Anti-Car Theft Act: Issues Concerning Additional Federal Funding of
Vehicle Title System (Letter Report, 08/13/1999, GAO/GGD-99-132).

Pursuant to a congressional request, GAO reviewed the Department of
Justice's (DOJ) development and implementation of the National Motor
Vehicle Title Information System (NMVTIS), focusing on: (1) the status
of NMVTIS; and (2) whether DOJ had evaluated NMVTIS' expected costs and
benefits to ensure that additional federal investment in NMVTIS is
justified.

GAO noted that: (1) DOJ has not evaluated NMVTIS' expected life-cycle
costs and benefits to ensure that additional federal funding is
justified; (2) the Clinger-Cohen Act of 1996 and best practices used by
public and private organizations to manage information technology
investments suggest that such an evaluation will provide an analytical
basis for informed investment decisions; (3) as of March 1999, the
American Association of Motor Vehicle Administrators (AAMVA) expected
the development and implementation of NMVTIS to cost about $34 million;
(4) AAMVA is expected to update this estimate when its seven-state test
of NMVTIS is finished; (5) AAMVA estimated that test would be completed
within the first quarter of calendar year 2000; (6) through FY 1999,
Congress has provided DOJ and the Department of Transportation with
about $8 million of an expected $22 million federal investment in
NMVTIS; (7) the states and AAMVA and its contractors would be expected
to provide the remaining $12 million; (8) NMVTIS was designed to allow
users to electronically validate an existing vehicle title and
title-related information; (9) however, a potential barrier to
electronically validating titles and title-related information could be
the lack of full participation by all state departments of motor
vehicles; and (10) although 43 states of the 47 states responding to
GAO's survey thought that they could implement NMVTIS and 32 states of
the 40 nonparticipating states had expressed an interest in doing so, 27
of the 47 states were concerned about how they would fund NMVTIS.

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

 REPORTNUM:  GGD-99-132
     TITLE:  Anti-Car Theft Act: Issues Concerning Additional Federal
	     Funding of Vehicle Title System
      DATE:  08/13/1999
   SUBJECT:  Larceny
	     Cost effectiveness analysis
	     Federal/state relations
	     Motor vehicles
	     Law enforcement
	     Life cycle costs
	     Information systems
	     Federal aid for criminal justice
IDENTIFIER:  DOT National Motor Vehicle Title Information System

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    United States General Accounting Office GAO               Report
    to the Chairman, Subcommittee on Consumer Affairs, Foreign
    Commerce and Tourism, Committee on Commerce, Science, and
    Transportation, U.S. Senate August 1999       ANTI-CAR THEFT ACT
    Issues Concerning Additional Federal Funding of Vehicle Title
    System GAO/GGD-99-132 United States General Accounting Office
    General Government Division Washington, D.C.  20548 B-281671
    August 13, 1999 The Honorable John Ashcroft Chairman, Subcommittee
    on Consumer Affairs, Foreign Commerce and Tourism Committee on
    Commerce, Science, and Transportation United States Senate Dear
    Mr. Chairman: Congress passed the Anti-Car Theft Act of 19921 in
    response to what it considered to be the nation's number one
    property crime-motor vehicle theft. Title II of the act required
    the designation or establishment of a National Motor Vehicle Title
    Information System (NMVTIS). The act requires that NMVTIS, among
    other things, allow users to instantly and reliably validate out-
    of-state motor vehicle titles for states that are retitling a
    vehicle and provide a history of the vehicle being retitled (e.g.,
    the vehicle's previously recorded odometer reading and any salvage
    information). The Department of Justice is responsible for NMVTIS'
    development and implementation. The American Association of Motor
    Vehicle Administrators (AAMVA)2 has a cooperative agreement with
    Justice to develop and test NMVTIS. AAMVA is working with seven
    states3 to have them develop and test the capability to interface
    their motor vehicle titling systems with NMVTIS. In your letter
    dated July 23, 1998, you expressed concern about the development
    of NMVTIS. Accordingly, we agreed with your office to determine
    (1) the current status of NMVTIS and (2) whether Justice had
    evaluated NMVTIS' expected costs and benefits to ensure that
    additional federal investment in NMVTIS is justified. We
    interviewed Justice and AAMVA officials and reviewed NMVTIS-
    related information regarding NMVTIS' development, operational
    testing, and cost estimate determination. We discussed with these
    officials NMVTIS' design and implementation. Also, we visited with
    officials in Virginia and Arizona, 1 P.L. 102-519, Oct. 25, 1992,
    49 U.S.C. Chapter 305, 311. 2 AAMVA is a voluntary, nonprofit, tax
    exempt, educational association representing U.S. and Canadian
    officials who are responsible for the administration and
    enforcement of motor vehicle laws. 3 The seven states are Arizona,
    Florida, Indiana, Kentucky, Massachusetts, New Hampshire, and
    Virginia. We use the term "states" to include the 50 states and
    the District of Colombia. Page 1
    GAO/GGD-99-132 National Motor Vehicle Title Information System B-
    281671 which are participating in NMVTIS and are in different
    stages of progress in developing the capability to interface their
    state motor vehicle titling systems with NMVTIS, and Texas and the
    District of Columbia, which are currently not participating in
    NMVTIS. We surveyed the 4 states that we visited and the 47
    states4 that we did not visit to obtain their views regarding
    NMVTIS. See appendix I for a more detailed discussion of our
    objectives, scope, and methodology, including our state survey. We
    conducted our work between September 1998 and June 1999 in
    accordance with generally accepted government auditing standards.
    We requested comments on a draft of this report from Justice and
    AAMVA officials. Their comments are discussed in the appropriate
    sections of the report and near the end of this letter. Justice
    has not evaluated NMVTIS' expected life-cycle costs and benefits
    Results in Brief    to ensure that additional federal funding is
    justified. The Clinger-Cohen Act of 19965 and best practices used
    by public and private organizations to manage information
    technology investments suggest that such an evaluation will
    provide an analytical basis for informed investment decisions. As
    of March 1999, AAMVA expected the development and implementation
    of NMVTIS to cost about $34 million. AAMVA is expected to update
    this estimate when its seven-state test of NMVTIS is finished.
    AAMVA estimated that test would be completed within the first
    quarter of calendar year 2000. Through fiscal year 1999, Congress
    has provided Justice and the Department of Transportation (DOT)
    with about $8 million of an expected $22 million federal
    investment in NMVTIS.6 The states and AAMVA and its contractors
    would be expected to provide the remaining $12 million. NMVTIS was
    designed to allow users to electronically validate an existing
    vehicle title and title-related information. However, a potential
    barrier to electronically validating titles and title-related
    information could be the lack of full participation by all state
    departments of motor vehicles. Although 43 states of the 47 states
    responding to our survey thought that 4 We received responses from
    the 4 states that we visited and from 43 of the 47 remaining
    states. The responses were from all 7 participating states and 40
    nonparticipating states. 5 The Clinger-Cohen Act of 1996 (P.L.
    104-106) generally directs agencies to consider alternative
    solutions to information technology problems, to perform life-
    cycle cost benefits analyses, and to select the most appropriate
    alternative. The Clinger-Cohen Act does not directly apply to
    NMVTIS, since it is being developed and operated by a third party,
    AAMVA. However, the principles of Clinger- Cohen provide an
    effective framework of information technology investment
    management. 6 DOT was initially responsible for NMVTIS. Page 2
    GAO/GGD-99-132 National Motor Vehicle Title Information System B-
    281671 they could implement NMVTIS and 32 states of the 40
    nonparticipating states had expressed an interest in doing so, 27
    of the 47 states were concerned about how they would fund NMVTIS.
    We are recommending in this report that the Attorney General (1)
    perform a life-cycle cost benefit analysis to determine if
    additional federal investment in NMVTIS is justified and (2)
    provide additional federal funds for NMVTIS only if such funding
    is supported by the analysis. The Anti-Car Theft Act was designed
    to reduce automobile theft by making Background      the selling
    of stolen cars and parts more difficult. According to 1992
    congressional testimony, thieves turned stolen cars into money in
    three ways. They (1) took the stolen car to a chop shop where the
    car was dismantled and its parts were sold as replacement parts
    for other vehicles, (2) obtained an apparently valid title for the
    car and then sold it to a third party (the area that NMVTIS is
    expected to address), or (3) exported the vehicle for sale abroad.
    In 1995, the National Insurance Crime Bureau (NICB) estimated that
    the value of stolen vehicles, which are subsequently titled each
    year, amounted to over $240 million.7 NICB estimated that the loss
    associated with total vehicle theft and fraud was in excess of
    $7.6 billion, annually.8 The Anti-Car Theft Act originally
    required DOT to develop a national motor vehicle title information
    system by designating an existing system or establishing a new
    system. The act was amended by the Anti-Car Theft Improvements Act
    of 1996, which, among other things, transferred responsibility for
    development and implementation of NMVTIS from DOT to Justice. In
    an August 22, 1996, memorandum, the Deputy Attorney General
    delegated responsibility for implementing the NMVTIS project to
    the Federal Bureau of Investigation (FBI). According to Justice,
    the FBI's role with respect to NMVTIS is to *  ensure that the
    system meets the intent of the act as it pertains to the FBI and
    law enforcement activity; *  ensure that the system meets the law
    enforcement needs of state, local, and federal law enforcement
    agencies; 7 NICB is a private, nonprofit organization that
    provides investigative resources and information to its membership
    of property and casualty insurance companies. See National Motor
    Vehicle Title Information System (NMVTIS): Fraud Cost Analysis
    Report, National Insurance Crime Bureau, (1995). 8 According to an
    NICB official, this estimate does not include losses due to
    odometer fraud. Page 3
    GAO/GGD-99-132 National Motor Vehicle Title Information System B-
    281671 *  provide guidance to AAMVA, the system administrator,
    concerning law enforcement issues and items related to system
    testing and national implementation; and *  analyze the issue of
    the use and dissemination of vehicle theft data. Justice's Office
    of Justice Programs provides funding for NMVTIS. According to
    Justice and DOT officials, Congress has provided, through
    appropriation acts and congressional guidance in conference
    reports, about $8 million to conduct the test of NMVTIS during
    fiscal years 1996 through 1999. DOT awarded $890,000 in fiscal
    year 1996 to AAMVA. After receiving responsibility for NMVTIS in
    1996, Justice awarded $1 million in fiscal year 1997 Byrne
    Discretionary Grant Program funding to AAMVA. According to AAMVA,
    it has passed the $1.89 million it has received from DOT and
    Justice to the seven participating states. In June 1999, Justice
    awarded $2.8 million in fiscal year 1998 funds to AAMVA to (1)
    continue funding the participating states, (2) add new states, and
    (3) recover some of its costs as a technical assistance provider
    to the seven participating states. According to AAMVA, $2 million
    is for the states and $800,000 is for AAMVA. Justice added that
    AAMVA cannot draw on these funds until a memorandum of
    understanding between it and the FBI is executed. The conference
    report accompanying the fiscal year 1999 appropriations states
    that Justice is to spend $3.15 million for NMVTIS.9 NMVTIS is
    being designed and tested by AAMVA and is intended to, if fully
    NMVTIS' Potential Benefits      implemented, deter trafficking in
    stolen vehicles by making it harder for thieves to obtain
    seemingly valid titles for stolen vehicles by retitling them in
    another state. This is because, using NMVTIS, the copy of the
    motor vehicle title presented for retitling would be
    electronically validated against the database of the state that
    originally titled the vehicle. Thus, NMVTIS would help prevent
    thieves from obtaining good titles to vehicles that they intend to
    resell. In addition, when the title is reissued in another state,
    NMVTIS would electronically cancel the motor vehicle title in the
    originating state. Presently, retitling between states is done
    manually, with states mailing information about a vehicle being
    retitled. According to AAMVA officials, NMVTIS would also prevent
    fraudulent use of duplicate motor vehicle titles. 9 H.R. Conf.
    Rep. 105-825 (1998) accompanying the Departments of Commerce,
    Justice and State, the Judiciary, and Related Agencies
    Appropriations Act, 1999, P.L. 105-277. Page 4
    GAO/GGD-99-132 National Motor Vehicle Title Information System B-
    281671 NMVTIS is also intended to protect prospective purchasers
    by accomplishing the following: *  Make "title washing" more
    difficult. Title washing is a type of title fraud in which vehicle
    brand history is removed from the title by retitling the vehicle
    in another state that does not carry a particular brand. This is
    done to make it easier to pass the vehicle to a third party who is
    otherwise unaware of the brand.10 *  Provide access to brand data
    that would help purchasers to determine the market value and
    safety of the vehicle prior to purchase. *  Provide odometer
    readings, which would help purchasers determine if the vehicle
    mileage has been improperly rolled back to a lower number. AAMVA
    expects titling states, law enforcement agencies, car dealers,
    insurance companies, and individual prospective purchasers to use
    NMVTIS. According to AAMVA, private companies and individuals
    would be able to access NMVTIS to verify titles and check vehicle
    history information, such as previous odometer readings and title
    brands. However, private companies and individuals currently do
    not have access to the stolen vehicle file in NMVTIS. According to
    AAMVA officials, AAMVA is working with Justice and other law
    enforcement officials who are involved with overseeing and
    managing the system containing stolen vehicle data to see if these
    data can be made available to private companies and individuals.
    The act authorized system users to be charged a fee for obtaining
    data. AAMVA said that it is constructing the system so that state
    departments of motor vehicles and law enforcement agencies are to
    be exempt from the fee. According to AAMVA officials, no fees have
    been charged to any user, as of July 20, 1999. They added that
    AAMVA and its contractors have been absorbing all costs associated
    with NMVTIS' operations and no federal funds have been used to
    support its operations, as of July 20, 1999. While the U.S.
    Customs Service did not provide direct input or coordination to
    Justice or AAMVA during NMVTIS' development, it 10 A vehicle's
    "brand" indicates that a qualifier is attached to the title. This
    qualifier indicates some imperfection in the vehicle. Examples
    include vehicles that have a junk or salvage status or have had
    water damage from a flood. At least one state has a
    "reconstructed" brand that indicates a salvage vehicle that has
    been rebuilt. NMVTIS uses a uniform set of codes to interpret
    various types of brands, which are often different in each state.
    Page 5                                     GAO/GGD-99-132 National
    Motor Vehicle Title Information System B-281671 anticipates
    realizing many benefits from NMVTIS when it becomes fully
    operational. Customs expects to be able to connect its computer
    systems to NMVTIS. Customs also expects that NMVTIS will be able
    to provide it with a greater ability to identify and detect stolen
    vehicles before they are exported from the United States.
    According to AAMVA officials, AAMVA expects to work with Customs
    to test NMVTIS at two ports. AAMVA's design of NMVTIS includes the
    following four files: NMVTIS' Design, Testing, and Evaluation
*  A theft file, which contains information on all vehicles
    reported stolen nationwide and is a "mirror" image of the FBI's
    national stolen vehicle database from its National Crime
    Information Center.11 The FBI pointed out that the act does not
    mandate the use of Center data and the use of the Center mirror
    image was approved only for the seven participating states. *  A
    brand file, which maintains data on vehicle brands from various
    sources, including insurance companies and junk and salvage yard
    operators. *  A manufacturers' certificate of origin (MCO) file,
    which contains vehicle origination information from the
    manufacturer, such as make, model, or color. *  A vehicle
    identification number (VIN) pointer file, which electronically
    directs a NMVTIS user to the state where the vehicle was last
    titled and would be used to validate the previous title and obtain
    various vehicle history information. NICB, which is an AAMVA
    contractor, has developed and is maintaining the theft file, which
    it received from the National Crime Information Center. AAMVA will
    provide the brand file. The MCO file and VIN pointer file have
    been developed and are being maintained by The Polk Company, which
    is also an AAMVA contractor.12 11 Information on stole vehicles is
    contained in the National Crime Information Center. The center is
    a computerized criminal justice information system in which
    federal and state law enforcement agencies maintain and share
    millions of records in 14 files, including files on fugitives,
    missing persons, and stolen vehicles. 12 The Polk Company is a
    privately held, for-profit company that has developed national
    information systems and information products for the motor vehicle
    marketplace. Page 6                                     GAO/GGD-
    99-132 National Motor Vehicle Title Information System B-281671 To
    test NMVTIS in operation, AAMVA agreed with seven states to have
    them develop their computer software to interface with NMVTIS. The
    test in the seven participating states is to allow for an
    evaluation of the *  technical feasibility of NMVTIS, *  degree of
    success in meeting the 1992 Act's requirements, *  areas that
    would benefit from federal rulemaking, *  estimated costs of
    implementation and operation, and *  time it will take the
    remaining states to develop interfaces to NMVTIS. As of March 18,
    1999, the seven participating states were developing the
    capability to interface with NMVTIS files and were in various
    stages of testing the interface. AAMVA expects completion of the
    test within the first quarter of calendar year 2000 and its
    evaluation of the results shortly thereafter. AAMVA has prepared
    an evaluation plan for testing NMVTIS. The evaluation plan
    includes an assessment of NMVTIS' ability to meet the act's
    requirements. According to AAMVA officials, AAMVA expected to
    complete its preliminary evaluation of NMVTIS by the end of July
    1999. AAMVA's March 19, 1999, cost estimate for a fully
    implemented NMVTIS is AAMVA's Estimated      $33.9 million-that
    is, $24.2 million for states to develop new systems or Cost of
    NMVTIS         adapt existing ones to link with NMVTIS and $9.7
    million for AAMVA and its contractors to develop and implement
    NMVTIS. AAMVA expects the federal government to fund $22.2
    million, which is to be used to offset $16.5 million of the
    states' costs and to reimburse AAMVA for $5.7 million in its role
    as the technical assistance provider. AAMVA and its contractors
    will be responsible for the additional $4 million. AAMVA expects
    the states to fund their remaining costs ($7.7 million). NMVTIS'
    operation and maintenance costs will be the responsibility of the
    states and AAMVA and its contractors. As previously mentioned, the
    states and AAMVA and its contractors can charge system users a fee
    for information provided.13 According to AAMVA, its estimate of
    the costs the states would incur is based on the participating
    states' actual costs plus other factors, such as inflation. AAMVA
    estimated that the development costs for other states would
    average about $425,000 per state. In developing its estimate,
    AAMVA stated that it assumed that the 7 participating states'
    costs would be representative of the nonparticipating states, and
    that the other 44 states would participate in NMVTIS. According to
    AAMVA officials, Indiana, 13 States and law enforcement agencies
    are exempt from fees. Page 7
    GAO/GGD-99-132 National Motor Vehicle Title Information System B-
    281671 Kentucky, and Virginia have fully implemented NMVTIS.14 The
    other four states may continue to incur additional unanticipated
    costs, which could impact AAMVA's projected cost estimate for the
    nonparticipating states. As previously discussed, AAMVA expects to
    report on the results of the participating states' efforts to
    interface their titling systems with NMVTIS in calendar year 2000.
    At that time, on the basis of the updated costs of 7 states and
    contractors, as well as its own costs, an AAMVA official said that
    AAMVA will revise the projected costs for the 44 nonparticipating
    states and NMVTIS' total cost. Assuming that AAMVA's test of
    NMVTIS proves that NMVTIS will work as Barriers to Realizing
    designed and will provide the benefits intended by the Anti-Car
    Theft Act, NMVTIS' Potential        those benefits will be
    diminished if all states do not participate in NMVTIS. Of the 40
    nonparticipating states responding to our survey, 32 states said
    Benefits                 that they were interested in
    participating in NMVTIS. According to 27 of the 47 responding
    states, the lack of funding is a major reason for
    nonparticipation. In addition, there are technical issues that may
    limit the effectiveness of NMVTIS, and Justice has raised issues
    about AAMVA's accounting deficiencies regarding the use of the
    federal funds. The Anti-Car Theft Act did not mandate that all
    states participate in Less Than All States'    NMVTIS. However,
    the National Highway Transportation Safety Participation
    Administration has reported that all states need to participate in
    NMVTIS to ensure the act's effectiveness in preventing title
    fraud. AAMVA and NICB have also stated that less than full
    participation by all states could make the vehicle history
    information, including title brands, incomplete since the
    nonparticipating states would not be providing data on-line. Also,
    instant title verification available from the VIN pointer file, or
    any vehicle history information maintained by nonparticipating
    states (such as vehicle title brands), would not be available
    through NMVTIS. AAMVA officials said that periodic updates of the
    VIN pointer and brand files with data from nonparticipating states
    are planned. These updates would provide some nonparticipating
    state data to those files, although those files would not be as
    effective as they could be if all states were participating in
    NMVTIS. 14 According to AAMVA officials, a state has implemented
    NMVTIS if it can perform all NMVTIS-related transactions. Page 8
    GAO/GGD-99-132 National Motor Vehicle Title Information System B-
    281671 We surveyed all 50 states and the District of Columbia to
    determine their interest in participating in NMVTIS and their
    views on NMVTIS. We found the following: *  43 of the 47 total
    respondents (participants and nonparticipants) thought NMVTIS
    could be implemented in their state; *  32 of 40 nonparticipating
    states responding to our survey expressed interest in
    participating in NMVTIS, and, of the 8 other states, 2 said they
    were planing to express interest in participating and 6 said
    resources or other priorities precluded their participation; and *
    27 of 47 states indicated that funding or resources could be a
    barrier to their successful implementation of NMVTIS. An AAMVA
    official believes that federal funding to states would help
    alleviate the funding barriers. He told us that 23 states had
    expressed their written interest to AAMVA about participating in
    NMVTIS. AAMVA officials added that they would not ask additional
    states to commit to participate in NMVTIS until additional federal
    funding becomes available. According to AAMVA officials,
    nonparticipating states would not be able to use NMVTIS to
    immediately verify out-of-state vehicle titles or obtain vehicle
    history information, including any brands, prior to issuing a new
    title. In addition, AAMVA officials told us that, when a state
    that is participating in NMVTIS retitles a vehicle previously
    titled in another state, it could not electronically and instantly
    cancel the old title if that other state is not participating in
    NMVTIS. According to AAMVA officials, participating states would
    have to rely on a mailed notification they receive from the
    nonparticipating state that issued the old title. The Anti-Car
    Theft Act, as amended, required Justice to report to Congress by
    October 1998 on states' participation in NMVTIS and barriers to
    state participation. As of April 22, 1999, FBI officials said that
    the report is in the process of being completed. In commenting on
    a draft of this report, AAMVA said that on the basis of its
    experiences, states become more motivated to participate in the
    system as states in close proximity to them implement the system.
    It added that, on the basis of discussions and increased interest,
    it expects all states to participate in NMVTIS within a reasonable
    time period. Page 9                GAO/GGD-99-132 National Motor
    Vehicle Title Information System B-281671 Three of the seven
    participating states indicated that they are experiencing
    Duplicate VINs             problems with duplicate VINs. AAMVA
    officials told us that duplicate VINs are caused by data entry
    errors, fraudulent title documents, or states that did not cancel
    their title record when the vehicle was retitled in a new state.
    AAMVA has developed procedures for overcoming the problem relating
    to duplicate VINs in the pointer file. While VINs may be
    duplicated in the pointer file, the states of title and the title
    numbers will not be duplicated. According to AAMVA officials, the
    states and AAMVA can use these additional identifiers to
    distinguish the vehicles with duplicate VINs and correct the
    problem by manually matching the correct title of the vehicle to
    the correct VIN. An AAMVA official said that the participating
    states and AAMVA are currently working on a solution to the
    duplicate VIN problem with respect to the theft and brand files.
    This is necessary because the NMVTIS theft and brand files have no
    other identifiers to distinguish vehicles with the same VIN. Also,
    according to AAMVA officials, as more states join NMVTIS, the
    duplicate VINs would be eliminated through troubleshooting
    efforts. AAMVA believes that, eventually, duplicate VINs would
    become a rare occurrence. As of May 14, 1999, the MCO file in
    NMVTIS was incomplete. According to Incomplete MCO File
    AAMVA officials, the MCO file did not contain data from all
    manufacturers. AAMVA and The Polk Company are presently working on
    getting all manufacturers to provide information. According to
    AAMVA officials, the major domestic vehicle manufacturers are now
    reporting to the MCO file, and The Polk Company is working on
    getting foreign manufacturers to also provide information.
    According to AAMVA officials, states believe that the MCO file is
    of value because electronic verification of MCO data would be
    handled like title data. They added that adding the MCO data is
    expected to take time because the MCO data are not required by
    law. On January 28, 1999, Justice audited AAMVA to determine if
    AAMVA was AAMVA Needs to Address     properly accounting for the
    receipt and expenditure of fiscal year 1997 Accounting
    Deficiencies    funds. Justice reported that AAMVA (1) allowed
    excessive consultant fees, which exceeded the maximum allowable
    amount by $89,371; (2) could not provide supporting documentation
    for payments totaling $300,000 to Arizona; (3) did not maintain
    adequate support for amounts claimed on their quarterly financial
    reports; and (4) did not adequately administer contractual
    arrangements with the states. Justice awarded $2.8 million in
    fiscal year 1998 funds to AAMVA. However, release of the funds is
    Page 10                 GAO/GGD-99-132 National Motor Vehicle
    Title Information System B-281671 contingent on AAMVA's
    satisfactory resolution of deficiencies contained in the Justice
    audit report. The impact of Justice's decision to hold up the
    release of the funds on AAMVA's timetable for full implementation
    of NMVTIS is not known. According to Justice, most of these
    deficiencies have been resolved; however, the Office of Justice
    Programs will not release more funds until all deficiencies have
    been resolved. According to AAMVA officials, as of July 27, 1999,
    AAMVA has provided all the required documentation to Justice and,
    therefore, in its opinion, the accounting issues should not be an
    impediment to the release of the funds. Justice has not evaluated
    NMVTIS' expected life-cycle costs and benefits Justice Has Not
    to ensure that additional federal funding is justified. The
    Clinger-Cohen Act Determined If NMVTIS of 1996 and the best
    practices used by public and private organizations to manage
    information technology investment would provide an analytical
    Warrants Additional             basis for informed investment
    management decisions. Federal Investment Neither the FBI nor the
    Office of Justice Programs has performed the analysis. Justice
    assigned responsibility for overseeing development of NMVTIS to
    the FBI, but FBI officials told us their assigned responsibility
    did not extend to life-cycle cost benefit analysis and
    economically justifying NMVTIS. The FBI officials agreed, however,
    that such an analysis should be done. As previously discussed,
    AAMVA will evaluate the results of the efforts of the seven
    participating states to interface with NMVTIS. Its evaluation
    should provide important data that Justice should include in its
    life-cycle cost benefit analysis. While AAMVA's evaluation will be
    limited to the seven participating states, Justice should use the
    results to assess the ability of the states to address the
    problems initially identified (e.g., duplicate VINs and incomplete
    MCO file). In addition, Justice could analyze the estimated costs
    to the federal government by using the current costs of the seven
    states. In estimating the benefits from NMVTIS, Justice will have
    to determine the likelihood that the 44 nonparticipating states
    will join NMVTIS. If less than full state participation is
    expected, Justice will then have to assess the impact on the
    ability of NMVTIS to provide the expected benefits. Despite not
    having done the analysis to determine if NMVTIS is worth continued
    federal investment, Justice is planning to fund additional states
    after the accounting deficiencies are addressed. AAMVA does not
    expect the final evaluation of the results from the participating
    states to be Page 11               GAO/GGD-99-132 National Motor
    Vehicle Title Information System B-281671 available before early
    in calendar year 2000. AAMVA's plans call for moving forward with
    implementation this year. AAMVA pointed out that the preliminary
    evaluation, which will include an evaluation of the system design
    feasibility, is due at the end of July 1999. AAMVA plans to (1)
    add three or four states to NMVTIS and provide federal funds to
    the states for their interface with NMVTIS, (2) begin a test with
    law enforcement users, and (3) visit seven additional states to
    prepare them for interfacing with NMVTIS. AAMVA plans to add the
    remaining states between fiscal years 2000 and 2003. AAMVA
    anticipates a fully implemented NMVTIS by 2004, which will include
    all 50 states and the District of Columbia in a nationwide system.
    The results of AAMVA's test of NMVTIS may provide data for Justice
    to Conclusions                    determine whether NMVTIS, as
    designed, could achieve the benefits envisioned in the Anti-Car
    Theft Act. However, more federal funding will be needed to fully
    implement NMVTIS. The full benefits may not be achieved if some
    states do not participate in NMVTIS. Therefore, we believe it
    would be unwise to commit additional federal funding until (1)
    AAMVA has completed the preliminary evaluation of the current test
    and (2) Justice has analyzed whether the benefits of NMVTIS, as
    designed, and less-than-full participation in NMVTIS would justify
    the continued federal investment. We recommend that the Attorney
    General (1) perform a life-cycle cost Recommendations
    benefit analysis to determine if additional federal investment in
    AAMVA's design of NMVTIS is justified and (2) provide additional
    federal funds for NMVTIS only if such funding is supported by the
    analysis. Justice and AAMVA provided their comments on a draft of
    this report on Agency Comments and July 22 and 20, 1999,
    respectively. Justice and AAMVA provided technical Our Evaluation
    comments, which we included where appropriate. Justice officials
    generally concurred with the draft report. They said that the
    Office of Justice Programs agrees that life-cycle cost benefit
    analysis is a good idea and will perform this analysis using funds
    from the fiscal year 1999 earmark. Justice officials said that to
    maintain the ongoing development of NMVTIS and to determine
    whether it merits additional funding before an evaluation can be
    undertaken in 2000, the Office of Justice Programs has stipulated
    that AAMVA must demonstrate that three of the participating states
    are fully operational before funds may be obligated for new
    states. In addition, the Office of Justice Programs will not
    obligate funds from the 1999 earmark for further expansion of
    NMVTIS until the life-cycle cost benefit analysis has been
    completed. Justice officials said that, under the Page 12
    GAO/GGD-99-132 National Motor Vehicle Title Information System B-
    281671 proposed memorandum of understanding, the FBI would
    participate with AAMVA in the evaluation of the analysis of the
    seven participating states. AAMVA officials said that our
    recommendation to put the system on hold until a life-cycle cost
    benefit analysis can be done would interrupt the system in each
    state, delay new states' implementations, and interrupt the
    momentum of the system and result in increased costs. AAMVA
    recommended that its preliminary report serve as justification for
    continued federal funding until Justice completes its analysis.
    AAMVA expects that the preliminary results will show NMVTIS'
    feasibility. We recognize that time will be needed to perform a
    life-cycle cost benefit analysis, and that such an analysis may
    cause some delay in NMVTIS' implementation, which may contribute
    to additional costs. However, using additional federal funds
    without such an analysis could result in much greater costs if
    NMVTIS were to prove to be ineffective. As agreed with your
    office, unless you publicly announce its contents earlier, we plan
    no additional distribution of this report until 30 days from its
    date. At that time, we will send copies to Senator Richard H.
    Bryan, Ranking Minority Member of this Subcommittee, and to
    Senator Robert C. Byrd, Senator Orrin G. Hatch, Senator Patrick J.
    Leahy, and Senator Ted Stevens and Representative John Conyers,
    Jr., Representative Henry J. Hyde, Representative David Obey, and
    Representative C.W. Bill Young in their capacities as Chairman or
    Ranking Minority Member of Senate or House Committees. We are also
    sending copies of this report to the Honorable Jacob J. Lew,
    Director, OMB; the Honorable Janet Reno, the Attorney General; and
    representatives of AAMVA; NICB; and The Polk Company. We will also
    make copies available to others upon request. Page 13
    GAO/GGD-99-132 National Motor Vehicle Title Information System B-
    281671 If you have any questions regarding this letter, please
    contact me or James M. Blume at (202) 512-8777. Key contributors
    to this assignment were Ronald J. Salo, Michael H. Harmond, and
    Anne M. Rhodes-Kline. Sincerely yours, Norman J. Rabkin Director,
    Administration of Justice Issues Page 14             GAO/GGD-99-
    132 National Motor Vehicle Title Information System Page 15
    GAO/GGD-99-132 National Motor Vehicle Title Information System
    Contents 1 Letter 18 Appendix I Objectives, Scope, and Methodology
    Abbreviations AAMVA       American Association of Motor Vehicle
    Administrators DOT         Department of Transportation FBI
    Federal Bureau of Investigation MCO         manufacturer's
    certificate of origin NICB        National Insurance Crime Bureau
    NMVTIS      National Motor Vehicle Title Information System VIN
    vehicle identification number Page 16            GAO/GGD-99-132
    National Motor Vehicle Title Information System Page 17
    GAO/GGD-99-132 National Motor Vehicle Title Information System
    Appendix I Objectives, Scope, and Methodology Our objectives were
    to (1) determine the current status of the National Motor Vehicle
    Title Information System (NMVTIS) and (2) determine whether
    Justice had evaluated NMVTIS' expected costs and benefits to
    ensure that additional federal investment in the system is
    justified. We analyzed NMVTIS cost data and expected benefits and
    the barriers that could prevent the benefits from being fully
    realized. In doing our analysis, we relied on the Clinger-Cohen
    Act of 1996 guidance for criteria regarding an effective framework
    for information technology investment management. We spoke with
    officials from the Department of Justice, the Federal Bureau of
    Investigation (FBI), the American Association of Motor Vehicle
    Administrators (AAMVA), and AAMVA's two contractors-The Polk
    Company and the National Insurance Crime Bureau.  Specifically, we
    discussed their efforts regarding the life-cycle process of system
    design and implementation consistent with best practices in both
    the public and private sectors of information technology
    investments. We also met with officials from two of the seven
    participating states (Arizona and Virginia) regarding their
    progress in the NMVTIS test. We selected Arizona and Virginia
    because they had completed or were expected to complete
    programming of their titling processes in preparation for
    beginning the test of NMVTIS. In addition to Arizona and Virginia,
    we met with officials from two nonparticipating states, Texas and
    the District of Columbia, which we selected primarily because of
    their proximity to the two participating states we visited. We
    obtained AAMVA's cost estimate for a fully implemented system in
    all 50 states and the District of Columbia and their basis for
    that estimate. We obtained, from Justice and AAMVA officials,
    federal funding appropriated as well as anticipated funding. We
    also obtained from AAMVA officials the distribution of the federal
    funding to seven states. We spoke with officials from AAMVA and
    its contractors and Arizona and Virginia about the proposed fee
    structure to recover NMVTIS operational costs in addition to their
    development costs for the system. These state officials were
    selected because they were in different stages of developing the
    capability of interfacing with NMVTIS. To identify the expected
    benefits of NMVTIS and potential barriers to achieving those
    benefits, we contacted officials from Justice, the FBI, AAMVA, and
    the states.  These officials provided us with their views on the
    benefits to be derived from the system's implementation and their
    individual perspectives on barriers that may prevent NMVTIS from
    realizing these benefits. Page 18               GAO/GGD-99-132
    National Motor Vehicle Title Information System Appendix I
    Objectives, Scope, and Methodology We surveyed officials in the 50
    states and the District of Columbia to obtain their views on
    NMVTIS-related issues.   These officials were responsible for the
    titling of motor vehicles in their states.  The survey addressed
    the states' (1) willingness to participate in NMVTIS, ability to
    implement NMVTIS, and current titling capabilities; (2) expected
    costs; (3) expected benefits of the system; and (4) barriers
    affecting states' decisions to join the system.  We received
    responses from the 7 participating states and from 40 of the 44
    nonparticipating states. We conducted our work between September
    1998 and June 1999 in accordance with generally accepted
    government auditing standards. We requested comments on a draft of
    this report from Justice and AAMVA officials.  Their comments are
    discussed near the end of the letter. Page 19
    GAO/GGD-99-132 National Motor Vehicle Title Information System
    Page 20    GAO/GGD-99-132 National Motor Vehicle Title Information
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