Federal Departments and Agencies Failure To Collect Audit-Related Debts

The collection of audit-related debt is a significant part of the Federal debt collection process. Three bills have been introduced in Congress to help correct debt collection problems. In addition, the President's budget for 1983 identifies debt collection as one of its management initiatives. Federal agencies are doing a poor job of managing and collecting audit-related debts because of poor accounting and collection control systems and poor management practices. When audit-related debts are paid or otherwise settled, Federal departments have no assurance that payments are made with non-Federal funds or that, when these debts are settled, Federal programs are maintained at the same level. Agency collection systems are often so inadequate that the total amount of audit-related debts due cannot be determined. Agencies are slow to determine the amount of audit debt subject to collection, do not promptly bring debts under accounting control, delay collections because of weak monitoring efforts, and rarely pursue collection of subgrantee audit-related debts. Many agencies do not make written determinations on audit findings, which are required by the Office of Management and Budget, within the required timeframe and are not establishing accounting and collection controls over these amounts. When Federal agencies have attempted to collect subgrantee debts from grantees, some grantees have refused to pay and no further action is taken to resolve the claim. Thus, agencies are inappropriately forgiving debts without a reasonable collection effort. Agencies have allowed appeal processes to be used by grantees to delay payment of their debts at a cost of millions of dollars to the Government. Changes must be made to discourage groundless appeals and to encourage the prompt processing of legitimate appeals. The accrual of interest while debts are under appeal could help accomplish these objectives. Agencies have not charged interest over the last 3 years on hundreds of millions of dollars in delinquent debt. GAO found that, when debts are repaid by the use of offset, agencies have no assurance that non-Federal funds equal to the amount of offset were restored to the Federal program to keep it at the intended funding level. When repayments of debts are made in cash, most agencies do not know the source of the payments or if the payment reduces program benefits.