Regulations & Guidance

31 CFR Part 256: Final Rule
Federal Register, October 17, 2006

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Treasury Financial Manual (I TFM 6-3100)

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Adjudicator Guidance Regarding Offset of Judgment Fund Payments

The Debt Collection Improvement Act of 1996 amended 31 U.S.C. 3325 to require agencies to include Taxpayer Identification Numbers (TINs) on certified payment vouchers. The primary purpose of this requirement is to facilitate the offset of payments to collect delinquent debt owed by the payee through the Treasury Offset Program (TOP) in accordance with 31 U.S.C. 3716 (c). The Judgment Fund Branch therefore requires a TIN for each payment it makes (see FMS Form 197, item 6). The TIN, along with payee name, is used to match against debtors in the TOP. Since the TIN is collected in order to offset payments, the submitting agency must ensure that the TIN that is provided to FMS is for the person having beneficial interest in the payment. The following examples provide guidance for the most common payment scenarios:

1. Individual Claimants. In most cases, the payee and the person having beneficial interest in the payment will be the same person. For example:

Claimant / Plaintiff: John Smith
Payee: John Smith
TIN: John Smith's Social Security Number

2. Representative Payees. However, in the case of representative payees, such as a guardian or attorney, the TIN must be for the beneficial interest holder, not the payee.

Claimant / Plaintiff: John Smith
Payee: Bob Jones (attorney for John Smith)
TIN: John Smith's Social Security Number

3. Joint Payees. When a payment is made to joint payees, both payees have a beneficial interest in the payment and both TINs must be listed. Such a payment is subject to offset for either of the payees. For example:

Claimant / Plaintiff: John and Mary Smith
Payee: John and Mary Smith
TIN: John Smith's Social Security Number and Mary Smith's Social Security Number

4. Class Actions. If a single payment is made in a class action lawsuit, separate coordination will be necessary if the submitting agency would like to confirm that no class members have debts listed in TOP.

Reimbursement Responsibilities Under the Contract Disputes Act

The payment of Contract Disputes Act (CDA) claims is governed by 41 U.S.C. 612. Subsections 612(a) and 612(b) provide that awards made by federal boards of contract appeals and judgments made by federal courts will be paid from the permanent indefinite appropriation commonly referred to as the "Judgment Fund which was established by 31 U.S.C. 1304. Subsection 612(c) provides that CDA payments made on behalf of federal agencies by the Judgment Fund pursuant to subsections (a) and (b) shall be reimbursed to the Fund."

Reimbursements are chargeable to the appropriated funds which were available for the subject federal agency's procurement activities at the time of the relevant board award or court judgment. If an agency's funds are determined to be insufficient at the time of the award or judgment, 41 U.S.C. 612 allows the agency to seek supplemental appropriations. For this purpose, a specific line-item appropriation is not required. All that is needed is a lump sum appropriation for the agency's procurement activities.

When the Judgment Fund pays a Contract Disputes Act claim on behalf of an agency, the Financial Management Service (FMS) reduces the Fund's balance with the U.S. Department of the Treasury and records an expense by the Fund. At the same time, FMS records a receivable in the Recoveries account for federal agency settlements of claims under the Contract Disputes Act. Consequently, the debtor federal agency is required to record a payable to the Judgment Fund. Those amounts remain a receivable on FMS's books and a payable on the debtor agency's books until reimbursement to the Fund is made by the agency. At the end of each fiscal year, FMS will send confirmation letters to agencies for the purpose of verifying account balances.

It is not only incumbent upon federal agencies to reimburse the Judgment Fund for payments that have been made on behalf of agencies, agencies are responsible for making those payments in a certain fashion and a timely manner. Defendant contracting Agencies must include a contact name (commonly, the contracting officer) as well as the contact's address and telephone number. Failure to include this information may delay the payment of the CDA claim in question.

Reimbursement request billing letters will be mailed to the agency contact within two weeks of the payment from the Judgment Fund. An agency's failure to repay promptly will lead to follow-up telephone calls and reminder letters to the agency's Chief Financial Officer.