Criminal Debt: Actions Still Needed to Address Deficiencies in Justice's Collection Processes
Published: 2004-03-05T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In July 2001, GAO reported that outstanding criminal debt, as reported in Department of Justice (Justice) statistical reports, had increased from about $6 billion as of September 30, 1995, to more than $13 billion as of September 30, 1999. Although some of the key factors that contributed to this increase were beyond Justice's control, GAO concluded--after accounting for such factors--that Justice's criminal debt collection processes were inadequate. Accordingly, in the 2001 report, GAO made 14 recommendations to Justice to improve the effectiveness and efficiency of its criminal debt collection processes. To follow up on the 2001 report, GAO was asked to (1) provide information on the amount and growth of criminal debt for fiscal years 2000 through 2002, (2) examine the extent to which Justice has acted on GAO's previous recommendations, and (3) review Justice's collection efforts for selected criminal debt cases related to white-collar financial fraud. This report addresses the first two objectives; GAO will report separately on its ongoing work to address the third.
section_title: What GAO Found
paragraphs: Justice reported an unaudited amount of total outstanding criminal debt of about $25 billion as of September 30, 2002, almost double when compared to Justice's unaudited amount from 3 years earlier. This increase, which was not unexpected, continued a trend that began in fiscal year 1996. A primary factor contributing to the increase is a mandate that requires restitution to be assessed regardless of the ability of the offender to pay. As we reported in 2001, collections as a percentage of outstanding criminal debt averaged about 7 percent for fiscal years 1995 through 1999. As indicated in Justice's unaudited records, because collections decreased slightly while debt increased, collections as a percentage of outstanding debt declined to an average of about 4 percent for fiscal years 2000, 2001, and 2002. For each of these 3 fiscal years, according to Justice's unaudited records, about two-thirds or more of criminal debt was related to white-collar financial fraud. Justice has made progress responding to GAO's 2001 recommendations related to criminal debt collection, but not to the degree that had been expected. A key recommendation in 2001 was for Justice, the Administrative Office of the U.S. Courts, the Office of Management and Budget, and the Department of the Treasury to work as a joint task force to develop a strategic plan that addresses managing, accounting for, and reporting criminal debt. As of mid-December 2003, Justice had not yet worked with these other agencies to develop this plan. We also made 13 interim recommendations to Justice to help improve the efficiency and effectiveness of criminal debt collection while the strategic plan was being developed. Since July 2001, Justice has completed action on 7 of these recommendations; actions to address 4 of the 7 were completed about 2 years after GAO made them. Actions to address the remaining 6 interim recommendations are in process. According to Justice, GAO did not fully recognize its progress in improving the criminal debt collection process. GAO said that it had given Justice full credit for its efforts to implement the 2001 recommendations, as well as for some related efforts outside the scope of those recommendations. GAO noted, however, that Justice had not yet led efforts to resolve key jurisdictional issues and functional responsibilities. While acknowledging that Justice was laying the foundation for improved collections by establishing policies and procedures in response to certain of the interim recommendations, GAO noted that it is important that the new policies and procedures be effectively implemented and that it will likely take some time for collection results to be realized from full implementation. Until Justice takes action to fully implement these recommendations, Justice's management processes and procedures will not provide adequate assurance that offenders are not afforded their ill-gotten gains and that innocent victims are compensated for their losses to the fullest extent possible.

section_title: Letter
paragraphs: In July 2001, we reported that the Department of Justice (Justice) and  certain other federal agencies needed to take a number of actions to  improve the federal government’s criminal debt collection efforts. We  reported that outstanding criminal debt, as reported in Justice’s U.S.  Attorneys’ statistical reports, had increased from about $6 billion as of  September 30, 1995, to over $13 billion as of September 30, 1999. We noted  that four key factors, some of which were beyond Justice’s or probation  offices’ control, contributed to the significant growth in the amount of  reported uncollected criminal debt: (1) the nature of the debt, in that it  involves criminals who may be incarcerated or have been deported or who  have minimal earning capacity; (2) the assessment of mandatory restitution  regardless of ability to pay as required by the Mandatory Victims  Restitution Act of 1996 (MVRA); (3) interpretation by Justice’s Financial  Litigation Units (FLU) of payment schedules set by judges which limit  collection activities; and (4) state laws that may limit the type of property  that can be seized and the amount of wages that can be garnished.
However, we also pointed out Justice could do more to improve the  collection of criminal debt. We noted as contributing factors to the growth  of reported uncollected criminal debt Justice’s inadequate policies and  procedures for collecting criminal debt, lack of adherence to established  criminal debt collection procedures at certain Justice districts, and  Justice’s insufficient coordination with other entities involved in the  collection of criminal debt. After taking into account the factors that were  not controllable, we concluded that Justice’s management processes and  procedures did not provide assurance that offenders were not afforded  their ill-gotten gains and that innocent victims would be compensated for  their losses to the fullest extent possible. We observed that until top  management at Justice and the U.S. Courts placed a higher priority on  ensuring that the entities involved in the criminal debt collection process  more effectively and efficiently pursued collection efforts, the assessment  of criminal fines and restitution as an effective punitive tool would be  jeopardized, and valuable, limited resources would continue to be wasted  on duplicative efforts. Accordingly, we made 14 recommendations to  Justice and several to the Administrative Office of the U.S. Courts (AOUSC)  to improve the effectiveness and efficiency of the federal government’s  criminal debt collection processes.
In your request letter and our subsequent discussions with your office, you  asked us to (1) provide detailed information on the amount and growth of  criminal debt for fiscal years 2000 through 2002, including specific amounts  related to white-collar financial fraud; (2) examine the extent to which  Justice has acted on our previous recommendations to it to improve  criminal debt collection; and (3) review Justice’s collection efforts for  selected criminal debt cases related to white-collar financial fraud. This  report addresses the first two objectives. We will report separately on the  results of our ongoing work, which addresses the third objective.
subsections: section_title: Background
paragraphs: Justice is responsible for collecting criminal debt and has delegated  operating responsibility to its FLUs within all of Justice’s U.S. Attorneys’  Offices (USAO). Justice’s Executive Office for United States Attorneys  (EOUSA) provides administrative and operational support, including  support required for debt collection, to the USAOs. The criminal debt  collection process typically begins when an offender is convicted and a  judge orders the offender to pay a fine or restitution. In addition to Justice,  the U.S. Courts and their probation offices may assist in collecting monies  owed. AOUSC provides national standards and promulgates administrative  and management guidance, including standards and guidance required for  debt collection, to the various U.S. judicial districts. The courts typically  receive payments of fines and deposit them in the Crime Victims Fund.  Both the courts and certain FLUs receive restitution payments, which are  disbursed to the applicable victims or entities as directed by the courts.
In our 2001 report, we noted that collection of outstanding criminal debt  was a long-standing problem, with many of the problems cited similar to  problems that we reported on back in 1985. Aside from the question of  whether those convicted had earnings or assets with which to pay fines or  restitution, a number of other factors make collection difficult. These  factors, listed below, remain applicable today:  Criminals may not be willing to comply with the law. Forcing  compliance is difficult because criminals are already convicted  offenders who may be serving time in prison or may have been  deported.
Imprisoned offenders have limited earning capacity, making potential  collections limited.
A significant amount of time may pass between offenders’ arrest and  sentencing, thus affording opportunities for offenders to hide  fraudulently obtained assets in offshore accounts, shell corporations,  family members’ names and accounts, or other ways.
MVRA requires that assessment of restitution be based on actual loss  and not on an offender’s ability to pay. Therefore, depending on the  nature of the crime, collection of the total restitution assessed may be  unrealistic from the outset.
According to 18 U.S.C. section 3613 (2000), most criminal debts must  remain on the books for 20 years plus the period of the offender’s  incarceration and cannot be “written off” prior to the expiration of those  periods unless the debtor is deceased or the court approves a petition of  remission filed by USAO. Even if Justice determines that certain  criminal debts, or a large percentage of them, are not collectible, these  debts must remain on the books.
section_title: Scope and Methodology
paragraphs: To provide detailed information on the amount and growth of criminal  debt, including specific amounts related to white-collar financial fraud, we  obtained information from Justice on the amount of (1) outstanding  criminal debt as of the end of fiscal years 2000, 2001, and 2002 and   (2) related collections for each of these 3 fiscal years. This information has  not been audited. However, we reviewed the trends in the amounts and  growth of overall criminal debt for these fiscal years. Specifically, we  analyzed trends in major components of the debt and reasons for the  changes and compared them to similar trends that we had assessed and  discussed in our 2001 report. We also discussed the trends with appropriate  Justice officials and compared overall criminal debt information provided  by those officials to information in existing published Justice reports, when  available. We worked with Justice officials to identify the criminal debt  categories in Justice’s information systems that Justice considers to be  white-collar financial fraud.
We obtained an understanding of the key automated information systems  Justice uses to track criminal debt amounts and related collections through  discussions with Justice officials and review of pertinent documents that  describe the systems. We also discussed with Justice officials and obtained  appropriate documentation supporting reliability testing performed by  Justice on these systems.
To evaluate actions Justice has taken to implement our previous  recommendations, we obtained and reviewed pertinent Justice documents,  including correspondence to certain congressional committees related to  our 2001 report, relevant memorandums, summaries of work performed,  proposed actions, revised policy and procedures manuals, and other  related materials and correspondence. We discussed the documents  provided by Justice and the status of implementation of each of the  recommendations with an appropriate Justice official.
We conducted our review from March 2003 through mid-December 2003 in  accordance with U.S. generally accepted government auditing standards.
We requested written comments on a draft of this report from the Attorney  General or his designated representative.  Justice’s letter is reprinted in  appendix I.
section_title: Criminal Debt Has Increased Markedly, but Collections Have Decreased Slightly
paragraphs: Justice reported an unaudited amount of total outstanding criminal debt of  about $25 billion as of September 30, 2002, almost double when compared  to Justice’s unaudited amount from 3 years earlier. This marked increase  over the 3-year period continued a significant upward trend that started in  fiscal year 1996, the year MVRA was enacted. Given MVRA’s requirement  that restitution be assessed regardless of the criminal’s ability to pay, the  significant increase in the balance of reported uncollected criminal debt  was not unexpected. According to Justice’s unaudited records, collections  relative to outstanding criminal debt averaged about 7 percent for fiscal  years 1995 through 1999 and decreased to an average of about 4 percent for  fiscal years 2000, 2001, and 2002. For each of these latter 3 fiscal years,  according to Justice’s unaudited records, about two-thirds or more of the  criminal debt was related to white-collar financial fraud.
As shown in figure 1, Justice’s reported criminal debt outstanding totaled  approximately $16 billion, $20 billion, and $25 billion as of September 30,  2000, 2001, and 2002, respectively. Criminal debt owed consists primarily of  fines and federal and nonfederal restitution related to a wide range of  criminal activities, including domestic and international terrorism,  organized drug trafficking, firearms crimes, and white-collar financial  fraud. According to Justice officials, nonfederal restitution stemming from  MVRA’s mandatory restitution requirements was the major component of  criminal debt outstanding as of September 30, 2000, 2001, and 2002.  Justice’s unaudited records showed that nonfederal restitution accounted  for about 70 percent of total reported criminal debt as of September 30,  2002. This proportion is generally consistent with what we found for fiscal  year 1999, which we reported in our 2001 report. At that time, about 66  percent of outstanding criminal debt as of September 30, 1999, was  nonfederal restitution debt.
According to Justice’s unaudited records, collections of outstanding debt  did not increase, and in fact fell slightly, over this 3-year period. As shown  in figure 1, collections for fiscal years 2000, 2001, and 2002, totaled about  $1 billion, $800 million, and $800 million, respectively, or an average of  about 4 percent of outstanding debt for the 3 years. In our 2001 report, we  reported that criminal debt collection averaged about 7 percent for fiscal  years 1995 through 1999.
As shown in figure 2, a major component of criminal debt was debt related  to white-collar financial fraud, which, according to Justice’s unaudited  records, totaled about $11 billion, $13 billion, and $17 billion as of  September 30, 2000, 2001, and 2002, respectively, or about two-thirds or  more of overall outstanding criminal debt at the end of each of these years.  White-collar financial fraud debts included fines and restitution related to  fraud against business institutions, antitrust violations, bank fraud and  embezzlement, bankruptcy fraud, computer fraud, consumer fraud, federal  procurement fraud, federal program fraud, health care fraud, insurance  fraud, and tax fraud. Also included were debts related to corporate  financial fraud, which, as of the date of completion of our fieldwork,  consisted of fines and restitution related to advance fee schemes,  commodities fraud, securities fraud, and other investment fraud. According  to Justice’s unaudited records, as was the case for criminal debt overall, the  major component of white-collar financial fraud debt for each of the 3  fiscal years was nonfederal restitution, which accounted for about 80  percent of the white-collar financial fraud debt as of September 30, 2002.
As shown in figure 3, according to Justice’s unaudited records, collections  of debt related to white-collar financial fraud, while increasing, have  remained low when compared to total white-collar financial fraud debt  outstanding. Such collections totaled about $300 million, $400 million, and  $600 million for fiscal years 2000, 2001, and 2002, respectively.
section_title: Prompt Action Has Not Been Taken to Address the Majority of Recommendations
paragraphs: Justice has not taken timely action to address all of the recommendations  we made to it in July 2001, which were designed to improve the  effectiveness and efficiency of Justice’s criminal debt collection processes.  Specifically, Justice has not taken action along with certain other agencies  to develop a strategic plan for criminal debt collection, which was a key  recommendation. In addition, since July 2001, Justice has completed action  on only 7 of the 13 interim recommendations that were made to stem the  growth of reported uncollected criminal debt while Justice and certain  other agencies worked to develop the strategic plan. Actions to address 4  of these 7 recommendations were completed about 2 years after we made  the recommendations, and actions to address the remaining 6 interim  recommendations are still in process. One indication of Justice’s level of  resolve to expeditiously improve collection success is the timeliness of a  required response to the Congress. Heads of federal agencies are required  to submit a written statement within an established time frame to certain congressional committees on actions taken in response to  recommendations we make in a report. Justice did not submit its  statement until 2 years after the date of our report, after we had made  inquiries about the status of the statement and Justice’s progress in  implementing our recommendations.
subsections: section_title: Justice Has Not Developed a Strategic Plan with Certain Other Agencies
paragraphs: In our 2001 report, we emphasized that addressing the long-standing  problems in the collection of outstanding criminal debt required a united  strategy among the entities involved with the collection process. In  addition to identifying a need to work closely with the U.S. Courts to  coordinate criminal debt collection efforts, we stated that leveraging  OMB’s and Treasury’s current central agency roles could result in effective  oversight of the collection of criminal debt. For example, a primary  function of OMB as a central agency is to evaluate the performance of  executive branch programs and serve as a catalyst for improving  interagency cooperation and coordination. In its central role, OMB is also  responsible for reviewing debt collection policies and activities. We also  noted that Treasury has a central agency role in implementing certain  provisions of the Debt Collection Improvement Act of 1996, which would  allow it to help Justice identify the types of delinquent criminal debt that  would be eligible for reporting and referral to Treasury’s offset program  (TOP).
To promote a united approach to collecting outstanding criminal debt, we  recommended that the Attorney General work with the Director of AOUSC,  the Director of OMB, and the Secretary of the Treasury in the form of a  joint task force to develop a strategic plan to improve criminal debt  collection processes and establish an effective coordination mechanism  among all entities involved in these processes. We stated that the strategy  should address managing, accounting for, and reporting criminal debt. We  also stated that the strategy should include (1) determining an approach for  assessing the collectibility of outstanding amounts so that a meaningful  allowance for uncollectible criminal debts can be reported and used for  measuring debt collection performance and (2) having OMB work with  Justice and certain other executive branch agencies to ensure that these  entities report and/or disclose relevant criminal debt information in their  financial statements and subject such information to audit.
It is important to reemphasize the need for assessing the collectibility of  outstanding criminal debt amounts and establishing and reporting a  meaningful allowance for uncollectible debts. According to Justice, about  74 percent or more of reported criminal debt amounts in its records for  fiscal years 2000, 2001, and 2002 were in suspense, meaning that no  collection action was being taken on the debt because it had been  determined that reasonable efforts to collect were unlikely to be effective.  However, we emphasized in our 2001 report that Justice had not performed  an analysis of its criminal debt to estimate how much of the outstanding  amounts was uncollectible and had not established an allowance for  uncollectible debt for amounts that were due to the federal government.  We specifically noted that since the collectibility of outstanding criminal  debt had not been assessed, the amount in suspense did not represent a  reliable estimate of the amount that was expected to be uncollected. We  also discussed the importance of subjecting criminal debt amounts to  independent audit, which would include assessments of internal controls  and compliance with applicable laws and regulations related to the  criminal debt process. Further, we noted that proper accounting for,  reporting, and managing of criminal debt would heighten management  awareness and ultimately result in a more effective collection process.
As of the completion date of our fieldwork, Justice had not begun to  develop, in conjunction with AOUSC, OMB, and Treasury, a written  strategic plan for collection of outstanding criminal debt. In December  2001, Justice’s EOUSA sent letters to AOUSC, OMB, and Treasury citing our  2001 report on criminal debt collection and our recommendation to form a  joint task force to develop a strategic plan to improve criminal debt  collection and establish effective coordination between each of the  involved entities. According to a Justice official, the purpose of the letters  was to solicit representatives from each of the agencies to assist in this  effort. However, this initial attempt to form the joint task force was  unsuccessful. The official stated that on account of our recent inquiries  about this recommendation, EOUSA plans to make another attempt to  contact appropriate officials at the other agencies. The Justice official also  stated that both EOUSA and AOUSC have to address certain internal  deficiencies, including systems problems, before they can effectively  develop a strategic plan.
As previously mentioned and discussed in more detail in our 2001 report,  addressing the long-standing problems in the collection of outstanding  criminal debt—including fragmented processes and lack of coordination— will require a united strategy among the entities involved with the  collection process. The participation and cooperation of each of these  entities, including AOUSC, OMB, and Treasury, are critical to the formation  of the joint task force and development of a strategic plan, as  recommended. Justice cannot require these agencies to participate in the  joint task force and development of the strategic plan. However, Justice is a  key federal agency responsible for the collection of criminal debt and, as  such, is accountable for enlisting all affected agencies’ support in a  sustained effort to develop a strategic plan and cohesive approach for  managing, accounting for, reporting, and improving the collection of such  debt.
It is important to note that Justice has begun to get criminal debts into TOP.  According to a Justice official, during the first part of fiscal year 2003,  Justice piloted the TOP process for criminal debts in four districts,  resulting in inclusion of about $700,000 of criminal debts in TOP by the end  of fiscal year 2003. This official told us that with the progress of the pilot  program, the debt referral program was expanded in August 2003 to all  eligible FLUs. According to the official, as of December 5, 2003, 20 of the  43 districts eligible to submit criminal debts to TOP had either added  criminal debts to TOP or were in the process of identifying criminal debts  and sending out 60-day notices to debtors demanding payment, which is  necessary before a debt can be sent to TOP. As of December 3, 2003, FLUs  had submitted 549 criminal debts, with a total outstanding balance of  approximately $1.4 million, to TOP, and Justice anticipates many more  debts will be included in TOP in the next few months. Given that TOP has  resulted in over $1 billion in nontax debt collections from payment offsets  governmentwide during each of fiscal years 2000, 2001, and 2002, it will be  important for Justice to continue to emphasize submitting debts to TOP as  an integral part of its criminal debt collection efforts, as such action could  increase potential collections.
section_title: Actions to Address Certain of Our Interim Recommendations Have Been Taken Recently or Are in Process
paragraphs: We recognized at the time of our 2001 report that the development of a  strategic debt collection plan with other agencies that have a key role to  play in criminal debt collection would take time. Therefore, to help  improve collections and stem the growth in reported uncollected criminal  debt while Justice worked with other agencies to establish the task force  and develop the strategic plan for criminal debt collection, we made 13  recommendations for interim action to the Attorney General. As shown in  table 1, Justice has completed action on 7 of these recommendations. Four  of the 7 recommendations, however, were not completed until about 2  years after we made them. Actions to address the 6 remaining  recommendations are still in process. Since the interim recommendations  largely focused on policies and procedures, it will be important that they be  effectively implemented once they are established.
The status of each of our 13 interim recommendations is discussed below.  Recommendations for which corrective actions have been completed are  discussed first.
subsections: section_title: Policies and Procedures for Sharing Relevant Financial Information
paragraphs: In May 2003, Justice’s EOUSA took action to address recommendation 2 by  issuing the Prosecutor’s Guide to Criminal Monetary Penalties. The guide  contains information on the obligations and responsibilities of criminal  prosecutors and others involved in the criminal debt collection process to  increase the likelihood that victims of crime are compensated for their  losses. EOUSA has provided the guide to all entities involved in the  collection of criminal debt at Justice, including prosecuting attorneys,  investigating case agents, and FLU staff. The guide is also available on  Justice’s intranet.
This guide requires prosecutors to ensure that the responsible FLU  receives all available information on a defendant’s financial resources by  (1) forwarding a copy of the presentence report to the FLU; (2) providing  the FLU with any information or pleading in the government’s file on a  defendant’s financial resources not obtained through the grand jury  investigation; (3) filing a motion asking the court to order disclosure to the  FLU of any information gathered by the grand jury, and to make the  disclosure as soon as it is ordered; and (4) ordering the transcript of any  hearing in which a defendant’s financial resources were discussed, such as  a bond hearing, and forwarding the transcript to the FLU. According to a  Justice official, case agents work directly with the prosecuting attorneys  and share any information, including financial information, with the  prosecutors before a judgment on a case is issued. The Justice official  noted that once a judgment in a criminal case is issued, it generally is sent  from the courts to the criminal prosecutor within 1 week, and once the  prosecutor receives the judgment, the financial information is shared with  the responsible FLU.
section_title: Use of Collectibility Analysis to Prioritize Criminal Debt Collection Efforts
paragraphs: In September 2003, EOUSA completed actions to address recommendation  4 by issuing a memorandum to all Financial Litigation Supervisors and  FLUs requiring that each FLU establish policies and procedures to ensure  that all FLU cases are effectively prioritized and enforced pursuant to a  priority system. The memorandum contained guidance, including factors to  consider in assigning priority codes (e.g., the debtor’s assets and income,  type of debtor, type of debt, type of victim, complexity of the case); default  priority codes based on the amount of the debt; information on setting  review dates; and implementation procedures, including a list of fields and  codes to be used in Justice’s new system for tracking debts, and milestone  dates for completion of the review and prioritization of all existing cases.  According to a Justice official, the guidance for establishing a priority  system is fairly general to allow each district to set its own priorities based  on the type of debt typically collected at that district. According to the  memorandum, effective October 1, 2003, all new judgments should be  prioritized using the priority system; by December 31, 2003, FLUs should  review all pre-existing judgments with an original debt balance of   $1 million or more; by March 31, 2004, FLUs should review all pre-existing  judgments with an original debt balance of $100,000 to $999,999; and by  December 31, 2004, to the extent resources permit, FLUs should review all  remaining pre-existing judgments. Although priority-setting is currently a  manual process, once Justice’s new system has been updated, which  according to the Justice official is scheduled for May 2004, the priority  codes will be incorporated into the new automated priority process.
section_title: Reinforcement of Certain Current Debt Collection Policies and Procedures
paragraphs: In January 2002, EOUSA completed actions to address recommendation 5  by sending a memorandum to all U.S. Attorneys, all First Assistant U.S.  Attorneys, and all Civil Chiefs, concerning our 2001 report. The  memorandum generally noted the findings in the report and encouraged  each district to review its policies and procedures for collecting and  enforcing criminal debt in light of the report. The memorandum also  offered the assistance of the districts’ Financial Litigation Program  Manager in implementing or improving criminal debt collection policies  and procedures. EOUSA has also worked to reinforce current policies and  procedures by developing and providing training materials to its staff  involved in debt collection. Moreover, EOUSA’s periodical DebtBeat, which  is available to all USAOs, private counsel, and client agencies, regularly  provides updates on debt collection issues, including any modifications to  debt collection policies and procedures.
section_title: Revision of Policies for Issuing Demand Letters
paragraphs: EOUSA used the May 2003 prosecutor’s guide to respond to  recommendation 6. Specifically, the guide requires FLUs to issue a demand  letter for payment of a debt for each case opened within 30 days of the  judgment. To facilitate collection, the guide further specifies that the  demand letter should inquire whether the defense attorney will continue to  represent the defendant for collection purposes.
section_title: Establishment of Time Frames for Certain Criminal Debt Collection Activities
paragraphs: EOUSA also used the May 2003 guide to address recommendation 7. As  stated in our 2001 report, FLUs lacked procedures for performing certain  debt collection actions in a timely manner, including (1) entering cases into  their tracking systems; (2) filing liens; (3) sending demand, delinquent, or  default letters; and (4) performing asset discovery work. The prosecutor’s  guide provides a specific time frame for performing each of these actions.  It requires that for each case opened for collection, the responsible FLU  should, at a minimum, take the following steps within 30 days of the  judgment: open and record the case; initiate the filing of a lien where  possible; issue a demand letter; and conduct an initial assessment of the  prioritization and collectibility of the case, which would include  performing asset discovery work. The guide also states that the responsible  FLU should provide notice to the defendant of any fine or restitution  payment that is found to be delinquent or in default within 10 working days  after the delinquency or default occurs.
section_title: Measurement of Criminal Debt Collection Performance against Goals
paragraphs: To address recommendation 11, according to a Justice official, Justice  annually assesses each district based on established collection goals for  that district. The official stated that because of the differences in size of  caseloads and types of cases worked, it does not make sense for EOUSA to  establish nationwide goals. Instead, each district establishes and is  measured against its own collection goals. To assess debt collection  performance and compliance with applicable guidance and regulations at  each district, EOUSA uses (1) a goals-setting package, which includes  instructions for completing goals based on each district’s workload and  collections; (2) a state-of-the-district report, which provides 3 years of  detailed district-specific collection statistics to allow each USAO to  evaluate its own collection activities based on historical experience; and  (3) a compliance checklist, which provides FLUs with an opportunity to  review their current policies and procedures to ensure compliance with  EOUSA requirements. According to the Justice official, EOUSA works with  each district to prepare these tools annually, and each district uses them to  determine needed actions to improve criminal debt collection.
section_title: Assessment of Human Capital Resources and Training
paragraphs: Justice has also assessed its FLUs’ human capital resources and training to  respond to recommendation 13. According to a Justice official, although  EOUSA did not prepare a formal written assessment of FLUs’ human  capital resources, EOUSA has assessed FLU human capital resources and  determined that FLUs are understaffed and need more staff or contractors  to perform debt collection activities. However, to date, EOUSA has not  been successful in requesting additional staff for debt collection.  Nevertheless, the Justice official noted that EOUSA did receive funding,  beginning in fiscal year 2002, through the Office for Victims of Crime to  support asset investigations in criminal debt collection cases. The Office for Victims of Crime provides 50 percent of the funding for asset  investigators, with the remaining 50 percent to be funded through the  Three Percent Fund. Therefore, half the asset investigators’ time may be  spent on postsentencing criminal fine and restitution debt collection cases.  The asset investigators’ services are available through the Financial  Litigation Investigator Program. Prior to fiscal year 2002, these  investigators were limited to working solely on civil debts because funding  for their time was exclusively through the Three Percent Fund.
section_title: Corrective Actions in Process to Address Remaining Recommendations
paragraphs: Justice is in the process of taking corrective actions to address the  remaining 6 recommendations. Specifically, actions taken to address parts  1 and 2 of recommendation 1 are still in process. In July 2003, EOUSA  rolled out to all USAOs a new version of its collections case tracking  system. The new system allows for the tracking of all debt components in a  single record for each debtor, thus eliminating the need to open multiple  records to track collections for a single debtor. Also, many of the required  fields, such as collection types and agency program codes, have been  coded to eliminate duplicative data entry by the user. However, additional  upgrades, such as automatic payment posting to debtor accounts, are still  under development and are scheduled to be completed during fiscal year  2004. According to a Justice official, complete implementation of this  recommendation depends on AOUSC upgrading its automated criminal  debt tracking systems. The Justice official stated that full reconciliation of  payment information between FLUs and the courts will not be possible  until AOUSC fully implements its new Civil/Criminal Accounting Module  system, which, according to the official, is not expected to be completed  until 2005.
Actions to address recommendations 3, 8, 9, and 10 are also in process at  Justice. We emphasized in our 2001 report the importance of documenting  key steps in the criminal debt collection process to help ensure that all  opportunities for collection were being pursued. We also noted that  because FLUs do not consistently assess interest and penalties, the  reported amounts do not accurately represent how much total principal,  interest, and penalties are due. We stressed that failure to assess interest  and penalties reduces the amount that can be recovered and passed along  to victims or the federal government and eliminates a tool designed to give  debtors an incentive to make prompt payments. According to a Justice  official, the Financial Litigation Working Group, which Justice established  in February 2002 in part to address our recommendations, will continue to  work toward fully implementing these open recommendations.
Finally, Justice is in the process of taking corrective actions to address  recommendation 12. According to a Justice official, EOUSA’s system  programmers are currently developing automated tracking of debtor status  from incarceration through probation. EOUSA plans to have such  automated tracking available during fiscal year 2004. In addition, according  to the official, EOUSA is working to determine how to allocate outstanding  criminal debt amounts between amounts likely to be collected and  amounts not likely to be collected, which is critical for effective use of debt  collection resources.
section_title: Conclusion
paragraphs: The long-standing problems in the collection of outstanding criminal  debt—including fragmented processes and lack of coordination—continue,  as there is no united strategy among key entities involved with the  collection process. According to Justice’s unaudited records, during fiscal  years 2000, 2001, and 2002, criminal debt increased significantly, but  collections decreased slightly. Until Justice takes actions to fully  implement our previous recommendations to it to improve criminal debt  collection efforts, including forming a joint task force with AOUSC, OMB,  and Treasury and developing a strategic plan to improve the criminal debt  collection processes, the effectiveness of criminal fines and restitution as a  punitive tool may be diminished, and Justice’s management processes and  procedures will not provide adequate assurance that offenders are not  afforded their ill-gotten gains and that innocent victims are compensated  for their losses to the fullest extent possible. Therefore, we reaffirm those  recommendations made to Justice from our 2001 report on which Justice  has not completed action.
section_title: Agency Comments and Our Evaluation
paragraphs: In written comments on a draft of this report, which are reprinted in  appendix I, Justice’s EOUSA said that the draft report did not fully reflect  EOUSA efforts to improve the criminal debt collection process by  implementing the recommendations from our 2001 report and by taking  additional actions that go beyond the specific recommendations made in  that report. We disagree. As stated in this report, Justice has not taken  timely action to address all of the July 2001 recommendations, which were  designed to improve the effectiveness and efficiency of Justice’s criminal  debt collection processes. Most important, from the standpoint of resolving  key jurisdictional issues and functional responsibilities, Justice has not  taken action along with certain other agencies to develop a strategic plan  for criminal debt collection.
Of the 13 interim recommendations made to stem the growth of reported  uncollected criminal debt while Justice and the other agencies worked to  develop the strategic plan, Justice completed action on only 7.  Actions to  address 4 of these 7 recommendations were completed about 2 years after  we made them, and actions to address the remaining 6 interim  recommendations are still in process.
In support of its view that it has taken extensive implementation action,  EOUSA referred to a June 16, 2003, letter and stated that excerpts from this  letter were included with its comments.  We are not aware of a June 16,  2003, letter; however, all of the excerpts contained in EOUSA’s comments  are included verbatim in Justice’s July 15, 2003, letter to the Congress  regarding actions EOUSA had taken in response to recommendations we  made in our 2001 report. Justice submitted this letter 2 years after the date  of our 2001 report, and after we had made inquiries about the status of  Justice’s response to the Congress regarding Justice’s implementation of  our recommendations.  In accordance with 31 U.S.C. 720, the head of a  federal agency is required to submit a written statement of the actions  taken on our recommendations to the Senate Committee on Governmental  Affairs and to the House Committee on Government Reform not later than  60 calendar days from the date of the report and to the House and Senate  Committees on Appropriations with the agency's first request for  appropriations made more than 60 calendar days after that date.  Moreover,  as stated in this report, to evaluate actions Justice has taken to implement  our previous recommendations, we obtained and reviewed pertinent  Justice documents, including correspondence to certain congressional  committees related to our 2001 report.  As such, in drafting our report, we  fully considered each of EOUSA’s assertions that were contained in the  previously mentioned excerpts from its letter.  Our responses to specific  parts of these excerpts appear in appendix I.
EOUSA also stated that our draft report failed to address its comments on  our 2001 report that responsibility for accounting for and reporting  criminal debt does not rest with Justice.  In our 2001 report, we stated that  Justice’s comments related to accounting for and reporting of criminal  debt, plus the lack of response from AOUSC regarding its position on this  issue, illustrated the need for cooperation and coordination in the criminal  debt collection area.  Thus, we emphasized the need for the development of  the previously mentioned strategic plan to improve the criminal debt  collection processes and establishment of an effective mechanism to  coordinate efforts among all entities involved in these processes.  We noted  that the strategic plan should address managing, accounting for, and  reporting of criminal debt.  It is important to note that, as stated in our 2001  report, both Treasury and OMB agreed that criminal debt should be  reported on either Justice’s or the U.S. Court’s financial statements.
Finally, EOUSA stated that our 2001 report focused on asset investigation  resources and that EOUSA has put particular emphasis in this area.   EOUSA also stated that even though it has fully implemented more than  half of our recommendations, with the remaining ones nearing completion,  collections have decreased slightly since our 2001 report.   As previously  stated, actions to address 4 of the 7 fully implemented recommendations  were completed about 2 years after our 2001 report, and actions to address  the 6 remaining recommendations are still in process.  Since these interim  recommendations largely focused on policies and procedures, it is  important that they be effectively implemented once they are established,  and it will likely take some time for collection results to be realized from  full implementation.   Moreover, as stated in our report, the debt collection  strategy to be developed by the task force should include determining the  collectibility of outstanding criminal debt amounts so that a meaningful  allowance for uncollectible debt can be reported and used for measuring  debt collection performance.  We also stated that proper accounting for,  reporting of, and managing of criminal debt would heighten management  awareness and ultimately result in a more effective collection process.   Identifying debts with the best prospects for collection will allow more  efficient targeting of limited collection resources in order to maximize  collections.
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 of this report to the Chairmen and  Ranking Minority Members of the Subcommittee on Financial  Management, the Budget and International Security, Senate Committee on  Governmental Affairs, and the Subcommittee on Government Efficiency  and Financial Management, House Committee on Government Reform. We  will also provide copies to the Attorney General, the Director of the  Administrative Office of the U.S. Courts, the Director of the Office of  Management and Budget, and the Secretary of the Treasury. Copies will  then be made available to others upon request. The report will also be  available at no charge on GAO’s Web site, at http://www.gao.gov.
If you have any questions about this report, please contact me on (202) 512- 3406 or Kenneth R. Rupar, Assistant Director, on (214) 777-5714. Other key  contributors to this report are Linda K. Sanders and Michael D. Hansen.
section_title: Comments from the Department of Justice’s Executive Office for United States Attorneys
paragraphs: The following are GAO’s comments on the Department of Justice’s  (Justice) Executive Office for United States Attorneys’ (EOUSA) letter  dated January 23, 2004.
subsections: section_title: GAO’s Comments
paragraphs: 1. See “Agency Comments and Our Evaluation” section. 2. Our 2001 report responded to a request that we review the federal  government’s collection of criminal debt, primarily fines and  restitutions. As such, our review resulted in numerous  recommendations to Justice and the Administrative Office of the U.S.  Courts (AOUSC) aimed at addressing the fragmented processes and  lack of coordination among those entities involved in debt collection  and at helping to improve collections and stem the growth in reported  uncollected criminal debt.
For this report, we were requested to examine the extent to which  Justice has acted on the recommendations we made in our 2001 report  to improve criminal debt collection. We acknowledge in our report  Justice’s use of the Prosecutor’s Guide to Criminal Monetary  Penalties to address recommendations 2, 6, and 7. Our follow-up work  did not focus on certain areas covered by the guide, including charging  defendants and negotiating plea agreements, because such issues were  not part of the scope of our 2001 report or of this report. 3. We acknowledge in this report that the Financial Litigation Working  Group was established in part to address the recommendations we  made in our 2001 report and will continue to work toward fully  implementing certain open recommendations. 4. Writing legislative proposals that will remove barriers to enforcement  of criminal debts, such as clarifying that payment schedules set forth in  court orders are minimum payments due and do not prohibit  enforcement of the total amount of the obligation imposed, is  consistent with our 2001 recommendation to AOUSC to revise the  language in the Judgment in a Criminal Case forms to clarify that  payment terms established by judges are minimum payments and  should not prohibit or delay collection efforts. Although we did not  recommend such action to Justice, its initiative to address this concern  makes sense. 5. We acknowledge in our report that Justice provided the prosecutor’s  guide to all entities involved in criminal debt collection at Justice, and  we credit the guide with addressing recommendation 2 by requiring  prosecutors to ensure that responsible Financial Litigation Units (FLU)  receive all available information on a defendant’s financial resources. 6. We acknowledged and explained in our report EOUSA’s State of the  District Report and Compliance Checklist in relation to actions taken to  address recommendation 11. 7. We are aware of EOUSA’s hiring of an independent contractor to  perform a requirements analysis for a new debt collection system.   However, as of the completion date of our fieldwork, according to an  EOUSA official, Justice was in the process of reviewing the contractor’s  work, and we could not obtain a copy of the contractor’s report until  the review was complete.  Therefore, we are unable to comment on the  results of the contractor’s review.  However, we acknowledge in our  report EOUSA’s new version of its collections case tracking system,  including its recent and planned upgrades designed to reduce the data  entry responsibilities of FLUs. 8. We provide in our report detailed information on Justice’s efforts to add  criminal debts to the Treasury Offset Program. 9. Our July 2001 report addressed many factors that have had an impact  on the effectiveness of the criminal debt collection process.  That  report resulted in numerous recommendations to Justice and AOUSC  to improve debt collection.   Justice has taken action to enhance its  asset investigations resources.  In our discussion of Justice’s efforts to  address recommendation 13, we acknowledge EOUSA’s receipt of  funding, beginning in fiscal year 2002, through the Office for Victims of  Crime to support asset investigations in criminal debt collection cases. 10. Assets identified by outside investigators, combined with fervent debt  collection efforts, could result in potential collections on outstanding  criminal debts.  If investigators found assets for approximately   $50 million of the $150 million of criminal debts referred to them, the  potential collection rate for such assets might well exceed the average  collection rates being experienced by Justice. 11. Although we are aware of EOUSA’s contract for credit bureau report  services, the issue of credit bureau report services did not directly  relate to any particular recommendation made in our 2001 report.   Therefore, the contract was not addressed in this report.  However, we  agree that credit bureau report services, if properly applied, can  enhance FLUs’ ability to assess a debtor’s ability to pay. 12. We acknowledge in our discussion of EOUSA’s actions to address  recommendation 5, that EOUSA has worked to reinforce policies and  procedures by developing and providing training materials to its staff  involved in debt collection. 13. In our 2001 report, we recommended that Justice perform an analysis  to assess whether FLUs’ human capital resources are adequate to  effectively perform their collection activities.  In our discussion of  Justice’s actions to address recommendation 13 in this report, we  acknowledge that EOUSA has assessed FLU human capital resources  and determined that FLUs need more staff or contractors to perform  debt collection activities.  We further state that, to date, EOUSA has not  been successful in requesting additional staff for debt collection.
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