Through its collections program, FMS also provides services  to federal agencies to collect, deposit, and account for federal collections. Specifically,  we reported that electronic collections provide better accuracy, lower  mailing and processing costs, and fewer delinquencies and defaults. Such reimbursements are deposited in the  Treasury’s general fund. Fully electronic payments  accounted for more than 80 percent of dollars collected by agencies other  than IRS for fiscal years 2005 through 2009, with $441 billion of the almost  $509 billion collected using fully electronic methods in fiscal year 2009. As shown in figure  2, there was a significant shift from nonelectronic to partly electronic  methods from 2005 to 2009. The growth in partly electronic payments largely represents a change in  agency processes rather than in payer behavior: the shift is largely the  result of a growth in electronic check processing capacity both at agencies  and through lockbox banks. Movement to Electronic Collection Methods Can Reduce Costs and Mitigate Some Risks, but Agency-Specific Circumstances Have Affected Adoption of These Methods

FMS, case-study agencies, and the payer groups we interviewed have  identified a variety of cost savings stemming from the use of electronic  collection methods. Other agency considerations also influence the selection and adoption of  collection methods. By not reviewing agency  responsibility to pay for collection services, FMS does not make use of an  available incentive to agencies to move to more efficient collection  methods. Agencies not scheduled for review until later years also may lack  information on how to overcome barriers to the use of electronic  collection methods or invest in more cost-effective collection methods. With better information about the  capabilities and benefits of the various collection methods, agencies could  in turn communicate that information to their payer groups. Some FMS collections guidance is outdated, but the Holistic Approach  plan does not include a strategy for updating guidance based on lessons- learned from the agency reviews. Appendix I: Objectives, Scope, and Methodology

To analyze opportunities to improve the efficiency of federal collections  governmentwide we examined (1) the extent to which agencies other than  the Internal Revenue Service (IRS) use collection methods in the Financial  Management Service’s (FMS) collections program, (2) how FMS and these  agencies can maximize the benefits of and overcome barriers to use of the  various collection methods, and (3) issues FMS should consider as it  implements its plans for improving the efficiency and security of these  collections. We  selected this set of case-study agencies to cover the use of the variety of  collection methods, a variety of payer and payment characteristics,  programs with significant collection totals, representation of at least two  departments, potential for improved efficiency, and instances of a recent  change in collection method. To identify the issues FMS should consider in implementing its plans for  improving the efficiency and security of collections, we reviewed relevant  legislation and FMS plans and agency agreements, applied relevant  findings from our case studies, and interviewed FMS and case-study  agency officials.
Why GAO Did This Study

The Department of the Treasury's Financial Management Service (FMS) collections program provides services to agencies to collect, deposit, and account for collections through a variety of methods. Electronic collection methods can reduce government borrowing costs and agency administrative costs, while improving compliance and security. The Government Accountability Office (GAO) was asked to identify (1) the extent to which agencies other than the Internal Revenue Service (IRS) use various collection methods, (2) ways to maximize the benefits of and overcome any barriers to agency use of the various collection methods, and (3) issues that FMS should consider in its plans to improve the efficiency and security of collections. GAO analyzed collections data, plans, and documents from FMS and five case-study agencies in the Departments of the Interior and Commerce that use a variety of collection methods, observed fee collection methods, and interviewed FMS and case-study agency officials. GAO also interviewed selected payer groups for case study agencies.

What GAO Found

Over the past 5 years, more than 80 percent of funds collected by agencies other than the Internal Revenue Service (IRS) were collected using fully electronic methods, including wire transfers and credit cards. As shown in the figure below, from fiscal year 2005 through 2009 there was a significant shift from nonelectronic collection methods to partly electronic methods. This shift was largely a result of a growth in electronic check-processing capacity. Moving to electronic collection methods can reduce costs and mitigate risks, such as theft, but the specific circumstances of individual agencies and payers have affected agencies' ability to fully adopt these methods. Use of electronic methods can result in cost savings, increased processing speed and accuracy, and improved security of staff and deposits. Specifically, FMS reports that on average the government saves 78 cents for each electronic transaction. Additionally, case-study agencies and payer groups GAO spoke with reported reduced costs when using electronic collection methods. Despite the advantages, payer characteristics, other agency considerations, and set-up costs or required system changes have limited agencies' adoption of electronic collection methods. Also, agencies may not have enough information to make cost-effective decisions about their choice of collection method. FMS is implementing a plan to improve the efficiency and effectiveness of federal collections, but the plan excludes important cost considerations and does not use all available incentives. Specifically, the plan does not consider the cost differences among different electronic methods or ensure the consistent application of policies on reimbursement for certain services. The FMS plan also does not include a strategy for incorporating key lessons-learned from agency reviews into its guidance and communicating that information to agencies. With such information, agencies not scheduled for review until later years could begin to transition to more efficient methods.