on an issue of 
veracity or credibility which cannot be resolved through review of 
documentary evidence, the hearing official at his discretion may afford 
the debtor an opportunity for an oral hearing. Such oral hearings will 
consist of an informal conference before a hearing official in which 
the employee and the Agency will be given the opportunity to present 
evidence, witnesses and argument. If desired, the employee may be 
represented by an individual of his/her choice. The Agency shall 
maintain a summary record of oral hearings provided under the 
procedures in this section.
    (2) Written decisions provided after a request for hearing will, at 
a minimum, state the facts evidencing the nature and origin of the 
alleged debt; and the

[[Page 47265]]

hearing official's analysis, findings and conclusions.
    (3) The decision of the hearing official is final and binding on 
the parties.
    (g) Request for waiver. In certain instances, an employee may have 
a statutory right to request a waiver of overpayment of pay or 
allowances, e.g., 5 U.S.C. 5584 or 5 U.S.C. 5724(i). When an employee 
requests waiver consideration under a right authorized by statute, 
further collection on the debt will be suspended until a final 
administrative decision is made on the waiver request. However, where 
it appears that the Government's ability to recover the debt may be 
adversely affected because of the employee's resignation, termination 
or other action, suspension of recovery is not required. During the 
period of the suspension, interest, penalty charges and administrative 
costs will not be assessed against the debt. The Agency will not 
duplicate, for purposes of salary offset, any of the procedures already 
provided the debtor under a request for waiver.
    (h) Method and source of collection. A debt will be collected in a 
lump sum or by installment deductions at established pay intervals from 
an employee's current pay account, unless the employee and the Agency 
agree to alternative arrangements for payment. The alternative payment 
schedule must be in writing, signed by both the employee and the CFO 
and will be documented in the Agency's files.
    (i) Limitation on amount of deduction. The size and frequency of 
installment deductions generally will bear a reasonable relation to the 
size of the debt and the employee's ability to pay. However, the amount 
deducted for any period may not exceed 15 percent of the disposable pay 
from which the deduction is made, unless the employee has agreed in 
writing to the deduction of a greater amount. If possible, the 
installment payments will be in amounts sufficient to liquidate the 
debt in three years or less. Installment payments of less than $50 
normally will be accepted only in the most unusual circumstances.
    (j) Duration of deduction. If the employee is financially unable to 
pay a debt in a lump sum or the amount of the debt exceeds 15 percent 
of disposable pay, collection will be made in installments. Installment 
deductions will be made over the period of active duty or employment 
except as provided in paragraph (a)(1) of this section.
    (k) When deductions may begin. (1) Deductions to liquidate an 
employee's debt will begin on the date stated in the Agency's Bill for 
Collection or demand letter notice of intention to collect from the 
employee's current pay unless the debt has been repaid or the employee 
has filed a timely request for hearing on issues for which a hearing is 
appropriate.
    (2) If the employee has filed a timely request for hearing with the 
Agency, deductions will begin after the hearing official has provided 
the employee with a final written decision indicating the amount owed 
the Government. Following the decision by the hearing official, the 
employee will be given 30 days to repay the amount owed prior to 
collection through salary offset, unless otherwise provided by the 
hearing official.
    (l) Liquidation from final check. If the employee retires, resigns, 
or the period of employment ends before collection of the debt is 
completed, the remainder of the debt will be offset from subsequent 
payments of any nature due the employee (e.g., final salary payment, 
lump-sum leave, etc.).
    (m) Recovery from other payments due a separated employee. If the 
debt cannot be liquidated by offset from any final payment due the 
employee on the date of separation, USAID will liquidate the debt, 
where appropriate, by administrative offset from later payments of any 
kind due the former employee (e.g., retirement pay). Such 
administrative offset will be taken in accordance with the procedures 
set forth in Sec. 213.20.
    (n) Interest, penalty and administrative cost. USAID will assess 
interest, penalties and administrative costs on debts collected under 
the procedures in this section. Interest, penalty and administrative 
costs will continue to accrue during the period that the debtor is 
seeking either formal or informal review of the debt or requesting a 
waiver. The following guidelines apply to the assessment of these costs 
on debts collected by salary offset:
    (1) Interest will be assessed on all debts not collected by the 
payment due date specified in the bill for collection or demand letter. 
USAID will waive the collection of interest and administrative charges 
on the portion of the debt that is paid within 30 days after the date 
on which interest begins to accrue.
    (2) Administrative costs will be assessed if the debt is referred 
to Treasury for cross-servicing.
    (3) Deductions by administrative offset normally begin prior to the 
time for assessment of a penalty. Therefore, a penalty charge will not 
be assessed unless deductions occur more than 90 days from the due date 
in the bill for collection or demand letter.
    (o) Non-waiver of right by payment. An employee's payment under 
protest of all or any portion of a debt does not waive any rights that 
the employee may have under either the procedures in this section or 
any other provision of law.
    (p) Refunds. USAID will promptly refund to the employee amounts 
paid or deducted pursuant to this section, the recovery of which is 
subsequently waived or otherwise found not owing to the United States. 
Refunds do not bear interest unless specifically authorized by law.
    (q) Time limit for commencing recovery by salary setoff. USAID will 
not initiate salary offset to collect a debt more than 10 years after 
the Government's right to collect the debt first accrued, unless facts 
material to the right to collect the debt were not known and could not 
have been known through the exercise of reasonable care by the 
Government official responsible for discovering and collecting such 
debts.


Sec. 213.23  Salary offset when USAID is not the creditor agency.

    (a) USAID will use salary offset against one of its employees that 
is indebted to another agency if requested to do so by that agency. 
Such a request must be accompanied by a certification by the requesting 
agency that the person owes the debt (including the amount) and that 
the procedural requirements of 5 U.S.C. 5514 and 5 CFR part 550, 
subpart K, have been met. The creditor agency must also advise USAID of 
the number of installments to be collected, the amount of each 
installment, and the commencement date of the first installment, if a 
date other than the next established pay period.
    (b) Requests for salary offset must be sent to the Chief Financial 
Officer, Office of Financial Management (M/FM), United States Agency 
for International Development, Ronald Reagan Building , 1300 
Pennsylvania Avenue NW., Washington, DC 20523-4601.
    (c) Processing of the claim by USAID. (1) Incomplete claims. If 
USAID receives an improperly completed request, the requesting 
(creditor) agency will be requested to supply the required information 
before any salary offset can be taken.
    (2) Complete claims. If the claim procedures in paragraph (a) of 
this section have been properly completed, deduction will begin on the 
next established pay period. USAID will not review the merits of the 
creditor agency's determinations with respect to the amount or validity 
of the debt as stated in the debt claim form. USAID will not assess a 
handling or any other

[[Page 47266]]

related charge to cover the cost of its processing the claim.
    (d) Employees separating from USAID before a debt to another agency 
is collected. (1) Employees separating from Government service. If an 
employee begins separation action before USAID collects the total debt 
due the creditor agency, the following actions will be taken:
    (i) To the extent possible, the balance owed the creditor agency 
will be liquidated from subsequent payments of any nature due the 
employee from USAID in accordance with Sec. 213.22;
    (ii) If the total amount of the debt cannot be recovered, USAID 
will certify to the creditor agency and the employee the total amount 
of USAID's collection; and
    (iii) If USAID is aware that the employee is entitled to payments 
from the Civil Service Retirement and Disability Fund, the Foreign 
Service Retirement Fund, or other similar payments, it will provide 
such information to the creditor agency so that it can file a certified 
claim against the payments.
    (2) Employees who transfer to another Federal agency. If an USAID 
employee transfers to another Federal agency before USAID collects the 
total amount due the creditor agency, USAID will certify the total 
amount of the collection made on the debt. It is the responsibility of 
the creditor agency to ensure that the collection is resumed by the new 
employing agency.

Subpart D--Compromise of Debts


Sec. 213.24  General.

    USAID may compromise claims for money or property where the 
principal balance of a claim, exclusive of interest, penalty and 
administrative costs, does not exceed $100,000. Where the claim exceeds 
$100,000, the authority to accept the compromise rests solely with DOJ. 
The CFO may reject an offer of compromise in any amount. Where the 
claim exceeds $100,000 and USAID recommends acceptance of a compromise 
offer, it will refer the claim with its recommendation to DOJ for 
approval. The referral will be in the form of the Claims Collection 
Litigation Report (CCLR) and will outline the basis for USAID's 
recommendation. USAID refers compromise offers for claims in excess of 
$100,000 to the Commercial Litigation Branch, Civil Division, 
Department of Justice, Washington, DC 20530, unless otherwise provided 
by Department of Justice delegations or procedures


Sec. 213.25  Standards for compromise.

    (a) USAID may compromise a claim pursuant to this section if USAID 
cannot collect the full amount because the debtor does not have the 
financial ability to pay the full amount of the debt within a 
reasonable time, or the debtor refuses to pay the claim in full and the 
Government does not have the ability to enforce collection in full 
within a reasonable time by enforced collection proceedings. In 
evaluating the acceptability of the offer, the CFO may consider, among 
other factors, the following:
    (1) Age and health of the debtor;
    (2) Present and potential income;
    (3) Inheritance prospects;
    (4) The possibility that assets have been concealed or improperly 
transferred by the debtor;
    (5) The availability of assets or income which may be realized by 
enforced collection proceedings; or
    (6) The applicable exemptions available to the debtor under State 
and Federal law in determining the Government's ability to enforce 
collection.
    (b) USAID may compromise a claim, or recommend acceptance of a 
compromise to DOJ, where there is significant doubt concerning the 
Government's ability to prove its case in court for the full amount of 
the claim, either because of the legal issues involved or a bona fide 
dispute as to the facts. The amount accepted in compromise in such 
cases will fairly reflect the probability of prevailing on the legal 
issues involved, considering fully the availability of witnesses and 
other evidentiary data required to support the Government's claim. In 
determining the litigative risks involved, USAID will give 
proportionate weight to the likely amount of court costs and attorney 
fees the Government may incur if it is unsuccessful in litigation.
    (c) USAID may compromise a claim, or recommend acceptance of a 
compromise to DOJ, if the cost of collection does not justify the 
enforced collection of the full amount of the debt. The amount accepted 
in compromise in such cases may reflect an appropriate discount for the 
administrative and litigative costs of collection, taking into 
consideration the time it will take to effect collection. Costs of 
collection may be a substantial factor in the settlement of small 
claims, but normally will not carry great weight in the settlement of 
large claims. In determining whether the cost of collection justifies 
enforced collection of the full amount, USAID may consider the positive 
effect that enforced collection of the claim may have on the collection 
of other similar claims.
    (d) To assess the merits of a compromise offer, USAID may obtain a 
current financial statement from the debtor, executed under penalty of 
perjury, showing the debtor's assets, liabilities, income and expense.
    (e) Statutory penalties, forfeitures or debts established as an aid 
to enforcement and to compel compliance may be compromised where the 
CFO determines that the Agency's enforcement policy, in terms of 
deterrence and securing compliance (both present and future), will be 
adequately served by accepting the offer.


Sec. 213.26  Payment of compromised claims.

    The CFO normally will not approve a debtor's request to pay a 
compromised claim in installments. However, where the CFO determines 
that payment of a compromise by installments is necessary to effect 
collection, a debtor's request to pay in installments may be approved.


Sec. 213.27  Joint and several liability.

    When two or more debtors are jointly and severally liable, 
collection action will not be withheld against one debtor until the 
other or others pay their proportionate share. The amount of a 
compromise with one debtor is not precedent in determining compromises 
from other debtors who have been determined to be jointly and severally 
liable on the claim.


Sec. 213.28  Execution of releases.

    Upon receipt of full payment of a claim or the amount compromised, 
USAID will prepare and execute a release on behalf of the United 
States. In the event a mutual release is not executed when a debt is 
compromised, unless prohibited by law, the debtor is still deemed to 
have waived any and all claims and causes of action against USAID and 
its officials related to the transaction giving rise to the compromised 
debt.

Subpart E--Suspension or Termination of Collection Action


Sec. 213.29  Suspension--general.

    The CFO may suspend or terminate the Agency's collection actions on 
a debt where the outstanding debt principal does not exceed $100,000. 
Unless otherwise provided by DOJ delegations or procedures, the CFO 
refers requests for suspension of debts exceeding $100,000 to the 
Commercial Litigation Branch, Civil Division, Department of Justice, 
for approval. If prior to referral to DOJ, USAID

[[Page 47267]]

determines that a debt is plainly erroneous or clearly without legal 
merit, the agency may terminate collection activity regardless of the 
amount involved without obtaining DOJ concurrence. The CFO may waive 
the assessment of interest, penalty charges and administrative costs 
during the period of the suspension. Suspension will be for an 
established time period and generally will be reviewed at least every 
six months to ensure the continued propriety of the suspension.


Sec. 213.30  Standards for suspension.

    (a) The CFO may suspend collection action on a debt when:
    (1) The debtor cannot be located;
    (2) The debtor's financial condition is expected to improve; or
    (3) The debtor has requested a waiver or review of the debt.
    (b) Based on the current financial condition of the debtor, the CFO 
may suspend collection activity on a debt when the debtor's future 
prospects justify retention of the claim for periodic review, and:
    (1) The applicable statute of limitations has not expired; or
    (2) Future collection can be effected by offset, notwithstanding 
the 10-year statute of limitations for administrative offsets; or
    (3) The debtor agrees to pay interest on the debt and suspension is 
likely to enhance the debtor's ability to fully pay the principal 
amount of the debt with interest at a later date.
    (c) The CFO will suspend collection activity during the time 
required for waiver consideration or administrative review prior to 
agency collection of a debt if the statute under which the request is 
sought prohibits USAID from collecting the debt during that time. The 
CFO will ordinarily suspend collection action during the pendency of 
his consideration of a waiver request or administrative review where 
statute and regulation preclude refund of amounts collected by the 
Agency should the debtor prevail.
    (d) The CFO may suspend collection activities on debts of $100,000 
or less during the pendency of a permissive waiver or administrative 
review when there is no statutory requirement where he determines that:
    (1) There is a reasonable possibility that waiver will be granted 
and the debtor may be found not owing the debt (in whole or in part);
    (2) The Government's interest is protected, if suspension is 
granted, by the reasonable assurance that the debt can be recovered if 
the debtor does not prevail; or
    (3) Collection of the debt will cause undue hardship to the debtor.
    (e) The CFO will decline to suspend collection where he determines 
that the request for waiver or administrative review is frivolous or 
was made primarily to delay collection.


Sec. 213.31  Termination--general.

    The CFO may terminate collection actions including accrued 
interest, penalty and administrative costs, where the debt principal 
does not exceed $100,000. If the debt exceeds $100,000, USAID obtains 
the approval of DOJ in order to terminate further collection actions. 
Unless otherwise provided for by DOJ regulations or procedures, 
requests to terminate collection on debts in excess of $100,000 are 
referred to the Commercial Litigation Branch, Civil Division, 
Department of Justice, for approval.


Sec. 213.32  Standards for termination.

    A debt may be terminated where the CFO determines that:
    (a) The Government cannot collect or enforce collection of any 
significant sum from the debtor, having due regard for available 
judicial remedies, the debtor's ability to pay, and the exemptions 
available to the debtor under State and Federal law;
    (b) The debtor cannot be located, there is no security remaining to 
be liquidated, and the prospects of collecting by offset are too remote 
to justify retention of the claim;
    (c) The cost of further collection action is likely to exceed the 
amount recoverable;
    (d) The claim is determined to be legally without merit or 
enforcement of the debt is barred by any applicable statute of 
limitations;
    (e) The evidence necessary to prove the claim cannot be produced or 
the necessary witnesses are unavailable and efforts to induce voluntary 
payment have failed; or
    (f) The debt against the debtor has been discharged in bankruptcy.


Sec. 213.33  Permitted actions after termination of collection 
activity.

    Termination of collection activity ceases active collection of the 
debt. Termination does not preclude the agency from retaining a record 
of the account for purposes of:
    (a) Selling the debt if the CFO determines that such sale is in the 
best interests of USAID;
    (b) Pursuing collection at a subsequent date in the event there is 
a change in the debtor's status or a new collection tool becomes 
available;
    (c) Offsetting against future income or assets not available at the 
time of termination of collection activity; or
    (d) Screening future applicants for prior indebtedness.


Sec. 213.34  Debts that have been discharged in bankruptcy.

    USAID generally terminates collection activity on a debt that has 
been discharged in bankruptcy regardless of the amount. USAID may 
continue collection activity, however, subject to the provisions of the 
Bankruptcy Code for any payments provided under a plan of 
reorganization. The CFO will seek legal advice by the General Counsel's 
office if he believes that any claims or offsets may have survived the 
discharge of a debtor.

Subpart F--Discharge of Indebtedness and Reporting Requirements


Sec. 213.35  Discharging indebtedness--general.

    Before discharging a delinquent debt (also referred to as a close 
out of the debt), USAID will make a determination that collection 
action is no longer warranted and request that litigation counsel 
release any liens of record securing the debt. Discharge of 
indebtedness is distinct from termination or suspension of collection 
activity and is governed by the Internal Revenue Code. When collection 
action on a debt is suspended or terminated, the debt remains 
delinquent and further collection action may be pursued at a later date 
in accordance with the standards set forth in this part. When a debt is 
discharged in full or in part, further collection action is prohibited 
and USAID must terminate debt collection action.


Sec. 213.36  Reporting to IRS.

    Upon discharge of an indebtedness, USAID will report the discharge 
to the IRS in accordance with the requirements of 26 U.S.C. 6050P and 
26 CFR 1.6050P-1. USAID may request FMS to file such a discharge report 
to the IRS on the agency's behalf.

Subpart G--Referrals to the Department of Justice


Sec. 213.37  Referrals to the Department of Justice.

    (a) The CFO, through the FMS cross-servicing agreement and by 
direct action, refers to DOJ for litigation all claims on which 
aggressive collection actions have been taken but which could not be 
collected, compromised, suspended or terminated. Referrals are made as 
early as possible, consistent with aggressive agency collection action, 
and within the period for bringing a timely suit against the debtor. 
Unless otherwise provided by DOJ

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regulations or procedures, USAID refers for litigation debts of more 
than $2,500 but less than $1,000,000 to the Department of Justice's 
Nationwide Central Intake Facility as required by the Claims Collection 
Litigation Report (CCLR) instructions. Debts of over $1,000,000 shall 
be referred to the Civil Division at the Department of Justice.
    (b) The CFO will clearly indicate on the CCLR the actions the DOJ 
should take on the referred claim.

Subpart H--Mandatory Transfer of Delinquent Debt to Financial 
Management Service (FMS) of the Department of Treasury


Sec. 213.38  Mandatory transfer of debts to FMS--general.

    (a) USAID's procedures call for transfer of legally enforceable 
debt to FMS 90 days after the Bill for Collection or demand letter is 
issued. A debt is legally enforceable if there has been a final agency 
determination that the debt, in the amount stated, is due and there are 
no legal bars to collection action. A debt is not considered legally 
enforceable for purposes of mandatory transfer to FMS if a debt is the 
subject of a pending administrative review process required by statute 
or regulation and collection action during the review process is 
prohibited.
    (b) Except as set forth in paragraph (a) of this section, USAID 
will transfer any debt covered by this part that is more than 180 days 
delinquent to FMS for debt collection services. A debt is considered 
180 days delinquent for purposes of this section if it is 180 days past 
due and is legally enforceable.


Sec. 213.39  Exceptions to mandatory transfer.

    USAID is not required to transfer a debt to FMS pursuant to 
Sec. 213.37(b) during such period of time that the debt:
    (a) Is in litigation or foreclosure;
    (b) Is scheduled for sale;
    (c) Is at a private collection contractor;
    (d) Is at a debt collection center if the debt has been referred to 
a Treasury-designated debt collection center;
    (e) Is being collected by internal offset; or
    (f) Is covered by an exemption granted by Treasury

    Dated: July 8, 2002.
Linda Porter,
Authorized Representative, Agency for International Development.
[FR Doc. 02-17608 Filed 7-17-02; 8:45 am]
BILLING CODE 6116-01-P