The Debt Collection Improvement Act of 1996 seeks to maximize the collection of billions of dollars of nontax delinquent debt owed to the federal government. The act requires agencies to refer eligible debts delinquent more than 180 days to the Department of the Treasury for payment offset and to Treasury or a Treasury-designated debt collection center for cross-servicing. The Treasury Offset Program, includes the offset of benefit payments, vendor payments, and tax refunds. Cross-servicing involves locating debtors, issuing demand letters, and referring debts to private collection agencies. The Rural Housing Service (RHS) has initiatives to ensure the timely referral of all delinquent debt. However, the agency's failure to make the act a priority has left key provisions of the legislation unimplemented and severely reduced collection opportunities. The agency had referred no direct single-family housing (SFH) loans to the Financial Management Service for cross-servicing. Three major factors delayed implementation. First, RHS's loan-servicing system had not incorporated key features necessary to implement the act's referral provisions. Second, RHS did not refer any debts for cross-servicing while pursuing an exemption from Treasury. Third, amounts reported as delinquent and eligible for consideration for referral were materially understated. RHS had not kept the documentation needed to independently verify the accuracy and validity of the exclusion amounts in its certified fiscal year 2000 year-end report. Accordingly, GAO was unable to determine whether RHS had appropriately excluded $182 million of delinquent loans from referral for offset and for cross servicing as of September 2000.
Recommendations for Executive Action
|Department of Agriculture||To improve RHS's compliance with the Debt Collection Improvement Act of 1996 (DCIA), GAO recommends that the Secretary of Agriculture direct the Administrator of RHS to take the following actions: work together with the Financial Management Service (FMS) to resolve any inconsistencies between RHS's reporting of delinquent debts on its Treasury Report on Receivables (TROR) and Treasury's instructions for such reporting. Absent any modifications to Treasury's instructions for preparing the TROR, report the entire accelerated balance of delinquent direct single-family housing (SFH) loans to FMS as delinquent debt and, absent any allowable exclusions, as debt eligible for referral to FMS for collection action.|
|Department of Agriculture||To improve RHS's compliance with DCIA, GAO recommends that the Secretary of Agriculture direct the Administrator of RHS to take the following actions: finalize and implement necessary regulatory changes and modifications to lender agreements to recognize losses on guaranteed SFH loans as federal debt and promptly refer such debt to FMS for collection action.|
|Department of Agriculture||To improve RHS's compliance with DCIA, GAO recommends that the Secretary of Agriculture direct the Administrator of RHS to take the following actions: complete development of the software enhancements that will allow automated identification of loans eligible for cross-servicing, and promptly refer all such loans to FMS for cross-servicing.|
|Department of Agriculture||To improve RHS's compliance with DCIA, GAO recommends that the Secretary of Agriculture direct the Administrator of RHS to take the following actions: maintain supporting documentation, in an appropriate level of detail that can be made readily available for independent verification, for all SFH debts reported and certified to Treasury as excluded from referral for collection action. At a minimum, the documentation should include, for each exclusion category (e.g., foreclosure), the total amount reported as excluded on the certified TROR and a listing of the identities and dollar amounts of the specific loans excluded.|