Debt Collection Improvement Act of 1996
Status of Selected Agencies' Implementation of Administrative Wage Garnishment Gao ID: GAO-02-313 February 28, 2002To improve federal debt collection, the Debt Collection Improvement Act of 1996 established a framework of debt collection tools, including administrative wage garnishment (AWG). This report discusses the extent to which nine agencies use or plan to use AWG to collect delinquent nontax federal debt and provides GAO's perspective on ways to make AWG more widespread and effective. GAO found that none of the nine agencies had yet implemented AWG. Although AWG is not mandatory, by failing to use this tool--more than five years after the act's enactment and more than three years after the Department of the Treasury issued implementing regulations--agencies have missed an opportunity to maximize collection of delinquent debt. Agencies identified various reasons for not yet implementing AWG or for deciding not to do so, including the need to focus their resources on implementing the act's mandatory provisions. Although some agencies or programs may have valid reasons for not implementing wage garnishment, all of the larger programs that deal with individuals and that have a demonstrated risk of financial loss resulting from unpaid debt should have AWG as a viable debt collection option. Reliance on the Financial Management Service (FMS) to perform AWG as part of cross-servicing might be prudent for some agencies, provided the collection tool is used as early as practicable to maximize its collection potential. However, the act does not require that agencies refer debts for cross-servicing until they are more than 180 days delinquent, and FMS, which views wage garnishment as a tool of last resort, does not contemplate initiating AWG in most cases until the debt has been with FMS for at least 90 days. As a result, FMS's use of AWG could be significantly limited and delayed.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-02-313, Debt Collection Improvement Act of 1996: Status of Selected Agencies' Implementation of Administrative Wage Garnishment
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United States General Accounting Office:
GAO:
Report to the Chairman, Subcommittee on Government Efficiency,
Financial Management and Intergovernmental Relations, Committee on
Government Reform, House of Representatives:
February 2002:
Debt Collection Improvement Act Of 1996:
Status of Selected Agencies' Implementation of Administrative Wage
Garnishment:
GA0-02-313:
Contents:
Letter:
Results in Brief:
Background:
Objective, Scope, and Methodology:
Status of Surveyed Agencies' Use of AWG:
Surveyed Agencies Lacked Comprehensive Implementation Plans and
Regulations:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Survey of Administrative Wage Garnishment:
Appendix II: Comments from the Financial Management Service:
GAO Comments:
Appendix III: Comments from the Department of Education:
GAO Comments:
Appendix IV: Comments from the Social Security Administration:
GAO Comments:
Appendix V: Comments from the Small Business Administration:
GAO Comments:
Appendix VI: Comments from the Department of Housing and Urban
Development:
GAO Comments:
Appendix VII: Comments from the Department of Health and Human
Services:
GAO Comments:
Appendix VIII: Comments from the Department of Veterans Affairs:
Table:
Table 1: Surveyed Agencies Plans for Implementing AWG under
DCIA Authority:
Abbreviations:
AWG: administrative wage garnishment:
CFO: Chief Financial Officers:
DCIA: Debt Collection Improvement Act:
DOE: Department of Energy:
EPA: Environmental Protection Agency:
FMS: Financial Management Service:
HHS: Health and Human Services:
HUD: Housing and Urban Development:
PCA: private collection agency:
SBA: Small Business Administration:
SSA: Social Security Administration:
USDA: U.S. Department of Agriculture:
VA: Veterans Affairs:
[End of section]
United States General Accounting Office:
Washington, D.C. 20548:
February 28, 2002:
The Honorable Stephen Horn:
Chairman:
Subcommittee on Government Efficiency, Financial Management and
Intergovernmental Relations:
Committee on Government Reform:
House of Representatives:
Dear Mr. Chairman:
On October 10, 2001, we testified before your subcommittee on selected
federal agencies' implementation of the Debt Collection Improvement
Act (DCIA) of 1996.[Footnote 1] That law established a framework for
improved federal debt collection governmentwide using various debt
collection tools. One of these tools is administrative wage
garnishment (AWG), which DCIA authorizes, but does not require,
agencies to use. This report provides more detailed information on the
extent to which nine large Chief Financial Officers (CFO) Act agencies
use or plan to use AWG to collect delinquent nontax federal debt and
our perspective on additional efforts that are needed to make AWG a
more effectively and commonly used debt collection too1.[Footnote 2]
In 1995, prior to the enactment of DCIA, debt collection experts
testified before your subcommittee that AWG can be an extremely
powerful debt collection tool, as the mere threat of its use is often
enough to motivate people to pay their delinquent debts. This is
significant given the large size of the U.S. labor force and the
reported $58 billion of delinquent debt held by federal agencies as of
September 30, 2000, the date for which the most recent agency-
certified data were available at the completion of our fieldwork.
[Footnote 3]
AWG as authorized by DCIA, unlike court-ordered wage garnishment, does
not require that agencies obtain a court judgment to initiate
garnishment. Instead, AWG is an administrative process that requires
that debtors be notified of the government's intent to have their
employer withhold specified amounts from their wages, requires that
debtors be given an opportunity to either pay their debt in full or
enter into a repayment agreement under terms acceptable to the agency
that holds the debt, and gives debtors the right to request a hearing.
If the delinquent debtor does not either pay the debt in full, enter
into a repayment agreement, or request a hearing, the agency may
proceed to issue an order requiring the debtor's employer to withhold
up to 15 percent of the debtor's disposable pay and transmit those
moneys to the agency.[Footnote 4]
Results in Brief:
As we testified, none of the nine large CFO Act agencies covered by
our review had yet implemented AWG as authorized by DCIA. Although AWG
is not mandatory, by failing to employ this tool”more than 5 years
after DCIA's enactment and more than 3 years after the Department of
the Treasury issued implementing regulations”agencies have missed an
opportunity to maximize collection of delinquent debt. In AWG, the
Congress gave agencies a powerful instrument for collecting debt or
leveraging payment from delinquent debtors who are not currently
making payments under an agreement with the agency. In the federal
government, Education has effectively used wage garnishment authority
similar to DCIA's since 1993 under student loan program legislation to
dramatically increase collections on delinquent student loans.
[Footnote 5]
Agencies identified various reasons for either not yet implementing
AWG or for deciding not to do so, including the need to focus their
resources on implementing the mandatory provisions of DCIA. While some
agencies or programs may have valid reasons for not implementing wage
garnishment (such as dealing mostly with commercial debt, to which AWG
has limited applicability), we believe that all of the larger programs
that deal with individuals and that have a demonstrated risk of
financial loss resulting from unpaid debt should have AWG as a viable
debt collection option.[Footnote 6] Although none of the nine CFO Act
agencies we surveyed were using AWG as authorized by DCIA, all but one
agency indicated that they intend to do so. The debts held by the one
agency are primarily of a commercial nature. The eight remaining
agencies said they plan to implement AWG by the end of fiscal year
2003. Four agencies said they intend to implement AWG in-house and, to
varying degrees, through Treasury's Financial Management Service (FMS)
cross-servicing program, and four agencies said they intend to rely
primarily on FMS to perform AWG as part of cross-servicing.
Reliance on FMS to perform AWG as part of cross-servicing might be
prudent for some agencies, provided the collection tool is used as
early as practicable to maximize its collection potential. As we
testified in June 2000, however, agencies with substantial delinquent
debt eligible for referral to FMS for cross-servicing failed to
promptly refer much of that debt in the past.[Footnote 7] Further,
DCIA does not require that agencies refer debts to FMS for cross-
servicing until they are more than 180 days delinquent, and FMS, which
views wage garnishment as a tool of last resort, does not contemplate
initiating AWG in most cases until the debt has been with FMS for at
least 90 days. FMS's own data show that as of September 30, 2001, more
than 50 percent of debt referred for cross-servicing governmentwide
was more than 2 years delinquent at the time of referral. As a result,
FMS's use of AWG could be significantly limited and delayed.
At the completion of our fieldwork, none of the eight surveyed
agencies that indicated that they planned to use AWG had a
comprehensive written implementation plan to help ensure that they
would implement AWG in a timely and effective manner. In addition, the
eight agencies were developing the regulations needed to implement
AWG, but none had finalized them. Consequently, it is difficult to
determine when these agencies will be able to take full advantage of
the debt collection potential of AWG.
AWG is an important tool that properly used in tandem with other debt
recovery techniques should generate collections and provide leverage
for agencies to obtain payments from delinquent debtors. Accordingly,
we are making a number of recommendations to expedite implementation
of AWG as a routine collection activity to be used in conjunction with
other debt collection tools by surveyed agencies whose operations
would make its use cost-effective.
Of the 10 agencies covered by and commenting on a draft of this
report, FMS was the only agency to explicitly disagree with any of our
recommendations. Specifically, FMS disagreed with our recommendation
concerning FMS's timing and philosophy in applying AWG and maintains
its position of using AWG as a collection tool of last resort. Given
the age of much of the debt referred to FMS for cross-servicing and
the fact that referring agencies would previously have attempted to
collect from these debtors, we continue to believe that FMS or its
private collection agency (PCA) contractors should immediately notify
debtors of the intent to use AWG if the debtors are not cooperative in
paying or making arrangements to pay.
Background:
Over the past several years, the federal government has reported an
outstanding balance of delinquent debt in the range of $50 billion to
$60 billion. DCIA reflected the Congress' recognition that timely and
effective agency debt collection efforts were needed to maximize
collections of delinquent debts owed to the federal government. A
central theme of the legislation is that before discharging any
delinquent debt owed to any executive, judicial, or legislative
agency, agencies should take all appropriate steps to collect the
debt. Among the collection tools the act authorized were
administrative offset (withholding some or all of a federal payment
scheduled to be issued to the debtor), federal salary offset, referral
to PCA contractors, referral to agencies operating a debt collection
center, reporting delinquencies to credit reporting bureaus, and
administratively garnishing the wages of delinquent debtors.
Some DCIA-authorized debt collection tools are mandatory, while others
are discretionary. AWG, one of the discretionary tools, is a process
whereby an employer withholds amounts from an employee's wages and
pays those amounts to the employee's creditor in satisfaction of a
withholding order.[Footnote 8] Prior to the enactment of DCIA,
agencies generally were required to obtain a court order before
garnishing the wages of nonfederal employees. DCIA authorizes agencies
to administratively garnish up to 15 percent of a debtor's disposable
pay to satisfy delinquent nontax debt owed to the United States. Under
a separate statute, Education has had authority since 1993 to garnish
up to 10 percent of the disposable pay of debtors who have defaulted
on student loans.
Treasury's FMS is responsible for promulgating regulations to
implement AWG and other debt collection tools authorized by DCIA. In
May 1998, 2 years after the act was passed, Treasury issued final
regulations that provide agencies with an overall framework for
implementing AWG. The regulations authorize agencies to begin the AWG
process as debt becomes delinquent, but they do not stipulate when in
the collection cycle this tool may be used. According to the
regulations, any federal agency that administers a program that might
result in a delinquent nontax debt owed to the federal government and
any agency that pursues recovery of such debt may administer AWG.
Therefore, agencies holding delinquent debt may administer AWG in-
house; they may authorize a debt collection agency, such as FMS, to
administer AWG on their behalf as part of cross-servicing operations;
or they may do both. To assist agencies in implementing AWG, Treasury
issued AWG Form 329, known as the AWG package, in November 1998. The
package includes a Letter to Employer & Important Notice to Employer,
Wage Garnishment Order, Wage Garnishment Worksheet, and Employer
Certification. In February 1999, FMS issued "Instructions to Federal
Agencies for Preparing AWG Forms."
As is the case with other debt collection tools, Treasury's
regulations dealing with AWG provide for due process for debtors. The
regulations require that at least 30 days before initiating wage
garnishment proceedings, agencies notify delinquent debtors in writing
of the nature and amount of the debt and of the agency's intention to
collect through deductions from pay. The notification must also
include an explanation of the debtor's rights regarding the proposed
action. These rights include the opportunity to inspect and copy
agency records related to the debt, to enter into a written repayment
agreement with the agency, and to request a hearing concerning the
existence or amount of the debt or the terms of the proposed repayment
schedule under the garnishment order.
An agency must provide a debtor with a hearing before it issues a
garnishment order if the agency receives the debtor's written request
for a hearing on or before the 15th business day following the mailing
of the notice. If a debtor does not make a timely request for a
hearing, the agency is to send a withholding order to the debtor's
employer within 30 days after the debtor fails to make a timely
request for a hearing. If the agency receives a debtor's written
request for a hearing after the 15th business day following the
mailing of the notice, the agency must still provide a hearing to the
debtor. In such a case, however, the agency is not to delay issuing a
withholding order unless it determines that the delay in filing the
hearing request resulted from factors over which the debtor had no
control or receives information that it believes justifies delaying or
canceling the withholding order.
Following receipt of a withholding order, employers are required to
certify to the agency certain information about the debtor, such as
the debtor's employment status and disposable pay available for
withholding. The employer must deduct from all disposable pay paid to
the debtor during each pay period the amount of the garnishment, which
is the lesser of (1) the amount indicated on the garnishment order, up
to 15 percent of the debtor's disposable pay, or (2) the amount by
which the debtor's disposable pay exceeds an amount equivalent to 30
times the minimum wage.[Footnote 9] If multiple garnishments from
various sources are applied to one debtor's wages, the total
garnishments may not exceed 25 percent of the individual's disposable
pay.[Footnote 10]
Once the agency has fully recovered the amounts owed by the debtor,
the agency is to send the debtor's employer notification to
discontinue wage withholding. Agencies are to review their debtors'
accounts at least annually to ensure that garnishment has been
terminated for accounts that have been paid in full.
Objective, Scope, and Methodology:
The objective of our review was to determine the extent to which
certain CFO Act agencies use or plan to use AWG as authorized by DCIA
to collect delinquent nontax federal debts.
As previously noted, we surveyed nine federal agencies: USDA,
Education, DOE, 11115, HUD, VA, EPA, SBA, and SSA. Together, these
agencies held about $40 billion of delinquent nontax federal debt as
of September 30, 2000, which represented more than 90 percent of all
CFO Act agencies' reported delinquent nontax debt as of that date.
We developed a survey instrument to obtain agency responses to a
uniform set of questions (see appendix I) and received completed
surveys from all nine surveyed agencies. We reviewed agency responses
and followed up with cognizant agency officials, where necessary, to
obtain any needed clarifications or additional information. Although
we discussed certain of the survey responses with agency officials by
telephone or electronic mail, we did not independently verify the
reliability of all the information that agencies provided. We also
conducted interviews with FMS officials responsible for regulations,
guidance, and cross-servicing operations related to AWG and reviewed
pertinent documents, including FMS's "AWG Operations & Procedures
Manual" and its "Performance Summary Report."
We performed our work from March 2001 through September 2001 in
accordance with U.S. generally accepted government auditing standards.
We requested written comments on a draft of this report from the 10
agencies covered by the report. All 10 agencies responded to our
request and provided either written or oral comments, which are
discussed in the "Agency Comments and Our Evaluation" section of this
report and are incorporated in the report as applicable. Letters with
comments from FMS, Education, HHS, HUD, SBA, SSA, and VA are reprinted
and discussed in further detail, when applicable, in the appendixes.
Status of Surveyed Agencies' Use of AWG:
The nine large CFO Act agencies we surveyed had not used AWG as
authorized under DCIA, thus undoubtedly losing some collection
opportunities. Together, the surveyed agencies reported holding about
$23 billion in consumer delinquent debt as of September 30, 2000.
[Footnote 11] This is not to imply that AWG could be used to collect
all such debt because circumstances such as bankruptcy or appeals
could limit the application of this debt collection tool. Eight of the
nine surveyed agencies said that they planned to adopt AWG as
authorized by DCIA. Four agencies expected to implement AWG in-house
and, to varying degrees, through FMS's cross-servicing program. One of
these agencies, Education, has been using AWG in-house under separate
statutory authority since 1993. The four remaining agencies indicated
that they would not perform AWG in-house but would authorize FMS to
apply AWG to debts they referred to FMS for cross-servicing. However,
we found in previous work that agencies have not been promptly
referring all eligible debts to FMS when they become 180 days
delinquent, as required by DCIA. Prompt referral of eligible debts is
especially important for agencies that contemplate relying primarily
on FMS to conduct AWG through cross-servicing because FMS intends to
apply AWG as a tool of last resort, to be used only after all other
collection efforts have been exhausted.
Use of AWG, whether in-house or at FMS, should likely yield a marked
increase in agency collections of consumer delinquent debt. The
increase would result largely from AWG's effectiveness as leverage to
obtain payment in full, to secure a repayment plan, or to obtain full
payment on a compromised amount. According to testimony by debt
collection experts, the mere threat of AWG is often enough to motivate
repayment. These experts based their testimony on experience at
Education, which indicated that employees did not want their employers
to find out that they had defaulted on their student loans. As a
result, according to the debt collection experts, about 50 percent of
the debtors notified of Education's intent to use AWG made payment
arrangements instead of allowing their wages to be garnished.
Education's Use of Wage Garnishment under Separate Authority Has
Increased Debt Collections:
According to Education officials and agency documents, collection of
defaulted student loans has increased dramatically since Education
implemented AWG in 1993 under the Higher Education Act, as amended.
Education indicated that it had collected more than $306 million in
principal and interest on defaulted student loans from fiscal year
1997 through March 2001 using 10 percent garnishment authority. The
primary difference between AWG under DCIA and wage garnishment under
the Higher Education Act is that the Higher Education Act allows up to
10 percent of disposable pay to be garnished, while DCIA allows up to
15 percent of disposable pay to be garnished.
Most Surveyed Agencies Plan to Use AWG:
Eight of the nine surveyed agencies said they plan to implement AWG
under DCIA authority. EPA, the ninth agency, determined that use of
AWG would not be cost-effective because of its limited applicability
to the agency's debts.[Footnote 12] According to agencies' survey
responses and other agency correspondence, all eight agencies expect
to implement AWG by the end of fiscal year 2003, as shown in table 1.
Agencies gave various reasons for the delay in implementing AWG,
including their need to focus priorities on the mandatory provisions
of DCIA, to develop the required AWG regulations, and to complete the
systems changes necessary to implement AWG.
As shown in table 1, four agencies we surveyed (USDA, DOE, HUD, and
VA) indicated that they plan to rely primarily on FMS to perform AWG
as part of cross-servicing. DOE said that given due process
requirements and efficiencies of processing debts, the agency prefers
that FMS perform AWG. HUD indicated that it uses FMS's cross-servicing
program as its main "active" collection tool. VA indicated that it
views AWG as a collection tool of last resort and stated that it would
concentrate on its own established methods of collection, such as
internal offset and referral of debts to the Treasury Offset Program.
Although USDA stated that it plans to rely primarily on FMS to perform
AWG, the agency did not comment on why it preferred this course of
action. In addition, four of the surveyed agencies (Education, HHS,
SBA, and SSA) plan to implement AWG in-house and, to varying degrees,
through FMS's cross-servicing program. The use of AWG in conjunction
with other debt collection tools, whether performed in-house or at
FMS, can provide leverage to obtain payments from delinquent debtors.
Table 1: Surveyed Agencies Plans for Implementing AWG under DCIA
Authority:
Agency: USDA;
Will agency implement AWG? Yes;
Agency will implement in-house: No;
Agency will implement through FMS: Yes;
Expected implementation date: Fiscal year 2002
Agency: Education;
Will agency implement AWG? Yes;
Agency will implement in-house: Yes;
Agency will implement through FMS: Yes[A];
Expected implementation date: Fiscal year 2002
Agency: DOE;
Will agency implement AWG? Yes;
Agency will implement in-house: No;
Agency will implement through FMS: Yes;
Expected implementation date: After April 2002
Agency: HHS;
Will agency implement AWG? Yes;
Agency will implement in-house: Yes;
Agency will implement through FMS: Yes[B];
Expected implementation date: Fiscal year 2002
Agency: HUD;
Will agency implement AWG? Yes;
Agency will implement in-house: No;
Agency will implement through FMS: Yes;
Expected implementation date: Fiscal year 2002
Agency: VA;
Will agency implement AWG? Yes;
Agency will implement in-house: No;
Agency will implement through FMS: Yes;
Expected implementation date: Fiscal year 2002
Agency: EPA;
Will agency implement AWG? No;
Agency will implement in-house: No;
Agency will implement through FMS: No;
Expected implementation date:
Agency: SBA;
Will agency implement AWG? Yes;
Agency will implement in-house: Yes;
Agency will implement through FMS: Yes[C];
Expected implementation date: After March 2002
Agency: SSA;
Will agency implement AWG? Yes;
Agency will implement in-house: Yes;
Agency will implement through FMS: Yes[C];
Expected implementation date: Fiscal year 2003
[A] Education stated that it would rely on FMS to perform AWG only for
nonstudent loan debts, which represent less than one-half of 1 percent
of Education's reported eligible delinquent debt.
[B] NHS stated that it would authorize FMS to perform AWG for certain
debts referred for cross-servicing.
[C] SBA and SSA stated that FMS would perform AWG for debts that are
referred for cross-servicing.
Source: Agency responses to GAO survey and other agency correspondence.
[End of table]
FMS's Use of AWG Could Be Limited:
Depending on the nature of an agency's delinquent debt, relying on FMS
to apply AWG as part of cross-servicing may be the best approach.
FMS's incorporation of AWG into the cross-servicing program would
undoubtedly improve its collection success and make its cross-
servicing collection efforts more comprehensive. However, relying
primarily on FMS to perform AWG has definite limitations. First, not
all delinquent debt reported by agencies as eligible for cross-
servicing has been promptly referred to FMS in the past, and debt that
has been referred has often been well beyond DCINs 180-day delinquency
threshold. Second, under FMS's cross-servicing program, AWG is
considered to be a collection means of last resort and will therefore
be used far into the debt collection process. To maximize the debt
collection potential of AWG for debts referred to FMS for cross-
servicing, agencies should send eligible debts to FMS promptly”even,
when practicable, prior to the 180-day delinquency threshold.[Footnote
13] As we stated in our October 2001 testimony, debt collection
experts have testified that AWG can be an extremely powerful debt
collection tool, as the mere threat of AWG is often enough to motivate
debtor repayment. [Footnote 14]
Although debt referred for cross-servicing was not reported to
Treasury on the Report on Receivables separately by consumer and
commercial debt, the four surveyed agencies that plan to rely
primarily on FMS for AWG implementation (USDA, DOE, HUD, VA) together
reported having referred only $288 million of about $690 million of
all types of debt that they reported as eligible for cross-servicing
as of September 30, 2000.[Footnote 15] For example, as discussed in
our October 2001 testimony, the USDA agencies we reviewed (the Rural
Housing Service and the Farm Service Agency) had not identified and
promptly sent debts to FMS for cross-servicing. Consequently, if AWG
had been attempted only on delinquent debts reported as referred for
cross-servicing, substantial amounts of delinquent debt would not have
been subject to this debt collection tool.
Because FMS views AWG as a collection tool of last resort, it is
critical that agencies relying on FMS to implement AWG refer debts
promptly to FMS for cross-servicing, even, when practicable, before
they reach the 180-day delinquency threshold. According to the "AWG
Operations & Procedures Manual" developed by FMS for its PCA
contractors, AWG is a tool to be used after all other collection
efforts have been exhausted. FMS has taken the position that AWG
should generally be the collection tool of last resort because AWG
will only allow the government to receive up to 15 percent of a
person's disposable wages as long as the person is employed.
The collection procedures FMS has provided to PCA contractors require
that they attempt first, to collect the entire debt by having the
debtor pay the debt in full with one payment; second, to establish an
acceptable payment plan that pays the debt in full; third, to
establish an acceptable one-time compromise agreement; and fourth, to
establish a compromise agreement that is paid off in 6 months. The
"AWG Operations & Procedures Manual" does not incorporate the use of
AWG in conjunction with other debt collection tools as leverage to
obtain payment in full, a repayment plan, or a more favorable
compromise amount and payment schedule.
The potential leverage of AWG and related collections may be delayed
if agencies do not refer debts to FMS as soon as possible. Based on
FMS's established procedures for cross-servicing, debts agencies refer
to FMS would typically age at least another 90 days before issuance of
the AWG notice to the debtor and 120 days before issuance of the
garnishment order to the employer. FMS first attempts to collect
referred debts for 30 days at its governmentwide debt collection
center before referring the debt to a PCA. Assuming that FMS's cross-
servicing activities operate in a manner consistent with the schedule
in its manual, after referral, debts would generally remain with the
PCA to be pursued using other collection tools for another 60 days
before the agency could request FMS's approval to mail the AWG notice.
Debts would age another 30 days before the AWG package could be sent
to the debtor's employer.
The four surveyed agencies that said they would rely primarily on FMS
to implement AWG (USDA, DOE, HUD, VA) do not forward debts to FMS for
cross-servicing until they are at least 61 days delinquent. Some debts
are more than 180 days delinquent when they are sent to FMS. In
response to our survey, USDA and DOE indicated that the delinquency
timeframe for referring debts to FMS varies by field office. For DOE,
debts range from 61 to 180 days delinquent at the time of referral to
FMS. USDA did not provide the range of delinquency for debts referred
to FMS. HUD indicated that it currently refers debts to FMS for cross-
servicing when they are from 121 to 180 days delinquent. VA indicated
that it refers debts to FMS when they are more than 180 days
delinquent. Since PCAs will typically use AWG as a debt collection
tool of last resort under FMS's cross-servicing program, debts of
agencies that rely primarily on FMS to implement AWG will be, at a
minimum, more than 150 days delinquent (i.e., 61 days at referral plus
30 days at FMS plus 60 days at the PCA) before the notice is sent to
the debtor. These debts will be more than 180 days delinquent (because
an additional 30 days will transpire after the notice is mailed to the
debtor) before wage garnishment begins. If the debtor requests a
hearing within the required time frame, wage garnishment could be
delayed as much as 60 additional days pending a hearing decision.
It is important to note that, regardless of what the surveyed agencies
told us about when they are referring debts to FMS for cross-
servicing, DCIA does not require agencies to refer debts to FMS until
they are 180 days delinquent. Moreover, as previously mentioned,
agencies have not in the past promptly referred all eligible debts
that are 180 days delinquent to FMS. According to FMS data, as of
September 30, 2001, more than 50 percent of debt referred for cross-
servicing governmentwide was more than 2 years delinquent at the time
of referral. As we have previously testified, industry statistics have
shown that the likelihood of recovering amounts owed on a debt
decreases dramatically as the age of the debt increases. Although FMS
officials told us that the age of delinquency has no bearing on what
can be collected using AWG, this view ignores AWG's potential to
motivate debtors to pay their debt in full, to enter into a repayment
plan for the full amount, or to agree on a compromised amount. The old
adage that "time is money" is very relevant to the application of AWG
to delinquent debts. Therefore, whenever possible, eligible debts
should be referred promptly to FMS for cross-servicing, even prior to
the 180-day delinquency threshold established by DCIA.
Surveyed Agencies Lacked Comprehensive Implementation Plans and
Regulations:
If AWG's potential for boosting collections on delinquent debts is to
be realized, agencies must develop clear implementation plans and
regulations that are consistent with those issued by Treasury.
Agencies must take these steps whether they intend to implement AWG in-
house, to rely on FMS to implement AWG, or to do both. At the
completion of our fieldwork, however, none of the eight agencies that
plan to use AWG had comprehensive written implementation plans. In
addition, although all eight agencies were developing regulations to
implement AWG, none had finalized their regulations. It is not clear
when the eight agencies will be able to take full advantage of the
debt collection potential of AWG, either in-house or through FMS. As
of the completion of our fieldwork, only two small agencies not
included in our review, the Railroad Retirement Board and the James
Madison Foundation, had provided FMS the authority to use AWG as part
of cross-servicing.
Implementation Plans Are Critical for Incorporating AWG as a
Collection Tool:
Although Treasury regulations do not require that agencies prepare
written implementation plans before implementing AWG, we believe that
comprehensive written implementation plans are critical for the eight
surveyed agencies that intend to use AWG. At a minimum, each agency's
implementation plan should specify:
* whether the agency intends to implement AWG in-house, through FMS,
or both;
* the types of debts to which the agency will apply AWG, since AWG may
not be a feasible means of collection for all types of debt the agency
holds;
* the tasks involved in implementing AWG and who will have
responsibility for carrying out each task; and;
* the process for conducting hearings, regardless of whether AWG is
conducted in-house or through FMS.
Three of the agencies had plans, but the plans were deficient. The
other five agencies said they did not have written implementation
plans.
Three surveyed agencies (HUD, SBA, and SSA) indicated on their surveys
that they had a written plan for implementing AWG. The plans they
submitted, however, did not clearly describe how and by whom hearings
would be conducted or clearly indicate when the agencies could fully
implement AWG as a routine debt collection tool. In addition, SBA's
and SSA's plans did not specify which types of debts would be subject
to AWG. They did not address, for example, which age categories of
debts would be subject to AWG and what the minimum debt amount subject
to AWG would be. HUD's plan stated that debts related to certain
programs that are referred to FMS for cross-servicing would be subject
to AWG, but the plan did not make it clear whether AWG would be
applicable to all other programs and related debts administered by the
agency.
The other five surveyed agencies that plan to implement AWG indicated
that they did not have written implementation plans. Three of these
agencies (USDA, DOE, and VA) plan to rely primarily on FMS to perform
AWG. The other two agencies (Education and HHS) plan to implement AWG
in-house and, to varying degrees, through FMS's cross-servicing
program. The survey responses and follow-up information do not make it
clear whether most of these agencies intend to develop an
implementation plan.
USDA stated that it has not prepared a formal AWG implementation plan
because of a shortage of resources and the need to address other DCIA
priorities. The importance of an AWG implementation plan for USDA was
discussed in a hearing before your subcommittee on December 5, 2001.
In that hearing, the commissioner of FMS stated that USDA intended to
authorize FMS to use AWG as part of the cross-servicing program and
needed to develop a plan to take full advantage of this debt
collection tool.
The commissioner emphasized that a significant percentage of USDA's
delinquent debt portfolio, such as Food Stamp Program debts, is exempt
from cross-servicing by Treasury and therefore would not be subject to
FMS's AWG program. DOE indicated that it has not developed a written
implementation plan because it has submitted its debt collection
regulations to FMS to determine if they adequately cover AWG and will
allow FMS to administer AWG functions on DOE's behalf. VA indicated
that it will rely on FMS to implement AWG and does not believe that a
written implementation plan is necessary. HI-15 indicated that it
plans to implement AWG based on departmental regulations, but the
regulations have not yet been published. Although Education did not
provide a written implementation plan, agency officials stated that
they have prepared a system requirements document that includes steps
for making the system changes necessary to administer AWG under DCIA.
Notwithstanding the reasons agencies gave for not yet having written
AWG implementation plans, we believe such plans are needed to help
ensure that agencies fully incorporate AWG into their debt collection
processes in the near future. We recognize that Education may not have
as great a need for an implementation plan because the agency has wage
garnishment experience under authority separate from DCIA.
Regulations Are Required for AWG Implementation:
As of the completion of our fieldwork, none of the eight surveyed
agencies that plan to use AWG as authorized by DCIA had finalized the
regulations needed to implement AWG, but each agency was developing
such regulations. Treasury regulations require an agency to prescribe
regulations for the conduct of AWG hearings that are consistent with
the Treasury regulations. FMS considers the performance of AWG
hearings to be a creditor agency function and does not plan to conduct
hearings on behalf of such agencies. FMS will refer debts back to
creditor agencies to conduct required hearings.
In the responses to our survey and in FMS's discussions with agencies,
a major concern agencies raised about AWG was their ability to handle
the hearings that debtors may request once they receive an AWG notice.
Two of the surveyed agencies (SBA and USDA) indicated that they
anticipate obstacles related to the hearings process, including
arranging for hearings and developing hearing procedures.
Many agencies have stated to FMS that they do not have the staff to
handle AWG hearings. Accordingly, agencies will have to either
establish that capacity or obtain hearings services on a contract
basis through another agency that is willing to provide such services.
FMS has informed agencies that if they do not believe they have the
staff to handle the hearing requests, other agencies are available to
perform hearing activities for a fee. According to a VA official, for
example, VA provides hearing services on federal salary offset to
other agencies for about $100 per hearing. VA expects to conduct AWG
hearings for its own agency and for other agencies for a similar fee.
The best available indication of the frequency of hearing requests is
from Education's experience with wage garnishment under student loan
legislation. During fiscal year 2000, Education issued 90,658 Notices
of Intent for wage garnishment, and approximately 10 percent of the
debtors who received a notice requested a hearing.
Conclusions:
AWG has the potential to be a powerful tool for collecting delinquent
federal debts, especially those owed by debtors who are not currently
making payments under an agreement with the agency. More than 5 years
after the enactment of DCIA, which authorized but did not mandate use
of AWG, and more than 3 years after Treasury issued implementing
regulations for AWG, however, none of the large CFO Act agencies we
surveyed had begun using AWG as authorized by DCIA, either in-house or
through FMS. And although eight of the nine agencies we surveyed said
they intended to use this debt collection tool, none had adequately
completed crucial preliminary steps”preparing detailed implementation
plans and developing the necessary implementing regulations.
By failing to implement AWG, agencies have clearly missed
opportunities to maximize collection of delinquent debts. Even when
agencies do begin implementing AWG, those that rely primarily on FMS
may find that the tool's effectiveness”particularly its usefulness in
leveraging full or compromise payments from debtors who wish to avoid
wage garnishment”is limited because agencies have in the past failed
to promptly refer a significant portion of eligible debts to FMS for
cross-servicing and because FMS intends to use AWG as a collection
tool of last resort, thus allowing debts (that may already be more
than 180 days delinquent) to age significantly before sending an AWG
notice to the debtor.
Recommendations for Executive Action:
To help ensure that agencies effectively incorporate AWG into their
debt collection processes, we recommend that the secretaries of the
Departments of Agriculture, Education, Energy, Health and Human
Services, Housing and Urban Development, and Veterans Affairs; and the
commissioner of the Social Security Administration direct their chief
financial officers and that the administrator of the Small Business
Administration direct the associate deputy administrator for capital
access to take the following steps:
* Prepare comprehensive written implementation plans that clearly
define, at a minimum, the types of debt that will be subject to AWG,
the policies and procedures for administering AWG, and the process for
conducting hearings. Some of the details that should be considered for
inclusion in the plan are (1) whether the agency will conduct AWG in-
house, at a debt collection center, or both; (2) the types of debts,
if any, that will be sent to FMS prior to becoming 180 days
delinquent; and (3) whether hearings will be conducted by the agency
or contracted out.
* Complete and finalize regulations for conducting AWG.
* Use AWG in conjunction with other debt collection tools, when
practicable, as leverage to obtain payments from delinquent debtors.
* Expedite referrals of eligible debts to FMS for cross-servicing when
relying on FMS to perform AWG. Agencies should refer such debts prior
to the 180-day delinquency threshold when practicable.
We also recommend that the commissioner of FMS modify FMS's "AWG
Operations & Procedures Manual" to incorporate the use of AWG in
conjunction with other debt collection tools, when practicable, as
leverage to obtain payments from delinquent debtors.
Agency Comments and Our Evaluation:
Each of the 10 agencies covered by our report responded to our request
for comments. We received a combination of written and oral comments
from the 9 agencies we surveyed and written comments from FMS. Letters
with comments from FMS, Education, MIS, HUD, SBA, SSA, and VA are
reprinted and discussed in further detail, when applicable, in the
appendixes. Eight of the 9 agencies we surveyed either stated that
they agreed with our report or indirectly indicated some level of
agreement by describing their efforts to implement one or more of our
recommendations. Several of these provided updates to their responses
to our survey document that was in large part the basis for this
report. We modified our report to reflect stated changes in how
agencies expected to implement AWG and any related schedule changes.
We also incorporated a number of technical suggestions as appropriate.
The 9th agency, EPA, stated that appropriate staff reviewed the report
and the agency did not have any comments.
The only explicit disagreement on our recommendations was expressed by
FMS. While saying it strongly agreed that agencies relying on FMS to
implement AWG should refer debts promptly to FMS for cross-servicing,
it disagreed with our recommendation concerning its timing and
philosophy in applying AWG. We recommended that FMS modify its "AWG
Operations & Procedures Manual" to incorporate the use of AWG in
conjunction with other debt collection tools, when practicable, as
leverage to obtain payments from delinquent debtors. FMS stated that
PCA officials cannot threaten an action unless they actually intend to
take it and FMS policy requires that AWG only be used when all other
attempts at collection have been exhausted. FMS acknowledged that its
policy does allow expedited use of AWG in defined circumstances but
said it continues to believe that AWG should be used only when all
other collection attempts have been unsuccessful and the debtor has
been given every opportunity to otherwise resolve the debt.
We did not recommend that FMS threaten debtors with the use of AWG
with no intention of using it. Rather, if upon contacting the debtor,
FMS could not obtain payment in full or a satisfactory repayment
agreement, our view was that FMS or its PCA contractor could
immediately initiate AWG. The intent would be to use AWG alone or in
conjunction with other debt collection tools to liquidate the debt.
Although FMS policy currently prescribes that its PCAs use AWG only
after all other collection efforts have been exhausted, neither
current law nor regulation contemplates that only one collection tool
may be used at a time. In fact, the AWG regulations specifically state
that agencies may pursue other debt collection remedies separately or
in conjunction with AWG. As stated in our report, viewing AWG only as
a collection tool of last resort ignores AWG's potential to motivate
debtors to pay their debt in full, to enter into a repayment plan for
the full amount, or to agree on a compromise amount. In our view,
deferring the notice of intended use negates a major benefit mentioned
by experts on the utility of AWG. Their main point was that invoking
the possibility of use could influence those who otherwise might not
respond to a request for payment, or to actually pay, to do so because
they do not wish employers to become aware that they have delinquent
federal debt.
FMS stated that it allows its PCAs under certain circumstances to
initiate the AWG process before the expiration of the 60-day period
following receipt of referred debt from other federal agencies. Our
recommendation contemplates that such action should be the norm rather
than the exception. As mentioned in our report, according to FMS data,
more than 50 percent of debt referred for cross-servicing
governmentwide as of September 30, 2001, was more than 2 years
delinquent at the time of referral. Moreover, agencies are not
required to send debts to FMS until they are more than 180 days
delinquent. Consequently, FMS in most cases is not the first federal
agency to attempt collection from or debt resolution with the debtors
because creditor agencies should be attempting to collect their
delinquent debts prior to sending them to FMS for cross-servicing. For
FMS to wait until it or its PCA contractors have exhausted all
collection efforts prior to initiating AWG by notifying the debtor
that such action will be taken greatly diminishes AWG's potential to
help FMS leverage payment from debtors who are significantly
delinquent on their obligations to the federal government and who
likely had not cooperated with the referring federal agencies in
resolving their debts.
Finally, while there may be differences of opinion on when FMS should
initiate AWG in its collection process, HUD in its comments on our
report spoke in favor of our recommendation to FMS that FMS should
incorporate the use of AWG in conjunction with other debt collection
tools rather than consider AWG as a collection tool of "last resort."
In developing its own implementation plan for AWG, HUD said that it
expected that effective use of AWG would be part of FMS's plan for
servicing debt referred for cross-servicing. In that light, HUD said
that it would expect that those assigned to cross-service debts would
be encouraged to use AWG as a tool to obtain voluntary payment.
This view from HUD aptly summarizes our position and is a key aspect
of the reasoning behind our recommendation that FMS use AWG in
conjunction with other collection tools and not principally as a last
resort. For the reasons offered above, we continue to believe that FMS
should modify its "AWG Operations & Procedures Manual" and policy with
regard to the use of AWG.
As agreed with your office, unless you announce its contents earlier,
we plan no further distribution of this report until 30 days after its
issuance date. At that time, we will send copies to the chairmen and
ranking minority members of the Senate Committee on Governmental
Affairs and the House Committee on Government Reform and to the
ranking minority member of your subcommittee. We will also provide
copies to the heads of the agencies we surveyed, the secretary of the
treasury, and the commissioner of FMS. We will then make copies
available to others upon request.
Please contact me at (202) 512-3406 if you or your staff have any
questions on this report. I can also be reached by e-mail at
engelg@gao.gov. Key contributors to this assignment were Kenneth R.
Rupar, Michael S. LaForge, Linda K. Sanders, and Michael D. Hansen.
Sincerely yours,
Signed by:
Gary T. Engel:
Director:
Financial Management and Assurance:
[End of section]
Appendix I: Survey of Administrative Wage Garnishment:
U.S. General Accounting Office:
Survey of Administrative Wage Garnishment (AWG):
Introduction:
The U.S. General Accounting Office has been asked to study the use or
planned use of Administrative Wage Garnishment (AWG) to collect
delinquent nontax Federal debt. As a part of our study, we are sending
this questionnaire to selected agencies and reporting entities within
agencies to ask about their experiences with AWG.
Most of the questions in this questionnaire can be answered by
circling answers or filling in blanks. Space has been provided at the
end of the questionnaire for any additional comments.
Please return the completed questionnaire to:
U.S. General Accounting Office:
Ms. Linda Sanders:
1999 Bryan Street, Suite 2200:
Dallas, TX 75201-6848:
Or, you may fax your completed questionnaire to Ms. Linda Sanders at
(214) 777-5758.
If you have any questions, please call either Linda Sanders
at (214) 777-5655 or Matthew Valenta at (214) 777-5697.
Thank you very much for your assistance.
Please note the following definition of wage garnishment:
Wage garnishment is a process whereby an employer withholds amounts
from an employee's wages and pays those amounts to the employee's
creditor in satisfaction of a wage garnishment order issued by the
creditor. A Federal agency collecting delinquent nontax debt may
garnish the wages of a delinquent debtor without first obtaining a
court order. This process, known as "administrative wage garnishment
(AWG)," is authorized, but not required by the Debt Collection
Improvement Act of 1996 (DCIA). For purposes of this questionnaire,
AWG does not include Federal salary offset, which is a process whereby
Federal agencies offset employee salaries to liquidate their
delinquent nontax Federal debts.
Background:
1. What is the name of your reporting entity for the Treasury Report
on Receivables (TROR)?
Reporting entity:
2. Who should GAO contact to inquire about information in this
questionnaire?
Name:
Telephone:
E-mail address:
3. Does your entity currently use Administrative Wage Garnishment
(AWG) as a means of debt collection? (Note: AWG does not include
Federal salary offset.) (Circle one)
1. Yes; Continue with question 4.
2. No; Skip to question 36.
4. Please cite statutory and/or other authority for using AWG. (Circle
all that apply)
1. Debt Collection Improvement Act of 1996 (DCIA):
2. Other - Cite specific statute:
5. Does your entity have written policies and procedures for
administering AWG? (Circle one):
1. Yes (Please provide a copy):
2. No:
6. What is the maximum amount and percent of disposable pay your
entity will administratively garnish (without a debtor's written
consent to garnish a greater amount)?
Amount:
Percent:
7. At how many days of delinquency does a debt become eligible for AWG
under your agency's process, i.e. attempts are made to identify a
debtor's employer? (Circle one)
1. 1”30 days;
2. 31”60 days;
3. 61”90 days;
4. 91”120 days;
5. 121”180 days;
6. Information not available;
7. Other, please describe.
7a. Who is responsible for identifying a debtor's employer so AWG can
be initiated? (Circle all that apply):
1. Your entity;
2. Treasury's Cross-servicing;
3. A Private Collection Agency;
4. Other, please explain.
8. At how many days of delinquency of a debt is a notice of intent to
initiate AWG issued to a debtor? (Circle one):
1. 1”30 days;
2. 31”60 days;
3. 61”90 days;
4. 91” 20 days;
5. 121”180 days;
6. Information not available;
7. Other, please describe.
8a. Who is responsible for issuing the notice of intent to
initiate AWG to a debtor? (Circle all that apply):
1. Your entity;
2. Treasury's cross-servicing;
3. A Private Collection Agency;
4. Other, please explain.
9. When did your entity, or someone on behalf of your entity, issue
its first notice of intent to initiate AWG to a debtor?
(Year/Month):
or - Check box if information is not available:
Request For Information:
Notices Of Intent To Initiate AWG (Enter zero "0" if none. Enter "UK"
if unknown):
10. How many notices of intent to initiate AWG were sent in each
period and what were their total dollar amounts?
Reporting period: FY 1999 and earlier:
Number:
Dollar:
Reporting period: FY 2000:
Number:
Dollar:
Reporting period: FY 2001 (Quarters 1 & 2):
Number:
Dollar:
11. How many notices of intent to initiate AWG were returned as
undeliverable in each period?
Reporting period: FY 1999 and earlier:
Number:
Dollar:
Reporting period: FY 2000:
Number:
Dollar:
Reporting period: FY 2001 (Quarters 1 & 2):
Number:
Dollar:
12. Does your entity attempt to contact debtors after a notice of
intent to initiate AWG is returned as undeliverable? (Circle one):
1. No (Please explain below):
2. Yes (Please describe your procedures below):
Hearings:
(Enter zero "0" if none;
Enter "UK" if unknown;
Enter "NA" if not applicable.)
13. How many debtors requested a hearing regarding AWG in each period?
Reporting period (Numbers of debtors):
FY 1999 and earlier:
FY 2000:
FY 2001 (Quarters 1 & 2):
14. How many hearings ended in each type of outcome in each
period?
a. Debt substantiated - no change in debt:
Reporting period (Numbers of debtors):
FY 1999 and earlier:
FY 2000:
FY 2001 (Quarters 1 & 2):
b. Debt invalidated - no debt owed:
Reporting period (Numbers of debtors):
FY 1999 and earlier:
FY 2000:
FY 2001 (Quarters 1 & 2):
c. Debt payment schedule established:
Reporting period (Numbers of debtors):
FY 1999 and earlier:
FY 2000:
FY 2001 (Quarters 1 & 2):
d. Debt payment schedule changed:
Reporting period (Numbers of debtors):
FY 1999 and earlier:
FY 2000:
FY 2001 (Quarters 1 & 2):
e. Debt amount owed was revised:
Reporting period (Numbers of debtors):
FY 1999 and earlier:
FY 2000:
FY 2001 (Quarters 1 & 2):
f. Other outcomes (Describe outcome(s) below and enter numbers):
Employer Notifications:
15. When did your entity, or someone on behalf of your entity, issue
its first AWG Form (SF-329), or its equivalent, to an employer? (AWG
Form SF-329 includes the Letter & Important Notice to Employer, Wage
Garnishment Order, Wage Garnishment Worksheet, and Employer
Certification)
Check box if information is not available:
(Year/Month):
16. At how many days of delinquency of a debt is an AWG Form sent to a
debtor's employer? (Circle one):
1. 1-30 days;
2. 31”60 days;
3. 61”90 days;
4. 91”120 days;
5. 121”180 days;
6. Information not available;
7. Other, please describe:
16a. Who is responsible for sending the AWG Form to the debtor's
employer? (Circle all that apply):
1. Your entity;
2. Treasury's cross-servicing;
3. A Private Collection Agency;
4. Other, please explain:
Numbers Of Employer Notifications:
Enter zero "0" if none;
Enter "UK" if unknown;
Enter "NA" if not applicable.
17. How many AWG Forms were sent to employers during each period and
what were their dollar amounts?
Reporting period:
FY 1999 and earlier:
Number:
Dollar Amount:
FY 2000:
Number:
Dollar Amount:
FY 2001 (Quarters 1 & 2):
Number:
Dollar Amount:
18. How many Employer Certification Forms were completed and returned?
Reporting period:
FY 1999 and earlier:
Number:
Dollar Amount:
FY 2000:
Number:
Dollar Amount:
FY 2001 (Quarters 1 & 2):
Number:
Dollar Amount:
19. How many Employer Certification Forms identified debtors who were
currently employed?
Reporting period:
FY 1999 and earlier:
Number:
Dollar Amount:
FY 2000:
Number:
Dollar Amount:
FY 2001 (Quarters 1 & 2):
Number:
Dollar Amount:
20. How many Employer Certification Forms identified debtors who were
no longer employed?
Reporting period:
FY 1999 and earlier:
Number:
Dollar Amount:
FY 2000:
Number:
Dollar Amount:
FY 2001 (Quarters 1 & 2):
Number:
Dollar Amount:
21. How many Employer Certification Forms were returned within 20 days
(i.e. the timeliness requirement)?
Reporting period:
FY 1999 and earlier:
Number:
Dollar Amount:
FY 2000:
Number:
Dollar Amount:
FY 2001 (Quarters 1 & 2):
Number:
Dollar Amount:
22. How much delinquent debt has your entity collected through AWG?
Reporting period:
FY 1999 and earlier:
Number:
Dollar Amount:
FY 2000:
Number:
Dollar Amount:
FY 2001 (Quarters 1 & 2):
Number:
Dollar Amount:
23. Does your entity take steps to encourage employers to return the
completed Employer Certification Forms? (Circle one.)
1. No (Please explain why not);
2. Yes (Please describe your procedures):
24. Are you aware of any allegations that a debtor has been discharged
from employment, refused employment, or subjected to disciplinary
action as a result of AWG being initiated by your agency? (Circle one.)
1. No;
2. Yes (Please describe):
Reviews For Financial Hardship:
(Enter zero "0" if none;
Enter "UK" if unknown;
Enter "NA" if not applicable.
25. How many AWG cases were reviewed for financial hardship in each
period?
Reporting period (Number of reviews):
FY 1999 and earlier:
FY 2000:
FY 2001 (Quarters 1 & 2):
26. How many reviews had each of these types of outcomes in each
period?
a. Debt remained unchanged:
Reporting period (Number of reviews):
FY 1999 and earlier:
FY 2000:
FY 2001 (Quarters 1 & 2):
b. Debt payments rescheduled:
Reporting period (Number of reviews):
FY 1999 and earlier:
FY 2000:
FY 2001 (Quarters 1 & 2):
c. Debt amount reduced:
Reporting period (Number of reviews):
FY 1999 and earlier:
FY 2000:
FY 2001 (Quarters 1 & 2):
d. Debt written off:
Reporting period (Number of reviews):
FY 1999 and earlier:
FY 2000:
FY 2001 (Quarters 1 & 2):
e. Other outcomes (Describe outcome(s) below and enter numbers):
27. Who is responsible for monitoring AWG, i.e., ensuring garnished
wages are applied to the appropriate debt? (Check all that apply):
1. Your entity;
2. Treasury's cross-servicing;
3. A Private Collection Agency;
4. Other, please explain.
28. Has your entity received any complaints from employers about AWG?
(Circle one.)
1. No;
2. Yes (Please describe):
Evaluation of AWG:
29. Has your entity performed a cost-benefit study of its AWG program?
(Circle one):
1. No;
2. Yes (Please enclose any report or results):
30. Which of the following best describes the cost-benefit
relationship of your entity's AWG program? (Circle one):
1. Benefits substantially outweigh the costs;
2. Benefits somewhat outweigh the costs;
3. Benefits are about equal to the costs;
4. Costs somewhat outweigh the benefits;
5. Costs substantially outweigh the benefits;
6. Not able to judge.
31. Please describe the benefits obtained from AWG:
32. Please describe the costs or difficulties in implementing or
administering AWG:
33. Comparing your experience with your expectations, which of the
following best describes your entity's AWG experience? (Circle one):
1. AWG has been substantially more successful than expected;
2. AWG has been somewhat more successful than expected;
3. AWG has been about as successful as expected;
4. AWG has been somewhat less successful than expected;
5. AWG has been substantially less successful than expected;
6. Not able to judge.
33a. Please explain your response:
34. Has your entity produced reports or other information about the
following topics that could be sent to GAO?
(Circle all that apply) (For circled topics, please enclose copies of
this information with this questionnaire):
a. The number of debtors who paid off their debt at anytime after
receiving an AWG notice and /or having wages garnished;
b. The number of debtors who paid off their debt after receiving an
AWG notice, but before any wages were garnished;
c. The number of debtors who entered into a repayment agreement after
receiving an AWG notice, but before any wages were garnished;
d. The number of debtors who entered into a compromise agreement after
receiving an AWG notice, but before any wages were garnished;
e. The number of debtors who left their employment without paying
their entire debt after wages were garnished at least once;
f. Your entity's experiences and "lessons learned" in implementing AWG.
35. Do you have any other comments about AWG that we should consider
in reporting about your entity's experience with AWG?
1. No;
2. Yes (Please describe):
For those entities that currently use AWG, please Stop here.
The following questions are for agencies that are NOT currently using
AWG as a means of debt collection.
36. Has your entity attempted to use AWG in the past as a means of
debt collection? (Circle one):
1. No; Please explain why your entity has not attempted to use AWG as
a means of debt collection.
2. Yes; Please explain why your entity no longer uses AWG as a means
of debt collection.
37. Does your entity plan to implement AWG within the next five years?
(Circle one):
1. Yes (Continue with question 38);
2. No (Skip to question 46);
3. Not sure (Skip to question 46).
38. Does your entity have a written plan for implementing and/or
administering AWG? (Circle one):
1. Yes (Continue); If Yes, please provide a copy of your plan;
2. No (Skip to question 40).
39. Does this written plan address the following issues? (Circle one
in each row);
A timetable for implementing AWG:
1. Yes;
2. No.
The types of debt that are planned for collection:
1. Yes;
2. No.
The types of debt that are not planned for collection:
1. Yes;
2. No.
Who will administer AWG:
1. Yes;
2. No.
The policies and procedures for administering AWG:
1. Yes;
2. No.
Selection of the hearing official:
1. Yes;
2. No.
40. If your entity plans to implement AWG, but has not yet developed a
written plan for implementing and/or administering AWG, please discuss
in detail the reason(s) for not developing a written plan.
41. Who will be responsible for identifying the debtor's employers,
issuing the notice of intent to initiate AWG to debtors, sending the
AWG Form to employers, and monitoring garnished wages to ensure they
are applied to the appropriate debt? (Circle all the apply):
Identifying debtor's employers:
1. Your entity;
2. Treasury's cross servicing;
3. A Private Collection Agency;
4. Other, please explain.
Issuing the notice of intent to initiate AWG to debtors:
1. Your entity;
2. Treasury's cross servicing;
3. A Private Collection Agency;
4. Other, please explain.
Sending the AWG Form to employers:
1. Your entity;
2. Treasury's cross servicing;
3. A Private Collection Agency;
4. Other, please explain.
Monitoring garnished wages to ensure they are appropriately applied:
1. Your entity;
2. Treasury's cross servicing;
3. A Private Collection Agency;
4. Other, please explain.
41a. If your agency does not plan to garnish wages prior to referral
to Treasury's cross-servicing, please explain why.
42. If your entity plans for Treasury's cross-servicing to administer
any aspect of AWG, at how many days of delinquency are debts currently
referred to Treasury's cross-servicing? (Circle one):
1. 1”30 days;
2. 31”60 days;
3. 61”90 days;
4. 91”120 days;
5. 121”180 days;
6. Information not available;
7. Other, please explain.
43. Describe any obstacles your agency anticipates encountering in
implementing or using AWG.
44. Discuss the benefits your agency anticipates achieving from
implementing or using AWG.
45. Please provide any additional comments you may have relating to
your plans to implement or use AWG.
For those entities that plan to use AWG, please Stop here.
46. If your entity does not plan to implement AWG within the next five
years or is not sure whether it will, please discuss in detail the
reason(s) why your entity does not plan to use or is not sure whether
it will use this debt collection tool.
[End of section]
Appendix II: Comments from the Financial Management Service:
Note: GAO comments supplementing those in the report text appear at
the end of this appendix.
Department Of The Treasury:
Commissioner:
Financial Management Service:
Washington, D.C. 20227:
January 23, 2002:
Mr. Gary T. Engel, Director:
Financial Management and Assurance:
United States General Accounting Office:
441 G Street, NW Room 5970:
Washington, D.C. 20548:
Dear Mr. Engel:
This letter is in response to the draft report (GA0-02-313) entitled
"Debt Collection Improvement Act of 1996: Status of Selected Agencies'
Implementation of Administrative Wage Garnishment." I am pleased to
comment on the information contained in your draft report. Overall,
the report accurately reflects the information provided by the
Financial Management Service (FMS), and we strongly agree with GAO's
conclusion that it is critical that agencies relying on FMS to
implement Administrative Wage Garnishment (AWG) refer debts promptly
to FMS for cross-servicing. I would also offer the following comments:
First, with regard to the recommendation that FMS "modify [its] AWG
Operations & Procedures Manual to incorporate the use of AWG in
conjunction with other debt collection tools, when practicable, as
leverage to obtain payments from delinquent debtors," I would note
that it is unlawful for a Private Collection Agency (PCA) under
contract to us to threaten to take a debt collection action as mere
leverage to get a debtor to pay. PCA officials cannot threaten an
action unless they actually intend to take it, and FMS policy requires
that we move forward with AWG only when we have exhausted all other
attempts at collection. [See comment 1]
Nevertheless, our policy is that under certain circumstances a PCA can
initiate the AWG process before expiration of the 60-day period
following receipt of the debt from FMS, if it has identified the
debtor's employer and the debtor's Taxpayer Identification Number
(TIN). Once the PCA has located the employer and the debtor's TIN, and
has determined that AWG is the best course of action, we encourage the
PCA to submit the request for AWG action directly to us. FMS quickly
reviews the case to ensure that no other collection action is
occurring on the debt prior to the PCA sending an AWG notice letter.
[See comment 1]
Regarding our policy on AWG as a collection tool of last resort, while
FMS views AWG as a tool with much potential, we continue to believe
that it should be used only when all other collection attempts have
been unsuccessful and the debtor has been given every opportunity to
otherwise resolve the debt. [See comment 1]
Once again, we appreciate that GAO has sought input from FMS regarding
this report and hope that our responses will be helpful to you in
finalizing the report. If you or your staff have any questions, please
have them contact Dean Balamaci on (202) 874-6660.
Sincerely,
Signed by:
Richard L. Gregg:
Comments from the Financial Management Service:
1. See our discussion in the "Agency Comments and Our Evaluation"
section.
[End of section]
Appendix III: Comments from the Department of Education:
Note: GAO comments supplementing those in the report text appear at
the end of this appendix.
United States Department Of Education:
The Deputy Secretary:
400 Maryland Ave., S.W.
Washington, D.C. 20202-0500:
[hyperlink, http://www.ed.gov]
"Our mission is to ensure equal access to education and to promote
educational excellence throughout the Nation."
January 24, 2002:
Mr. Gary T. Engel:
Director:
Financial Management and Assurance:
United States General Accounting Office:
Washington, DC 20548:
Dear Mr. Engel:
I am writing in response to your request for comment on the draft GAO
report to Congressman Stephen Horn entitled, "Debt Collection
Improvement Act Of 1996: Status of Selected Agencies' Implementation
of Administrative Wage Garnishment." I appreciate this opportunity to
provide comments on the draft report.
We believe that the draft report is misleading. It leaves the reader
with the impression that no agency is conducting administrative wage
garnishment (AWG). While a statement is made at the beginning of the
report that "ED has effectively used wage garnishment under authority
similar to DCIA since 1993," the remainder of the report consistently
ignores this fact. Thus, the draft report depicts ED as having no
working administrative wage garnishment process when, in fact, ED is
the only agency that has a working process. Further, the draft report
does not give a clear synopsis of ED's use of administrative wage
garnishment. [See comment 1]
During our many discussions with GAO, we explained our difficulty in
making the transition from an administrative wage garnishment process
that has been working extremely effectively under the Higher Education
Act (HEA), as amended in particular by the Emergency Unemployment
Compensation Act of 1991. In drafting the new rules and procedures for
DCIA-authorized administrative wage garnishment, the Treasury
Department created additional requirements that have not allowed ED to
smoothly transition to the DCIA process. To implement the DCIA
process, we will need to make significant procedural and programmatic
changes to our already successful administrative wage garnishment
process. The need for these changes is one of the primary reasons for
the delay in implementing DCIA-authorized AWG. [See comment 2]
The Department is committed to converting to the DCIA-authorized
administrative wage garnishment process. We currently have a task in
place which, when completed, will allow for garnishment activity to
begin at 15 percent. We expect that task to be complete before the end
of fiscal year 2002 or no later than the close of the calendar year.
I would like to point out that our success in collection using the HEA
administrative wage garnishment process on student loan debt, along
with our successful use of many of the other collection tools, led to
the Congress's adoption of this same garnishment tool for all federal
agencies in the DCIA. ED's exemplary record in collecting federal
debt, using tools such as AWG, is the primary reason for our
"permanent exemption" from the account transfer requirements contained
in the DCIA.
In view of the above comments, we are requesting that the draft GAO
report be revised to reflect ED's initiative and success with the AWG
program before it is submitted to the Subcommittee on Government
Efficiency, Financial Management, and Intergovernmental Relations,
Committee on Government Reform.
Sincerely,
Signed by:
William D. Hansen:
GAO Comments:
1. Education stated that the draft report is misleading and should be
revised because it leaves the reader the impression that no agency is
conducting AWG and does not give a clear synopsis of Education's use
of AWG. We disagree. The primary focus of our work was implementation
of AWG as authorized by the DCIA. We accurately stated that none of
the nine CFO Act agencies we surveyed were using AWG as authorized by
DCIA and all but one agency indicated that they intend to do so.
Despite this, we clearly state in this report, as Education noted in
its response, that Education has effectively used wage garnishment
under authority similar to DCINs since 1993 to collect delinquent
student loans. According to Education, such efforts have dramatically
increased collections on delinquent student loans. We made this point
at the beginning of our report, as well as in the body of our report
and in a separate subsection that is titled "Education's Use of Wage
Garnishment under Separate Authority Has Increased Debt Collections."
2. As stated in this report, Education has been using AWG under
separate authority, to garnish up to 10 percent of debtors' disposable
pay and plans to implement AWG under DCIA authority in fiscal year
2002. While we acknowledge that Education has had to consider the
additional requirements to smoothly transition to the DCIA process,
other agencies have also had to develop the necessary procedural and
programmatic changes for implementing AWG. As such, we stated in this
report that the eight agencies we surveyed that are planning to
implement AWG under DCIA authority, including Education, gave various
reasons for the delay in its implementation, including the need to
complete the necessary systems changes.
[End of section]
Appendix IV: Comments from the Social Security Administration:
Note: GAO comments supplementing those in the report text appear at
the end of this appendix.
Social Security Administration:
Office of the Commissioner:
Washington D.C. 20254:
January 22, 2002:
Mr. Gary T. Engel:
Director, Financial Management and Assurance:
U.S. General Accounting Office:
Washington, D.C. 20548:
Dear Mr. Engel:
Thank you for the opportunity to review and comment on the draft
report, "Debt Collection Improvement Act of 1996: Status of Selected
Agencies' Implementation of Administrative Wage Garnishment" (GA0-02-
313). Our comments on the report are enclosed. If you have any
questions, please have your staff contact Laura Bell at (410) 965-2636.
Sincerely,
Signed by:
Jo Anne B. Barnhart:
Commissioner:
Enclosure:
Comments Of The Social Security Administration On The General
Accounting Office Draft Report, "Debt Collection Improvement Act Of
1996: Status Of Selected Agencies' Implementation Of Wage Garnishment"
(GAO-02-313):
Recommendation 1:
Prepare comprehensive written implementation plans that clearly
define, at a minimum, the types of debt that will be subject to
administrative wage garnishment (AWG), the policies and procedures for
administering AWG and the process for conducting hearings. Some of the
details that should be considered for inclusion in the plan are: 1)
Whether the agency will conduct AWG in-house, at a debt collection
center or both; 2) the types of debts, if any, that will be sent to
Financial Management Services (FMS) prior to becoming 180 days
delinquent; and 3) whether hearings will be conducted by the agency or
contracted out.
Comment:
SSA has both a written implementation plan for AWG that addresses the
major milestones to be accomplished, as well as a project scope
agreement (PSA) (copy attached) that outlines how the process will
work. The documents address the specific issues that are raised in
items (1) and (2) and have been provided to the GAO auditors. The
implementation plan is a working document that contains the elements
necessary to finalize the specific policy and procedures including how
hearings will be handled. The draft Notice of Proposed Rule Making
(NPRM) also addresses the hearings issue. [See comment 1]
SSA has established the basic operational and policy parameters under
which this process will be developed and implemented. As the
developmental process proceeds, a greater level of detail will be
defined.
Recommendation 2:
Complete and finalize regulations for conducting AWG.
Comment:
The Agency has developed an NPRM for AWG, which is currently being
reviewed internally.
Recommendation 3:
Use AWG in conjunction with other debt collection tools hen
practicable, as leverage to obtain payments from delinquent debtors.
Comment:
SSA intends to use AWG in conjunction with all available debt
collection tools as described in the PSA.
Recommendation 4:
Expedite referrals of eligible debts to FMS for cross-servicing when
relying on EMS to perform AWG. Agencies should refer such debts prior
to the 180-day delinquency threshold.
Comment:
While SSA intends to establish its own AWG program, our program will
not preclude us from using AWG for cases referred to FMS under the
cross-servicing program.
Technical Comment:
In the report (page 16), GAO suggests that SSA's plan needed to
provide more detailed information on its implementation efforts for
AWG. However, in testimony before Congress on October 10, 2001, GAO
stated that SSA had provided a written implementation plan for AWG
that addressed the major milestones that must be accomplished, as well
as a PSA that outlines how the process works. We suggest that the
report reflect the status as stated in the October testimony. [See
comment 1]
GAO Comments:
1. Although SSA provided us copies of their written implementation
plan and project scope agreement, we do not consider either document
to be a comprehensive written AWG implementation plan. The one-page
written implementation plan that was provided to us did not address
(1) which debts would be subject to AWG, (2) which age categories of
debts would be subject to AWG, and (3) what would be the minimum debt
amount subject to AWG. Also, the plan did not clearly describe how and
by whom hearings would be conducted or clearly indicate when SSA could
fully implement AWG. Although SSA provided us its project scope
agreement, it only documented the scope of software changes that are
needed to implement AWG.
[End of section]
Appendix V: Comments from the Small Business Administration:
Note: GAO comments supplementing those in the report text appear at
the end of this appendix.
U.S. Small Business Administration:
Washington, D.C. 20416:
January 25, 2002:
Mr. Gary T. Engel:
Director, Financial Management and Assurance:
U.S. General Accounting Office:
441 G Street NW, Room 5970:
Washington, DC 20548:
Dear Mr. Engel:
Administrator Barreto has asked me to respond to your fax of January
7, 2002, requesting comment on the U.S. General Accounting Office's
(GAO) draft report on the Debt Collection Improvement Act, "Status of
Selected Agencies' Implementation of Administrative Wage Garnishment."
The U.S. Small Business Administration (SBA) is committed to the full
use of administrative wage garnishment (AWG) as an additional tool in
the Agency's vigorous pursuit of delinquent debt. The Agency also
plans to fully participate with the U.S. Department of the Treasury
(Treasury) in the use of AWG through Treasury's handling of SBA's
delinquent debt in cross-servicing. As you may be aware, SBA was one
of the first Federal agencies to participate in the Treasury Offset
Program (TOP) and cross-servicing. Currently, SBA has $240 million of
debt active in TOP and $950 million active in cross-servicing. In
addition, SBA has completed the sale of $4.4 billion of loans through
the Agency's Asset Sales Program.
In your draft report, it was mentioned that SBA did not specify what
types of debt would be subject to AWG when the Agency began the use of
this collection process. Please be advised that SBA intends to include
all eligible debt in AWG, i.e., all business loans to individuals
(including disaster business loans), disaster home loans and personal
guarantors of business loans. Eligible business loans will include
partnerships that have general partners directly obligated on the
debt, along with sole proprietorships. SBA will initiate AWG in the
near future, after the publication of final regulations setting forth
debtors' due process rights and appeal procedures. In general, debt in
excess of $250 and over 180 days delinquent will be subject to AWG.
Your draft report recommends the implementation of AWG as a function
of the Chief Financial Officer. At SBA, the debt collection function
is coordinated by the Office of Capital Access. Therefore, your report
should note that at SBA this function is overseen by the Associate
Deputy Administrator for Capital Access. [See comment 1]
If we can provide further information on SBA's implementation of AWG,
please let us know. Our primary point of contact within SBA for this
matter is Walter Intlekofer, who can be reached at 205-7543.
Sincerely,
Signed by:
Ronald E. Bew:
Associate Deputy Administrator for Capital Access:
GO Comments:
1. We have revised our report to reflect that responsibilities for
addressing our recommendations at SBA reside with the associate deputy
administrator for capital access.
[End of section]
Appendix VI: Comments from the Department of Housing and Urban
Development:
Note: GAO comments supplementing those in the report text appear at
the end of this appendix.
U.S. Department Of Housing And Urban Development:
Office Of The Chief Financial Officer:
Washington, D.C. 20410-0100:
January 25, 2002:
Mr. Gary T. Engel:
Director:
Financial Management and Assurance:
U.S. General Accounting Office:
441 G Street, NW, Room 5970:
Washington, DC 20548:
Dear Mr. Engel:
Thank you for the opportunity to comment on the draft report entitled
Debt Collection Improvement Act Of 1996: Status of Selected Agencies'
Implementation of Administrative Wage Garnishment (GA0-02-313).
The draft Report includes four recommendations. The recommendations
and HUD's responses are as follows:
Prepare comprehensive written plans that clearly define, at a minimum,
the types of debt that will be subject to AWG, the policies and
procedures for administering AWG, and the process for conducting
hearings. Some of the details that should be considered for inclusion
in the plan are (1) whether the agency will conduct AWG in-house, at a
debt collection center, or both; (2) the types of debts, if any, that
will be sent to FMS prior to becoming 180 days delinquent; and (3)
whether hearings will be conducted by the agency or contracted out.
HUD will revise its written AWG Implementation Plan to include all of
the items and information recommended in the GAO Report.
The only specific criticism of HUD's plan indicated in the GAO draft
Report is that "the plan did not make it clear whether AWG would be
applicable to all other programs and related debts administered by the
agency." The HUD plans submitted to the GAO were intended to apply to
the Department as a whole. We believe that this confusion stems from
HUD's decision to submit the AWG Survey response and AWG
Implementation Plan prepared by HUD's Financial Operations Center.
These were submitted as a Departmentwide response because the
information presented was consistent with the Office of the Chief
Financial Officer perspectives for all of HUD. HUD discussed this
approach with the GAO contact person for the survey (Linda Sanders)
who advised that it would not be a problem. HUD will revise its plan
to prevent any continued misunderstanding. [See comment 1]
Complete and finalize regulations for conducting AWG.
The AWG rule for HUD has been prepared by HUD's Office of General
Counsel (OGC) and put into Departmental clearance on January 9, 2002.
OGC expects that it will be published for comment in mid-February and
that the final regulation will be in effect by the end of Fiscal Year
2002.
HUD continues to plan for AWG implementation as soon as the regulatory
basis for AWG is completed. With this update, HUD recommends that
Table 1 of the GAO Report be revised to reflect that HUD's expected
implementation date for AWG is "Fiscal Year 2002." [See comment 2]
Use AWG in conjunction with other debt collection tools, when
practicable, as leverage to obtain payments from delinquent debtors.
HUD agrees and will revise its AWG Implementation Plan to emphasize
this strategy. After the effective date of HUD's AWG regulation, HUD
will revise its demand letters to add AWG to the list of consequences
if the debtor does not make voluntary payment. HUD will train its Debt
Servicing Representatives about the AWG option.
HUD agrees with GAO's recommendation that FMS should incorporate the
use of AWG in conjunction with other debt collection tools rather than
consider AWG as a collection tool of "last resort." In developing its
plan, HUD expected that effective use of AWG would be part of
Treasury/FMS' plan for servicing debts that HUD refers to FMS for
cross servicing. HUD expects that the debt collectors assigned to
cross serviced debts will be encouraged to use the "threat" of AWG as
a tool to obtain voluntary payment.
Expedite referrals of eligible debts to FMS for cross-servicing when
relying on FMS to perform AWG. Agencies should refer such debts prior
to the 180-day delinquency threshold when practicable.
HUD agrees and will include this precept in its revised AWG
Implementation Plan.
HUD already refers new delinquent debts to FMS on a monthly basis
before the 180 days delinquency threshold. Eligible delinquent debts
will continue to be referred in the first monthly cycle after all due
process requirements have been completed.
Again, I want to thank you for the opportunity to review and comment
on this GAO report. If you have questions, please contact Margaret E.
White, (202) 708-4474, or James M. Martin, (202) 708-0638), of my
staff.
Sincerely,
Signed by:
Angela M. Antonelli:
[End of section]
GAO Comments:
1. We understood that the survey and implementation plan submitted by
HUD covered the agency as a whole. The intent of our comment was to
address our concern that HUD's departmentwide implementation plan only
specifies the use of AWG for certain debts referred to FMS for cross-
servicing and did not make it clear whether AWG would be applicable to
all other programs and related delinquent debts administered by the
agency that are not referred to FMS for cross-servicing.
2. We have revised our report to reflect HUD's expected implementation
date of fiscal year 2002.
Appendix VII: Comments from the Department of Health and Human
Services:
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
Department Of Health & Human Services:
Office of Inspector General:
Washington, D.C. 20201:
January 31, 2002:
Mr. Gary T. Engel:
Director, Financial Management and Assurance:
United States General Accounting Office:
Washington, D.C. 20548:
Dear Mr. Engel:
Enclosed are the Department's comments on your draft report, "Debt
Collection Improvement Act Of 1996: Status of Selected Agencies'
Implementation of Administrative Wage Garnishment." The comments
represent the tentative position of the Department and are subject to
reevaluation when the final version of this report is received.
The Department also provided several technical comments directly to
your staff.
The Department appreciates the opportunity to comment on this draft
report before its publication.
Sincerely,
Signed by:
Janet Rehnquist:
Inspector General:
Enclosure:
The Office of Inspector General (OIG) is transmitting the Department's
response to this draft report in our capacity as the Department's
designated focal point and coordinator for General Accounting Office
reports. The OIG has not conducted an independent assessment of these
comments and therefore expresses no opinion on them.
Comments Of The Department Of Health And Human Services On The U.S.
General Accounting Office's Draft Report, "Debt Collection Improvement
Act Of 1996 ” Status Of Selected Agencies' Implementation Of
Administrative Wage Garnishment"
General Comments:
Thank you for the opportunity to review the General Accounting
Office's draft report: "Debt Collection Improvement Act of 1996:
Status of Selected Agencies' Implementation of Administrative Wage
Garnishment (AWG)." The Department agrees with GAO's overall
assessment that AWG when fully implemented by all Government
Agencies will be a valuable tool to obtain payments from delinquent
debtors. The Department appreciates the efforts of the GAO in
preparing this report and fully intends to effectively incorporate AWG
into our debt collection processes as GAO has outlined in its
recommendations.
Technical Comments:
We are providing the following comments on the draft report:
* Page 10 & 16 - The draft indicates that HHS plans to implement AWG
primarily in-house. NHS plans to implement AWG both in-house and
through the Department of Treasury's Financial Management Service. We
suggest that the report highlight that HHS will utilize AWG in-house
and through the Department of Treasury's Financial Management Service.
[See comment 1]
* Page 11 ” Table 1 shows HHS' expected implementation date to be the
end of 2001. We suggest that the date be changed to Fiscal Year 2002.
HHS' proposed AWG Regulations were sent to OMB on December 6, 2001 for
review prior to publication in the Federal Register. Once finalized,
the Regulation will provide HHS the authority to commence the AWG
process. This will take place in FY 2002. [See comment 2]
* Page 12 - The document indicates that debt referred for cross-
servicing is/was not reported to Treasury separately as consumer or
commercial debt. HHS transmits data elements to Treasury that identify
a claim as consumer or commercial and within the various file formats
originally issued by Treasury. We suggest that the GAO modify the
report to identify the agencies that do not report the consumer or
commercial debt separately. [See comment 3]
GAO Comments:
1. HHS suggested that the report highlight that it will utilize AWG in-
house and through FMS. Although table 1 reflects that HHS will be
using AWG both in-house and through FMS's cross-servicing program, we
have revised the body of our report so that it more clearly reflects
that HHS and certain other agencies will implement AWG in-house and to
varying degrees through FMS's cross-servicing program.
2. HHS suggested that the date for its expected implementation be
changed to fiscal year 2002. As of the completion of our fieldwork,
HHS estimated its expected implementation date to be the end of
calendar year 2001. We have revised our report to incorporate HHS's
updated expected implementation date.
3. HHS stated that it transmits data elements to Treasury that
identify a claim as consumer or commercial debt and suggested that we
modify the report to identify the agencies that do not report the
consumer or commercial debts separately. We understand that agencies
transmit debts to Treasury for cross-servicing as consumer or
commercial debts, however, debts are not separately reported in this
manner on the Treasury Report on Receivables. We have revised our
report to clarify that debts referred are not reported as consumer or
commercial debts on the Treasury Report on Receivables.
[End of section]
Appendix VIII: Comments from the Department of Veterans Affairs:
The Secretary Of Veterans Affairs:
Washington:
January 25, 2002:
Mr. Gary T. Engel:
Director, Financial Management and Assurance:
U.S. General Accounting Office:
441 G Street, NW:
Washington, DC 20548:
Dear Mr. Engel:
I am furnishing the Department of Veterans Affairs' response to your
draft report, Debt Collection Improvement Act Of 1996: Status of
Selected Agencies' Implementation of Administrative Wage Garnishment
(GA0-02-313).
VA agrees with your conclusion that administrative wage garnishment
has the potential to be a powerful tool for collecting delinquent
federal debts. To this end, the Department of Veterans Affairs (VA)
plans to implement procedures for referring delinquent debts to the
Department of the Treasury to perform administrative wage garnishment
(AWG) by the end of fiscal year 2002.
The enclosure provides further details on VA's plans for implementing
the General Accounting Office's recommendations where practicable. I
appreciate the opportunity to comment on your draft report.
Sincerely yours,
Signed by:
Anthony J. Principi:
Enclosure:
Department Of Veterans Affairs' Comments To GAO Draft Report,
Debt Collection Improvement Act Of 1996: Status of Selected
Agencies' Implementation of Administrative Wage Garnishment
(GA0-02-313):
To help ensure that agencies effectively incorporate AWG into their
debt collection processes, GAO recommends that I:
* Prepare comprehensive written implementation plans that clearly
define, at a minimum, the types of debt that will be subject to AWG,
the policies and procedures for administering AWG, and the process for
conducting hearings. Some of the details that should be considered for
inclusion in the plan are (1) whether the agency will conduct AWG in-
house, at a debt collection center, or both; (2) the types of debts,
if any, that will be sent to FMS prior to becoming 180 days
delinquent; and (3) whether hearings will be conducted by the agency
or contracted out.
Concur - VA is developing a set of proposed debt collection
regulations including one for AWG. In addition to these regulations,
VA will develop hearing procedures, and refer as many eligible debts
as possible to the Department of the Treasury cross-servicing program.
At the end of FY 2001, VA referred 94 percent of our eligible
delinquent debt to Treasury for cross servicing.
VA is planning to include in the regulations provisions to conduct
hearings on our own cases at the Debt Management Center (DMC) in St.
Paul, Minnesota. Treasury officials have been advised that the DMC, as
a franchise fund entity, would consider conducting hearings for other
Federal agencies.
* Complete and finalize regulations for conducting AWG.
Concur - This month, VA will start reviewing a package of proposed debt
collection regulations, including the AWG regulation. VA intends to
rely on Treasury to perform AWG as part of their cross-servicing
program. Since Treasury already contracts with private collection
agencies (PCAs) for collection purposes, the PCAs have the resources
to seek out and verify employment sources and pursue AWG. That process
would be a very costly and labor-intensive venture for VA to implement
in-house.
* Use AWG in conjunction with other debt collection tools, when
practicable, as leverage to obtain payments from delinquent debtors.
Concur ” GAO's draft report cites testimony by debt collection experts
that the mere threat of AWG is often enough to motivate repayment. VA
refers debts to Treasury for cross servicing. VA supports Treasury's
use of all available tools including AWG as part of their cross-
servicing efforts. As Treasury will be the collectors, it is
appropriate for Treasury to communicate with debtors regarding what
collection tools they will use.
* Expedite referrals of eligible debts to FMS for cross-servicing when
relying on FMS to perform AWG. Agencies should refer such debts prior
to the 180-day delinquency threshold when practicable.
Concur ” While VA agrees that expediting referrals of eligible debts
to FMS for cross-servicing would ultimately hasten the government's
collection efforts, such action is not practical in VA. VA has a 180-
day timeframe for due process for those debts related to benefits or
services under the jurisdiction of the DMC.
[End of section]
Footnotes:
[1] U.S. General Accounting Office, Debt Collection Improvement Act of
1996: Agencies Face Challenges Implementing Certain Key Provisions,
[hyperlink, http://www.gao.gov/products/GAO-02-61T] (Washington, D.C.:
Oct. 10, 2001).
[2] The nine CFO Act agencies we included in our review are the
departments of Agriculture (USDA), Education, Energy (DOE), Health and
Human Services (HHS), Housing and Urban Development (HUD), and
Veterans Affairs (VA); the Environmental Protection Agency (EPA); the
Small Business Administration (SBA); and the Social Security
Administration (SSA).
[3] In this report, "delinquent debt" refers to delinquent nontax debt.
[4] Disposable pay means that part of the debtor's compensation
(including, but not limited to, salary, bonuses, commissions, and
vacation pay) from an employer remaining after the deduction of health
insurance premiums and any amounts required by law to be withheld.
[5] Education has used wage garnishment since 1993 under authority
granted by section 488A of the Higher Education Act of 1965, as
amended, 20 U.S.C. 1095a.
[6] Consumer debt typically consists of debts by individuals and is
likely to be subject to AWG because the debtor is often an individual
who is employed. However, certain commercial debts could involve
individual debtors, guarantors, or co-debtors, and AWG may be
applicable to such debtors.
[7] U.S. General Accounting Office, Debt Collection: Treasury Faces
Challenges in Implementing Its Cross-Servicing Initiative, [hyperlink,
http://www.gao.gov/products/GAO/T-AIMD-00-213] (Washington, D.C.: June
8, 2000).
[8] Wage garnishment does not include the collection of delinquent
nontax debt owed to the federal government from the wages of federal
employees from their federal employment. Federal pay is subject to the
federal salary offset procedures set forth in 5 U.S.C. 5514 and other
applicable laws.
[9] At the completion of our fieldwork, the federal minimum wage was
$5.15 per hour.
[10] Withholding orders for child support have priority over AWG for
delinquent nontax federal debt.
[11] The remainder of the $40 billion of delinquent debt the agencies
reported holding as of September 30, 2000, was commercial debt. In
addition to the $40 billion of reported delinquent debt, the nine
agencies held more than $25 billion in debts classified as currently
not collectible, which were not broken out by consumer and commercial
debts on the agencies' Treasury Report on Receivables. Although
currently not collectible debts are written off by the agencies for
accounting purposes, AWG could be applicable to significant amounts of
such debts.
[12] Most of EPA's debts are commercial debts issued under the
Superfund program, which provides federal clean-up authority and funds
to address problems posed by abandoned or uncontrolled hazardous waste
sites.
[13] Federal agencies may, at their discretion, refer valid, legally
enforceable debts for cross-servicing that are less than 180 days
delinquent; however, it may not be feasible for certain agencies to do
so.
[14] [hyperlink, http://www.gao.gov/products/GA0-02-61T].
[15] According to FMS's Performance Summary Report for September 2001,
only 74 percent of debt reported by agencies as eligible for cross-
servicing governmentwide had been referred to FMS.
[End of section]
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