(1) Each agency shall notify the director of all accounts in an amount, including interest and penalties, in excess of one thousand dollars that have been delinquent for a period of sixty days or more. Such notice shall certify the amount due, any penalties or interest thereon, and the political subdivision responsible for the payment of the account.

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(2) Upon receipt of the notice required pursuant to subsection (1) of this section, the director shall notify the political subdivision of the delinquency and that such amount and any interest and penalties thereon, if not paid within thirty days, shall be withheld from the next state aid payment to such political subdivision and that, if the amount of such next state aid payment is insufficient to pay the account in full, plus interest and penalties thereon, a deduction shall continue to be made from subsequent state aid payments payable to such political subdivision until such time as the account and interest and penalties thereon are paid in full.

(3) At the end of the thirty-day period, the director shall contact the reporting agency and verify that the account is still delinquent. If the agency verifies that the account is still delinquent, the director shall notify the State Treasurer of the amount that shall be withheld from state aid payments to the political subdivision and the state aid payments from which such amount shall be withheld.

(4) The State Treasurer shall contact the agency in question and upon verification by the agency that the account remains delinquent, shall withhold the specified amounts from the specified state aid payments. The State Treasurer shall then credit the amount withheld to the fund to which the original payment was due.