a

GAO

United States General Accounting Office

Report to the Chairman, Subcommittee 

on Government Efficiency, Financial 

Management and Intergovernmental 

Relations, Committee on Government 

Reform, House of Representatives

March 2002 DEBT COLLECTION 

IMPROVEMENT ACT 

OF 1996 

Major Data Sources 

Inadequate for 

Implementing the 

Debtor Bar Provision

GAO-02-462
Page i GAO-02-462 DCIA Debtor Bar Provision

Contents

Letter 1

Results in Brief 2

Background 4

Objectives, Scope, and Methodology 6

Major Sources of Information on Delinquent Federal Debtors 8

Conclusions 16

Recommendations for Executive Action 17

Agency Comments and Our Evaluation 17

Appendixes

Appendix I: Respondents to the Debt Reporting Practices Survey 22

Appendix II: Debt Reporting Practices Survey 24

Appendix III: Comments from the Financial Management Service 45

Appendix IV: Comments from the Department of Housing and Urban 

Development 49

Appendix V: Comments from the Department of Veterans Affairs 50

Appendix VI: GAO Contact and Staff Acknowledgments 51

Abbreviations

CAIVRS Credit Alert Interactive Voice Response System

CFO Chief Financial Officers

CNC currently not collectible

DCIA Debt Collection Improvement Act of 1996

DOE Department of Energy

EPA Environmental Protection Agency

FHA Federal Housing Administration

FMS Financial Management Service

HHS Department of Health and Human Services

HUD Department of Housing and Urban Development

IRS Internal Revenue Service

SBA Small Business Administration

SSA Social Security Administration

TOP Treasury Offset Program

USDA Department of Agriculture

VA Department of Veterans Affairs
Page ii GAO-02-462 DCIA Debtor Bar Provision
Page 1 GAO-02-462 DCIA Debtor Bar Provision

United States General Accounting Office

Washington, D.C. 20548

A

March 29, 2002 Letr

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 agencies’ 

implementation of the Debt Collection Improvement Act (DCIA) of 1996.1

 

While a primary purpose of DCIA is to maximize collections of delinquent 

nontax debt owed to the federal government, another significant aim of the 

law is to reduce losses arising from debt management activities by 

requiring proper screening of potential borrowers and sharing of 

information within and among federal agencies. As such, DCIA contains a 

provision that is intended to bar delinquent federal nontax debtors from 

obtaining additional federal financial assistance in the form of certain 

loans, loan insurance, or loan guarantees until the debtors resolve their 

delinquencies.2

 This report assesses the adequacy of existing tools and 

addresses the advantages and disadvantages of major information sources 

currently available or under development that federal credit agencies and 

lenders can use to identify delinquent federal debtors for the purpose of 

denying them additional federal financial assistance. 

Presently, the major information sources that contain data on delinquent 

federal debtors are credit bureau reports, the Department of Housing and 

Urban Development’s (HUD) Credit Alert Interactive Voice Response 

System (CAIVRS), and the Financial Management Service’s (FMS) Treasury 

Offset Program’s (TOP) database. To varying degrees, federal agencies 

report certain delinquent debtors to these data sources in accordance with 

1

U.S. General Accounting Office, Debt Collection Improvement Act of 1996: Agencies Face 

Challenges Implementing Certain Key Provisions, GAO-02-61T (Washington, D.C.: 

October 10, 2001).

2

Section 3720B of title 31, United States Code, as amended by section 845(a) of the 

Agriculture Appropriations Act, fiscal year 2001, Public Law No. 106-387, sec. 1(a) 114 

Stat.1549, 1549A-65 (2000), bars delinquent federal nontax debtors from obtaining federal 

financial assistance in the form of federal loans, loan insurance, or loan guarantees, except 

for disaster loans, marketing loans, or loan deficiency payments under subtitle C of the 

Agricultural Market Transition Act. 
Page 2 GAO-02-462 DCIA Debtor Bar Provision

various statutes or regulations. However, to help ensure that federal 

financial assistance is denied to delinquent debtors as required by DCIA, 

federal credit agencies must have access to delinquent debtor information 

that (1) includes all debtors delinquent 90 days or more on federal nontax 

debts and (2) is maintained and updated until the delinquencies are 

resolved.

Results in Brief The federal government does not yet have an effective data source for 

implementing DCIA’s debtor bar provision. Although credit bureau reports, 

CAIVRS, and FMS’s TOP database each contain certain information on 

delinquent federal nontax debtors, none of those information sources 

currently provides all-inclusive, timely data or maintains them long enough 

to allow it to serve as an adequate data source for successfully barring 

future financial assistance to debtors who are currently delinquent or who 

did not meet their obligations in the past. In general, the constraints relate 

to scope of reporting, adequacy of the data for this purpose, and the fact 

that data are subject to being routinely purged from these sources after a 

specified number of years. In view of these constraints, the risk of credit 

agencies’ not barring all delinquent federal nontax debtors from obtaining 

additional federal financial assistance is increased. 

As it now stands, it would appear that information from the TOP database, 

with modifications, provides the best opportunity to offer an adequate 

reference point for identifying delinquent debtors for the purpose of 

denying them additional financial assistance. Credit bureau issues are 

largely beyond the immediate influence of the federal government, and 

CAIVRS reporting is voluntary. Referral of delinquent debt to FMS for 

offset is already legislatively required, and agencies have major incentives 

to refer debt because collections through TOP have proven quite effective. 

Accordingly, information from the TOP database offers the major 

advantage of one referral addressing two purposes—collections as well as 

delinquency reporting. 
Page 3 GAO-02-462 DCIA Debtor Bar Provision

Notwithstanding present advantages, maximizing the effectiveness of 

information from the TOP database as a delinquency reporting tool would 

call for a number of changes, including improvements in agencies’

delinquent debt referral practices and enhancing or supplementing 

information currently maintained in the TOP database. Accelerating the 

referrals of delinquent debt to TOP to 90 days versus waiting 180 days to 

refer the debt is an option already available to agencies for certain types of 

debt and, regardless of agency in-house collection initiatives, may be in the 

best interest of the government since it could help accelerate collections.3

 

Other matters, such as retaining data from the TOP database concerning 

certain discharged or closed-out debts and debts more than 10 years 

delinquent and adding data on delinquent debts that are generally excluded 

from offset by FMS, could be addressed by FMS; however, FMS currently 

does not have plans to deal with these issues because it believes that 

information from the TOP database should be used in conjunction with 

other information sources, such as credit bureau reports and CAIVRS, to 

identify delinquent debtors for the purpose of denying them additional 

financial assistance. We believe FMS has a number of opportunities to 

improve the delinquent debtor information available to federal agencies in 

order to enhance the effectiveness of agencies’ implementation of DCIA’s 

debtor bar provision, directed at achieving improvements in the available 

information.

Six of the nine CFO Act agencies that participated in our review by 

completing a survey on delinquent debt reporting responded they had no 

comment on a draft of this report, and one of the nine agencies did not 

respond to our request for comments. The other two CFO Act agencies 

agreed with our recommendations. FMS, however, disagreed with our 

conclusion that existing data sources are inadequate for implementing 

DCIA's debtor bar provision and also disagreed with our recommendations 

intended to improve the effectiveness of FMS's Barring Delinquent Debtors 

Program by enhancing or supplementing information from the TOP 

database. In disagreeing with our recommendations, FMS raised questions 

about the level of effort and resources required to have a database of the 

scale we envisioned; said there were uncertainties regarding its authority 

to collect, maintain, and use the data for this purpose; and noted that in 

3

DCIA requires federal agencies to transfer nontax debts delinquent more than 180 days to 

Treasury for the purpose of offsetting federal payments and for cross-servicing to collect 

delinquent debts owed to the federal government. Federal agencies may, at their discretion, 

refer valid, legally enforceable debts for administrative offset and cross-servicing that are 

less than 180 days delinquent.
Page 4 GAO-02-462 DCIA Debtor Bar Provision

general, existing data were adequate for implementing the debtor bar 

provision.

We disagree. Although cost associated with having a more comprehensive 

database of delinquent debtors needs to be considered, there may be 

relatively little extra cost because agencies are already required to provide 

much of this information for purposes of administering TOP. Also, FMS did 

not mention the tradeoffs involved—the associated benefits in the form of 

increased collections and avoiding making loans to applicants already 

delinquent on other federal loans. Regarding its authority to use 

information provided to TOP to implement the debtor bar provision, we do 

not see insurmountable issues. The options we asked FMS to pursue did 

not include any roles or responsibilities not already contemplated by the 

debtor bar provision of DCIA. However, given its role as the lead agency 

for federal debt collection, we would encourage FMS to seek any additional 

authority that it may deem necessary. Regarding the adequacy of existing 

data sources for carrying out the DCIA debtor bar provision, our review 

showed that individually and collectively, they currently fall short of what 

is needed to more fully implement this provision. Therefore, we continue 

to believe that FMS should pursue enhancing or supplementing information 

from the TOP database to provide agencies with a more comprehensive 

database of delinquent debtors to be used in barring such debtors from 

obtaining additional federal financial assistance.

Background During a hearing on DCIA implementation held by your subcommittee in 

June 2000, concerns were raised that there were federal nontax debtors 

who were delinquent on more than one federal debt. Our October 10, 2001, 

testimony before the subcommittee reiterated concerns about delinquent 

federal nontax debtors’ obtaining additional federal financial assistance 

because of the lack of an adequate information source that would facilitate 

agencies’ identification of such applicants prior to approval of financial 

assistance.4

As previously stated, DCIA bars certain delinquent federal nontax debtors 

from obtaining federal financial assistance in the form of federal loans, 

loan insurance, or loan guarantees until the debtors resolve the 

delinquencies. FMS published final regulations on this statutory 

4

GAO-02-61T.
Page 5 GAO-02-462 DCIA Debtor Bar Provision

requirement on December 8, 1998. According to the regulations, for the 

purpose of denying federal financial assistance, a person’s delinquent debt 

is resolved only if the person (1) pays or otherwise satisfies the delinquent 

debt in full; (2) pays the delinquent debt in part if the creditor agency 

accepts such partial payment as a compromise in lieu of payment in full; 

(3) cures the delinquency under terms acceptable to the creditor agency in 

that the person pays any overdue payments, plus all interest, penalties, late 

charges, and administrative charges assessed by the creditor agency as a 

result of the delinquency; or (4) enters into a written repayment agreement 

with the creditor agency to pay the debt, in whole or in part, under terms 

and conditions acceptable to the creditor agency. 

For purposes of denying federal financial assistance under Treasury 

regulations, a debt is in delinquent status if it has not been paid within 90 

days of the payment due date. Treasury has established 90 days delinquent 

as the trigger for denying federal financial assistance because it (1) allows 

sufficient time for debts to be referred to credit bureaus and (2) is 

consistent with standard lending practices, which classify a loan as 

nonperforming at 90 days past due.

The DCIA debtor bar provision does not expire as the debt ages. It applies 

even if the creditor agency has suspended or terminated collection activity 

on the debt or, in certain cases, discharged the debt.5

 As specified in 

Treasury regulations, for the purpose of denying federal financial 

assistance, a debt is in delinquent status unless (1) the person seeking 

federal financial assistance has been released by the creditor agency from 

any obligation to pay the debt, or there has been a determination that such 

person does not owe or does not have to pay the debt; (2) the debtor is the 

subject of, or has been discharged in, a bankruptcy proceeding, and, if 

applicable, the person is current on any court-authorized repayment plan; 

or (3) the existence of the debt or the delinquency of the debt is being 

challenged under an ongoing administrative appeal that was filed by the 

debtor in a timely manner. 

5

According to the Federal Claims Collection Standards, before discharging a delinquent debt 

(also referred to as a close-out of the debt), agencies must terminate all collection action. 

Upon discharge of an indebtedness, agencies must report the discharge to the Internal 

Revenue Service (IRS) in accordance with the requirements of 26 U.S.C. 6050P and 26 C.F.R. 

1.6050P-1. IRS Form 1099C is used to report the uncollectible debt as income to the debtor, 

which may be taxable at the debtor’s current tax rate.
Page 6 GAO-02-462 DCIA Debtor Bar Provision

Objectives, Scope, and 

Methodology

The objective of our review was to determine the advantages and 

disadvantages of existing major information sources, namely, credit bureau 

reports, CAIVRS, and the TOP database, to promptly identify delinquent 

federal debtors for the purpose of denying them federal financial 

assistance. To accomplish this objective, we developed and pretested a 

survey instrument to obtain agency responses to a uniform set of questions. 

The scope of this effort included the nine largest civilian Chief Financial 

Officers (CFO) Act agencies6

—the Departments of Agriculture (USDA), 

Education, Energy (DOE), Health and Human Services (HHS), HUD, and 

Veterans Affairs (VA); the Environmental Protection Agency (EPA); the 

Small Business Administration (SBA); and the Social Security 

Administration (SSA). These nine agencies held about $40 billion of 

reported delinquent nontax federal debt as of September 30, 2000, which 

represented more than 90 percent of all CFO Act agencies’ reported 

delinquent nontax debt. We surveyed these nine agencies on their debtreporting practices. Because these agencies typically perform debtreporting activities at the entity level rather than at the department level—

within USDA, 22 individual entities (for example, the Rural Development 

Insurance Fund, Agricultural Credit Insurance, and Rural Communication 

Development) report debt information to Treasury—our surveys were 

completed at the entity level. We achieved 100 percent response from the 

90 entities involved in our review. See appendix I for the number of 

participating entities, by agency and bureau, and appendix II for a copy of 

our survey instrument.

6

The 24 CFO Act agencies are set forth at 31 U.S.C. 901(b).
Page 7 GAO-02-462 DCIA Debtor Bar Provision

We reviewed the survey responses and followed up with appropriate 

agency officials, where necessary, to obtain clarifications. Although we 

discussed certain survey responses with agency officials, we did not 

independently verify the reliability of the information that was provided. In 

addition, we conducted interviews with officials from four national creditreporting agencies and HUD regarding credit bureau reports and CAIVRS, 

respectively.7

 We also conducted interviews with FMS officials concerning 

the TOP database and using the information from that database to bar 

delinquent debtors from receiving additional financial assistance. 

We performed our work in accordance with U.S. generally accepted 

government auditing standards from January 2001 through October 2001. 

We requested written comments on a draft of this report from FMS and 

from the nine CFO Act agencies that responded to our survey on delinquent 

debt reporting. Although one of the nine agencies did not respond to our 

request for comments, six of the nine agencies responded that they had no 

comment on the draft report. FMS and the remaining two CFO Act 

agencies submitted written comments, which are discussed in the Agency 

Comments and Our Evaluation section of this report and are incorporated 

in the report as applicable. Comments from FMS, HUD, and VA are 

reprinted in appendixes III, IV, and V, respectively.

7

We included Equifax, Experian, and Trans Union in our review of consumer credit bureaus, 

and Dun & Bradstreet and Experian in our review of commercial credit bureaus. Treasury 

provided these credit bureaus as contacts for federal agencies for reporting delinquent 

debtor information in the draft Guide to the Federal Credit Bureau Program released in 

September 2000. In October 2001, Treasury published its Guide to the Federal Credit 

Bureau Program, and, according to an FMS official, FMS has distributed approximately 900 

copies to federal credit agency contacts, liaisons, and senior officials. The guide was 

developed to assist agencies in their compliance with current laws and regulations in an 

effort to encourage credit bureau reporting, as required and as authorized, in order to stem 

the rise in federal debt delinquencies. In the guide, the commissioner of FMS notes that 

reporting delinquent debt information to credit-reporting agencies, whether when required 

or as encouraged, is the direct responsibility of the respective federal agency, and the intent 

of the guide is to assist agencies in meeting those responsibilities. Subsequent to its 

issuance, effective January 22, 2002, the guide’s designated credit-reporting agencies section 

has been modified to include INNOVIS for consumer accounts and Equifax for commercial 

accounts.
Page 8 GAO-02-462 DCIA Debtor Bar Provision

Major Sources of 

Information on 

Delinquent Federal 

Debtors

In order to comply with Treasury’s regulations implementing DCIA’s debtor 

bar provision, federal credit agencies must be able to identify debtors 

delinquent 90 days or more on federal nontax debts. Three major 

information sources—credit bureau reports, CAIVRS, and the TOP 

database—contain certain delinquent debtor information that may be 

useful in evaluating federal loan applicants. However, the extent to which 

delinquent federal debtor information is sent to and maintained by each of 

these information sources varies.

Credit Bureau Reports DCIA requires most federal agencies to report all delinquent consumer 

nontax debts to credit bureaus.8

 For delinquent commercial nontax debts, 

federal agencies have been required by Office of Management and Budget 

(OMB) policy to report all such debts to credit bureaus since September 

1983. FMS’s Guide to the Federal Credit Bureau Program, which was 

issued in October 2001, currently recommends that federal agencies report 

delinquent consumer debt to four credit bureaus—Equifax, Experian, 

Trans Union, and INNOVIS—and commercial debt to three credit 

bureaus—Dun & Bradstreet, Experian, and Equifax. The credit bureaus 

receive and integrate into their respective databases credit information 

from federal agencies and from private sector entities. In turn, this 

information is sold in the form of credit reports, which are used for such 

purposes as determining creditworthiness and assisting with debt 

collection efforts. Treasury guidance states that federal agencies should 

report consumer debts monthly and commercial debts quarterly. Credit 

bureau reporting is important because federal agencies are required by 

OMB policy to use credit bureaus as a screening tool to determine if 

applicants for federal financial assistance are delinquent on any federal 

debt. Based on responses from the nine CFO Act agencies we surveyed, 

about $30 billion of these agencies’ reported delinquent debt has been 

subject to credit bureau reporting.

Credit bureau reports include critical information for the debtor bar 

provision, including the number of days a debt is delinquent. As such, 

credit bureau reports are a relatively good information source for 

identifying certain delinquent federal nontax debtors. However, the 

information that credit bureaus are currently able to provide is limited for 

the purpose of denying federal financial assistance because (1) certain 

8

31 U.S.C. 3711(e).
Page 9 GAO-02-462 DCIA Debtor Bar Provision

federal agencies’ nontax debt that is 90 days delinquent, which is the trigger 

associated with the bar provision, is not all reported to credit bureaus and 

(2) by law, certain adverse credit information can be retained and reported 

by credit bureaus for only 7 years.

In response to our survey of nine CFO Act agencies, which together 

reported holding about $40 billion of delinquent nontax debt as of 

September 30, 2000, eight of the nine agencies indicated that they had not 

reported to credit bureaus about $9.8 billion of their delinquent debt as of 

that date. HHS’s survey response stated that Medicare debt, which 

amounted to more than $5.2 billion, was exempted from the credit bureau 

reporting requirement by 31 U.S.C. 3701(d). Although reporting Medicare 

debt to credit bureaus is exempted by 31 U.S.C. 3701(d), this does not mean 

that HHS is legally precluded from such reporting. The exemption means 

that HHS may report Medicare debt but is not required to do so. In 

addition, section 3701(d) does not exclude Medicare debt from the debtor 

bar provision in 31 U.S.C. 3720B. Further, about $3.4 billion is not reported 

because the debts are guaranteed loans made by USDA’s Commodity Credit 

Corporation to foreign governments. Agency officials stated that reporting 

foreign debt to credit bureaus would serve no useful purpose and, 

therefore, would not be cost-effective.9

 Also, our recent work revealed that 

some agencies may not be classifying certain credit losses as delinquent 

federal debt.10 Other reasons cited by the agencies for not reporting 

delinquent debt included, at certain entities, (1) a lack of automated 

capability or system limitations to report to credit bureaus and (2) the 

validity of the debt could not be firmly established.

Two of the nine agencies we surveyed responded that they refer delinquent 

debts directly to credit bureaus and do not rely on Treasury’s crossservicing for such reporting. The other seven agencies indicated that 

although they may refer some of their delinquent debts directly to credit 

bureaus, they rely on FMS to report certain debts to credit bureaus on their 

behalf as part of cross-servicing. However, we noted that as of 

September 30, 2000, these seven agencies together reported about 

$1.4 billion of debt eligible for cross-servicing but had referred only about 

$330 million to FMS. Consequently, a significant amount of delinquent debt 

9

According to Treasury, for the most part, collecting these foreign delinquent debts is 

infeasible primarily because of foreign diplomacy considerations and affairs of state.

10GAO-02-61T.
Page 10 GAO-02-462 DCIA Debtor Bar Provision

is not likely being promptly captured by credit bureaus, which limits 

federal credit agencies’ use of credit bureau reports to identify delinquent 

federal nontax debtors for the purpose of denying federal financial 

assistance.

Another problem with relying on FMS to report delinquent debts to credit 

bureaus as part of cross-servicing is that the debts would typically not be 

reported until well beyond the 90-day delinquency trigger for denying 

federal financial assistance. Under DCIA, agencies are not required to refer 

eligible debts to FMS for cross-servicing until they are delinquent more 

than 180 days. In addition, in order to give debtors advance notice of the 

potential reporting of debts to credit bureaus and an additional opportunity 

for the debtors to repay their debts, FMS waits from the date it receives the 

debts at least 30 days for commercial debts and 60 days for consumer debts 

before reporting these debts to credit bureaus. Based on the stated debt 

referral practices of the seven agencies we surveyed that indicated they 

rely on FMS to report certain debts to credit bureaus, debts would seldom, 

if ever, be referred to FMS for cross-servicing in sufficient time for FMS to 

report the debts to credit bureaus at 90 days delinquent. Moreover, 

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. Therefore, it is important for agencies to 

refer delinquent debts directly to credit bureaus in accordance with FMS’s

Guide to the Federal Credit Bureau Program.11

11Federal agencies have two options for credit bureau reporting once they have referred 

cases to FMS for cross-servicing: (1) they may continue to report the cases to credit 

bureaus, and FMS will not do so, or (2) they may cease reporting, and FMS will report to 

credit bureaus on the agencies’ behalf.
Page 11 GAO-02-462 DCIA Debtor Bar Provision

Aside from the fact that not all delinquent federal nontax debts are 

reported to credit bureaus and that many are reported much later than 

would be desirable, it is important to note that under the Fair Credit 

Reporting Act, adverse credit information for consumer debts can 

generally only be reported by credit bureaus for up to 7 years from the date 

of the initial missed payment. Therefore, for the purpose of identifying 

debtors with older delinquent consumer debts in order to deny them 

federal financial assistance, federal credit agencies cannot rely solely on 

credit bureau reports. Further, we noted that 3 of the 90 entities that 

responded to our survey indicated that they request the removal of certain 

debtors from credit bureau reports once they discharge debts, even though 

such debts do not always meet Treasury’s criteria for debt resolution for 

the purpose of denying federal financial assistance.12 According to a 

Treasury official, at this point, FMS is currently reviewing the issue of 

whether federal agencies should be allowed to remove, or should be 

precluded from removing, discharged debts from credit bureau reports. 

The official stated that Treasury currently does not have an official policy 

on this matter, but such policy may be established in March 2002. 

According to officials from two credit bureaus included in our review, 

information on discharged debts should not be removed from the credit 

bureaus so that the discharged debts will continue to be reflected on the 

credit bureau reports.

12Debts that are discharged but not resolved in accordance with Treasury’s criteria for debt 

resolution (e.g., the debt is not cured or resolved under terms and conditions acceptable to 

the creditor agency) should continue to be considered as delinquent debts for the purpose 

of denying federal financial assistance to be in compliance with the delinquent debtor bar 

provision.
Page 12 GAO-02-462 DCIA Debtor Bar Provision

CAIVRS CAIVRS was developed by HUD in the 1980s to assist its Federal Housing 

Administration (FHA) lenders in determining whether a borrower or 

coborrower was currently in default or had a claim on an FHA mortgage 

within the last 3 years by providing limited debtor information. HUD 

expanded CAIVRS during the early 1990s to include reporting of delinquent 

nontax debt from other federal agencies. Although the Federal Claims 

Collection Standards, which were revised in November 2000, strongly 

encourage agencies to report delinquent debts to CAIVRS in part to assist 

agencies in complying with the debtor bar provision of DCIA, agencies are 

not required by the standards to submit such debts to HUD for inclusion in 

the CAIVRS database.13 Moreover, each federal agency determines its own 

criteria for reporting specific debts to CAIVRS. Therefore, CAIVRS has 

limitations as an information source for identifying delinquent nontax 

debtors for the purpose of denying federal financial assistance. 

First, in part because agencies are not required to report to CAIVRS, only 

five of the nine agencies we surveyed indicated that they do report certain 

of their delinquent debts to CAIVRS. These five agencies indicated that 

they reported to CAIVRS about $23 billion, or about 58 percent, of the 

$40 billion of total delinquent debt the nine agencies reported holding as of 

September 30, 2000. 

Second, CAIVRS contains limited information on delinquent debts. For 

example, CAIVRS does not include the date of delinquency or the number 

of days the debt is delinquent, which is critical for denying federal financial 

assistance under the authority of DCIA. While the data available through 

CAIVRS provide an indicator of indebtedness, the system does not contain 

sufficient data for determining whether to deny the debtor additional 

federal financial assistance. As such, those accessing the data have to 

contact the source agency to acquire the relevant information. Also, each 

agency that reports debts to CAIVRS can use its own discretion as to how 

long debts stay in the system. For example, three of the five agencies we 

surveyed that report debts to CAIVRS indicated that they remove certain 

debts from CAIVRS at the time they are written off,14 and all five of these 

1331 C.F.R. 901.4(b).

14Generally, write-off is mandatory for delinquent debt older than 2 years. Once the debt is 

written off, or removed from the agency’s accounting and financial records, the agency must 

either classify the debt as currently not collectible (CNC) or discharge the debt. Although 

CNC debts have been written off for accounting purposes, CNC debts have not been 

discharged and collection action can still be taken.
Page 13 GAO-02-462 DCIA Debtor Bar Provision

agencies indicated that they remove certain debts at the time they are 

discharged. As noted above, debts that are written off and discharged 

debts do not always meet the criteria for debt resolution for the purpose of 

denying federal financial assistance. Therefore, such practices can serve to 

defeat the fundamental objective of the debtor bar provision in DCIA.

FMS’s TOP Database TOP is a mandatory governmentwide delinquent debt matching and 

payment offset system. Section 3716 of title 31 of the U.S.C., as amended 

by DCIA, requires federal agencies to transfer nontax debts more than 180 

days delinquent to Treasury for the purpose of offsetting federal payments 

to collect delinquent debts owed to the federal government. Under TOP, 

federal agencies may recover delinquent debt by (1) receiving offset federal 

payments due the delinquent debtor or (2) using debtor locator/address 

information provided by TOP to locate delinquent debtors.

Unquestionably, information from the TOP database could provide federal 

credit agencies with pertinent information about delinquent debtors for the 

purpose of denying additional federal financial assistance. The TOP 

database includes the date delinquency began for each referred debt; 

therefore, the number of days a debt is delinquent could be readily 

determined. In addition, FMS allows agencies to continually update their 

debt information in the TOP database. 

However, the information from the TOP database also has some 

limitations. For example, one of the TOP database’s downsides as an 

information source for identifying delinquent federal nontax debtors is that 

agencies do not promptly refer large amounts of delinquent debt eligible for 

TOP. First, as of September 30, 2000, the nine agencies we surveyed 

reported referring a significant amount—about $24 billion of about

$28 billion of debt reported as eligible for TOP as of September 30, 2000—

but still leaving about $4 billion out of this database that would be valuable 

in making loan or other financial assistance decisions.15

15In addition to the $40 billion of reported delinquent debt at the nine agencies we surveyed, 

these agencies held more than $25 billion in debts classified as CNC. The $28 billion of debt 

reported as eligible for TOP includes both debt more than 180 days delinquent and debt 

classified as CNC. The remainder of the delinquent debt and CNC debt was not reported as 

eligible for TOP because the debt was determined by the reporting agencies to be either less 

than 180 days delinquent or to have met the criteria for a TOP exclusion category (e.g., 

foreclosure or bankruptcy). 
Page 14 GAO-02-462 DCIA Debtor Bar Provision

Second, we identified at least one exclusion type—debts in foreclosure—

that while not eligible for referral to TOP would meet the criteria for 

barring delinquent nontax debtors from receiving additional federal 

financial assistance. Specifically, six of the nine agencies we surveyed 

reported having collectively about $1 billion of debts in foreclosure as of 

September 30, 2000. 

Finally, agencies are not required by DCIA to report eligible debts for 

administrative offset until they are more than 180 days delinquent. This is 

well beyond the 90-day trigger for the purpose of denying federal financial 

assistance. Moreover, according to FMS data, as of September 30, 2001, 

more than 65 percent of debt referred to TOP for offset governmentwide 

was actually more than 2 years delinquent at the time of agency referral.

It is also important to note that debt information in the TOP database also 

lacks permanence in that, generally, debt information can be maintained in 

the TOP database for only up to 10 years.16 In addition, TOP does not 

maintain debt information on debts that agencies discharge because 

agencies are prohibited from taking further collection action on such debts 

once they are reported to IRS as income. Further, we noted that four of the 

nine agencies we surveyed indicated that they request the removal of 

certain debts from TOP when the debts are written off. Therefore, given 

the lack of permanence of the nontax debt information in the TOP 

database, agencies could not rely solely on such information to identify all 

debtors with certain older delinquent nontax debts for the purpose of 

denying federal financial assistance.

FMS’s Barring Delinquent 

Debtors Program

Information from FMS’s TOP database is currently not available to agencies 

to identify delinquent debtors for the purpose of denying federal financial 

assistance. However, FMS is designing a new Internet-based program, to 

be known as the Barring Delinquent Debtors Program, to assist agencies in 

identifying delinquent debtors. According to FMS officials, the program 

will supplement other tools already available to agencies, such as credit 

bureau reports and CAIVRS. As currently envisioned, the program will 

allow agencies to initiate searches of information from the TOP database to 

16According to Federal Claims Collection Standards, unless otherwise provided by law, 

administrative offset of payments under the authority of 31 U.S.C. 3716 to collect a debt may 

not be conducted more than 10 years after the government’s right to collect the debt first 

accrued.
Page 15 GAO-02-462 DCIA Debtor Bar Provision

determine whether applicants for direct or guaranteed loans owe 

delinquent federal nontax debt. 

However, as currently planned, the Barring Delinquent Debtors Program 

will make available only limited information on delinquent debtors. For 

example, creditor agencies and lenders will be given the debt number and 

agency contact information, including the agency name, address, and 

phone number, for any debt matched to the information extracted from the 

TOP database. While this information will provide an indicator of 

indebtedness, creditor agencies and lenders accessing the information will 

have to contact the source agency to acquire the relevant information for 

use in denying federal financial assistance. In this case, it appears that the 

Barring Delinquent Debtors Program will supply information similar to that 

provided by CAIVRS; however, because fewer agencies report their 

delinquent debt to CAIVRS, potentially more delinquent debtor information 

could be obtained from the TOP database.

Currently, FMS anticipates that the new program will be available before 

the end of fiscal year 2002. According to FMS, however, various legal and 

technical issues may influence implementation of the Barring Delinquent 

Debtors Program, including making pertinent data available to 

(1) appropriate agency personnel and (2) authorized private lending 

institutions involved in federal lending activities, while maintaining 

systems and data security. 

In order to maximize the effectiveness of FMS’s Barring Delinquent 

Debtors Program as a delinquent debt reporting tool, enhancements are 

needed that would ideally capture additional delinquent debt information 

that may not meet the criteria for TOP collection action but would be 

useful for purposes of the debtor bar provision. Such enhancements could 

include retaining information for delinquent debts that have been referred 

to TOP but are no longer eligible for collection action even though the 

debts had not been resolved in accordance with Treasury regulations. On 

the other hand, enhancing the information from the TOP database for the 

Barring Delinquent Debtors Program may or may not be appropriate for 

certain types of debt (e.g., debt from 91 to 180 days delinquent) because 

federal credit agencies are already required by DCIA to report such debt to 

credit bureaus, and credit-granting agencies are required to use credit 

reports as a way to determine whether an applicant for federal financial 

assistance owes a delinquent debt to the government. In the case of this 

newer debt, the need for augmenting the information from the TOP 
Page 16 GAO-02-462 DCIA Debtor Bar Provision

database would hinge on the success of agencies’ completely and timely 

reporting new delinquencies to the designated credit bureaus.

At a minimum, to improve the information available to federal agencies for 

implementing the debtor bar provision, information from the TOP database 

would need to be enhanced or supplemented to include, among other 

things, (1) delinquent debts that have been discharged but do not meet the 

criteria for debt resolution, (2) debts more than 10 years delinquent, and 

(3) debts that meet the criteria for exclusion from TOP but are nevertheless 

delinquent for purposes of the debtor bar provision, such as foreclosures.17 

However, according to Treasury officials, Treasury does not plan as part of 

its Barring Delinquent Debtors Program to expand the program to include 

any types of debt outside of those that are currently maintained in the TOP 

database because, as noted above, FMS plans for the program to be a 

resource for federal agencies to use in conjunction with other available 

tools, including credit bureau reports and CAIVRS. Yet, by not considering 

these enhancements, Treasury may not be maximizing the potential of the 

Barring Delinquent Debtors Program.

Conclusions The federal government does not presently have an effective mechanism 

for ensuring compliance with DCIA’s debtor bar provision. None of the 

three data sources we reviewed contain all of the necessary data, and the 

data maintained in each of the information sources are subject to being 

routinely purged after a specified number of years, even though the debtor 

bar provision may still apply. Therefore, individually and collectively, 

although helpful, the three data sources do not fully get the job done. We 

strongly support credit bureau reporting primarily because it provides a 

demonstrable incentive for delinquent debtors to repay the federal 

government so that their credit ratings will not be adversely affected. In 

addition, of the three major data sources, the TOP database has the 

17According to a Treasury official, only debts that are eligible for offset and are included in 

the TOP database will be eligible for inclusion in the Barring Delinquent Debtors Program. 

Debts that have been written off but have not been discharged (e.g., debts classified as 

CNC) are included in the TOP database and may be included in the Barring Delinquent 

Debtors Program. Debts that have been discharged and are not eligible for offset are 

excluded from both the TOP database and the Barring Delinquent Debtors Program. In 

addition, certain debts that are more than 10 years delinquent may be offset and will 

therefore be included in the data used for the Barring Delinquent Debtors Program (e.g., 

defaulted student loan debt, which remains in the TOP database because there is no statute 

of limitations for collection on that type of debt).
Page 17 GAO-02-462 DCIA Debtor Bar Provision

potential to be the most comprehensive source of information on 

delinquent federal debtors for the purpose of the debtor bar provision. By 

enhancing or supplementing information currently maintained in the TOP 

database and allowing federal agencies access to certain current and 

historical data on delinquent debtors, Treasury can improve the 

information available to federal agencies to enhance the effectiveness of 

agencies’ implementation of the DCIA debtor bar provision. Also, if 

agencies successfully reported delinquent debts to credit bureaus in 

accordance with FMS guidance, thus making data on newer delinquencies 

available, and if information in the TOP database were enhanced to provide 

additional information on ongoing and older delinquencies, there would be 

opportunities to assess the necessity of CAIVRS reporting at some future 

date. Unless improved access to delinquent debt information is achieved, 

the risk that delinquent federal debtors would be able to secure new forms 

of financial assistance from federal credit agencies will continue.

Recommendations for 

Executive Action 

To assist federal agencies in identifying delinquent debtors for the purpose 

of complying with DCIA’s debtor bar provision, we recommend that the 

commissioner of FMS pursue maximizing the effectiveness of the Barring 

Delinquent Debtors Program by enhancing or supplementing information 

from the TOP database that will be made available for the program. 

Specifically, such enhancements should include data on 

• discharged debts that do not meet the criteria for debt resolution, 

• debt delinquent more than 10 years, and 

• debt normally excluded from TOP referral but delinquent for purposes 

of denying additional federal financial assistance (e.g., foreclosures).

Agency Comments and 

Our Evaluation

We received written comments on a draft of this report from FMS and two 

of the nine CFO Act agencies that participated in our survey on debtreporting practices. Six of the remaining seven CFO Act agencies advised 

us that they had no comments, and one did not respond. HUD and VA 

agreed with our recommendations that FMS pursue maximizing the 

effectiveness of FMS's program to help agencies identify delinquent federal 

debtors by enhancing or supplementing information from the TOP 

database. The commissioner of FMS largely disagreed with our 

recommendations as well as the basic premises underpinning the need for 

improved quality of such information.
Page 18 GAO-02-462 DCIA Debtor Bar Provision

FMS stated that its Debt Check Program, known as the Barring Delinquent 

Debtors Program at the time we completed our fieldwork, will result in 

significant benefits to agencies and governmentwide debt collection efforts 

with existing data already captured in the TOP system. FMS characterized 

our recommendations as (1) essentially requiring a costly new computer 

system rather than merely using information it already has, 

(2) questionable from a legal perspective, and (3) not necessary because 

existing data sources, particularly credit bureau reports, are adequate for 

implementing DCIA's debtor bar provision.

We do not agree with FMS's characterization of our recommendations. Our 

recommendations to FMS were aimed at meeting the clear requirement of 

DCIA that delinquent federal debtors generally be barred from obtaining 

additional specified types of federal financial assistance. In assessing the 

three data sources that contain information on delinquent federal debtors, 

we found that the TOP database provides the most promising information 

in this area. At the same time, information from the database has some 

limitations that could not be overcome fully by using credit bureaus and 

CAIVRS in conjunction with the TOP database. Our recommendations 

were targeted at maximizing the effectiveness of FMS's Barring Delinquent 

Debtors Program by enhancing or supplementing information from the 

TOP database that would be made available for the program. In this regard, 

we realized that there may be alternative approaches to effectively 

achieving the legislative objectives of the debtor bar provision. 

Accordingly, we couched our recommendations in terminology asking that 

FMS consider three ways of strengthening available data in pursuit of this 

goal.

During our review, we saw FMS’s effort to develop the Barring Delinquent 

Debtors Program as both meritorious and necessary to address the 

fundamental concerns that gave rise to the DCIA provision calling for the 

federal government to be able to preclude those who had not resolved 

delinquent loans from obtaining additional federal financial assistance. We 

agree with FMS that the existing data already captured in TOP will result in 

significant benefits to agencies and governmentwide debt collection 

efforts. In no way have we questioned the merits of TOP. At the same time, 

we identified basic data limitations in FMS's Barring Delinquent Debtors 

Program that limit FMS’s ability to fully meet the DCIA debtor bar 

provision. FMS's response to our draft report indicates it is not willing to 

invest in efforts to improve the capability of an initiative that could address 

the specific legislative requirement and concurrently help upgrade the 

overall federal internal control environment for minimizing abuses 
Page 19 GAO-02-462 DCIA Debtor Bar Provision

stemming from delinquent federal debtors applying for and receiving 

additional federal financial assistance.

With regard to its three main arguments for not pursuing the enhancement 

of data availability through the TOP system, FMS did not present an 

alternative that would fully achieve what the law requires. We believe that 

a first step in deciding the scope of an enhancement effort would 

reasonably entail assessing the costs and benefits of factors such as those 

FMS used in commenting on our recommendations. Among these would 

be changes, if any, to current data collection methods; systems review and 

redesign; and resources required. Also, there would need to be 

consideration of the anticipated benefits of having stronger repayment 

incentives for delinquent debtors and of ultimately avoiding additional 

loans to already delinquent debtors, which logically would carry added risk 

of additional losses. FMS's comments do not address these potential 

benefits. 

As stated in our report, the federal government does not yet have an 

effective data source for adequately implementing DCIA's debtor bar 

provision. Limitations on the length of time that information on individual 

delinquent debts is available through credit bureaus are beyond the 

immediate influence of the federal government, and CAIVRS reporting is 

voluntary and is not nearly as complete as the information in the TOP 

database. As a result, we have taken the position that the best opportunity 

to fill in some of the key data gaps for identifying delinquent debtors over 

extended time frames is by augmenting and retaining data that are 

routinely required to be reported to the TOP database. Enhancing or 

supplementing information from the TOP database for use in the Debt 

Check Program could provide federal credit agencies access to a more 

comprehensive and centralized database of delinquent federal debtors that 

the agencies now lack. It is important to note that HUD, which designed 

and administers CAIVRS, stated in its comments that it agreed with the 

recommendations in our draft report that a single, complete, and 

comprehensive source of information regarding delinquent debtors would 

better support the debtor bar provision of DCIA. HUD supported our case 

for recommending that information from TOP be modified and used as the 

primary tool for barring delinquent debtors from obtaining additional 

financial assistance. 

We agree with FMS that the cost associated with creating and building a 

more comprehensive database of delinquent debt needs to be considered. 

However, for most of the new capacity we asked FMS to consider—namely, 
Page 20 GAO-02-462 DCIA Debtor Bar Provision

the 10-plus-year-old delinquent debt and other discharged debts that are no 

longer subject to TOP—there may be relatively little extra cost. In essence, 

these categories of delinquent debt would have to be maintained in such a 

way to ensure they were not used for the TOP program, but that they would 

continue to be accessible for determining whether new applicants had 

delinquent, unresolved debt. Any such added costs for FMS would have to 

be considered along with costs other agencies would incur to provide data 

not now provided to TOP. Any expected additional FMS and agency costs 

would have to be weighed against the ongoing increased risk of not having 

a viable and comprehensive tool for meeting the requirements of the DCIA 

debtor bar provision.

Concerning FMS's authority to obtain and use the type of data discussed in 

this report, we do not see insurmountable issues. FMS has the lead role for 

debt collection governmentwide and could determine whether it now has 

regulatory options or whether it would need to work with the Congress to 

obtain the requisite added authority to assist other federal agencies in 

identifying delinquent federal debtors in order to meet the express 

requirements of the DCIA debtor bar provision. We have not recommended 

that FMS carry out any roles or responsibilities not contemplated by DCIA. 

Further, much of the additional information that we have asked FMS to 

maintain for purposes of implementing the debtor bar provision would 

have already been reported to FMS by agencies with debt more than 180 

days delinquent. From our perspective, the challenge is one of maintaining 

and organizing the data for the specific use of barring delinquent debtors. 

However, if FMS continues to question whether it has adequate authority to 

carry out the existing DCIA debtor bar provision, we would encourage it to 

seek that authority. We would be willing to collaborate with FMS on that 

effort.

Regarding the adequacy of existing data sources for carrying out the DCIA 

debtor bar provision, our review showed that individually and collectively, 

they currently fall short of what is needed to more fully implement this 

provision. We agree with FMS's observation that because lending agencies 

are required to obtain credit reports for creditworthiness determinations, 

credit bureaus are a primary source of the information necessary to 

determine loan eligibility. However, as stated in our report, credit reports 

do not typically contain data on delinquent consumer debt beyond 7 years, 

which limits their use to bar delinquent debtors, and debt information in 

CAIVRS is limited because reporting is voluntary. Also, debt more than 

10 years delinquent and agency-discharged debt are typically removed from 

TOP because they are no longer eligible for offset. Because of these 
Page 21 GAO-02-462 DCIA Debtor Bar Provision

shortfalls in the existing data sources available to agencies for identifying 

delinquent federal debtors, we continue to believe that our 

recommendations to augment what FMS is now referring to as the Debt 

Check Program presents the best opportunity for agencies to be able to 

implement the DCIA debtor bar provision.

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 or Kenneth R. Rupar, assistant director, 

at (214) 777-5714 if you or your staff have any questions about this report. 

Key contributors to this report are listed in appendix VI.

Sincerely yours,

Gary T. Engel

Director

Financial Management and Assurance
Page 22 GAO-02-462 DCIA Debtor Bar Provision

Appendix I

Respondents to the Debt Reporting Practices Apendxies

Survey ApendxiI

A total of nine agencies participated in our debt-reporting practices survey. 

Because debt-reporting activities typically vary within these agencies, we 

provided a survey for each Treasury Report on Receivables submitted by 

the agencies and requested a response that would account for all debts 

contained in that report. As such, we obtained responses from a total of 90 

reporting entities within these agencies. The following is a list of the 

agencies, by bureau within each agency. The number in parentheses 

following each bureau or agency represents the number of reporting 

entities within that bureau or agency.

Department of Agriculture

• U.S. Department of Agriculture (1)

• Forest Service (1)

• Commodity Credit Corporation (4)

• Rural Development and Farm Service Agency (5)

• Agricultural Marketing Service (1)

• Federal Crop Insurance Corporation (2)

• Rural Utilities Service (3)

• Agriculture Stabilization and Conservation Service (1)

• Food and Nutrition Service (1)

• Rural Development (3)

Department of Education

• Office of Postsecondary Education (7)

• Departmental Management (1)

Department of Energy

• Energy Programs (1)

• Departmental Administration (1)

• Bonneville Power Administration (1)

• Southeastern Power Administration (1)

• Southwestern Power Administration (1)

• Western Area Power Administration (1)

Environmental Protection Agency (2)
Appendix I

Respondents to the Debt Reporting Practices 

Survey

Page 23 GAO-02-462 DCIA Debtor Bar Provision

Department of Health and Human Services

• Substance Abuse and Mental Health Administration (1)

• Program Support Center (1)

• Health Resources and Services Administration (5)

• Centers for Medicare and Medicaid Services (4)

• Food and Drug Administration (1)

• Office of the Secretary (1)

• National Institutes of Health (1)

• Centers for Disease Control (1)

• Health Resources and Services Administration Indian Health 

Services (1)

• Administration for Children and Families (1)

• Administration on Aging (1)

Department of Housing and Urban Development

• Housing Programs (8)

• Public and Indian Housing Programs (1)

• Government National Mortgage Association (1)

• Community Planning and Development (2)

• Policy, Development and Research (1)

• Management and Administration (1)

Small Business Administration (4)

Social Security Administration (5)

Department of Veterans Affairs

• Veterans Benefits (3)

• Medical and Construction (3)

• Housing Credit Assistance (3)

• Administration and Cemeteries (1)

• Life Insurance (1)
Page 24 GAO-02-462 DCIA Debtor Bar Provision

Appendix II

Debt Reporting Practices Survey ApendxiI



	



	








	














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Appendix III

Comments from the Financial Management 

Service ApendxiI
Appendix III

Comments from the Financial Management 

Service

Page 46 GAO-02-462 DCIA Debtor Bar Provision
Appendix III

Comments from the Financial Management 

Service

Page 47 GAO-02-462 DCIA Debtor Bar Provision
Appendix III

Comments from the Financial Management 

Service

Page 48 GAO-02-462 DCIA Debtor Bar Provision
Page 49 GAO-02-462 DCIA Debtor Bar Provision

Appendix IV

Comments from the Department of Housing 

and Urban Development ApendxiIV
Page 50 GAO-02-462 DCIA Debtor Bar Provision

Appendix V

Comments from the Department of Veterans 

Affairs ApendxiV
Page 51 GAO-02-462 DCIA Debtor Bar Provision

Appendix VI

GAO Contact and Staff Acknowledgments ApendxiVI

GAO Contact Kenneth R. Rupar, (214) 777-5714

Acknowledgments Other key contributors to this report were Richard T. Cambosos, 

Michael D. Hansen, Linda K. Sanders, and Matthew F. Valenta.

(191019)
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