National Fine Center: Progress Made but Challenges Remain for Criminal
Debt System (Letter Report, 05/25/95, GAO/AIMD-95-76).
Pursuant to a congressional request, GAO reviewed the National Fine
Center (NFC), focusing on the: (1) Administrative Office of the United
States Courts' (AOUSC) efforts to establish NFC and centralize criminal
debt accounting and reporting within NFC; and (2) additional actions
AOUSC needs to take to complete implementation of the NFC automated
accounting system.
GAO found that AOUSC has: (1) established a process for centralizing and
maintaining federal criminal debt accounts; (2) developed a formal
training program for judicial district staff; (3) selected an
off-the-shelf accounting system and inexpensive interim software until
the selected system becomes operational; (4) begun processing new
criminal debt information for 25 small judicial districts; and (5) begun
converting criminal debt information from the interim system to the
off-the-shelf system. In addition, GAO found that: (1) AOUSC is slightly
ahead of schedule in establishing NFC and centralizing federal criminal
debt, however much planning and implementation effort remains; (2) many
enhancements to the selected accounting system will be required to
automate certain manual processes before NFC can begin receiving new
criminal debt information from larger judicial districts; (3) AOUSC and
the Department of Justice (DOJ) still must ensure the reliability of the
existing criminal debt accounting data before entering the information
into the NFC system; and (4) although AOUSC plans to further enhance the
system to increase user access to NFC information within the next 5
years, it must first identify the specific enhancements required and
determine how to accomplish them.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: AIMD-95-76
TITLE: National Fine Center: Progress Made but Challenges Remain
for Criminal Debt System
DATE: 05/25/95
SUBJECT: Fines (penalties)
Debt collection
Government collections
Crimes or offenses
Criminals
Accounting systems
Computerized information systems
Restitution
Data integrity
Criminal procedure
IDENTIFIER: BOP Inmate Financial Responsibility Program
Raleigh (NC)
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Cover
================================================================ COVER
Report to the Honorable
Byron L. Dorgan, U.S. Senate
May 1995
NATIONAL FINE CENTER - PROGRESS
MADE BUT CHALLENGES REMAIN FOR
CRIMINAL DEBT SYSTEM
GAO/AIMD-95-76
National Fine Center
Abbreviations
=============================================================== ABBREV
AOUSC - Administrative Office of the United States Courts
DOJ - Department of Justice
EOUSA - Executive Office for United States Attorneys
IRS - Internal Revenue Service
NFC - National Fine Center
OMB - Office of Management and Budget
USAO - U.S. Attorney's Office
Letter
=============================================================== LETTER
B-260760
May 25, 1995
The Honorable Byron L. Dorgan
United States Senate
Dear Senator Dorgan:
This report provides the results of our review of the Administrative
Office of the United States Courts' (AOUSC)\1 efforts to centralize
criminal debt accounting and reporting within the National Fine
Center (NFC). Pursuant to the Criminal Fine Improvements Act of
1987,\2 AOUSC was required to establish a criminal debt accounting
and reporting system. The legislative history of the act indicated
that the system was expected to automate and centralize criminal debt
processing for all 94 judicial districts. This system was to replace
the existing fragmented approach for receiving criminal fine payments
and alleviate long-standing weaknesses in accounting for, collecting,
and reporting on criminal monetary penalties imposed on federal
criminals.
Because of concerns you raised about AOUSC's ability to implement the
NFC system, you asked in your capacity as Chairman of the Special
Task Force on Government Waste, that we (1) provide information on
AOUSC's latest efforts to establish NFC and centralize criminal debt
accounting and reporting and (2) determine additional actions AOUSC
needs to take to complete implementation of NFC. Appendix I includes
additional information you requested regarding project funding and
staffing.
--------------------
\1 AOUSC is the administrative arm of the federal judiciary, which is
composed of federal courts throughout the United States.
\2 Public Law 100-185, 101 Stat. 1279.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
Since April 1994, AOUSC has (1) established a process for
centralizing and maintaining federal criminal debt accounts, (2)
developed a formal training program for judicial district staff,\3
(3) selected an off-the-shelf accounting system which became
operational in April 1995, (4) installed an inexpensive interim
software package that was used through March 1995 until the selected
system became operational, (5) begun processing new criminal debt
information for 25 of the smaller judicial districts, and (6) begun
converting criminal debt information from the interim to the
off-the-shelf system.
AOUSC is slightly ahead of its April 1994 schedule in establishing
NFC and implementing a system to centralize federal criminal debt.
However, only a small fraction of criminal debt accounts are
currently on the NFC system, and an extensive amount of planning and
implementation effort remains. Before NFC can begin receiving new
criminal debt information from the larger judicial districts, a
number of enhancements to the selected off-the-shelf accounting
system will be required to automate certain manual processes--such as
the calculation of interest and penalties--so that NFC can
efficiently and effectively handle the increased volume of accounts.
The more significant challenges still facing AOUSC and the Department
of Justice (DOJ) include (1) ensuring that account data for the
estimated $4.5 billion in existing criminal debt resulting from years
of fragmented recordkeeping are reliable before entering the
information into the NFC system and (2) determining the
collectibility of both new and existing debt so that NFC can reliably
report on the amount of debt that is likely to be collected. In
addition, while AOUSC has indicated that it plans to further enhance
the system to increase user access to NFC information and improve
management reporting within the next 3 to 5 years, it still needs to
identify the specific enhancements that will be required and
determine how to accomplish them.
--------------------
\3 Judicial district staff consist of judicial branch personnel in
the Clerk of the Court's office and probation office and executive
branch personnel within the Department of Justice's U.S. Attorney's
Office.
BACKGROUND
------------------------------------------------------------ Letter :2
Approximately 50,000 criminals are convicted in federal courts each
year. Federal courts may impose one or more of the following four
monetary penalties upon conviction.
Fines: amounts the court sets as punishment. Fines may accumulate
interest, and those that are not paid promptly may result in
additional penalties.
Restitution: amounts paid to identifiable crime victims that are
entitled to compensation.
Special assessments: fixed amounts, ranging from $5 to $200,
assessed for each count upon which the defendant is convicted.
The courts are required to impose special assessments on each
offender convicted of a crime.
Reimbursement of costs: an amount equal to the court and legal
costs of the trial.
Following enactment of numerous laws relating to the imposition and
collection of monetary penalties during the 1980s, federal courts
have imposed criminal fines and ordered monetary restitution in
greater amounts. According to DOJ, an estimated $1.5 billion in
monetary penalties were assessed against persons convicted of federal
crimes in fiscal year 1994. DOJ also estimated that, as of the end
of fiscal year 1994, about $4.5 billion in criminal fines,
restitution, special assessments, and court costs were outstanding
for persons convicted of federal crimes.
Criminal debtors have been allowed to make payments directly to
victims or to local offices of one of three different agencies within
judicial districts--the Clerk of the Court, probation office, or U.S.
Attorney's Office (USAO). For example, criminal debtors may make
payments based on the monetary penalties routinely imposed by federal
courts as follows.
Debtors may pay the courts directly.
Debtors may pay the local USAO, which forwards receipts to the
Clerk of the Court or deposits the receipts in DOJ lock boxes.\4
Incarcerated debtors may pay their debts through the Inmate
Financial Responsibility Program.\5
Debtors may periodically pay their debts through probation
officers, who are members of the federal court staff.
Debtors may pay restitution directly to victims or through the
courts or their USAO.
This has created a fragmented process for tracking and collecting
criminal debt and resulted in a lack of standardized procedures,
discrepancies among agency collection records, and duplication of
effort.
The Criminal Fine Improvements Act of 1987 transferred responsibility
for the processing of criminal fines and assessments from DOJ to
AOUSC. The House Judiciary Committee's report on the act set forth
the expectation that AOUSC was to establish a centralized and highly
automated system capable of receiving all criminal debtor payments;
processing fines, restitution, forfeiture of bail bonds and
collateral,\6 and special assessments; and retrieving up-to-date
information on the status of any obligation covered by the system for
all 94 judicial districts. By using this centralized debt system and
relieving DOJ of recordkeeping responsibilities, it was expected that
additional DOJ resources would be available to perform debt
collection enforcement and, therefore, collect more of the
outstanding debt. The Executive Office for United States Attorneys
(EOUSA), within DOJ, is responsible for providing direction and
administrative support over debt collection activities. U.S.
Attorneys' staff within each judicial district are responsible for
enforcing collection of delinquent or defaulted criminal debts.
However, because implementation of the NFC system is still in the
early stages, DOJ has continued to perform much of the recordkeeping
as well as debt collection enforcement functions. After the system
becomes fully operational in all districts, DOJ is expected to be
relieved of the recordkeeping function but will retain responsibility
for enforcing legal collection actions on delinquent and defaulted
criminal debt.\7 DOJ will be one of the primary users of the NFC
system because the system will identify delinquent and defaulted
accounts that require legal enforcement action.
After receiving initial funding of $2.2 million in 1990,\8 AOUSC
initiated an NFC project in Raleigh, North Carolina, and began
developing a prototype automated information system to centralize
criminal debt for one judicial district. However, in an August 1993
report\9 on the Raleigh Fine Center, we concluded that the project
would not be operational by its 1995 target date due to difficulties
in reconciling debtor accounts and training staff. We also raised
concerns about the lack of computer systems security controls to
prevent unauthorized access to sensitive information contained in the
NFC database. As a result of our report and a program review
performed subsequently by AOUSC, in October 1993, AOUSC discontinued
development efforts in Raleigh. According to AOUSC officials, the
project would have been too difficult and costly to expand to the
remaining 93 judicial districts primarily because of the inadequately
developed and documented computer software. The system continues to
operate in the Raleigh location only.
In April 1994, AOUSC began its current two-phased implementation
approach that emphasized using an off-the- shelf accounting system
which could be enhanced rather than developing a system totally
in-house. Under phase I, AOUSC plans to install an off-the-shelf
accounting system to support establishing debtor accounts, billing
debtors, recording receipts, paying victims, and reporting on a
limited scale for new criminal debts. Also, AOUSC officials plan to
enhance the off-the-shelf system to automate certain processes, most
of which are now performed manually. For example, they plan to
automate the calculation of interest and penalties that are to be
assessed on criminal fines. Phase I was also to include reconciling
existing criminal debt accounts and entering agreed upon balances
into the NFC system.
By phase I's scheduled completion in September 1996, AOUSC expects
that all 94 judicial districts will be providing new criminal debt
information to NFC. To minimize the impact on NFC and judicial
district staffs caused by the need to manually perform some
processing and billing functions, AOUSC decided to add low volume
districts--those generally having fewer than 200 convicted criminals
annually--first. Larger districts would be added later as planned
system enhancements became operational. See appendix III for a table
showing proposed time frames for adding judicial districts to NFC.
Once the selected system is fully operational under phase I, AOUSC
plans to expand the system during phase II to improve users' access
to NFC information and increase management information reporting
capabilities. During phase II, which is projected to be completed
within 3 to 5 years, AOUSC intends to either further enhance its
selected off-the-shelf accounting system or perform a completely new
procurement. AOUSC officials have been unable as yet to provide
information, including cost estimates, on specifically how they will
accomplish phase II.
--------------------
\4 Several commercial banks contract with the Department of the
Treasury to provide services for agencies which collect large numbers
of payments. The banks use post office boxes--or lock boxes--to
collect the payments, which are then deposited into government
accounts.
\5 DOJ encourages incarcerated offenders to participate in this
program, which allows inmates to make contributions toward their
financial obligations. Voluntary deductions from inmates' wages are
made monthly, quarterly, or semiannually.
\6 Bail bonds and collateral are forms of guarantees used to secure a
defendant's temporary release until required to appear in court.
Failure of a defendant to appear in court may result in forfeiture of
collateral or a bail bond.
\7 If offenders do not make criminal debt payments as required, the
debts are to be referred to the USAOs. The USAOs are responsible for
taking legal collection actions on delinquent or defaulted criminal
debts, such as filing liens on debtor properties, requesting
garnishment of debtor wages, coordinating collection activities with
probation officers, and providing names of criminal debtors to the
Internal Revenue Service (IRS) for the purpose of offsetting tax
refunds.
\8 The Congress originally provided that the NFC system would be
funded annually from excess deposits to the Crime Victims Fund.
Excess monies were not available from the Fund until 1989, and AOUSC
received initial funding in 1990. In 1992, the Congress revised the
NFC funding method to ensure more stable funding.
\9 National Fine Center: Expectations High, but Development Behind
Schedule (GAO/GGD-93-95, August 10, 1993).
SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :3
Our review focused primarily on AOUSC's efforts to centralize
criminal debt in its NFC system under its phase I implementation. We
were unable to analyze the AOUSC's phase II implementation due to the
lack of specificity at this stage as to what AOUSC planned to
accomplish. We reviewed available project and systems planning
documentation for phase I, including systems and functional
requirements, and discussed project and systems status with NFC,
EOUSA, and judicial district officials. We also reviewed (1)
training documents used to orient and instruct judicial district
staff on the process for submitting data to NFC, (2) the NFC
implementation schedule for adding judicial districts to the NFC
system, and (3) the AOUSC's draft reconciliation strategy. In
addition, we observed data entry and processing of judicial district
input data on the interim NFC system and reviewed monthly reports
generated by the system. We also discussed with AOUSC officials
their strategy for selecting an off-the-shelf accounting system for
later use.
Further, we reviewed documentation and discussed with Raleigh Fine
Center personnel lessons learned from the prior systems development
effort and observed operation of the system with Raleigh personnel.
We reviewed current and planned NFC staffing needs and obtained NFC
budgetary and expenditure data. We performed our review from August
1994 through January 1995 in accordance with generally accepted
government auditing standards. A detailed description of our scope
and methodology is in appendix II. The Director, AOUSC, and the
Director, EOUSA, provided written comments on a draft of this report.
These comments are presented in appendixes IV and V, respectively.
AOUSC HAS BEGUN CENTRALIZING
CRIMINAL DEBT
------------------------------------------------------------ Letter :4
Since April 1994, AOUSC has progressed in implementing phase I of its
NFC approach. AOUSC officials have (1) established a process for
centralizing and maintaining federal criminal debt accounts, (2)
developed a formal training program for judicial district staff, (3)
selected an off-the-shelf accounting system which became operational
in April 1995, (4) installed an inexpensive interim software package
that was used through March 1995 until the selected system became
operational, (5) begun processing new criminal debt information for
25 of the smaller judicial districts, and (6) begun converting
criminal debt information from the interim to the off-the-shelf
system.
AOUSC officials selected an off-the-shelf accounting system that
could be modified to meet unique billing and disbursement needs.
AOUSC officials told us that they selected this accounting system
based on published external evaluations of commercially available
microcomputer accounting software\10 as well as AOUSC's internal
evaluations of several software packages. This decision was
consistent with Office of Management and Budget (OMB) Circular A-130
guidance\11 that encourages agencies to purchase off-the-shelf
financial systems rather than develop their own.
However, because the latest version of the selected system was still
under development by the vendor, AOUSC bought and started using an
inexpensive (about $200) interim accounting software package having
limited capability and processing capacity so that implementation for
some of the smaller districts could begin in August 1994. AOUSC
officials told us that the interim software package would accommodate
processing requirements for the 23 judicial districts that they
expected to have implemented through March 1995. According to the
AOUSC Director, the selected off-the-shelf accounting system, which
was received in October 1994 and began operating in April 1995, is
replacing the interim system and is to provide the capability for
processing criminal debt information for all 94 judicial districts by
September 1996. Efforts to convert criminal debt accounts from the
interim system to the off-the-shelf system are to be completed by May
1995.
AOUSC has also established a process for obtaining and updating debt
information. Once implemented, Clerk of the Court staff in judicial
districts are to manually complete standardized account establishment
forms for newly convicted criminals, that include the monetary
penalties imposed by the courts, along with (1) personal debtor data,
such as address, date of birth, and social security number, (2)
payment requirements, and (3) information on any restitution payments
to be made to those harmed by the crime. In addition, judicial
district staffs in the Clerk of the Court's office, probation office,
and U.S. Attorney's Office also are to submit manually prepared
account maintenance forms to NFC when information about the debtor or
the account changes, such as a change of address. Under this
process, once NFC staff receive completed forms, they are to enter
data into the automated accounting system.
The NFC accounting system generates monthly billings to debtors, who,
in turn, are to remit payments to NFC. NFC staff manually determine,
based on payments received from debtors and the terms set forth in
the sentencing documentation, any applicable amounts that are to be
paid to crime victims. The NFC system also generates monthly
statements to the judicial districts showing individual debtor
account balances.
AOUSC has developed and begun conducting a formal training program at
judicial districts aimed at defining the roles and responsibilities
of staff in the Clerk of the Court's office, the probation office,
and U.S. Attorney's Office who compile and submit criminal debt
information to NFC. The primary goals of the training are to (1)
promote effective communication among the entities involved in
criminal debt activities and (2) ensure that complete and accurate
standardized data are provided to NFC. This training is provided to
judicial district personnel prior to the district sending criminal
debt information to the NFC system.
According to AOUSC's Director, as of April 1995, NFC implementation
in the judicial districts was slightly ahead of schedule. On August
1, 1994, the NFC began receiving criminal debt information on new
accounts from two judicial districts--Vermont and Maine. As of
December 1994, 13 judicial districts were sending information on new
criminal debt accounts to NFC. The NFC was expanded to 25 judicial
districts as of April 1995, which was 2 more than the 23 AOUSC had
initially planned in April 1994.
Our analysis of the criminal debt data received by NFC for the
initial 13 districts showed that these new accounts amounted to about
$6.4 million, which represented about 6 percent of the 13 districts'
criminal cases with outstanding balances, and about one-tenth of one
percent of DOJ's estimated $4.5 billion in total debt. We did not
perform similar analysis for the 12 additional districts recently
brought onto NFC.
--------------------
\10 The evaluations were contained in Sheldon P. Needle, A Guide to
Accounting Software for Microcomputers, Fall 1993 Edition (Rockville,
Maryland: Computer Training Services, Inc., 1993).
\11 The Judicial Branch, of which AOUSC is a part, is not required to
follow OMB guidelines. However, AOUSC has determined that the NFC
system will comply with OMB circulars because DOJ, which is required
to follow OMB guidance, is a primary user of the NFC system.
ACTIONS NEEDED TO COMPLETE NFC
IMPLEMENTATION
------------------------------------------------------------ Letter :5
Extensive planning and implementation effort remains if AOUSC is to
fully implement a system to account for and report on criminal debt
for all 94 judicial districts. Currently, only a small fraction of
criminal debt accounts are on the NFC system. Before the larger
courts are added, software enhancements will be needed so that NFC
can effectively support certain billing, payment receipt, and
disbursement functions, most of which NFC staff now do manually.
In addition, some of the larger challenges facing AOUSC and DOJ
involve (1) ensuring that data for existing debtor accounts are
reliable before entering the information into the NFC system and (2)
developing a methodology for determining, tracking, and reporting the
collectibility of new and existing debt. Further, while AOUSC has
indicated that it will enhance the system to increase user access to
NFC information and improve management reporting during phase II, it
has not yet determined what specific enhancements will be made to NFC
or how it intends to accomplish them.
ENHANCING SOFTWARE
CAPABILITIES
---------------------------------------------------------- Letter :5.1
During phase I, in addition to replacing the interim software package
with the selected off-the-shelf system, AOUSC plans to develop
several software enhancements to automate certain functions, most of
which are now performed manually by NFC staff. For example, one
enhancement will automate the calculation of interest and penalties.
While the selected off-the-shelf system--an accounts
receivable/accounts payable package--has standard capabilities,
legislation that calls for calculation of interest and default
penalties for fines requires additional capabilities. Specifically,
there are several statutes that specify interest rates and penalties
that are to be calculated for fines. The applicable statute is
determined by the date of the debtor's offense. Automating such
interest and penalty calculations would save staff time and eliminate
errors inherent in manual calculations.
Another enhancement involves developing an automated interface to
enable judicial districts to provide account establishment and
maintenance data to NFC in automated formats. This improvement would
reduce manual data entry tasks now performed by NFC staff and the
corresponding risk of errors. Other enhancements include (1)
automating transaction data from debtor payments sent to lock boxes
and payments made through the Bureau of Prisons Inmate Financial
Responsibility Program and (2) establishing an interface between NFC
and a DOJ system to allow DOJ staff increased access to account
information.
ENSURING DATA QUALITY BEFORE
RECORDING EXISTING DEBT
ACCOUNTS
---------------------------------------------------------- Letter :5.2
While AOUSC has begun entering new account information, a major
challenge will be reconciling existing criminal debt accounts and
entering the resulting amounts into the NFC system. NFC will not
contain complete criminal debt information for its users and the
Congress until it also includes complete and reliable data on the
estimated $4.5 billion in existing criminal debt.
Separate records maintained by judicial district staffs within the
Clerk of the Court's office, probation office, and U.S. Attorney's
Office will need to be reconciled. Within a judicial district, each
of these entities is responsible for receiving payments and
maintaining accounting records, and they may not balance or update
their records at the same time. Another reason that accounts may not
agree is that the U.S. Attorney's Office is generally the only
entity within the judicial districts that calculates and applies
interest and penalties on accounts. Accordingly, AOUSC must
coordinate with these entities to develop and implement a
reconciliation approach to identify differences among the accounts,
determine reasons for the differences, and ensure that agreed-upon
corrections are made.
AOUSC officials recognize the difficulties of reconciling existing
debt records, and the magnitude of effort that will be needed to
reconcile about 100,000 debtor accounts, nationwide. During the
Raleigh National Fine Center project, judicial district staff took
over a year to reconcile about 2,500 accounts. In our August 1993
report, we stated that the reconciliation, eventually completed in
1992, took longer than expected because judicial district and U.S.
Attorney staffs had difficulty agreeing on account balances. This
difficulty occurred despite the use of procedures directing that (1)
account balances differing by $500 or less be considered reconciled
because further reconciliation would not be cost-effective and (2)
differences remaining would be decided in favor of the debtor.
A separate but related problem that occurred during the Raleigh
reconciliation effort is likely to resurface during AOUSC's future
account reconciliation attempts. In Raleigh, although the team
performing the reconciliation eventually reconciled all account
balances under the procedures previously described, it found that
many accounts lacked current addresses and social security numbers.
Such information is critical since NFC cannot bill debtors without
correct addresses.
AOUSC has begun preparing a strategy to guide the upcoming
reconciliation process. This draft strategy, in part based on the
reconciliation performed in Raleigh, identifies the roles and
responsibilities of staff who are to perform the reconciliation and
sets forth steps in the reconciliation process. However, the
strategy has not yet been accepted by AOUSC, DOJ, and judicial
district officials. AOUSC has not established time frames for
beginning and completing reconciliations in each of the remaining 93
districts or estimated the resources needed to perform the process.
In addition, the reconciliation strategy does not set forth steps to
be followed if addresses and/or social security numbers are missing
from debtor account information.
DETERMINING COLLECTIBILITY
OF CRIMINAL DEBT
---------------------------------------------------------- Letter :5.3
While not specifically addressed by the Criminal Fine Improvements
Act of 1987, a critical area that AOUSC and DOJ have not yet
addressed is that of determining the collectibility of criminal debt
accounts. Currently, AOUSC records all new criminal debt in its NFC
system as accounts receivable without a determination by AOUSC or DOJ
as to whether it appears collectible. Also, AOUSC officials have not
established within the NFC system an allowance for doubtful or
uncollectible receivables\12 to properly account for and report on
those receivables determined to have a low probability of collection.
Without such allowances, decisionmakers, including the Congress, may
be led to believe that substantially greater amounts are collectible.
Also, AOUSC officials recognize that, during the reconciliation
process, there is a need to identify accounts that are no longer
legally enforceable and have included procedures in AOUSC's draft
reconciliation strategy to address these instances. Accounts that
are no longer enforceable include special assessment cases when the
5-year statute of limitations on collecting the debt has expired or
when a debtor has died. These accounts would not be transferred to
NFC.
AOUSC will need to work with DOJ to ensure that realistic
determinations of collectibility are made on new criminal debts as
the accounts are established, based on available information, and on
those that have become delinquent or are in default.\13 In addition,
there is a need to assess existing debt accounts that are legally
enforceable, but may be uncollectible. Although AOUSC has no
authority to make adjustments to accounts or to write off debts, it
could categorize certain debts as uncollectible for accounting
purposes. We have worked with various agencies to develop
methodologies for determining collectibility and, in some instances,
have assisted them in applying the methodologies to their accounts
receivable balances. Reliably estimating an allowance for
uncollectible receivables requires consideration of both historical
collection experience and current economic conditions. Also, a
December 1992 standard recommended by the Federal Accounting
Standards Advisory Board,\14 and approved for use for fiscal years
ending September 30, 1994, and thereafter, states that such an
analysis should be performed on groups of accounts with similar
collection risk characteristics and should include an evaluation of
individual accounts to determine a debtor's current ability to pay.
Court officials told us that sufficient information is often
available at the time of sentencing to determine the offender's
ability to pay and, therefore, whether or not a monetary penalty
imposed is likely to be collected. For example, in the 1993 bombing
of the World Trade Center in New York City, each of the four
defendants received 240 years in prison and $250,000 in fines.
Although $1 million of outstanding fines resulted from this case, DOJ
and AOUSC officials believe the probability of collecting these fines
is low. Currently, however, the DOJ records these debts as being
fully collectible.
It will be important for AOUSC to work cooperatively with DOJ to
develop a methodology for determining collectibility. By not
distinguishing between collectible and uncollectible criminal debt
accounts, NFC will be unable to accurately report on the composition
of the outstanding criminal debt balance. Similarly, users who are
responsible for collecting debts will not have the ability to
effectively target collection resources and realistically assess
their performance unless information is available to identify which
debts possess the best likelihood of collection, and thus, should be
rigorously pursued.
--------------------
\12 Uncollectible accounts are those fines, restitutions, special
assessments, and court costs that should not be considered as valid
accounts receivable for financial reporting purposes. The allowance
for doubtful or uncollectible receivables account represents those
receivables that are unlikely to be collected and results in a
decrease to the accounts receivable account balance. This allowance
would be for financial reporting purposes, and would not affect the
enforceability of the debts.
\13 A fine becomes delinquent if a debtor's payment is more than 30
days late. A fine is in default if a payment is delinquent for over
90 days.
\14 The Federal Accounting Standards Advisory Board is charged with
recommending new federal accounting standards. The Board is composed
of nine members, including representatives from GAO, the Office of
Management and Budget, and the Department of the Treasury. The Board
recommends standards to the Comptroller General, the Director of OMB,
and the Secretary of the Treasury, who jointly approve the standards
that are applicable for the federal government.
DEFINING PHASE II OBJECTIVES
---------------------------------------------------------- Letter :5.4
AOUSC recognizes that the NFC system established during phase I will
have to evolve to a more sophisticated financial information system
during phase II so that it can be used to improve management of
criminal debt collection activities. AOUSC officials told us that
they have begun working with DOJ and other system users to define the
necessary information and reporting requirements. They plan to
address this more fully during phase II and, at the time of our
review, had not yet determined what additional enhancements and
capabilities will be needed to complete this phase.
According to AOUSC officials, at the end of phase II, the NFC system
is to
provide a repository of national statistical information on
criminal debt collection;
produce reports to accommodate management information needs of the
Congress, the judiciary, the executive branch, and other
entities;
provide the Clerk of the Court offices, probation offices, U.S.
Attorneys' Offices, and the Bureau of Prisons with easy access
to account information so that the maximum level of debt
collection can be achieved; and
provide a means to account for the collection of bail bond and
collateral forfeiture actions, as required by the Criminal Fine
Improvements Act of 1987.
AOUSC officials believe that a successful implementation of phase II
will enable them to fully meet the requirements of the act.
CONCLUSIONS
------------------------------------------------------------ Letter :6
The two-phased NFC implementation approach chosen by AOUSC has
enabled AOUSC to begin centralizing new criminal debt information in
25 of the smaller judicial districts. AOUSC has also purchased an
off-the-shelf accounting system that, together with planned
enhancements, should enable it to expand the NFC implementation to
additional districts and more effectively accommodate information
from the larger districts. The timely completion of these
enhancements is important to the future efficient operation of NFC.
AOUSC and DOJ also face significant challenges that will require
extensive planning, as well as coordination among other NFC system
users, if AOUSC is to successfully implement the required system.
These challenges include reconciling the estimated $4.5 billion in
existing debt and developing a methodology for determining the
collectibility of new and existing debtor accounts. It is also
critical that AOUSC determines specifically how it intends to proceed
beyond phase I to increase user access to NFC account information and
improve management reporting. AOUSC will need to address these
issues to fully centralize criminal debt for all 94 judicial
districts and improve the government's ability to collect what is
owed.
RECOMMENDATIONS
------------------------------------------------------------ Letter :7
As part of its efforts to complete the planned implementation of the
NFC system, including enhancements such as the one needed to perform
interest and penalty calculations, and various interfaces to
facilitate the exchange of information between NFC and its users, we
recommend that the Director, AOUSC,
work with DOJ to finalize a reconciliation strategy to include time
frames and resources for reconciling existing criminal debt
accounts at judicial districts and entering the reconciled
information into the NFC system and
fully define a strategy for addressing additional actions needed to
enable the NFC system to (1) provide a repository for national
criminal debt statistical information, (2) produce reports to
accommodate management information needs, (3) facilitate
communication between NFC and its users, and (4) account for
bail bond and collateral forfeiture actions.
We also recommend that the Director, AOUSC, and the Director of DOJ's
EOUSA, work together to develop and implement a methodology for
determining the collectibility of all criminal debt.
AGENCY COMMENTS AND OUR
EVALUATION
------------------------------------------------------------ Letter :8
In written comments on a draft of our report, AOUSC's Director
generally agreed with our findings and recommendations. However, the
Director said that DOJ, by virtue of its criminal debt collection
responsibilities, should assume the lead role for reconciling
existing criminal debt accounts and for determining the
collectibility of all criminal debt. Accordingly, the Director
stated that these recommendations should be directed to DOJ, not
AOUSC. Based on our discussions with both entities, DOJ and U.S.
Attorneys are the primary parties who will ultimately determine
whether or not criminal debt accounts are collectible. However,
AOUSC also needs to ensure that the NFC system contains reliable
information for reporting on the composition of the outstanding
criminal debt balance. Therefore, we have revised our recommendation
regarding developing a methodology for determining collectibility of
criminal debt to place this responsibility with both AOUSC and DOJ.
While we agree that DOJ and the U.S. Attorneys have a major role in
reconciling existing criminal debt account balances, it is AOUSC's
responsibility to ensure that the NFC system contains complete and
reliable data on all criminal debt, including existing unreconciled
accounts. As stated in our report, AOUSC had already prepared a
draft reconciliation strategy and had provided it to DOJ for
coordination. We have modified our recommendation regarding
reconciling existing accounts to state that AOUSC should work with
DOJ to finalize a reconciliation strategy.
In addition, the AOUSC Director stated that the draft report did not
give AOUSC sufficient credit for the progress in implementing the NFC
system. We updated the report to reflect progress through April
1995, but wish to point out that only a small percentage of new
criminal debtor accounts are on the system. As noted in the report,
we believe that AOUSC and DOJ still face significant challenges in
their joint effort to reconcile existing debtor accounts and to
report collectible amounts.
The AOUSC Director also provided a number of suggested clarifications
that we have incorporated as appropriate. The AOUSC Director's
comments and our response are included in appendix IV.
DOJ's Office of the Director, EOUSA, commented that the report should
have placed more emphasis on the NFC's lack of procedures, policies,
and plans for developing the system. Our report describes the status
of the NFC system implementation effort and indicates throughout the
report that extensive planning and coordination will be needed to
fully implement the NFC system. Nonetheless, progress is being made
to enhance the reliability of accounting and reporting of criminal
debt information. During our review, AOUSC officials recognized that
additional planning would be required to ensure the NFC system would
meet the needs of its users, and said that they were in the process
of preparing formal plans. DOJ's continued involvement in the NFC
project is critical to ensuring that the NFC system is developed to
meet the needs of all stakeholders, especially in light of DOJ's
responsibilities for enforcing the collection of criminal debt.
Also, the Director, EOUSA, stated that reconciliation of existing
criminal debt accounts does not represent a major challenge to the
NFC as we had reported. There are several factors, in addition to
the experiences of the Raleigh reconciliation, which we used to
conclude that the reconciliation effort will be a major challenge.
First, at the time of our review, AOUSC had not finalized a
reconciliation strategy for use by judicial district staff, of which
the U.S. Attorney's Offices are a part, including establishing time
frames for performing the reconciliations and estimating the
resources needed to perform the process. Second, AOUSC officials and
some judicial district officials--representing small districts that
were already providing new criminal debt information to NFC--stated
that reconciliation of existing accounts would be a time-consuming
and large undertaking. Third, discussions with the former Associate
Director, Financial Litigation Unit, EOUSA, indicated that special
assessments alone, which are applied to each count of a conviction
and represent about 46 percent of criminal debts, would create a
large amount of work during the reconciliation process. The comments
from the Director, EOUSA, and our response are included in appendix
V.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the date of this letter. At that time, we will send copies of
this report to the Director, Administrative Office of the United
States Courts; the Director, Executive Office for United States
Attorneys; the Attorney General; and interested congressional
committees. Copies will be made available to others upon request.
Please call me at (202) 512-7487 if you have any questions concerning
this report. Other major contributors to this report are listed in
appendix VI.
Sincerely yours,
Linda D. Koontz
Associate Director, Information Resources
Management/General Government Issues
STATUS OF NFC PROJECT FUNDING AND
STAFFING
=========================================================== Appendix I
NFC PROJECT FUNDING
AOUSC has received a total of $19 million from the Crime Victims
Fund\1 to support NFC development and operations since its inception
through fiscal year 1994. An additional $6.2 million is to be made
available to AOUSC in fiscal year 1995. Initially, AOUSC was to
receive $2.2 million annually after the Fund had exceeded collections
of $125 million through fiscal year 1990 and $150 million thereafter.
However, because Crime Victims Fund deposits did not exceed these
levels in some years, AOUSC was not provided funding for NFC. In
1992, legislation was enacted to ensure more funding stability for
NFC, and $6.2 million was to be provided annually for fiscal years
1992 through 1995. Thereafter, the Fund was to receive $3 million
annually.
As of September 30, 1994, about $6.7 million is reported to have been
expended or obligated since the inception of the project. AOUSC
officials estimated that an additional $4.2 million will be expended
or obligated for fiscal year 1995. To date, the majority of the
project's total reported costs have been for personnel compensation
and benefits, travel, and automation related expenditures. Table I.1
summarizes NFC's reported funding activity.
Table I.1
National Fine Center Funding Activity
(Dollars in millions)
Reported
through Estimated for Estimated
fiscal year fiscal year through fiscal
Category 1994 1995 year 1995
-------------- ------------- ------------- --------------
Expended or $ 6.7\a $4.2 $10.9
obligated
Unobligated $12.3 $2.0 $14.3
============================================================
Total $19.0 $6.2 $25.2
available
------------------------------------------------------------
Note: Funding activity data are based on information provided by
AOUSC officials as of November 8, 1994. We did not verify the
accuracy of AOUSC's information.
\a This includes reported expenditures and obligations for the
Raleigh National Fine Center project.
NFC PROJECT STAFFING
NFC staffing is being accomplished in several ways--transferring
staff from the Raleigh Fine Center project, reassigning individuals
within AOUSC, hiring new employees, and detailing staff from various
components of the federal judiciary and the Department of Justice.
According to NFC project management officials, long-term staffing
requirements have not been determined. As of November 1994, 23
full-time staff were assigned to the NFC project. At that time,
AOUSC officials had proposed that another 11 staff would be added by
the end of March 1995 to provide increased support for accounting
related activities and systems analyses. Table I.2 summarizes
current and proposed NFC staff by position description.
Table I.2
Reported National Fine Center Staffing
as of November 8, 1994
Proposed
Position description Current staffing staffing
------------------------ ------------------ --------------
Managers 4 4
Accounting technicians 2 6
Accountants 6 8
Senior accountants 3 3
Programmers 2 2
Systems analysts 0 3
Management analysts 2 2
Trainers 2 2
Justice's legal staff\a 1 2
Secretaries 1 2
============================================================
Total 23 34\b
------------------------------------------------------------
\a Salaries for Department of Justice staff are reimbursed by NFC.
\b As of May 1995, 4 of the 11 proposed staff had been assigned to
the project.
--------------------
\1 The Crime Victims Fund was established by the Victims of Crime Act
of 1984 (Public Law 98-473, 98 Stat. 2170). Virtually all criminal
fines, special assessments, and bail bond forfeitures are deposited
into this fund. The Fund is administered by the Office for Victims
of Crime in the Department of Justice. Ninety percent of the Fund is
distributed to states in the form of compensation and grants. Crime
victims compensation programs administered by the states (for
example, rape crisis centers and child abuse centers) provide
financial assistance to victims and survivors of victims of criminal
violence.
SCOPE AND METHODOLOGY
========================================================== Appendix II
Our review focused primarily on AOUSC's efforts to centralize
criminal debt on its NFC system under phase I implementation. We
were unable to analyze AOUSC's phase II implementation due to the
lack of specificity at this stage as to what AOUSC planned to
accomplish. To obtain information on the status of the NFC's systems
implementation, we reviewed available project and systems planning
documentation. We also discussed project and systems status with
cognizant NFC management and staff, EOUSA officials, and various
officials within the Clerk of the Court's office, probation office,
and U.S. Attorney's Office in several judicial districts that are
currently providing criminal debt information to the NFC system--the
District of Vermont, District of Maine, and Western District of
Wisconsin. To determine what percentage of the 13 judicial
districts' outstanding criminal debt caseload was on the NFC
accounting system, we obtained criminal debt case information from
U.S. Attorney's Offices for those districts and compared it to NFC
caseload information.
To determine how the current system development approach differed
from previous efforts, we reviewed available documentation, discussed
prior system development efforts with judicial district personnel,
and observed the operations of the prior Raleigh Fine Center system.
Since the NFC began processing new criminal debt cases in August
1994, we observed data entry and processing of judicial district
standard input data on the NFC accounting system and reviewed monthly
reports generated by the system. We reviewed an NFC functional
requirements document and discussed system needs with DOJ and EOUSA
officials, and various judicial district staffs.
We discussed with AOUSC officials their strategy for selecting an
off-the-shelf system for later use. We also reviewed an August 1994
draft of the AOUSC's reconciliation strategy. In addition, we
reviewed training documents used to orient and instruct judicial
district personnel on the process for submitting data to NFC and
reviewed the NFC implementation schedule for adding judicial
districts to the NFC system. We also obtained information on current
and planned NFC staffing levels, obtained budgetary and expenditure
data for fiscal years 1990-1994, and estimated funding activity for
fiscal year 1995. We performed our review from August 1994 through
January 1995 in accordance with generally accepted government
auditing standards.
PLANNED NFC IMPLEMENTATION
SCHEDULE BY JUDICIAL DISTRICT AND
EXPECTED ANNUAL ACCOUNTS THROUGH
AUGUST 1996
========================================================= Appendix III
Number of Expected
districts to annual
be brought number of
onto the NFC new
Stage Implementation dates system accounts\b
------ ------------------------ ------------ ------------
1 April through December 13\a 2,081
1994
2 January through April 12\a 3,098
1995
3 May through August 1995 15 6,975
4 September through 20 8,345
December 1995
5 January through April 20 16,215
1996
6 May through August 1996 14 15,051
============================================================
Total 94 51,765
------------------------------------------------------------
\a According to NFC project management officials, these districts are
submitting new account information to NFC.
\b AOUSC officials provided us data on the expected number of annual
new accounts from statistical information they had compiled on the
number of convicted federal offenders for the period September 1992
to September 1993. We did not verify the accuracy of AOUSC's
statistics.
(See figure in printed edition.)Appendix IV
COMMENTS FROM THE ADMINISTRATIVE
OFFICE OF THE UNITED STATES COURTS
========================================================= Appendix III
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
The following are GAO's comments on the letter from the Director,
Administrative Office of the United States Courts, dated April 16,
1995.
GAO'S COMMENTS:
1. This issue is discussed in the "Agency Comments and Our
Evaluation" section of the report.
2. See comment 1.
3. We have modified the Results in Brief and other sections of the
report to reflect that 25 districts are providing new criminal debt
account information for input into the NFC system and that the NFC
implementation is slightly ahead of schedule.
4. The report has been modified to reflect the recent additional
progress made by AOUSC. We have further updated the report to
indicate that AOUSC (1) has begun converting criminal debt accounts
from its interim accounting software package to the new off-the-
shelf accounting system and (2) is planning to complete conversion
efforts for all 25 districts by May 1995.
5. AOUSC is correct in its characterization of our report as
emphasizing that much more needs to be done to completely implement
the NFC system. We have modified the report to reflect that, as of
April 1995, AOUSC was slightly ahead of schedule in implementing the
NFC system.
6. We believe the discussions of AOUSC's overall strategy and
policies for the phase I NFC implementation effort are appropriate.
7. We have modified the Results in Brief section to reflect that
AOUSC and DOJ should work together to determine the collectibility of
criminal debt. We have further clarified that DOJ is responsible for
enforcing the collection of delinquent and defaulted criminal debts.
8. See comment 1.
9. See comment 1.
(See figure in printed edition.)Appendix V
COMMENTS FROM THE EXECUTIVE OFFICE
FOR UNITED STATES ATTORNEYS
========================================================= Appendix III
Now on p. 4.
(See figure in printed edition.)
See comment 1.
See comment 2.
See comment 3.
(See figure in printed edition.)
Now on p. 14.
Now on p. 10.
See comment 4.
(See figure in printed edition.)
See comment 5.
Now on p. 10.
Now on p. 11.
See comment 6.
Now on p. 12.
See comment 7.
Now on p. 11.
(See figure in printed edition.)
See comment 8.
Now on p. 14.
See comment 1.
Now on p. 2.
(See figure in printed edition.)
The following are GAO's comments on the letter from the Director of
DOJ's Executive Office for United States Attorneys dated April 19,
1995.
GAO'S COMMENTS:
1. This issue is discussed in the "Agency Comments and Our
Evaluation" section of the report.
2. The available project and systems planning documentation we
reviewed consisted of (1) a draft project plan, (2) the February 1994
functional requirements document, (3) training documentation
presented during training sessions, (4) the judicial district
implementation schedule included in our report as appendix III, and
(5) a draft reconciliation strategy. AOUSC had coordinated these
documents with DOJ.
3. At the time of our review, we were informed by both the NFC
Project Manager and the former Associate Director, Financial
Litigation Staff, EOUSA, that a decision had not been made as to how
DOJ would be provided access to NFC data. Our report points out the
need for AOUSC to complete system enhancements to automate certain
functions, including establishing an interface between NFC and DOJ.
Also, during our review, AOUSC was in the process of developing
automated account establishment and maintenance forms to transfer
criminal debt data from judicial districts to NFC. The fact that DOJ
staff are working closely with AOUSC staff to implement the NFC
system should help ensure that DOJ's user needs are being met.
4. See comment 1.
5. Although NFC could enter reconciled amounts into the system
without addresses and social security numbers, our report points out
that the lack of this information was a problem during the Raleigh
reconciliation. This information would be needed before collection
of criminal debt could take place in other districts.
6. We have revised the report to clarify that AOUSC's draft
reconciliation strategy requires judicial district staff only to
identify those existing debt accounts that are no longer legally
enforceable because, for example, the defendant's obligation to pay
has expired or the defendant has died. These cases would not be
transferred to NFC. The methodology for determining collectibility
that we have recommended AOUSC and DOJ develop should address (1)
steps to determine the collectibility of legally enforceable existing
debt and (2) guidance as to when these accounts should be entered
into the NFC system.
7. We have revised the report.
8. We agree that uncollectible debts may still be legally enforceable
and as such, should be transferred to NFC. As stated in our report,
uncollectible accounts should not be considered as valid accounts
receivable for financial reporting purposes, however; AOUSC needs to
account for these receivables for enforcement, compliance, and
tracking purposes.
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix VI
ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION, WASHINGTON,
D.C.
Ronald B. Bageant, Assistant Director, (202) 512-9498
Brian C. Spencer, Technical Assistant Director
Brenda E. Anderson, Evaluator-in-Charge
GENERAL GOVERNMENT DIVISION,
WASHINGTON, D.C.
William O. Jenkins, Jr., Assistant Director
OFFICE OF THE GENERAL COUNSEL,
WASHINGTON, D.C.
Jan B. Montgomery, Assistant General Counsel