Audit rates agencies good at collections

At top: Employment Security, Revenue

By Adam Wilson | The Olympian • Published August 18, 2008

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A recent performance audit of the state's debt collection efforts hailed the practices of two major collection agencies, the Department of Revenue and the Employment Security Department.

Previous performance audits — authorized by a voter-approved initiative in 2005 — have highlighted government shortcomings. One such report detailed "serious and pervasive issues" in the Port of Seattle's management of construction projects.

But the audit released last week was positive enough for Revenue Director Cindi Holmstrom to hold it up as an honor.

"We put tremendous effort and thought into being top performers in this area. It's gratifying to have the results validated by an independent third party," she said.

The report by state Auditor Brian Sonntag's office provided a list of best practices to ensure money owed the state, such as unpaid taxes, is collected. It checked on 10 programs in state government, and found Revenue and Employment Security followed the recommendations.

"Both programs effectively and efficiently collect debt and have excellent performance measures in place to gauge the effectiveness of their collection efforts," the audit said.

Taxpayer savings

Improvement elsewhere, however, could mean significant savings for taxpayers. The report estimated the state would gain $16 million more per year if the eight other programs audited improved their collection rates by 5 percent.

And if they cut their outstanding balances by 50 percent, it would mean an extra $160 million for state coffers, the report said.

The Department of Labor and Industries, for instance, halved the amount of overpaid worker compensation benefits it was owed in fiscal year 2007, bringing in $4.6 million.

But other debts might be harder to collect. The Department of Ecology, for example, is owed $14.7 million by troubled mining company Asarco. That accounts for 74 percent of the agency's outstanding debt.

"There's only so much you can do if all your debt is tied up in one company that's bankrupt and subject to massive litigation," said Glenn Kuper of the Office of Financial Management.

Most of the performance recommendations are either in place or will be by the end of the year, according to Financial Management's response.

But some changes could cost money, such as allocating more personnel to debt collection programs, and others might require law changes.

Not all debt can be collected in the same manner, Kuper noted. He pointed to the Housing Trust Fund, run by the Department of Community, Trade and Economic Development to help low-income families buy houses.

Unpaid loans in the program take a significant amount of work "to make the debt collectable while still helping people," Kuper said.

Most of the money owed the state is handled by the two larger agencies that passed the audit with flying colors, however.

Three-quarters of $608 million in state accounts receivable fell under the jurisdiction of Employment Security, which administers unemployment benefits.

Of $3.3 billion in debt targeted by the audit, the majority, $2.5 billion, was overdue taxes handled by Revenue.

"We take our job seriously and collections is a big, core function for us," Revenue spokesman Mike Gowrylow said. "We actually appreciate these audits, because they do cause us to examine our systems and think about how we could do things better."