FROM THE OFFICE OF PUBLIC AFFAIRS

Good morning. I am pleased to be here today andto have this opportunity to discuss the Department of theTreasury’s actions to implement the Debt Collection Improvement Act of 1996 (DCIA).

First, I would like to thank the Chairman, theRanking Minority Member and the other members of thisSubcommittee for their support of this legislation and their hardwork for its passage.

The Debt Collection Improvement Act of 1996,through the establishment of new and improved debt collectiontools, has redefined how Federal agencies should collect theirdelinquent debts. The provisions of the DCIA will make Governmentdebt collection more efficient and effective, resulting inimproved fiscal integrity of the United States, while preservingthe due process rights of our citizens and treating debtorsfairly.

This legislation had strong support in Congressand the Executive branch because improving Government processes,making Government more efficient, and saving taxpayers’money makes good sense. The development of the legislativelanguage contained in the DCIA, the enactment of the law, and theimplementation of its provisions represent Government at itsbest.

Above all, this legislation represents aGovernment commitment to those millions of our citizens who paytheir debts to the Government in a timely and responsible way.The message

we send to them is that we will respect theirintegrity and conscientiousness by making every reasonable effortto assure that others who owe money to the Government dischargetheir

obligations as well. We owe it to all of ourcitizens to make clear that the Government will act prudently inassuring that it recovers amounts that are due to it. To do lesswould be to send a

very unfortunate message to those who havefinancial obligations to the Government.

Mr. Chairman, we at Treasury have supported thislegislative initiative from its onset and are committed to itssuccess. We hope that our testimony today on DCIA implementationwill assure you of our commitment.

When the legislation was initially beingconsidered by Congress, more than $51 billion of the $245 billionof non-tax receivables owed to various program agencies wasdelinquent. Most of this debt was related to direct loans,defaulted loan guarantees and various other forms of accountsreceivable from Government operations.

At the end of 1996, the nontax receivables owedto the Federal Government had increased to $252 billion with$51.3 billion of that amount, that is 20 percent, or one in fivedollars owed to the Federal Government being delinquent. Thedelinquency rate remains largely unchanged from the prior period.Delinquent receivables over one-year old constitute 83 percent ofthe total--indicating that four dollars in every five ofdelinquent debt is old and difficult to collect. Debts of thisage are typically collected at the rate of only twenty five centson the dollar in the private sector.

Without strong commitment and cooperation acrossGovernment, from the Federal agencies, the Office of Managementand Budget, Treasury, and every Congressional Committee that hasa hand in the process of authorizing, funding and providingoversight of programs that create debt, the volume of delinquentdebt is likely to grow. If we are to get the delinquencies to alevel that is considered tolerable, we must fully implement theprovisions of the DCIA and we must use them in each and everyprogram.

We at Treasury are heavily invested in showingthat Treasury can make a difference in this process. After all,every dollar that is not collected is a dollar that we will beresponsible for borrowing to finance the Federal Government.

Between April 1996 and September 1997, aseventeen-month period since the passage of the DCIA, we willhave invested a substantial amount of resources in implementingthe DCIA. This was made possible through close cooperationbetween the Office of Management and Budget, Treasury, and ourCongressional appropriators, and through the ability of theFinancial Management Service to find funds and resources inbudgets that are already tight.

In this short time, we have built agovernmentwide delinquent debtor database, and we have alreadybegun offsetting payments. We have also built a basic debtmanagement workflow system to cross-service and collectdelinquent debt that is over 180 days old through collection atTreasury’s Financial Management Service or through privatedebt collectors.

Mr. Chairman, since passage of the Act lastApril, our efforts have been intense and they will continueunabated. Next year we will be able to report to you that:

o all the Government’s eligible payments are subject to being offset;

o all accounts over 180 days delinquent are being properly serviced;

o all agencies are using the debt collection contracts in situations where Treasury and the agencies agree that they should; and

o all regulations needed are in place.

Mr. Chairman, that concludes my remarks. JerryMurphy, our Fiscal Assistant Secretary, will now discuss theFinancial Management Service’s implementation of the DCIA ingreater detail.