Civil Debt Collection: Justice's Private Counsel Pilot Program Should Be
Expanded (Letter Report, 09/14/94, GAO/GGD-94-195).

Under its private counsel debt collection program, the Justice
Department has contracted with private counsel firms in a number of
judicial districts to litigate and collect nontax delinquent civil
debts. The purpose of the pilot program is to see whether private
counsels can reduce civil case backlogs in U.S. Attorney offices and can
cost-effectively collect such delinquent debts. GAO found that the
program has generally been successful. Through September 1992, private
counsel firms and U.S. Attorney offices participating in the pilot
program in seven federal judicial districts collected $122.5 million in
debt, at a total estimated cost of $5.3 million. GAO concludes that
private counsel firms were cost effective in collecting nontax civil
debt. Although U.S. Attorney offices collected more money than private
counsel firms, the latter closed more cases at a lower unit cost.
Private counsel firms helped work through the existing debt caseload,
addressing both large numbers of the debt collect cases that were
backlogged at the program's inception and later handling most of the
newly referred cases. Most importantly, private counsel firms worked
cases and collected debt that U.S. Attorney offices might not have
otherwise addressed because of their workloads. In GAO's view, allowing
Justice the option of contracting with private counsel firms to help
with debt collection when necessary is a generally positive approach to
addressing the civil debt collection problem.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-94-195
     TITLE:  Civil Debt Collection: Justice's Private Counsel Pilot 
             Program Should Be Expanded
      DATE:  09/14/94
   SUBJECT:  Lawyers
             Debt collection
             Program evaluation
             Legal services contracts
             Cost effectiveness analysis
             Student loans
             Contract costs
             Government collections
             Delinquent loans
             Collection procedures
IDENTIFIER:  DOJ Central Intake Facility Program
             DOJ Private Counsel Debt Collection Program
             
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Cover
================================================================ COVER


Report to Congressional Committees

September 1994

CIVIL DEBT COLLECTION - JUSTICE'S
PRIVATE COUNSEL PILOT PROGRAM
SHOULD BE EXPANDED

GAO/GGD-94-195

Private Counsel Program


Abbreviations
=============================================================== ABBREV

  CIF - Central Intake Facility
  EOUSA - Executive Office for U.S.  Attorneys
  FLU - financial litigation unit
  USAO - U.S.  Attorney Office

Letter
=============================================================== LETTER


B-256332

September 14, 1994

The Honorable John Glenn, Chairman
The Honorable William V.  Roth, Jr.
Ranking Minority Member
Committee on Governmental Affairs
United States Senate

The Honorable Joseph R.  Biden, Chairman
The Honorable Orrin G.  Hatch
Ranking Minority Member
Committee on the Judiciary
United States Senate

The Honorable Jack Brooks, Chairman
The Honorable Hamilton Fish, Jr.
Ranking Minority Member
Committee on the Judiciary
House of Representatives

The Honorable Gary A.  Condit, Chairman
The Honorable Craig Thomas
Ranking Minority Member
Information, Justice, Transportation,
 and Agriculture Subcommittee
Committee on Government Operations
House of Representatives

Public Law 99-578\1 (1986) required the Comptroller General to
evaluate the Attorney General's private counsel debt collection pilot
program.  The act, as amended, authorized a pilot program whereby the
Attorney General is to make best efforts to contract with at least 4
private counsel firms in up to 15 judicial districts to litigate and
collect nontax delinquent civil debts.\2 The purpose of the pilot
program is to determine whether private counsels can (1) reduce civil
case backlogs in U.S.  Attorney offices (USAO) and (2)
cost-effectively collect delinquent nontax civil debts.  Our first
report\3 addressed the Department of Justice's efforts to comply with
the law's provisions to follow federal contracting competition
requirements, obtain reasonable prices, and encourage minority-owned
law firms to compete.  We noted in that report that we could not
evaluate the program's cost effectiveness because the U.S.  Attorneys
had not collected the necessary data. 

This report assesses the overall results of the pilot program in the
seven federal judicial districts where it was implemented. 
Specifically, this report (1) examines whether Justice's use of
private counsels is a cost-effective mechanism for collecting
delinquent nontax civil debt, (2) compares collection results and
costs of the participating USAOs and private counsel firms, and (3)
reviews the effect that private counsel firms had on reducing the
caseload of nontax civil debt cases.  It also assesses the future
role of private counsel firms in collecting debts owed the
government.  Appendix I contains additional information on our
objectives, scope, and methodology. 


--------------------
\1 This law amended 31 U.S.C.  3718. 

\2 Congress extended the pilot program through September 30, 1996,
and increased the maximum number of judicial districts that could
participate from 10 to 15.  P.L.  102-589 (1992). 

\3 Department of Justice:  Status of Implementing Private Attorney
Debt Collection Pilot Program (GAO/GGD-89-90, Aug.  15, 1989). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

We believe that the pilot program has generally been successful. 
Through September 1992,\4 private counsel firms and USAOs
participating in the pilot program in seven federal judicial
districts collected $122.5 million in debt, at a total estimated cost
of $5.3 million. 

We believe private counsel firms were cost effective in collecting
nontax civil debt.  Those firms collected $9.2 million at a cost of
$2.4 million.  Pilot USAOs collected substantially more unpaid civil
debt at only slightly higher estimated costs ($113.3 million
collected at a cost of $2.9 million) than private counsel firms. 
However, it is difficult to make unambiguous conclusions about the
relative efficiency of USAOs and private counsel firms.  Differences
in how USAOs and private counsel costs are measured and differences
in the size of cases worked by USAOs and private counsel firms tend
to skew dollar per case collected results in favor of USAOs. 
However, because of large differences in the number of cases handled,
other measures favor the private counsels.  When costs of collection
are calculated on a cost per case basis, for example, USAOs cost $422
for every case closed compared to $243 for private firms. 

Private counsel firms assisted in working through the existing debt
caseload, addressing both large numbers of the debt collection cases
that were backlogged at the program's inception, and later handling a
majority of newly referred cases.  Private counsel firms addressed
25,519 (67.6 percent) of the 37,758 total debt cases referred to them
for collection through September 1992. 

More importantly, private counsel firms worked cases and collected
debt that USAOs might not have otherwise addressed because of their
workloads.  Department of Education officials told us that without
private counsels working their delinquent student loan cases,
collection efforts on many of those cases would not have been made
because USAOs either would not or could not have handled the volume
of student loan cases.  Six of seven pilot USAOs reported that their
combined civil and criminal (e.g., criminal fines or restitution)
debt caseload remained too high, and five told us that they needed
the private counsels to help manage their overall debt caseloads. 

From fiscal year 1985 through 1992, while the pilot USAOs applied
decreasing numbers of staff years to debt collection work, the
average number of debt collection cases pending in USAOs (exclusive
of cases referred to private counsel firms) grew by 23 percent.  That
increase, however, reflects two distinctly different trends:  (1) a
tripling in the number of pending criminal debts, which are handled
only by USAOs (or other Justice staff) and not by private counsel,
and (2) a 76-percent decline in the average number of pending civil
debts. 

The combination of a decrease in the number of referred nontax civil
debt cases and legislative requirements of the pilot program
threatens Justice's overall ability to supplement its debt collection
capability with private counsel firms.  Current law requires Justice
to make best efforts to ensure that at least four private counsel
firms participate in the pilot program in each designated judicial
district.  Participating private counsel firms said they need a
relatively large volume of cases to ensure profitable operations. 
Through fiscal year 1992, over 85 percent of the cases referred to
private counsel firms were delinquent student loan cases.  But
because Education had virtually stopped sending cases for collection
(opting instead for wage garnishment), Justice can no longer refer
the volume of cases needed to support four private counsel firms in
each participating district.  We are including matters for
congressional consideration that are intended to help Justice retain
and enhance its use of private counsel firms to supplement its
ability to meet changing civil debt collection needs. 


--------------------
\4 Data through fiscal year 1992 were the latest available when we
did our review. 


   BACKGROUND
------------------------------------------------------------ Letter :2

Justice is the government's collector of last resort.  After federal
departments or agencies exhaust all reasonable efforts short of
litigation to persuade debtors to pay what they owe, they are to
refer the matter to Justice.  Justice is to collect such civil debts
(e.g., payments due on student loans or mortgages guaranteed by a
federal agency) by filing suit and obtaining and enforcing judgments. 

The responsibility for debt collection activities is divided among
several Justice components.  The office of the Associate Deputy
Attorney General has overall responsibility to plan, supervise, and
coordinate Justice's financial litigation and debt management
efforts.  Several Justice litigating divisions have major roles in
litigating and collecting various kinds of civil and/or criminal
debts (i.e., criminal fines, restitution, and special assessments)
and are to work closely with the U.S.  Attorneys in collecting those
debts.  For example, the Tax Division is responsible for recovering
taxes from bankrupt debtors and individuals and corporations who owe
delinquent taxes.  Justice's Civil Division holds overall
responsibility for litigation and collection of civil debt owed the
government.  The Civil Division generally handles only large civil
debt cases and delegates most debt owed client agencies to the 93
U.S.  Attorneys, the government's principal litigators.\5 Each USAO
has a criminal and civil unit, and each civil unit has a financial
litigation unit (FLU) to pursue civil and criminal debts owed the
government.  Of the 8,083 total work years that the 94 USAOs applied
to all activities in fiscal year 1992, 328 (37 Assistant U.S. 
Attorneys, 65 paralegal specialists, and 226 financial litigation
agents) were applied to debt collection. 

Justice's fiscal year 1994 appropriations act\6 provided for an
increase in debt collection resources.  The act authorizes the
Attorney General to credit to Justice's working capital fund up to 3
percent of all amounts collected pursuant to civil debt collection
litigation activities beginning in fiscal year 1994.  Justice can use
those collections to pay for the costs of "processing and tracking"
debt collection litigation but not for actual litigation expenses. 
The House Conference report accompanying the 1994 appropriations
act\7 described "processing and tracking" as including such services
and functions as Justice's debt collection management unit, debt
accounting operations group, and other activities and debt collection
tools associated with the litigation and collection of debts (e.g.,
credit reports, asset investigations, and training).  The report
noted that if Justice collected $900 million in civil debt during
fiscal year 1994, $27 million could be deposited in the working
capital fund, and total debt collection resources available in 1994
could increase to an estimated $44.3 million.  As of April 1994,
according to Justice officials, the working capital fund was
accumulating money, but Justice had yet to release any of this money
for debt collection activities. 

According to statistics from Justice's Executive Office for U.S. 
Attorneys (EOUSA), the number of cases and amount of civil debt owed
the government has grown significantly since fiscal year 1988. 
Figure 1 shows the change in the criminal and civil debt caseloads
pending at the end of each fiscal year in USAOs.  It demonstrates the
growing and changing mix of pending USAOs' debt cases.  Civil debt
cases accounted for roughly 71.2 percent of the workload pending at
the end of fiscal year 1985, but accounted for only 33.4 percent of
the workload pending at the end of fiscal year 1992.  USAOs recorded
$2.3 billion in outstanding criminal debt at the end of fiscal year
1992, an increase of $2 billion (in current dollars) since the end of
fiscal year 1985.  Over the same period, the amount of civil debt
outstanding grew from under $1 billion to $1.4 billion (in current
dollars).  Appendix II provides additional detail on USAOs' total
civil and criminal debt caseload and balance. 

   Figure 1:  Change in USAO
   Pending Criminal and Civil Debt
   Caseloads, Fiscal Years 1985
   Through 1992

   (See figure in printed
   edition.)

Source:  GAO analysis of Justice data. 


--------------------
\5 Because a single U.S.  Attorney administers offices in both Guam
and the Northern Mariana Islands, there are 94 USAOs but only 93 U.S. 
Attorneys. 

\6 P.  L.  103-121, Section 108, 107 Stat.  1153, 1164 (1993). 

\7 H.R.  Rep.  No.  103-293, 103\d Cong., 1\st Sess.  at 22 (1993). 


      DESCRIPTION OF THE PRIVATE
      COUNSEL DEBT COLLECTION
      PILOT PROGRAM
---------------------------------------------------------- Letter :2.1

To enhance the government's ability to collect nontax delinquent
civil debts, Congress passed Public Law 99-578 in 1986.  The law, as
amended, authorized a pilot program whereby the Attorney General is
to use best efforts to contract with at least 4 private counsel firms
in each of not more than 15 judicial districts to determine whether
such firms can reduce case backlogs and cost-effectively collect
delinquent debts. 

A key component of the pilot program is the Central Intake Facility
(CIF).  This facility, established in 1988, is where executive or
legislative agencies are to refer their nontax delinquent debts to
Justice for litigation.  Previously, federal agencies referred their
delinquent debt cases directly to the USAO in the district where the
debtor resided.  A private company operates CIF under the technical
direction of Justice's Office of Debt Collection Management, which is
responsible for managing the pilot program. 

Among other things, CIF is to

  process all referrals from client agencies,

  enter debt account data on all debts accepted,

  distribute cases to pilot USAOs and private counsel firms in the
     judicial district where the debtor resides, and

  report periodically to Justice's Office of Debt Collection
     Management on collection progress. 

In addition, CIF also established a computer software system
(COLLECTOR) to assist in managing cases and tracking collections
associated with the pilot program. 

CIF's operations have changed since its inception.  Justice extended
its implementation nationwide beginning in October 1990, allowing for
the centralized distribution of debts to nonpilot USAOs.  This
operation, however, known as the Nationwide Central Intake Facility,
is separate from CIF's operations.  Also, CIF is no longer
responsible for receiving and depositing collections from debtors in
the pilot districts.  Beginning in January 1992, pilot program
attorneys were to instruct debtors to mail payments directly to a
"lockbox" operated by a bank in Atlanta, Georgia.  A lockbox is a
collection mechanism established at a bank to receive payments. 
Payments are sent directly to the lockbox bank by the payee.  The
bank deposits the payment in the appropriate account and forwards
payment information to CIF, which posts debtor payments and notifies
referring agencies of funds collected. 

At the end of fiscal year 1992, 18 private counsel firms were
participating with USAOs in 7 federal judicial districts in
collecting nontax civil debt.\8 Justice selected these districts to
participate in the program in part because of the large numbers of
uncollected debts in those areas.  Districts began implementation on
different dates; the first district started in October 1988, and the
seventh started in July 1990.  Table 1 summarizes the USAOs and
private counsel firms participating in the seven pilot federal
judicial districts as of September 30, 1992. 



                           Table 1
           
             USAOs and Number of Private Counsel
               Firms Participating in the Debt
           Collection Pilot Program as of September
                           30, 1992

                               Number of
                           participating
Judicial district/       private counsel  Date pilot program
USAO                               firms  began in district
--------------------  ------------------  ------------------
Eastern District of                    3  Oct. 11, 1988
 Michigan
Eastern District of                    3  Mar. 6, 1989
 New York
Southern District of                   1  May 8, 1988
 Texas
Southern District of                   2  July 17, 1989
 Florida
Central District of                    3  Sept. 25, 1989
 California
District of Columbia                   2  Apr. 16, 1990
Northern District of                   4
 California                                July 16, 1990
------------------------------------------------------------
Source:  Department of Justice. 

Justice originally contracted with 25 private counsel firms in the 7
pilot districts.  Justice received only three qualified proposals
from firms in each of three pilot districts.  All of these firms were
offered and subsequently accepted contracts.  In addition, Justice
has contracted with private counsel firms in the Western District of
Louisiana, Southern District of Florida (which is also one of the
seven pilot districts), Middle District of Florida, and District of
New Jersey to address foreclosure cases from the Department of
Agriculture, Farmers' Home Administration, and the Department of
Housing and Urban Development.  According to Justice officials,
Justice plans to contract with firms in the Eastern District of
Pennsylvania and Northern District of Illinois to assist with
foreclosure cases.  Once accomplished, Justice will have implemented
private counsel debt collection efforts in 12 of the 15 authorized
districts.  CIF does not track data relating to these foreclosures. 
As a result, this review did not include collections relating to
foreclosures. 

Participating USAOs and private counsel firms have numerous tasks as
part of the pilot program.  Among other things, each is to retrieve
automated debt collection management reports daily from the COLLECTOR
system, assign attorneys and debt collection staff to new cases,
follow up on cases, and update the automated system with information
concerning litigation progress.  Pilot USAOs were also to designate
an Assistant U.S.  Attorney to supervise the work of private counsel
offices in their district. 

When the pilot program began, 9,345 civil debt cases valued at $107.7
million were either active or awaiting action in the 7 pilot USAOs.\9
For purposes of the pilot program, CIF defined those cases as
backlogged and tracked them separately from newly referred cases. 
The USAOs retained 5,900 backlogged cases and CIF referred the
remaining 3,445 backlogged cases to private counsel firms, according
to pilot program guidelines for assigning cases.  In general, those
guidelines provided that cases were to be assigned on a random basis
among the USAO and participating private counsel firms in each
district, except for agency-referred debts over $25,000;\10 criminal
fines; and tax, social security, and tariff debts, which were to be
assigned only to USAOs.  As of September 30, 1992, the pilot USAOs
and private counsel firms were working on roughly 21,000 debt cases
valued at $254.9 million. 


--------------------
\8 One firm received separate contracts in two different federal
judicial districts.  This firm was counted twice. 

\9 For this report, a referred debt case's value is the amount of the
outstanding debt along with any interest, penalties, and fees that
had accrued or been attached when Justice received the case from the
referring agency. 

\10 Justice revised this guideline as of September 1, 1990, to allow
private counsel firms to be referred nontax civil debts up to
$100,000. 


   PILOT PROGRAM GENERALLY
   SUCCESSFUL
------------------------------------------------------------ Letter :3

We believe that the pilot program has generally been successful
because the USAOs and private counsel firms cost-effectively
collected delinquent nontax civil debts and reduced the backlog of
debt cases.  Through September 30, 1992, the pilot USAOs and private
counsel firms collected $122.5 million in debt at a total estimated
cost of $5.3 million.\11 Overall, pilot USAOs collected $113.3
million at a total estimated cost of just under $3 million, and
private counsel firms collected $9.2 million at a total cost of $2.4
million.\12 In addition, private counsel firms assisted in working
through the existing debt caseload, addressing large numbers of the
debt collection cases that were backlogged at the program's inception
and later handling a majority of newly referred cases.  Table 2
summarizes the annual collections and costs data for pilot USAOs and
private counsel firms. 



                           Table 2
           
            Comparison of Pilot USAOs' and Private
               Counsel Firms' Estimated Annual
                    Collections and Costs

                    (Dollars in thousands)


Fiscal  Collecti          Collecti          Collecti
year         ons   Costs       ons   Costs       ons   Costs
------  --------  ------  --------  ------  --------  ------
1989    $15,671.  $275.7    $174.3   $40.3  $15,846.  $316.0
               8                                   1
1990    16,059.9   723.1   1,636.2   367.5  17,696.1  1,090.
                                                           6
1991    60,909.2  1,054.   2,570.6   682.6  63,479.8  1,736.
                       3                                   9
1992    20,632.8   903.2   4,813.2  1,269.  25,446.0  2,172.
                                         4                 6
============================================================
Total   $113,273  $2,956  $9,194.3  $2,359  $122,468  $5,316
              .7      .3                .8        .0      .1
------------------------------------------------------------
Source:  GAO analysis of Justice data. 

Table 3 summarizes the collection activity from pilot USAOs and
private counsel firms for backlogged, newly referred, and all cases. 
From the inception of the pilot through fiscal year 1992, CIF
referred 25,519 (67.6 percent) of the 37,758 total civil nontax debt
cases to private counsel firms and the remaining 12,239 (32.4
percent) to the USAOs.  Altogether, USAOs and private counsel firms
closed 5,543 of the 9,345 backlogged cases and collected a total of
$11.8 million.  Of the 28,413 newly referred cases, the USAOs and
private counsel firms closed 11,198 and collected a total of $110.7
million. 



                           Table 3
           
             Summary of Collection Activities By
            Private Counsels and Pilot USAOs from
           Backlogged and Newly Referred Civil Debt
               Cases, as of September 30, 1992

                    (Dollars in thousands)

                                           Cases
                                        yielding
              Case         Number of  collection      Amount
              status           cases         s\a   collected
------------  ----------  ----------  ----------  ----------
Backlogged cases
------------------------------------------------------------
Private       Open             1,521         572      $842.3
 counsels
              Closed           1,924         581     1,465.9
============================================================
              Subtotal         3,445       1,153     2,308.2
USAOs         Open             2,281       1,397     4,316.5
              Closed           3,619       1,766     5,141.3
============================================================
              Subtotal         5,900       3,163     9,457.8
Total number                   3,802       1,969     5,158.8
 open and
 closed
 backlogged    Open
 cases
              Closed           5,543       2,347     6,607.2
============================================================
              Total            9,345       4,316   $11,766.0

Newly referred cases
------------------------------------------------------------
Private       Open            14,270       3,715    $3,062.2
 counsels
              Closed           7,804       1,779     3,823.9
============================================================
              Subtotal        22,074       5,494     6,886.1
USAO          Open             2,945       1,286     9,532.3
              Closed           3,394       1,521    94,283.6
============================================================
              Subtotal         6,339       2,807   103,815.9
Total number                  17,215       5,001    12,594.5
 open and
 closed
 newly         Open
 referred
 cases
              Closed          11,198       3,291    98,107.5
============================================================
              Total           28,413       8,292  $110,702.0

All cases
------------------------------------------------------------
Private       Open            15,791       4,287    $3,904.5
 counsels
              Closed           9,728       2,360     5,289.8
============================================================
              Subtotal        25,519       6,647     9,194.3
USAOs         Open             5,226       2,683    13,848.8
              Closed           7,013       3,287    99,424.9
============================================================
              Subtotal        12,239       5,970   113,273.7
Total number                  21,017       6,970    17,753.3
 of all        Open
 cases
              Closed          16,741       5,647   104,714.7
============================================================
              Total           37,758      12,617  $122,468.0
------------------------------------------------------------
\a In 155 cases, collections are credited to both USAOs and private
counsel firms.  However, the amount of the collections is not double
counted. 

Source:  GAO Analysis of Justice data. 

As shown in table 3, of the original 9,345 backlogged cases, USAOs
retained 5,900 (63.1 percent) cases valued at $93.1 million.  By the
end of fiscal year 1992, 2,281 of those cases were still in open
status, although USAOs had collected $4.3 million from 1,397 of them. 
The USAOs had closed 3,619 cases and collected $5.1 million from
1,766 cases.  Thus, as of September 30, 1992, the USAOs had collected
$9.5 million from 3,163 of 5,900 backlogged cases and closed 1,853
(31.4 percent) without being credited for any collections. 

Table 3 also shows that CIF referred the other 3,445 (36.9 percent)
backlogged cases with a value of $14.6 million to private counsel
firms.  At the end of fiscal year 1992, 1,521 cases were still open,
although private counsel firms had collected $0.8 million from 572 of
those cases.  Private counsel firms had closed 1,924 cases,
collecting $1.5 million from 581 of those cases.  Thus, private
counsel firms had collected $2.3 million from 1,153 backlogged cases
and closed 1,343 (39 percent) of the 3,445 originally referred
backlogged cases without being credited for any collections. 

Private counsel firms received and worked larger numbers of newly
referred cases.  Of the 28,413 newly referred cases, CIF referred
22,074 (77.7 percent) cases valued at $72.3 million to private
counsel firms.  By the end of fiscal year 1992, they had closed 7,804
cases and collected $6.9 million from a total of 5,494 cases.  Pilot
USAOs had collected over $103.8 million from 2,807 of 6,339 newly
referred cases.  Those cases had a value of $360.9 million. 


--------------------
\11 These collections represent only cash type payments received by
Justice.  Another $25.8 million was collected from payments made
directly to the referring agency and offsets acquired by federal
agencies (e.g., Internal Revenue Service withholding money from a
debtor's federal tax refund).  Neither USAOs nor private counsel
firms are credited for those collections, even though those cases
were assigned to them. 

\12 Justice reached similar results.  According to the Attorney
General's fiscal year 1992 report on the private counsel debt
collection project, for fiscal years 1989 through 1992 pilot USAOs
collected $113.4 million in civil debt at a cost of $3 million, and
private counsel firms collected $9.1 million at a cost of $2.7
million. 


      USAOS DESCRIBED CASELOAD AS
      TOO HIGH, PRIVATE COUNSEL
      FIRMS AS NEEDED
---------------------------------------------------------- Letter :3.1

Despite CIF assigning over two-thirds of the nontax civil debt cases
to private counsel firms, six of the seven pilot USAOs told us that
their fiscal year 1992 civil and criminal caseload remained too high. 
Facing large numbers of backlogged debt collection cases with limited
FLU staff, pilot USAOs expressed concern about managing their overall
debt collection workload. 

The average total number of criminal and civil debt cases pending at
the end of the year in each of the pilot USAOs rose by nearly
one-fourth from fiscal years 1985 through 1992.  According to
information from EOUSA, at the end of fiscal year 1985, each pilot
USAO had an average of 977 criminal and 2,317 civil debt cases
pending.  By the end of fiscal year 1992, the average number of
pending criminal debt cases had tripled to 3,492.\13 However, partly
because most civil cases had been referred to private counsel firms,
the average number of pending civil debt cases had fallen to 557. 
Figure 2 shows the change in the average number of criminal, civil,
and total debts cases pending in the pilot USAOs, exclusive of cases
pending with private counsel firms.  (App.  III contains detailed
information on the number of criminal and civil debts pending at the
end of fiscal years 1985 through 1992 in the seven participating
pilot federal judicial districts, along with summary figures for all
other USAOs.)

   Figure 2:  Growth in the Pilot
   USAOs' Average Debt Caseload
   From the End of Fiscal Years
   1985 Through 1992

   (See figure in printed
   edition.)

Source:  GAO analysis of EOUSA data. 

While the pilot USAOs' average debt caseload grew, the number of work
years they applied to debt collection activities declined.  According
to data from EOUSA, the seven pilot USAOs applied 49.5 work years to
debt collection activities in fiscal year 1987\14 and 51.5 work years
in fiscal year 1988.  Since then, the resources devoted to debt
collection declined to 46.8 work years in fiscal year 1992. 

Some of the pilot USAOs' FLUs appeared to be understaffed judging
from Justice workload models.  According to EOUSA, decisions
regarding FLU staffing requirements rely on information from the U.S. 
Attorneys' yearly budget requests, analyses by EOUSA, and a debt
collection workload model developed in 1988.  In general, that model
shows that a trained debt collection agent can handle 350 cases at a
time.  EOUSA adjusts that target on the basis of the dollar size of
the cases, age of the debts, whether the state in which the USAO is
located allows for wage garnishment, and other factors.  According to
EOUSA, Justice had originally requested more than twice the number of
work years to address debt collection activities in the pilot USAOs
for fiscal year 1992.  The initial budget request was for 105 work
years for those pilot USAOs, but the Office of Management and Budget
approved only 55. 

With the growth in the number and amount of outstanding criminal
debt, pilot USAOs have had to apply increasing FLU resources to
criminal debt collection activities.  Table 4 summarizes this change
in the pilot FLUs.  Pilot USAO FLUs spent 25.6 work years (52.5
percent) on criminal debt collection activities in fiscal year 1990,
but 29.6 work years (63.2 percent) in fiscal year 1992.\15



                                     Table 4
                     
                       Change in the Number and Percent of
                       Pilot USAO FLU Resources Applied to
                        Criminal and Civil Debt Collection
                        Activities, Fiscal Years 1990-1992


Co
ll
ec
ti
on
ac
ti    Number of                 Number of                 Number of
vi   work years   Percent of   work years   Percent of   work years   Percent of
ty      applied        total      applied        total      applied        total
--  -----------  -----------  -----------  -----------  -----------  -----------
No         23.1         47.5         20.8         43.3         17.2         36.8
 n
 t
 a
 x
 c
 i
 v
 i
 l
 d
 e
 b
 t
Cr         25.6         52.5         27.2         56.7         29.6         63.2
 i
 m
 i
 n
 a
 l
 d
 e
 b
 t
================================================================================
To         48.7        100.0         48.0        100.0         46.8        100.0
 t
 a
 l
--------------------------------------------------------------------------------
Source:  GAO analysis of EOUSA data. 

According to Justice officials, there are legal, practical, and
policy reasons why only USAOs (or other Justice) staff may work on
collecting criminal fines and restitution.  The proceeds from most
criminal fines and all special assessments go to the Crime Victims
Fund, which is then distributed to the states to assist those victims
of crime who have suffered because of criminal activity.  Because
private counsels, in collecting civil debts, get a portion of the
collected debt as payment for their services, some change in the law
would be required to address payment of private counsels in the
context of collecting criminal fines and restitution.  In addition, a
Justice official told us that, as a matter of policy, Justice is
reluctant to turn over criminal monetary enforcement to non-Justice
personnel because of concern for protecting sensitive information,
such as that subject to grand jury secrecy requirements. 

Thus, private counsel firms appear to have played an important role
not just in civil debt collection, but also in providing USAOs with
some flexibility in addressing the changing mix of their debt
collection workloads.  An Education official told us that collection
efforts on many delinquent student loan cases would not have been
made without private counsels because USAOs either would not or could
not handle the volume of student loan cases.\16 Justice officials
also said that private counsel firms agreed to work many smaller
dollar value cases that USAOs would not work.  Five of the pilot
USAOs commented that the continued use of private counsel firms was
important to help them maintain a manageable caseload.  Other Justice
officials also told us that they believe private counsels are needed
to help USAOs address unexpected influxes of civil debt.  For
example, Justice expanded the use of private counsel firms into a new
pilot district in New Jersey during fiscal year 1993 to address a
surge of foreclosure cases from the Department of Housing and Urban
Development.  Justice's planned implementation of new pilot districts
to handle foreclosure cases in the Eastern District of Pennsylvania
and the Northern District of Illinois is a similar example of being
able to respond with private counsel firms to meet unforeseen debt
collection needs. 


--------------------
\13 According to an EOUSA official, the growth in the number and
amount of pending criminal debts is attributable in part to the
federal sentencing guidelines, which govern the imposition of
criminal monetary penalties in federal court.  For example, the
guidelines require courts to impose fines in all criminal cases,
except where the defendant establishes that he or she is unable to
pay and is not likely to become able to pay any fine.  In general,
the maximum fine permitted by law as to each count of conviction is
$250,000 for a felony or any misdemeanor resulting in death. 
However, higher or lower limits may apply when specified by statute. 
United States Sentencing Commission, Guidelines Manual, section 5E1.2
(Nov.  1993).  In cases where a defendant is ordered to make
restitution and to pay a fine, any money paid by the defendant is
first applied to the restitution.  Id.  at section 5E1.1. 

\14 Data were not available for prior periods. 

\15 An EOUSA official noted that these figures also included some
time spent on tax, asset forfeiture, and Social Security-related
issues but said that criminal debt collection activities still
utilized more than half of the available FLU work years. 

\16 A number of those cases included Education student loan debt
cases that (1) fell below the minimum debt criteria of $600 set by
program regulations (4 C.F.R.  part 105) for agency referrals to
USAOs and (2) did not have complete or up-to-date debtor background
information. 


   COST EFFECTIVENESS COMPARISONS
   INCONCLUSIVE
------------------------------------------------------------ Letter :4

Pilot USAOs have collected more unpaid civil debt at relatively lower
costs per dollar collected than private counsel firms.  However,
differences in how USAOs and private counsel costs are measured and
in the case mix tend to skew collection results in favor of the
USAOs.  When unit costs are assessed on the basis of the number of
cases closed, private counsel firms spent less per closed case than
USAOs. 

Table 5 summarizes our analyses of the aggregate collection and cost
data for pilot USAOs and private counsel firms.  On the one hand,
pilot USAOs collected $38.32 for every $1 estimated in cost.  Private
counsel firms collected $3.90 for every $1 in cost.  On the other
hand, it cost USAOs an estimated $421.54 for every case that they
closed compared to $242.58 for every case that private counsel firms
closed. 



                           Table 5
           
           Pilot USAOs' and Private Counsel Firms'
           Estimated Annual Collections per Dollar
              of Costs and Cost per Case Closed,
                    Fiscal Years 1989-1992


                             Private                 Private
                             counsel                 counsel
Fiscal year        USAOs       firms       USAOs       firms
------------  ----------  ----------  ----------  ----------
1989              $56.84       $4.32     $228.04     $347.78
1990               22.21        4.45      325.70      341.86
1991               57.77        3.77      536.80      342.83
1992               22.84        3.79      557.53      193.92
Average           $38.32       $3.90     $421.54     $242.58
------------------------------------------------------------
Source:  GAO analysis of Justice data. 

Further, the comparisons of collections per $1 of cost must be
considered in relation to the case mix and how costs are measured. 
There are two fundamental problem areas in the debt collection
comparison equation:  (1) differences in the measurement of USAOs'
and private counsels' costs and (2) types and size of cases assigned
to each group.  Together, these complications blur both the costs and
collections aspects of any comparison.  It is very unlikely that all
of the difference between USAOs and private counsel firms on this
measure is a function solely of these two factors, but it seems very
likely that a portion of it is. 

First, USAOs' and private counsel firms' costs are not strictly
comparable.  USAO costs are based on FLU salaries and overhead
expenses, estimated by EOUSA with a relatively simple model.  The
model multiplies the estimated percentage of FLU staff time spent on
cases referred from CIF with average FLU salaries by staff type
(e.g., attorney, paralegal, or financial litigation agents) and
estimated overhead costs for each pilot office.  According to EOUSA
officials, the pilot USAOs spend some time helping private counsel
firms, and that time, providing various types of assistance, is
included in the USAOs' costs.  Private counsel firm costs equal
contractual fixed proportions of debt collected (contingency fees)
and reimbursement for some specific actual costs incurred (e.g.,
filing and recording fees).  The contingency fees vary from firm to
firm,\17 ranging from 19.5 percent to 35 percent of debt collected,
and are structured not only to cover salary and overhead costs but
also to allow for profit.  It is important to note that this payment
arrangement yields no contingency fee payment to private firms in
those cases where no funds are collected. 

So long as the private counsel firms' contractual contingency fees
are between roughly 20 and 33 percent, their collection-to- cost
ratios will generally range between $3 and $5 in collections for
every $1 in costs, regardless of the cases' dollar values.\18 On the
other hand, because USAOs' costs are unrelated to their collection
results, and because USAOs work larger value debt cases, their
collections-to-costs ratios are not so constrained. 

Justice has acknowledged in internal memorandums that the fundamental
differences in cost calculations make it impossible to completely
compare the two costs.  Justice also recognized other limitations in
trying to compare the activities of private counsels and USAOs.  For
example, Justice noted that, before May 21, 1991, debt collection
efforts proceeded under the laws of several states.\19 Because state
laws varied, it was impossible to compare the activities between
judicial districts.  Justice also noted that various aspects of
litigation can never be compared because litigation varies from case
to case.  We believe that although this may be true to some extent
(statistical analysis can control for certain amounts of variation),
it suggests that any analysis should also examine differences in the
cases addressed by USAOs and private counsel firms. 


--------------------
\17 Each private counsel firm individually contracted its own fee
arrangement with Justice.  These fees remained unchanged through
fiscal year 1992. 

\18 This is true except in cases where the firms' costs are
reimbursed directly by the debtor.  Federal courts have awarded
surcharges or fees to USAOs and private counsel firms in debt
collection cases in which the government prevails.  The Federal Debt
Collection Procedures Act of 1990 (P.  L.  101-647, title XXXVI)
entitles U.S.  Attorneys and private attorneys in the pilot program
to include a 10 percent surcharge, in addition to the outstanding
debt, to cover costs of processing and handling the litigation and
enforcement of the debt.  Another option for private counsel firms is
to request attorney fees in accord with the terms of their contracts
with Justice.  Each contract between Justice and private counsel
firms is to include language directing those firms to include
language in all judgments seeking payment of attorney's fees. 
Federal judges have varied in what amount they will allow private
counsel firms to claim in debt cases.  If courts award sufficient
surcharges or fees to USAOs and private counsel firms, the government
in effect may receive free debt collection service.  Because of
various problems with analyzing data from COLLECTOR, we were unable
to determine with accuracy the total amounts of attorney fees and
surcharges collected. 

\19 The Federal Debt Collection Procedures Act of 1990, supra,
codified at 28 U.S.C.  section 3001 et seq., created a uniform
federal framework for the collection of debts owed to the U.S. 
government. 


      CASES WORKED BY USAOS AND
      PRIVATE COUNSEL FIRMS TENDED
      TO DIFFER SIGNIFICANTLY IN
      NUMBER AND VALUE
---------------------------------------------------------- Letter :4.1

Differences in the number and value of cases worked by USAOs and
private counsel firms affect cost and collection comparisons. 
Because USAOs tended to work on larger dollar cases, they had the
possibility of securing large dollar collections that may have
accounted for a portion of their apparent collections-to-costs
advantage.  Conversely, private counsel firms addressed and closed
considerably more cases than did USAOs.  Consequently, data on the
cost per case closed tended to favor the private counsel firms. 

Private counsel firms received twice the number of cases referred to
USAOs, but their cases averaged less than 10 percent of the value of
the USAOs' cases.  The private counsel firms' 25,519 cases had a
value of $86.9 million and the USAOs' 12,239 cases had a value of
$454 million.  Thus, the cases referred to private counsel firms
averaged $3,405, while cases referred to pilot USAOs averaged
$37,093.  Table 6 shows the distribution of cases to participating
pilot USAOs and private counsel firms for the eight federal
departments and agencies that referred the largest numbers of nontax
civil debt cases to Justice between the program's inception and
September 30, 1992. 



                                     Table 6
                     
                       Distribution of Cases Between Pilot
                     USAOs and Private Counsel Firms, Through
                                  September 1992


Refer
ring
depar
tment                  Average                  Average                  Average
or            Dollar    dollar         Dollar    dollar         Dollar    dollar
agenc  Numbe  value\     value  Numbe  value\     value  Numbe  value\     value
y          r       a  per case      r       a  per case      r       a  per case
-----  -----  ------  --------  -----  ------  --------  -----  ------  --------
Educa  6,267  $25,30    $4,037  21,91  $59,74    $2,726  28,18  $85,05    $3,018
 tion              3                5       9                2       1
Veter  1,558  12,413     7,967  2,423  15,448     6,376  3,981  27,861     6,999
 ans
 Admi
 nist
 rati
 on
Small  1,221  59,871    49,034    174   1,364     7,839  1,395  61,235    43,896
 Busi
 ness
 Admi
 nist
 rati
 on
Housi    763  12,538    16,432    569   3,210     5,642  1,332  15,748    11,823
 ng
 and
 Urba
 n
 Deve
 lopm
 ent
Healt    981  102,05   104,026    162   5,504    33,976  1,143  107,55    94,098
 h                 0                                                 4
 and
 Huma
 n
 Serv
 ices
Justi    308   4,229    13,730      9      14     1,526    317   4,243    13,383
 ce
Defen    199  49,285   247,662     88     554     6,298    287  49,839   173,655
 se
Agric    260  23,277    89,526     12     422    35,142    272  23,698    87,126
 ultu
 re
Other    682  165,02   241,968    167     633     3,788    849  165,65   195,118
                   2                                                 5
================================================================================
Total  12,23  $453,9   $37,093  25,51  $86,89    $3,405  37,75  $540,8   $14,325
           9      87                9       7                8      84
--------------------------------------------------------------------------------
Note:  The average dollar value per case calculation was based on
using the actual dollar value not the rounded value shown in the
dollar value column. 

\a Dollars in thousands. 

Source:  GAO analysis of Justice CIF data. 

The relatively larger dollar value of the USAOs' cases allowed them
to receive large collections from single cases.  According to data
from CIF, pilot USAOs collected $70.6 million (or 62 percent of their
total collections) from 14 cases alone, all of which produced more
than $1 million in collections.  The largest collection in one case
was $21.6 million collected by the pilot USAO in the Eastern District
of New York in fiscal year 1991.  However, $52,667 was the largest
collection secured by a private counsel firm in any one case.  USAOs
collected $52,668 or more in 178 cases, which yielded total
collections of nearly $94 million, or about $528,000 per case. 

Collections-to-cost ratio results do not take into account the
sizable difference in the number of cases worked.  Because the
private counsels closed more cases than the USAOs and were paid only
when they made collections, their cost per case was less.  Private
counsel firms were paid contingency fees of $2.4 million and closed
9,728 cases, or an average cost of $243 per closed case.  USAOs
closed 7,013 cases through September 1992.  Having estimated costs of
$2.9 million for civil debt collection activities, the USAOs spent an
average of $422 per closed case. 


   PROGRAM CHANGES NEEDED TO
   ENSURE FLEXIBILITY
------------------------------------------------------------ Letter :5

The combination of a substantial decrease in the number of referred
nontax civil debt cases and legislative requirements of the pilot
program may threaten Justice's overall ability to supplement its debt
collection capability with private counsel firms and thus the
government's capacity to collect additional nontax civil debt. 
Current law requires Justice to make best efforts to ensure that at
least four private counsel firms participate in the pilot program in
each designated judicial district.  Participating private counsel
firms said they need a relatively large volume of cases to ensure
profitable operations.  But because Education stopped referring cases
for collection (opting instead for wage garnishment), Justice can no
longer refer the volume of cases to multiple firms that the private
counsel firms said is needed.  Without some changes, the program may
collapse, further limiting Justice's ability to address the debt
caseload. 

Education's delinquent student loan cases were important to the
private counsels' participation in the pilot program when many firms
participated at one location.  Over 85 percent of the cases referred
to private counsels between the inception of the pilot program
through fiscal year 1992 were Education accounts.  However, according
to Justice's Office of Debt Collection Management, the number of
student loan cases referred fell from 18,928 in fiscal year 1991 to
1,192 in fiscal year 1993.  The decrease is due in part to Education
having gained authorization to garnish wages of employed debtors.\20
According to a senior Education debt collection official, following
what was considered to have been a highly successful pilot test of
its wage garnishment system in 1993, Education now plans to implement
that system nationwide during fiscal year 1994.  In the interim,
Education has retained delinquent accounts rather than referring them
to Justice for collection. 

Before the number of Education's student loan referrals decreased, 7
of the 25 private counsel firms receiving contracts had discontinued
participating in the program, citing the small number and/or
unprofitability of Justice case referrals.  Of the remaining 18
private counsel firms, 10 said that they were dissatisfied with the
number of cases they received during 1992.  An official with
Justice's Office of Debt Collection Management told us that he
believed the pilot program would die, because the absence of
Education cases would mean that there would not be enough referrals
to support all of the private counsel firms in each district.  The
official said that in the future, there may be only enough civil debt
cases for one firm in each district.  We do not know how many cases
these firms believe they need to make their efforts worthwhile
(although that number may vary by firm), but Justice's contracts with
participating private counsel firms guaranteed that they would
receive at least 25 civil debt cases each year, according to Justice
officials. 

At the end of fiscal year 1992, only one pilot district still had
four private counsel firms participating, despite the requirement
that the Attorney General make best efforts to have at least four
private counsel firms participate in each of the pilot districts.\21
Congress is considering taking action on this provision of the law,
which would address this aspect of the pilot program.  H.R.  3400
would, among other things, amend 31 U.S.C.  3718(b)(1)(A) by deleting
the minimum number of firms the Attorney General must make best
efforts to contract with for legal services.  In testimony before the
Senate Committee on Governmental Affairs in February 1994, we
supported this change.\22 This amendment would provide the Attorney
General with flexibility to contract with private counsels
commensurate with the volume of debt cases involved.  This
arrangement would help the USAOs, with their relatively limited
resources, to concentrate on criminal debt and larger dollar civil
cases. 

Of course, other options to address the changing debt collection
caseload are available, but they may be less viable, considering
prevailing budget constraints and other litigative priorities, such
as violent crime.  For example, USAOs could transfer attorney,
paralegal, and other staff resources from elsewhere in their offices. 
But this approach would remove those staff from other civil or
criminal casework.  Or USAOs could use any available funded openings
to hire new staff for their FLUs, rather than adding them to other
office functions.  The somewhat unstable nature of the civil
workload, as exemplified by the sharp drop in Education cases and a
recent influx of foreclosure cases in certain locations, may be
reason to argue against hiring permanent staff to handle this work. 

Justice officials have also argued for more permanent FLU staff
resources, noting that FLU resources are becoming increasingly
consumed with collecting criminal monetary penalties and that
additional FLU staff generate more revenue for the government than
they cost.  (Justice has estimated that each additional dollar
applied to civil debt collection activities yields between $15 and
$32 in additional debt collections.) Money available from Justice's
working capital fund may allow Justice to expand its civil debt
collection activities, but Justice has yet to release any of those
funds.  Instability in the amount of funds available from the working
capital fund may also preclude Justice from hiring permanent staff
for civil debt collection activities. 


--------------------
\20 P.  L.  102-164, 105 Stat.  1049, 1066 (1991), the Emergency
Unemployment Compensation Act of 1991, authorized Education to
garnish wages administratively. 

\21 31 U.S.C.  3718(b)(1)(A). 

\22 Improving Government:  GAO's Views on H.R.  3400 Management
Initiatives (GAO/T-AIMD/GGD-94-97, Feb.  23, 1994). 


   CONCLUSIONS
------------------------------------------------------------ Letter :6

We believe that the pilot program has demonstrated that private
counsel firms are capable of assisting USAOs with nontax civil debt
collection work.  We also believe that the private counsel firms
participating in the pilot program collected money for the government
that the USAOs might not have otherwise collected because of the size
and changing nature of their overall debt workload.  Although USAOs
collected more money than private counsel firms, the latter closed
more cases at a lower unit cost. 

Because collections made by private counsel firms require contingency
fee payments that may offset the net recovery amount, it makes sense
to assign these firms the smaller dollar cases.  Unless the firms
recover those contingency fees directly from the debtor over and
above the amount of the debt, the government could pay relatively
more for collection by using private counsel firms than would be the
case if they were handled by USAOs. 

The sharp decrease in the number of Education student loan cases
referred to Justice for collection is resulting in some change in the
pilot program.  There may not be a sufficient volume of work to
sustain the participation of four private counsel firms in each
federal judicial district, but there may be enough work for one or
two firms.  And because of the growing criminal debt workload, the
USAOs may not be able to address all of the remaining civil debt
cases single-handedly.  Thus, allowing Justice to have the option of
contracting with private counsel firms to assist with debt collection
activities when necessary is a generally positive approach to
addressing the civil debt collection problem. 


   MATTERS FOR CONGRESSIONAL
   CONSIDERATION
------------------------------------------------------------ Letter :7

Because of the success of the pilot program and the flexibility it
provides in addressing debt collection, we believe that Congress
should consider allowing the Attorney General to contract with
private counsel firms to collect delinquent nontax civil debt on an
as needed basis.  We believe that Congress should consider expanding
the Attorney General's authority to contract with such firms to all
federal judicial districts and not limit it to 15 districts as
currently authorized.  In addition, because of the unstable nature of
the caseload, we believe that Congress should consider deleting the
requirement contained in 31 U.S.C.  3718(b)(1)(A) that the Attorney
General use best efforts to contract with at least four private
counsel firms in each district. 


   COMMENTS FROM THE DEPARTMENT OF
   JUSTICE
------------------------------------------------------------ Letter :8

The Department of Justice provided written comments on a draft of
this report (see app.  IV).  Justice concurred with our conclusions
and matters for congressional consideration.  It acknowledged that
our report did not express any definite conclusions about the
relative efficiency of the USAOs' and private counsel firms' civil
debt collection efforts.  However, Justice believed our presentation
favored private counsel firms because we expressed a preference for
comparing costs to close cases rather than Justice's costs to
collect.  Justice said that our discussion of cost effectiveness
would have been better balanced if we had further explored measures
of the costs to collect debt that were more favorable to USAOs. 

We believe that the report presents a balanced comparison of the
costs and results of debt collection by private counsel firms and
USAOs.  We acknowledged in the report that USAOs collected more debt
at less cost.  However, we believe that the comparison of the costs
to collect debt precludes any definitive conclusions because of
differences in (1) the number, nature, and value of cases and (2)
methods used to determine collection costs.  We also analyzed the
cost to close cases to illustrate that there are measures other than
the cost to collect debt to measure results.  Although we acknowledge
in the report that private counsel firms closed more cases at less
cost, we do not conclude that they were more cost effective overall
than USAOs, nor do we express a preference for either measure of
comparison.  As the report notes, we believe both private counsels
and USAOs serve useful roles in civil debt collection. 

Justice also suggested some technical changes to the report, which we
made as appropriate. 


---------------------------------------------------------- Letter :8.1

We are sending copies of this report to the Attorney General.  We
will also make copies available to others upon request. 

The major contributors to this report are listed in appendix V. 
Please contact me on (202) 512-8777 if you have any questions
concerning this report. 

Laurie E.  Ekstrand
Associate Director, Administration
 of Justice Issues


OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix I

The overall objective of this review was to assess the pilot
program's overall results in the seven federal judicial districts
where the pilot program was implemented.  The specific objectives
were to (1) examine whether Justice's use of private counsels is a
cost-effective mechanism for collecting delinquent nontax civil debt,
(2) compare collection results and costs from the participating USAOs
and private counsel firms, (3) review the effect that private counsel
firms had on reducing the caseload of nontax civil debt cases, and
(4) assess the future role of private counsel firms in collecting
debts owed the government. 

To determine whether Justice's use of private counsel firms was a
cost-effective mechanism for collecting delinquent nontax civil debt
and to compare the results and costs from participating USAOs and
private counsel firms, we calculated each offices' collection results
and estimated costs.  We measured collection results using
information from the Central Intake Facility (CIF) database.  We
limited our analysis to data through September 30, 1992, because that
was the last complete fiscal year data at the time of our review. 
Although there have been some changes in Justice's civil nontax debt
collection workload since then, we do not believe they affect the
report's overall analysis and conclusions, except as explicitly
noted.  We treated collections in the same manner as CIF, using cash
type collections processed through Justice's lockbox.  Not included
were criminal fines collected at sentencing by the clerks of the U.S. 
district courts, debts and settlements paid directly to agencies,
property acquired for agencies, or offsets acquired by federal
agencies against amounts owed them.  We performed limited testing of
CIF's database, but we did not perform a reliability assessment of
the database or CIF's computer software system (COLLECTOR).  In 1992,
Justice's Inspector General performed a limited reliability
assessment during their audit of the pilot program and found no
significant problems regarding the accuracy of CIF data.\1 To
estimate the costs of collecting debt, we analyzed data on private
counsel firm costs recorded in CIF's database and applied a model of
USAO costs developed by Justice's EOUSA.  (The model is discussed in
more detail on pp.  16, 17, and 18)

To determine what effect private counsel firms had on reducing the
caseload of delinquent nontax civil debt at pilot USAOs, we analyzed
CIF's caseload database.  We determined the extent to which cases
were backlogged in pilot USAOs at the inception of the pilot program
and analyzed the status of these cases, including disposition and
results, as of September 30, 1992. 

To assess the future of Justice's use of private counsel firms, we
analyzed trends in the numbers of criminal and civil debt collection
cases in the USAOs relative to Justice's resources and availability
of private counsel firms and discussed the implications of those
changes in the debt collection workload with Justice and Education
officials.  We also reviewed legislation being considered by
Congress. 

We did not examine debt collection tactics used by either USAOs or
private counsel firms.  Thus, we are not taking a position on the
effectiveness or propriety of collection methods. 

To supplement information gathered from the database and obtain
participants' perspectives on the program, we conducted telephone
interviews with officials at the 7 pilot USAOs, all 18 private
counsel firms participating in the program as of September 30, 1992,
and 6 of the 7 private counsel firms that terminated their pilot
program contracts before September 30, 1992.  One private counsel
firm that terminated its contract did not respond to our calls.  We
did not verify any of the data reported by the private counsel firms
or USAOs.  We also visited the Justice Management Division, EOUSA,
and the Department of Education in Washington, D.C.; CIF in Silver
Spring, MD; and the USAO in the Eastern District of Michigan. 

The Department of Justice provided written comments on a draft of
this report.  These comments are presented and evaluated on page 22
and are reprinted in appendix IV.  We did our work between September
1992 and December 1993 in accordance with generally accepted
government auditing standards. 


--------------------
\1 U.S.  Department of Justice, Office of the Inspector General,
Audit Report:  Private Counsel Debt Collection (Feb.  1992, 92-3). 


SUMMARY OF CRIMINAL AND CIVIL DEBT
CASELOAD AND BALANCE OUTSTANDING
IN USAOS AT THE END OF THE FISCAL
YEARS 1985 THROUGH 1992
========================================================== Appendix II

                                        (Dollars in thousands)


                     Number of                   Number of                   Number of
Fiscal year              cases       Balance         cases       Balance         cases       Balance
----------------  ------------  ------------  ------------  ------------  ------------  ------------
1985                    29,219    $260,319.6        72,393    $887,648.5       101,612  $1,147,968.1
1986                    44,447     369,228.2        69,441     961,044.5       113,888   1,330,272.7
1987                    59,982     515,936.3        57,425     926,117.9       117,407   1,442,054.2
1988                    73,057     704,655.8        46,093     883,579.2       119,150   1,588,235.0
1989                    84,171     968,487.8        44,039   1,025,133.0       128,210   1,993,620.8
1990                    96,455   1,260,382.1        41,366   1,051,678.1       137,821   2,312,060.2
1991                   105,649   1,714,470.7        50,355   1,362,885.8       156,004   3,077,356.5
1992                   110,898  $2,286,911.6        55,727  $1,370,952.6       166,625  $3,657,864.2
----------------------------------------------------------------------------------------------------
Source:  U.S.  Attorney Statistical Reports. 


USAO CRIMINAL AND CIVIL DEBT
CASELOADS
========================================================= Appendix III



                                   Table III.1
                     
                     Number of Criminal Debt Cases Pending in
                      USAOs at the End of Fiscal Years 1985
                                   Through 1992

                                                                          Change
                                                                          1985 -
USAO        1985    1986    1987    1988    1989    1990    1991    1992    1992
--------  ------  ------  ------  ------  ------  ------  ------  ------  ------
Central    1,037   1,255   2,113   2,425   2,496   3,238   3,612   3,762   2,725
 Distric
 t,
 Califor
 nia
Northern     384     631   1,123   1,792   2,046   1,885   2,140   2,590   2,206
 Distric
 t,
 Califor
 nia
District     493     636     677     752     636   1,525   1,662   1,691   1,198
 of
 Columbi
 a
Southern     749   1,194   1,465   3,227   3,378   3,611   3,496   3,623   2,874
 Distric
 t,
 Florida
Eastern    1,203   1,022   1,352   1,550   1,727   1,848   2,171   2,490   1,287
 Distric
 t,
 Michiga
 n
Eastern    1,550   2,167   2,533   2,798   3,411   3,774   3,887   4,372   2,822
 Distric
 t,
 New
 York
Southern   1,423   2,819   4,231   5,601   6,553   7,907   7,958   5,918   4,495
 Distric
 t,
 Texas
================================================================================
Subtotal   6,839   9,724  13,494  18,145  20,247  23,788  24,926  24,446  17,607
All       22,380  34,723  46,488  54,912  63,924  72,667  80,723  86,452  64,072
 other
 USAOs
================================================================================
Total     29,219  44,447  59,982  73,057  84,171  96,455  105,64  110,89  81,679
                                                               9       8
--------------------------------------------------------------------------------
Source:  GAO analysis of EOUSA data. 



                                   Table III.2
                     
                     Civil Debt Cases Pending in USAOs at the
                      End of Fiscal Years 1985 Through 1992

                                                                          Change
                                                                          1985 -
USAO        1985    1986    1987    1988    1989    1990    1991    1992    1992
--------  ------  ------  ------  ------  ------  ------  ------  ------  ------
Central    3,019   3,187   2,262   2,176   2,285   2,300   5,176   4,598   1,579
 Distric
 t,
 Califor
 nia
Northern   1,599   1,534   1,235   1,321   1,341   1,180   2,674   2,359     760
 Distric
 t,
 Califor
 nia
District   1,060   1,097   1,083     604     546     583   1,029   1,126      66
 of
 Columbi
 a
Southern   1,347   1,303   1,166   1,039   1,109   1,181   1,705   2,112     765
 Distric
 t,
 Florida
Eastern    3,349   3,099   2,343   1,912   1,442   1,827   3,706   4,837   1,488
 Distric
 t,
 Michiga
 n
Eastern    3,403   3,916   2,808   1,748     894   1,273   1,906   1,995  (1,408
 Distric                                                                       )
 t,
 New
 York
Southern   2,442   2,667   2,966   2,798   2,778   2,478   3,325   2,667     225
 Distric
 t,
 Texas
================================================================================
Subtotal  16,219  16,803  13,863  11,598  10,395  10,822  19,521  19,694   3,475
All       56,174  52,638  43,562  34,495  33,644  30,544  30,834  36,033  (20,14
 other                                                                        1)
 USAOs
================================================================================
Total     72,393  69,441  57,425  46,093  44,039  41,366  50,355  55,727  (16,66
                                                                              6)
--------------------------------------------------------------------------------
Note:  According to EOUSA, the data shown here on civil cases pending
in the seven pilot USAOs include cases assigned to private counsel
firms. 

Source:  GAO analysis of EOUSA data. 



                                   Table III.3
                     
                     Total Debt Cases Pending in USAOs at the
                      End of Fiscal Years 1985 Through 1992

                                                                          Change
                                                                          1985 -
USAO        1985    1986    1987    1988    1989    1990    1991    1992    1992
--------  ------  ------  ------  ------  ------  ------  ------  ------  ------
Central    4,056   4,442   4,375   4,601   4,781   5,538   8,788   8,360   4,304
 Distric
 t,
 Califor
 nia
Northern   1,983   2,165   2,358   3,113   3,387   3,065   4,814   4,949   2,966
 Distric
 t,
 Califor
 nia
District   1,553   1,733   1,760   1,356   1,182   2,108   2,691   2,817   1,264
 of
 Columbi
 a
Southern   2,096   2,497   2,631   4,266   4,487   4,792   5,201   5,735   3,639
 Distric
 t,
 Florida
Eastern    4,552   4,121   3,695   3,462   3,169   3,675   5,877   7,327   2,775
 Distric
 t,
 Michiga
 n
Eastern    4,953   6,083   5,341   4,546   4,305   5,047   5,793   6,367   1,414
 Distric
 t,
 New
 York
Southern   3,865   5,486   7,197   8,399   9,331  10,385  11,283   8,585   4,720
 Distric
 t,
 Texas
================================================================================
Subtotal  23,058  26,527  27,357  29,743  30,642  34,610  44,447  44,140  21,082
All       78,554  87,361  90,050  89,407  97,568  103,21  111,55  122,48  43,931
 other                                                 1       7       5
 USAOs
================================================================================
Total     101,61  113,88  117,40  119,15  128,21  137,82  156,00  166,62  65,013
               2       8       7       0       0       1       4       5
--------------------------------------------------------------------------------
Source:  GAO analysis of EOUSA data. 




(See figure in printed edition.)Appendix IV
COMMENTS FROM THE DEPARTMENT OF
JUSTICE
========================================================= Appendix III

Now on p.  17. 



(See figure in printed edition.)

Now on p.  17. 



(See figure in printed edition.)

Now on p.  18. 

Now on pp.  10 and 11. 

Now on pp.  2 and 9. 

Now on p.  15. 



(See figure in printed edition.)


Following are GAO's comments on Justice's June 10, 1994, letter. 


   GAO COMMENTS
------------------------------------------------------- Appendix III:1

1. Justice said that we discounted the USAOs cost-to-collections
ratio because 62 percent of the collections were from 14 cases that
produced more than $1 million each and that the exclusion of these
cases from the ratio shows that the USAOs collected at least 4.6
times the amount collected by private counsel firms, at a cost of
less than $2.9 million.  We mentioned these 14 cases in the report to
illustrate our point that because the USAOs worked on the largest
dollar value cases, they had the possibility of securing the largest
dollar collections.  Thus, in comparing the cost effectiveness of the
USAOs and private counsel firms, the use of the cost-to-collections
ratio favored the USAOs. 

2. We agree with Justice that the data in table 3 show that in
comparison to the private counsel firms, the USAOs collected more
from all cases referred and collected from a larger percentage. 
However, the data show that the private counsels closed more newly
referred cases and cases overall.  We included table 3 in the report
to show overall caseload status and collection results and to
illustrate that both USAOs and private counsel firms serve useful
roles in civil debt collection.  However, because the data being
compared are not equal, (i.e., there are differences in the nature
and value of cases) we believe that any comparisons of USAOs and
private counsel firms are inconclusive. 


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix V

GENERAL GOVERNMENT DIVISION,
WASHINGTON, D.C. 

Edward H.  Stephenson, Jr., Assistant Director, Administration of
Justice  Issues
Steven C.  Martin, Assignment Manager
David P.  Alexander, Technical Analyst

OFFICE OF THE GENERAL COUNSEL,
WASHINGTON, D.C. 

Ann H.  Finley, Senior Attorney

DETROIT FIELD OFFICE

Henry L.  Malone, Regional Management Representative
Jerry W.  Aiello, Evaluator-in-Charge
Keith Landrum, Evaluator
William G.  Sievert, Technical Assistance Group Manager
Sharon L.  Fucinari, Technical Analyst

RELATED GAO PRODUCTS

National Fine Center:  Expectations High, but Development Behind
Schedule (GAO/GGD-93-95, Aug.  10, 1993). 

Justice Department:  Litigation and Collection of Civil Fines and
Penalties (GAO/GGD-88-23FS, Jan.  7, 1988). 

Justice Department:  Impediments Faced in Litigating and Collecting
Debts Owed the Government (GAO/GGD-87-7BR, Oct.  15, 1986). 

Debt Collection:  Billions Are Owed While Collection and Accounting
Problems Are Unresolved (GAO/AFMD-86-39, May 23, 1986). 

Justice Department:  Improved Management Processes Would Enhance
Justice's Operations (GAO/GGD-86-12, Mar.  14, 1986). 

Financial Integrity:  Justice Made Progress but Further Improvements
Needed (GAO/GGD-86-9, Oct.  31, 1985). 

After the Criminal Fine Enforcement Act of 1984--Some Issues Still
Need to Be Resolved (GAO/GGD-86-02, Oct.  10, 1985). 
