Audit suggests state’s debt collection be moved to governor’s office

CARSON CITY — A state audit released Monday recommended Nevada’s debt collection efforts be transferred to the governor’s office from the state controller because of chronic problems, some dating back decades, and lack of confidence in the office to recoup unpaid bills.

The executive branch audit listed seven recommendations, including automating a complicated process and turning over the debt collection duties to the Governor’s Office of Finance.

Recouping money owed to the state has fallen dramatically in recent years, from a high of nearly $2.3 million in 2013 to a low of $293,000 for the fiscal year that ends next week, records show.

As of last year, the state’s total uncollected debt was $573 million. Not surprisingly, the state agency with the largest debt over 60 days old is the Department of Taxation, which is owed $209 million.

The audit was sought by the state controller’s office, which accepted most of the auditors’ recommendations.

“If the governor’s office can make it work better, then that’s fine by us,” said Controller Ron Knecht, who also sits on the Executive Branch Audit Committee.

Knecht and his staff said they will work with the governor’s office on a bill draft for the 2017 Legislature to transfer debt services.

Gov. Brian Sandoval, however, questioned whether the change could be made sooner.

Auditors noted that the issue of debt collection has been an ongoing problem for decades.

Under state law, state agencies are required to turn over debts 60 days past due to the controller’s office. Additionally, licensing agencies are to turn over lists of license holders so licenses can be withheld for nonpayment of debts. But agencies have not turned over those lists, and auditors note that reconciling those records is a time-consuming and manual process.

State agencies also have little faith in the controller’s office to collect.

“The reduction in the collection rate by not assigning debts timely has also eroded agencies’ confidence in the office’s ability to effectively collect debts,” the audit said. “Taxation represents it is not cost beneficial to dedicate the significant resources required in assigning debts to the office due to the office’s ineffectiveness in collecting debts.”

Auditors estimate that automating the assignment of debt would reap a one-time increase in collections of $30 million and annual increases of $5.3 million.

James Smack, deputy chief controller, added that the office likely will recommend the state write off debts deemed noncollectable, a sum he conceded is probably in the eight-figure range.

A recent attempt to automate the system failed and could cost the state millions of dollars. Nevada, under previous Controller Kim Wallin, entered a $1.8 million contract with CGI Technologies to develop a debt collection system. Payments to the vendor were to be made from increased collections, though it was never implemented.

An amendment to the contract for $684,000 was approved in January with assurances from Knecht’s office that added enhancements would make the system functional. During a Board of Examiners meeting in January chaired by Sandoval, Smack estimated the system was 80 percent complete and Nevada would be able to recover $400,000 monthly.

But Knecht, in a written response to the audit, said his office is at an impasse with the contractor and is now looking for other “out-of-the-box” and “inexpensive solutions.”

Contact Sandra Chereb at schereb@reviewjournal.com. Find @SandraChereb on Twitter.