United States General Accounting Office 

GAO Testimony 

Before the Subcommittee on Government Management, 

Information and Technology, Committee on Government 

Reform and Oversight, House of Representatives 

DEBT COLLECTION


IMPROVEMENT ACT


Significant Challenges 

Remain to Effectively 

Implement Treasury’s 

Administrative Offset 

Program 

Statement of Gary T. Engel


Associate Director, Governmentwide Accounting and


Financial Management Issues


Accounting and Information Management Division


For Release on Delivery


Expected at


9:30 a.m.


Friday,


June 5, 1998


GAO/T-AIMD-98-195


Mr. Chairman and Members of the Subcommittee: 

Thank you for the opportunity to testify on the Department of the 

Treasury’s implementation of the administrative offset provision of the 

Debt Collection Improvement Act of 1996 (DCIA). The act, developed under 

the leadership of this Subcommittee, among other things, requires that 

agencies notify the Treasury of all legally enforceable1

 nontax debts over 

180 days delinquent for the purpose of offsetting federal payments, 

including tax refunds, and provides authority for disbursing officials to 

conduct payment offsets. 

As you requested, our testimony today describes (1) the status of referrals 

by agencies of delinquent nontax debts to Treasury for administrative 

offset, (2) actions Treasury has taken and plans to take to include all 

eligible federal payments in the administrative offset program, and 

(3) actions Treasury has taken, or plans to take, to consolidate the 

administrative, tax refund, and federal salary offset programs. 

Treasury has recently made progress in getting the 24 agencies covered by Summary	 the Chief Financial Officers (CFO) Act of 19902

 to refer nontax debt over 

180 days delinquent for administrative offset. 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. 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 

Subcommittee held DCIA oversight hearings in November 1997. 

Also, 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. These delinquencies involve about (1) $12.3 

billion of debts involved in bankruptcies, foreclosures, and forbearance 

and formal appeals actions, (2) $3.6 billion of foreign debt, (3) $3 billion3 

of debts referred to the Department of Justice (DOJ) for litigation, and 

(4) $525 million of debts owed to the Department of Housing and Urban 

1

Treasury generally considers a debt legally enforceable when the final agency determination 

regarding the debt is made or any legal bar to further collection is removed. 

2

The CFO Act, as expanded by the Government Management Reform Act, covers the federal 

government’s 24 largest departments and agencies, which account for 99 percent of federal 

expenditures. 

3

According to Treasury reports, agencies have referred about $3.5 billion of delinquent debt to DOJ for 

litigation, and DOJ has referred about $500 million of this debt to Treasury for administrative offset. 

Page 1 GAO/T-AIMD-98-195 
Development (HUD), much of which will be scheduled for sale. 

Approximately $7 billion of nontax debt over 180 days delinquent has not 

been referred primarily because agencies have not yet completed actions 

such as (1) ensuring due process, which is necessary before debts can be 

referred for offset, and (2) determining whether loan workout procedures 

have been established with debtors, which precludes referral for offset. 

On the payment side, because of systems development problems, Treasury 

does not yet have a system capable of matching all federal payments 

against the delinquent debtor database. 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. Currently, 

payments subject to offset through the administrative offset program are 

limited to those made by Treasury to vendors and to federal retirees, 

representing about 5 percent of the total number of payments made, and 

about 21 percent of the total dollars paid, by Treasury disbursing offices in 

fiscal year 1997. Also, Treasury has made little progress in fully 

determining the extent to which federal payments, such as those made by 

the Department of Defense (DOD), can be made available for offset. 

Further, Treasury has not yet consolidated the administrative, tax refund, 

and federal salary offset programs. 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. 

In developing an administrative offset system, Treasury did not apply a 

disciplined systems development process, including the development of an 

overall concept of operations and functional requirements. The resulting 

system, which was planned for implementation in January 1998, was not 

placed into operation, and a subsequent systems development effort is 

underway. 

In current efforts to develop an administrative offset system, Treasury has 

recently taken several actions to address systems development issues. We 

identified and discussed with Treasury several areas where additional 

actions are needed, including giving a higher priority to developing a 

concept of operations, the functional requirements, and a risk 

management plan for the entire system. We are encouraged by Treasury’s 

commitment to address these issues. But 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 

Page 2 GAO/T-AIMD-98-195 
investment in the development of an administrative offset system. 

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. 

Recent Progress to 

Identify and Refer 

Delinquent Nontax 

Debt for Offset 

The Subcommittee’s November 1997 oversight hearing on DCIA’s 

implementation underscored the need for progress in referring delinquent 

nontax debts to Treasury for offset. At about the time of the hearing, 

agencies had referred $9.4 billion of nontax debt over 180 days delinquent 

to Treasury for administrative offset. 

Initially, agencies had been slow to refer delinquent nontax debt for 

administrative offset under DCIA largely because of uncertainty as to the 

delinquent nontax debt that should be referred. Also, Treasury had not 

made a concerted effort to identify delinquent nontax debt that could be 

offset or to develop time frames for agencies to refer the debt for offset. 

In January 1998, Treasury began actively working with agencies to reach 

agreement on the outstanding nontax debts over 180 days delinquent that 

can be referred for administrative offset and to obtain commitments from 

the agencies on referral of those debts. Treasury initially met with the five 

major credit agencies—the Departments of Agriculture, Education, 

Housing and Urban Development, and Veterans Affairs (VA) and the Small 

Business Administration. Later, Treasury expanded its work to include the 

other CFO Act agencies. 

As of April 1998, the CFO Act agencies had referred about $16.7 billion of 

delinquent nontax debt to Treasury for administrative offset—a 78 percent 

increase over about 7 months. Most of this increase resulted from 

Treasury’s work with the agencies to bring the nontax delinquent debts 

they submitted for the Internal Revenue Service’s (IRS) tax refund offset 

program into Treasury’s administrative offset database. Debts that 

agencies normally would have referred to IRS for tax refund offsets in 

calendar year 1998 were, instead, referred to Treasury’s Financial 

Management Service. These debts were incorporated into the database 

Treasury uses for matching debts for administrative offset and then 

referred to IRS, which maintains a separate database. 

In addition to the delinquent nontax debt that has been referred for offset, 

the CFO Act agencies also hold considerable delinquent nontax debt that 

has not been referred to Treasury. According to Treasury reports, in 

Page 3 GAO/T-AIMD-98-195 
April 1998, these agencies held $43.1 billion4

 of nontax debt over 180 days 

delinquent, including the $16.7 billion of referred debt. Treasury and the 

CFO Act agencies have determined that $19.4 billion, or almost 75 percent, 

of the $26.4 billion in unreferred nontax delinquent debt would not be 

referred for administrative offset, at least not in the near term, for the 

following reasons: 

•	 about $12.3 billion relates to nontax delinquent debts that are involved 

with bankruptcies, foreclosures, statutory forbearance, or formal appeals. 

An automatic stay that generally prevents the government from pursuing 

collection against debtors in bankruptcy is provided by 11 U.S.C. Section 

362. In addition, debts in foreclosure are governed by state laws that may 

preclude the government from pursuing foreclosure if collection is 

attempted through offset. Further, debts subject to forbearance generally 

are not legally enforceable, thus precluding collection of the debt until the 

forbearance process is completed.5

 Also, agencies generally cannot certify 

debts under appeal as valid and legally enforceable until the appeal 

process is completed. Consequently, Treasury has agreed with agencies 

that these types of debts should be excluded from referral for offset. 

•	 about $3.6 billion involves delinquent foreign debts. Treasury has stated 

that, for the most part, collecting these delinquent debts through 

administrative offsets is infeasible primarily due to foreign diplomacy 

considerations and affairs of state. 

•	 about $3 billion of delinquent nontax debt has been referred by agencies to 

DOJ for litigation. (See footnote 3.) These debts are no longer under the 

control of the agencies and, therefore, Treasury does not hold the agencies 

responsible for referring such debt for administrative offset. Rather, DOJ is 

to determine if, and when, such debt is referred for offset. 

•	 about $525 million of delinquent nontax debt owed to HUD, much of which 

will be scheduled for sale, is not being required to be referred for 

administrative offset at this time. 

In addition to these categories of unreferred debt, about $7 billion of 

outstanding nontax debt over 180 days delinquent remains. Most of this 

debt involves circumstances that may delay or preclude offset. 

For example, the vast majority of the Department of Education’s 

approximate $3.1 billion of unreferred nontax delinquent debt consists 

4

These delinquencies comprise over 90 percent of the debt over 180 days delinquent reported for the 

entire federal government. 

5

Forbearance action taken by a creditor, generally, extends the time for payment of a debt or 

postpones, for a time, the enforcement of legal action on the debt. 

Page 4 GAO/T-AIMD-98-195 
primarily of debts related to student loans, most of which were being 

serviced by state or private guaranty agencies. According to Education 

officials, although delinquent debt serviced by guaranty agencies is subject 

to referral for administrative offset, many referrals have not yet been made 

because the required due process for the debtors has not been completed. 

Another example involves delinquent debts related to the Department of 

Agriculture’s (USDA) state-administered food stamp program and farm 

loans. According to USDA officials, the food stamp program’s delinquent 

debts, which totaled about $775 million, must be further reviewed by the 

states to determine whether these debts are in repayment status or 

whether the debtors have been afforded due process. Also, according to 

USDA officials, statutory servicing rights normally require that the farm loan 

debtors be offered workout alternatives prior to collection by offset. As 

such, this debt, which totaled about $420 million, will not be made 

available for offset until this statutory process has been completed. 

Finally, according to a DOD official, DOD delinquent debts totaling about 

$2 billion are primarily in protest or dispute. Accordingly, these debts have 

not yet been referred to Treasury for offset. 

While referring all legally enforceable delinquent nontax debts for offset is Few Payments an essential element of an effective administrative offset program, the

Brought Into program’s objectives cannot be achieved in the absence of another equally 

Administrative Offset	 essential element—payments that can be offset. As discussed later, 

systems development problems have hampered Treasury’s ability to Program	 attempt to bring additional payments into its administrative offset 

program. 

Currently, payments that are available for administrative offset are limited 

to (1) vendor payments disbursed by Treasury and (2) retirement 

payments made by the Office of Personnel Management (OPM). These types 

of payments have been in the administrative offset program since 1996. 

Further, they comprised about 5 percent of the total number of 

disbursements made, and about 21 percent of the total dollars paid, by 

Treasury disbursing offices during fiscal year 1997. 

In addition, although almost all of the vendor payments disbursed by 

Treasury are currently available for administrative offset, many of these 

payments cannot be matched against debtor information in Treasury’s 

delinquent debtor database because the vendor records do not contain 

Page 5 GAO/T-AIMD-98-195 
Taxpayer Identification Numbers (TIN). According to Treasury, during 

March 1998, about one-third of the payment requests submitted by the 

agencies for payment by Treasury did not include TINs. 

Further, Treasury does not yet know the total number of federal payments 

that may be available for administrative offset. In addition to federal 

payments made by Treasury, more than 50 Non-Treasury Disbursing 

Offices (NTDO) make federal payments. However, Treasury has not yet 

identified the total volume of NTDO payments, which include those made by 

DOD, the U.S. Postal Service (USPS), and numerous other federal agencies. 

Moreover, Treasury has not yet fully determined the extent to which 

payments will be exempt from administrative offset. Currently, Treasury 

has a request pending from the Pension Benefit Guaranty Corporation for 

discretionary exemption for a number of payment types, including those 

related to premium refunds to pension plans. In the future, other agencies 

may identify payments exempt by statute or request means-tested or 

discretionary exemption of payments.6 

To date, Treasury has primarily relied on the agencies to identify 

potentially exempt payments. For example, VA informed Treasury that 

certain payments were exempted based on Section 5301(a) of Title 38, and 

Treasury confirmed the exemption. In addition, the Social Security 

Administration (SSA) and USDA requested and received exemptions for 

Supplemental Security Income and certain Food and Consumer Services 

payments, respectively, based on DCIA’s requirement that the Treasury 

Secretary exempt payments under means-tested programs. At this stage, 

Treasury does not know the total effect on the administrative offset 

program of payments that will be excluded from the program in 

accordance with DCIA, or other statutory provisions, and on the basis of 

requests for exclusions by heads of agencies. 

To facilitate implementation of payments into the administrative offset 

program, Treasury is developing several regulations applicable to payment 

issues. Some regulations have been published as Interim Rules (for 

example, those relating to federal salary offset), while others are currently 

being drafted or are with another agency for comment. For example, the 

rule for offset of federal benefit payments has been forwarded to SSA for 

consultation. Retirement and Survivors Benefits and Disability Insurance 

Benefits under the Social Security Program accounted for about 

6

DCIA excludes payments certified by the Department of Education under Title IV of the Higher 

Education Act of 1965 and payments made under United States tariff laws. In addition, DCIA requires 

exemptions for means-tested programs and allows other discretionary exemptions when the head of 

the agency makes the request to the Treasury Secretary, and the Secretary approves the request. 

Page 6 GAO/T-AIMD-98-195 
61 percent of the number of payments made by Treasury Disbursing 

Offices in fiscal year 1997.7

 According to Treasury’s most recent DCIA 

Implementation Plan, it does not intend to publish a final rule for 

offsetting federal benefit payments, including Social Security payments, 

until October 1998. In addition, according to Treasury and SSA officials, 

even if the final rule were published, SSA will not be ready to make 

required systems changes until 1999 because of demands on its staff 

related to the Year 2000 computing crisis.8 

Offset Programs Not 

Yet Consolidated 

One of the DCIA’s goals is to minimize debt collection costs by 

consolidating related functions and activities. To date, however, Treasury 

has not yet consolidated the administrative, tax refund, and federal salary 

offset programs. 

The Federal Tax Refund Offset Program (TROP) has been a cooperative 

effort of IRS and the federal program agencies. Legislation, beginning with 

the Deficit Reduction Act of 1984 (Public Law 98-369), authorized the use 

of tax refund offsets to recover delinquent federal nontax debts. The 

Emergency Unemployment Compensation Act of 1991 (Public Law 

102-164) provided permanent authority to use tax refund offsets. Since 

TROP’s inception in 1986, approximately $8.5 billion of delinquent debt has 

been recovered through the program. 

The Debt Collection Act of 1982 authorized, but did not require, federal 

salary offsets and administrative offsets to liquidate delinquent nontax 

debt owed to federal agencies. The DCIA requires agencies to participate in 

an annual matching of records to identify federal employees delinquent on 

federal debts. 

Since 1987, the federal employee salary offset program has been a 

cooperative effort between the federal agencies and DOD’s Defense 

Manpower Data Center (DMDC). Under the program, DMDC performs the 

computer matching necessary to identify federal employees who are 

delinquent on their debts using delinquent nontax debtor files provided by 

the various creditor agencies. DMDC matches these files against active and 

retired civilian employment files provided by OPM, as well as against DOD’s 

7

DCIA provides that, except for $9,000 a debtor may receive within a 12-month period, all payments 

due to an individual under the Social Security Act shall be subject to offset. 

8

For the past several decades, information systems have typically used two digits to represent the year, 

such as “98” for 1998, in order to conserve electronic data storage and reduce operating costs. In this 

format, however, 2000 is indistinguishable from 1900 because both are represented as “00.” As a result, 

if not modified, computer systems or applications that use dates or perform date- or time-sensitive 

calculations may generate incorrect results beyond 1999. 

Page 7 GAO/T-AIMD-98-195 
active, retired, and reserve military personnel files. Under a similar 

program, creditor agencies submit delinquent nontax debtor files to USPS 

for matching against USPS personnel files. According to Treasury data, 

during fiscal year 1997, agencies collected over $42 million through these 

programs. 

Treasury’s lack of progress in consolidating the offset programs is 

primarily the result of its problems with the development of a new 

administrative offset system. I would now like to highlight these problems. 

Treasury does not have a system that can perform all the administrative Systems Development offset functions envisioned as a result of DCIA. This can be directly

Problems Must Be attributed to problems Treasury has experienced in managing the 

Effectively Addressed	 development of such a system. Although Treasury has recently taken 

several actions to address systems development issues, it will be some 

time before enough information is available to accurately assess the 

effectiveness of those actions. In addition, we have identified several areas 

where additional actions must be taken immediately to reduce the risk of 

further system development problems. 

Prior to the passage of DCIA in April 1996, Treasury in conjunction with the 

Federal Reserve Bank of San Francisco (FRBSF), developed a pilot system 

to demonstrate the feasibility of conducting administrative offsets on a 

routine basis. The system, referred to as the Interim Treasury Offset 

Program (ITOP), is currently operational and is used to offset vendor 

payments disbursed by Treasury Disbursing Offices and OPM retirement 

payments. However, Treasury never intended the system, as it was 

originally developed, to perform all of the administrative offset functions 

envisioned as a result of DCIA. 

In September 1996, Treasury awarded a contract for the development and 

implementation of a new and expanded administrative offset system, 

known as the Grand Treasury Offset Program (GTOP). This system was to 

be used to consolidate the administrative, tax refund, and federal salary 

offset programs, and was to include all eligible delinquent federal nontax 

debt and federal payments. In addition, Treasury intended the system to be 

capable of incorporating state child support debts and other state debts, 

which DCIA authorizes to be recovered through federal payment offsets. 

GTOP was scheduled to be implemented in January 1998. However, because 

of systems development problems, it has not been placed into operation. 

Page 8 GAO/T-AIMD-98-195 
Currently, Treasury is focusing its efforts on enhancing ITOP to handle all 

eligible debts and payments for the administrative offset program, as well 

as the consolidation of the administrative, tax refund, and federal salary 

offset programs. 

GTOP’s Development	 Treasury has concluded that it currently cannot use GTOP for the 

administrative offset program primarily because Treasury did not apply a 

disciplined system development process for that system. Treasury’s 

policies, including its systems life cycle methodology, and our guidance9 

call for the completion of a concept of operations and functional 

requirements in the development of a major system. 

The GTOP development effort was undertaken without (1) completing an 

overall concept of operations, which includes the high-level information 

flows for the system and (2) documenting the functional requirements that 

the system must meet. Treasury’s policies call for such generally accepted 

steps to be completed before a system is developed. 

We are unsure why the previous management team responsible for GTOP’s 

oversight allowed GTOP to be developed before these critical steps were 

completed. However, according to Treasury, the effect was that the 

completeness and usefulness of the software delivered by the GTOP 

contractor in October 1997 cannot be reasonably measured and the system 

cannot be tested to determine if it would meet Treasury’s needs. Thus, 

Treasury has not placed the system into operation. 

Current Treasury Efforts	 In December 1997, Treasury established a new management team for DCIA 

implementation, which includes managing a new systems development 

effort for the administrative offset program. The new management team 

has decided to halt all work on GTOP and enhance ITOP. Treasury 

recognizes that one of the disadvantages of this approach is that it may 

result in little or no return on the approximately $5 million it has paid to 

the contractor for development of the system software that has been 

delivered. However, it also believes that modifying ITOP is the most 

practical way to consolidate the administrative and tax refund offset 

programs for the 1998 tax year and to begin adding federal salary and 

benefit payment streams in the administrative offset program during 

calendar year 1998 or early 1999. 

9

Strategic Information Planning: Framework for Designing and Developing System Architectures 

(GAO/IMTEC-92-51, June 1992). 

Page 9 GAO/T-AIMD-98-195 
According to Treasury officials, the enhancement of ITOP will comply with 

Treasury guidance for systems development efforts. Based on our review 

of documentation recently provided to us, there are indications that some 

of the critical system development requirements are being addressed. For 

example, Treasury has identified the information flows associated with 

several payment types and has begun to develop the corresponding 

functional requirements for those payment types. It has also developed a 

DCIA Implementation Plan that includes many of the steps necessary to 

enhance ITOP and projected completion dates for each step. This plan 

should enable Treasury management and others to promptly and 

objectively measure whether the ITOP enhancement is on schedule. 

In addition, Treasury’s Financial Management Service’s Debt Management 

Services is now routinely briefing the Under Secretary for Domestic 

Finance and other top Treasury officials on progress relating to the 

administrative offset program with the intention that such high-level 

oversight will facilitate keeping the implementation of DCIA on schedule 

and help to identify any significant problems early so that corrective 

actions can be taken promptly. While these efforts are positive steps, we 

have identified several areas where additional actions are needed. 

Actions Needed to Reduce 

Significant Risks Further 

In reviewing Treasury’s plans and actions to date, we have identified 

several areas where additional actions must be taken immediately to 

adequately reduce the risk of costly modifications and further delays in the 

effective implementation of the administrative offset provisions of DCIA. 

First, a documented overall concept of operations has not yet been 

developed. A concept of operations includes high-level descriptions of 

information systems, their interrelationships, and information flows. It 

also describes the operations that must be performed, who must perform 

them, and where and how the operations will be carried out. 

According to Treasury officials, they understand the importance of such a 

document, but until recently, have not placed a high priority of completing 

it because they believe the individuals involved with the project have an 

overall view of how the offset processes should work. After we discussed 

this issue with Treasury officials, they have agreed to increase the priority 

associated with this effort and have projected completion of an overall 

concept of operations in July 1998. 

It is important for Treasury to place a high priority on ensuring that this 

effort is completed on schedule because it is the primary building block on 

Page 10 GAO/T-AIMD-98-195 
which the entire systems development effort is based. Moreover, if 

personnel changes occur prior to completion of the project, it would be 

difficult to effectively complete the project promptly without such 

documentation. 

Second, overall functional requirements for the administrative offset 

system are not yet available. Functional requirements, which describe a 

system’s functional inputs, processes, and outputs, are derived from the 

concept of operations and serve as the rationale for a system’s detailed 

requirements. They are generally expressed in user terminology and are 

the foundation that guides the development process. 

Although Treasury has begun to develop and document functional 

requirements for several key processes, such as federal salary and tax 

refund offsets, it has not developed overall functional requirements for the 

administrative offset system. While the development of functional 

requirements for each key process is a necessary step in the incremental 

systems development approach being used, it does not replace the need 

for overall functional requirements. Until the functional requirements for 

the overall system are defined, the requirements for a given process may 

not be adequate. We discussed this issue with Treasury officials, and they 

have agreed to increase the priority associated with this effort and have 

projected completion of overall functional requirements by the end of 

August 1998. 

Treasury is in the process of preparing functional requirements for certain 

key processes. Treasury personnel stated that for each key process, the 

functional requirements would be clearly defined and that a requirements 

traceability matrix would be developed so that a test plan could be 

prepared. 

Treasury must place a high priority on (1) completing the overall 

functional requirements, (2) clearly defining the specific functional 

requirements as they are prepared for each key process, and (3) ensuring 

that the key process functional requirements are consistent with the 

applicable overall functional requirements. This is important because 

many system developers and program managers have identified ill-defined 

or incomplete requirements as one of the root causes of system failures. In 

addition, as previously stated, the lack of documented functional 

requirements is a major reason GTOP was not able to be tested. 

Page 11 GAO/T-AIMD-98-195 
Third, Treasury’s DCIA Implementation Plan does not yet include all facets 

of the administrative offset program. The most recent version of the plan, 

dated May 1, 1998, includes the tasks and projected milestone dates 

involved with several of the key processes. However, the plan does not 

include information on handling certain payment types, such as payments 

made by NTDOs (other than USPS and DOD), miscellaneous payments, and 

salary payments made by payroll offices other than USDA’s National 

Finance Center (NFC), for which Treasury makes the disbursement.10 

According to Treasury officials, because of the priorities they have put on 

merging the administrative and tax refund offset programs, processing 

salary payments from NFC, and processing Social Security Benefit 

payments, they have not as yet devoted time to fully developing an overall 

DCIA Implementation Plan. 

We recognize that Treasury’s current focus is largely directed toward 

consolidating existing payment offset programs to improve efficiency and 

attempt to minimize the costs of debt collection, which is an important 

objective of DCIA. In addition, the degree of specificity associated with a 

particular facet of the program may vary depending on the priority that 

Treasury assigns to it. However, a complete DCIA Implementation Plan is 

critical to the success of Treasury’s systems development efforts. Such a 

plan is needed for Treasury management and others to effectively evaluate 

(1) how the development and implementation of the overall system is 

progressing and (2) when corrective action is needed to ensure that major 

slippages do not occur. Treasury officials have agreed to more fully 

develop the DCIA Implementation Plan in the near future. 

Fourth, Treasury has not yet completed a risk management plan. A risk 

management plan is critical for the successful implementation of a 

systems development project because it provides management and others 

the ability to focus their efforts on the areas that pose the greatest risks. It 

also outlines the actions that Treasury will take to mitigate the risks 

identified. Treasury officials stated that although they have not developed 

such a plan for the overall system, they have developed a plan for the 

software development efforts. A risk management plan takes on even 

more importance when tight time frames are involved in a given effort 

because it outlines the actions that will be taken should the project miss 

key delivery dates. Treasury officials agreed that an overall risk 

management plan is needed and has projected completion in July 1998. 

10During fiscal year 1997, NFC processed about 35 percent of the payroll transactions processed by the 

93 payroll offices that used Treasury Disbursing Offices for making salary payments. 

Page 12 GAO/T-AIMD-98-195 
Finally, Treasury has not yet evaluated the adequacy of the hardware and 

software platforms. Treasury has decided to use the hardware and 

software platforms11 that were selected for GTOP until it can conduct tests 

to determine if these platforms are adequate. Treasury officials 

acknowledge that this decision increased project risk because 

development efforts were being based on these platforms prior to knowing 

whether they were adequate for the requirements of the enhanced ITOP 

system. However, they believe the risk is justified because (1) the 

hardware has already been acquired and an evaluation of the adequacy of 

the platforms should be completed by June 30, 1998, and (2) some work 

had been performed to evaluate the adequacy of the platforms before they 

were selected for GTOP. Management must ensure that the evaluation of the 

hardware and software platforms is completed by the estimated 

completion date of June 30, 1998. Otherwise, Treasury runs a risk that the 

system it is developing cannot become operational without costly 

modification. 

Treasury’s commitment to address the systems development issues we 

have raised is encouraging. But 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. Otherwise, Treasury is 

significantly exposed to the risk of costly systems modifications and 

additional delay in developing a system to implement the administrative 

offset provision of DCIA. 

Mr. Chairman, this concludes my statement. I would be happy to respond 

to any questions that you or other members of the Subcommittee may 

have at this time. 

11The hardware platform is the physical computer, which consists of components such as the central 

processor, memory, and disk storage. The software platform refers to the operating system software 

and other system support software. Application software that performs a specific task is designed to 

run on a specific combination of hardware and software platforms. Consequently, applications for one 

platform generally cannot run on others. 

(901774) Page 13 GAO/T-AIMD-98-195 
Ordering Information 

The first copy of each GAO report and testimony is free.


Additional copies are $2 each. Orders should be sent to the


following address, accompanied by a check or money order


made out to the Superintendent of Documents, when


necessary. VISA and MasterCard credit cards are accepted, also.


Orders for 100 or more copies to be mailed to a single address


are discounted 25 percent.


Orders by mail:


U.S. General Accounting Office


P.O. Box 37050


Washington, DC 20013


or visit:


Room 1100


700 4th St. NW (corner of 4th and G Sts. NW)


U.S. General Accounting Office


Washington, DC


Orders may also be placed by calling (202) 512-6000 


or by using fax number (202) 512-6061, or TDD (202) 512-2537.


Each day, GAO issues a list of newly available reports and


testimony. To receive facsimile copies of the daily list or any


list from the past 30 days, please call (202) 512-6000 using a


touchtone phone. A recorded menu will provide information on


how to obtain these lists.


For information on how to access GAO reports on the INTERNET,


send an e-mail message with "info" in the body to:


info@www.gao.gov


or visit GAO’s World Wide Web Home Page at:


http://www.gao.gov


PRINTED ON RECYCLED PAPER 
Bulk Rate


Postage & Fees Paid


GAO


Permit No. G100


United States


General Accounting Office


Washington, D.C. 20548-0001


Official Business


Penalty for Private Use $300


Address Correction Requested