SECTION OVERVIEW AND POLICIES

The purpose of this section is to provide guidance to Business Units for recovering moneys due and owing to the State from contractors.

The State Comptroller has authority, as a function of his constitutional and statutory duty to audit all vouchers before payment, to set-off against payments due to a contractor an amount equal to any debt owed by the contractor to the State (see N.Y. Const. Article V, § 1; State Finance Law § 8).

Appendix A, Section 9 (Standard Clauses for New York State Contracts) provides notice to the Contractor of the State’s authority to withhold for the purposes of set-off any moneys due to a contractor, up to any amounts due and owing to the State under any contract with the State or for any other reason, including tax delinquencies, fee delinquencies, or monetary penalties relative thereto.

Process and Document Preparation

A Business Unit may determine that there are moneys due and owing from a contractor to the State. Upon making the determination, the Business Unit should contact the contractor to determine whether the contractor agrees that it owes moneys to the State. If the contractor agrees, the Business Unit may cancel an outstanding check, process a credit memo voucher, obtain a check from the contractor, or obtain a check from a third party to recover the moneys. Please see Section 9.D – Refunds Owed to the State of this Chapter for more information about these recovery options.

If the contractor disagrees with the Business Unit’s determination, the Business Unit should identify the contracts the contractor has with the State and note the contract end dates. If the contract end dates are imminent and the Business Unit has compelling evidence to support its determination, the Business Unit should contact the Bureau of State Expenditures’ Customer Service Help Desk at (518) 474-4868 and request that State Expenditures escrow funds due to the contractor up the amount purportedly due and owing to the State until such time that the Business Unit can afford the contractor due process. Due process consists of: 1) notice to the contractor of the State’s determination that an amount is due and owing, and 2) an opportunity for the contractor to respond to such determination.

Due Process

If the contract end dates are not imminent and the contractor will continue to receive contract payments from the State in an amount sufficient to recover the alleged amount due and owing, the Business Unit should send notice to the contractor in the form of written correspondence that describes the amount due and owing to the State and the reason the contractor owes moneys to the State. The Business Unit should allow the contractor a reasonable period of time to review its claim and submit a response. After the Business Unit receives and reviews the contractor’s response, if the Business Unit still determines that an amount is due and owing to the State, the Business Unit should issue a final determination letter to the contractor that specifies the amount due and owing and provides notice to the contractor that the State intends to recover such amount from the contractor by means of set-off.

If all contracts between the State and the contractor have expired and/or there is no reasonable expectation that the contractor will receive future contract payments from the State, the Business Unit can pursue a set-off against other payments from the State to the contractor (such as the contractor’s income tax refund, see Tax Law § 171-f) or consult with its Counsel’s Office regarding other legal remedies such as the commencement of litigation. Before pursuing a set-off against a contractor’s income tax refund, the Business Unit should consult with the Department of Taxation and Finance regarding additional due process requirements that may be required by statute.

Recovering Moneys

Before the Business Unit decides what approach it will take to recover the moneys, it should consider the consequences to offsetting future payments to the contractor. For example, the Business Unit should consider whether offsetting payments could prevent the contractor from providing critical goods and/or services to the State. If so, the Business Unit should have a contingency plan to ensure it continues to receive the goods and/or services without any interruption. The affected program area within the Business Unit should coordinate with its Counsel’s Office and Finance Office to ensure the contingency plan is sound and can be executed as seamlessly as possible.

In addition to the consequences of offsetting contract payments, the Business Unit should consider other means of recovering the moneys. For example, the Business Unit may agree to a repayment plan with the contractor. If a Business Unit agrees to a repayment plan with the contractor, depending on the circumstances, the Business Unit may have a variety of options to formalize the repayment plan, including amending the contract under which the overpayment occurred, amending another contract between the Business Unit and the contractor to include repayment language, or entering into a separate repayment agreement. The Business Unit should consult with its Counsel’s Office and/or OSC’s Bureau of Contracts before it finalizes a repayment agreement with the contractor. Please refer to Chapter I, Section 5 – OSC Bureau Contact Information for the Bureau of Contracts’ contact information.

Guide to Financial Operations

REV. 09/17/2014