The Agriculture Department has improved its debt collection over the past year, and expects to refer most of its delinquent debts to the Treasury Department by the end of 2002, officials at a House hearing said Wednesday.
Rep. Stephen Horn, R-Calif., chairman of the House Government Reform Subcommittee on Efficiency, Financial Management and Intergovernmental Relations, said he was pleased with the progress the Agriculture Department has made since last year's hearing on the agency's debt collection efforts. At that time, Horn called the department "severely deficient in implementing the 1996 Debt Collection Improvement Act's key requirements and in taking advantage of the law's other tools."
"The department is giving much higher priority attention to debt collection than it had in the past," Horn said. "And this heightened attention is paying off."
The Debt Collection Improvement Act requires agencies to refer nontax debts that have been delinquent for more than 180 days to the Treasury Department. Nontax-related debts include defaults on loans to students, small businesses and homebuyers. Delinquencies also occur when an agency overpays beneficiaries and vendors.
Agriculture referred 58 percent of its eligible debts to the Treasury Department's cross-servicing program in the first three quarters of fiscal 2002. In contrast, the department referred only 14 percent of its eligible debts in 2001. Treasury's Financial Management Service runs the cross-servicing program, which allows the department to collect debts for other agencies directly from debtors or refer the debts to private collection agencies.
Deputy Agriculture Secretary James Mosley said he expects his department to reach its goal of 60 percent referrals when fiscal 2002 figures are available. He also said he is confident that "most" of the department's eligible delinquent debts will be referred to Treasury by the end of this calendar year.
The Agriculture Department is the federal government's largest direct loan provider, helping to finance water and waste management projects, affordable housing, electric and telephone utilities, rural businesses, farms and emergency disaster relief. Agriculture's $103 billion in receivables represented more than a third of the government's $297 billion in outstanding nontax debt at the close of the third quarter of fiscal 2002.
During the hearing, GAO singled out two Agriculture Department agencies-the Rural Housing Service and the Farm Service Agency- for praise.
The Rural Housing Service has addressed systems limitations that delayed debt referrals to Treasury and is now referring all reported eligible debt to the agency, Gary Engel, director of financial management and assurance at GAO, testified. The Farm Service Agency made progress toward enhancing its Program Loan Accounting System so that it can automatically flag debts for referral to Treasury. Also, the agency improved its oversight procedures and communicates better with field offices.
Over the past year, Agriculture has also considered ways to enhance its use of wage garnishment. The department formed a working group to develop a plan for garnishing the wages of individuals who fail to pay their debts to the agency.
Despite the progress, Horn and GAO warned the Agriculture Department not to rest on its laurels.
"We still have a long way to go before the Debt Collection Improvement Act will realize its full potential," Horn said. "Agencies should be referring all eligible debts to the Treasury Department-not just some."
Horn praised agencies governmentwide for helping Treasury collect roughly $15 billion in delinquent debt through its offset program, and $100 million through contracts with private collection agencies. In fiscal year 2002, collection agencies collected about $43 million, an increase of more than 60 percent over the previous fiscal year.
But agencies, including the Agriculture Department, still need to work on referring debt to Treasury in a timely manner and should make sure they take full advantage of the law's range of collection tools, including provisions to garnish wages, he said.