	Recent Progress to Identify and Refer Delinquent Nontax Debt for Offset

The Subcommittee’s November 1997 oversight hearing on DCIA’s implementation underscored the need for progress in referring delinquent nontax debts to Treasury for offset. At about the time of the hearing, agencies had referred $9.4 billion of nontax debt over 180 days delinquent to Treasury for administrative offset. As of April 1998, the CFO Act agencies had referred about $16.7 billion of delinquent nontax debt to Treasury for administrative offset—a 78 percent increase over about 7 months. According to Treasury reports, in April 1998, these agencies held $43.1 billion of nontax debt over 180 days delinquent, including the $16.7 billion of referred debt. Treasury and the CFO Act agencies have determined that $19.4 billion, or almost 75 percent, of the $26.4 billion in unreferred nontax delinquent debt would not be referred for administrative offset, at least not in the near term, for the following reasons: about $12.3 billion relates to nontax delinquent debts that are involved with bankruptcies, foreclosures, statutory forbearance, or formal appeals. Accordingly, these debts have not yet been referred to Treasury for offset. In addition to federal payments made by Treasury, more than 50 Non-Treasury Disbursing Offices (NTDO) make federal payments. Moreover, Treasury has not yet fully determined the extent to which payments will be exempt from administrative offset. According to Treasury data, during fiscal year 1997, agencies collected over $42 million through these programs. Treasury’s lack of progress in consolidating the offset programs is primarily the result of its problems with the development of a new administrative offset system. Systems Development Problems Must Be Effectively Addressed

Treasury does not have a system that can perform all the administrative offset functions envisioned as a result of DCIA. Although Treasury has recently taken several actions to address systems development issues, it will be some time before enough information is available to accurately assess the effectiveness of those actions. This system was to be used to consolidate the administrative, tax refund, and federal salary offset programs, and was to include all eligible delinquent federal nontax debt and federal payments. GTOP was scheduled to be implemented in January 1998. Currently, Treasury is focusing its efforts on enhancing ITOP to handle all eligible debts and payments for the administrative offset program, as well as the consolidation of the administrative, tax refund, and federal salary offset programs. GTOP’s Development

Treasury has concluded that it currently cannot use GTOP for the administrative offset program primarily because Treasury did not apply a disciplined system development process for that system. Thus, Treasury has not placed the system into operation. Fourth, Treasury has not yet completed a risk management plan. But it will be important for Treasury’s top management to ensure that the planned corrective actions are effectively and expeditiously completed prior to making any significant investment in the development of an administrative offset system. Otherwise, Treasury is significantly exposed to the risk of costly systems modifications and additional delay in developing a system to implement the administrative offset provision of DCIA.
Why GAO Did This Study

Pursuant to a congressional request, GAO discussed the Department of the Treasury's implementation of the administrative offset provision of the Debt Collection Improvement Act (DCIA) of 1996, focusing on: (1) the status of referrals by agencies of delinquent nontax debts to Treasury for administrative offset; (2) actions Treasury has taken and plans to take to include all eligible federal payments in the administrative offset program; and (3) actions Treasury has taken, or plans to take, to consolidate the administrative, tax refund, and federal salary offset programs.

What GAO Found

GAO noted that: (1) Treasury has recently made progress in getting the 24 agencies covered by the Chief Financial Officers (CFO) Act of 1990 to refer nontax debt over 180 days delinquent for administrative offset; (2) as of April 1998, the CFO Act agencies had referred to Treasury about $16.7 billion in nontax debt over 180 days delinquent, and Treasury has entered these delinquencies into its debtor database; (3) this is a substantial increase over the $9.4 billion that had been referred to Treasury about 7 months earlier, at about the time the congressional subcommittee held DCIA oversight hearings in November 1997; (4) as of April 1998, about $26.4 billion of reported nontax debt over 180 days delinquent had not been referred to Treasury and is unlikely to be referred in the near future; (5) on the payment side, Treasury does not yet have a system capable of matching all federal payments against the delinquent debtor database; (6) as of April 1998, 2 years after DCIA's enactment, Treasury had collected about $1.2 million of delinquent nontax federal debt through its administrative offset program; (7) payments subject to offset through the administrative offset program are limited to those made by Treasury to vendors and to federal retirees by Treasury disbursing offices in fiscal year 1997; (8) also, Treasury has made little progress in fully determining the extent to which federal payments can be made available for offset; (9) Treasury has not yet consolidated the administrative, tax refund, and federal salary offset programs; (10) Treasury's systems development problems have also caused delay in consolidating these programs and thus, any debt collection efficiencies envisioned by such a consolidation have not yet been realized; (11) in developing an administrative offset system, Treasury did not apply a disciplined systems development process; (12) the resulting system, which was planned for implementation in January 1998, was not placed into operation, and a subsequent systems development effort is under way; (13) in efforts to develop an administrative offset system, Treasury has recently taken several actions to address systems development issues; (14) it will be important for Treasury's top management to ensure that the planned corrective actions are effectively and expeditiously completed prior to making any significant investment in the development of an administrative offset system; and (15) otherwise, Treasury is significantly exposed to risks that it may experience costly modifications and additional delays in developing a system for implementing the administrative offset provision of DCIA.