Summary

Pursuant to a congressional request, GAO examined the procedures that Federal agencies use for the collection of audit disallowances. This is the third in a series of reports on how Government agencies follow up and resolve findings identified through the audit process. This report concentrated on the debt collection phase of the audit resolution process which begins once questioned costs are disallowed.

GAO found that Federal agencies are doing a poor job of managing and collecting audit-related debts owed by contractors and grantees such as State and local governments. Most agencies do not know the total amount owed to them; nor do they collect debts promptly or charge interest, as required, when the payments are late. Additionally, when debts are paid, agencies usually do not know whether the amounts received have been taken from their own or other Federal programs. Finally, some agencies are inappropriately forgiving millions of dollars of audit-related debts without a reasonable collection effort as required by the Federal Claims Collection Standards.