An interstate bad debt occurs when a receipt is adjusted that previously issued to another state. This most commonly occurs when:
- The other state has made a collection and issued a CSENet
- Overpayment caused by Oklahoma and other state collecting the same balance
The creation of interstate bad debts depends on a number of factors:
- Who is the controlling order state?
- Which state collected the balances first?
- Did Oklahoma know the other state was involved? If not, why?
- Who is at fault or responsible for causing the overpayment?
Because the factors of each scenario can be different, look at various details to decide if a Finance Action Request (FAR) should be sent to create an Interstate Bad Debt. Ultimately, the state that is at fault will be the state that must pursue an overpayment. This is not a step-by-step checklist, but more of a discussion of factors that should be considered before proceeding with a FAR.
Who is the Controlling Order State?
When there might be an interstate overpayment, first determine which state is the controlling order state. When there are discrepancies, the controlling order state determines the balances. It is imperative that Child Support Services (CSS) shares all financial information (collections, refunds, etc.) with the controlling state so that the balances are acute.
Which State Collected First?
This question centers on “which state’s collection paid the balance first?” because any subsequent payments caused the overpayment. It is likely that the state that collected subsequent payments will pursue the overpayment; however, that is not always the case, but something that should be considered.
Was CSS Aware of the Other State?
Determine whether intergovernmental transmittals were sent or received as appropriate. Answering this question will help determine which state is responsible or the balances and overpayment.
Which State is Responsible?
Ultimately, determine which state caused the overpayment using the questions above. Oklahoma will create overpayments when at fault, but cannot bear the burden of bad debts for other state’s errors.
When is it NOT an Interstate Bad Debt?
- If the non-custodial parent (NCP) is paying another state and that state sends the collections directly to the custodial person (CP) who is on Temporary Assistance for Needy Families (TANF) in Oklahoma, build a Retained Support overpayment. An FAR should not be sent as this is not an Interstate Bad Debt.
- For an outgoing intergovernmental case (NCP in other state), another state may have collected the same balance and issued it directly to the CP leading to the same balance being paid twice. Since the CP received the payments, this scenario would result in the creation of a CP Bad Debt, and not an Interstate Bad Debt.
It’s all in the Details
Because there are so many factors involved in intergovernmental cases, all factors must be considered when determining which state should pursue an overpayment. Each case is unique, and the details vary and must be considered. For additional assistance or questions, contact the Center for Finance and Budget (CFB) Finance Liaison.