Debt Collection Improvement Act of 1996: Major Data Sources Inadequate for Implementing the Debtor Bar Provision
Published: 2002-03-29T00:00:00

Fast Facts:

Highlights:
section_title: What GAO Found
paragraphs: The Debt Collection Improvement Act of 1996 seeks to maximize collections of delinquent nontax debt owed to the federal government. However, the act also seeks to reduce losses by requiring proper screening of potential borrowers and information sharing within and among federal agencies. The major information sources of data on delinquent federal debtors are credit bureau reports, the Department of Housing and Urban Development's Credit Alert Interactive Voice Response System (CAIVRS), and the Financial Management Service's (FMS) Treasury Offset Program's (TOP) database. There is no effective mechanism for federal implementation of the act's debtor bar provision. Although credit bureau reports, CAIVRS, and FMS's TOP database each contain some information on delinquent federal nontax debtors, none provides all-inclusive, timely data or maintains them long enough to serve as an adequate data source for successfully barring future financial assistance to currently delinquent debtors or those who did not meet their past obligations. The TOP database, with modifications, now provides an adequate reference point for identifying delinquent debtors to deny them additional financial assistance. Maximizing the TOP database as a delinquency reporting tool would require several changes, such as improving agencies' delinquent debt referral practices and enhancing or supplementing information in the TOP database.

section_title: Letter
paragraphs: On October 10, 2001, we testified before your subcommittee on agencies’  implementation of the Debt Collection Improvement Act (DCIA) of 1996.   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.  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  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.
subsections: section_title: Background
paragraphs: 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.
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  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.  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.
section_title: Objectives, Scope, and Methodology
paragraphs: 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 agencies—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 debt- reporting practices.  Because these agencies typically perform debt- reporting 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.
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 credit- reporting agencies and HUD regarding credit bureau reports and CAIVRS,  respectively.  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.
section_title: Major Sources of Information on Delinquent Federal Debtors
paragraphs: 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.
subsections: section_title: Credit Bureau Reports
paragraphs: DCIA requires most federal agencies to report all delinquent consumer  nontax debts to credit bureaus.   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  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.  Also, our recent work revealed that  some agencies may not be classifying certain credit losses as delinquent  federal debt.  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 cross- servicing 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  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.
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.  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.
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.  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, and all five of these  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.
section_title: FMS’s TOP Database
paragraphs: 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.
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.  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.
subsections: section_title: FMS’s Barring Delinquent Debtors Program
paragraphs: 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  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  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.   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.
section_title: Conclusions
paragraphs: 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  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.
section_title: Recommendations for Executive Action
paragraphs: 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).
section_title: Agency Comments and Our Evaluation
paragraphs: 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 debt- reporting 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.
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  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,  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  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.
section_title: Respondents to the Debt Reporting Practices Survey
paragraphs: 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.
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)
Office of Postsecondary Education  (7)  Departmental Management  (1)
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)
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)
Veterans Benefits  (3)  Medical and Construction  (3)  Housing Credit Assistance  (3)  Administration and Cemeteries  (1)  Life Insurance  (1)
section_title: Debt Reporting Practices Survey
section_title: Comments from the Financial Management Service
section_title: Comments from the Department of Housing and Urban Development
section_title: Comments from the Department of Veterans Affairs
section_title: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Acknowledgments
paragraphs: Other key contributors to this report were Richard T. Cambosos,  Michael D. Hansen, Linda K. Sanders, and Matthew F. Valenta.
section_title: GAO’s Mission
paragraphs: The General Accounting Office, the investigative arm of Congress, exists to  support Congress in meeting its constitutional responsibilities and to help improve  the performance and accountability of the federal government for the American  people. GAO examines the use of public funds; evaluates federal programs and  policies; and provides analyses, recommendations, and other assistance to help  Congress make informed oversight, policy, and funding decisions. GAO’s  commitment to good government is reflected in its core values of accountability,  integrity, and reliability.
section_title: Obtaining Copies of GAO Reports and Testimony
paragraphs: The fastest and easiest way to obtain copies of GAO documents is through the  Internet. GAO’s Web site (www.gao.gov) contains abstracts and full-text files of  current reports and testimony and an expanding archive of older products. The  Web site features a search engine to help you locate documents using key words  and phrases. You can print these documents in their entirety, including charts and  other graphics.
Each day, GAO issues a list of newly released reports, testimony, and  correspondence. GAO posts this list, known as “Today’s Reports,” on its Web site  daily. The list contains links to the full-text document files. To have GAO E-mail  this list to you every afternoon, go to www.gao.gov and select “Subscribe to daily e-mail alert for newly released products” under the GAO Reports heading.
subsections: section_title: Order by Mail or Phone
section_title: Visit GAO’s Document Distribution Center
section_title: To Report Fraud, Waste, and Abuse in Federal Programs
paragraphs: Web site: www.gao.gov/fraudnet/fraudnet.htm, E-mail: fraudnet@gao.gov, or 1-800-424-5454 or (202) 512-7470 (automated answering system).
section_title: Public Affairs