Debt Collection Improvement Act

Significant Challenges Remain to Effectively Implement Treasury's Administrative Offset Program Gao ID: T-AIMD-98-195 June 5, 1998

This testimony discusses the Treasury Department's implementation of the administrative offset provision of the Debt Collection Improvement Act of 1996. The act requires that agencies notify the Treasury of all legally enforceable nontax debts more than 180 days delinquent in order to offset federal payments, including tax refunds. The act also authorizes disbursing officials to conduct payment offsets. GAO describes the (1) status of referrals by agencies of delinquent nontax debts to Treasury for administrative offset; (2) steps that Treasury has taken or plans to take to include all eligible federal payments in the administrative offset program; and (3) steps that Treasury has taken or plans to take to consolidate the administrative, tax refund, and federal salary offset programs.

GAO noted that: (1) Treasury has recently made progress in getting the 24 agencies covered by the Chief Financial Officers (CFO) Act of 1990 to refer nontax debt over 180 days delinquent for administrative offset; (2) as of April 1998, the CFO Act agencies had referred to Treasury about $16.7 billion in nontax debt over 180 days delinquent, and Treasury has entered these delinquencies into its debtor database; (3) this is a substantial increase over the $9.4 billion that had been referred to Treasury about 7 months earlier, at about the time the congressional subcommittee held DCIA oversight hearings in November 1997; (4) as of April 1998, about $26.4 billion of reported nontax debt over 180 days delinquent had not been referred to Treasury and is unlikely to be referred in the near future; (5) on the payment side, Treasury does not yet have a system capable of matching all federal payments against the delinquent debtor database; (6) as of April 1998, 2 years after DCIA's enactment, Treasury had collected about $1.2 million of delinquent nontax federal debt through its administrative offset program; (7) payments subject to offset through the administrative offset program are limited to those made by Treasury to vendors and to federal retirees by Treasury disbursing offices in fiscal year 1997; (8) also, Treasury has made little progress in fully determining the extent to which federal payments can be made available for offset; (9) Treasury has not yet consolidated the administrative, tax refund, and federal salary offset programs; (10) Treasury's systems development problems have also caused delay in consolidating these programs and thus, any debt collection efficiencies envisioned by such a consolidation have not yet been realized; (11) in developing an administrative offset system, Treasury did not apply a disciplined systems development process; (12) the resulting system, which was planned for implementation in January 1998, was not placed into operation, and a subsequent systems development effort is under way; (13) in efforts to develop an administrative offset system, Treasury has recently taken several actions to address systems development issues; (14) it will be important for Treasury's top management to ensure that the planned corrective actions are effectively and expeditiously completed prior to making any significant investment in the development of an administrative offset system; and (15) otherwise, Treasury is significantly exposed to risks that it may experience costly modifications and additional delays in developing a system for implementing the administrative offset provision of DCIA.

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