Improving the Collection of Debts Owed the Government

Gao ID: 113894 November 20, 1980

The amount of debts owed the Government is growing, with agencies reporting that $117 billion was owed by U.S. citizens and organizations at the start of fiscal 1980. Specific debt collection problems identified at the Department of Housing and Urban Development (HUD) include a lack of debt collection information reported by the accounting systems. Although each of the 2,000 mortgages held by HUD was individually accounted for, summary accounting information was not available. The proposed Debt Collection Act of 1980 would place added incentive and/or a legislative requirement on HUD to develop the data, report the data within the internal structure of HUD as well as to the Office of Management and Budget, and constantly evaluate the success of its own collection. HUD officials were unable to provide formal financial statements reporting the operations of the Home Improvement program. The extent of problems involving defaulted loans within the program is unknown, because HUD has never matched the names of defaulted borrowers against one another. Improvements must be made in loan servicing and accounting at HUD to alleviate the numerous problems that exist. Serious accounting systems problems and the lack of a viable debt collection program have been revealed in the Department of Education's Law Enforcement Education Program. The program did not properly bill and collect for grants and loans. Bills were inaccurate and collection reduced because of billing system errors and weak collection efforts. An estimated 90 percent of the bills were incorrect, because the computer program supporting the accounting system improperly computed the interest owed or amount of payment required. Few individuals paid their bills and followup collection actions were ineffective. An estimated 84 percent of those billed did not pay or seek forgiveness by certifying that they were employed by a qualifying law enforcement agency. Payment processing was also inadequate. Payments were not deposited promptly and were poorly controlled, causing ineffective cash management and an increased potential for loss or theft. Debt forgiveness was not properly controlled. The program did not record and report loans receivable accurately to establish and maintain effective financial control. The Debt Collection Act of 1980 would require Federal agencies to improve their accounting systems for the recording and reporting of their accounts and loans receivable balances.

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