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Report to the Honorable Byron L. Dorgan, U.S. Senate:

March 2004:

CRIMINAL DEBT:

Actions Still Needed to Address Deficiencies in Justice's Collection 
Processes:

GAO-04-338:

GAO Highlights:

Highlights of GAO-04-338, a report to the Honorable Byron L. Dorgan, 
U.S. Senate

Why GAO Did This Study:

In July 2001, GAO reported that outstanding criminal debt, as reported 
in Department of Justice (Justice) statistical reports, had increased 
from about $6 billion as of September 30, 1995, to more than $13 
billion as of September 30, 1999. Although some of the key factors 
that contributed to this increase were beyond Justice’s control, GAO 
concluded—after accounting for such factors—that Justice’s criminal 
debt collection processes were inadequate. Accordingly, in the 2001 
report, GAO made 14 recommendations to Justice to improve the 
effectiveness and efficiency of its criminal debt collection 
processes.

To follow up on the 2001 report, GAO was asked to (1) provide 
information on the amount and growth of criminal debt for fiscal years 
2000 through 2002, (2) examine the extent to which Justice has acted on 
GAO’s previous recommendations, and (3) review Justice’s collection 
efforts for selected criminal debt cases related to white-collar 
financial fraud. This report addresses the first two objectives; GAO 
will report separately on its ongoing work to address the third.

What GAO Found:

Justice reported an unaudited amount of total outstanding criminal 
debt of about $25 billion as of September 30, 2002, almost double when 
compared to Justice’s unaudited amount from 3 years earlier. This 
increase, which was not unexpected, continued a trend that began in 
fiscal year 1996. A primary factor contributing to the increase is a 
mandate that requires restitution to be assessed regardless of the 
ability of the offender to pay. As we reported in 2001, collections as 
a percentage of outstanding criminal debt averaged about 7 percent for 
fiscal years 1995 through 1999. As indicated in Justice’s unaudited 
records, because collections decreased slightly while debt increased, 
collections as a percentage of outstanding debt declined to an average 
of about 4 percent for fiscal years 2000, 2001, and 2002. For each of 
these 3 fiscal years, according to Justice’s unaudited records, about 
two-thirds or more of criminal debt was related to white-collar 
financial fraud.

Justice has made progress responding to GAO’s 2001 recommendations 
related to criminal debt collection, but not to the degree that had 
been expected. A key recommendation in 2001 was for Justice, the 
Administrative Office of the U.S. Courts, the Office of Management and 
Budget, and the Department of the Treasury to work as a joint task 
force to develop a strategic plan that addresses managing, accounting 
for, and reporting criminal debt. As of mid-December 2003, Justice had 
not yet worked with these other agencies to develop this plan. We also 
made 13 interim recommendations to Justice to help improve the 
efficiency and effectiveness of criminal debt collection while the 
strategic plan was being developed. Since July 2001, Justice has 
completed action on 7 of these recommendations; actions to address 4 of 
the 7 were completed about 2 years after GAO made them. Actions to 
address the remaining 6 interim recommendations are in process.

According to Justice, GAO did not fully recognize its progress in 
improving the criminal debt collection process. GAO said that it had 
given Justice full credit for its efforts to implement the 2001 
recommendations, as well as for some related efforts outside the scope 
of those recommendations. GAO noted, however, that Justice had not yet 
led efforts to resolve key jurisdictional issues and functional 
responsibilities. While acknowledging that Justice was laying the 
foundation for improved collections by establishing policies and 
procedures in response to certain of the interim recommendations, GAO 
noted that it is important that the new policies and procedures be 
effectively implemented and that it will likely take some time for 
collection results to be realized from full implementation.

Until Justice takes action to fully implement these recommendations, 
Justice’s management processes and procedures will not provide 
adequate assurance that offenders are not afforded their ill-gotten 
gains and that innocent victims are compensated for their losses to the 
fullest extent possible.

What GAO Recommends:

While GAO is not making any new recommendations in this report, it 
reaffirms those made in 2001 for which actions have not been 
completed.

www.gao.gov/cgi-bin/getrpt?GAO-04-338.

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Gary T. Engel at (202) 
512-3406 or engelg@gao.gov.

[End of section]

Contents:

Letter: 

Results in Brief: 

Background: 

Scope and Methodology: 

Criminal Debt Has Increased Markedly, but Collections Have Decreased 
Slightly: 

Prompt Action Has Not Been Taken to Address the Majority of 
Recommendations: 

Conclusion: 

Agency Comments and Our Evaluation: 

Appendix:

Appendix I: Comments from the Department of Justice's Executive Office 
for United States Attorneys: 

GAO's Comments: 

Table: 

Table 1: Status of Recommendations from the July 2001 Criminal Debt 
Report: 

Figures: 

Figure 1: Criminal Debt Outstanding and Collected for Fiscal Years Ended 
September 30, 1995, through September 30, 2002: 

Figure 2: Justice's Total Criminal Debt and White-Collar Financial Fraud 
Debt Outstanding as of September 30, 2000, 2001, and 2002: 

Figure 3: White-Collar Financial Fraud Debt Outstanding and Collected 
for Fiscal Years Ended September 30, 2000 through 2002: 

Letter March 5, 2004:

The Honorable Byron L. Dorgan: 
United States Senate:

Dear Senator Dorgan:

In July 2001, we reported that the Department of Justice (Justice) and 
certain other federal agencies needed to take a number of actions to 
improve the federal government's criminal debt collection 
efforts.[Footnote 1] We reported that outstanding criminal debt, as 
reported in Justice's U.S. Attorneys' statistical reports,[Footnote 2] 
had increased from about $6 billion as of September 30, 1995, to over 
$13 billion as of September 30, 1999. We noted that four key factors, 
some of which were beyond Justice's or probation offices' control, 
contributed to the significant growth in the amount of reported 
uncollected criminal debt: (1) the nature of the debt, in that it 
involves criminals who may be incarcerated or have been deported or who 
have minimal earning capacity; (2) the assessment of mandatory 
restitution regardless of ability to pay as required by the Mandatory 
Victims Restitution Act of 1996 (MVRA);[Footnote 3] (3) interpretation 
by Justice's Financial Litigation Units (FLU) of payment schedules set 
by judges which limit collection activities; and (4) state laws that 
may limit the type of property that can be seized and the amount of 
wages that can be garnished.

However, we also pointed out Justice could do more to improve the 
collection of criminal debt. We noted as contributing factors to the 
growth of reported uncollected criminal debt Justice's inadequate 
policies and procedures for collecting criminal debt, lack of adherence 
to established criminal debt collection procedures at certain Justice 
districts, and Justice's insufficient coordination with other entities 
involved in the collection of criminal debt. After taking into account 
the factors that were not controllable, we concluded that Justice's 
management processes and procedures did not provide assurance that 
offenders were not afforded their ill-gotten gains and that innocent 
victims would be compensated for their losses to the fullest extent 
possible. We observed that until top management at Justice and the U.S. 
Courts placed a higher priority on ensuring that the entities involved 
in the criminal debt collection process more effectively and 
efficiently pursued collection efforts, the assessment of criminal 
fines and restitution as an effective punitive tool would be 
jeopardized, and valuable, limited resources would continue to be 
wasted on duplicative efforts. Accordingly, we made 14 recommendations 
to Justice and several to the Administrative Office of the U.S. Courts 
(AOUSC) to improve the effectiveness and efficiency of the federal 
government's criminal debt collection processes.

In your request letter and our subsequent discussions with your office, 
you asked us to (1) provide detailed information on the amount and 
growth of criminal debt for fiscal years 2000 through 2002, including 
specific amounts related to white-collar financial fraud; (2) examine 
the extent to which Justice has acted on our previous recommendations 
to it to improve criminal debt collection; and (3) review Justice's 
collection efforts for selected criminal debt cases related to white-
collar financial fraud. This report addresses the first two objectives. 
We will report separately on the results of our ongoing work, which 
addresses the third objective.

Results in Brief:

Justice reported an unaudited amount of total outstanding criminal debt 
of about $25 billion as of September 30, 2002, almost double when 
compared to Justice's unaudited amount from 3 years earlier.[Footnote 
4] This increase, which was not unexpected, continued a significant 
upward trend that started in fiscal year 1996, the year MVRA was 
enacted. According to Justice officials, nonfederal restitution 
stemming from MVRA's mandatory restitution requirements was the major 
component of criminal debt outstanding as of September 30, 2000, 2001, 
and 2002. Justice's unaudited records showed that nonfederal 
restitution accounted for about 70 percent of total reported criminal 
debt as of September 30, 2002. As we reported in 2001, the rate of 
criminal debt collection averaged about 7 percent for fiscal years 1995 
through 1999. Due to a significant increase in debt and a slight 
decrease in collections as indicated in Justice's unaudited records, 
this rate decreased to an average of about 4 percent for fiscal years 
2000, 2001, and 2002. For each of these more recent 3 fiscal years, 
according to Justice's unaudited records, about two-thirds or more of 
criminal debt was related to white-collar financial fraud.

Justice has made progress in responding to our recommendations, but not 
to the degree we would have anticipated. As we reported in 2001, 
building and sustaining the capacity to address the long-standing 
problems in collecting outstanding criminal debt--including overcoming 
fragmented processes and lack of coordination--will require a united 
strategy among the entities involved. Therefore, we recommended that 
Justice, AOUSC, the Office of Management and Budget (OMB), and the 
Department of the Treasury (Treasury) work together in the form of a 
joint task force to develop a strategic plan that addresses managing, 
accounting for, and reporting criminal debt. As we recommended, this 
strategy should include (1) determining the collectibility of 
outstanding criminal debt amounts so that a meaningful allowance for 
uncollectible debt can be reported and used for measuring debt 
collection performance and (2) ensuring that relevant criminal debt 
information is reported and/or disclosed in applicable executive branch 
agencies' financial statements and subjecting such information to 
audit. We previously noted that proper accounting for, reporting, and 
managing of criminal debt would heighten management awareness and 
ultimately result in a more effective collection process. However, as 
of the completion of our follow-up fieldwork in mid-December 2003, 
Justice had not yet worked with these other agencies to develop the 
strategic plan, which was a key recommendation. We also made 13 interim 
recommendations to Justice to stem the growth of reported uncollected 
criminal debt while Justice and other agencies worked to develop the 
strategic plan. Since July 2001, Justice has completed action on 7 of 
the interim recommendations. Actions to address 4 of these 7 
recommendations were completed about 2 years after we made them; 
actions to address the remaining 6 are still in process.

Justice's own criminal debt information, which shows that debt has 
increased markedly while collections have decreased slightly, strongly 
supports the need for prompt and decisive management action to ensure 
full implementation of our prior recommendations. Until such action is 
taken, including forming a joint task force with AOUSC, OMB, and 
Treasury and developing the strategic plan, the effectiveness of 
criminal fines and restitution as a punitive tool may be diminished, 
and Justice's management processes and procedures will not provide 
adequate assurance that offenders are not afforded their ill-gotten 
gains and innocent victims are compensated for their losses to the 
fullest extent possible.

Justice stated that we had not fully reflected its efforts to improve 
the criminal debt collection process. As discussed in the "Agency 
Comments and Our Evaluation" section at the end of this report and in 
the more detailed analysis in appendix I following our reprinting of 
Justice's comments, we believe that the report accurately depicts 
Justice's efforts to respond to the recommendations made in our July 
2001 report to improve criminal debt collection.

Background:

Justice is responsible for collecting criminal debt and has delegated 
operating responsibility to its FLUs within all of Justice's U.S. 
Attorneys' Offices (USAO).[Footnote 5] Justice's Executive Office for 
United States Attorneys (EOUSA) provides administrative and operational 
support, including support required for debt collection, to the USAOs. 
The criminal debt collection process typically begins when an offender 
is convicted and a judge orders the offender to pay a fine or 
restitution. In addition to Justice, the U.S. Courts and their 
probation offices may assist in collecting monies owed. AOUSC provides 
national standards and promulgates administrative and management 
guidance, including standards and guidance required for debt 
collection, to the various U.S. judicial districts. The courts 
typically receive payments of fines and deposit them in the Crime 
Victims Fund.[Footnote 6] Both the courts and certain FLUs receive 
restitution payments, which are disbursed to the applicable victims or 
entities as directed by the courts.

In our 2001 report, we noted that collection of outstanding criminal 
debt was a long-standing problem, with many of the problems cited 
similar to problems that we reported on back in 1985.[Footnote 7] Aside 
from the question of whether those convicted had earnings or assets 
with which to pay fines or restitution, a number of other factors make 
collection difficult. These factors, listed below, remain applicable 
today:

* Criminals may not be willing to comply with the law. Forcing 
compliance is difficult because criminals are already convicted 
offenders who may be serving time in prison or may have been deported.

* Imprisoned offenders have limited earning capacity, making potential 
collections limited.

* A significant amount of time may pass between offenders' arrest and 
sentencing, thus affording opportunities for offenders to hide 
fraudulently obtained assets in offshore accounts, shell corporations, 
family members' names and accounts, or other ways.

* MVRA requires that assessment of restitution be based on actual loss 
and not on an offender's ability to pay. Therefore, depending on the 
nature of the crime, collection of the total restitution assessed may 
be unrealistic from the outset.

* According to 18 U.S.C. section 3613 (2000), most criminal debts must 
remain on the books for 20 years plus the period of the offender's 
incarceration and cannot be "written off" prior to the expiration of 
those periods unless the debtor is deceased or the court approves a 
petition of remission filed by USAO. Even if Justice determines that 
certain criminal debts, or a large percentage of them, are not 
collectible, these debts must remain on the books.

Scope and Methodology:

To provide detailed information on the amount and growth of criminal 
debt, including specific amounts related to white-collar financial 
fraud, we obtained information from Justice on the amount of (1) 
outstanding criminal debt as of the end of fiscal years 2000, 2001, and 
2002 and (2) related collections for each of these 3 fiscal years. This 
information has not been audited. However, we reviewed the trends in 
the amounts and growth of overall criminal debt for these fiscal years. 
Specifically, we analyzed trends in major components of the debt and 
reasons for the changes and compared them to similar trends that we had 
assessed and discussed in our 2001 report. We also discussed the trends 
with appropriate Justice officials and compared overall criminal debt 
information provided by those officials to information in existing 
published Justice reports, when available. We worked with Justice 
officials to identify the criminal debt categories in Justice's 
information systems that Justice considers to be white-collar financial 
fraud.

We obtained an understanding of the key automated information systems 
Justice uses to track criminal debt amounts and related collections 
through discussions with Justice officials and review of pertinent 
documents that describe the systems. We also discussed with Justice 
officials and obtained appropriate documentation supporting 
reliability testing performed by Justice on these systems.

To evaluate actions Justice has taken to implement our previous 
recommendations, we obtained and reviewed pertinent Justice documents, 
including correspondence to certain congressional committees related to 
our 2001 report, relevant memorandums, summaries of work performed, 
proposed actions, revised policy and procedures manuals, and other 
related materials and correspondence. We discussed the documents 
provided by Justice and the status of implementation of each of the 
recommendations with an appropriate Justice official.

We conducted our review from March 2003 through mid-December 2003 in 
accordance with U.S. generally accepted government auditing standards.

We requested written comments on a draft of this report from the 
Attorney General or his designated representative. Justice's letter is 
reprinted in appendix I.

Criminal Debt Has Increased Markedly, but Collections Have Decreased 
Slightly:

Justice reported an unaudited amount of total outstanding criminal debt 
of about $25 billion as of September 30, 2002, almost double when 
compared to Justice's unaudited amount from 3 years earlier. This 
marked increase over the 3-year period continued a significant upward 
trend that started in fiscal year 1996, the year MVRA was enacted. 
Given MVRA's requirement that restitution be assessed regardless of the 
criminal's ability to pay, the significant increase in the balance of 
reported uncollected criminal debt was not unexpected. According to 
Justice's unaudited records, collections relative to outstanding 
criminal debt averaged about 7 percent for fiscal years 1995 through 
1999 and decreased to an average of about 4 percent for fiscal years 
2000, 2001, and 2002. For each of these latter 3 fiscal years, 
according to Justice's unaudited records, about two-thirds or more of 
the criminal debt was related to white-collar financial fraud.

As shown in figure 1, Justice's reported criminal debt outstanding 
totaled approximately $16 billion, $20 billion, and $25 billion as of 
September 30, 2000, 2001, and 2002, respectively. Criminal debt owed 
consists primarily of fines and federal and nonfederal 
restitution[Footnote 8] related to a wide range of criminal activities, 
including domestic and international terrorism, organized drug 
trafficking, firearms crimes, and white-collar financial fraud. 
According to Justice officials, nonfederal restitution stemming from 
MVRA's mandatory restitution requirements was the major component of 
criminal debt outstanding as of September 30, 2000, 2001, and 2002. 
Justice's unaudited records showed that nonfederal restitution 
accounted for about 70 percent of total reported criminal debt as of 
September 30, 2002. This proportion is generally consistent with what 
we found for fiscal year 1999, which we reported in our 2001 report. At 
that time, about 66 percent of outstanding criminal debt as of 
September 30, 1999, was nonfederal restitution debt.

According to Justice's unaudited records, collections of outstanding 
debt did not increase, and in fact fell slightly, over this 3-year 
period. As shown in figure 1, collections for fiscal years 2000, 2001, 
and 2002, totaled about $1 billion, $800 million, and $800 million, 
respectively, or an average of about 4 percent of outstanding debt for 
the 3 years. In our 2001 report, we reported that criminal debt 
collection averaged about 7 percent for fiscal years 1995 through 1999.

Figure 1: Criminal Debt Outstanding and Collected for Fiscal Years 
Ended September 30, 1995, through September 30, 2002:

[See PDF for image]

Note: EOUSA data used for this figure are unaudited.

[End of figure]

As shown in figure 2, a major component of criminal debt was debt 
related to white-collar financial fraud, which, according to Justice's 
unaudited records, totaled about $11 billion, $13 billion, and $17 
billion as of September 30, 2000, 2001, and 2002, respectively, or 
about two-thirds or more of overall outstanding criminal debt at the 
end of each of these years. White-collar financial fraud debts included 
fines and restitution related to fraud against business institutions, 
antitrust violations, bank fraud and embezzlement, bankruptcy fraud, 
computer fraud, consumer fraud, federal procurement fraud, federal 
program fraud, health care fraud, insurance fraud, and tax fraud. Also 
included were debts related to corporate financial fraud, which, as of 
the date of completion of our fieldwork, consisted of fines and 
restitution related to advance fee schemes,[Footnote 9] commodities 
fraud, securities fraud, and other investment fraud. According to 
Justice's unaudited records, as was the case for criminal debt overall, 
the major component of white-collar financial fraud debt for each of 
the 3 fiscal years was nonfederal restitution, which accounted for 
about 80 percent of the white-collar financial fraud debt as of 
September 30, 2002.

Figure 2: Justice's Total Criminal Debt and White-Collar Financial 
Fraud Debt Outstanding as of September 30, 2000, 2001, and 2002:

[See PDF for image]

Note: EOUSA data used for this figure are unaudited.

[End of figure]

As shown in figure 3, according to Justice's unaudited records, 
collections of debt related to white-collar financial fraud, while 
increasing, have remained low when compared to total white-collar 
financial fraud debt outstanding. Such collections totaled about $300 
million, $400 million, and $600 million for fiscal years 2000, 2001, 
and 2002, respectively.

Figure 3: White-Collar Financial Fraud Debt Outstanding and Collected 
for Fiscal Years Ended September 30, 2000 through 2002:

[See PDF for image]

Note: EOUSA data used for this figure are unaudited.

[End of figure]

Prompt Action Has Not Been Taken to Address the Majority of 
Recommendations:

Justice has not taken timely action to address all of the 
recommendations we made to it in July 2001, which were designed to 
improve the effectiveness and efficiency of Justice's criminal debt 
collection processes. Specifically, Justice has not taken action along 
with certain other agencies to develop a strategic plan for criminal 
debt collection, which was a key recommendation. In addition, since 
July 2001, Justice has completed action on only 7 of the 13 interim 
recommendations that were made to stem the growth of reported 
uncollected criminal debt while Justice and certain other agencies 
worked to develop the strategic plan. Actions to address 4 of these 7 
recommendations were completed about 2 years after we made the 
recommendations, and actions to address the remaining 6 interim 
recommendations are still in process. One indication of Justice's level 
of resolve to expeditiously improve collection success is the 
timeliness of a required response to the Congress. Heads of federal 
agencies are required to submit a written statement within an 
established time frame to certain congressional committees on actions 
taken in response to recommendations we make in a report.[Footnote 10] 
Justice did not submit its statement until 2 years after the date of 
our report, after we had made inquiries about the status of the 
statement and Justice's progress in implementing our recommendations.

Justice Has Not Developed a Strategic Plan with Certain Other Agencies:

In our 2001 report, we emphasized that addressing the long-standing 
problems in the collection of outstanding criminal debt required a 
united strategy among the entities involved with the collection 
process. In addition to identifying a need to work closely with the 
U.S. Courts to coordinate criminal debt collection efforts, we stated 
that leveraging OMB's and Treasury's current central agency roles could 
result in effective oversight of the collection of criminal debt. For 
example, a primary function of OMB as a central agency is to evaluate 
the performance of executive branch programs and serve as a catalyst 
for improving interagency cooperation and coordination. In its central 
role, OMB is also responsible for reviewing debt collection policies 
and activities. We also noted that Treasury has a central agency role 
in implementing certain provisions of the Debt Collection Improvement 
Act of 1996, which would allow it to help Justice identify the types of 
delinquent criminal debt that would be eligible for reporting and 
referral to Treasury's offset program (TOP).[Footnote 11]

To promote a united approach to collecting outstanding criminal debt, 
we recommended that the Attorney General work with the Director of 
AOUSC, the Director of OMB, and the Secretary of the Treasury in the 
form of a joint task force to develop a strategic plan to improve 
criminal debt collection processes and establish an effective 
coordination mechanism among all entities involved in these processes. 
We stated that the strategy should address managing, accounting for, 
and reporting criminal debt. We also stated that the strategy should 
include (1) determining an approach for assessing the collectibility of 
outstanding amounts so that a meaningful allowance for uncollectible 
criminal debts can be reported and used for measuring debt collection 
performance and (2) having OMB work with Justice and certain other 
executive branch agencies to ensure that these entities report and/or 
disclose relevant criminal debt information in their financial 
statements and subject such information to audit.

It is important to reemphasize the need for assessing the 
collectibility of outstanding criminal debt amounts and establishing 
and reporting a meaningful allowance for uncollectible debts.[Footnote 
12] According to Justice, about 74 percent or more of reported criminal 
debt amounts in its records for fiscal years 2000, 2001, and 2002 were 
in suspense, meaning that no collection action was being taken on the 
debt because it had been determined that reasonable efforts to collect 
were unlikely to be effective. However, we emphasized in our 2001 
report that Justice had not performed an analysis of its criminal debt 
to estimate how much of the outstanding amounts was uncollectible and 
had not established an allowance for uncollectible debt for amounts 
that were due to the federal government. We specifically noted that 
since the collectibility of outstanding criminal debt had not been 
assessed, the amount in suspense did not represent a reliable estimate 
of the amount that was expected to be uncollected. We also discussed 
the importance of subjecting criminal debt amounts to independent 
audit, which would include assessments of internal controls and 
compliance with applicable laws and regulations related to the criminal 
debt process. Further, we noted that proper accounting for, reporting, 
and managing of criminal debt would heighten management awareness and 
ultimately result in a more effective collection process.

As of the completion date of our fieldwork, Justice had not begun to 
develop, in conjunction with AOUSC, OMB, and Treasury, a written 
strategic plan for collection of outstanding criminal debt. In December 
2001, Justice's EOUSA sent letters to AOUSC, OMB, and Treasury citing 
our 2001 report on criminal debt collection and our recommendation to 
form a joint task force to develop a strategic plan to improve criminal 
debt collection and establish effective coordination between each of 
the involved entities. According to a Justice official, the purpose of 
the letters was to solicit representatives from each of the agencies to 
assist in this effort. However, this initial attempt to form the joint 
task force was unsuccessful. The official stated that on account of our 
recent inquiries about this recommendation, EOUSA plans to make another 
attempt to contact appropriate officials at the other agencies. The 
Justice official also stated that both EOUSA and AOUSC have to address 
certain internal deficiencies, including systems problems, before they 
can effectively develop a strategic plan.[Footnote 13]

As previously mentioned and discussed in more detail in our 2001 
report, addressing the long-standing problems in the collection of 
outstanding criminal debt--including fragmented processes and lack of 
coordination--will require a united strategy among the entities 
involved with the collection process. The participation and cooperation 
of each of these entities, including AOUSC, OMB, and Treasury, are 
critical to the formation of the joint task force and development of a 
strategic plan, as recommended. Justice cannot require these agencies 
to participate in the joint task force and development of the strategic 
plan. However, Justice is a key federal agency responsible for the 
collection of criminal debt and, as such, is accountable for enlisting 
all affected agencies' support in a sustained effort to develop a 
strategic plan and cohesive approach for managing, accounting for, 
reporting, and improving the collection of such debt.

It is important to note that Justice has begun to get criminal debts 
into TOP. According to a Justice official, during the first part of 
fiscal year 2003, Justice piloted the TOP process for criminal debts in 
four districts, resulting in inclusion of about $700,000 of criminal 
debts in TOP by the end of fiscal year 2003. This official told us that 
with the progress of the pilot program, the debt referral program was 
expanded in August 2003 to all eligible FLUs.[Footnote 14] According to 
the official, as of December 5, 2003, 20 of the 43 districts eligible 
to submit criminal debts to TOP had either added criminal debts to TOP 
or were in the process of identifying criminal debts and sending out 
60-day notices to debtors demanding payment, which is necessary before 
a debt can be sent to TOP.[Footnote 15] As of December 3, 2003, FLUs 
had submitted 549 criminal debts, with a total outstanding balance of 
approximately $1.4 million, to TOP, and Justice anticipates many more 
debts will be included in TOP in the next few months. Given that TOP 
has resulted in over $1 billion in nontax debt collections from payment 
offsets governmentwide during each of fiscal years 2000, 2001, and 
2002, it will be important for Justice to continue to emphasize 
submitting debts to TOP as an integral part of its criminal debt 
collection efforts, as such action could increase potential 
collections.

Actions to Address Certain of Our Interim Recommendations Have Been 
Taken Recently or Are in Process:

We recognized at the time of our 2001 report that the development of a 
strategic debt collection plan with other agencies that have a key role 
to play in criminal debt collection would take time. Therefore, to help 
improve collections and stem the growth in reported uncollected 
criminal debt while Justice worked with other agencies to establish the 
task force and develop the strategic plan for criminal debt collection, 
we made 13 recommendations for interim action to the Attorney General. 
As shown in table 1, Justice has completed action on 7 of these 
recommendations. Four of the 7 recommendations, however, were not 
completed until about 2 years after we made them. Actions to address 
the 6 remaining recommendations are still in process. Since the interim 
recommendations largely focused on policies and procedures, it will be 
important that they be effectively implemented once they are 
established.

Table 1: Status of Recommendations from the July 2001 Criminal Debt 
Report:

Recommendations; The Attorney General should: 1. Work together with 
the Director of AOUSC to (1) reduce duplication of data entry for 
collections and disbursements, (2) require FLUs and the courts to 
periodically reconcile payment data recorded in their separate 
tracking systems, and (3) revise district guidance so that FLUs can 
take a more proactive role in monitoring collection efforts of 
probation offices; 
Status: In process.

Recommendations; The Attorney General should: 2. Establish policies 
and procedures that require Justice investigating case agents and 
prosecuting attorneys to share relevant financial information with FLUs 
within an established time frame after an offender is sentenced; 
Status: Date completed: May 2003. 

Recommendations; The Attorney General should: 3. Require FLUs to 
document correspondence with case agents and prosecuting attorneys in 
the FLU files, including whether and why efforts were not coordinated; 
Status: In process.

Recommendations; The Attorney General should: 4. Require FLUs to use 
collectibility analyses to prioritize criminal debt collection efforts 
on debt types deemed through historical experience to be more 
collectible; 
Status: Date completed: Sept. 2003. 

Recommendations; The Attorney General should: 5. Reinforce current 
policies and procedures for entering cases into criminal debt tracking 
systems; 
filing liens; 
issuing demand letters, delinquent notices, and default notices; 
performing asset discovery work; 
using other enforcement techniques; 
and using event codes, including suspense codes; 
Status: Date completed: Prior to FY 2003. 

Recommendations; The Attorney General should: 6. Revise current 
policies for issuing demand letters, specifying when a demand letter 
should be sent and within what time frames; 
Status: Date completed: May 2003. 

Recommendations; The Attorney General should: 7. Require FLUs to 
establish time frames for procedures related to criminal debt 
collection activities that do not currently have established time 
frames; 
Status: Date completed: May 2003. 

Recommendations; The Attorney General should: 8. Require FLUs to 
document in their files instances where asset discovery work was not 
performed and why it was not performed; 
Status: In process.

Recommendations; The Attorney General should: 9. Establish a policy for 
the FLUs to date stamp when judgments in a criminal case are received; 
Status: In process.

Recommendations; The Attorney General should: 10. Revise interest and 
penalty policies so that interest and penalties are consistently 
assessed and reported; 
Status: In process.

Recommendations; The Attorney General should: 11. Adequately measure 
criminal debt collection performance against established goals; 
Status: Date completed: Prior to FY 2003. 

Recommendations; The Attorney General should: 12. Revise the FLUs' 
databases to (1) capture needed information such as terms of fine and 
restitution order, status of offender (expected release date from 
prison or probation) and (2) allow FLUs to allocate outstanding 
amounts between amounts likely to be collected and those that are not 
likely to be collected; 
Status: In process.

Recommendations; The Attorney General should: 13. Perform an analysis 
to assess whether the FLUs' human capital resources and training are 
adequate to effectively perform their collection activities; 
Status: Date completed: Prior to FY 2003. 

Source: EOUSA.

[End of table]

The status of each of our 13 interim recommendations is discussed 
below. Recommendations for which corrective actions have been completed 
are discussed first.

Policies and Procedures for Sharing Relevant Financial Information:

In May 2003, Justice's EOUSA took action to address recommendation 2 by 
issuing the Prosecutor's Guide to Criminal Monetary Penalties. The 
guide contains information on the obligations and responsibilities of 
criminal prosecutors and others involved in the criminal debt 
collection process to increase the likelihood that victims of crime are 
compensated for their losses. EOUSA has provided the guide to all 
entities involved in the collection of criminal debt at Justice, 
including prosecuting attorneys, investigating case agents, and FLU 
staff. The guide is also available on Justice's intranet.

This guide requires prosecutors to ensure that the responsible FLU 
receives all available information on a defendant's financial resources 
by (1) forwarding a copy of the presentence report to the FLU; (2) 
providing the FLU with any information or pleading in the government's 
file on a defendant's financial resources not obtained through the 
grand jury investigation; (3) filing a motion asking the court to order 
disclosure to the FLU of any information gathered by the grand jury, 
and to make the disclosure as soon as it is ordered; and (4) ordering 
the transcript of any hearing in which a defendant's financial 
resources were discussed, such as a bond hearing, and forwarding the 
transcript to the FLU. According to a Justice official, case agents 
work directly with the prosecuting attorneys and share any information, 
including financial information, with the prosecutors before a judgment 
on a case is issued. The Justice official noted that once a judgment in 
a criminal case is issued, it generally is sent from the courts to the 
criminal prosecutor within 1 week, and once the prosecutor receives the 
judgment, the financial information is shared with the responsible FLU.

Use of Collectibility Analysis to Prioritize Criminal Debt Collection 
Efforts:

In September 2003, EOUSA completed actions to address recommendation 4 
by issuing a memorandum to all Financial Litigation Supervisors and 
FLUs requiring that each FLU establish policies and procedures to 
ensure that all FLU cases are effectively prioritized and enforced 
pursuant to a priority system. The memorandum contained guidance, 
including factors to consider in assigning priority codes (e.g., the 
debtor's assets and income, type of debtor, type of debt, type of 
victim, complexity of the case); default priority codes based on the 
amount of the debt; information on setting review dates; and 
implementation procedures, including a list of fields and codes to be 
used in Justice's new system for tracking debts, and milestone dates 
for completion of the review and prioritization of all existing cases. 
According to a Justice official, the guidance for establishing a 
priority system is fairly general to allow each district to set its own 
priorities based on the type of debt typically collected at that 
district. According to the memorandum, effective October 1, 2003, all 
new judgments should be prioritized using the priority system; by 
December 31, 2003, FLUs should review all pre-existing judgments with 
an original debt balance of $1 million or more; by March 31, 2004, FLUs 
should review all pre-existing judgments with an original debt balance 
of $100,000 to $999,999; and by December 31, 2004, to the extent 
resources permit, FLUs should review all remaining pre-existing 
judgments. Although priority-setting is currently a manual process, 
once Justice's new system has been updated, which according to the 
Justice official is scheduled for May 2004, the priority codes will be 
incorporated into the new automated priority process.

Reinforcement of Certain Current Debt Collection Policies and 
Procedures:

In January 2002, EOUSA completed actions to address recommendation 5 by 
sending a memorandum to all U.S. Attorneys, all First Assistant U.S. 
Attorneys, and all Civil Chiefs, concerning our 2001 report. The 
memorandum generally noted the findings in the report and encouraged 
each district to review its policies and procedures for collecting and 
enforcing criminal debt in light of the report. The memorandum also 
offered the assistance of the districts' Financial Litigation Program 
Manager in implementing or improving criminal debt collection policies 
and procedures. EOUSA has also worked to reinforce current policies and 
procedures by developing and providing training materials to its staff 
involved in debt collection. Moreover, EOUSA's periodical DebtBeat, 
which is available to all USAOs, private counsel, and client agencies, 
regularly provides updates on debt collection issues, including any 
modifications to debt collection policies and procedures.

Revision of Policies for Issuing Demand Letters:

EOUSA used the May 2003 prosecutor's guide to respond to recommendation 
6. Specifically, the guide requires FLUs to issue a demand letter for 
payment of a debt for each case opened within 30 days of the judgment. 
To facilitate collection, the guide further specifies that the demand 
letter should inquire whether the defense attorney will continue to 
represent the defendant for collection purposes.

Establishment of Time Frames for Certain Criminal Debt Collection 
Activities:

EOUSA also used the May 2003 guide to address recommendation 7. As 
stated in our 2001 report, FLUs lacked procedures for performing 
certain debt collection actions in a timely manner, including (1) 
entering cases into their tracking systems; (2) filing liens; (3) 
sending demand, delinquent, or default letters; and (4) performing 
asset discovery work. The prosecutor's guide provides a specific time 
frame for performing each of these actions. It requires that for each 
case opened for collection, the responsible FLU should, at a minimum, 
take the following steps within 30 days of the judgment: open and 
record the case; initiate the filing of a lien where possible; issue a 
demand letter; and conduct an initial assessment of the prioritization 
and collectibility of the case, which would include performing asset 
discovery work. The guide also states that the responsible FLU should 
provide notice to the defendant of any fine or restitution payment that 
is found to be delinquent or in default within 10 working days after 
the delinquency or default occurs.

Measurement of Criminal Debt Collection Performance against Goals:

To address recommendation 11, according to a Justice official, Justice 
annually assesses each district based on established collection goals 
for that district. The official stated that because of the differences 
in size of caseloads and types of cases worked, it does not make sense 
for EOUSA to establish nationwide goals. Instead, each district 
establishes and is measured against its own collection goals. To assess 
debt collection performance and compliance with applicable guidance and 
regulations at each district, EOUSA uses (1) a goals-setting package, 
which includes instructions for completing goals based on each 
district's workload and collections; (2) a state-of-the-district 
report, which provides 3 years of detailed district-specific collection 
statistics to allow each USAO to evaluate its own collection activities 
based on historical experience; and (3) a compliance checklist, which 
provides FLUs with an opportunity to review their current policies and 
procedures to ensure compliance with EOUSA requirements. According to 
the Justice official, EOUSA works with each district to prepare these 
tools annually, and each district uses them to determine needed actions 
to improve criminal debt collection.

Assessment of Human Capital Resources and Training:

Justice has also assessed its FLUs' human capital resources and 
training to respond to recommendation 13. According to a Justice 
official, although EOUSA did not prepare a formal written assessment of 
FLUs' human capital resources, EOUSA has assessed FLU human capital 
resources and determined that FLUs are understaffed and need more staff 
or contractors to perform debt collection activities. However, to date, 
EOUSA has not been successful in requesting additional staff for debt 
collection. Nevertheless, the Justice official noted that EOUSA did 
receive funding, beginning in fiscal year 2002, through the Office for 
Victims of Crime to support asset investigations in criminal debt 
collection cases. The Office for Victims of Crime provides 50 percent 
of the funding for asset investigators, with the remaining 50 percent 
to be funded through the Three Percent Fund.[Footnote 16] Therefore, 
half the asset investigators' time may be spent on postsentencing 
criminal fine and restitution debt collection cases. The asset 
investigators' services are available through the Financial Litigation 
Investigator Program. Prior to fiscal year 2002, these investigators 
were limited to working solely on civil debts because funding for their 
time was exclusively through the Three Percent Fund.

Corrective Actions in Process to Address Remaining Recommendations:

Justice is in the process of taking corrective actions to address the 
remaining 6 recommendations. Specifically, actions taken to address 
parts 1 and 2 of recommendation 1 are still in process.[Footnote 17] In 
July 2003, EOUSA rolled out to all USAOs a new version of its 
collections case tracking system. The new system allows for the 
tracking of all debt components in a single record for each debtor, 
thus eliminating the need to open multiple records to track collections 
for a single debtor. Also, many of the required fields, such as 
collection types and agency program codes, have been coded to eliminate 
duplicative data entry by the user. However, additional upgrades, such 
as automatic payment posting to debtor accounts, are still under 
development and are scheduled to be completed during fiscal year 2004. 
According to a Justice official, complete implementation of this 
recommendation depends on AOUSC upgrading its automated criminal debt 
tracking systems. The Justice official stated that full reconciliation 
of payment information between FLUs and the courts will not be possible 
until AOUSC fully implements its new Civil/Criminal Accounting Module 
system, which, according to the official, is not expected to be 
completed until 2005.

Actions to address recommendations 3, 8, 9, and 10 are also in process 
at Justice. We emphasized in our 2001 report the importance of 
documenting key steps in the criminal debt collection process to help 
ensure that all opportunities for collection were being pursued. We 
also noted that because FLUs do not consistently assess interest and 
penalties, the reported amounts do not accurately represent how much 
total principal, interest, and penalties are due. We stressed that 
failure to assess interest and penalties reduces the amount that can be 
recovered and passed along to victims or the federal government and 
eliminates a tool designed to give debtors an incentive to make prompt 
payments. According to a Justice official, the Financial Litigation 
Working Group, which Justice established in February 2002 in part to 
address our recommendations, will continue to work toward fully 
implementing these open recommendations.

Finally, Justice is in the process of taking corrective actions to 
address recommendation 12. According to a Justice official, EOUSA's 
system programmers are currently developing automated tracking of 
debtor status from incarceration through probation. EOUSA plans to have 
such automated tracking available during fiscal year 2004. In addition, 
according to the official, EOUSA is working to determine how to 
allocate outstanding criminal debt amounts between amounts likely to be 
collected and amounts not likely to be collected, which is critical for 
effective use of debt collection resources.

Conclusion:

The long-standing problems in the collection of outstanding criminal 
debt--including fragmented processes and lack of coordination--
continue, as there is no united strategy among key entities involved 
with the collection process. According to Justice's unaudited records, 
during fiscal years 2000, 2001, and 2002, criminal debt increased 
significantly, but collections decreased slightly. Until Justice takes 
actions to fully implement our previous recommendations to it to 
improve criminal debt collection efforts, including forming a joint 
task force with AOUSC, OMB, and Treasury and developing a strategic 
plan to improve the criminal debt collection processes, the 
effectiveness of criminal fines and restitution as a punitive tool may 
be diminished, and Justice's management processes and procedures will 
not provide adequate assurance that offenders are not afforded their 
ill-gotten gains and that innocent victims are compensated for their 
losses to the fullest extent possible. Therefore, we reaffirm those 
recommendations made to Justice from our 2001 report on which Justice 
has not completed action.

Agency Comments and Our Evaluation:

In written comments on a draft of this report, which are reprinted in 
appendix I, Justice's EOUSA said that the draft report did not fully 
reflect EOUSA efforts to improve the criminal debt collection process 
by implementing the recommendations from our 2001 report and by taking 
additional actions that go beyond the specific recommendations made in 
that report. We disagree. As stated in this report, Justice has not 
taken timely action to address all of the July 2001 recommendations, 
which were designed to improve the effectiveness and efficiency of 
Justice's criminal debt collection processes. Most important, from the 
standpoint of resolving key jurisdictional issues and functional 
responsibilities, Justice has not taken action along with certain other 
agencies to develop a strategic plan for criminal debt collection.

Of the 13 interim recommendations made to stem the growth of reported 
uncollected criminal debt while Justice and the other agencies worked 
to develop the strategic plan, Justice completed action on only 7. 
Actions to address 4 of these 7 recommendations were completed about 2 
years after we made them, and actions to address the remaining 6 
interim recommendations are still in process.

In support of its view that it has taken extensive implementation 
action, EOUSA referred to a June 16, 2003, letter and stated that 
excerpts from this letter were included with its comments. We are not 
aware of a June 16, 2003, letter; however, all of the excerpts 
contained in EOUSA's comments are included verbatim in Justice's July 
15, 2003, letter to the Congress regarding actions EOUSA had taken in 
response to recommendations we made in our 2001 report. Justice 
submitted this letter 2 years after the date of our 2001 report, and 
after we had made inquiries about the status of Justice's response to 
the Congress regarding Justice's implementation of our recommendations. 
In accordance with 31 U.S.C. 720, the head of a federal agency is 
required to submit a written statement of the actions taken on our 
recommendations to the Senate Committee on Governmental Affairs and to 
the House Committee on Government Reform not later than 60 calendar 
days from the date of the report and to the House and Senate Committees 
on Appropriations with the agency's first request for appropriations 
made more than 60 calendar days after that date. Moreover, as stated in 
this report, to evaluate actions Justice has taken to implement our 
previous recommendations, we obtained and reviewed pertinent Justice 
documents, including correspondence to certain congressional 
committees related to our 2001 report. As such, in drafting our report, 
we fully considered each of EOUSA's assertions that were contained in 
the previously mentioned excerpts from its letter. Our responses to 
specific parts of these excerpts appear in appendix I.

EOUSA also stated that our draft report failed to address its comments 
on our 2001 report that responsibility for accounting for and reporting 
criminal debt does not rest with Justice. In our 2001 report, we stated 
that Justice's comments related to accounting for and reporting of 
criminal debt, plus the lack of response from AOUSC regarding its 
position on this issue, illustrated the need for cooperation and 
coordination in the criminal debt collection area. Thus, we emphasized 
the need for the development of the previously mentioned strategic plan 
to improve the criminal debt collection processes and establishment of 
an effective mechanism to coordinate efforts among all entities 
involved in these processes. We noted that the strategic plan should 
address managing, accounting for, and reporting of criminal debt. It is 
important to note that, as stated in our 2001 report, both Treasury and 
OMB agreed that criminal debt should be reported on either Justice's or 
the U.S. Court's financial statements.

Finally, EOUSA stated that our 2001 report focused on asset 
investigation resources and that EOUSA has put particular emphasis in 
this area. EOUSA also stated that even though it has fully implemented 
more than half of our recommendations, with the remaining ones nearing 
completion, collections have decreased slightly since our 2001 report. 
As previously stated, actions to address 4 of the 7 fully implemented 
recommendations were completed about 2 years after our 2001 report, and 
actions to address the 6 remaining recommendations are still in 
process. Since these interim recommendations largely focused on 
policies and procedures, it is important that they be effectively 
implemented once they are established, and it will likely take some 
time for collection results to be realized from full implementation. 
Moreover, as stated in our report, the debt collection strategy to be 
developed by the task force should include determining the 
collectibility of outstanding criminal debt amounts so that a 
meaningful allowance for uncollectible debt can be reported and used 
for measuring debt collection performance. We also stated that proper 
accounting for, reporting of, and managing of criminal debt would 
heighten management awareness and ultimately result in a more effective 
collection process. Identifying debts with the best prospects for 
collection will allow more efficient targeting of limited collection 
resources in order to maximize collections.

As agreed with your office, unless you announce its contents earlier, 
we plan no further distribution of this report until 30 days after its 
issuance date. At that time, we will send copies of this report to the 
Chairmen and Ranking Minority Members of the Subcommittee on Financial 
Management, the Budget and International Security, Senate Committee on 
Governmental Affairs, and the Subcommittee on Government Efficiency and 
Financial Management, House Committee on Government Reform. We will 
also provide copies to the Attorney General, the Director of the 
Administrative Office of the U.S. Courts, the Director of the Office of 
Management and Budget, and the Secretary of the Treasury. Copies will 
then be made available to others upon request. The report will also be 
available at no charge on GAO's Web site, at [Hyperlink, 
http://www.gao.gov].

If you have any questions about this report, please contact me on (202) 
512-3406 or Kenneth R. Rupar, Assistant Director, on (214) 777-5714. 
Other key contributors to this report are Linda K. Sanders and Michael 
D. Hansen.

Sincerely yours,

Signed by: 

Gary T. Engel: 
Director, Financial Management and Assurance:

[End of section]

Appendixes: 

Appendix I: Comments from the Department of Justice's Executive Office 
for United States Attorneys:

U.S. Department of Justice:

Executive Office for United States Attorneys 
Office of the Director:
RFK Main Justice Building, Room 2616	
(202) 514-2121 
950 Pennsylvania Avenue, NW:
Washington, DC 20530:

JAN 23 2004:

Mr. Gary T. Engel 
Director:

Financial Management and Assurance 
United States General Accounting Office 
441 G Street, NW, Room 5970 
Washington, DC 20548:

Dear Mr. Engel:

As requested, this letter provides comments from the Executive Office 
for United States Attorneys (EOUSA) on the General Accounting Office's 
(GAO) draft report regarding criminal debt collection processes. The 
draft report follows up on GAO's 2001 [NOTE 1] report by providing 
information 
on the amount and growth of criminal debt for fiscal years 2000 through 
2002 and examines the extent to which the Department of Justice (DOJ) 
has acted on GAO's previous recommendations in this area. [NOTE 2] We 
appreciate the opportunity to provide comments.

The overall tone of the draft report fails to reflect the great efforts 
EOUSA has undertaken to improve the criminal debt collection process by 
implementing the 2001 report recommendations, as well as the additional 
actions EOUSA has taken that fall outside the specific recommendations 
made in the report.

In the 2001 report, GAO made thirteen recommendations it believed would 
help improve the efficiency and effectiveness of criminal debt 
collection. EOUSA has addressed all thirteen recommendations, fully 
implementing more than half of these recommendations, with the 
remaining changes nearing completion. As part of addressing the 
recommendations, EOUSA has written and published a book entitled, 
Prosecutor's Guide to Criminal Monetary Penalties. This 
manual not only discusses the debt collection process, but covers the 
entire process of ensuring victims of crime are compensated for their 
losses. This process includes charging defendants; negotiating plea 
agreements; and determining, imposing, and enforcing of criminal fines 
and restitution. The Prosecutor's Guide goes well beyond the narrow 
focus of GAO's recommendations and serves as a guide not only for the 
Financial Litigation Units (FLU), but also for criminal prosecutors, 
victim witness coordinators, probation officers, and clerks of courts.

Two major factors impacting the implementation of several of the 
recommendations are the reprogramming of the collections tracking 
system used by the United States Attorneys' Offices and the roll-out of 
AOUSC's new Civil/Criminal Accounting Module (CLAM). As you know, 
computer programming changes require extensive testing to ensure data 
integrity. Despite such challenges, EOUSA has already made substantial 
changes to our system consistent with GAO's recommendations. Our 
collections tracking system is now centralized, many of the fields have 
been hardcoded, thereby reducing the amount of data entry required by 
the user, and additional changes, which address GAO's recommendations, 
are scheduled to be released this summer. It is our understanding that 
AOUSC is nearing completion on the alpha testing stage of CCAM and will 
begin beta testing thereafter. Upon successful completion, CLAM will be 
rolled-out to all courts. Until this occurs, EOUSA is unable to fully 
implement some of GAO's recommendations.

The draft report fails to mention many of the efforts undertaken by 
EOUSA as outlined in our June 16, 2003 letter. For your convenience, I 
am including excerpts from that letter:

EOUSA has established a Financial Litigation Working Group comprised of 
Assistant United States Attorneys and paralegals. This group is (1) 
reviewing and revising all of our criminal debt collection policies and 
procedures for inclusion in the United States Attorneys Manual and the 
newly created United States Attorneys Procedures Manual; (2) writing 
legislative proposals that will remove many barriers to enforcement of 
debts owed to the United States and victims of crime, such as 
clarifying that payment schedules set forth in court orders are minimum 
payments due and do not prohibit the enforcement of the total amount of 
the obligation imposed; and (3) developing new training materials for 
criminal prosecutors emphasizing the importance of providing the 
Financial Litigation Units (FLU) with financial information on the 
defendant.

In addition, EOUSA developed a State of the District Report and a 
Compliance Checklist which are provided to the USA Os on an annual 
basis. The State of the District Report summarizes the collection 
accomplishments of each USAO and provides the United States Attorneys 
with an invaluable management tool to measure the success of their 
offices' collection responsibilities. The Compliance Checklist 
provides the FLU with an opportunity to review their current policies 
and procedures to ensure compliance with EOUSA's requirements.

A further example of EOUSA's commitment in this area is the recent 
hiring of an 
independent contractor to perform a requirements analysis for a new 
debt collection system. This new system, along with the system 
currently being developed by AOUSC, should greatly reduce the data 
entry responsibilities of the FLUs, thereby allowing the FLUs to 
concentrate their efforts on enforcement of the debts.

Most recently, EOUSA has sought and received funding from the Office 
for Victims of Crime (OVC) to cover the costs associated with adding 
criminal debts to the Treasury Offset Program (TOP) (i.e., injured 
spouse claims). In cooperation with AOUSC, several USAOs have begun to 
submit criminal debts to the TOP. The remaining districts will begin to 
submit criminal debts once the local clerks of courts offices have the 
necessary computer systems in place.

Much of the GAO report focused on the lack of asset investigations 
resources. As a result, EOUSA has put particular emphasis in this area. 
We have requested and received funding from OVC to assist the districts 
with asset investigations. This money allows districts to hire outside 
investigators to work on older, high dollar, complex cases which were 
considered uncollectible, and thus had not been addressed with 
available FLU resources.[NOTE 3] EOUSA has also entered into a 
nation-wide 
contract for credit bureau report services. Through this contract the 
FLUs now have convenient, easy to use web-based access to credit 
bureau reports that are an important tool in assessing a debtor's 
ability to pay. In addition, EOUSA, through our Office of Legal 
Education, developed a course dedicated solely to asset investigations 
in debt collection cases. Furthermore, we are currently in the process 
of finalizing a reference manual for the FLUs to use in conducting 
asset investigations.

Finally, in response to the GAO's finding that additional resources are 
needed to increase the effectiveness of the federal government's 
criminal debt collection efforts, EOUSA has requested funding for 
attorney positions as well as contractors in our annual appropriations 
request. If provided, these personnel would be specifically dedicated 
to the collection of criminal debt.

The draft report states that EOUSA has not implemented its general 
recommendation that the Attorney General, Director of AOUSC, Director 
of OMB, and Secretary of Treasury form a joint task force to develop a 
strategic plan that addresses the managing, accounting, and reporting 
of criminal debt. While the draft report acknowledges that EOUSA sent 
letters to the above agencies and meets regularly with personnel from 
AOUSC and Treasury to discuss ways to improve criminal debt collection 
and establish effective coordination for the debt collection process, 
it fails to address our comments to the 2001 report that the 
responsibility for accounting and reporting criminal debt does not rest 
with DOJ.

As stated in the draft report, the main purpose of this recommendation 
is to establish a formal reporting and accounting of criminal debt, 
that is, a report that can be subject to independent auditing. As we 
explained in our June 5, 2001, response, although DOJ is 
responsible for the enforcement of criminal debts, the responsibility, 
by statute [NOTE 4, for the receipting and disbursing of payments rests 
with the courts. In other words, the receivables are not DOJ's assets, 
because 18 U.S.C. § 3611 gives administration and possession of those 
receivables to AOUSC, not DOJ. Moreover, DOJ is not in control of 
source records or the timing or reporting of collections. Accordingly, 
this recommendation should be more appropriately directed to AOUSC.

By its very nature, the collection of criminal debts is difficult. The 
outstanding criminal debt balance is now twice the amount GAO reported 
in its 2001 report. As discussed in the draft report, the primary 
reason for this dramatic increase, which was not unexpected, is the 
Mandatory Victims Restitution Act (MVRA). The MVRA mandates that 
restitution be imposed in most federal crimes for the full amount of 
the loss, regardless of the defendant's ability to pay. The solution 
for improving the collection process is complex and, unfortunately, 
there are no quick fixes that can be put into place that will guarantee 
success. For example, even though EOUSA has fully implemented more than 
half of GAO's recommendations with the remaining nearing completion, 
collections decreased slightly since the 2001 report. Nevertheless, as 
outlined above, EOUSA holds the collection of debts owed to the federal 
government and victims of crime as a high priority and is firmly 
committed to continuously improving the process.

Thank you for the opportunity to comment on the draft report. If you 
have any questions regarding the above, please contact Laurie Levin, 
Assistant Director, Financial Litigation Staff, Office of Legal 
Programs and Policy, at (202) 616-6444.

Sincerely,

Signed for: 

Guy A. Lewis: 
Director:

NOTES: 

[1] See GAO-01-664.

[2] The 2001 report contains thirteen specific recommendations to 
help improve the efficiency and effectiveness of criminal debt 
collection. Additionally, GAO recommended the Attorney General, 
Director of the Administrative Office of United States Courts (AOUSC), 
Director of the Office of Management and Budget (OMB), and Secretary of 
Treasury form a joint task force to develop a strategic plan that 
addresses the managing, accounting, and reporting of criminal debt.

[3] In one fiscal year, over $150 million in criminal debts had been 
referred to outside investigators. Interestingly, after thorough 
investigations, the outside investigators determined that over $100 
million of the debts were uncollectible as no asset could be found. 
Since write-off is not an option with criminal debts, these debts were 
placed into suspense.

[4] See 18 U.S.C. § 3611.

The following are GAO's comments on the Department of Justice's 
(Justice) Executive Office for United States Attorneys' (EOUSA) letter 
dated January 23, 2004.

GAO's Comments:

1. See "Agency Comments and Our Evaluation" section.

2. Our 2001 report responded to a request that we review the federal 
government's collection of criminal debt, primarily fines and 
restitutions. As such, our review resulted in numerous recommendations 
to Justice and the Administrative Office of the U.S. Courts (AOUSC) 
aimed at addressing the fragmented processes and lack of coordination 
among those entities involved in debt collection and at helping to 
improve collections and stem the growth in reported uncollected 
criminal debt.

For this report, we were requested to examine the extent to which 
Justice has acted on the recommendations we made in our 2001 report to 
improve criminal debt collection. We acknowledge in our report 
Justice's use of the Prosecutor's Guide to Criminal Monetary Penalties 
to address recommendations 2, 6, and 7. Our follow-up work did not 
focus on certain areas covered by the guide, including charging 
defendants and negotiating plea agreements, because such issues were 
not part of the scope of our 2001 report or of this report.

3. We acknowledge in this report that the Financial Litigation Working 
Group was established in part to address the recommendations we made in 
our 2001 report and will continue to work toward fully implementing 
certain open recommendations.

4. Writing legislative proposals that will remove barriers to 
enforcement of criminal debts, such as clarifying that payment 
schedules set forth in court orders are minimum payments due and do not 
prohibit enforcement of the total amount of the obligation imposed, is 
consistent with our 2001 recommendation to AOUSC to revise the language 
in the Judgment in a Criminal Case forms to clarify that payment terms 
established by judges are minimum payments and should not prohibit or 
delay collection efforts. Although we did not recommend such action to 
Justice, its initiative to address this concern makes sense.

5. We acknowledge in our report that Justice provided the prosecutor's 
guide to all entities involved in criminal debt collection at Justice, 
and we credit the guide with addressing recommendation 2 by requiring 
prosecutors to ensure that responsible Financial Litigation Units (FLU) 
receive all available information on a defendant's financial resources.

6. We acknowledged and explained in our report EOUSA's State of the 
District Report and Compliance Checklist in relation to actions taken 
to address recommendation 11.

7. We are aware of EOUSA's hiring of an independent contractor to 
perform a requirements analysis for a new debt collection system. 
However, as of the completion date of our fieldwork, according to an 
EOUSA official, Justice was in the process of reviewing the 
contractor's work, and we could not obtain a copy of the contractor's 
report until the review was complete. Therefore, we are unable to 
comment on the results of the contractor's review. However, we 
acknowledge in our report EOUSA's new version of its collections case 
tracking system, including its recent and planned upgrades designed to 
reduce the data entry responsibilities of FLUs.

8. We provide in our report detailed information on Justice's efforts 
to add criminal debts to the Treasury Offset Program.

9. Our July 2001 report addressed many factors that have had an impact 
on the effectiveness of the criminal debt collection process. That 
report resulted in numerous recommendations to Justice and AOUSC to 
improve debt collection. Justice has taken action to enhance its asset 
investigations resources. In our discussion of Justice's efforts to 
address recommendation 13, we acknowledge EOUSA's receipt of funding, 
beginning in fiscal year 2002, through the Office for Victims of Crime 
to support asset investigations in criminal debt collection cases.

10. Assets identified by outside investigators, combined with fervent 
debt collection efforts, could result in potential collections on 
outstanding criminal debts. If investigators found assets for 
approximately $50 million of the $150 million of criminal debts 
referred to them, the potential collection rate for such assets might 
well exceed the average collection rates being experienced by Justice.

11. Although we are aware of EOUSA's contract for credit bureau report 
services, the issue of credit bureau report services did not directly 
relate to any particular recommendation made in our 2001 report. 
Therefore, the contract was not addressed in this report. However, we 
agree that credit bureau report services, if properly applied, can 
enhance FLUs' ability to assess a debtor's ability to pay.

12. We acknowledge in our discussion of EOUSA's actions to address 
recommendation 5, that EOUSA has worked to reinforce policies and 
procedures by developing and providing training materials to its staff 
involved in debt collection.

13. In our 2001 report, we recommended that Justice perform an analysis 
to assess whether FLUs' human capital resources are adequate to 
effectively perform their collection activities. In our discussion of 
Justice's actions to address recommendation 13 in this report, we 
acknowledge that EOUSA has assessed FLU human capital resources and 
determined that FLUs need more staff or contractors to perform debt 
collection activities. We further state that, to date, EOUSA has not 
been successful in requesting additional staff for debt collection.

[End of section]

(191035):

FOOTNOTES

[1] U.S. General Accounting Office, Criminal Debt: Oversight and 
Actions Needed to Address Deficiencies in Collection Processes, GAO-01-
664 (Washington, D.C.: July 16, 2001). The report covered the debt 
collection processes of the U.S. Courts, including the Administrative 
Office of the U.S. Courts and selected probation offices, as well as 
Justice. In addition, it covered the criminal debt oversight roles of 
the Office of Management and Budget and the Department of the Treasury.

[2] These statistical reports, which are published annually, are 
unaudited.

[3] Courts are required by 18 U.S.C. § 3663A (2000) to order 
restitution when sentencing offenders convicted of (1) a crime of 
violence as defined by 18 U.S.C. § 16 (2000); (2) an offense against 
property under title 18 of the U.S.C. including any offense committed 
by fraud or deceit; or (3) an offense related to tampering with 
consumer products, 18 U.S.C. § 1365 (2000), in which an identifiable 
victim has suffered a physical injury or pecuniary loss. See also 18 
U.S.C. §§ 2248, 2259, 2264, and 2327 (2000).

[4] The latest reported data from Justice as of the completion date of 
our fieldwork in mid-December 2003 were for fiscal year 2002. Justice 
was still in the process of compiling and summarizing criminal debt 
information for fiscal year 2003. 

[5] There are 94 districts throughout the country, but USAOs for 2 of 
them are combined, resulting in 93 USAOs.

[6] Criminal fine payments are required by 42 U.S.C. § 10601 (2000) to 
be deposited in the Crime Victims Fund except for payments for fines 
related to the Endangered Species Act, Lacey Act Amendments of 1981, 
Railroad Unemployment Insurance Act, Federal Water Pollution Control 
Act, Postal Service Fund, and county public schools.

[7] U.S. General Accounting Office, After the Criminal Fine Enforcement 
Act of 1984--Some Issues Still Need to Be Resolved, GAO/GGD-86-2 
(Washington, D.C.: Oct. 10, 1985).

[8] Nonfederal restitution is criminal debt owed to victims of crime 
other than the federal government, for which Justice has collection 
responsibility.

[9] Advance fee schemes involve fraud against businesses or individuals 
involving the payment of a fee in advance for goods, services, or other 
things of value.

[10] When the Comptroller General issues a report that includes a 
recommendation to the head of an agency, 31 U.S.C. § 720(b) (2000), 
requires the head of an agency to submit a written statement on action 
taken on the recommendation. The statement is required to be submitted 
to the Committee on Governmental Affairs of the Senate and the 
Committee on Government Reform of the House of Representatives before 
the 61st day after the date of the report and to the Committees on 
Appropriations of both houses of the Congress in the agency's first 
request for appropriations submitted more than 60 days after the date 
of the report.

[11] TOP is a governmentwide delinquent debt matching and payment 
offset system. TOP offsets federal payments such as tax refunds, vendor 
and miscellaneous payments, and federal retirement payments against 
federal nontax debts, states' child support debts, and certain states' 
tax debts.

[12] According to Statement of Federal Financial Accounting Standards 
(SFFAS) No. 1, Accounting for Selected Assets and Liabilities, and 
SFFAS No. 7, Accounting for Revenue and Other Financing Sources and 
Concepts for Reconciling Budgetary and Financial Accounting, a 
receivable should be recognized once amounts that are due to the 
federal government are assessed, net of an allowance for uncollectible 
amounts. Also, OMB Circular No. A-129 (revised, November 2000), 
Policies for Federal Credit Programs and Non-Tax Receivables, requires 
agencies to provide accounting and management information for effective 
stewardship, including resources entrusted to the government (e.g., for 
nonfederal and federal restitution).

[13] EOUSA meets regularly with AOUSC, and the goal of these meetings 
is to improve criminal debt collection and establish effective 
coordination for the debt collection process.

[14] To be eligible for the program, the clerk's office in that 
district must meet certain criteria established by AOUSC, including 
that the clerk's office must (1) agree to participate in including 
criminal debts in TOP and (2) use a specific automated accounting 
system.

[15] This 60-day notice informs the debtor of the FLU's intent to 
submit the debt to Treasury for offset purposes.

[16] Pub. L. No. 107-273, Div. C., Title 1, § 11013(a), 116 Stat. 1758, 
1823 (2002), authorizes Justice to deposit in its Working Capital Fund 
3 percent of all amounts collected pursuant to its civil debt 
collection litigation activities. Such amounts remain available until 
expended and are to be used first, for paying the costs of processing 
and tracking civil and criminal debt-collection litigation, and, 
thereafter, for financial systems and for debt-collection-related 
personnel, administrative, and litigation expenses. Section 11013(a) of 
Pub. L. No. 107-273, expanded on the authority conferred on Justice by 
an earlier law (Pub. L. No. 103-121, Title 1, § 108, 107 Stat. 1153, 
1164 (1993)) that limited Justice's use of such deposits to paying the 
costs of processing and tracking civil debt collection litigation.

[17] The May 2003 prosecutor's guide addresses part 3 of recommendation 
1--that Justice revise its district guidance so FLUs can take a more 
proactive role in monitoring collection efforts of probation offices. 
According to the guide, FLUs' responsibilities for enforcement of 
restitution or a fine include coordination with probation offices while 
defendants are on supervision or probation to facilitate collection, 
mutual exchange of information, and providing advance notice to 
probation offices of collection methods. Further, the guide states that 
during a defendant's supervision, the prosecutor and/or the FLU should 
coordinate with each other and with probation offices to facilitate the 
maximum possible collection of the restitution or fine.

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