ML20052G988

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Responds to Gao Recommendations Re Negligence in Collecting Debts.Nrc Supports Eight Recommendations
ML20052G988
Person / Time
Issue date: 04/26/1982
From: Palladino N
NRC COMMISSION (OCM)
To: Stockman D
OFFICE OF MANAGEMENT & BUDGET
Shared Package
ML20052G933 List:
References
NUDOCS 8205190218
Download: ML20052G988 (33)
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{{#Wiki_filter:1 s,nCityy [ k UNITED STATES g hJi i P; NUCLEAR REGULATORY COMMISSION W ASHIN GTON, D.C. 20555 ,,,fe',*o', 7 g, Wl M, N CHAIRMAN The Honorable David A. Stockman Director Office of Management and Budget Washington, DC 20503

Dear Mr. Stockman:

In accordance with the statutory obligation to respond to recommendations-by the General Accounting Office (GAO) within 60 days of publication, we hereby submit our responses to the recommendations made by the GA0 in their report entitled, " Federal Agencies Negligent in Collecting Debts Arising from Audits," (AFMD-82-32). The Commission supports the eight recommendations made by the GAD. Specific comments on the Nuclear Regulatory Commission's compliance with the recommendations are presented in the Enclosure. s Sincerely, 8 Nunzio . Pd11adino Chainnan

Enclosure:

Responses to GA0 Recommendations 8205190218 820426 PDR COMMS NRCC CDRRESPDtOENCE PDR o

r NRC Response to Recommendations to the Final GAO Report Entitled " Federal Agencies Negligent In Collecting Debts Arising From Audits" Chapter 2 R: commendation 1 Require a written determination of the allowability of all questioned costs within six months of audit report issuance. Recommendation 2 Ensure establishment of accounts receivable for all disallowed costs within 30 days of the written detennination of indebtedness. NRC Response: The NRC has implemented procedures for follow-up of audit recomendations. These procedures are consistent wita OMB Circular A-73. The six-month and 30-day time constraints cited in recommendations 1 and 2 will be added to these procedures by June 30, 1982. Recommendation 3 ~ Ensure aggressive collection action in accordance with the Claims Collection Standards, which include written demands for payment at 30-day intervals, affecting the debtor's credit rating, offsetting the debt against amounts due from other Federal programs, and suspension or termination of fundings. NRC Response: The NRC has codified its debt collection procedures. These procedures have been implemented and they comply with Federal Claims l Collection Standards. Recommendation 4 Hold grantees fully responsible for the debts of their sub-grantees and apply the Claims Collection Standards in collecting these amounts from grantees. NRC Response: To date, grantees under NRC.'s small grant program ($1,655,000 in FY 81) have not had sub-grantees. Should an NRC grantee have sub-grantees, NRC will hold the grantee fully responsible for the debts of its sub-grantees through the financial assistance agreement. The Federal Claims Collection Standards are applied in collecting any amounts due from grantees. Chapter 3 Recommendation 5 Ensure compliance with the Claims Collections Standards to preclude the tennination of any debts over $20,000 and ensure that all Claims Collection Standards concerning compromise and tennination are met before settling l debts of $20,000 or less.

,e 2-4 NRC Response: The NRC's debt collection procedures concerning compromise and termination of debts are consistent with the Federal Claims Collection Standards. Debts in excess of $20,000 are referred for litigation to the General Accounting Office or the Department of Justice. Recommendation 6 Streamline the audit disallowance appeal process to ensure that unnecessary delays are eliminated and that interest is charged on all amounts under appeal. NRC Response: The NRC's audit disallowance appeal process assures tha' unnecessary delays are eliminated. A late payment charge is imposed on each debt under appeal if such debt has been initially asserted by the NRC on or after March 24, 1982. R: commendation 7 Require interest to bd charged and collected on all debts at the rate specified by the Treasury Fiscal Requirements Manual, beginning no later than 30 days from establishment of the debt and continuing until collection or final disposition. NRC Response: If a debt is not paid in full on or before the payment due date, the NRC assesses a late payment charge based upon the prevailing rate prescribed by the Treasury Fiscal Requirements Manual. The payment due date-is normally 30 days from the date in the initial written demand (to date there have been no circumstances that warrant extending the payment due date beyond 30 days). C Chapter 4 t Recommendation 8 Require grantee debtors to certify that their payment of audit-related debts has not reduced the level of performance of any Federal program. We further recommend that a followup system be established whereby grant management staff closely monitor performance of grantees to ensure that settlement of debts does not adversely affect grantee performance. This system should also include provision for audit followup, whereby routine l verification is made part of the subsequent audit of grantees paying off l audit-related debts. NRC Response: The NRC grant program started in fiscal year 1980 and, to date, no NRC grantee has had an audit-related debt to the NRC. All grant agreements executed after June 30, 1982, will require grantee debtors to certify that their payment of audit-related debts does not reduce the level of performance of any Federal program. NRC grant management procedures will assure that settlement of debts does not adversely affect grantee performance. 9 O

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. A' f5D 82 32 h 4 '- 7 Q4 -.7 P .- ;.~.. F 4cCOU14.g JANUARY 22.1982 h_. ~ E .E '- ? <x ~*E;14 ? s 1 ' ...% v -.,.s y ., ; ;?. :.- .e.

,(63Z% '// M 'b cowTeotten cenenat or Tsc umTro sTATcs (*T;M*)\\ u n c u.~ a.e. z u g Janua'ry 22, 1982 B-200473 The Honorable Jack Brooks Chairman, Legislation and National Security Subcommittee Committee on Government Operations House of Representatives

Dear Mr. Chairman:

This report is in response to your October 20, 1981, rrquest that we examine procedures of Federal. departments and agenc..es for collection of audit disallowances. This is the third' in a series of reports on how Government agencies follow up and resolve findings identified through the au-

  • Our two previous reports showed inadequa:te systems dit process.

for tracking audit findings and excessive delays in determining the This report concen-propriety of costs questioned-during audits. trages on the debt collection phase of the audit resolution process whi*ch begins once questioned costs are disallowed. We found that Federal agencies generally are doing a poor. job of managing and collecting these debts. Most agencies do not know the total amount of audit-related debt owed to them, nor do they as req'uired, when collect known debts promptly or charge interest, And, when debts are paid, agencies usually do payments are late. not hnow whether the amounts received have been taken from their .own or other Federal programs. Furthermore, some Federal agencies ~ For various rea-avoi,d altogether the collecti~on of some debts. sons they assume the responsibility for terminating deb'ts rather than collec.ing them. t As you requested, we did not obtain agencies official cod-ments on this report. As arranged with your office,'we plan no further distribution of this report 'until 30 days from its date unless you advise otherwise or publicly announce its contents earlier. At that time, we will send copies to interested parties and make copies available to others upon request. Sincerely yours, f e Comptroller General of the United States f 9 t I ~

COMPTROLLER GENERAL'S REPORT FEDERAL AGENCIES NEGLIGENT TO THE CHAIRMAN, SUBCOMMITTEE IN COLLECTING DEBTS ARISING ON LEGISLATION AND NATIONAL FROM AUDITS SECURITY, HOUSE COMMITTEE ON GOVERNMENT OPERATIONS .D. I G E S T Federal agencies are doing a poor job of managing and collecting audit-related debts owed by con-tractors and grantees such as State and local governments. Most agencies do not know th'e total amount owed to them, nor do they collect debts promptly or charge the required interest when payments are late. When,they are paid, agencies usually do not know whether the amounts received have b'een taken from their own or other Federal. programs. Also, some Federal agencies avoid col-lecting some of their debts altogether. POOR ACCOUNTING AND COLLECTION ~ CONTROL SYSTEMS GAO found that Federal. agencies' collec' tion sys-tems are so inadequate that the total amount of audit-related debt due the Government cannot be determined, and the small portion that can'.be identified (S374.million) remains uncoll.ected!. for years. Much of this delay in collection ij ~ 2 because Federal;a,gencies lack an aggres,s_ive ol, c lection effort. Some debt is never collected; for instance, one agency'dism'issed over $2.4 mil-lion in audit-related debts based on its view that the debts had become uncollectible because ' of the statute of limitations. B'ased on (1) a questionnaire sent to the 36 agen-y cies with the largest dollar amounts of monetary ~ audit findings and (2) a detailed audit at seven Federal agencies, GAO concluded,that agencies --are slow to determine the amount o'f the debt so it can be pursued (see p. 7), --do not promptly bring debts under accounting, control (see p. 7), --do not effectively monitor collections (see p. 9), and Tear Sheet AFM'D-82-32 JANUARY 22,1982 i i .1

RECOMMENDATIONS GAO recommends that the head of each department or agency implement policies and procedures that: --Require a written determination of the allow. ability of all questioned' c,o,s,ts within,4, months of audit report issuance. --Ensure establishment of accounts receivab'le for all disallowed costs within 30 days of the writ-ten determination of indebtedness. --Ensure aggressive collection action in accord-ance with the Claims Collection Standards, which include written demands for payment at 30-day intervals, affecting the debtor's credit ratini, offsetting the debt against amounts due from other Federal programs, and suspension or ter-7- mination of-funding. --Hold grantees fully responsible for the deb'ts of their subgrantees and apply the Claims.Co.1-lection Standards in collecting these amounts I from grantees. --Ensure compliance with the Claims Collection L Standards to. preclude the termination of any debts ove'r.520,000 and ensure that all; Claims Collection Standards concerning compromise and terminat-ion 'are, met.before Jsettling debts of $20,000 or.less. --Streamline the audit disallowance appeal process' to ensure that unnecessary delays are elimina'ted and that interest is charged on all amounts un-der appeal. --Require interest to be charged and collected on ~ all debts at the rate specified by the Treasury Fiscal Requirements Manual, beginning no.later F l than 30 days from establishment of the debt and continuing until collection or final disposi-tion. --Require grantees to certify that their payment of' audit-related debts does not reduce the level L of benefits of any Federal program and institute [ program and audit followup. I GAO also. recommends that the Direc*.or, Office of and Budget incorporate these recom-Management mendations into the management circular on audit Tear Sheet I;

j O 8 'O 'O Pl 3 0 AGE 2JCY PIMRES FOR liANDLING AND (INTROLLING DISAIRWED CD6IS - (note a) s M (bntrol of Disa11cwed (bots Does organization if no acccants receiv-C< At what point are disal-establish accounts able, hoe does orga-y loved costs established receivable for dis-nization c ntrol as a debt? allcwed costs? disallowed osts? - hjency Degurtirent.of Agriculture Set up account receivable Yes Disallowance sustained Yes IMurtnent of Conrerce Varies Yes Department of Defense Disa11cwance sustained Sometimes Finance tracks Degurtment of Education Disa11ovance sustained Sometines Program trade j s-Degurtnent of Enertf/ Yes Disa11osance sustained Denurtment of llealth azul Iltsinn Services Yes th.partnent of Ilousing and Urtun Develcpient Payirent requested Disa11ovance sustained No Prograse tracks Delurtnent of the Interior Claim determined by OGC Sometimes Audit tracks r Departnent of Justice Disa11ovance sustained Yes Degurtnent of t h r Inspector General determines Yes sometines bf varies by division Degurtnent of State c]/Variesby. division b IMuttnent of Transportation Varles by tureau ' Sometines c/ Varles by bureau Department of the Treasury Disa11cwance sustained No Program trade 3e Accl0N 3 Yes Enviroivrental Protection Agency Paynent requested No Program tracks General Services Administrat. ion Paytrent requested Yes Naticaul Aeroinutics arx1 Spe.co AnnLnistration Payuent requested Disa11cwance sustained Yes Sunt! Dusiness Administratico At final negotiation Sometimes No response veterans Adninistration Yes [ Intermtional Conminicationti Agency Payirent requested Program arvl grants office track 4 Disallos..sust./paymt. req. No Natiosul Science FouMation No Program tradte Auditee agrees Nucicar Regulatory Conmissi<n Disallo<ance sustained No Audit or program tracks r Of fice of Personnel Managentnt Disa11cwance sustained Yes Smithsonian Institution Finance trade No a Civil Aeronautics Board Depends on audit Program tracks Constster ProWct safety Cormdesion

  • Costs negotiated No Finst audit released Yes repital niployuent Opportunity Coimission Yes Payment requested Foleral Decrgency thnagement Agency Audit division determines Yes lejat Services Corporation Disa11cwanco sustained Yes National 1:rulamient for the lhimanities Disa11osance sustained Yes Teismasseo Valley Authority Disa11:.wance sustained No Program tracks t!nitol Stistes Postal Service o

9 4 4

e FRIX]UDJCY Wl'Ill WilIOl VARIOUS MC110DS ARE USED 'ID HISURE 'I1MT ON!1W."!OfLi DO PUP . REDUCC *111C SCOPE OF 'DIEIR WOttK AS A RESULT OF DISAllIMED GEIS Include audit procedires Rely on contractiry to check source of furds officer to ensure CosWet special audit on next regularly schal-contractor perfornance review uled audit of all contract tesins Other Agency Rarely Always Always l Ikgurtnent of Agriculture No respcmse No response No response l lApartm:nt of Coismrce Frequently Frequently Always . (ti) -lj twpirt;mnt. of Defense occasionally Frequently Always 1 Degurtuent of Education Rarely Occasionally Always Rarely Always Always l Departnent of Energy LWgurtarunt of Iles1th anxl litsen Services ~ No response No response Always Degurt; rent of Ilousing and Urinn Develcpnent No responso No response Always ikturtuent of the Interior occasionally Always ikgurtn. nt of Justice , Rarely stia u t y it.iruly Alwayu (.,) i n pu t m ent i st. I..l ue Occasiorm11y Always bj Varles by division Always INpirtaient of State b/ Varies by division b/Variesbydivision [ IApirtaient of Transportation c/ Varles by tureau c] Varles by bureau Always Depart;icist of Use Treasury Occastorm11y Rarely As of ten as not-(L) Rarely Rarely Always, Acrial Divironmental Protection Agency Rarely Barely Always j General Services Administration Ikstiosul Acrormutics and Space Adninistration No response No response No response Rarely Rarely Always ,I Sno11 Business Administration No response Po response No response Veterans Aduinistration stirely Rarely Always interswitional Coisiunications Agosv.y Doco not orply Does not apply Always N. t.hnal m:leim:u l'wivlation. Rarely threly Always Nuclear Itegulatory Consnission Occasionally Always Rarely No response No response No response (j) of fice of Personnel Managenent Sndumonian Institution Does not apply Does not apply Does not arply Civil Aeroruutics Board Rarely Always l Consuner Proluct Safety Connission Rarely t" ual Diployirent Opportunity Connission Rarely Barely Always (k) q Rarely Frequently Always (1) Rarely Rarely Always i IWeral nmogency ninagenent Agency tcyil Servlees Corporation 11atiorul Ermloecr.t for t.he Ilumanities Rarely Barely Rarely l Rarely Always I Tennessee Valley Authority , Rarely No response No response ' Always l United States tbstal Service (

I O N223CY ESOCHURES FDft OlMCi!JG ltTTEREST 04 DISAUIWED CDETS Does organization " In W percentage of cases ever charge in-If interest is char 9ed. shere disallosances are at what point dor e it recovered is an interest When interest is assesecJ, terest on dis-hy ncY alto.axl mata? teg1n accruisq7 charge collected 7 hcw is the rate deter.mised7 Yes .Delt delltspent 28-30 days tres than 10 percent (n) in piirtment of Agriculture. tb Yes Delt dellrquent 30 days Ib data avstlable Treasury rate j lxpartwnt of Converce th aurtment of Defense Delt dellovpert 60 days 11 to 40 gercent

  • Treasury rate Yes t\\ urterent of t'ducation 1

tb thyss taent of I'nergy Yes Da4A delisspent.30-45 days i.ess than to percent Treasury rate Di1urteent of itealth arni Ikaran Services tb Dipartment of IkmAstrq aswl Urban Omvelcgeient ib Ocp rtwnt of the Interior DetA deltrquent 30 days tass than to percent Treasury renerptiation trut.1 Yes thpartwnt of Justice Debt detterprit 30 days 11 to 40 gencent Treasury rate Yes twportacist of 1.ator When auilitee inforwisl tio data avollable Treasury rate Yes o.pis twnt of State tqurtment of Tranciportation tg varies by div. thilA eletinguent,30 days ines than 1.) percent Treasury rate tb Desurtunt of the Treasury 3 tb Yes Del A dellrquent 30 days Emma than 10 gwrcent Troneury rate N*r10t4 gyg f:nvitcruiental Psotection Agency tb r?,eneral Services hbninistratirst Debt dellrquent 30 days Ib data avallable Treasury rate Natlosen Aeraiautics an1 Space Adair11stration Yee tb smalt tiusiness Muinistration Vetere ns Administration tu respcnse Nu response too resguise No resgense No I Interesstional Ccrinanications Agency tb t4atir. nut Science Founlation Debt dentrquent 30 days less than 10 percert Teswas of contract Yes tauclear Regulatory canaissicn

  • WIun auditee inforsmi Nore than eo gwrcent (ol Yes Of fice of Personnel ttanagesvent tb Smithtminian Institution If rn Amewkilate repayment less than 10 percent Current prime rate Yes t

Civl1 Aeronautics IVurd tb Corns.cr Paubact Safety Cbisnission I) gen.nl Ibploywamit Ogg=>ttuntly Cuionisstral tb 5 tb hol. s el 3%+a spiny thewymmet Aryncy tu . DulA de11 nguent 30 dhys teos tlu.n 10 percent Trosaury rate s..y.s :;.ea vlosa on om at less Yes 8 ta.it Ersut thkwent for the fearnnities 94J Ttessessou Valley Authority ib United States twtal Service O e e O e e t 9 e o ~^

.smumensw sm. m Footnotes to appandix III (cont.) n/ The interest rate charged by Agriculture is the rat'e soecified in the contract or, if no rate is specified, it is the' lower of the State-allowed rate or the quarterly interest rate published by the Department of the Treasury. o/ The Of fice of Personnel Management currently charges interest at the portfolio rate of the contractor, but is changing to the semiannual Treasury rate. p/ Subsequent to our writing the report, additional data were re-ceived from the Department of Education, the National Science Foundation, and two administrative divisions of the Department of Transportation (Federal Railroad and Federal Highway Adminis-trations). We did not include these data.in the report.. (911523) 47 ~

I Contents ~ Page i DIGEST CHAPTER 1 INTRODUCTION 1 Costs dis' allowed through the audit process are debts due the Government 2 Federal collection legislation and regulations 3 Claims Collection Act 3 Accounting and Auditing'Act 3 ' objectives, scope, and methodology 4 2 POOR ACCOUNTING AND. COLLECTION CONTROL SYSTEMS CAUSE INEFFECTIVE DEBT COLLECTION 6 Agencies are l'till slow to determine amount of debt 7 Accounting control is not established promptly if at all 7 Some agencies have no accounting - control over. audit-related debts 8 Weak: collection monitoring leads to . costly delays 9 c l Debt remains outstanding too long because of ineffective monitoring 10 Collection' actions are lax 12 Coll'ection of subgrantee debts is also' 14 ~ ~ ~ ~ ~ insdequate ~' ~ ~. Federal agencies ~are not requiring grantees to repay subgrantee debts promptly - 15 Conclusions 17- ). . Recommendations 17 3 POOR MANAGEMENT PRACTICES CONTRIBUTE TO INEFFECTIVE DEBT COLLECTION 19 Agencies inappropriately terminate debts rather than collect them 19 Department of Agriculture disregards Claims Collection Standards 19 Debt appeals process provides grantees opportunity to delay 21 Most disallowed costs are appealed 21 h The appeals p.rocess is time consuming 21 g Interest should be accrued on debts under appeal 23 e e s

CHAPTER I INTRODUCTION Each year, auditors detect and report hundreds of millions of dollars in misspent funds. It is the responsibility of agency man-agement to see that these funds are accounted for and collected without d'elay. Failure to effectively follow up and co'llect audit-related debts results in a loss of funds as well as a waste of audit resources. ~ This is the third in a series of reports on how Government agencies follow up on and resolve findings identified through the audit process. Our first report 1/ identified at 34 agencies nearly 14,000 audit reports containing unresolved findings in-c volving more than 54.3 billion in potential recoveries,.pe alties, revenues, or sa.vings. Our second report 2/ showed the problem had' worsened. On February 25, 1981,'the Comptroller General testified on both reports before the Subcommittee on Legislation and Nationa.1 Security, House Committee on' Government Operations.. In September. 1981, based on the Subcommittee hearings and our reports, the House Committee on' Government Operations issued'a report entitled " Continued Failure of Departments and Agenc~ies 'to Take Effe~ tive c Action on Audit Findings." Audit resolution and related debt collection are a signifi-Both GAO cant part of the entire Federal debt collection process. and the Congress have been actively seeking improvements in the t Government's ability to collect all debts. For example, two bills have been introduced in Congress to help alleviate debt collection problems: the Debt Collection Act of 1981 (S. 1249) and the Debt Collection Improvement Act of 1981 (H.R. 2543). - Primarily as a result of earlier GAO and committee reports on audit r.esolution, as well as other GAO and congressional work ~ in the broad area of debt collection, the executive branch has ~ attempted to strengthen the entire audit resolution and debt col-lection process. In December 1979; for example, the Office of Management and Budget (OMB) issued new policy guidance to agency management in a revised Circular A-73. Even m' ore recently, OMB OMB also proposed additional changes to its management circulars. established a special debt collection project under-the sponsor-l ship of the President's Management Improvement Council to review 1/"More Ef fective Action is Needed on Auditors ' Findings--Millions [ Can be Collected or Saved" (FGMSD-79-3, Oct. 25, 1978). ~ l 2/" Disappointing Progress in Improving Systems for Resolving Bil-liens in Audit Findings" (AFMD-81-27, Jan. 23, 1981). 1 j

p But when audit findings indicate that grantees or contractors have spent Federal funds for unauthorized purposes, the misspsnt funds should be promptly recovered. The identification and recov-ery of debts should proceed as follows: --The auditors issue a report to agency management question-ing any expenditures that appear to violate laws or regu-lations. --Program managers resolve the auditors' findings by review-ing their reports and the grantee 's or contractor's comments and' deciding whethe'r expenditures were indeed improper and should be disallowed. --Managers notify the grantee or contractor of the need to re-turn the disallowed costs, and establ.ish an accounting record of the de,bt. --If the grantee or contractor does not repay promptly, man-agers take additional steps to collect the debt. FEDERAL COLLECTION LEGISLATION AND REGULATIONS Several laws and regulations require the head of 'each.execu-1 i tive agency to aggressively pursue collection of all debts aris-ing from audit disallowances and to establish and maintain systems i of accounting and internal controls over the collection of such l debts. - Two important laws require rigorous accounting and collec-I tion controls: the Claims Collection Act and the. Accounting and Auditing Act. Claims' Collection Act ~ ~ l The major legislative authority for debt collection in the - I Federal Government is the ' Federal Claims Collection Act of 1966 l (31 U.S.C. 951). The act requires the Comptroller General.and l-the Attorney General to issue joint regulations implementing the law. The regulations (4 C.F.R. 101-105) are entitled "The Fed-i I eraliClaims Collection Standards," and have the force and effect I of law. I imposes primary responsibility for collecting debt's f The act due the Government on the agencies whose operations give rise to l such indebtedness. Furthermore, the Standards require agencies' to when j take aggressive collection action and collect amounts due, feasible, by offsetting future paynients to the debtor. i Accountino and Auditing Act The Accounting and Auditing Act of 1950 (31 U.S.C. 66a) re-l quires the head of each executive agency to establish and main-8 tain systems of accounting and internal controls. The purpose i of this requirement is to provide adequate assurance of the I 3 i A

~ In addition to using questionnaires, we audited the debt col-Icction efforts at selected regional cf fices and headquarters of 7 of the 36 agencies. These agencies were the Departments of Ag-riculture, Education, Health and Human Services (HHS), Housing and Urban Development (HUD), Labor, and Transportation, and the Environ-mental Protection Agency (EPA). At most of the seven agencies we evaluated the effectiveness of debt collection ef forts by assessing the agencies,' ha'ndling and ' disposition of all amounts they disallowed during fiscal 1978 to 1980. Since some agencie.s did not have records of disallowed costs, j _ we evaluated audits with questioned costs, tracing these findings 1 through the audit resolution process to determine the disallowed Where it was necessary to begin the evaluation by select-I costs. ing audit reports, we selected all audit reports issued during fiscal 1978 to 1980 with questioned costs of S5,000 or more. All assessments involved reviewing and' analyzing' accounting rec >rds and files as wel1 as discussing aspects of debt collection afforts ~[ with agency officials. Altogether, we evaluated the effectivbness of actions taken on S315.4 million of audit-related debts result-ing from 1,567 separate audits. i This audit was made in accordance with generally accepted ~ Government auditing standards. Our approach was Government-wide; individual agencies were not the primary focus of this review. Agencies are cited only to. illustrate problems found throughout the Government. t { t ~ Ij !j i I I 'i i 9 s

I lI

AGENCIES ARE STILL SLOW TO DETERMINE AMOUNT OF DEBT The first step in collecting debts that result from audit We found that the findings is determining the ' mount of ' debt. a resolution.of auditors' findings is still a Government-wide prob-lem despite two previous GAO reports, congressional hearings.on 'four occasions since March 1979, and two House Government Opera-tions Committee reports all dealing with the need to improve au- ~ dit resolution in the Govarnment. Our audit disclosed that many agencies are still not comply-l ing with the OMB requirement to make written determinations on all l audit ' findings within 6 months after issuance of audit reports. it four of the seven agencies where we performed audit work, At uncommon for agencies to take up to 2 years to make thess d was not h-written determinations. Two specific examples typify the del'ays. 9 --In August 1978, HUD issued a~ report on an audit of a Com-munity Development Block Grant in which questioned costs i amounted to $2.3 million. It was not until May 1981 (2-1/2 years later) that HUD determined the amount of costs to be disallowed. As of June 1981, a receivable had not been established and nothing had been collected. --A March 1975 Department of Transportation audit questioned a grantee's expense of.approximately $1.4 million. The grantee corresponded with the Department several. times re - garding the audit findings between April.1975 and-January 1976, but not until January 1978 was the' grantee again i asked to respond to the. unresolved. audit. findings., Cor-respondence between the Department and the grantee began Th'e Depart-again in February'1978 and lasted over a year'. ment finally disallowed $265,156 in April 1981, approxi-mately 6 years after the audit. As of November 1981 the l.- debt still was not collected. I ~ ACCOUNTING CONTROL IS NOT ES'TA'BL'ISHED PROMPTLY IF AT ALL I OMB Circular A-73 requires Federal agenciss to maintain ap-lI Howe"er, many Fed-propriate accounting and collection controls. still have not established basic internal controls eral agencies to ensure that. debts are appropriately accounted for and promp'tly i Debts must be brought under accounting control as collected. soon as possible af ter the questioned costs have been disallowed. such control must be maintained throughout the collec-Furthermore, tion process to ensure timely repayment. A I y r s

Departmsnt sent the first demand for payment of the dis-allosed amount of S55,613. No accounting controls were ever established over,the debt. When the grantee refused to pay, the Department said it would deduct the debt from 5658,029 which the grantee had requisitioned under another grant. The requisition was then processed. However, T,ransportation officials not only failed to deduct the disallowance, they also. paid the grantee twice for the 5658,029 requisition. In May 1981, the grantee returned,the duplicate. payment. Finally, in July 1981 the Department deducted the $55,613 from another requisition, but as we point out in chapter 4, this' reduction could have a negative ef fect on the program. Only two of the seven agencies audited routinely accounted for audit disallowances as receivables. Even where procedures -1 had been in effect for some time, agencies ignored them, ~carsing ~ delays in setting up receivables. The Department of Educati on, for example, took an average of 168 days to set up a receivable for cash collection cases. At the Health Services Administration, HHS, the average time to record 42 audit disallowances as receiv-ables was 81.5 days; for 22 other audit disallowances involving $490,000, the finance office failed altogether to establish ac-counts receivable. Two cases illustrate the delays in more de-tail: --The agency disallowed $589,940 in February 1978. A re'- ceivable was not established until December 1979 The documents supporting this case were scattered among three separate offices. As.of October 1981, the debt was uncol-lected and the three files had not been consolidated and reconciled to determine th'e correct amount due. --The agency disallowed $163,431 in August 1977 Almost.a year later, in June 1978, the finance office was advised ~ ~ to establish a receivable but to delay collection action because of the gran, tee's appeal.- The appeal was denied ~ in June 1979, but collection was not made until July 1980. O One of the reasons for delays in bringing audit-related debts under accounting control is the lack of control over key documents used to establish accounts receivabl'e. At the Department of Edu-l cation, for example, these documents often were. received by the finance office months after the monetary audit findings had been i l disallowed. l j WEAK COLLECTION MONITORING 8 LEADS TO COSTLY DELAYS i At all the agencies we visited, the debt collection function was given low management priority. Collection practices were not adequate to ensure that audit-related debts due the Government were promptly recovered. At each of the agencies audited, some of the following deficiencies were noted: agencies were no,t f I 9 i 5 e b

o ~ the finance offic Decentralization and' lock of coordina-tion delayed collection. The contract office inappropri-ately parformed finance functions and did not evaluate the contractor,'s ability to pay the debt in one lump sum'before authorizing installments. the Department of Education,'s finance office, we were --At unable to locate 49 of the 970 accounts receivable records selecte'd for review. Finance office staff could-neitherAs locate the files nor tell us the status of each case. long as these cases are missing from the files, collection controls are nonexistent. Some, of these receivables may have been paid and,he files clo~ed. Although the total t s magnitude of the debt in these cases is unknown, we do know that 12 of them involve S733,132. Without monitoring and reviewing the records, however, it is impossible to deter-mine how much has been collected and how much might be lost ~ as a result of the failure to monitor.and control the cases. 'Another problem arises because grantees f requently appeal au-disallowances in whole or in part.~ At some agencies the fi-dit nance offices place appealed cases in a pending status and do not l pursue collection action on them, regardless of'the amount appealed. Therefore, even those portions of.the disallowances that grantee's, _ f have not contested are not pursued until a decision -is' ma~de on the' appeal. Furthermore, when appeals are ultimately withdrawn or re-solved, the appeals boards of ten do not promptly advise' the finance offices of the outcome. In these situations, collections'are fur-i ther delayed. For example: ~ i the Department of Edu. cation, the finance office does not l --At [ resume collection acti,on af ter an appeal until directed ta do so by the program of fice or the ' appeals bo'ard. In June' j the finance section was.. unaware'of several'r~esolved ~

1981,

~ appeals totaling-$101,230 which-had been settle'd in~the Government,'s favor for an_averag.e of 4_ months. -l j --At the Health Care Financing Ad' ministration, HHS,' debts sus ' tained after the appeal were similarly slow'to be collecte.d. The average delay between the appeals board ~ decision and the-

l recovery of debts involving S16,307,698 was nearly a year.-

'{ Several appealed debts that had been upheld, involving ll ~'S8,642,885, remained uncollected for.an average of over 5 months as of August 1981. Furthermore, the' agency does not adequately monitor withdrawn appeals. As of Augus t 1981, officials were not yet awar.e that appeals had been withdrawn and collection should be pursued on two debts of S466,687 I l a'nd S69,945, even though this had been the case for 9 and 8 months, respectively. --The Department of Labor transfers jurisdiction over appealed audits to its Solicitor's Office. However, no debt collec-tion actions'are pursued on uncontested portions. In one 6 ^ j region, a total of S170,621 that was unchallenged had been outstanding an average of 9 months as of July 31, 1981 i 11 I s

t should be disallowed, and established a receivable. After i notification in December 1980, the grantee furnishe'd addi-tional information on the disallowance. Education offi-cials, however, took 9 months to evaluate this information and to decide on a course of action. In September 1981, Education finally decided that the amount due the Govern-ment should be revised to $615,159 and the grantee settled the debt within 1 month of this revision. --In June 1978, the Department of, Transportation issued an audit report quest.ioning costs of 528,995 for overpayments ~ to the same grantee on two projects. Program officials i made the first demand for payment in October 1979, after ) consultation with the grantee and the Department's Chief Counsel. But they took no further action until after we brought the case to their attention.- Then they beg' n cor-r l responding with the grantee to determine the status of th.e' disallowance. The grantee repaid the $28,995 in September p_ 1981, 2 years after the original disallowance. These disallowed amounts were eventually recovered; howeve.r, i we found that agencies still have backlogs of open audit disallow- . The following cases illustrate the 6ngoing problems and e ances. lengthy delays in collecting audit-related debts. ~ ' --Environmental Protection Agency auditors questioned salary and fringe benefit charges of $187,071 in a September 1974 audit report.' It took. ~5-1/ 2~ years, until April 1980, to resolve the~ audit and determine that $177,001 was unallow-The first foll'owup after the disallowance'was in able. July 1980. Thereaft'er the case languished until February 1981, when EPA attached.a condition to a 1981. grant that. required repayment of the debt within 30 days of acceptanc?e_. - l' l

  • The grantee'subsequ'ently proposed a repayment schedule that EPA officials rejected.

EPA officials did not act again ~ l: until October 1981, when they agreed to a revised proposal 1 for, settling the debt by three equal reductions of the ll ..-a grantee's letter of c.redit. EPA agreed not to charge in- ~ l terest if the reductions were made as scheduled.- This debt i has been "in the process" for over 7 years and probably will As not be completely settled for at least another.2 years. we point out in chapter 4, offsetting a grantee's letter of' credit may not. be a' satisf actory settlement. i --In April 1974, Department of Agriculture' auditors found that ? a school district was overreimbursed $1,343,292 because it provided free or reduced-price meals without regard to students' eligibility. In June 1975, a school district of-ficial could not support this action and agreed to repay the amount questioned. No collection action was taken, how-ever, until'4 years later, when Agriculture officials con-tacted the State agency to request payment. In' April 1980, Agriculture officials told the State agency to bill'the i 13 e

ensuring that their subgrantees ehpend CETA (Comprehensive Employ-ment and Training Act) funds only on allowable costs..At other is implied in -he grant requirements. Many agencies this concept Federal agencies also give the grantee responsibility for auditing When its subgrantees and determining whether costs are allowable. the funds spent by subgrantees are for unauthorized expenses, grantee is accountable to the Federal Government for these funds. ' Federal ngencies are not recuiring crantees to repay subgrantee debts promptly Despite the fact that Federal agencies must pursue collection from grantees of funds subgrantees have misspent, Federal agencies do not always do so. Agency officials told us that they frequently / give up on collecting amounts owed the Government because grantees simply refuse to pay for debts owed by their subgrantees.until they [ have received payment _themselves. Of ten these subgrantees are small, community-based, not-f or-profit organizations that use* Fed- '~ l eral funds as their primary, source of money for operation, making it next to impossible to recover nisspent Federal funds, i t ~ I Several examples typify Fe'deral agencies' and grantees' treat-ment of these situations.- --Officials of a city receiving substantial HUD funding' stated the city is not obligated to repay HUD for subgrantee dis - allowances until the city has recovered the money from the subgrantees or taken' all possible legal actions. - According to the City Attorney, the city cannot take responsibility. - for the actions of its subgrantees. We evaluated six audit.s; ' of five subgrantees conducted by the city in which auditors j disallowed $501,000 between April 1974 and September 1979.. As of July 1981, four of the five subgrantees were out of business or defunded by the city, while the.. city had made - no collection and returned no funds to HUD. HUD auditors I reviewed these disallowances in June and July 1980 and ree-ommended that the city repay. HUD. But as of July 1981, HUD. ~ - had taken no action to recover the funds. --At the Department of Agriculture, subgrantee funds totaling S341,000 were disallowed in January 1979 The Department of Agriculture did not immediately pursue the claim against the State grantee since it had not yet recovered any of the funds and was contemplati..g legal action'against the sub-grantee. Finally, Agriculture sent demand letters to the State in February and March 1981; as of September 1981 the debt was still uncollected. i --In still another case at Agriculture, a S16,000 disallow-ance was established against the subgrantee of a State agency. Agriculture, however, did not pursue the claim against the State agency. Agriculture officials told us t I l .2 t

Agenciec should select appropriate, positive etcps to aggres-sively pursue collection in order to comply with the intent of the Claims Collection Act. Agencies have no legal autho,rity to re-f rain from taking action on debts due the United States. They r must take aggressive action to recover these debts, including the i interest accrued on any delinquent debts. (See ch. 3.) CONCLUSIONS Federal practices to collect debts,resulting from audit' find- ' ings need significant improvement. Because of inadequate accounting controls, inadequate monitoring, and the lack of an aggressive col-I lection effort, the Government too often does not collect or other-wise settle amounts it is rightly owed. When amounts are finally collected, they are unnecessarily late and there is no collection of interest or penalities. To remedy this situation, Federal managers must become more concerned with t'he collection of audit-related debts. It is only 4-with management's concern, commitment, and attention that adequate systems of internal control will be established to ensure that (1) the amount of audit-related debt is established quickly, (2) all such debts are promptly'~ brought 6nder accounting control, (3) debts ~ ~ are effectively and aggressively controlled.and monitored until collection, and (4) aggressive action is taken to. collect.from and/or appropriately settle with grantees the audit-related. debts at subrecipient levels. . As we have testified and reported on several occasions, we believe that the-legislation under consideration in Congress-- H.R. 1526, the Financial Managers Accountability.Act, and S.

864, the Financial Integrity Act--would help make internal controls in Federal agencies more effective.

These two bills would require greiter accountabilit'p by~Keads "of" Federal agencies for the effec-tiveness of their organizations' systems of internal. financial con-trol..' RECOMMENDATIONS We recommend that the head of each department or agency im-plement policies and procedures that: --Require a written determination of the allowability of all cuestioned costs within 6 months of audit report issuance. --Ensure establishment of accounts receivable for all dis-allowed. costs within 30 days of the written determination I of indebtedness. --Ensure aggressive collection action in accordance with the Claims Collection Standards, which include written demands for payment at 30-day intervals, affecting the debtor's credit rating, offsetting the debt against amounts due from other Federal programs, and suspension or termination of fundings. 1 l l 17 l 1 P

~ CHAPTER 3 POOR MANAGEMENT PRACTICES CONTRIBUTE TO INEFFECTIVE DEBT COLLECTION [ We noted a number of poor management practices which in our to collect j. opinion significantly contributed to agencies' inability'11y, we audit-related debts promptly and effectively. Specifica i 'noted that i, --agencies are inapp:.priately " forgiving" debts without a reasonable collection effort, --the appeals process provides incentive to grantees to delay payment, and --interest is not charged on delinquent debts. ~I AGENCIES INAPPROPRIATELY TERMINATE DEBTS RATHER THAN COLLECT THEM Federal administrators are empowered to make final decisions on amounts to be recovered from gran. tees and contractors. Their ~ authority, however, is limited. Their decisions must be based on Federal laws, regulations., and the terms of grants and contricts.. A 1978 Comptroller General decision (B-163922, Feb. 10, 1978) dealt with an agency,'s responsi.bility for collecting improper e.xpendi-tures-questioned by auditors.1.It states that without e.xplici.t statutory authority,. an agency cannot waive recovery of -grant funds spent in violatio.n of.its regulations no matter how well-intentioned the grantee may have been. Such expenditures become debts due the. Federal Government and -therefore must b'e recovered as required un- ~ der the'" Claims Collec'tioIn~ S'tandards. 'In spite of this, we'found that. millions of dollars.in d.ebts -rightfully owed the Fed 6ral Gov-ernm'ent are being purposely terminated ra.ther than collected. At the same time the Government is continuing to provide funds to the same organizations-that are misusing Federal funds. .The Department of Agriculture has gone t.o great lengths to avoid collecting mil-lions of dollars it found spent in violation of its own regula-tions. Other agencies have similarly violated the claims Chilec-tion Standards by terminating debts rather than,taking aggressive action to collect them. Department of Agriculture disregards Claims Collection Standards i The Claims Collection Standards require agencies to take ag-i gressive action to collect all claims of the United States arising from their activities. At one regional office of the Department of Agriculture, however, we found a record of confusion and inde-cision spanning several years which ultimately resulted in the .l Department terminating nearly $12 million in debts without,ever ) 19 i 1

m DEET APPERLS PROCESS PROVIDES GRANTEES OPPORTUNITY TO DELAY Another factor that contributes to the Government's poor per-formance in recovering disallowed costs is the process that allows the misuse of appeal rights. When grantees and contractors are faced wi,th paying back audit disallowances, they often appeal in an effort to reverse the agency's decision'or reduce the amount. - An appeal also suspends the billing process until the case is con-sidered and decided. I't provides additionaz time to grantees and contractors who have no, expectations of winning but who want to de-lay payment without penalty. Not only do these appeals delay col-lections but they clog. the appeals system and delay the settlement of legitimate appeals. As a result, millions of dollars are tied up in lengthy appeals which, in effect, provide grantees and con-tractors interest-free loans. While we are in no way questioning the right of appeal, we believe changes must be made in tae process to' discourage groundless appeals and to ensure that legitimate ap-peals are processed without undue delay. Most disallowed costs are appealed The total amount of audit-related debt under appeal is. unknown because agencies do not have adequate systems to' acco.unt' for it. Of the 32 agencies responding to our questionnaire, 16 told us they could not readily provide the amount of unrecovered audit disal-lowances under appeal. At six of the seven agencies where we per-formed audit work, 1/ the amount under appeal was 81 percent ($201 million of $249'-million) of the total. outstanding audit- - related debt at th.ose 1ocations during our review. ~ The appeals process is time consuming-Unresolved appeals cases had been open an average of 18 months at the agencies we audited. J Th'e-time req'uired' to settle appeals varied from a high of 28 months at Education to 12 months at HHS. Several factors contributed to delays in appe'al settlement. ~~ Legal staf f priority is one such factor.. Appeals boards usually-administer the process; however, they of ten must rely on others-to carry out various steps. At any given time, the workload of an agency's office of general counsel determines the availability' of staff to handle appeals. When attorneys are not available, the process is delayed. The structure of the body handling the appeals also influences the timeliness of appeal resolution. For example, at-the Depart-ment of Education, appeals panels must consist of three secretarial appointees. However, - the Secretary of Education had appointed no 1/At HUD we were told the appeals process is not used. l i 21 ~

Intaract chould bo accrued on dobts uncer appeal None of the agencies audited charge interest while cases are under appeal. During' the appeals process, debtors typically retain Federal funds for long periods while a decision is being made on their entitlement to the funds. This 'gives debtors an incentive to file appeals because they can thereby delay payment of their debts at.the Government's expense. We believe a better way to handle' appeals would be to let in-terest accrue on debts under appeal. If the appeal were lost, the amount of the debt plus interest would be due immediately. Not only would this be mere equitable, but it also would serve to dis-courage groundless appeals and help reduce the unnecessary workload of the appeals board, leaving it free to concentrate its efforts on legitimate appeals. While this should u,nquestionably improve the situation, agencies would have to monitor the workload of those involved in the appeals process to ensure quick processing, so appellants are not penalized for agency delays. CHARGING INTEREST ON DELINQUENT DESTS WOULD IMPROVE COLLECTIONS ' Not only does the GovArnment not assess interest while appeals are under consideration; it also does not collect inte' rest.when debts are delinquent and not appealed. T?., Government's failure to coll.ect interest on. delinquent audit-related debts is yet another factor that hinders collection, costs the Government millions of ' dollars, and violates the Claims Collection Standards. Grantees and contractors who cwe money to the Government have.an incentive to delay payment as long as possible. Agencies are not 4ttempting to collect interest because they are not aware of the' requirement or_because they have not developed implementing instrhetions. 7 Regu1ation requires interest charges on delinquent debt and installment payments Until' April 1979, the Federal Claims Collection Standards, allowed agencies considerable discretion in determining whether to~ assess interest charges on delinquent debt and installment pay-ments. H oweve r, in April 1979 the Standards.were revised,. and the provisions regarding assessment of interest were strengthened and made more explicit. The revision requires the cha.rging of interest on delinquent debts as well as debts being paid in installments ac-ccrding to the Treasury Fiscal Requirements Manual, whi ch stipu-lates: "If. payment is everdue, a late charge will be applied and collected a a percentage rate based on the current value of funds t o the T reasury. " 23 9 m.

Furthermore, by n't assessing interest, Fedaral agancies interest. o have given debtors an incentive to pay the Government only after all interect-charging creditors have been paid. CONCLUSIONS Federal agency manage' ment is doing a poor job of collecting the debt.s it establishes as a result of its cwn audit. findings. Some agencies have terminated debts amounting to millions of dol-lars rather than collect them. Other' agencies provide incentives for debtors to appeal audit disallowances at considerable cost to the Government. Virtually all agencies do not collect interest on delinquent debts even though it is a fundamental debt manage-ment principle and a requirement of the claims Collection Standards. Although the cost of this mismanagement cannot be precisely deter-mined, we believe it is very costly. Furthermore, we believe this mismanagement serves as an invitation to abuse by those 4to can benefit from such practices. Decisive and meaningful actions by top' management are needed to stop the flagrant disregard of the ~- Claims Collection Standards. l RECOMMENDATIONS We therefore recommend that the head of each department and agency implement policies and procedures that: t --Ensure compliance with the ' Claims Collections Standards to preclude the -termination. of any debts over $20,000 and en-sure that.a.ll' Claims. Collection Standards concerning com-promise and termination are met before settling debts of S20,000 or less. - --Streamline the. audit disallowa'nce appeal process to. ensure that unnecessary. delays are eliminated.and that interest is charged on-all. amounts under appeal. --Require interest to be charged'and collected on all debts, at the rate specified by the Treasury Fiscal Requirements Manual, beginning no later than 30 cays from establishment of the debt and continuing until collection or final dis-i. position. We further recommend that the Director, ' Office of Management and Budget incorporate this requirement into the management cir-cular on audit resolution and follow up to ensure that agencies are complying 9 8 0 25 e -1.---,.-n--, e-,-,- ....,-.n--. ,,..w, --,..w. ..e. .,m,-.-,,

a 4

,-c.-

reported it' collected 5119 million of. a total of $168 million in audit-related debts over the last 3 years through offect. Two cassa wa found at HUD illustrate how offset can be incquitable. 1 --HUD disalloweda S22,495 for ineligible costs of a subgrantee. l' When the county grantee delayed paying the debt,- HUD threat-ened to reduce the n. ext year's grant by.the disallowed amount. County officials found this to be a good option because they told us they would rather have the,HUD program reduced than spend county general revenues to maintain it. --HUD disallowed S2.5,880 for ineligible expenditures by a subgrantee in t'ovember 1979 In Februaiy 1980,'the city grantee received partial payment of SB,500 from the sub-grantee, but it was unable to obtain the remainder. In June 1980, the city paid.the entire disallowance to HUD by reducing its HUD lettar of credit. ,As of July 1981, the 3 city still had not been able to obta'in the remaining 517,380 from the subgrantee. This subgrantee continues to be, funded in full by the city while other subgrantees are short ~~ $17,380.. PERFORMANCE LEVEL MAY NOT'BE MAINTAINED WHEN DEBTS ARE PAID IN CASH Regardless of the method agencies use to recover audit di's-allowances, the recovery should not reduce the performance ' level of the program. This' principle 1 applies when the repayments are made with cash, regardless of the source of these funds. All in- ~ 1 volved program performance must be maintained.- ~- Treasury Circular 1075 requires. grantees receiving advance funds to draw only_what they need for the program when they need it._ Acceptance of the letter of credit by a grantee means it ac-cepts these conditions as well. Accordingly, withdrawals for pur-posks such as payment of debts resulting from other programs are prohibited. Since laterest is not charged on advances, to ndsuse the advance authority in'such a fashion results in an i'nterest-free loan to the grantee from.the unsuspecting Federal Government. In, fact, during our review we found that a subgrantee, paid disallowed ~ costs to HUD by endorsing a check it had received for 'th'e CETA pro-HUD to verify that performance was maintained.on their res, Labor or gram from the Department of Labor. No e.ffort was made by pective programs. Most agencies make no attempt to assure themselves that the payment of the. debt will not adversely affect the intended objec-tives of the Federal assistance. Agency officials told us either that they were not, concerned about the source of funds used to pay grantee debts or that they had no way of determining the source. For example: --HUD officials acknowledge they cannot be assured that repay-ment of audit-related debts by grantees and sabgrag. tees comes from non-Federal funds. 27 a l l - -, - -.. - - - _ ,_;;.-.__..,;.._,,_, ; n._

I APPENDIX I ca m tz w m c2 r 2s MhETY 5EVEhTH CONGRESS Cohgres of tfjc Unitch states ~ J!)ouse of Reprzsentatihis LEGISI.ATION AND NATIONAL SECURIT' SUBCOMMITTEI or Twt COMMITTEE ON GOYERNMENT OPERATIONS R/vouan Houst omcc Buttninc, Acow B.373 WAsMINGTON. Q.C. 20$t5 October 20, 1981 Mr. Charles 1. Bowsher Co=ptroller General U.S. Ceneral Accounting Of fice 441 C Street, N.W. Vashington, D.C. 20548

Dear General:

In March 1979, this Subcommittee held the first in a series of hearings on, the failure of Tederal depart =ents and agencies to follow-up and resolve audit findings. More recently the Subco==1ttee conducted a follow on review and held hearings in February, June, and July 1981'on the continued failure by these same agencies to take ef fective action on audit -findings. CAO has been most helpful to us throughout this period and I-look forvard to our continuing to work together to i= prove zzsage=ent in government. Repeatedly during the Subcom=ittee hearings, the =atter of collection i procedures over audit disallowances was raised as an area where serious deficien-- cies' appeared to exist. Therefore, I was particularly pleased to learn, as expressed in =y letter to Mr. Staats on June 10, 1980, of the CAO review undervay .t.xa=ining federal departments' and agencies' collection procedures over audit disailevances. In that same letter' I also expressed my hope that the reviev vould be given prinzity and that the Subce==ittee vould be kept informed of its progress. As I understand, members of your Accounting and Financial Management Division recently briefed my staf f on the prelicinary results of this review. Because of, v the deficiencies and significant proble=s uncovered in Tederal agencies' audit disal-lovance collection procedures, the Subco=cittee hopes to schedule hearings on the results of your findings in cid-February. So that we can properly study the results of your findings and prepare for the likelihood of these hearings, I vould appreciate having a draf t of your report by the third week in January. Thank you for your cooperation. Sincerely, e I IACK BROOKS ir:an 29 i A I*

t RENRIE MAGNI'IUDE OF AUDIT DISAIHHAPEES (note a) Iba long outstanding Disa11oved costs 1 year to 2 years to 3 years to outstanding as Less than less tlun less than less than 4 years , hjency_ 2 years 3 years 4 years or note of June 30, 1981 1 year (thousands) (percent) Degurbient of Agriculture Dquetnent of Comerce Dqurtnent of Defense b/Does not agply $ 71,203 Dqurtnent of Eatication (note x) 10,900 3J 50 14 2 I Ih tut tps nt of I'.nergy Dqurtnent of Ilealth arxl litamn Services ,156,455 38 28 6 3 25 IMparbient of Ilousing and' Urban Development l c]. 42,200 1 3 0,400 47 15 34 Dqurtnent of the Initerior 7,020 65 27 4 'l 4 Departnent of Justice ' 52,712 74 10 16 Departuent of Labor 733 Dqurtnent of State 322 ef Varies by division Degurtnent of Transportation (note x) df Ibie Dqurtnent of the Treasury 194 38 40 3 11 w Environnental Protection Agency 1, 520 H /CTICri thie General Services Mninistration National Aeronautics arvi Space Adninistrationi thie Small Business Adntinistration veterans Adninistration' ' International Conuunications Agency 101 17 03 37 100 Natiorul Science Fourxlation '(note x) e, ' None a Nuclear Regulatory Comnissi,on 19,665 33 34 11 11 11 Of fice of Personnel' Managenent lble S:nithsonian Institution 30 100 Civil Aeronautics Board. None Constaner Product safety Connission a o 306 13 6 01 11gual Diploynent Ogportunity Connission ',{ _C/ ' ', ',1,260 Federal Darrgency Management Agency 47. 1 00 19 J-tejal Services Corporation i None Natiosul Erxiowment for the llunnnities 100 6 Tennessee Valley Authority 1610 Unitel States 1bstal Service

  • 1btal S373,999

'No data available. g s

I i I .i .: s.. 4.. DISALIIMED COSTS APPEALCD AND Sisi'11ED, BY tRNBCR OF CASES Time fran appeal to settlement 6 nonthe 6 nonths 1 to 2 2 to 3 Hore than or less to 1 year years years 3 years Agency

.- (percent)

--- = 4 Detxtrbrent of Agriculture Deparumnt, of Comerce - Deparumnt of Defense Deixiruient of Education (note x) 7 26 27 30 10 1, De}xtrtnent of Energy Ikturtnent of Ilealth and 11uman Services None IMpirtnent of Ilousing and Urban Developnent' Deixirbient of the Interior 4 j Departnent of Justice Deparuient of Imbor j Departnent of State d,e/ Varies by div. Departnent of Transportation (note x) j Department of the Treasury - 47 36 17 ACTION Environmental Protection Agency' h/ None General Services Adminintration 27 21 24 10 18 National Aeronautics art Space. Administration g None Srrall Business Administration Veterans Administration None International Comunica,tions Agency 33 67 National Science Foundation (note x) None 23 23 39 15 Nuclear Regulatory Connission Office of Personnel Managenent None Smithsonian Institution Civil Aeronautics Doard None' Consuner Product Safety Ccmnission 100 None I' qual Diployuent Opportunity Connission. Federal Diergency Managenent Agency Legal Services Corporation Node Nono-National Endcatent for the ilumanities 50 50 Tennessee Valley Authority United States Postal Service

  • No data available.

i t I l is-i l-STA'IUS'OF 00STS DISAlmfEI) EURIta) FISCA1,1970,1979, Arc 1900 (AS OF JttE 30, 1901) 1btal hvount of Disallowed (bets in A rpestionest Date:wirmt on Determined twi costs estab-knots of egysal basis other Stitt Still cut-11shed as Itecovered as to be not Written off as than agpast to outstanding stasalinrj asil disallowed .of 6/30/81 a debt uncollectible be not. a debt as of 6/30/81 ursler aggval b N N N N N Ap.cy (uou. amis) liegurtwnt of hjrlaatture g LAgua tweit of Conngrce Ih gurtment of Defense . h.1/ Nans 1, $44,9q,3 $ 76,623 $ 20,156 $503 Degurtment of n'ducation (note a) $ 9.127 tygurtment of i:nergy J/ 16,100 j/ 7,053 th gurtnent. of licalth an! Ihnen Se-vlees - 262,603 179,815 $2.296 217 $11,406 82,700 63,915 135,300 Degurtru nt of Inousirvy azul Urtnn Dawslopnent , f 36,000. k 55,200 thgurtment of the Interior 3,661 k 41,005 th guitment of Justice _/. thine te. ut. of twitor d J,564

  • t/I' J,292'

, d,1f 31 df - g df 153 .1/ ess i s......i..i ra.,i o la ltigus twnt of Tranuportatt(si (riote u) t ~ .: 155 jf 155 ./. On th puen.. sit tt' thu Trsnuusy 250 ' 75 02 90 34 Wrlm 31,309 tnviruwental Psutection Agency g 40,091 g 15,356 I 1 Ceneral Services Aanintstration t:4tiosut Aeronautics arul Space Mainistratlor Siroll tiusiness Mainistration Veteraris Mainistratlon 100 6 101 Interratiosul (bne.unications Agency Naticmal Science Fousukiticn (note x) Nasa tuclear ite.platory Chrraission 8.740 4.9 32 11,955 2,439 776 of fice of Perscrinet tsarm9enent 44 44 Sanithsonian Institution 36 35 Civil Aeroinutics Donrd Hase Constamir Prodect Safety Canmission 306 314 306 typal utiloyieent Ogrottunity conmission g 29 M i: 61 g 6.061 47 47 35 r.nl.rrat Inier.pney tsuwpnent Agency 8 tcyit Eurvices Corporattori ', 17 15 1 Naticnal thk.narent for the lksunities Tcwwwssee Valley Autlerity ,7,068 7,191 ,677 (Mittwa States 5%taE Service $t1,406 3705,122 st2% 563 ymt (rote y; $652,374 $277,695 s3,062 $g -i .tu.sai4 avulaw,to. 9 5 e e e I

t L RDE)VERIES BF11UENED 'IO ' DIE TREASURY AND INTEREST OXLDCTED Anrunt of recovered cash Anount of interest returned to U.S. Treasury collected on disallcwed Agency as of June 30, 1981 costs-as of June 30, 1901 (thousands)-- -Departnent of Agriculture Departnent of Camerce (y) Departnent of Defense b,i/ Does not apply Departnent of Education (note x) $ 6,541 Departnent of Energy Does not apply (y) Departnent of Ilealth and litsinn Services 6,015 -u/$3,173 Departnent of Ilousing and Urban Deveicpient (y) }, Departnent of the Interior (y) Departnent of Justice Departnent of Labor Departnent of State Departnent of Transportation (note x)

  • df 2,641 Departnent of the Treasury ff 114 (y) 47 (y)

AcrION Environmental Protection Agency 1 (y) General Services Adntinistration National Aeronautics and Space Adninistration Small Dusiness Administration Veterans Adninistration I International Connunications Agency None (y) National Science Foundation (note x) (y) Nuclear Regulatory Ccsimission Does not a[ ply Office of Personnel Managenent (do.) Smithsonian Institution (y) Civil Aeronautics Board Constater Product Safety Comnission (y) (y) Equal Diployment Opportunity Connission Federal Dtergency thnagement Agency (y) *

  • None (y)

Legal Services Corporation o. National Endomnent*for the IIUnanitiles 15 Tennessee Valley Authority (y) (y) United States Ibstal Service $15,374 uj$3,173 Total

  • No data availab1'e.

+ Footnotes to appendix II (cont.) k/ No data available for 1978. 1/ The Department of Labor states that it will be able to develop this information in the future. m/ The Environmental Protection Agency had no accounts receivable subsidiary ledger before fiscal 1980. The data provided covers eight of the EPA regions and shows as of March 31, 1980, the status of collections of disallowed costs from audit reports issued in fiscal 1979 and the first 6 months of fiscal 1980. n/ Figures for the Federal Emergency Management Agency cover ths period April 1, 1980, through September 30, 1980, only. No data are av'ailable for earlier periods, o/ Grantess, restored amount's to program bank accounts. o/ At the Department of Energy the audit followup system does not indicate how disallowed. costs are recovered. In most cases, the amounts are recovered by offset to an invoice or current letter of credit. g/ Reimbursement to program account (applicable to Office"of Human Development Services only). . f/ Deducted from another pay project request. s/ Of fset against a current billing. " t/ Funds were returned in July 1981. 'u/ Of $3,173,000 in interest reported as collected by HHS, only' $3,100 was.actually interest. The rest was. the. principal re-paid on one audit disallowance.- v/ Agencies do not charge interest on disallowed costs.. (See app. III, p., 45.) w;/ Amount settled is not the total of columns entitled " Settled in favor of Government ** and " Settled in favor of auditee" be-cause of inconsistent or incomplete agedcy responses. I x,/ Subsequent to our writing the report, additional data were re-ceived from the Department of Education, the National S'cience Foundation, and two administrative divisions of the Department of Transportation (Federal Railroad and Federal Highway Adminis-trations). We did not include these data in the report. [ g/ Columns 3 through F do not total to column A due to inconsist-l ent or incomplete responses from agencies. 39 9 .}}

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