To determine the primary reason for the low collection rates and significant write-offs of CFP debt, we obtained and reviewed OSM’s audited financial statements, annual reports, and other financial information related to its CFP collection activities, and we analyzed OSM’s CFP receivables and related accounts and information for fiscal years 1997 through 2000. We interviewed OSM officials for their perspective on the results of our review and analysis of this information. To determine whether adequate processes exist to collect CFP debt, we acquired an understanding of OSM’s CFP debt collection policies and procedures, as well as applicable federal laws and regulations. We were provided access to OSM’s Civil Penalty Accounting Control System database. The database contained a universe of 490 cases that had CFP receivables balances reduced to zero by collection or write-off (closed cases) during fiscal years 1999 and 2000 or were outstanding (open cases) CFP receivables balances as of September 30, 2000. We further stratified the database into cases representing debts greater than or equal to $100,000 (high-dollar cases) and those representing debts less than $100,000. We selected for review all nine high-dollar cases and a random statistical sample of 175 cases with initial receivable amounts less than $100,000. We did not independently verify the completeness or accuracy of financial data or test information security controls over the systems used to compile these data because such verification was not necessary for the purposes of this request. OSM was unable to provide documentation of collection specialists’ actions for 120 of the 184 CFP cases selected. As a result of this scope limitation, we could not project our findings to the entire universe of cases nor conclude on the overall adequacy of OSM’s past and present debt collection processes. Our findings therefore relate only to the applicable attributes in the 64 cases for which OSM had documentation of collection specialists’ actions. We interviewed OSM officials to obtain explanations for significant trends we observed and for findings and instances of noncompliance with its policies and procedures we identified during our review of the available cases. To determine what role, if any, OMB and Treasury play in overseeing and monitoring the government’s collection of civil debt, we interviewed OMB and Treasury officials. We performed our review primarily in Denver, Colorado, from January 2001 through August 2001 in accordance with U.S. generally accepted government auditing standards. Prior to our December 14, 2001, briefing to your office on the results of our work, we provided Interior, OSM, Treasury, and OMB with a draft of our detailed briefing slides for review and comments, which contained recommendations to the Acting Director of OSM. The comments received are discussed in the “Agency Comments and Our Evaluation” section of this report, on the “Agency Comments” slide, and are incorporated in the report as applicable. OSM’s letter is reprinted in appendix II. The Surface Mining Control and Reclamation Act of 1977 (SMCRA) established OSM to administer and enforce a nationwide program to protect society and the environment from the adverse effects of surface coal mining operations and to promote the reclamation of unreclaimed mining areas. Under Titles IV and V of SMCRA, OSM administers and enforces nationwide surface mining laws. Title IV of SMCRA authorizes OSM to collect quarterly Abandoned Mine Land (AML) reclamation fees. SMCRA also requires that coal mine operators obtain permits from OSM or the responsible state regulatory authority before undertaking any mining activity. These permits identify parties that actively mine coal and become the basis for OSM to generate Coal Reclamation Fee Reports (Form OSM-1), which are used to collect AML fees. Title V of SMCRA authorizes OSM to enforce environmental and reclamation standards for coal mining. Violations of these standards, referred to as “on the ground” (mine site) violations, typically involve harm to the environment. Section 518 of SMCRA authorizes OSM to assess CFP for violations of Titles IV and V. OSM is to issue a Notice of Violation to (1) Title IV violators for unpaid reclamation fees or for not filing a Form OSM-1 and (2) Title V violators for noncompliance with environmental and reclamation standards. If the violation is not corrected within a specified time, OSM is to issue a Failure to Abate Cessation Order, which requires that mining operations cease and the violation be abated immediately. OSM’s assessment unit is to review each violation cited to determine the appropriate CFP amount to assess for a violation and bases its determination on a point system directly related to the cited mine operator’s history of previous violations, including the seriousness of such violations, damage caused, negligence involved, and good faith in attempting to achieve compliance. Once the assessment amount is determined, OSM is to issue a Notice of Proposed Assessment (NOPA) to the mining operator. The assessment amount in the NOPA becomes the official CFP assessment when OSM issues a Final Order. The Final Order is to be issued within 30 days of the operator’s receipt of the NOPA, unless the operator appeals. Under SMCRA, CFP can be assessed only after the cited mine operator has had an opportunity to have a public hearing, which may include a potentially lengthy appeals process. Since 1995, OSM has recorded proposed assessments as CFP receivables when (1) payment is made for the full amount of the assessment when the NOPA is issued, (2) a Final Order (First Demand Letter) is issued, (3) a payment plan is entered into, or (4) a final appeal decision has been made. The occurrence of any one of these events is to result in the establishment of an account receivable. If a payment is not made in 15 days after OSM mails the Final Order, OSM is to issue a Second Demand Letter. The Second Demand Letter is to be followed 15 days later by a Final Demand Letter. Thus, all three demand letters are to be sent within 30 days. OSM is to classify CFP debt as delinquent if payment is not received within 30 days of the Final Order. Once a CFP receivable is established, OSM is to enter the CFP debt into the Civil Penalty Accounting and Control System, and a collection specialist begins collection activity. Upon receipt of the Citation File, the collection specialist is to create a Collection Specialist Case File (CS File), or an Entity File if the violator has multiple CFP debts, to document collection actions taken on the CFP debt. The collection specialist then is to perform (1) a full compliance check on the entity to identify all outstanding debt or (2) skip tracing activity to locate the debtor and obtain the mailing address and telephone numbers of the entity involved. The collection specialist also is supposed to call the debtor and document each attempt at contact with the debtor. If a debtor is unable to pay the debt in full, the collection specialist may offer an installment agreement or, under certain conditions, a compromise settlement. For either an installment agreement or a compromise settlement, the collection specialist is supposed to research the debtor’s ability to pay, document his or her determination of the debtor’s ability to pay, and have that determination reviewed and approved by other OSM staff. If the debt remains unpaid, the collection specialist can refer the debt to the Solicitor if, for example, (1) the debt needs to be consolidated with debts previously referred to Solicitor, (2) the debtor files for bankruptcy, or (3) the debtor strongly disputes responsibility for the debt or raises a legal challenge that will likely result in litigation. The collection specialist can also refer the CFP debt to Treasury for collection and offset if (1) the debtor does not respond to direct collection efforts by paying in full, (2) the debtor cannot be located, (3) the debtor defaults on a payment agreement and does not correct the default, or (4) the debt has been delinquent for 180 days or more. If CFP debt remains uncollected after referrals to the Solicitor and Treasury, the Solicitor or Treasury can recommend that the debt be written off. The collection specialist would then terminate collection activity on the debt and write off the receivable. Reasons for the termination of collection activity and write-off of the CFP debt include (1) substantial amounts are uncollected, (2) the debtor cannot be located, (3) the cost of collection will exceed the amount recoverable, (4) the statue of limitations has expired, or (5) the case is without merit or there is insufficient evidence. The Department of Justice must approve the write-off of any CFP debt that is greater than or equal to $100,000. During fiscal year 2000, OSM began writing off CFP debt referred to the Solicitor that was delinquent more than 2 years and classifying it as currently not collectible (CNC). In January 2000, OSM established formal guidance to write off such debts. In March 2001, OSM established formal guidance to write off other active debt that is referred to Treasury and has been delinquent more than 2 years. OSM also is to include all unpaid CFP debt in its Applicant Violation System to track the debt’s status once the debt becomes delinquent. OSM has a history of low collection rates for its CFP debt. In 1987, we reported that the financial quality of OSM’s CFP debts made them difficult to collect. We noted that for fiscal year 1986, OSM reported about $158 million in CFP receivables, of which $155 million was reported as delinquent. OSM also designated about 52 percent of the CFP receivables as uncollectible at that time.