IG audit finds Treasury didn’t collect $472M in debts owed to 28 agencies

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A Treasury Department watchdog report finds a software flaw led to the agency failing to collect $472 million in debts owed to over 28 agencies.

The July 7 audit from the Treasury inspector general’s office stems from an anonymous whistleblower complaint sent to the Office of Special Counsel in September 2019.

The whistleblower told OSC that Treasury had not acted on uncollected debts owed to the Labor Department’s Occupational Safety and Health Administration (OSHA).

An initial report found Treasury did not service 11,000 OSHA debts worth $91.5 million because of defective software at the Bureau of the Fiscal Service.

The 1996 Debt Collection Improvement Act gives the bureau the responsibility to carry out governmentwide debt collection. Under the legislation, OSHA must refer any debts over 180 days past due to Treasury for collection.

The IG’s latest audit, however, revealed the scope of the problem to be far more widespread, impacting many agencies and causing nearly half a billion dollars of debts to go uncollected.

“Creditor agencies are unaware that impacted debt was not serviced timely, and do not have accurate data to update delinquent debt records. This impedes government collection efforts and increases the potential that the associated debts will not be collected timely,” the IG audit states.

The Treasury IG found the Bureau of the Fiscal Service didn’t communicate to 28 agencies that it didn’t initiate “timely collection efforts” on debts they referred to Treasury to collect.

According to the audit, the bureau was unable to initiate these collection efforts on time because of a software issue, and the issue delayed collection efforts on 13,278 federal agency debts worth more than $480 million.

Linda Chero, the bureau’s acting assistant commissioner for debt management services, told the IG’s office that the system error led to the bureau being unable to properly process debts owed to other federal agencies.

Chero said the system error has been corrected, as that as of July 27, the bureau has collected nearly $10 million of the nearly $97 million of debts owed to OSHA. The bureau has also collected more than $3 million of the $376 million owed to other federal agencies.

Chero said the bureau agrees with all of the IG’s audit recommendations, including taking steps to ensure that impacted agencies are informed about current and future software errors, as well as any remediation processes put in place by Fiscal Service, and the status of all impacted debts.

Special Counsel Henry Kerner thanked the whistleblower in a statement Monday for coming forward with “serious allegations” that have been supported by the IG’s audit.

“The audit shows the scope and magnitude of this problem were far more significant than previously known. The whistleblower’s disclosure made it possible for the federal government to initiate collection of nearly a half-billion dollars in uncollected debts,” Kerner said.

The anonymous whistleblower told OSC that in October 2017, Treasury implemented new software for processing outstanding debts that didn’t work with OSHA’s existing processing software.

“Both Treasury and OSHA officials are aware of, but have not corrected, this failure,” Kerner told the Treasury IG in his referral, summarizing the whistleblower’s complaint.

The bureau in 2017 launched a commercial off-the-shelf system called the Cross-Servicing Next Generation (CS-NG) to replace a prior system called FedDebt. The system is central to the bureau’s cross-servicing program, which is used to collect delinquent non-tax debt on behalf of agencies.

The Treasury IG in February 2020 found that a software issue associated with the implementation of the CS-NG system prevented the bureau from initiating collection efforts on migrated and submitted debts that included a business address instead of a primary address.

Based on these findings, Treasury’s IG office began an audit of the Fiscal Service’s transition from FedDebt to CS-NG.

The audit found that Fiscal Service officials were unable to provide explanations for the actions taken to mitigate risks identified in the Risk Register, a risk management tool.

Among the audit’s findings, the report states that the bureau didn’t assign anyone to resolve more than  50 IT error resolution tickets,  even though 40 of them were deemed “major,” and two were labeled “critical” fixes.

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