Criminal Debt: Oversight and Actions Needed to Address
Deficiencies in Collection Processes (16-JUL-01, GAO-01-664).
The collection of outstanding criminal debt has been a
long-standing problem for the federal government. Since October
1985, as reported in the U.S. Attorney's statistical reports, the
balance of outstanding criminal debt has grown from $260 million
to over $13 billion. Currently, the receipting of collections and
recordkeeping for criminal debt is primarily the responsibility
of the U.S. Courts, while the Department of Justice is
responsible for collecting criminal debt. This report reviews (1)
the key reasons for the growth in reported uncollected criminal
debt, (2) whether adequate processes exist to collect criminal
debt, and (3) what role, if any, the Office of Management and
Budget (OMB) and the Department of the Treasury play in
overseeing and monitoring the government's collection of criminal
debt. GAO found that there are four key factors that have
contributed to the significant growth in the amount of
uncollected criminal debt. These factors are (1) the nature of
the debt, in that it involves criminals who may be incarcerated
or deported or who have minimal earning capacity, (2) the pay, as
required by the Mandatory Victims Restitution Act of 1996, (3)
interpretation by the Financial Litigation Units 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. Financial
Litigation Units did not always follow their policies and
procedures and could ensure that collection actions were prompt
and adequate. The present management practices and processes do
not provide assurance that offenders are not afforded their
ill-gotten gains and that innocent victims are compensated for
their losses to the fullest extent possible. Collection
responsibilities continue to be divided between Justice and the
courts, with neither having a central management oversight role.
Neither OMB or Treasury has identified the need to take an active
oversight role in the collection of the growing balance of
outstanding criminal debt.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-01-664
ACCNO: A01395
TITLE: Criminal Debt: Oversight and Actions Needed to Address
Deficiencies in Collection Processes
DATE: 07/16/2001
SUBJECT: Criminals
Debt collection
Fines (penalties)
Interagency relations
Internal controls
Prisoners
Restitution
BOP Inmate Financial Responsibility
Program
Crime Victims Fund
IRS Income Tax Refund Offset Program
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GAO-01-664
A
Report to the Ranking Minority Member, Permanent Subcommittee on
Investigations, Committee on
Governmental Affairs, U. S. Senate
July 2001 CRIMINAL DEBT Oversight and Actions Needed to Address Deficiencies
in Collection Processes
GAO- 01- 664
Letter 5 Executive Summary 8 Chapter 1
20 Introduction
Background 22 Objectives, Scope, and Methodology 30
Chapter 2 32
Factors Contributing to Nature of the Debt 32 Assessment of Mandatory
Restitution 34
the Growth in Payment Schedules Set by Judges 36
Uncollected Criminal State Laws 39
Debt Chapter 3
40 Inadequate Criminal
Financial Litigation Units 41 Probation Offices 54 Debt Collection
Coordination Among the Entities Involved 60 Processes and Lack of
Coordination Contribute to Low Collection Rate
Chapter 4 66
Oversight Roles of Accounting For, Reporting, and Managing Criminal Debt 67
Referring Debt to Treasury 68 OMB and Treasury
Chapter 5 70
Conclusions, Conclusions 70
Recommendations 70 Recommendations, Agency Comments and Our Evaluation 72
and Agency Comments
Appendixes Appendix I: Scope and Methodology 80 Appendix II: History of
Criminal Debt Collection Legislation 84 Appendix III: Comments From the
Department of Justice 85 Appendix IV: Comments From the Administrative
Office of the
U. S. Courts 104 Appendix V: Comments From the Department of the Treasury
114 Appendix VI: GAO Staff Acknowledgments 117
Related GAO Products 118 Tables Table 1: Guidance Provided to USAOs and U.
S. Courts 25
Table 2: Terms Stipulated in JCCs Related to GAO?s Selected Cases 37 Table
3: Required Frequency of Review for Criminal Debts
in Suspense 48 Table 4: Examples of Inconsistencies in Applying Interest 51
Table 5: Average Number of Criminal Cases Per Staff, Fiscal Years
1995 and 1999, for the Four FLUs We Visited 53 Table 6: Status of Offenders
in GAO?s Selected Cases 57 Table 7: Details of Cases Selected 81 Table 8:
Number of Occurrences by Selected District for Each Item Statistically
Projected for the 140 Random Cases 82
Figures Figure 1: Growth in Outstanding Criminal Debt Since 1985 21 Figure
2: Total Reported Criminal Debt by Major Type as of
September 30, 1999 23 Figure 3: Total Reported Criminal Debt by Major Type,
as of September 30, 1999, at the Four Selected Districts 24
Figure 4: Process of Assessing Criminal Fines and Restitution 26 Figure 5:
Typical Post- MVRA Criminal Debt Collection Process 28 Figure 6: Reported
Criminal Debt Outstanding From
September 30, 1995, Through September 30, 1999 32 Figure 7: Reported Federal
Criminal Debt (Fines and Federal
Restitution) and Nonfederal Criminal Debt (Nonfederal Restitution) as of
September 30, 1995 and 1999 35 Figure 8: Reported Criminal Debt Outstanding
and Collected From
September 30, 1995, Through September 30, 1999 41
Figure 9: Age of Reported Criminal Debts Outstanding as of September 30,
1999 42
Abbreviations
AOUSC Administrative Office of the United States Courts BOP Bureau of
Prisons DCIA Debt Collection Improvement Act of 1996 EOUSA Executive Office
for United States Attorneys FLU Financial Litigation Unit IFRP Inmate
Financial Responsibility Program JCC Judgment in a Criminal Case MOU
memorandum of understanding MVRA Mandatory Victims Restitution Act of 1996
NFC National Fine Center OIG Office of the Inspector General OMB Office of
Management and Budget SFFAS Statement of Federal Financial Accounting
Standards USAO United States Attorneys? Offices USSC United States
Sentencing Commission
Lett er
July 16, 2001 The Honorable Susan M. Collins Ranking Minority Member
Permanent Subcommittee on Investigations Committee on Governmental Affairs
United States Senate
Dear Senator Collins: This report responds to your request that we review
the federal government?s collection of criminal debt, primarily fines and
restitution. The collection and management of such criminal debt has been a
longstanding problem for the federal government. This report discusses the
following factors that have an impact on the effectiveness of the criminal
debt collection process:
the nature of criminal debt, the assessment of mandatory restitution,
interpretation of payment schedules set by judges, and limitations due to
state laws;
inadequate policies and procedures, and inadequate adherence to
established procedures by the Department of Justice and the U. S. courts,
and in the districts visited, a lack of coordination in assessing and
collecting criminal debt; and
the current oversight environment, which does not leverage the central
agency roles of the Department of the Treasury and the Office of Management
and Budget in the government?s collection of criminal debt.
We make recommendations related to these issues that, if successfully
implemented, should improve the collection of criminal debt.
As arranged with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days after
the date of this report. At that time we will send copies to the Chairman of
your subcommittee as well as the Chairman and Ranking Minority Member of the
Committee on Governmental Affairs. We will also provide copies to the
Attorney General, the Secretary of the Treasury, the Director, Office of
Management and Budget, and the Director, Administrative Office of the United
States Courts. Copies will also be made available to others upon request.
If you have any questions about this report, please contact me at (202) 512-
3406 or J. Lawrence Malenich, Assistant Director, at (202) 512- 9399. GAO
staff acknowledgments are listed in appendix VI.
Sincerely yours, Gary T. Engel Director Financial Management and Assurance
Executive Summary Purpose This report responds to your request that GAO
review the federal government?s collection of criminal debt, primarily fines
and restitution. 1 The collection and management of such criminal debt has
been a longstanding problem for the federal government. As reported in the
U. S.
Attorneys? statistical reports, 2 outstanding criminal debt more than
doubled from about $5. 6 billion as of September 30, 1995, to over $13
billion as of September 30, 1999. Approximately 66 percent of the reported
amount as of September 30, 1999, is restitution owed to nonfederal victims,
including individual victims and nonfederal entities (e. g., banks,
organizations, and insurance companies), some of whom may be relying on the
federal government for potential reimbursement.
As discussed with your staff, we set out to determine (1) the key reasons
for the growth in reported uncollected criminal debt, (2) whether adequate
processes exist to collect criminal debt, and (3) what role, if any, the
Office of Management and Budget (OMB) and the Department of the Treasury
(Treasury) play in overseeing and monitoring the government?s collection of
criminal debt.
Scope and To meet the objectives, we interviewed key officials, reviewed
applicable policies and procedures, and selected cases for review. We
reviewed all 44
Methodology criminal debt cases 3 that were greater than or equal to $14
million at the
four federal judicial districts with the largest amount of outstanding
criminal debt as of September 30, 1999. These four districts- the Central
District of California, the Eastern and Southern Districts of New York, and
the Southern District of Florida- accounted for about $5. 6 billion (or 43
percent) of the over $13 billion of the reported outstanding criminal debt
as of this date. At each of the four districts, we also selected and
reviewed a
1 The courts assess fines as punishment, whereas restitution is intended to
make identifiable victims whole. 2 United States Attorneys Annual
Statistical Report for Fiscal Year 1999, U. S. Department of Justice. This
is an unaudited annual report. 3 These debts relate to 42 debtors and are
referred to as ?high- dollar? cases throughout the report.
stratified random sample of 35 criminal debt cases from a population of
8,650 debts with a dollar value of $5, 000 or greater but less than $14
million (for a total of 140 random cases). 4
Background The collection of outstanding criminal debt has been a long-
standing problem, with many of the problems that GAO has been reporting on
since
October 1985 5 still remaining. Since that time, as reported in the U. S.
Attorneys? statistical reports, the balance of outstanding criminal debt has
grown from $260 million to over $13 billion. The Congress attempted to
address some of these problems through the Criminal Fines Improvement Act of
1987. This act transferred the responsibility for accounting for and
processing criminal debt from the Department of Justice (Justice) to the
courts and gave them the responsibility for establishing a centralized
accounting system. In 1990, the Administrative Office of the United States
Courts began developing a centralized entity, called the National Fine
Center, to record, track, and report on federal criminal debt. The National
Fine Center was expected to automate and centralize criminal debt processing
for the 94 districts throughout the country and provide a management
information system to replace the existing fragmented approach for receiving
payments and to alleviate long- standing weaknesses
in accounting for, collecting, and reporting on criminal monetary penalties
imposed on federal criminals.
However, an independent consulting firm concluded that the task of
developing a National Fine Center, involving several agencies in two
branches of government, proved to be more complex than expected and that the
needs of the districts could not be met through a centralized approach.
Thus, with the consent of the Congress, the centralized approach was
terminated. As a result, the criminal debt collection process continues to
be fragmented, involving both judicial and executive branch entities in
94 districts across the country. 4 Many of the results of our analysis of
the stratified random sample of debts are presented throughout this report
as percentage estimates that are expressed at a 95 percent confidence level.
All percentage estimates have sampling errors of � 9 percentage points or
less. For estimates other than percentages, sampling errors associated with
these estimates do not exceed 10 percent of the value of those estimates
(See appendix I, ?Scope and
Methodology?). 5 After the Criminal Fine Enforcement Act of 1984- Some
Issues Still Need to Be Resolved (GAO/ GGD- 86- 02, October 10, 1985). Also
see ?Related Products? at the end of this report.
Currently, the receipting of collections and recordkeeping for criminal debt
is primarily the responsibility of the U. S. courts, while Justice is
responsible for collecting criminal debt (Justice has delegated this
responsibility to its Financial Litigation Units within the 94 U. S.
Attorneys? offices). The criminal debt collection process typically begins
when an offender is convicted and a judge orders the offender to pay a fine
and/ or
restitution as stipulated in a Judgment in a Criminal Case. In addition to
the Financial Litigation Units, caseworkers from Justice?s Bureau of Prisons
and the U. S. courts? probation officers may assist in collecting monies
owed. Collections of fines are typically received by the courts and
deposited into the Crime Victims Fund 6 whereas collections of restitution
payments are received by both the courts and the Financial Litigation Units
in 18 districts and disbursed to the applicable victims or entities as
directed by the court.
Results in Brief According to Justice officials, and based on our
observations, there are four key factors some of which are not within the
Financial Litigation
Units? or probation offices? control- that have contributed to the
significant growth in the amount of uncollected criminal debt. These factors
are (1) the nature of the debt, in that it involves criminals who may be
incarcerated or deported or who have minimal earning capacity; (2) the
assessment of mandatory restitution regardless of the criminal?s ability to
pay, as required by the Mandatory Victims Restitution Act of 1996; 7 (3)
interpretation by the Financial Litigation Units 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. 6 42 U. S. C. Section 10601 requires criminal fine
payments to be deposited into 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. For these exceptions, the
Treasury is entitled to use the funds collected, whereas funds deposited
into the Crime Victims Fund are generally used to provide grants for victim
assistance and compensation
programs. 7 18 U. S. C. 3663A requires the court to order restitution for
offenders convicted of (1) a crime of violence as defined by18 U. S. C. 16;
(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), in
which an identifiable victim has suffered a physical injury or pecuniary
loss. See also 18 U. S. C., secs. 2248, 2259, 2264, and 2327.
Also contributing to the growth of uncollected debt is the lack of adequate
processes to collect such debt at the four districts visited. Specifically,
the four Financial Litigation Units visited did not always follow their
policies and procedures and could improve their policies and procedures to
ensure that collection actions were prompt and adequate. In addition, the
four
probation offices we visited did not always follow their procedures that
could have allowed for increased collections from offenders under
supervision. Further, because the district entities involved with assessing,
collecting, and accounting for criminal fines and restitution did not
adequately coordinate their efforts or share financial information about
offenders, they hindered the government?s ability to increase collections.
Of the $3.76 billion of debt assessed in our high- dollar cases, there was
approximately $148 million (or about 4 percent) in collections through
September 30, 1999. In addition, we estimate that 4 percent of the judgment
amounts for our sampled population had been collected through September 30,
1999.
Since the effort to centralize the collection process was terminated in
1996, collection responsibilities continue to be divided between Justice and
the courts, with neither having a central management oversight role.
Further, neither OMB nor Treasury has identified the need to take an active
oversight role in the collection of the growing balance of outstanding
criminal debt. Such oversight is needed, however, because the lack of
coordination and cooperation among the many entities involved in the
criminal debt collection process has been a long- standing problem.
Oversight of the collection of such debt could be achieved by leveraging
OMB?s and Treasury?s current respective central agency roles related to
financial reporting and debt management.
Taking into account the factors that are not controllable, the present
management practices and processes do not provide assurance that offenders
are not afforded their ill- gotten gains and that innocent victims are
compensated for their losses to the fullest extent possible. Until top
management at Justice and the courts place a higher priority on ensuring
that the entities involved in the criminal debt collection process more
effectively and efficiently pursue collection efforts, the assessment of
criminal fines and restitution as an effective punitive tool may be
jeopardized, and valuable, limited resources will continue to be wasted on
duplicative efforts. Our recommendations are designed to increase the
effectiveness and efficiency of the federal government?s criminal debt
collection processes.
Principal Findings Factors Contributing to the Justice officials have stated
that criminal debt, by its very nature, is difficult Growth in Uncollected
to collect. Criminal defendants may be incarcerated or deported, with little
Criminal Debt earning capacity; they often spend money on attorneys, who are
paid up front; and their assets acquired through criminal activity may be
seized by the government prior to conviction. Thus, by the time fines or
restitution
are assessed, offenders may have no assets left for making payments on the
assessments. In addition, regardless of its collectibility, most criminal
debt must be pursued for 20 years plus the period of incarceration and
cannot be
?written off? unless the debtor is deceased or the debt is forgiven by a
court order. Before the passage of the Mandatory Victims Restitution Act in
1996, the courts could typically consider an offender?s ability to pay in
deciding whether to assess restitution. However, the Mandatory Victims
Restitution Act of 1996 reformed restitution law by requiring the court to
order full restitution to each victim in the full amount of each victim?s
losses, without regard to the offender?s economic situation. Consequently,
the assessment
of mandatory restitution has resulted in a dramatic increase in the balance
of reported uncollected criminal debt. To illustrate, four of the cases we
reviewed involved offenders convicted of bombing the World Trade Center.
Each offender received a 240- year prison sentence and was ordered to pay
$250 million in restitution plus a fine ranging from $250,000 to $4.5
million.
These four cases alone increased the criminal debt balance by over $1
billion. As of May 2000, the four offenders had collectively paid
approximately $3,000. Under these circumstances, there is very little, if
any, chance that a significant portion of the $1 billion restitution owed by
these
offenders will be collected. Another factor affecting collections is that,
in some districts, judges are stipulating payment terms (e. g., $300 per
month) in their judgments, 8 and the Financial Litigation Units that we
visited are interpreting such terms as precluding them from making any
collection efforts (other than filing a lien). In some districts, including
three of the four districts we visited,
8 The Second, Third, and Fifth Circuits require the sentencing court to set
a payment schedule at sentencing. Some judges in the Ninth Circuit are also
setting payment schedules, but they are not required to do so.
judges often stipulate payment terms because probation officers are not
authorized to do so. However, according to a Chief Judge we interviewed in
one of these districts, the terms were not intended to preclude the
Financial Litigation Units from pursuing collection efforts, such as
searching for and liquidating assets. As a result of the Financial
Litigation Units? interpretation, prompt collection efforts are not being
pursued at these districts and the government may be potentially losing
opportunities to collect criminal debt.
An additional factor affecting collections is state legislation, such as
laws that limit the type of property that can be seized and the amount of
wages that can be garnished. For example, some states, such as Florida, have
unlimited homestead exemptions, prohibiting the seizure of a primary
residence regardless of the amount of equity in the home. Inadequate
Criminal Debt
At the four Financial Litigation Units that we visited, procedures for
Collection Processes and
enforcing collection- such as filing liens, searching for offender assets,
Lack of Coordination
pursuing other legal remedies (such as wage garnishment or writs of
execution 9 ), and issuing demand letters- did not exist or were not always
Contribute to the Low being followed. Prompt action is essential for
maximizing potential Collection Rate collections because the likelihood of
collection decreases as debts age. For example, in most cases, Financial
Litigation Units are required to promptly file liens to ensure that property
that could be used toward payment of the debt is not transferred or sold.
However, only one of the four Financial
Litigation Units we visited had established a specific time frame for the
filing of liens- within 45 days of the judgment being entered into the
tracking system. In 10 percent of the high- dollar cases, there was no
evidence that required liens were filed, and in the cases in which liens
were filed, the Financial Litigation Units took an average of 410 days from
the judgment date to file the lien. Based on our sample, we estimate that
required liens were not filed for 30 percent of the sampled population. For
9 A writ of execution is issued by a court to enforce a judgment. For
example, a writ of execution permits the U. S. Marshals Service to seize an
offender?s property as complete or partial payment on a fine or restitution
or the writ can be applied against an offender?s income or bank account in a
process called garnishment.
the random cases 10 we reviewed in which liens were filed, the average
number of days from the judgment date to the filing of a lien was 639 days.
11 Not promptly filing liens or not filing them at all significantly
increases the
potential for offenders to liquidate their assets and not repay debts owed.
According to the U. S. Attorneys? Manual, the Financial Litigation Units
should ?promptly and vigorously? perform asset discovery work. However, in
48 percent of the high- dollar cases and in an estimated 66 percent of the
sampled population, we found little or no evidence of asset discovery work.
We also found that the procedures did not (1) establish time frames or (2)
require the Financial Litigation Units to document why such procedures were
not used. Unless steps are promptly taken and documented to identify whether
an offender has assets, the offender may have time to hide or
liquidate assets that could have been available to pay toward the debt. A
critical element of any effective collection process is the human capital
component. However, we found that a historical problem for the Financial
Litigation Units, which still exists, is the lack of asset investigators and
the limited number of debt collection staff. At the four Financial
Litigation
Units we visited, staffing levels for collecting criminal debt have only
slightly increased from an average of 8.7 staff in 1995 to 9.3 in 1999, even
though the number of assessments and debts pending has significantly
increased. Specifically, the number of criminal debts pending for the four
Financial Litigation Units we visited increased from an average of 4,406 to
6,373 cases per district, or about 45 percent, and the average dollar amount
of outstanding debts per staff increased by over 160 percent. Probation
officers are required to ensure that offenders? financial information used
to develop pre- sentence reports and installment schedules is adequately
verified. However, in 20 of 42 high- dollar and 40 of 10 Because of certain
circumstances (such as the offender was in prison), certain attributes for
which we test were not applicable to all the cases in the stratified random
sample. For
example, some probation office procedures are required only once an
offender?s period of probation begins. Therefore, in our testing of
compliance with these procedures, if the offender was still in prison, the
attribute being tested would not be applicable for that case. In
circumstances in which attributes do not apply to all cases, estimating the
results to an appropriate population would introduce significant sampling
error intervals. Therefore, we have presented only the actual results for
the applicable cases in each circumstance.
11 We were unable to determine the date a lien was filed in four of the
high- dollar cases and in 12 random cases in which liens had been filed.
Therefore, these cases were not used to calculate the average days.
the 125 random 12 cases we reviewed, probation officers had not taken
adequate steps to verify an offender?s assets during the pre- sentence
investigation. Also, similar to weaknesses we reported in June 1998, 13
probation officers sometimes did not follow their guidelines for
establishing installment schedules based on financial criteria or for
reviewing subsequent changes in financial circumstances that could have
allowed for increased installment payments. In response to GAO
recommendations issued in the June report, the U. S. courts issued revised
guidance in September 2000. If effectively implemented, this revised
guidance should help address weaknesses related to the establishment of
installment schedules by probation officers and should result in increased
collections.
To facilitate the collection process and reduce duplication of efforts, the
entities involved with assessing and collecting criminal debt (investigative
agencies, prosecuting attorneys, and probation offices) should share
financial information obtained about the offender with the Financial
Litigation Units. However, in over half the cases we reviewed, we found
little evidence of coordination among the entities involved in the criminal
debt collection process and a lack of specific procedures to ensure that
efforts are coordinated. For example, we found that investigating case
agents and prosecutors do not always share financial information with
Financial Litigation Units, hindering the Financial Litigation Units?
ability to assess an offender?s ability to pay. Specifically, in 52 percent
of the highdollar cases and in an estimated 61 percent of the sampled
population, we found little or no evidence of coordination through
correspondence with case agents or prosecuting attorneys. In addition, we
found that Financial Litigation Units typically were not monitoring the
collection efforts of probation officers, as advised by the U. S. Attorneys?
Manual, and that,
contrary to district procedures, probation officers were not always
informing Financial Litigation Units of an offender?s upcoming release from
probation. Furthermore, at the four districts we visited, the Financial
Litigation Units and the clerks? offices maintained separate databases to
track criminal debt collections. This lack of coordination is a long-
standing problem that has not been adequately addressed and has resulted in
12 See footnote 10 in executive summary. 13 Fines and Restitution:
Improvement Needed in How Offenders? Payment Schedules Are Determined (GAO/
GGD- 98- 89, June 29, 1998).
inefficient processes and duplication of effort. Because of the many
agencies and district offices involved in assessing and collecting criminal
debt- including two branches of the federal government and 94 districts-
effective and efficient criminal debt collection hinges on the ability of
these entities to work together.
Oversight Roles of OMB and As previously noted, management oversight of the
criminal debt collection Treasury
process has been divided between the executive and judicial branches. The
National Fine Center was an attempt to centralize the criminal debt
collection process, a move that would have increased management oversight.
However, since the effort to centralize and automate the
collection process was terminated in 1996, the collection responsibilities
continue to be divided between Justice and the courts, with neither having a
central management oversight role. Presently, neither OMB nor Treasury has
identified the need to take an active role in overseeing the federal
government?s process for collecting the billions of dollars of outstanding
criminal debt. A primary function of OMB as a central agency is to evaluate
the performance of federal programs and to 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. 14 As
such, OMB could work with Justice and other executive branch agencies that
are due restitution to ensure that these entities report and disclose
relevant criminal debt information in their financial statements and subject
such information to audit. In implementing provisions of the Debt Collection
Improvement Act of 1996
(DCIA), Treasury, through its Financial Management Service, could assist
Justice and the courts in identifying the types of delinquent criminal debt
that would be eligible for referral to Treasury for collection actions. In
turn, by better accounting for and reporting its delinquent criminal debt,
Justice and the courts would enhance their own management oversight over
this problem. Collectively, these efforts would place greater emphasis on
the management of criminal debt and could increase collections.
14 For example, OMB provides guidance to agencies to assist them in
implementing legislation, such as the Debt Collection Improvement Act of
1996 (see OMB Circular No. A129,
Policies for Federal Credit Programs and Non- Tax Receivables).
Recommendations Our recommendations, detailed in chapter 5, are designed to
increase the effectiveness and efficiency of the federal government?s
criminal debt collection process. To help address the long- standing
problems in this area,
including fragmented processes and lack of coordination, we recommend that
the key entities involved in the criminal debt collection process establish
a joint task force to develop a strategic plan to improve the
processes and coordination among all entities involved and to reduce the
duplication of effort.
In the interim, to help improve collections and stem the growth in
uncollected criminal debt, we make specific recommendations related to the
following:
establishing or revising procedures and processes for prioritizing,
managing, and collecting criminal debt and reinforcing established criminal
debt collection procedures that are not being adequately followed;
revising 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;
improving the coordination and sharing of information among the entities
involved in the assessment and collection process; and
having Treasury, in its role under the DCIA, assist Justice and the courts
in identifying the types of delinquent criminal debt that would be eligible
for referral to Treasury for collection actions. Agency Comments and
Justice and OMB agreed with our recommendation for working together in Our
Evaluation 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 the process. The
Administrative Office of the United States Courts (AOUSC) and Treasury did
not state whether they agreed or disagreed with the establishment of and
their participation in this task force. We believe that the involvement of
AOUSC, as well as Treasury, given its central agency role of preparing the
federal government?s financial statements and implementing DCIA, is critical
to the
success of the task force. Justice generally agreed with the premise of the
report and recognized the need for improvements in the criminal debt
collection area. Justice also agreed with 10 of our 12 recommendations
specifically addressed to it and
partially agreed with the other 2. The AOUSC commented that most of our
recommendations directed to it had already been implemented and that it is
pursuing those related to working with Justice to refer eligible debt to
Treasury and reduce duplication of the recordkeeping function. Treasury
agreed with our recommendation specifically addressed to it regarding
assisting Justice and the courts in identifying eligible delinquent debt for
referral to Treasury. Justice and the AOUSC both commented on the
methodology used to develop the report findings. For example, Justice and
AOUSC stated that closed cases (i. e., debts paid in full) should have been
reviewed. We disagree. To address the requestor?s objectives of determining
the key reasons for the growth in reported uncollected criminal debt and
determining whether adequate processes exist to collect criminal debt, we
selected cases that involved debt amounts outstanding as of September 30,
1999. Reviewing closed cases would not have addressed why debts have not
been collected nor would it have provided a sound basis for determining
whether there are adequate processes for collecting criminal debt at the
four districts visited. In addition, since we used debts
outstanding as of September 30, 1999, many of which were more than 3 years
old, ample time for collection activity had passed before we reviewed the
cases, enabling us to assess the level of collection efforts performed.
In addition to commenting on our methodology, the AOUSC stated that the
effect of the Mandatory Victims Restitution Act of 1996 (MVRA) should have
received greater attention in the report. We believe that we have provided
sufficient balance in the report as evidenced by an entire chapter
devoted to uncontrollable factors, such as MVRA, that contribute to the
growth in outstanding criminal debt. See ?Agency Comments and Our
Evaluation? in chapter 5 of this report, for more discussion.
Chapt er 1
Introduction The collection of outstanding criminal debt has been a long-
standing problem, with many of the issues that we have been reporting on
since October 1985 1 still remaining. Since that time, as reported in the U.
S. Attorneys? statistical reports, the balance of outstanding criminal debt
has grown from $260 million to over $13 billion (see figure 1). The Congress
attempted to address some of these problems through the Criminal Fines
Improvement Act of 1987 when it transferred the responsibility for
accounting for and processing criminal debt from Justice to the courts and
gave them the responsibility for establishing a centralized accounting
system (see appendix II, ?History of Criminal Debt Collection Legislation?).
In 1990, the Administrative Office of the United States Courts (AOUSC) began
developing a centralized entity, called the National Fine Center (NFC) to
record, track, and report on federal criminal debt. The NFC was expected to
automate and centralize criminal debt processing for the 94 federal judicial
districts and provide a management information system to replace the
existing fragmented approach for receiving payments and alleviate long-
standing weaknesses in accounting for, collecting, and
reporting on criminal monetary penalties imposed on federal criminals. 1
GAO/ GGD- 86- 02, October 10, 1985. Also see ?Related Products? at the end
of this report.
Figure 1: Growth in Outstanding Criminal Debt Since 1985 14 Dollars in
billions 12 10 8 6 4 2 0
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Fiscal year ended September 30
Source: Unaudited Executive Office for United States Attorneys (EOUSA) data
(presented in actual dollars). Note: MVRA, which requires that the
assessment of restitution be based on actual loss and not on the
offender?s ability to pay, was enacted in 1996.
However, after several years of developing a National Fine Center that was
criticized by GAO 2 and the Congress, the AOUSC engaged an independent
consulting firm in February 1996 to perform a full review of the project.
The consulting firm concluded that the task of developing a National Fine
Center, involving several agencies in two branches of government, proved to
be more complex than expected and that the needs of the districts could not
be met through a centralized approach. Thus, with the consent of the
Congress, the NFC was terminated. As such, the criminal debt collection
2 National Fine Center: Expectations High, but Development Behind Schedule
(GAO/ GGD- 93- 95, August 10, 1993) and National Fine Center: Progress Made
but Challenges Remain for Criminal Debt System (GAO/ AIMD- 95- 76, May 25,
1995).
process continues to be fragmented, involving both judicial and executive
branch entities in 94 districts across the country.
Also, around the time of the consultant?s report, the Mandatory Victims
Restitution Act of 1996 (MVRA) was enacted, requiring that restitution be
assessed at the full amount regardless of an offender?s ability to pay.
Since that time the balance of reported uncollected criminal debt has
increased
dramatically. Reported uncollected criminal debt has more than doubled from
about $5. 6 billion as of September 30, 1995, to approximately $13 billion
as of September 30, 1999, with about 66 percent of that amount attributed to
restitution owed to nonfederal parties. The collectibility rate however has
not increased proportionally.
Background Criminal debt arises when a court orders an offender to pay fines
and/ or restitution as part of the punishment for violating a federal
criminal law. Unless the offender immediately pays the debt, Justice is
responsible for enforcing its collection. Justice has delegated this
responsibility to its Financial Litigation Units (FLU) in the United States
Attorneys? Offices (USAO) across the country. As of September 30, 1999, the
Executive Office for United States Attorneys (EOUSA) database reflected
approximately $13.1 billion in reported outstanding criminal debt, of which
about $5.6 billion (or 43 percent) was accounted for by the four districts
we visited
(see figures 2 and 3 for a breakout of the major types of criminal debt
involved).
Figure 2: Total Reported Criminal Debt by Major Type as of September 30,
1999
(Total Outstanding Criminal Debt = $13.1 Billion) 1%
Other 16%
Fines 66%
17% Federal Restitution
Nonfederal Restitution Source: Unaudited EOUSA data on outstanding criminal
debt as of September 30, 1999.
Figure 3: Total Reported Criminal Debt by Major Type, as of September 30,
1999, at the Four Selected Districts
(Outstanding Criminal Debt = $5.6 Billion) 2%
Other 8%
Federal Restitution 11%
Fines 79%
Nonfederal Restitution Source: Unaudited EOUSA data on outstanding criminal
debt as of September 30, 1999.
Each of the 94 3 districts has a USAO, an executive branch agency, and a U.
S. district court that includes district judges, a clerk?s office, and a
probation office within the judicial branch of government. The districts
operate independently from one another with guidance provided by the offices
indicated in table 1.
3 There are 94 districts throughout the country, but the USAOs and probation
offices for two of them are combined resulting in 93 USAOs and probation
offices.
Table 1: Guidance Provided to USAOs and U. S. Courts Centralized office/
entity Entity providing guidance Type of guidance provided
USAOs Justice?s Executive Office Provides general executive assistance, for
United States Attorneys administrative support, and other (EOUSA)
operational support. U. S. courts,
The Judicial Conference of Policymaking body for the judiciary. probation
offices, the United States Recommends to the various courts and clerk?s
offices
ways to promote uniform management procedures.
Administrative Office of the Implements Judicial Conference U. S. Courts
(AOUSC) policies and provides national standards and promulgates
administrative and management guidance.
U. S. Sentencing Provides sentencing guidelines.
Commission In addition to general guidance provided by Justice, the Judicial
Conference, and the U. S. Sentencing Commission (USSC), each district office
develops supplemental guidance for criminal debt collection procedures.
Within each district, the USAO, probation office, and the clerk?s office
enter into a memorandum of understanding (MOU) that
documents how criminal debt collection activities will be accomplished. Each
of the USAOs also has a Financial Litigation Plan that details district
guidance on collecting criminal debt. The following sections provide
additional detail on (1) assessing criminal fines and restitution and (2)
accounting for and collecting criminal debt in this currently decentralized
and fragmented environment.
Assessing Criminal Fines Agencies such as Justice?s Federal Bureau of
Investigation and the Drug
and Restitution Enforcement Administration investigate violations of federal
law and refer
the results of their investigations to a local USAO (see figure 4 for a
general overview of the criminal debt assessment process). The country is
divided into 94 federal judicial districts, with a federal district court in
each district. Each of the 94 districts is located in one of 12 regional
circuits, and each circuit has a Court of Appeals.
Figure 4: Process of Assessing Criminal Fines and Restitution
Investigative USAO
Court imposes Probation office
agency refers seeks
sentence and develops
violation conviction issues JCC
pre- sentence report Clerk of the Court
distributes JCC Note: JCC = Judgment in a Criminal Case.
After the USAO obtains the conviction of an offender, the court issues a
Judgment in a Criminal Case (JCC), which details terms of the sentence and
orders the payment of a fine and/ or restitution, if applicable. To assist
judges in determining the fine and/ or restitution amount, a probation
officer prepares and provides to the court a pre- sentence report that
includes financial information related to an offender?s ability to pay a
fine and information related to victims? losses. In preparing the pre-
sentence report, probation officers are to use financial information
obtained from the investigating agency, the trial, and the offender. In
deciding whether to assess a fine and, if so, the amount to assess, courts
are to consider an
offender?s income, earning capacity, and financial resources; the potential
burden placed on an offender?s family; and any restitution or other
obligations that the offender is required to make. For example, if large
amounts of restitution are ordered, the assessment of fines is typically
waived based on the offender?s inability to pay a fine. USSC guidelines
provide guidance on the minimum and maximum fine amounts for the U. S.
courts to impose based on the offense. The statute requires the court to
order the payment of a fine immediately unless, in the interest of justice,
the court provides for payment on a date certain or in installments.
According to the guidelines and the statute, judges may consider whether
paying the fine in a lump- sum would have an unduly
severe impact on the offender or any dependents, and if so, should establish
an installment schedule for paying the fine. The installments should be in
equal monthly payments over the period established by the court, unless the
court establishes another schedule. The length of time
over which scheduled payments should be made is the shortest time in which
full payment can reasonably be made, generally not to exceed 12 months. In
addition, judges may waive fines if they believe that offenders will be
unable to pay and are unlikely to become able to pay (e. g., if they
are sentenced to life in prison or cannot afford to hire private counsel).
Judges may also order restitution to be paid to the victims of a crime. In
accordance with statute, before MVRA was enacted in April 1996, the court
typically waived or reduced the restitution amount based on the offender?s
ability to pay. However, under MVRA, the court typically must order
restitution to each victim in the full amount of each victim?s loss, without
regard to an offender?s economic situation. 4 If the court believes that an
offender cannot immediately or fully pay the restitution amount in the
foreseeable future, the court can order the offender to make nominal
installment payments.
In some districts, judges must set the payment schedules and document them
in the JCC, and in other districts, judges can delegate to probation
officers the authority to set payment schedules. However, within the last
few years, more judges have been required to establish payment schedules as
a result of several circuit court decisions that have affected policies in
this area. For example, some circuit courts have held that courts are
prohibited from ordering a defendant to pay criminal fines or restitution in
accordance with a payment schedule set by a probation officer or a prison
official because the setting of a payment schedule is an inherently judicial
function that may not be delegated to others. 5 In addition, some circuit
courts have prohibited the imposition of an immediate payment order of the
entire amount unless the defendant can pay the entire amount immediately. 6
Finally, some circuit courts have interpreted the MVRA to
4 Exceptions include cases in which (1) the number of identifiable victims
is so large that paying restitution would be impractical or (2) determining
complex factual issues related to the cause or amount of the victims? losses
would complicate or prolong the sentencing process to a degree that the
burden of the sentencing process would outweigh the need to provide
restitution to the victim.
5 See, e. g., United States v. Porter, 41 F. 3d 68 (2d Cir. 1994); United
States v. Mortimer, 94 F. 3d 89 (2d Cir. 1996); United States v. Graham, 72
F. 3d 357 (3d Cir. 1995), cert. denied 516 U. S. 1183 (1996); United States
v. Miller, 77 F. 3d 71 (4th Cir. 1996); and, United States v. Pandiello, 184
F. 3d 682 (1999). 6 See, e. g., United States v. Mortimer, 52 F. 3d 429, 436
(2d Cir. 1995).
require the court to set the payment schedule in all cases at sentencing. 7
Criminal Debt Collection
After the assessment process, the criminal debt collection process varies
Process depending on the other sentencing terms imposed on the offender.
Figure 5 shows the typical post- MVRA criminal debt collection process.
Figure 5: Typical Post- MVRA Criminal Debt Collection Process
Judge orders offender to pay and issues JCC
Bureau of Prisons Probation Office
Clerk of Court sends payments
schedules payment distributes JCC
from incarcerated offenders to Clerk
of the Court USAO FLU enters data into tracking system (including receipts),
and enforces collections by filing liens, performing asset discovery work,
etc.
Clerk of the Court enters receipts and disburses funds received to victims
or applicable fund
Offender makes payment
Note: JCC = Judgment in a Criminal Case.
7 See, e. g., United States v. Coates, 178 F. 3d 681 (3d Cir. 1999) and
United States v. Myers, 198 F. 3d 160 (5th Cir. 1999).
The FLUs within the USAOs? Civil Divisions have been delegated the
responsibility for collecting criminal debt. After receiving a JCC, the FLU
enters information from the JCC into the FLUs? case tracking system and
performs certain collection actions depending on such factors as the amount
of the debt. The FLUs? collection efforts include filing liens (based
on debtor?s address or county of known residence), identifying debtor
assets, garnishing debtor wages, and serving notice of late payments. To
facilitate collection and reduce duplication of effort, the entities
involved with assessing and/ or collecting criminal debt (investigative
agencies, prosecuting attorneys, and the courts) should share the financial
information they have obtained about the offender with the FLUs. Offenders
are encouraged to participate in the Bureau of Prisons (BOP) Inmate
Financial Responsibility Program (IFRP). This program provides a means of
collecting voluntary periodic deductions from inmates? wages earned from a
prison occupation. The amounts are generally small and are deducted
periodically (e. g., monthly, quarterly, or semiannually). When released
from prison or as ordered by the judge at sentencing, the offender is
assigned to a probation officer. If the criminal debt has not been paid, the
probation officer or the court, depending on the district, should establish
an installment schedule for payment. Probation officers may restrict
offenders from performing certain activities, such as traveling outside the
district, if they are not making their required payments. Probation officers
may also request that the court revoke supervision 8 (i. e., send an
offender to prison) if the offender is willfully refusing to make payments.
Since, as noted above, the NFC effort did not succeed, the FLUs in each
district maintain their own databases to meet their enforcement
responsibilities. Restitution payments from offenders in most districts are
submitted to the clerk?s office. The clerk?s office records these payments
and provides a copy of the payment information to the FLUs so that they can
update their databases. Most criminal fines are paid to the clerk?s office
and deposited into Justice?s Crime Victims Fund, which provides grants for
victim assistance programs and compensation to victims. Payments for
restitution assessed after MVRA are paid to and disbursed by the clerk?s
office; however, the handling of payments and disbursements for pre- MVRA
restitution vary by district. In 18 districts, the clerk?s office 8 The term
?supervision? incorporates the circumstances of an offender on probation or
supervised release (i. e., from prison).
accepts only post- MVRA restitution payments; therefore, the FLUs in these
districts maintain an additional system to receive pre- MVRA restitution
payments from offenders and to disburse payments received to applicable
victims. Restitution is often owed to many victims, and disbursements must
be prorated based on the amounts owed to each victim. The clerk?s office
disburses checks to victims, whereas the FLU uses an independent financial
institution to receive payments and disburse checks to victims. AOUSC
officials have indicated that they are working with the staff in the
remaining districts to assist them in assuming the receipting of collections
responsibilities for pre- MVRA payments. Objectives, Scope, and
Our objectives, as agreed to by the subcommittee staff, were to determine
Methodology
(1) the key reasons for the growth in reported uncollected criminal debt,
(2) whether adequate processes exist to collect criminal debt, and (3) what
role, if any, the Office of Management and Budget (OMB) or the Department of
the Treasury (Treasury) plays in overseeing and monitoring the government?s
collection of criminal debt.
To determine the key reasons for the growth in reported uncollected criminal
debt and whether adequate processes exist to collect criminal debt, we (1)
interviewed officials from the Executive Office for United States Attorneys
(EOUSA), the Administrative Office of the United States Courts (AOUSC), and
five selected district offices, 9 (2) reviewed applicable policies and
procedures for collecting criminal debt, (3) obtained a database from EOUSA
of all outstanding criminal debt as of September 30, 1999, and (4) reviewed
all criminal debt cases greater than or equal to $14 million at the four
districts with the largest amount of outstanding criminal debt as of
September 30, 1999. These four districts- the Central District of
California, the Eastern and Southern Districts of New York, and the Southern
District of Florida- accounted for $5. 6 billion (or 43 percent) of the over
$13 billion of outstanding criminal debt as of this date. At these
four districts, we reviewed all 44 cases greater than or equal to $14
million, which accounted for $3.7 billion (or 66 percent) of the $5.6
billion. We also 9 The five districts include the four districts with the
largest amount of outstanding criminal
debt as of September 30, 1999- the Central District of California, the
Eastern and Southern Districts of New York, and the Southern District of
Florida- and the Northern District of California, where we documented our
initial understanding of the criminal debt collection process. For the
purposes of this report, ?the four districts we visited? refers to the four
districts where we performed our detailed testing.
selected and reviewed 35 random criminal debt cases with a dollar value of
$5, 000 or greater but less than $14 million at each of the four districts
(for a total of 140 random cases); thus, we had a total of 184 cases
selected for our review. We did not independently verify the completeness or
accuracy of these data or test information security controls over the system
used to compile these data because that verification was not necessary to
meet the objectives of this report.
To determine what role, if any, OMB and Treasury play in overseeing and
monitoring the government?s collection of criminal debt, we interviewed
officials from these entities and reviewed applicable laws and regulations.
We performed our work from April 2000 through April 2001 in accordance with
U. S. generally accepted government auditing standards. We requested
comments on a draft of this report from the respective agencies. These
comments are discussed in the ?Agency Comments and Our Evaluation? section
of the report and are reprinted in appendix III through appendix V.
See appendix I for a more detailed discussion of our scope and methodology.
Factors Contributing to the Growth in
Chapt er 2
Uncollected Criminal Debt According to statistics from the EOUSA, the amount
of criminal debt has grown significantly since fiscal year 1995 (see figure
6). Several factors contributing to the growth in reported uncollected
criminal debt, some of which are not within the FLUs? or probation offices?
control, include (1) the
nature of the debt, including the government?s limited ability to write off
certain debt deemed to be uncollectible, (2) the assessment of mandatory
restitution, (3) interpretation of payment schedules set by judges, and (4)
limitations due to state laws.
Figure 6: Reported Criminal Debt Outstanding From September 30, 1995,
Through September 30, 1999 14
Dollars in billions 12 10
8 6 4 2 0
1995 1996 1997 1998 1999 Fiscal year ended September 30
Source: Unaudited data provided by EOUSA. Note: MVRA was enacted in 1996.
Nature of the Debt The nature of criminal debt, including how and why it is
levied, can make the debt more difficult to collect. Criminals may not be
willing to comply with the law, and forcing compliance is difficult because
criminals are
already convicted felons who may be serving time in prison or may have been
deported. Moreover, offenders in prison have limited earning capacity, and
so potential collections are limited. In 57 percent of the high- dollar
cases we reviewed and in an estimated 20 percent of our sampled population,
the offender was still in prison. Further, significant time may pass between
an offender?s arrest and sentencing, giving offenders time to hide
fraudulently obtained assets, such as funds in offshore accounts, shell
corporations, or family members? names and accounts.
Even though the courts are required to consider an offender?s ability to pay
when assessing fines, collection cannot always be assured. Fines are
sometimes assessed to make a statement about the nature of the crime and its
impact on society. Restitution, as discussed below, is typically assessed
without regard to an offender?s ability to pay; therefore, collection may be
unrealistic.
Asset seizure and forfeiture are important components of law enforcement
efforts to deprive criminals of the proceeds and instruments of their
crimes. Several years may pass between an offender?s arrest and sentencing.
Federal laws authorize agencies to seize assets before a criminal
conviction, thereby potentially overcoming one difficulty in collecting
fines and restitution- defendants diverting their assets before conviction.
However, the FLUs are not permitted to pursue liquidation of assets for debt
collection until after an offender is convicted and sentenced. Proceeds from
forfeiture are typically used to make owners (e. g., a mortgager) whole and
to fund law enforcement activities, and are not necessarily used to fulfill
restitution orders. Therefore, the use of
forfeiture, as we reported in June 1994, 1 could decrease amounts that might
otherwise be available for paying restitution to crime victims and reducing
outstanding criminal debt. According to Justice statistics, of the estimated
$536 million of forfeited cash and property 2 recovered during fiscal year
1999, approximately $39 million (or 7 percent) was applied to restitution in
victim- related offenses. The remaining amounts were either converted to
cash and used for law enforcement purposes or retained for official law
1 Restitution, Fines, and Forfeiture: Issues For Further Review and
Oversight (GAO/ TGGD- 94- 178, June 28, 1994). 2 Not all of these seizures
were related to cases in which fines or restitution was ordered.
enforcement use. In our case reviews, only 2 of the 44 high- dollar cases
provided that the proceeds from the sale of assets be used to pay
restitution. None of the JCCs for the random cases stated such terms. In the
2 high- dollar cases, the JCCs specifically stated that the proceeds of the
sale of seized and forfeited assets should be used to pay victims.
Finally, according to 18 U. S. C. 3613, most criminal debts must remain ?on
the books? for 20 years plus the period of incarceration and cannot be
?written off? until the statute of limitations expires, the debtor is
deceased, or the court approves a petition of remission filed by the USAO.
Therefore, even if Justice determines that certain debts are not
collectible, these debts must remain ?on the books,? and the FLUs must
periodically reassess their collectibility in accordance with USAO policies
(see chapter 3) regardless
of the status of the offender or previous actions to collect these debts.
For example, in accordance with USAO policies, a $30,000 debt must be
reassessed annually even if the FLU was unsuccessful in previous attempts to
identify assets and the offender is serving a sentence of life in prison.
The U. S. Attorneys? Manual states that if the FLU determines that a fine
will likely never be collected, it can seek a petition for remission 3 of
all or part of a fine from the judge. According to the Manual, seeking
remission is preferable to placing it ?in suspense? and continuing to pursue
collection. However, we found no evidence that the FLU had requested a
petition for remission in the cases we reviewed, even though some cases
appear to have met the criteria for remission. According to FLU officials,
obtaining a court order to write off delinquent debt is a time- consuming
process and is not considered a priority among the many other tasks (e. g.,
working on
open cases) the FLUs must perform. Assessment of
Before the Mandatory Victims Restitution Act of 1996 (MVRA), the Mandatory
Restitution assessment of restitution, like the assessment of fines, was
typically based on an offender?s ability to pay. However, MVRA requires that
assessment of restitution be based on actual loss and not on the offender?s
ability to pay. Assessments of restitution have significantly increased
since the passage of
the act. As of September 30, 1995, approximately $3.4 billion (102,158
cases) in criminal debts was owed to the federal government in fines and
federal restitution and about $2. 2 billion (15,126 cases) was owed in 3 The
FLU can request that the judge approve a petition for remission of a debt,
which
thereby dismisses the debt and allows the FLU to write off such amounts.
nonfederal restitution. Although federal and nonfederal criminal debt
amounts have increased from September 30, 1995, to September 30, 1999, the
increase for nonfederal debt (i. e., restitution) is far greater (see figure
7).
Figure 7: Reported Federal Criminal Debt (Fines and Federal Restitution) and
Nonfederal Criminal Debt (Nonfederal Restitution) as of September 30, 1995
and 1999 10
Dollars in billions 8 6 4 2 0
1995 1999
Federal Nonfederal
Source: Unaudited USAO Statistical Reports.
When assessed amounts are not based on an offender?s ability to pay, the
likelihood of collecting the full amount may be unrealistic. For example, in
addition to each offender receiving a 240- year prison sentence, the four
offenders convicted of bombing the World Trade Center were each ordered to
pay $250 million in restitution plus fines ranging from $250,000 to
$4. 5 million. These four cases alone increased the criminal debt balance by
over $1 billion. All four offenders refused to provide financial information
and, as of May 2000, these offenders had collectively only paid
approximately $3, 000. Under these circumstances, it is unlikely that a
significant portion of the restitution owed by these offenders will be
collected. In another example, an offender was convicted in March 1997 of
conspiracy, mail fraud, and tax evasion; sentenced to 20 years imprisonment
and 3 years of supervised release; and ordered to pay a fine
of $1 million and restitution of over $475 million. FLU records show that as
of September 30, 1999, the offender had paid only $25. FLU records also show
the offender refused to participate in the Inmate Financial Responsibility
Program. Before sentencing, the offender also refused to provide the
probation officer with a personal financial statement that would identify
income, expenses, assets, and liabilities. Other work by the probation
officer, including obtaining a credit report, doing an online property
search, and reviewing tax return information, did not disclose assets
available to pay down the debt.
Payment Schedules Set In some districts, the judges may delegate the
authority to set payment
by Judges terms to probation officers. In those districts where it has been
held that the courts may not delegate the authority to set payment schedules
(including two of the districts we visited), judges must include them in the
JCC. We found that the payment schedules set by judges can significantly
influence collection efforts. EOUSA and FLU officials we interviewed
indicated they believe that when a judge orders specific payment schedules
in the JCC, they are precluded from making any collection efforts (other
than filing a lien), such as pursuing liquidation of assets, until an
offender is released from probation. However, the view of AOUSC officials
and the
Chief Judge in one of these districts is that the inclusion of payment
schedules in the JCC does not preclude the FLU from identifying and pursuing
assets but merely sets a minimum amount that must be paid while an offender
is under supervision. The EOUSA and FLU interpretation inhibits the FLUs
from taking prompt collection efforts, and the government may lose
opportunities to collect criminal debt.
In 16 of the 44 high- dollar and 41 of the 140 random cases we reviewed,
judges stipulated terms in the JCCs regarding how or when fines or
restitution should be paid; in the remaining cases, the fine or restitution
was due immediately (see table 2 for terms stipulated in our selected
cases). In the cases where judges stipulated payment terms, we found that
the FLUs typically wait until after the offender is released from prison and
probation before performing collection actions (e. g., searching for and
liquidating assets). As a result of such delays, opportunities to maximize
collections may be missed.
Table 2: Terms Stipulated in JCCs Related to GAO?s Selected Cases Terms
High- dollar cases Random cases a
Due immediately- no additional payment terms 28 99 Due after release from
prison b 1 17 Percentage of gross income due on a periodic 2 10 basis A
specific or equal amount due on a periodic
2 5 basis ?At least? amounts due on a periodic basis 8 3
Other terms 3 6 a In circumstances in which attributes do not apply to all
cases, estimating the results to an appropriate population would introduce
significant sampling error intervals. Therefore, we have presented only the
actual results for the applicable cases in each circumstance. See footnote
10 in executive summary. b All but 6 of these offenders had been released
from prison as of the time of our review.
Source: Data obtained from terms documented in JCCs.
As we reported in 1999, 4 the payment schedules set by judges vary by
district. For example, in 1 of the high- dollar cases and in 17 random
cases, including 13 random cases selected from the Eastern District of New
York, the judges stipulated that the amount was not due until the offender
was released from prison. In these instances, the FLUs typically do not
perform
any collection actions other than filing a lien. In 2 high- dollar and 10
random cases, 9 of which were from the Southern District of New York, judges
established a payment schedule based on a percentage of gross income to be
paid on a periodic basis (e. g., 10 percent of gross monthly income to be
paid monthly). In 8 high- dollar and 3 random cases from the Central
District of California, the judge established a minimum amount that must be
paid on a periodic basis (e. g., at least $300 to be paid each month).
We found that probation officers typically did not recommend an increase in
payment amounts, and the FLUs typically did not attempt to increase them or
pursue liquidation of assets, even if financial circumstances 4 Federal
Courts: Differences Exist in Ordering Fines and Restitution (GAO/ GGD- 99-
70,
May 6, 1999).
improved. 5 The following examples show the effects of terms being
stipulated in the JCCs.
In one case, in February 1998, an offender was convicted of bank fraud and
ordered to pay $113 million in restitution jointly and severally with
coparticipants through quarterly payments of at least $2,400. 6 Since the
payment schedule was specified in the order and the offender was making the
minimum payments, neither the FLU nor the probation officer recommended or
attempted to pursue the net proceeds of $80,000 from the sale of her house
and $19,200 from the sale of two cars. While on probation, the offender was
permitted to move to another country with court approval. As of February
2001, clerk records show that this offender had paid $28,800 and all
coparticipants combined had paid less than $100,000.
Another offender was convicted of wire fraud, sentenced in November 1997
to 6 months of home detention to be served concurrently with 3 years of
probation and ordered to pay over $74 million in restitution jointly and
severally with coparticipants. The judge ordered the defendant to make
quarterly payments of at least $750 after she completed home detention.
Based on financial statements the offender provided, her pre- sentence
report showed that she had over $40,000 in unencumbered assets 7 and $5,000
of unsecured debt, resulting in a net
worth of over $35, 000. The probation office had not recommended the pursuit
of liquidation, nor had the FLU attempted liquidation of any assets owned by
the offender. According to the FLU, because the judge included the payment
schedule in the judgment, the FLU will not pursue collection until after the
offender is released from supervision. As of April 2000, the offender had
paid $6,000.
In April 1998, another offender in our selection was convicted of
conspiracy to commit mail fraud and ordered to pay a $20,000 fine in
quarterly installments over a 3- year probation period even though just
before his sentencing, the offender reported $5,000 in cash, $12,400 in
his checking account, and over $100,000 of equity in his home. In this
example, it appears that the offender may have had the ability to pay his
whole fine or a significant portion of it immediately; however, since the 5
Probation officers do not have authority to pursue liquidation of assets,
but they can recommend that the FLU pursue such liquidation.
6 A judge may order debtors to be individually liable or jointly liable with
other offenders. 7 Assets not tied up by a legal claim and thus available
for collection (i. e., no lienholder).
judge set a payment schedule in the JCC, neither the FLU nor the probation
office reassessed the offender?s ability to pay or pursued a lump- sum
payment. According to clerk records, the offender had paid $14,400 as of
June 2000.
State Laws According to EOUSA officials, state law can also restrict the
FLU?s ability to perform certain collection efforts and therefore contribute
to the growth
in outstanding criminal debt. State law may limit the type of property that
can be seized and the amount of wages that can be garnished. For example,
certain states, such as Florida, have unlimited homestead exemptions,
prohibiting the seizure of a primary residence regardless of the amount of
equity in the home and thus prohibiting the FLU from requiring an offender
to borrow against a primary residence.
During our case- file reviews, we found several instances in which real
property and personal property were registered in the offender?s spouse?s
name (or other family member). These assets may be difficult to liquidate
unless the state is a ?community property? state, such as California, in
which each spouse is entitled to one- half interest in property owned or
income earned by the other spouse.
Inadequate Criminal Debt Collection Processes and Lack of Coordination
Chapt er 3
Contribute to Low Collection Rate Because of the many agencies and districts
involved in the collection process, improving the rate of criminal debt
collection, which has averaged about 7 percent for fiscal years ending
September 30, 1995 through 1999, hinges in part on the ability of these
entities to work together and to implement effective processes (see figure
8). The four FLUs we visited did not have effective policies and procedures
or did not always follow their policies and procedures to ensure that
collection actions were prompt and
adequate for increasing the potential for collecting the maximum amount of
criminal debt. In addition, the four probation offices we visited did not
always follow their procedures that could have allowed for increased
collections from offenders under supervision. Further, because the entities
involved in the criminal debt collection process did not adequately
coordinate their efforts or share financial information about offenders,
they weakened the government?s ability to increase collections. Of the $3.
76 billion of debt assessed in our high- dollar cases, approximately $148
million (or about 4 percent) was collected through September 30, 1999. In
addition, we estimate that 4 percent of the judgment amounts for our
sampled population had been collected through September 30, 1999.
Figure 8: Reported Criminal Debt Outstanding and Collected From September
30, 1995, Through September 30, 1999 14 Dollars in billions 12 10 8 6 4 2 0
1995 1996 1997 1998 1999
Outstanding balance as of September 30 Collected for the fiscal year ended
September 30
Source: Unaudited data provided by EOUSA. Note: MVRA was enacted in 1996.
Financial Litigation As stated in Standards for Internal Control in the
Federal Government, 1 Units transactions should be promptly and accurately
recorded to maintain their relevance and value to management in controlling
operations and making
decisions. Also, collection actions must be promptly performed, because, as
industry statistics have shown, the likelihood of recovering amounts owed
decreases dramatically with the age of delinquency. Many of the
1 Standards for Internal Control in the Federal Government (GAO/ AIMD- 00-
21. 3. 1, November 1999).
outstanding debts as of September 30, 1999, were over 3 years old (see
figure 9).
Figure 9: Age of Reported Criminal Debts Outstanding as of September 30,
1999 8 Dollars in billions
7 6 5 4 3 2 1 0
Less than 1 1 to 3 Over 3 Years from judgment date
Source: Unaudited EOUSA data.
In reviewing our selected cases at the four FLUs we visited, we found that
the FLUs did not always follow their established procedures or lacked
procedures for performing the following actions in a timely manner:
entering cases into their tracking systems;
filing liens;
performing asset discovery work, such as researching asset databases;
using other enforcement techniques, such as wage garnishment;
monitoring and reassessing cases;
sending demand, delinquent, or default letters; and
assessing interest and penalties.
We also found that the lack of asset investigators, as well as the limited
number of collection staff, a historical problem for the FLUs, weakens their
ability to aggressively follow up on and enforce collections. In addition,
we found that the FLUs? tracking systems do not capture certain data, such
as court- ordered terms or status of offender, that are needed to
effectively
assist in managing the debt portfolio. Entering Cases into the The EOUSA
Resource Manual, along with local guidance for the four FLUs FLUs? Tracking
Systems
we visited, outlines the procedures that should be followed once the FLU
receives a JCC. According to this guidance, the FLUs are to enter criminal
debts into their collection tracking systems in a ?timely fashion,? but no
later than 14 days after receiving the JCC. Although procedures exist for
entering the data, we noted during our reviews that no policies or
procedures existed to ensure that a copy of the JCC is promptly sent to the
FLUs.
18 U. S. C. Sec. 3612( b)( 2) requires the clerk?s office to transmit a
certified copy of the JCC to the Attorney General (i. e., USAO) within 10
days after the judgment or order. However, according to FLU officials, this
copy is typically sent to the prosecuting attorney within the USAO?s
Criminal Division and not to the FLU within the USAO?s Civil Division. The
prosecuting attorney is to then forward a copy to the FLU. Since the FLUs we
visited were not required to, and did not typically, stamp the date they
received a copy of the JCC, we were unable to determine when they received
the copy and how long they had the copy before entering the criminal debt
information into their systems.
The average length of time for entering the 44 high- dollar cases was 288
days; for the sampled population, we estimate that the length of time was
289 days. 2 For most cases, FLU officials could not provide us with
explanations as to why these cases were not entered into their tracking
systems within 30 3 days of the JCC date. Unless the FLUs promptly receive
a copy of the JCC and promptly enter the data into the tracking systems, 2
Because the FLUs did not typically stamp the date that they received the
copy of a JCC, we could only determine the time that had passed between the
judgment date and the entry of the data. 3 The figure of 30 days was
calculated by adding the 10 days authorized for the clerk to provide the JCC
to the USAO plus the 14 days allowed by FLU guidance to enter JCC
information into its tracking system, plus 6 nonbusiness days.
time- sensitive collection actions, such as filing liens and performing
asset discovery work, are delayed and opportunities to maximize collections
may be missed. Filing Liens FLUs are required to file notices of liens on
offenders? properties, pursuant to 18 U. S. C. Sec. 3613, to establish the
government?s claims on these assets
and to prevent the sale or transfer of such property. The first liens filed
by the FLU are typically filed according to the offender?s home address;
additional liens should be filed if the FLU identifies assets in other
locations. The U. S. Attorneys? Manual specifies that liens are required to
be filed in all cases over $650 but does not establish a specific time frame
for filing. Only one of the FLUs in the four districts we visited- the
Southern District of Florida- had established a time frame for filing a
lien; this district requires liens to be filed within 45 days of the
judgment date.
Instead of specifying a time frame, the other three districts require that
liens be filed to ?guarantee enforcement to the fullest extent of the law.?
However, during our reviews we found that liens often were not filed or not
filed promptly. Specifically, we found that required liens had not been
filed in 10 percent of the high- dollar cases and in an estimated 30 percent
of the sampled population. In another 27 high- dollar cases and 68 4 random
cases, we found that over 60 days 5 elapsed between the judgment date and
when the lien was filed. The filing of liens is further delayed if judgments
are not
promptly received and entered into the collection tracking system. For the
38 high- dollar and 96 6 random cases in which liens had been filed, the
average number of days from the date the case was entered into the system
until a lien was filed were 142 and 356 days, respectively; and from the
judgment date to filing were 410 and 639 days, respectively.
In most cases, the FLUs were not able to determine why a lien was not filed
or not promptly filed. Not promptly filing liens or not filing them at all
4 See footnote 10 in executive summary. 5 The figure of 60 days was
calculated by using the 45 days established by the Southern District of
Florida plus 15 days.
6 See footnote 10 in executive summary. Also, we were unable to determine
the date a lien was filed in four high- dollar and 12 random cases in which
liens had been filed. Therefore, these cases were not used to calculate the
average days.
significantly increases the potential for offenders to liquidate their
assets and avoid repaying debts owed to the government. For example, an
offender in our selection was fined $25,000 in 1989. During 1991, the
offender reported receiving net proceeds of $180, 000 from selling a home
and $18,000 from selling a boat (the offender did not specify whether the
proceeds from the sale of the boat were gross or net). The offender?s last
payment was received in 1995. As of May 2000, no lien had been filed, and
the offender owed over $15,000 plus over $13,000 of interest. According to
FLU officials, the file does not indicate why the lien was not filed. Had
the FLUs promptly filed a lien, the proceeds from these sales might have
been applied towards payment of the fine.
Performing Asset Discovery The U. S. Attorneys? Manual specifies that the
USAO should ?execute on? Work
(i. e., seize) an offender?s property as soon as possible after sentencing.
According to this manual, in order to identify property owned by the
offender, the USAO should ?promptly and vigorously? perform asset discovery
work, which includes procedures such as reviewing the presentence
report, requesting financial statements and tax returns from the debtor,
obtaining credit reports, and researching on- line property locator
services. However, we found that the four FLUs we visited performed very
limited asset discovery work and that established procedures did not
specifically identify when these procedures were required to be performed.
For example, in 48 percent of the high- dollar cases and in an estimated 66
percent of the sampled population we found no evidence that the FLU
attempted to identify the debtor?s assets. According to USAO officials,
asset discovery work is performed only if the FLU believes, based on its
judgment, that the offender may have assets. Moreover, there is no
requirement to document these judgments or whether they were made. Not
promptly identifying whether an offender has assets increases the risk that
the offender may have time to hide or liquidate assets that could have been
available to pay toward the debt. For example, an offender was convicted of
tax fraud, sentenced in 1994, released from supervision in 1995, and ordered
to pay about $344,000 in restitution. As of May 2000, the
offender had paid only $750. Our review of the FLU file showed that the FLU
did not perform asset discovery work before May 2000. Since this offender
had been selected for our review, the FLU performed an asset search to
identify assets that could possibly be liquidated and also scheduled a
deposition with the offender to determine whether there were assets that
could be liquidated. However, over 6 years has passed since the
offender was sentenced; therefore, the offender could have previously
liquidated or hidden his assets.
We also found that district guidance at the four FLUs we visited specifies
that asset discovery work should be performed, but the guidance does not (1)
establish time frames for performing the work or (2) prioritize debt cases
based on factors that indicate increased potential for collections. Lack of
time frames and prioritization increases the risk of delays in performing
asset discovery work and thereby the potential for missing
opportunities to maximize collections. In addition, asset discovery work is
further delayed if the judgment is not promptly received and the information
is not promptly entered into the case tracking system. Factors that could
help prioritize collection efforts include the type of crime or the type of
victim. For example, collection rates tend to be higher for offenses related
to white- collar crimes than for those related to violent crimes. Or cases
involving hundreds of nonfederal victims may take higher priority over those
with a relatively insignificant fine amount owed to the federal government.
Using Other Enforcement The U. S. Attorneys? Manual states that USAOs are to
?litigate vigorously? to Techniques enforce the collection of debts ?to the
fullest extent of the law? and that the
?government should execute on an offender?s property as soon as practicable
after sentencing.? FLUs are authorized by law to perform a wide range of
enforcement techniques, such as wage garnishment and asset seizure, to
collect criminal debt. If offenders willfully do not pay their criminal
debt, FLUs can summon them to appear in court. In court, offenders can be
ordered to answer questions under oath or in writing about their financial
status or explain why they have not complied with the court?s order for
paying a debt. FLUs can also obtain a court order, called a writ of
execution, that permits the U. S. Marshals Service to seize an offender?s
property as complete or partial payment of a fine or restitution. Writs of
execution can also be applied against an offender?s income or bank
account in a process called garnishment. In October 1985, we reported 7 that
the FLUs we visited rarely used the techniques we have just discussed due to
several factors, including limited resources. Based on our reviews at the
four districts we visited, the FLUs
7 GAO/ GGD- 86- 02, October 10, 1985. The FLUs were referred to as
collection units when this report was issued.
are still rarely using any of these enforcement techniques, and the guidance
does not specify when and how frequently these techniques should be used.
For example, we found only one case in which the FLU garnished wages.
According to FLU officials, enforcement techniques are not pursued until the
FLU determines that an offender has assets or sufficient earnings and is
willfully not paying amounts owed. However, as noted above, the FLU is
performing limited asset discovery work to determine whether assets do exist
that could be pursued, as indicated in the example where the FLU performed
an asset search in May 2000, 5 years after the offender?s release from
supervision, and only after the case had been selected for our review. Based
on that search, the FLU scheduled a deposition with the
offender to determine whether there were assets that could be liquidated. In
another example, an offender was convicted of embezzlement, false
imprisonment, and tax evasion and was sentenced in 1998 to 20 months of
imprisonment and 3 years of probation. The offender was also ordered to pay
approximately $67,000 in restitution in monthly installments of at least
10 percent of gross monthly income. After sentencing, but before
surrendering for incarceration, the offender sold property and realized a
profit of about $13,000. According to FLU officials, the FLU could have
forfeited the property, but they could not explain why this option was not
pursued.
Monitoring and Reassessing The FLUs use event codes 8 in their collection
tracking systems to Cases
document actions taken to pursue collection and the status of cases.
According to the U. S. Attorneys? Manual, criminal debts that are placed in
suspense must be periodically reviewed to determine whether the offender?s
status has changed and to reassess the offender?s ability to pay (see table
3). For example, the code ?DDNL? is used to place an account in suspense
when a debtor cannot be located. This policy allows FLUs to keep
criminal debts ?open? as legally required while limiting the time and effort
to be spent on a case. According to the manual, debts placed in suspense
must be periodically reviewed to reassess an offender?s ability to pay. 8 An
event code is a code entered into the FLU database that identifies a
collection action (e. g., lien filed) or why a debt should be placed in
suspense (e. g., no ability to pay).
Table 3: Required Frequency of Review for Criminal Debts in Suspense Debt
amount Frequency of review (at a minimum)
Greater than $25,000 Each year $25,000 to greater than $10, 000 Every 2
years $10,000 or less Every 3 years Source: U. S. Attorneys? Manual.
In September 1993, Justice?s Office of the Inspector General (OIG) reported
that the FLUs were not adhering to the prescribed policies for reviewing
debts in suspense. During our reviews, we also found that the FLUs we
visited were still not consistently using the event codes, including
suspense codes, and they were not following their prescribed procedures for
reassessing an offender?s ability to pay. Specifically, we found that the
event code as of September 30, 1999, was inconsistent with the information
in the case file for 14 percent of the high- dollar cases and for an
estimated 20 percent of the sampled population. For example, an offender was
fined
$100,000 in October 1989. The offender reported over $420, 000 in net worth
on a personal financial statement dated September 1989 and was making
payments towards the fine until September 1997, at which time the offender
still owed $82,000 plus interest and penalties. However, the FLU had not
reviewed the case from September 1997 through April 2000, well over the 1-
year frequency- of- review guidelines for debt over $25,000.
In addition, the FLUs did not promptly monitor cases and update their
records, resulting in an inaccurate principal balance in EOUSA records. In
40 percent of the high- dollar cases and for an estimated 65 percent of the
sampled population, the FLU had not revisited the case within established
time frames. For example, an offender in our selection was ordered to pay
restitution of $20 million in November 1991. The offender had paid over
$50,000 before his death in 1993. However, as of September 30, 1999 (over 6
years after the offender?s death), the FLU was showing that the offender
still owed a balance of over $19.9 million. Had the FLU revisited this case
in a timely manner, this amount would have been written off.
We found that the September 30, 1999, balance for GAO- selected cases was
overstated by more than $450 million. Five of the high- dollar cases we
reviewed involved one case with several defendants who were jointly and
severally liable for all or some parts of the total restitution owed. To
avoid double counting in joint- and- several cases, the FLUs are to open one
record
for the lead defendant and track all other codefendants or coparticipants
under the lead defendant?s record. However, the FLU inappropriately opened
separate records for these defendants, thereby overstating the amount owed
as of September 30, 1999, by more than $430 million. Sending Demand,
The EOUSA Manual requires the FLUs to send a demand letter to offenders
Delinquent, and Default
?as soon as? a case is entered into the criminal tracking system, notifying
Letters
offenders of their debt and the consequences of not paying the debt (i. e.,
interest and penalties would be assessed). While three of the four districts
in our review have incorporated this guidance into their local procedures,
local procedures for the fourth, the Central District of California, state
that the FLU should not send demand letters to an offender who is under the
supervision of a probation officer. In October 1985, we reported that demand
letters were sent in only 17 percent of the cases reviewed in five
districts, and of those sent, the average number of days the FLUs took to
send the letters was 143. 9 Not sending or not promptly sending demand
letters continues to be a problem for the USAOs. The problem could be
attributed, in part, to the lack of specific guidance as to when demand
letters should be sent. For example,
EOUSA guidance states that demand letters be sent ?as soon as? a case is
entered into the criminal tracking system; however, it does not address
situations that may not be applicable to this guidance, such as debts
entered into the tracking system that are not yet due. We found that the
FLUs had not sent demand letters required by the EOUSA Manual in 69 percent
of the high- dollar cases and in an estimated 45 percent of the sampled
population. Sending demand letters is further delayed by the amount of time
it takes the FLUs to receive the judgments and enter information from them
into their tracking systems. For the highdollar
and random cases for which demand letters were sent, the average number of
days the FLUs took to send the first letter from the date the judgment was
entered into the tracking system, was 163 and 433 10 days, respectively.
Also, for those same high- dollar and random cases, the
9 GAO/ GGD- 86- 02 , October 10, 1985. 10 See footnote 10 in executive
summary.
average number of days the FLUs took, from the judgment date, to send the
first letter was 481 and 712 11 days, respectively.
In accordance with 18 U. S. C. 3612( d), delinquency notices should be sent
within 10 working days after a fine or restitution is determined to be
delinquent (i. e., a payment more than 30 days late). A payment that is not
made within 90 days after it is determined to be delinquent is in default,
and a default notice should be sent within 10 working days. However, we
found that neither delinquency nor default notices were sent in 21 of the 24
highdollar cases and 58 of the 101 random cases 12 in which the debt was
determined to be delinquent or in default. Failing to promptly inform an
offender of the penalties for not making payments diminishes the incentive
for the offender to make prompt payments. Assessing Interest and
In accordance with 18 U. S. C. 3612( f), interest and penalties are required
to Penalties be assessed on unpaid fines or restitution 13 over $2,500
unless the court waives this requirement (i. e., if the judge specifically
states in the JCC that interest and/ or penalties are waived). The law also
permits the Attorney General to waive interest and penalties if it is
determined that efforts to
collect are not likely to be effective. However, according to the U. S.
Attorneys? Manual, a determination of whether to waive interest and
penalties should be considered only after the principal has been paid.
In September 1993, the Justice OIG reported that 8 of the 10 offices they
visited did not pursue penalties and that 2 had waived both interest and
penalties for all delinquent debts. The OIG recommended that the EOUSA
emphasize the need for assessing interest and penalties. However, we found
that the four FLUs we visited still were not consistently assessing interest
and penalties. While in some instances, the FLUs assessed required
interest, in 4 out of 7 high- dollar and in 12 14 out of 49 random cases
that required interest and penalties to be assessed, the FLUs had not done
so. Moreover, the FLUs generally do not assess penalties. EOUSA officials
11 See footnote 10 in executive summary. 12 See footnote 10 in executive
summary. 13 Prior to MVRA, interest and penalties were not required to be
assessed on restitution debts. 14 See footnote 10 in executive summary.
believe that assessing interest and penalties is not productive because the
principal debt itself is often difficult to collect. As shown in table 4,
inconsistently applying interest and penalties leads to inconsistent data
and an understated balance.
Table 4: Examples of Inconsistencies in Applying Interest Judgment
Payments Balance as of
Judgment date amount Interest applied received September 30, 1999
April 15, 1993 $13,250, 000 $23, 174, 496 $200 $36, 424, 296 August 22, 1997
$37,372, 826 $0 $0 $37, 372, 826 Source: Data obtained from FLU files and
unaudited EOUSA data.
According to the EOUSA database, as of September 30, 1999, the outstanding
debt balance included over $400 million of interest and penalties assessed
by the FLUs. However, because the FLUs do not consistently assess interest
and penalties, the reported amounts do not accurately represent how much
total principal, interest, and penalties are
due. In addition, failure to assess interest and penalties reduces the
amount that could be recovered and passed along to victims or the federal
government and eliminates a tool designed to provide debtors an incentive
for prompt payments.
Human Capital Issues Effective and prompt collection actions are affected by
the adequacy of human resources. We recently designated human capital a
governmentwide high- risk area, 15 emphasizing that an organization?s
people- its human capital- are its most critical asset in managing for
results. Our high- risk report explains that human capital problems lead to
programmatic problems and risks and that human capital shortfalls are
eroding the ability of many agencies to effectively, efficiently, and
economically perform their mission. In addition, according to the
Comptroller General?s Standards for Internal Control in the Federal
Government, 16 only when the right
personnel for the job are on board and are provided the right training, 15
High- Risk Series: An Update (GAO- 01- 263, January 2001). 16 GAO/ AIMD- 00-
21. 3.1, November 1999.
tools, structure, incentives, and responsibilities is operational success
possible.
The lack of asset investigators and the limited number of collection staff
have presented a historical problem for the FLUs. In October 1985, we
reported that debt collection, especially criminal debt collection, receives
low priority and suffers from staffing problems. 17 In that report, we
stated that personnel spent more time on accounting for criminal fines than
on
enforcing collection. We also reported that the FLUs, who are responsible
for civil and criminal collections, were staffed with one attorney and from
1 to 10 collection clerks, depending on the size of the district (generally
the
same staffing levels as in 1999). In July 1990, we reported that FLUs stated
that they have insufficient trained staff to aggressively follow up on and
enforce collections. 18 In September 1993, the Justice OIG reported that as
data entry responsibilities increase, less time is spent on actual criminal
debt collection actions.
Staffing levels for the four FLUs we visited have only slightly increased
from an average of 8.7 individuals during 1995 to 9. 3 individuals during
1999, even though the number of assessments and debts pending have
significantly increased. Specifically, the number of debts pending for the
four FLUs we visited increased from an average of 4,406 to 6,373 cases per
district, or about 45 percent, and the average dollar amount of outstanding
debts per staff increased by over 160 percent. Table 5 reflects the average
number of criminal cases compared with the average number of staff (i. e.,
workload) for fiscal years 1995 and 1999 for the four FLUs we visited. In
addition to the criminal case workload data presented in table 5, the FLUs
are also responsible for collecting civil debt that other federal agencies
refer to them. The number of outstanding civil debts for all FLUs increased
from 44,786 debts as of the end of fiscal year 1995 to 146,421 at the end of
fiscal year 1999. 17 GAO/ GGD- 86- 02, October 10, 1985. 18 U. S. Department
of Justice: Overview of Civil and Criminal Debt Collection Efforts (GAO/ T-
GGD- 90- 62, July 31, 1990).
Table 5: Average Number of Criminal Cases Per Staff, Fiscal Years 1995 and
1999, for the Four FLUs We Visited
Average number Number of
Number of of cases per
Average dollar amount Fiscal year cases staff
staff of cases per staff
1995 4, 406 8. 7 506 $57. 2 million 1999 6, 373 9. 3 685 $150. 9 million
Source: EOUSA.
Further, none of the four FLUs we visited had full- time resources dedicated
19 to or specializing in performing searches to identify hidden assets, and
they had few resources available for enforcing collections. When assets are
not promptly identified, offenders have more time to hide fraudulently
obtained assets, such as funds in offshore accounts, shell corporations, or
family members? names and accounts. Once assets are
identified, the FLUs should pursue collection through the use of enforcement
techniques (i. e., legal remedies); however, most of the individuals
assigned to the FLUs we visited were not attorneys or paralegals, whose
skills are needed to pursue such techniques.
EOUSA officials have historically recognized the need for additional
training and staff, but they indicate that budget constraints limit the
FLUs? ability to provide the additional training or hire additional staff
that would enable them to collect debt more effectively. In addition, an
official from
the FLU in the Southern District of New York in Manhattan indicated that
this district often has difficulty in filling its lower- paying positions,
such as those for debt collection agents. In conjunction with documenting
our initial understanding of the debt collection process, we visited the
Northern District of California. During this visit, we were briefed on a
project that this district had initiated in 1999 to employ dedicated asset
investigators. According to the EOUSA, the
project, which provided for one full- time and four part- time former
criminal investigators, has been very successful. The district reported that
over 1,000 cases were investigated and over $10 million has been or is in
the process of being recovered as a result of those investigations. As noted
19 One of the FLUs we visited had individuals from the U. S. Marshals
Service assist in asset discovery work on a part- time basis.
above, three of the four districts where we performed our testing did not
have dedicated asset investigators, and the collection staff was not
performing significant asset discovery work. FLU Tracking Systems The FLUs?
tracking systems do not capture key information needed for the
FLUs and EOUSA to effectively manage the debt portfolio. As we reported in
June 1994, 20 the FLUs? tracking systems do not indicate the terms of the
fine or restitution orders. This continues to be a problem for the FLUs we
visited. For example, although a JCC may state that an offender owes at
least a certain amount on a periodic basis, this information would not be
reflected in the systems. The tracking systems also do not capture an
offender?s expected release dates from prison and probation, information
that could assist the FLUs in determining time frames for reassessing an
offender?s ability to pay. In addition, the systems do not permit the FLUs
to
allocate outstanding debts between amounts likely to be collected and those
not likely to be collected. For example, even if an offender is making
monthly installment payments, the FLU must either put the entire balance in
suspense or none of the balance in suspense.
Probation Offices The four probation offices we visited did not consistently
adhere to certain policies and procedures for developing pre- sentence
reports and collecting criminal debt. The AOUSC provides guidance to
probation officers for (1) developing pre- sentence reports, (2)
establishing installment schedules, and (3) monitoring installment
schedules. However, we found that the probation offices we visited were not
always following these procedures,
thereby decreasing the usefulness of financial information in pre- sentence
reports and the potential for maximizing criminal debt collections. In June
1998, 21 we recommended that the AOUSC establish, as policy, specific
guidance on how probation officers should determine how offenders should pay
their fines and restitution, including criteria establishing what types of
assets should be considered for immediate lump- sum payments or substantial
payments, how installment schedules should be established, and the type and
amount or range of expenses that should ordinarily be considered necessary
when determining the amount of payments under
20 GAO/ T- GGD- 94- 178, June 28, 1994. 21 Fines and Restitution:
Improvement Needed in How Offenders? Payment Schedules Are Determined (GAO/
GGD- 98- 89, June 29, 1998).
installment schedules. To address these recommendations, the AOUSC issued
revised guidance in September 2000 that, if properly implemented, should
help address the reported weaknesses. However, as the AOUSC and we pointed
out in that report, unless probation officers effectively
implement these guidelines, such weaknesses will continue to exist.
Developing Pre- Sentence
Prior to sentencing, probation officers perform ?financial investigations?
of Reports offenders? financial condition for inclusion in pre- sentence
reports. This includes collecting, verifying, and analyzing financial
information regarding the offender. Probation officers depend on offenders
to provide certain financial information; however, offenders are not always
cooperative. In 10 of the 42 high- dollar and 18 of the 125 random cases 22
we reviewed, the offender did not provide this information, thus decreasing
the usefulness of the pre- sentence report for debt collection purposes.
Regardless of whether the offender provides this information, probation
officers are responsible for taking steps to determine an offender?s ability
to pay, such as obtaining pay stubs, reviewing tax returns, searching for
assets, and running credit reports. However, in 20 of the 42 high- dollar
and
40 of the 125 random cases, 23 we found that probation officers did not take
adequate steps to develop the financial condition section of the presentence
report. For example, one probation officer included information provided by
the offender and obtained a credit report to verify liabilities but did not
take the steps needed to identify assets or verify income. In another case,
the offender did not provide information, and there was no evidence in the
file that the probation officer attempted to obtain financial information by
other means. The probation officer for another case
obtained prior years? income tax returns to verify income information
provided by the offender but did not take the steps needed to identify
assets. Since the offender most likely would not report income obtained
through criminal activities on his tax returns, other steps should have been
taken to assess the reasonableness of reported income versus the
offender?s lifestyle. Probation officials indicated that they often have
limited time frames for preparing the pre- sentence reports and have to
obtain the offender?s
22 See footnote 10 in executive summary. 23 See footnote 10 in executive
summary.
consent and cooperation to obtain certain information and documents (e. g.,
tax returns). Further, probation officials have indicated that their
investigations focus on analyzing information provided by the offender and
not necessarily on identifying unreported assets. Establishing Installment
According to 18 USC 3572( d), offenders should pay their fines and Schedules
restitution ?immediately, unless, in the interest of justice, the court
provides for payment on a certain date or in nominal installments.? As noted
earlier, depending on the district, installment schedules are established by
a judge and documented in the JCC or by probation officers while an offender
is under their supervision. Therefore, once a probation
officer is supervising an offender, the officer either (1) monitors the
courtordered installment schedule or (2) establishes and then monitors the
installment schedule. Probation officers were required to establish
installment schedules in 10 of the 42 high- dollar cases and in 72 of the
125 random cases. However, probation officers did not establish installment
schedules in 3 of the 10 high- dollar cases and 15 of the 72 random cases 24
as required. In the other cases, the probation officers were not required to
establish an installment schedule because the (1) offender was still in
prison or (2) the court stipulated an installment schedule. As discussed in
chapter 2, judges may stipulate payment terms in the JCC. These terms can
influence actions taken by probation officers and the FLUs to collect
criminal debt. See table 6 for the status of offenders in our selected cases
as of May 2000. 24 See footnote 10 in executive summary.
Table 6: Status of Offenders in GAO?s Selected Cases Status High- dollar
cases Random cases a
In prison 24 28 Under probation 8 32 Released from prison and
8 64 probation Other (e. g., fugitive, deported,
2 16 died) a In circumstances in which attributes do not apply to all cases,
estimating the results to an appropriate population would introduce
significant sampling error intervals. Therefore, we have presented only the
actual results for the applicable cases in each circumstance. See footnote
10 in executive summary. Source: Data obtained from probation files.
Unless a court has set a payment schedule, probation officers should
establish installment schedules (or reassess court- established schedules)
to collect outstanding criminal debt from offenders once they are released
to their supervision. Probation officers should recommend that offenders
make a full lump- sum or a significant one- time partial payment based on
their ability to pay and establish an installment schedule for the balance
not
paid. The guidelines require probation officers to request that offenders
periodically report on their financial circumstances by preparing personal
financial statements listing their assets- such as bank accounts,
securities, and real estate- that could be used for lump- sum payments
against their fines and restitution. The FLU should be notified if lump- sum
payments are
made, and identified assets should be reported to the FLU so it could pursue
collection. According to AOUSC guidelines, probation officers should set an
installment payment schedule based on the offender?s
monthly cash flow if full payment is not possible. The monthly cash flow is
determined by deducting necessary monthly expenses from monthly income.
Necessary expenses are broadly defined as those for the offender?s continued
employment and for the basic health and welfare of the offender?s
dependents, which could include home rent or mortgage, utilities, groceries
and supplies, insurance, transportation, medical
treatment, and clothing. We found deficiencies in the establishment of
installment schedules, including inadequate recommendations for significant
partial payments, in
3 of 7 high- dollar and 16 of 57 random cases 25 in which installment
schedules were established. Specifically, we found that probation officers
did not consider an offender?s reported assets, such as bank accounts and
second homes that might have been available for full or partial payment of
a fine or restitution. Instead, probation officers typically established
installment schedules and did not recommend lump- sum payments or
liquidation of assets. For example, an offender was convicted of tax fraud
in September 1994, sentenced to 5 months in prison and 1 year probation, and
ordered to pay approximately $344,000 in federal restitution. Although
the offender reported having significant assets on his financial submission
for use in preparing the pre- sentence report, the probation officer did not
recommend a significant partial payment. Instead, the probation officer
established a $25- per- month installment schedule which the offender
stopped paying after he was released from probation. Even if the offender
had continued to make these payments, it would have taken over 1,000 years
for the debt to be paid off.
We also found that probation officers used arbitrary methods, such as
negotiated amounts and good- faith payments, to establish the installment
payment schedules, instead of linking them to income, expenses, or other
financial criteria as required. For example, an offender who was ordered to
pay $5,900 in restitution entered into a payment agreement with the
probation office that called for $10 monthly payments, even though financial
submissions indicated that the offender had a positive monthly cash flow
(income minus necessary monthly expenses) of about $360. At a rate of $10 a
month, it would take the offender over 49 years to pay off the debt. 26
Monitoring Installment Offenders under supervision are to submit to their
probation officers
Schedules (1) monthly supervision reports listing income and necessary
expenses and
(2) on a less frequent basis, updated personal financial statements.
Probation officers are required to scrutinize these reports, including the
type and amount of offender- reported ?necessary expenses.? In addition,
probation officers may request that offenders increase or decrease
installment payment amounts if their ability to pay changes (with court 25
See footnote 10 in executive summary. 26 According to FLU guidance, monthly
payments should be at least $60 in order for them to be cost effective.
approval if the court set the payment schedule). However, we found that
probation officers did not follow their guidelines for reviewing an
offender?s financial circumstances. Following the guidelines could have
allowed for increased installment payments for 1 of the 13 high- dollar and
12 of the 77 random cases 27 in which an installment schedule had been
established by either the probation officer or the judge. We also found that
in the cases in which the judge set a minimum amount that must be paid or
set other payment terms, probation officers typically did not recommend
increased payment amounts or liquidation of assets, even if an offenders?
financial circumstances improved (see examples and related discussion in
chapter 2). For example, for the offender with the $25- per- month payment,
the probation officer did not attempt to increase the amount even though the
offender reported (1) significant assets on his financial submission for use
in preparing the pre- sentence report, (2) ownership of two vehicles (a 1990
Lexus and a 1991 Ford Bronco), (3) a net positive cash flow on his monthly
reports, and (4) bank accounts without listed balances. In another example,
an offender was convicted of mail fraud, sentenced in 1998 to 3 years of
probation, and ordered to pay restitution in the amount of $12,000. The
judge ordered restitution to be paid in $100 quarterly payments (i. e., $33
per month) unless modified by the probation officer. For the July 1999
reporting period, 9 months after being sentenced, the offender reported a
positive monthly cash flow of over $1, 500; however, the probation officer
did not recommend that the payment amount be increased. Not adequately
monitoring an offender?s financial circumstance results in missed
opportunities to seek an increase in an offender?s installment payments.
Probation officers have considerable leverage over an offender under
supervision and can take actions if offenders are not making agreed- upon
installment payments. For example, probation officers can withhold consent
for a debtor to travel outside the district, or they can seek to revoke
probation. Even though installment payments typically range from $25 to $100
per month, offenders do not always make the agreed- upon installment
payments. In several cases, we found no evidence that probation officers
took action to enforce the installment schedules (i. e.,
sought to revoke probation and send the offender back to prison) when the
offender failed to make agreed- upon installment payments. Probation
officers indicated that they must prioritize their time in light of the
number 27 See footnote 10 in executive summary.
of offenders they are supervising. They stated that their first priority is
to ensure that offenders do not engage in criminal activity or violate other
terms of probation (e. g., are not using drugs during the probation period).
However in a couple of instances, we found that when probation officers
recommended against an offender being released from probation based on
nonpayment of criminal debt in accordance with an established installment
schedule, the judges rejected the recommendations. For example, in April
1999, a judge for one of our sample cases granted an offender an early
release from probation even though the probation office had recommended
against the release stating that the offender, who had been convicted of
mail fraud in April 1997 and ordered to pay $175, 000 in restitution, had
not made sufficient restitution payments. Before his release, the offender
had paid only $600. As of June 2000, the last payment from this offender was
for $50 received in May 1999.
Coordination Among In over half the cases we reviewed at the four districts
visited, we found
the Entities Involved little evidence of coordination among the entities
involved in assessing and
collecting criminal debt and a lack of policies and procedures to ensure
that efforts are coordinated. For example, we found little evidence that
prosecutors and probation officers had shared financial information with
FLUs, thus potentially weakening the FLUs? ability to assess an offender?s
ability to pay. In addition, we found that FLUs typically were not
monitoring the collection efforts of probation officers, as advised by the
U. S. Attorneys? Manual, and that, contrary to district procedures,
probation officers were not informing FLUs of an offender?s upcoming release
from
probation. Furthermore, at the four districts we visited, the FLUs and the
clerks? offices maintained separate databases to track criminal debt
collections. This lack of coordination is a long- standing problem that has
not been adequately addressed. The failure to adequately address this
problem results in inefficient processes and duplication of efforts. Because
of the many agencies and districts involved in assessing and collecting
criminal debt- including two branches of the federal government and 94
districts- enhancing the effectiveness and efficiency of criminal debt
collection hinges on these entities working together.
Sharing Financial Investigating agencies and prosecuting attorneys typically
obtain
Information With FLUs substantial financial information concerning criminal
debtors during the
investigation of a case and prosecution of offenders. However, no national
requirements exist for sharing financial information with the FLUs, and
only two of the four districts we visited have incorporated specific (but
different) procedures for sharing financial information in their MOUs. The
Justice OIG reported in September 1993 that (1) prosecuting attorneys (who
are on the criminal side of the USAOs) did not always provide the FLUs (who
are on the civil side of the USAOs) with available financial data on a
regular, systematic basis and (2) no formal requirement exists for
attorneys to provide this financial information to the FLUs. The OIG
recommended that a formal national requirement be established for
prosecuting attorneys to provide debtor financial information to the FLU
staff after an offender has been sentenced. However, based on our case file
reviews, we found that sharing financial information with the FLUs continues
to be a problem in the four districts we visited. Specifically, in 52
percent of the high- dollar cases and in an estimated 61 percent of the
sampled population, we found no evidence in the FLU files of correspondence
with the investigating case agents or prosecuting attorneys. According to
FLU officials, this type of correspondence may
have occurred but was not documented in the case file. As stated in the
Standards for Internal Control in the Federal Government, 28 internal
control and all transactions and other significant events need to be clearly
documented and the documentation should be readily available for
examination.
After an offender is sentenced, district guidance requires the FLUs to
obtain a copy of the financial information contained in the pre- sentence
report from either the probation officers or the prosecuting attorney. In
October 1985, we reported that guidance did not exist for probation offices
to share information with the FLUs and that probation officers did not
routinely provide such information to the FLUs. In September 1993, the
Justice OIG reported that 154 of 185 FLU files they reviewed did not contain
a copy of the pre- sentence report. Recently issued guidance now
specifically requires probation officers to share financial information from
pre- sentence reports with the FLUs.
In most of the high dollar and random cases reviewed, we found no evidence
in the FLU files that the FLUs had reviewed a copy of the presentence
report. As a result of this lack of coordination, the FLUs do not have
valuable financial information needed to assess an offender?s ability to
pay, to enforce collections, and to reduce duplication of effort in
identifying
28 GAO/ AIMD- 00- 21. 3.1, November 1999.
assets. For example, an offender in our sample reported over $420,000 of net
worth in a personal financial statement dated September 1989 that was used
by the probation office to prepare the pre- sentence report. In another
example, prior to sentencing, an offender provided a bank statement showing
a balance of over $73,000; however, there was no evidence that actions were
taken to pursue these funds. In both examples, there was no
evidence in the FLU?s files that the FLU had obtained a copy of the
presentence report. If the information had been shared with the FLUs, they
could have used this report as a starting point for performing asset
discovery work. Communication Between
In October 1985, we reported that although the U. S. Attorneys? Manual FLUs
and Probation Offices
advises the FLUs to monitor the collection efforts of probation offices,
there was little involvement by the FLUs in probation office collections. 29
The guidance requires the FLUs to maintain contact with probation offices
regarding the offender?s compliance or failure to pay criminal debt.
However, district guidance for the four districts we visited states that the
FLUs are to assist the probation offices, if requested. During our reviews,
we found that the FLUs typically did not monitor collection efforts of
probation officers and that probation officers rarely requested assistance
or notified the FLUs before an offender was released from probation. In
general, the FLUs did not pursue collection until they determined that an
offender had been released from probation. In commenting on our June 1998
report related to establishing offender?s payment schedules, 30 the AOUSC
stated that greater emphasis should be placed on Justice?s role in
collecting fines and restitution because Justice has primary responsibility
for collecting criminal debt. We believe that the current district guidance,
which states that FLUs should assist if requested, adversely affects the
FLUs? ability to enforce debt collection and puts them in a reactive instead
of a proactive role.
For example, in March 1989, an offender was ordered to pay $26 million in
restitution to hundreds of investors who had invested in the offender?s
fraudulent company. In April 1995, the offender was released from prison and
in 1997 made several payments before moving to a different district. In
29 GAO/ GGD- 86- 02, October 10, 1985. 30 GAO/ GGD- 98- 89, June 29, 1998.
April 1999, he agreed to make $500 monthly payments to one of the financial
institutions he owed money to plus 50 percent of the income from future
speaking engagements and 100 percent of the income from the
?movie rights? he sold pertaining to a published novel he wrote. As of June
2000, the FLU had not pursued collection because, according to the FLU, the
offender is ?under the supervision of probation,? and the probation office
had not requested its assistance. There have been no recorded payments since
1997. An Internet search that we performed revealed that the offender is
involved in many activities from which he is most likely deriving additional
income, including publications, a spot on a radio program, and a full- time
salary.
Several months before an offender is to be released from probation with an
outstanding debt, procedures at the four districts we visited require
probation officers to notify the applicable FLU. However, there was rarely
evidence of such notification in the FLU?s files. As we reported in chapter
3, the FLU?s tracking system does not adequately track the status of an
offender; consequently, unless the probation officer notifies the FLU, the
FLU will not always know when an offender is scheduled to be released from
supervision. In 3 high- dollar and 7 31 random cases we reviewed, the
offenders stopped making installment payments when they were released from
supervision. In these instances, there was no indication in the file that
the probation officer notified the FLU of the offender?s release or the
status
of the offender?s criminal debt obligations, including the terms of the
installment agreement. For example, an offender was sentenced in October
1989 to 2 years in prison and 5 years of probation for income tax evasion.
The offender was also ordered to pay a $100,000 fine. During supervision,
the offender made over $17,000 in payments, with the last payment occurring
in September 1997, 1 month before the offender?s release from
supervision. There was no evidence in the FLU file that it had been notified
of the release, and no collection actions were taken by the FLU for this
case until it was selected for our review in April 2000.
Lack of communication between the FLUs and the probation offices about
offenders? installment schedules, assets, and release dates hinders timely
notification of the status of an offender?s compliance with payment
arrangements and related events, thus decreasing the potential for
collections. 31 See footnote 10 in executive summary.
Databases for Tracking In each of the four districts we visited, the clerk?s
office and the FLU Collections and
maintain separate databases to account for criminal debt collections,
Disbursements
resulting in duplicative and inefficient data entry for both entities.
Although the courts are responsible for processing collections and
disbursements for most criminal debt, clerk?s office officials have stated
that they do not have the systems in place to calculate required interest.
Instead, the clerk?s offices rely on the FLUs? tracking systems to calculate
interest, if assessed. Posting information to these databases typically
requires the exchange of hardcopy information between the clerk and the FLU
so that both
databases can be updated to properly reflect collections and disbursements.
The National Fine Center (NFC) was supposed to eliminate this duplication;
however, since the NFC effort failed (as noted in chapter
1), both entities continue to maintain separate systems for tracking
collections and disbursements. Highlighting this inefficiency is the fact
that each month both entities must post payments received from offenders
participating in the Bureau of Prisons (BOP) Inmate Financial Responsibility
Program (IFRP), in which a portion of prisoners? earnings is used to pay
their outstanding debt.
Hundreds of inmates typically participate in the program. Monthly or
quarterly payments received from each inmate are generally small dollar
amounts, but they are collectively large in volume. For example, a typical
monthly report from BOP for the Eastern District of New York contains about
400 inmate debt payments. Since both the FLU and the clerk?s office track
payments, each entity must determine what debt balance (i. e., special
assessment, 32 fine, or restitution) to apply these 400 payments to and then
post each payment. If the payment is for restitution, amounts collected must
be prorated to the victims (sometimes hundreds of victims) before checks can
be disbursed.
Maintaining these separate, nonintegrated systems also places greater
emphasis on the need for timely coordination and communication so that data
in these systems are accurate and the information is timely. For the cases
we reviewed in which payments had been collected, there was typically a
delay between the time that the clerk posted a payment and the time that the
FLU posted the same payment. We also found that the FLUs typically did not
inform the clerk of payments they received, resulting in
32 Special assessments are fixed amounts assessed for each count on which
the defendant is convicted, typically ranging from $5 to $200 per count.
Payments received from offenders apply first to special assessments, then to
restitution, and then fines.
several significant differences in the payment records. For example, an
offender was convicted of Racketeer Influenced and Corrupt Organizations Act
(RICO) violations, wire fraud, and bribery and was sentenced in 1996 to 60
months of incarceration and 3 years of supervised release. The offender was
ordered to make restitution in the amount of $412 million. According
to clerk?s office records, $3,050 had been paid as of September 30, 1999,
while FLU records showed that over $11.7 million had been paid as of the
same date. District guidance at the four districts we visited did not
specifically require the FLUs to notify the clerk?s offices of payments they
received or require the FLUs and the clerks to periodically reconcile
payment data recorded in the two systems. Without timely notification of
payments received or periodic reconciliations, differences between the two
systems will continue to exist. We also identified inefficient practices
involving the processing of disbursements to victims. In 76 districts, the
clerk?s offices are receiving all types of criminal debt payments from
offenders and disbursing checks to restitution victims; however, in 18 of
the 93 USAOs, the FLUs receive restitution payments from offenders for
offenses that occurred before the MVRA and are disbursing checks for
restitution only to pre- MVRA victims. Having these two entities in 18 of
the districts perform similar functions results in wasted resources.
According to AOUSC officials, they are working with the remaining clerk?s
offices to process pre- MVRA restitution.
In addition, the four clerk?s offices we visited generally set a low or no
threshold amount for disbursing a check to a victim. As a result, we found
instances in which the clerk?s office issued checks for less than $10 to
victims ranging from individuals to large financial institutions. In one
example, restitution was owed to several companies ranging from $500 to
$75,000. Once every month or so, checks were being disbursed to these
companies. In October 1998, 12 checks were issued ranging from 20 cents to
$62, and 4 of these checks were returned as undeliverable, including one for
20 cents and another for 53 cents. Disbursing such small amounts is not
cost- effective unless these are the final checks to be issued (i. e., the
offender most likely will not be submitting additional payments).
Chapt er 4
Oversight Roles of OMB and Treasury Historically, management oversight of
the criminal debt collection process has been divided between the executive
and judicial branches with Justice responsible for enforcing collections and
the courts responsible for receipting and disbursement of collections. This
condition still exists today. In 1984, there was recognition of the
increased need for centralized management of the collection process, and in
1987 efforts to establish the
National Fine Center (NFC) began. The NFC was an attempt to automate and
centralize the criminal debt collection process, which would have increased
management oversight. However, since that effort was terminated in 1996, as
noted in chapter 1, the collection responsibilities
continue to be fragmented between Justice and the courts, with neither
having a central management oversight role. Moreover, neither OMB nor
Treasury has identified the need to take an active role in overseeing the
federal government?s process for collecting the billions of dollars of
outstanding criminal debt. While the collection of such debt has been a
long- standing problem, the substantial growth in the outstanding balance is
a relatively recent development. Because serious
coordination and cooperation problems among the fragmented entities involved
continue to exist and because of the low collection rates, such oversight is
needed. Effective oversight of the collection of criminal debt could be
achieved by leveraging OMB and Treasury?s current respective central agency
roles. 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. For example, OMB provides guidance to agencies in the form
of circulars to assist them in meeting enacted legislation, such as the Debt
Collection Improvement Act of 1996 (DCIA). 1 As such, OMB could 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. In
implementing provisions of the DCIA, Treasury, through its Financial
Management Service, could assist Justice in identifying the types of
delinquent criminal debt that would be eligible for reporting and referral
to Treasury for collection actions. In turn, by better accounting for and
reporting its delinquent criminal debt, Justice would enhance its own 1 OMB
Circular No. A- 129, Policies for Federal Credit Programs and Non- Tax
Receivables.
management oversight of this problem. Collectively, these efforts would
place greater emphasis on the management and collection of criminal debt.
Although Justice and the courts develop unaudited annual statistical data
for informational purposes, 2 neither entity is accounting for any of these
debts as receivables, disclosing the debts in financial statements, or
having the receivable information subjected to audit. In addition, neither
entity is
referring eligible criminal debt to Treasury for collection. Having Justice
and the courts properly account for, report, and manage criminal debts, with
assistance from OMB and Treasury, would heighten management awareness and
ultimately result in a more effective collection process.
Accounting For, According to Statement of Federal Financial Accounting
Standards Reporting, and (SFFAS) No. 1, Accounting for Selected Assets and
Liabilities, and SFFAS
No. 7, Accounting for Revenue and Other Financing Sources and
Managing Criminal Concepts for Reconciling Budgetary and Financial
Accounting, a Debt receivable should be recognized once amounts that are due
to the federal government are assessed, net of an allowance for
uncollectible amounts. Also, in accordance with this OMB Circular No. A-
129, Policies for Federal Credit Programs and Non- Tax Receivables, agencies
are to (1) service and
collect debts in a manner that best protects the value of the federal
government?s assets and (2) provide accounting and management information
for effective stewardship, including resources entrusted to the
government (e. g., for nonfederal and federal restitution). Although both
the courts and Justice have tracking systems in place, neither entity
performs an analysis of criminal debts to estimate how much of the
outstanding amounts are uncollectible (i. e., neither entity establishes an
allowance for
uncollectible accounts for amounts due to the federal government). Justice?s
tracking system allows for amounts to be recorded as ?in
suspense?; however, these amounts do not necessarily represent amounts that
are uncollectible. In EOUSA?s unaudited fiscal year 1999 annual statistical
report, the FLUs classified as ?in suspense? about $9. 9 billion of the
approximately $13.1 billion, or 75 percent of the reported uncollected
criminal debt 2 The Annual Statistical Report summarizes and presents data
related to criminal prosecutions and civil litigation conducted by the U. S.
Attorneys for each fiscal year. The courts also generate annual statistics
related to sentences imposed (e. g., type of crime and
prison terms).
balance as of September 30, 1999. However, since the collectibility of
outstanding criminal debt has not been assessed, the amount in suspense does
not represent an estimate of the amount that is expected to be
uncollected (see chapter 3). Unless FLUs or the courts assess the
collectibility of this debt, set expectations as to the amount of debt that
can be collected, and compare expectations against actual collections,
management cannot effectively monitor program performance in debt
collection.
OMB oversees implementation of the Chief Financial Officers Act, as expanded
by the Government Management Reform Act of 1994, which requires audited
financial statements for the U. S. government, as well as the 24 major
federal executive branch agencies and departments, including Justice.
Justice prepares audited financial statements, but is not recording or
disclosing receivables for relevant criminal debt in them, and the U. S.
courts are not required to prepare financial statements or to disclose this
information. Therefore, criminal debt is not being reported in the U. S.
government?s financial statements. Financial statement disclosure by Justice
would increase oversight of the process because reported amounts would be
subject to audit under these acts. Such audits would include assessments of
internal control and compliance with applicable laws and regulations related
to the criminal debt process. Disclosure by the U. S. courts would also
increase oversight, but the reported amounts would currently not be subject
to audit.
Referring Debt to The DCIA requires executive, judicial, and executive
branch agencies to
transfer eligible nontax debt or claims 3 over 180 days delinquent to
Treasury
Treasury for collection actions. Although referring delinquent criminal debt
could increase collections and oversight of such debt, neither Justice nor
the courts are currently referring delinquent criminal debts to Treasury.
During our reviews, we found that prior to DCIA, the FLUs referred certain
debts to the former Tax Refund Offset Program and were successful in
collecting payments. For example, an offender was ordered in December 1987
to pay a $10, 000 fine and $24,700 in restitution. For tax years 1993
through 1995, the FLU referred this debt to the offset program. In March
1996, the offender?s 1995 tax refund of $1, 756 was offset and applied
toward payment of the fine.
3 Claims include debts owed to the United States or debts being collected by
the United States on behalf of others.
Justice officials believe that the courts should be responsible for
referring criminal debt to Treasury because the law specifies that the
courts are responsible for accounting for criminal debt collection
activities. Court officials indicated that they do not currently have the
systems in place- and may not be aware of other collection actions or legal
remedies being pursued by the FLUs- that could prohibit referral. The
courts? tracking systems are not complete because the courts (1) rely on the
FLUs? tracking systems to calculate interest due, (2) do not track pre- MVRA
restitution cases in 18 of 94 districts, and (3) do not always record a debt
(i. e., establish a receivable) until the first payment is received from an
offender.
Treasury officials stated that they rely on the agencies to notify them of
delinquent debts that should be referred for collection. Justice has not
been reporting this debt on its Report on Receivables 4 and is not
accounting for criminal debts as receivables or reporting them on its
financial statements or other financial submissions. Treasury officials have
stated that Treasury is willing to assist Justice and the courts in
identifying types of criminal debts that would be eligible for referral and
having the debt referred to
Treasury for collection actions. 4 Executive branch agencies are required to
periodically submit to Treasury a Report on Receivables, which details the
status of such agencies? receivables.
Conclusions, Recommendations, and Agency
Chapt er 5
Comments Conclusions The collection of criminal debt has been a long-
standing problem for the federal government. Efforts over the past 15 years
to centralize and automate the process have not been successful. Outstanding
amounts continue to increase partly because many of the problems we reported
on as far back as 1985 still exist. However, a dramatic increase in the
balance of reported uncollected criminal debt is primarily attributable to
the Mandatory Victims Restitution Act of 1996 (MVRA), which requires that
restitution be assessed regardless of the ability of the offender to pay or
the
potential for collection. Major continuing problems are that the many
entities involved in assessing and collecting criminal debt (1) do not
always use available enforcement techniques or (2) do not coordinate efforts
so that resources are used most effectively. Without additional high- level
oversight and cooperation between the entities, criminal debt collection is
likely to remain ineffective. Further, the assessment of criminal fines and
restitution as an effective
punitive tool may be in jeopardy. Recommendations 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. Therefore, we recommend that
the Attorney General, the Director of the Administrative Office of the U.
S. Courts (AOUSC), the Director of the Office of Management and Budget
(OMB), and the Secretary of the Treasury work together in the form of a
joint task force to develop a strategic plan to improve the criminal debt
collection processes and establish an effective coordination mechanism among
all entities involved in these processes. The strategy should address
managing, accounting for, and reporting
criminal debt. This strategy includes determining an approach for assessing
the collectibility of outstanding amounts so that a meaningful allowance can
be reported and used for measuring debt collection performance and 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.
In the interim, while the task force is being established, we are making the
following specific recommendations to the entities involved in criminal debt
collection: To help improve collections and stem the growth in reported
uncollected criminal debt, we recommend that
the Secretary of the Treasury, through the Department of Treasury?s
(Treasury) Financial Management Service, assist the Department of Justice
and the courts in identifying the types of delinquent criminal debt that
would be eligible for referral to Treasury for collection actions;
the Attorney General and the Director of the AOUSC continue to work
together to (1) reduce duplication of data entry for collections and
disbursements, (2) require the Financial Litigation Units (FLUs) and the
courts to periodically reconcile payment data recorded in their separate
tracking systems, and (3) revise district guidance so that the FLUs can take
a more proactive role in monitoring collection efforts of probation offices;
the Attorney General
establish policies and procedures that require Justice investigating case
agents and prosecuting attorneys to share relevant financial information
with the FLUs within an established time frame after an offender is
sentenced,
require FLUs to document correspondence with case agents and prosecuting
attorneys in the FLU files, including whether and why efforts were not
coordinated,
require FLUs to use collectibility analyses to prioritize criminal debt
collection efforts on debt types deemed through historical experience to be
more collectible,
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,
revise current policies for issuing demand letters, specifying when a
demand letter should be sent and within what time frames,
require FLUs to establish time frames for procedures related to criminal
debt collection activities that do not currently have established time
frames,
require FLUs to document in their files instances where asset discovery
work was not performed and why it was not performed,
establish a policy for the FLUs to date stamp when Judgments in a Criminal
Case are received,
revise interest and penalty policies so that interest and penalties are
consistently assessed and reported,
adequately measure criminal debt collection performance against
established goals,
revise the FLU?s 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, and
perform an analysis to assess whether the FLU?s human capital resources
and training are adequate to effectively perform their collection
activities; and
the Director of the Administrative Office of the U. S. Courts
ensure and monitor effective implementation of guidance for (1) developing
pre- sentence reports, (2) establishing and monitoring offenders? compliance
with installment schedules, (3) providing financial information reported in
the pre- sentence report to the FLUs within an established time frame after
sentencing, and (4) notifying
FLUs within an established time frame before an offender is released from
supervision,
revise guidance to encourage the clerk?s office to provide a copy of the
Judgment in a Criminal Case to both the FLU and the prosecuting attorney
within the established time frame,
continue to work with the clerk?s offices to process all pre- MVRA
restitution so that the same entity in all districts is responsible for
receiving and disbursing pre- and post- MVRA restitution,
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, and
establish cost- effective thresholds for disbursements made by check to
victims for restitution payments.
Agency Comments and A draft of this report was provided to Justice, AOUSC,
OMB, and Treasury Our Evaluation for their review and comment. The following
discussion highlights these agencies? most significant comments and our
evaluation. Letters from
Justice, AOUSC, and Treasury are reprinted in the appendixes. OMB provided
oral comments, which are incorporated into this section. Justice and the
courts also provided us with technical comments that we considered and
addressed, where appropriate.
Establishment of a Task Justice and OMB agreed with our recommendation that
they work together Force
in 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 the process. We recommended that this task
force also address managing, accounting for, and reporting criminal debt, as
well as developing an approach for assessing the collectibility of
outstanding amounts so that a meaningful allowance can be reported and used
for measuring debt collection performance. AOUSC and Treasury did not state
whether they agreed or disagreed with the establishment of and their
participation in this task force. We believe that the involvement in the
task force of AOUSC and Treasury- given Treasury?s central agency role of
preparing the federal government?s financial statements and implementing
DCIA- is critical to the success of the task force. We recommended that one
of the responsibilities of the task force be to address issues in accounting
for and reporting criminal debt. As we note in the report, accounting
standards require a receivable to be recognized once amounts due to the
federal government are assessed, net of an allowance
for uncollectible amounts. In addition, OMB guidance requires agencies to
provide accounting and management information for effective stewardship,
including resources entrusted to the government (e. g., nonfederal
restitution). Treasury and OMB agreed that criminal debt should be reported
on either Justice?s or the court?s financial statements. The courts did not
specifically address accounting and reporting issues, and Justice stated
that it would not be proper to report criminal debt receivables on Justice?s
financial statements and that it believes administration and possession of
the receivables is the responsibility of the
courts. Justice?s comments related to this issue, plus the lack of a
response from AOUSC regarding their position on this issue, illustrate the
need for cooperation and coordination in the criminal debt collection area.
We also recommended that OMB work with Justice and other executive branch
agencies, while the task force is being established, to report and/ or
disclose criminal debt information in the agencies? financial statements and
to subject such information to audit. OMB disagreed with this
recommendation, stating that these reporting issues would be better
handled by the task force. In light of Justice?s and OMB?s responses, we
have deleted the recommendation for OMB to work with Justice and other
executive branch agencies, while the task force is being established, and
incorporated this recommendation into the task force recommendation. Agency
Specific Comments Justice generally agreed with the premise of the report
and recognized the
need for improvements in the criminal debt collection area. Justice also
agreed with 10 of our 12 recommendations specifically addressed to it and
partially agreed with the other 2. The AOUSC commented that most of our
recommendations directed to it had already been implemented and that it is
pursuing those related to working with Justice to refer eligible debt to
Treasury and reduce duplication of the recordkeeping function. Treasury
agreed with our recommendation specifically addressed to it regarding
assisting Justice and the courts in identifying eligible delinquent debt for
referral to Treasury. Justice and the AOUSC also commented on the
methodology used to develop the report findings. In addition, the AOUSC
commented on the focus of the report and on the lack of recognition given to
actions the courts have taken to improve the criminal debt collection
process.
Justice and AOUSC?s Comments Justice and AOUSC, in commenting on the
methodology we used to select
on Our Methodology and review cases, stated that closed cases (i. e., debts
paid in full) should
have been reviewed and that many of the cases reviewed had already been
determined by Justice to be uncollectible debt and had been placed ?in
suspense.? We disagree. To address the requestor?s objectives of
determining the key reasons for the growth in reported uncollected criminal
debt and whether adequate processes exist to collect criminal debt, we
selected cases that involved debt amounts outstanding as of
September 30, 1999. Since we used debts outstanding as of September 30,
1999, many of which were more than 3 years old, ample time for collection
activity had passed before we reviewed the cases, enabling us to assess the
level of collection efforts performed. Reviewing closed cases or focusing on
those cases that had not been placed in suspense by the FLUs would not have
addressed why debts have not been collected nor would it have provided a
sound basis for determining whether there are adequate processes for
collecting criminal debt at the four districts visited.
The amount of outstanding criminal debt continues to grow and has grown
substantially over the past several years. However, the collection rate for
fiscal years ending September 30, 1995 through 1999, has averaged about 7
percent. The report clearly points out that this is partly due to the
uncontrollable factors discussed in chapter 2, but also to the lack of (1)
adequate collection processes, (2) coordinated efforts to collect such
debt, and (3) management oversight. Thus, to determine why outstanding
amounts continue to increase, we selected and reviewed cases with the
largest outstanding debt balances as of September 30, 1999, at the four
districts with the largest amounts of outstanding debt including debts in
suspense as well as debts not in suspense. In addition, we reviewed a
stratified randomly selected sample of 35 cases in each of the four
districts. Selecting closed cases or cases that had not been placed in
suspense would have provided anecdotal information about successful
collections, but would not have addressed our objectives of determining the
reasons for the
growth and determining whether adequate processes exist, especially given
the overall low collection rate.
We also found that debts recorded as ?in suspense? do not necessarily
represent amounts that are uncollectible. For example, even if offenders
were making monthly installment payments, the FLU must put either the entire
debt balance in suspense or none of the balance in suspense. In addition, to
determine why amounts had not been collected, regardless of whether they
were in suspense, we assessed the collection efforts that had been performed
and found that adequate steps, such as performing asset discovery work, were
not always taken or documented prior to the FLU?s placing such debts in
suspense. Further, we found little evidence that prosecutors and probation
officers had shared financial information with FLUs, thus potentially
weakening the FLUs? ability to assess an offender?s
ability to pay (i. e., determine collectibility). Justice also commented
that many of the cases we reviewed involved incarcerated debtors and pre-
date existing criminal debt policies. We point out in chapter 2 that
incarceration may limit an offender?s ability to pay
while in prison, however the high dollar cases we reviewed typically
involved debtors who had defrauded innocent victims of millions of dollars,
resulting in the large restitution amounts being owed. Although the
offender?s earning potential may be limited while incarcerated, other debt
collection techniques such as identifying and pursuing assets, should be
performed. Further, as we point out in the report, only about 20 percent of
the stratified randomly selected cases involved offenders who were
incarcerated at the time of our review.
In chapter 3 we point out that much of the outstanding criminal debt as of
September 30, 1999, involved cases that were over three years old.
However, many of the procedures that should be used are typical debt
collection tools (e. g., filing liens, issuing demand letters) that should
be applied to effectively collect criminal debt. We found that the FLUs were
not always performing these procedures. In addition, we found that the FLUs
we visited were not always following their prescribed procedures for
reassessing an offender?s ability to pay. Had these cases been revisited as
required, any new policies could have been applied to outstanding debts at
that time. Finally, AOUSC also questioned why cases under $5,000 were not
reviewed. Our review focused on the largest- dollar cases ($ 14 million or
greater) as well as a stratified randomly selected sample of cases between
$5, 000 and $14 million. We excluded those under $5, 000, which, as shown in
table 7 in appendix I, comprised only $8. 9 million of the $5. 6 billion of
outstanding debt at the four districts visited, or less than 0.2 percent of
the total dollar amount of outstanding debt at such districts, an amount
that we deemed immaterial.
Justice Justice agreed with 10 of the 12 recommendations specifically
addressed to it. In addition, Justice partially agreed with the other 2
recommendations, which related to (1) requiring FLUs to use collectibility
analyses to prioritize criminal debt collection efforts on debt types deemed
through historical experience to be more collectible, and (2) adequately
measuring criminal debt collection performance against established goals.
Justice indicated that it is already performing the recommended functions,
however we believe that the intent of these 2 recommendations should be
further discussed so that additional improvements can be made in these
areas. As to performing a collectibility analysis, Justice stated that it is
already performing an analysis in accordance with its suspense policies.
However, we found that the FLUs? suspense policies are not the same as
performing an effective collectibility analysis since debts may be placed in
suspense without performing an adequate assessment of collectibility. Also,
having historical collectibility analyses would allow the FLUs to prioritize
new debts based on factors that indicate increased potential for
collections.
Justice also stated that it is already measuring criminal debt collection
performance against established goals. However, it is our understanding that
these efforts focus on reporting collection activity and analyzing
collection practices, not on establishing goals and measuring performance
against such goals, as we recommend. In addition, we believe that
performing a collectibility analysis is an essential first step in
adequately setting goals and measuring performance. Administrative Office of
the U. S.
In addition to commenting on our methodology, the AOUSC commented Courts
that the effect of the Mandatory Victims Restitution Act of 1996 (MVRA)
should have received greater attention in the report and that the report
should give greater recognition to actions that the courts have already
taken to improve criminal debt collection. We believe that we have provided
sufficient balance in the report as evidenced by an entire chapter devoted
to uncontrollable factors, such as MVRA, that contribute to the growth in
outstanding criminal debt. This chapter precedes chapters devoted to
procedural and coordination issues so that the reader is made
aware of the significance of uncontrollable factors and the context in which
the adherence to required policies and procedures and coordination of
efforts take place. In addition, mandatory restitution is listed as a factor
in the transmittal letter at the beginning of this report and is discussed
in many places throughout the report.
The AOUSC also commented that more recognition should be given to actions it
has taken to improve criminal debt collection. One such action includes a
comprehensive policy and procedural manual issued in September 2000, several
months after our district visits, and not widely distributed until December
2000. In our report we point out that if the
AOUSC effectively implements its revised guidance related to (1) developing
pre- sentence reports, (2) establishing and monitoring offenders? compliance
with installment schedules, (3) providing financial information reported in
the pre- sentence report to the FLUs within an established time frame after
sentencing, and (4) notifying FLUs within an established time frame before
an offender is released from supervision, then reported weaknesses in these
areas are likely to be addressed. Since the guidance was issued after our
visits, we were not able to assess whether these policies have been
effectively implemented and have therefore recommended that AOUSC ensure
that such policies are
effectively implemented. Finally, AOUSC stated that it had implemented most
of our recommendations; however, the letter did not specifically address
each recommendation. While we recognize that the revised guidance should
help improve collections, the policies must be effectively implemented
before our recommendation is satisfied. The policy and procedural manual
does not address our recommendations to (1) 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 and (2) establish cost- effective thresholds for
disbursements made by check to victims for restitution payments. In
addition, we were not provided with details of additional actions taken by
the courts to address such recommendations.
Appendi Appendi xes x I
Scope and Methodology To accomplish our objectives (see chapter 1), we
obtained an understanding of the collection processes by interviewing
officials from the Executive Office for United States Attorneys (EOUSA) and
the Administrative Office of the United States Courts (AOUSC) and reviewing
applicable policies and procedures they provided. In addition, we visited
the Northern District of California to ?walk through? the collection process
at the district level. This included (1) interviewing USAO and district
court officials, (2) obtaining and reviewing supplemental policies and
procedures developed by the district, including their memorandum of
understanding (MOU) and Financial Litigation Plan, and (3) reviewing several
collection
case files. Based on this visit and our review of applicable guidance, we
developed a data collection instrument to be used to document the results of
our testing.
To determine the key reasons for the growth in reported uncollected criminal
debt, we held discussions with the EOUSA, AOUSC, and district officials. We
also analyzed data that the EOUSA provided to us related to criminal debt,
including the database of outstanding criminal debt as of September 30,
1999. We did not independently verify the completeness or accuracy of this
data or test information security controls over the system used to compile
this data because that verification was not necessary for the purposes of
this report. To determine whether adequate processes exist to collect
criminal debt, we obtained a database from the EOUSA of all outstanding
criminal debt as of September 30, 1999, and selected a sample of cases to
review. As agreed
with the subcommittee staff, to obtain significant dollar coverage, we
selected a sample of outstanding criminal debts at the four districts with
the largest amounts of outstanding criminal debt as of September 30, 1999.
These districts were the Central District of California, the Eastern and
Southern Districts of New York, and the Southern District of Florida.
Combined, they accounted for about $5. 6 billion (or 43 percent) of the
approximately $13 billion outstanding balance as of that date. At each of
the four districts, we held discussions with representatives of the USAO,
probation office, and clerk?s office to reconfirm the understanding of the
collection process that we obtained during our walk- through of the Northern
District of California. We also requested and reviewed documentation
relating to the procedures for collecting criminal debt within each of the
four districts.
To ensure that we obtained significant dollar coverage within these four
districts, we selected all cases greater than or equal to $14 million. In
addition, we selected, at each office, a stratified random sample of 35
criminal debt cases from a population of all cases $5, 000 or greater but
under $14 million. We did not review cases under $5,000 because they were
deemed to be immaterial. In total, we selected 184 cases for review (see
table 7 for details regarding our selection).
Table 7: Details of Cases Selected Number of
Dollar Items tested Justification for cases per
amount per in each number of items Groups
stratum stratum
stratum tested in each stratum
$14 million or 44 $3.7 billion All items To obtain significant greater
dollar coverage $5, 000 or greater
8, 650 $1.9 billion 35 at each of To provide coverage of but less than $14
the 4 districts
the rest of the million selected (140 population of criminal in all)
debt at the four locations
Less than 16, 718 $8. 9 million None Average amount of
$5, 000 strata ($ 532) was deemed to be immaterial Total 25, 412 $5.6
billion Source: Unaudited EOUSA data.
For each case selected, we reviewed the files maintained by the FLU,
probation office, and clerk?s office to determine whether their policies and
procedures were followed. At the USAOs, we reviewed the FLU files to
determine whether the FLUs followed their own procedures for
(1) entering cases into their tracking systems, (2) enforcing collections
(e. g., filing liens and issuing demand letters), and (3) assessing an
offender?s ability to pay. At the probation offices, we reviewed the
probation files to determine whether probation officers followed their
policies and procedures for (1) assessing an offender?s ability to pay and
(2) establishing, monitoring, and enforcing installment schedules. We also
compared the payment records maintained by the FLUs with those maintained by
the clerk?s offices to determine whether these payment amounts agreed.
Further, we reviewed the files at the three entities to determine whether
evidence existed that the federal entities involved in assessing and
collecting criminal debt coordinated collection efforts. The results of
these reviews were documented in a data collection instrument.
When we found errors, we developed and submitted questions to the FLUs,
probation offices, and clerk?s offices regarding instances of noncompliance
with policies and procedures identified during our reviews. In addition, we
obtained and analyzed these entities? written responses to our questions.
Also, see table 8 for number of occurences by selected district for items
projected throughout the report.
Table 8: Number of Occurrences by Selected District for Each Item
Statistically Projected for the 140 Random Cases
Central Southern
Eastern Southern
District of District of
District of District of
California Florida
New York New York
Population 2,476 2, 733 1,785 1, 656 Sample size 35 35 35 35 Number of
occurences for items projected
FLU had not filed required liens 6 11 15 12 Little or no evidence that FLU
21 25 22 25 attempted to identify the debtor?s assets
No evidence of correspondence 18 26 20 20
with case agents or prosecuting attorneys was found in the FLU files Event
code as of September
5 3 11 13 30, 1999, was inconsistent with the information in the case file
FLU had not revisited the case 18 26 21 26 within established time frames
FLU had not sent the required 22 18 14 5
demand letters Status of the offender (in 4 888 prison) To determine what
role, if any, OMB and Treasury play in overseeing and monitoring the
government?s collection of criminal debt, we interviewed
OMB and Treasury officials.
We performed our work from April 2000 through April 2001 in accordance with
U. S. generally accepted government auditing standards. We requested
comments on a draft of this report from 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, or their
designees. These comments are discussed in the ?Agency Comments and Our
Evaluation? section and are reprinted in appendix III through appendix
V.
History of Criminal Debt Collection
Appendi x II
Legislation Over the past two decades, Congress has enacted legislation
related to the collection of criminal debt. The table below presents
legislation significantly affecting the assessment and collection of such
debt.
Law Purpose
Victim and Witness Reflects desire of Congress to establish restitution as
an Protection Act of 1982
important remedy in federal law. (P. L. 97- 291, 96 Stat. Establishes
court?s ability, when sentencing a defendant 1248)
convicted of a federal offense, to order, in addition to or in lieu of any
other penalty authorized by law, that the defendant make restitution to any
victim of the offense. Victims of Crime Act of Provides that certain
federal fines and forfeitures owed by 1984 (P. L. 98- 473, 98 offenders be
allocated to crime victims.
Stat. 2170)
States that certain payments were to be deposited into the Crime Victims
Fund and distributed by Justice as grants to eligible crime victim
compensation programs and to states for eligible crime victim assistance
programs. Criminal Fine Establishes the Attorney General as the
responsible party Enforcement Act of 1984
for receiving payments on criminal fines and for establishing (P. L. 98-
596, 98 Stat. a criminal fine collection process. 3134)
Requires defendants to pay interest and penalties in certain situations.
Requires clerk?s offices to provide to Justice a certified copy of
judgments for fines exceeding $500. Criminal Fine Transfers the
responsibility for receiving criminal fine and Improvements Act of 1987
assessment payments from Justice back to the courts. (P. L. 100- 185, 101
Stat.
Addresses the need to establish procedures and 1279) mechanisms within the
judicial branch for processing criminal debt.
Provides that the Director of the AOUSC may specify that payment be made
to the clerk of the court or in the manner provided for under section 604(
a)( 18) of title 28. Mandatory Victims Effective April 24, 1996,
restitution must be ordered as part
Restitution Act of 1996 of a sentence for certain offenses in cases with an
(P. L. 104- 132, Title II, 110 identifiable victim regardless of the
offender?s economic Stat. 1227) circumstances. The financial circumstances
should be considered in how the offender will pay the restitution (e. g.,
establishment of an installment payment plan). Enacted as part of the
Antiterrorism and Effective Death Penalty Act of 1996.
Appendi x I II
Comments From the Department of Justice Note: GAO Comments supplementing
those in the report text appear at the end of this appendix.
See comment 1.
See comment 1. See comment 1. See comment 2.
See comment 1.
See comment 3. See comment 4.
See comment 1. See comment 5.
See comment 6.
See comment 7. See comment 8. See comment 9.
See comment 10. See comment 1.
See comment 11.
See comment 12. See comment 13.
See comment 14.
See comment 15. See comment 1.
See comment 16. See comment 1.
See comment 1.
See comment 17.
GAO Comments 1. See ?Agency Comments and Our Evaluation? section. 2. We
disagree that many of the Judgment in a Criminal Case (JCC) forms
that we reviewed require payments to be made after an offender is released
from incarceration. As noted in table 2 of the report, judges stipulated
that debt amounts were not due until the offender was released from prison
in only 18 of the 184 JCCs that we reviewed (1 of the high- dollar and 17 of
the random cases). Also, as noted in the table, all but six of these debtors
had been released from prison as of the time of our review. As such, the
FLU?s collection efforts for most of these cases should not have been
limited.
3. We found delays in the filing of liens in all four districts we visited.
Some of the random cases we reviewed in the one district noted were opened
prior to 1992. However, either a lien had not been filed in these cases or
the cases were opened within two and a half years prior to that date.
Therefore if the liens were promptly filed during 1992, this delay
should not have significantly affected the average number of days to file a
lien. If a lien was not filed, then the case was not included in determining
the average number. In addition, as noted under ?Agency Comments and Our
Evaluation,? filing liens is a typical debt collection
procedure that should be expected even without a specific policy. Also,
Justice points out that, prior to 1992, the FLU in this one district would
only file a lien if there was a reason to believe the defendant owned
property. As noted in the report, we found that the FLUs did not always
perform adequate procedures to determine whether defendants owned property.
4. We recognize in the report that one of the factors contributing to the
growth in uncollected debt is that most debts cannot be written off for a
significant period of time, usually 20 years plus the period of
incarceration. We also state in the report that only fines can be remitted
and that seeking a petition for remission of all or part of a fine from the
judge is preferable to placing it in suspense and continuing to pursue
collection. However, as we point out, we found no evidence that the FLU had
requested a petition for remission in the cases we reviewed, even though
some of the debts involving fines appear to have met the criteria for
remission.
5. Throughout the report we recognize that mandatory restitution is a key
factor contributing to the growth in uncollected criminal debt. Most of
the high- dollar cases we reviewed involved offenders convicted of white-
collar crimes that included defrauding innocent victims and resulted in
large amounts of restitution being owed to these victims. We included the
criminal debt arising from the conviction of the World Trade Center
defendants to illustrate the impact of mandatory restitution (i. e.,
assessing full restitution based on victims? losses regardless of ability to
pay). In the World Trade Center cases, the losses were calculated to
compensate victims injured by the bombings. Most of the restitution cases we
reviewed involved offenders who defrauded
victims of significant assets. 6. As we point out in our report, the FLU?s
interpretation of payment terms in JCCs is limiting FLU collection efforts.
As such, we include the listing of payment schedules in JCCs as a factor
contributing to the
growth of criminal debt. However, the view of the AOUSC officials and the
Chief Judge in one district we visited is that the inclusion of payment
schedules in the JCC was not intended to preclude the FLU
from identifying and pursuing assets, but merely sets a minimum amount that
must be paid while an offender is under supervision. Although the EOUSA
disagrees with this view, it does acknowledge that the FLUs could seek
modification of a court order if assets were identified. However, we found
that in those cases in which terms were included, the FLUs typically would
not perform collection actions
(such as searching for assets) until after the offender was released from
supervision and as a result, opportunities to maximize collections may have
been missed. If the courts, as we recommended, revise the language in the
JCCs to clarify that payment terms established by judges are minimum
payments and should not prohibit or delay
collection efforts, this problem is likely to be addressed. 7. This
percentage does not accurately reflect the percentage of cases where payment
terms were set forth in the JCC. Collection efforts should not be limited in
those cases where the judge set an ?at least? amount that must be paid.
Further, as noted in table 2, all but six of the debtors in cases where the
JCCs stated that the debt was not due until the offender was released from
prison had been released from prison as
of the time of our review. As such, the FLU?s interpretation of the payment
terms would only have been a factor in those six cases where the offender
was still in prison.
8. We clearly point out in the report that part of the problem related to
issuing demand letters is the lack of specific guidance on when demand
letters should be sent. For example, EOUSA guidance states that demand
letters should be sent ?as soon as? a case is entered into the criminal
tracking system; however, it does not address situations that may not be
applicable to this guidance, such as debts entered into the tracking system
that are not yet due. As such, our reported finding relates to the issue of
whether demand letters were sent in accordance with available guidance.
Further, if the intent of the demand letter is to notify offenders of their
debt and the consequences of not paying the
debt (i. e., interest and penalties), then a demand letter should be issued
as soon as possible regardless of whether the offender has entered into a
payment agreement. If, however, the FLU explained why a demand letter was
not appropriate, we did not consider it to be an error even though it may
have been required by their current policies and procedures.
9. If the FLU explained why certain actions (e. g., filing liens) were not
appropriate (e. g., the offender was deported), we did not consider it to be
an error, even though it may have been required by their current policies
and procedures. 10. We did not consider the lack of certain actions as
errors if the FLU
explained why the action (e. g., assessing interest and penalties or issuing
delinquent and default notices) was not appropriate (e. g., not applicable
prior to MVRA or for fines imposed prior to 1985). In fact, we
specifically state in a footnote that assessment of interest and penalties
was not required for pre- MVRA restitution debts. We also specifically point
out that the court has the authority to waive interest and that the law also
permits the Attorney General to waive interest and penalties if it is
determined that efforts to collect are not likely to be effective.
However, according to the U. S. Attorneys? Manual, a determination about
whether to waive interest and penalties should be considered only after the
principal has been paid. The intent of the discussion is to illustrate the
effects of failing to consistently apply interest and penalties irrespective
of whether they may be subsequently waived.
11. We are encouraged that resources (e. g., the Internet) to perform debt
collection actions (e. g., identifying assets) are more readily available
today, however we found that the FLUs typically were not using these
resources on the cases we reviewed, including more recently opened cases.
Further, if the FLUs had been following their procedures for revisiting
cases, the FLUs could have used resources currently available to pursue
collection.
12. The lack of coordination among the entities involved in assessing and
collecting criminal debt has been a historical problem for the federal
government and continues to be a problem based on our reviews at the
four largest districts. As Justice states on page 7 of its letter, the
memorandums of understanding set forth the responsibilities of each office,
but they do not necessarily facilitate coordination. For example, as noted
in our report, the FLUs are to assist probation offices in their collection
responsibilities only if requested, putting the FLU in a more reactive than
proactive role.
13. We note in our report that there was no evidence of a pre- sentence
report in most of the files we reviewed. Justice commented in footnote 4 of
its letter that pre- sentence reports were redacted from the FLU files.
EOUSA officials stated during our first district visit that, if a
presentence report was removed from the files, a note would be included in
the file stating that the report was removed. During our reviews, we found a
few notes in the files indicating that copies of the pre- sentence reports
had been reviewed, but typically there was no evidence that a
copy of the pre- sentence report had been obtained or reviewed. As it
related to cases opened prior to 1990, had the FLUs been revisiting cases as
required, pre- sentence reports could have been obtained for these cases.
14. We disagree and believe that the FLUs should work with probation
officers to collect debts and not wait for assistance to be requested. We
agree that the probation officer?s monthly contact with debtors can
help in assessing collectibility. However, we also point out that probation
officers? first priority is to ensure that offenders do not engage in
criminal activity or violate other terms of probation. Further,
installment payments accepted by probation officers typically range from $25
to $100 per month, and we found in the applicable cases we reviewed that the
probation officers typically did not recommend that larger amounts be paid,
even if the offender appeared capable of
making larger payments. 15. We did not specifically state that criminal
debts should be referred to
Treasury for purposes of cross- servicing, but that criminal debt should be
referred to Treasury for collection actions. We recommended that Treasury
work with Justice and the courts to identify the types of delinquent debt
that would be eligible for referral to Treasury and
believe that the task force should also address referral issues.
16. We believe that Justice?s current policies and procedures encourage
information sharing, but they do not specifically require case agents and
prosecuting attorneys to provide financial information to the FLUs in a
timely manner. As such, we recommended that these other components of
Justice be required to provide information within an established time frame.
We are encouraged that EOUSA, to the extent necessary, will work with other
components within Justice to develop
policies and procedures consistent with our recommendation. Also, we believe
that if AOUSC implements our recommendation for revising the language in the
JCC, Justice?s collection efforts should no longer be limited by its
interpretation of payment terms in JCCs.
17. Justice points out that the $13 billion of outstanding criminal debt
does not accurately reflect ?real? potential recoveries. We agree and point
out throughout the report that there are many factors contributing to the
growth in outstanding criminal debt. However, based on our reviews at the
four largest districts, we believe that more needs to be done to improve
criminal debt collection processes. This includes
ensuring that criminal debt receivables are appropriately accounted for, net
of an allowance for uncollectible amounts, based on an adequately performed
collectibility analysis. As such, we recommended that a task force be
established to address criminal debt collection issues, including debt
reporting. Also, although Justice may have collected over $1. 1 billion in
fiscal year 1999, amounts collected during a given fiscal year do not
necessarily reflect actions taken by the FLUs to collect on such debt, but
also include collections by other offices (e. g.,
probation offices or debts immediately paid to clerks? offices). In
addition, $500 million of the stated $1. 1 billion collected during fiscal
year 1999 related to one case involving an antitrust violation. As noted in
our report, collections over the past 5 years have averaged about 7 percent-
an indicator that more should be done to increase collections.
Comments From the Administrative Office of
Appendi x I V
the U. S. Courts Note: GAO Comments supplementing those in the report text
appear at the end of this appendix.
See comment 1.
See comment 2. See comment 1.
See comment 1. See comment 3.
See comment 4. See comment 5. See comment 6.
See comment 7. See comment 8. See comment 9. See comment 10.
See comment 11.
GAO Comments 1. See ?Agency Comments and Our Evaluation? section. 2. We are
unsure how the AOUSC calculated that over 85 percent of all
federal criminal defendants are indigent at the time of their arrest.
However, as we point out in table 7 of the report, the majority of debts
(about 65 percent) outstanding as of September 30, 1999, for the four
districts we visited, were for amounts less than $5, 000 and represent only
$8. 9 million (less than 1 percent) of the $5.6 billion outstanding
balance for these districts. We did not review any cases with outstanding
debt amounts below this threshold because they were deemed immaterial.
Criminal fines should be based on ability to pay. As such, debt arising from
indigent debtors typically would involve fines of
less than $5,000 and therefore were not selected for review. Restitution
amounts are based on actual losses typically resulting from the conviction
of white- collar crimes, involving offenders who have
defrauded victims of significant assets. As we point out in figure 3 of our
report, 87 percent of the total amount outstanding in the four districts we
visited were nonfederal and federal restitution debts and only 11 percent
were debts involving fines.
3. We commend the efforts of the 76 clerks? offices that voluntarily agreed
to accept pre- MVRA restitution payments. However, as we point out in our
report, having two entities in 18 districts responsible for accepting pre-
MVRA restitution payments results in wasted resources. In addition, at each
of the four districts we visited, the clerk?s offices and the FLUs maintain
separate databases to account for criminal debt collections, resulting in
duplicative and inefficient data entry. Posting information to these
databases typically requires the exchange of hardcopy information between
the clerk and the FLU so that both
databases can be updated to properly reflect collections and disbursements.
As the AOUSC points out, the posting of hundreds of small- dollar- amount
payments from inmates is a time- consuming and labor- intensive task, a task
also being performed by Justice. Therefore, as we recommended, it is
important that AOUSC continue to work with the 18 districts to accept pre-
MVRA payments and for AOUSC and
Justice to continue to work together to reduce the duplication of data entry
for collections and disbursements. 4. As we point out in our report, the
collection of criminal debt has been a
long- standing problem for the federal government, and efforts over the past
15 years to centralize and automate the process have not been
successful. The National Fine Center (NFC) was supposed to eliminate the
need for the clerks? offices and the FLUs to maintain separate databases to
account for criminal debt collections. However, an
independent consulting firm concluded that the task of developing a national
fine center, involving several agencies in two branches of government,
proved to be more complex than expected and that the needs of the districts
could not be met through a national approach. Thus, with the consent of the
Congress, the centralized approach was terminated. Since the NFC effort was
terminated, both entities continue
to maintain separate systems for tracking collections and disbursements,
resulting in duplicative and inefficient data entry. We commend the efforts
under way to improve coordination, including the planned implementation of a
national integrated financial accounting system with a criminal accounting
module, as discussed in the AOUSC?s comments, by fiscal year 2004. However,
based on our reviews at the four districts that had the largest amount of
outstanding criminal debt as of September 30, 1999, more needs to be done in
the interim to reduce the duplication of efforts and enhance coordination.
We therefore recommended that Justice and AOUSC work together to improve
such coordination.
5. Our report points out that we found little involvement by the FLUs in
probation office collections and that district guidance for the four
districts we visited stated that the FLUs are to assist the probation
offices, if requested. This results in the FLUs? taking a reactive instead
of a proactive role. During our reviews, we found little evidence that the
FLUs typically monitored collection efforts of probation officers or that
probation officers requested assistance or notified the FLUs before an
offender was released from probation. As such, notification may have
occurred, but it was not documented in the files. And in at least 10
instances, including 4 from the Southern District of Florida, the
offenders stopped making installment payments when they were released from
supervision.
6. We do not criticize the courts for the lack of pre- sentence reports in
the FLU files but note that in many cases there was no evidence that the
pre- sentence reports were in the FLU files. We also point out that the FLUs
are required to obtain a copy of the financial information contained in the
pre- sentence report from either the probation officer or the prosecuting
attorney. Similarly, we do not criticize the courts for
failing to make copies of the judgments available to the FLUs but state that
the judgment is typically sent to the prosecuting attorney within
the USAO?s Criminal Division and not to the FLU within the USAO?s Civil
Division. The prosecuting attorney is to then forward a copy to the FLU. We
are encouraged that the recently issued guidance requires the courts to
provide copies of pre- sentence reports and judgments directly to the FLUs.
Therefore, we recommended effective implementation of
these policies to help address reported weaknesses in this area. 7. We
believe that ?providing a mechanism to electronically receive offset
payments from Treasury? is a significant role. We point out in our report
that the FLUs referred certain debts to the former Tax Refund Offset Program
and were successful in collecting payments but that neither Justice nor the
courts are currently referring delinquent criminal debts to Treasury. We
also believe that since the courts (1) order defendants to pay criminal debt
(i. e., initiate a receivable) and (2) are responsible for the receipting
and recordkeeping for criminal debt, they must also play a role in
identifying the types of debts that are eligible for referral and in
determining how collections will be disbursed.
8. Probation offices can and should play a role in assessing collectibility
for offenders under their supervision. As Justice points out in its
comments, probation officers have a relatively smaller caseload and
have monthly contact with the debtor. As such, probation officers are in a
good position to assess a debtor?s ability to pay while the debtor is under
their supervision. In addition, since the clerk?s offices are
responsible for receipting and recordkeeping, they play a role in
determining when and what debt has been paid, factors that are necessary for
assessing collectibility. 9. We did not review the court?s procedures in the
Southern District of Florida for setting targets for the assessment of
collectibility. However, it is our understanding that these targets were
based on what probation officers expected to receive from the offenders (e.
g., $50 per month per an established payment plan) and were not necessarily
based on an
assessment of the offender?s ability to pay amounts in excess of these
established payments. Also, the assessment does not include an assessment of
collectibility for the entire district, but only for probation
officers. 10. A note was added to figures 1, 6, and 8 to remind the reader
of the
MVRA enactment date, and MVRA is discussed throughout the report as a key
factor in the increase of uncollected criminal debt. Figure 4 depicts the
assessment process as it relates to the criminal debt
collection process, including the fact that the probation office assists the
court by preparing the pre- sentence report. It is not intended to be all-
inclusive. Figure 5 was revised to reflect additional collection
responsibilities of the FLUs, and the title was changed to more accurately
reflect the contents of the figure. The entities listed in table 1
are centralized offices that prepare and issue guidance related to criminal
debt. We did not add the Congress to the table, because its function is to
mandate, through legislation, actions that these centralized offices are
required to take.
11. The four districts we visited had the largest amount of outstanding
criminal debt as of September 30, 1999. Specifically, these four districts
represented about $5. 6 billion (or 43 percent) of the reported $13.1
billion of total outstanding criminal debt as of that date. Given the
historical problems in this area and the conditions we found at these four
districts, we believe that we can conclude that major improvements are
needed in criminal debt collection processes.
Comments From the Department of the
Appendi x V
Treasury Note: GAO Comments supplementing those in the report text appear at
the end of this appendix.
See comment 1. See comment 2. See comment 3.
GAO Comments 1. See ?Agency Comments and Our Evaluation? section. 2.
Treasury correctly points out that Justice and the courts may have to
address internal financial management issues related to ensuring that debts
referred are legally enforceable and that debt balances are accurate and up-
to- date before being referred to Treasury. However, we
believe that delinquent debts could be certified on a case- by- case basis
so that the referral process for eligible debts could begin. 3. Treasury
commented that criminal debt should be reported separately from
administrative nontax debts. We believe that the task force should
address this as one of the reporting issues.
Appendi x VI
GAO Staff Acknowledgments Bill Boutboul, Richard Cambosos, Dean Carpenter,
Paul Foderaro, Kate Francis, David Grindstaff, Sophia Harrison, Casey
Keplinger, and Dan Mesler made key contributions to this report.
Related GAO Products
Federal Courts: Differences Exist in Ordering Fines and Restitution (GAO/
GGD- 99- 70, May 6, 1999).
Fines and Restitution: Improvement Needed in How Offenders? Payment
Schedules Are Determined (GAO/ GGD- 98- 89, June 29, 1998).
National Fine Center: Progress Made but Challenges Remain for Criminal Debt
System (GAO/ AIMD- 95- 76, May 25, 1995).
Restitution, Fines, and Forfeiture: Issues for Further Review and Oversight
(GAO/ T- GGD- 94- 178, June 28, 1994).
National Fine Center: Expectations High, but Development Behind Schedule
(GAO/ GGD- 93- 95, August 10, 1993).
U. S. Department of Justice: Overview of Civil and Criminal Debt Collection
Efforts (GAO/ T- GGD- 90- 62, July 31, 1990).
After the Criminal Fine Enforcement Act of 1984- Some Issues Still Need to
Be Resolved (GAO/ GGD- 86- 02, October 10, 1985).
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GAO United States General Accounting Office
Page 1 GAO- 01- 664 Criminal Debt Collection
Contents
Contents Page 2 GAO- 01- 664 Criminal Debt Collection
Contents Page 3 GAO- 01- 664 Criminal Debt Collection
Page 4 GAO- 01- 664 Criminal Debt Collection
Page 5 GAO- 01- 664 Criminal Debt Collection United States General
Accounting Office
Washington, D. C. 20548 Page 5 GAO- 01- 664 Criminal Debt Collection
Page 6 GAO- 01- 664 Criminal Debt Collection
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Executive Summary Page 9 GAO- 01- 664 Criminal Debt Collection
Executive Summary Page 10 GAO- 01- 664 Criminal Debt Collection
Executive Summary Page 11 GAO- 01- 664 Criminal Debt Collection
Executive Summary Page 12 GAO- 01- 664 Criminal Debt Collection
Executive Summary Page 13 GAO- 01- 664 Criminal Debt Collection
Executive Summary Page 14 GAO- 01- 664 Criminal Debt Collection
Executive Summary Page 15 GAO- 01- 664 Criminal Debt Collection
Executive Summary Page 16 GAO- 01- 664 Criminal Debt Collection
Executive Summary Page 17 GAO- 01- 664 Criminal Debt Collection
Executive Summary Page 18 GAO- 01- 664 Criminal Debt Collection
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Page 20 GAO- 01- 664 Criminal Debt Collection
Chapter 1
Chapter 1 Introduction
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Chapter 1 Introduction
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Chapter 1 Introduction
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Chapter 1 Introduction
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Chapter 1 Introduction
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Chapter 1 Introduction
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Chapter 1 Introduction
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Chapter 1 Introduction
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Chapter 1 Introduction
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Chapter 1 Introduction
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Chapter 1 Introduction
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Chapter 2
Chapter 2 Factors Contributing to the Growth in Uncollected Criminal Debt
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Chapter 2 Factors Contributing to the Growth in Uncollected Criminal Debt
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Chapter 2 Factors Contributing to the Growth in Uncollected Criminal Debt
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Chapter 2 Factors Contributing to the Growth in Uncollected Criminal Debt
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Chapter 2 Factors Contributing to the Growth in Uncollected Criminal Debt
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Chapter 2 Factors Contributing to the Growth in Uncollected Criminal Debt
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Chapter 2 Factors Contributing to the Growth in Uncollected Criminal Debt
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Chapter 3
Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
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Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
Page 42 GAO- 01- 664 Criminal Debt Collection
Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
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Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
Page 44 GAO- 01- 664 Criminal Debt Collection
Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
Page 45 GAO- 01- 664 Criminal Debt Collection
Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
Page 46 GAO- 01- 664 Criminal Debt Collection
Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
Page 47 GAO- 01- 664 Criminal Debt Collection
Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
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Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
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Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
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Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
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Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
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Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
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Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
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Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
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Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
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Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
Page 57 GAO- 01- 664 Criminal Debt Collection
Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
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Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
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Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
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Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
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Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
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Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
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Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
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Chapter 3 Inadequate Criminal Debt Collection Processes and Lack of
Coordination Contribute to Low Collection Rate
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Chapter 4
Chapter 4 Oversight Roles of OMB and Treasury
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Chapter 4 Oversight Roles of OMB and Treasury
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Chapter 4 Oversight Roles of OMB and Treasury
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Chapter 5
Chapter 5 Conclusions, Recommendations, and Agency Comments
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Chapter 5 Conclusions, Recommendations, and Agency Comments
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Chapter 5 Conclusions, Recommendations, and Agency Comments
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Chapter 5 Conclusions, Recommendations, and Agency Comments
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Chapter 5 Conclusions, Recommendations, and Agency Comments
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Chapter 5 Conclusions, Recommendations, and Agency Comments
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Chapter 5 Conclusions, Recommendations, and Agency Comments
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Chapter 5 Conclusions, Recommendations, and Agency Comments
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Appendix I
Appendix I Scope and Methodology
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Appendix I Scope and Methodology
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Appendix I Scope and Methodology
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Appendix II
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Appendix III
Appendix III Comments From the Department of Justice
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Appendix III Comments From the Department of Justice
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Appendix III Comments From the Department of Justice
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Appendix III Comments From the Department of Justice
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Appendix III Comments From the Department of Justice
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Appendix III Comments From the Department of Justice
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Appendix III Comments From the Department of Justice
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Appendix III Comments From the Department of Justice
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Appendix III Comments From the Department of Justice
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Appendix III Comments From the Department of Justice
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Appendix III Comments From the Department of Justice
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Appendix III Comments From the Department of Justice
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Appendix III Comments From the Department of Justice
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Appendix III Comments From the Department of Justice
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Appendix III Comments From the Department of Justice
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Appendix III Comments From the Department of Justice
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Appendix III Comments From the Department of Justice
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Appendix III Comments From the Department of Justice
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Appendix IV
Appendix IV Comments From the Administrative Office of the U. S. Courts
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Appendix IV Comments From the Administrative Office of the U. S. Courts
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Appendix IV Comments From the Administrative Office of the U. S. Courts
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Appendix IV Comments From the Administrative Office of the U. S. Courts
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Appendix IV Comments From the Administrative Office of the U. S. Courts
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Appendix IV Comments From the Administrative Office of the U. S. Courts
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Appendix IV Comments From the Administrative Office of the U. S. Courts
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Appendix IV Comments From the Administrative Office of the U. S. Courts
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Appendix IV Comments From the Administrative Office of the U. S. Courts
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Appendix V
Appendix V Comments From the Department of the Treasury
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Appendix V Comments From the Department of the Treasury
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Appendix VI
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Related GAO Products Page 120 GAO- 01- 664 Criminal Debt Collection
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