Debt Collection Improvement Act of 1996: Major Data Sources Inadequate for Implementing the Debtor Bar Provision
Released: 2002-04-29T00:00:00

Letter

Background

During a hearing on DCIA implementation held by your subcommittee in June 2000, concerns were raised that there were federal nontax debtors who were delinquent on more than one federal debt. Our October 10, 2001, testimony before the subcommittee reiterated concerns about delinquent federal nontax debtors’ obtaining additional federal financial assistance because of the lack of an adequate information source that would facilitate agencies’ identification of such applicants prior to approval of financial assistance.

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.

Objectives, Scope, and Methodology

The objective of our review was to determine the advantages and disadvantages of existing major information sources, namely, credit bureau reports, CAIVRS, and the TOP database, to promptly identify delinquent federal debtors for the purpose of denying them federal financial assistance. To accomplish this objective, we developed and pretested a survey instrument to obtain agency responses to a uniform set of questions. The scope of this effort included the nine largest civilian Chief Financial Officers (CFO) Act 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.

Major Sources of Information on Delinquent Federal Debtors

In order to comply with Treasury’s regulations implementing DCIA’s debtor bar provision, federal credit agencies must be able to identify debtors delinquent 90 days or more on federal nontax debts. Three major information sources—credit bureau reports, CAIVRS, and the TOP database—contain certain delinquent debtor information that may be useful in evaluating federal loan applicants. However, the extent to which delinquent federal debtor information is sent to and maintained by each of these information sources varies.

Credit Bureau Reports

DCIA requires most federal agencies to report all delinquent consumer nontax debts to credit bureaus. 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.

FMS’s TOP Database

TOP is a mandatory governmentwide delinquent debt matching and payment offset system. Section 3716 of title 31 of the U.S.C., as amended by DCIA, requires federal agencies to transfer nontax debts more than 180 days delinquent to Treasury for the purpose of offsetting federal payments to collect delinquent debts owed to the federal government. Under TOP, federal agencies may recover delinquent debt by (1) receiving offset federal payments due the delinquent debtor or (2) using debtor locator/address information provided by TOP to locate delinquent debtors.

Unquestionably, information from the TOP database could provide federal credit agencies with pertinent information about delinquent debtors for the purpose of denying additional federal financial assistance. The TOP database includes the date delinquency began for each referred debt; therefore, the number of days a debt is delinquent could be readily determined. In addition, FMS allows agencies to continually update their debt information in the TOP database.

However, the information from the TOP database also has some limitations. For example, one of the TOP database’s downsides as an information source for identifying delinquent federal nontax debtors is that agencies do not promptly refer large amounts of delinquent debt eligible for TOP. First, as of September 30, 2000, the nine agencies we surveyed reported referring a significant amount—about $24 billion of about $28 billion of debt reported as eligible for TOP as of September 30, 2000— but still leaving about $4 billion out of this database that would be valuable in making loan or other financial assistance decisions.

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.

FMS’s Barring Delinquent Debtors Program

Information from FMS’s TOP database is currently not available to agencies to identify delinquent debtors for the purpose of denying federal financial assistance. However, FMS is designing a new Internet-based program, to be known as the Barring Delinquent Debtors Program, to assist agencies in identifying delinquent debtors. According to FMS officials, the program will supplement other tools already available to agencies, such as credit bureau reports and CAIVRS. As currently envisioned, the program will allow agencies to initiate searches of information from the TOP database to 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.

Conclusions

The federal government does not presently have an effective mechanism for ensuring compliance with DCIA’s debtor bar provision. None of the three data sources we reviewed contain all of the necessary data, and the data maintained in each of the information sources are subject to being routinely purged after a specified number of years, even though the debtor bar provision may still apply. Therefore, individually and collectively, although helpful, the three data sources do not fully get the job done. We strongly support credit bureau reporting primarily because it provides a demonstrable incentive for delinquent debtors to repay the federal government so that their credit ratings will not be adversely affected. In addition, of the three major data sources, the TOP database has the potential to be the most comprehensive source of information on delinquent federal debtors for the purpose of the debtor bar provision. By enhancing or supplementing information currently maintained in the TOP database and allowing federal agencies access to certain current and historical data on delinquent debtors, Treasury can improve the information available to federal agencies to enhance the effectiveness of agencies’ implementation of the DCIA debtor bar provision. Also, if agencies successfully reported delinquent debts to credit bureaus in accordance with FMS guidance, thus making data on newer delinquencies available, and if information in the TOP database were enhanced to provide additional information on ongoing and older delinquencies, there would be opportunities to assess the necessity of CAIVRS reporting at some future date. Unless improved access to delinquent debt information is achieved, the risk that delinquent federal debtors would be able to secure new forms of financial assistance from federal credit agencies will continue.

Recommendations for Executive Action

To assist federal agencies in identifying delinquent debtors for the purpose of complying with DCIA’s debtor bar provision, we recommend that the commissioner of FMS pursue maximizing the effectiveness of the Barring Delinquent Debtors Program by enhancing or supplementing information from the TOP database that will be made available for the program. Specifically, such enhancements should include data on discharged debts that do not meet the criteria for debt resolution, debt delinquent more than 10 years, and debt normally excluded from TOP referral but delinquent for purposes of denying additional federal financial assistance (e.g., foreclosures).

Agency Comments and Our Evaluation

We received written comments on a draft of this report from FMS and two of the nine CFO Act agencies that participated in our survey on 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.

Respondents to the Debt Reporting Practices Survey

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)

Debt Reporting Practices Survey

Comments from the Financial Management Service

Comments from the Department of Housing and Urban Development

Comments from the Department of Veterans Affairs

GAO Contact and Staff Acknowledgments

GAO Contact

Acknowledgments

Other key contributors to this report were Richard T. Cambosos, Michael D. Hansen, Linda K. Sanders, and Matthew F. Valenta.

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