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. 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. 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. 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.