Debt Collection: Improved Reporting Needed on Billions of Dollars in Delinquent Debt and Agency Collection Performance

AIMD-97-48 Published: Jun 02, 1997. Publicly Released: Jun 02, 1997.
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Highlights

Pursuant to a congressional request, GAO reviewed debt collection issues for nontax debts, focusing on: (1) reported governmentwide data on credit receivables and delinquencies for federally managed loans; (2) the status of efforts at four major credit agencies to resolve delinquencies; (3) the dollars collected using various legislatively-established collection tools; and (4) ways debt collection reporting can be enhanced to evaluate progress in collecting debt, and thereby assess agency efforts to meet the mandates of the Debt Collection Improvement Act of 1996. GAO did not verify the accuracy of the information provided to it by the Office of Management and Budget (OMB), the Financial Management Service (FMS), or by the four agencies included in the review.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of the Treasury The Secretary of the Treasury should require the Assistant Commissioner, FMS Debt Management Services, in conjunction with major credit agencies and OMB, to revise the framework and data requirements for agency reporting on debt collection to ensure that reports to the Congress provide complete reporting on the status of agency efforts to collect delinquent debt. FMS should clearly specify the reporting framework, such as the one discussed in this report, and ensure that it is uniformly followed by reporting agencies. Effective status reporting will offer a clear picture of agency progress in collecting delinquent debt and highlight any significant backlogs in resolution phases meriting administrative action or legislative consideration.
Closed - Implemented
FMS' Debt Management Services has revised the Receivables Report for agencies' use as of the second quarter of fiscal year 1999. The report was revised to incorporate this recommendation and to capture data relevant to the provisions of the Debt Collection Improvement Act. Agencies can access and submit the report via the Internet. In addition, FMS now requires that all yearend reports are verified by the submitting agency's CFO or equivalent. Verification of the Receivables Report means that the report has been reconciled to the agency's Audited Financial Statements and to the Federal Agencies Centralized Trial-Balance System. FMS also submitted a revised write-off policy to OMB for inclusion in OMB Circular A-129, which is currently under review.
Department of the Treasury The Secretary of the Treasury should require the Assistant Commissioner, FMS Debt Management Services, in conjunction with major credit agencies and OMB, to revise the framework and data requirements for agency reporting on debt collection to ensure that reports to the Congress offer an evaluation of agency use of individual collection tools. This evaluation should include agency and governmentwide assessments of how actively, successfully, and cost effectively agencies are pursuing delinquent debt. At a minimum, data should be available concerning the collection tools predominantly used, including: (a) the number of cases and the amount of delinquent dollars against which each tool was applied; (b) the number of cases for which the agency was successful in applying the tool; and (c) the cost of using the tool in relation to the dollars collected.
Closed - Implemented
The revised Receivables Report is designed, in part, to collect data pertaining to agencies' use of collection tools and identify the amount of debt collections by specific tool. The report includes a separate section entitled " Debt Management Tool and Technique Performance Data," which specifies the number and dollar amount of debts delinquent 180 days or less for which specific collection tools have been used including private collection agency, litigation, internal offset, wage garnishment, Treasury cross-servicing, and Treasury offset. The report also includes a section entitled "Collections," which includes the total number and dollar amount of collections on delinquent debt by various collection tools including those mentioned above. According to FMS officials, the revised report does not address the cost of using each tool in relation to the dollars collected. Although FMS has developed an activity based system to estimate costs for debt collection activity such as cross-servicing and payment offset, an FMS official stated that agencies have reported that they do not capture cost information for debt collection tools. The official stated that FMS has encouraged agencies to track costs, but has no authority to require agencies to track debt collection costs by collection tools. The CFO Council and the Federal Credit Policy Working Group are looking at ways to resolve issues related to capturing this information.
Department of the Treasury The Secretary of the Treasury should require the Assistant Commissioner, FMS Debt Management Services, in conjunction with major credit agencies and OMB, to revise the framework and data requirements for agency reporting on debt collection to ensure that reports to the Congress report amounts that agencies are actually trying to collect. This would include the gross receivables and interest receivable amounts that are currently included in the footnotes to their financial statements, plus: (a) principle that has been written off but that is still being pursued; and (b) accrued interest on delinquent debt that is still being pursued. The report should also explain differences between these amounts.
Closed - Implemented
FMS' Debt Management Services has revised the Receivables Report for agencies' use as of the second quarter of fiscal year 1999. The report was revised to incorporate this recommendation and to capture data relevant to provisions of the Debt Collection Improvement Act, including amounts that agencies are actually trying to collect including gross receivables and interest receivables amounts, and debts that have been written off but not closed out. For debts that have been written off but not closed out, the report includes whether the debts are at private collection agencies, Treasury designated debt collection centers, and/or in the Treasury Offset Program. Agencies can access and submit the report via the Internet. In addition, FMS now requires that all yearend reports are verified by the submitting agency's CFO or equivalent. Verification of the Receivables Report means that the report has been reconciled to the agency's Audited Financial Statements and to the Federal Agencies Centralized Trial-Balance System. FMS also submitted a revised write-off policy to OMB for inclusion in OMB Circular A-129, which is currently under review.
Department of the Treasury The Secretary of the Treasury should require the Assistant Commissioner, FMS Debt Management Services, in conjunction with major credit agencies and OMB, to revise the framework and data requirements for agency reporting on debt collection to ensure that reports to the Congress provide information that is reliable based on independent audits and disclose information about the reliability of pertinent account balances that are questioned through audits.
Closed - Implemented
FMS' Debt Management Services has revised the Receivables Report for agencies' use as of the second quarter of fiscal year 1999. The report was revised to incorporate this recommendation and to capture data relevant to provisions of the Debt Collection Improvement Act. Agencies can access and submit the report via the Internet. In addition, FMS now requires that all yearend reports are verified by the submitting agency's CFO or equivalent. Verification of the Receivables Report means that the report has been reconciled to the agency's Audited Financial Statements and to the Federal Agencies Centralized Trial-Balance System. FMS also submitted a revised write-off policy to OMB for inclusion in OMB Circular A-129, which is currently under review.
Department of the Treasury The Secretary of the Treasury should require the Assistant Commissioner, FMS Debt Management Services, in conjunction with major credit agencies and OMB, to revise the framework and data requirements for agency reporting on debt collection to ensure that reports to the Congress report delinquent debt consistently from agency to agency or disclose inconsistencies.
Closed - Implemented
FMS' Debt Management Services has revised the Receivables Report for agencies' use as of the second quarter of fiscal year 1999. The report was revised to incorporate this recommendation and to capture data relevant to provisions of the Debt Collection Improvement Act. Agencies can access and submit the report via the Internet. The instructions for the revised receivables report require agencies to provide a footnote whenever agency data is inconsistent with the report definition. In addition, FMS now requires that all yearend reports are verified by the submitting agency's CFO or equivalent. Verification of the Receivables Report means that the report has been reconciled to the agency's Audited Financial Statements and to the Federal Agencies Centralized Trial-Balance System. FMS also submitted a revised write-off policy to OMB for inclusion in OMB Circular A-129, which is currently under review.
Department of the Treasury The Secretary of the Treasury should require the Assistant Commissioner, FMS Debt Management Services, in conjunction with major credit agencies and OMB, to revise the framework and data requirements for agency reporting on debt collection to ensure that reports to the Congress aggregate the credit data by similar program characteristics and provide explanatory information where necessary in order to more appropriately portray program differences and focus on collection challenges unique to similar programs.
Closed - Implemented
According to FMS, the revised Treasury Report on Receivables contains enhanced reporting capabilities allowing program-level credit data to be aggregated, sorted, and analyzed based on similar program characteristics. Recently, an automated mechanism was incorporated into a software enhancement of the revised Treasury Report, which allows for automatic generation of program-level reports of fiscal yearend data.

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