Scope and Methodology

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. Criminal Debt Has Increased Markedly, but Collections Have Decreased Slightly

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. 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. 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. 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 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. Prompt Action Has Not Been Taken to Address the Majority of Recommendations

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. 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. 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. 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. We noted  that the strategic plan should address managing, accounting for, and  reporting of criminal debt. 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. 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. 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. That  report resulted in numerous recommendations to Justice and AOUSC  to improve debt collection.
Why GAO Did This Study

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.

What GAO Found

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.