RHS excluded $182 million of this delinquent debt from referral to FMS for TOP and cross-servicing. Support for Not Referring a Significant Amount of Delinquent Direct SFH Loans Not Maintained

DCIA requires federal agencies to refer all legally enforceable and eligible non-tax debts that are more than 180 days delinquent to Treasury for collection through administrative offset and cross-servicing. FMS officials told us that it is their expectation that agencies would retain the applicable data needed to justify not referring delinquent debt for collection action. As of September 30, 2000, neither RHS nor FSA treated such losses resulting from the SFH program and the Farm Loan Program, respectively, as non-tax federal debts. Agriculture and Most Other Agencies Have Not Used AWG to Collect Delinquent Debt

DCIA authorizes both federal agencies that administer programs that give rise to delinquent non-tax debts and federal agencies that pursue recovery of such debts, such as FMS, to administratively garnish up to 15 percent of a debtor’s disposable pay until the debt is fully recovered. Agencies, including Agriculture, identified various reasons for the delay in implementing AWG, including the need to focus priorities on the mandatory provisions of DCIA and develop the required regulations or administrative hearing procedures to implement AWG. This is disappointing in light of the large population in the country’s labor force and the fact that debt collection experts testified before this Subcommittee in 1995, prior to the enactment of DCIA, that AWG can be an extremely powerful debt collection tool, as the mere threat of AWG is often enough to motivate debtor repayment. An important consideration is that much of the delinquent debt reported by agencies as eligible for cross-servicing is not currently being promptly referred to FMS.
Why GAO Did This Study

The testimony discusses debt collection efforts by two major components at the Department of Agriculture--the Rural Housing Service (RHS) and the Farm Service Agency (FSA). The Debt Collection Improvement Act of 1996 requires agencies to (1) notify the Department of the Treasury of debts more than 180 days delinquent for the purposes of administrative offset against any amounts that might otherwise be due and (2) refer such debts to Treasury for centralized collection. To facilitate collection, agencies can administratively garnish the wages of delinquent debtors throughout government.

What GAO Found

GAO found that agencies are excluding most reported debt more than 180 days delinquent from referral requirements. To more fully realize the benefits of debt collection, agencies need to improve their implementation of the act. The Financial Management Service is making steady progress in collecting delinquent federal non-tax debt through the Treasury Offset Program--a mandatory governmentwide debt collection program that compares delinquent debtor debt to federal payment data. Agriculture and other agencies still have not used administrative wage garnishment to collect delinquent non-tax debt even though experts have testified that it can be an extremely powerful tool for debt collection. If the government is going to make significant progress in collecting the billion of dollars its owned in delinquent non-tax debt, federal agencies have to make implementation of the act's debt collection provisions a top priority.