Financial Management

Legislation to Improve Governmentwide Debt Collection Practices Gao ID: T-AIMD-95-235 September 8, 1995

This testimony focuses on the proposed Debt Collection Improvement Act of 1995, whose overall thrust GAO agrees with, and governmentwide debt collection improvement being considered by Congress. Federal agencies have long had problems in managing credit programs and collecting nontax debts. Billions of dollars is at stake. As of September 1994, the government reported $241 billion in nontax receivables, mainly from direct loans and loans acquired as a result of claims paid of defaulted guaranteed loans. Of that amount, $49 billion was reported to be delinquent. Moreover, the government was contingently liable for outstanding guaranteed loans totaling $694 billion. It is essential that the federal government not only make and guarantee creditworthy loans but also put effective practices in place to collect amounts owed. In addition to being a good business practice, increasing debt collections could help reduce the deficit. GAO highlights the magnitude of the government's direct loans and guaranteed loans, the long-standing debt collection problems facing federal agencies, the necessity of having reliable information with which to manage credit programs, and the importance of leadership in having effective credit management and debt collection programs.

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