We reviewed FSA’s policies and  procedures on debt referrals and examined the agency’s current and  planned efforts to refer eligible delinquent debts. To determine whether FSA’s use of exclusions from referral requirements  was appropriate, we used statistical sampling techniques to select 15 FSA  field offices from the four states with the highest dollar amounts of  reported debt excluded from TOP as of September 30, 2000. We did not review FSA’s process for identifying and referring debts to  Treasury for cross-servicing because the agency had suspended all such  referrals in April 2000 pending development of guidelines to implement a  new referral policy. Thus, the old adage that “time is money” is very  relevant for referrals of debts to FMS for collection action. About $295 million  of the exclusions were judgment debts. We reviewed supporting documents  for all 263 loans from these offices that were more than 180 days delinquent  and had been excluded from referral to FMS as of September 30, 2000, to  determine the extent to which exclusions in the four states were consistent  with established criteria for excluding loans in bankruptcy,  forbearance/appeals, foreclosure, and DOJ litigation. FSA lacks sufficient processes and  controls to adequately identify and promptly refer all direct farm loan  program loans eligible for referral to FMS. If FSA is to make significant progress  in collecting on millions of dollars of delinquent farm loan program loans,  the agency must give higher priority to fully complying with the debt  collection provisions of DCIA. We will also provide copies to the  secretary of agriculture, the inspector general of the Department of  Agriculture, the administrator of the Farm Service Agency, and the  secretary of the treasury.
Why GAO Did This Study

The Debt Collection Improvement Act of 1996 seeks to maximize the collection of billions of dollars of nontax delinquent debt owed to the federal government. The act requires agencies to refer eligible debts delinquent more than 180 days to the Department of the Treasury for payment offset and to Treasury or a Treasury-designated debt collection center for cross-servicing. The Treasury Offset Program includes the offset of benefit payments, vendor payments, and tax refunds. Cross-servicing involves locating debtors, issuing demand letters, and referring debts to private collection agencies. The Farm Service Agency (FSA) has initiatives to ensure the timely referral of all delinquent debt. However, the agency's failure to make the act a priority has left key provisions of the legislation unimplemented and has severely reduced opportunities for collection. FSA lacks effective procedures and controls to identify and promptly refer eligible delinquent debts to Treasury for collection action. GAO identified several obstacles to FSA's establishment and implementation of an effective and complete debt-referral process. In the four states with the highest dollar amounts of federal debt excluded from the Treasury Offset Program, GAO reviewed FSA's use of exclusions from referral requirements because of bankruptcy, forbearance/appeals, foreclosure and Department of Justice litigation.

What GAO Found

GAO found that about half of the exclusions in these states were inconsistent with established criteria.