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 ************************************************************************** * This file contains an ASCII representation of the text of a GAO * * report. Delineations within the text indicating chapter titles, * * headings, and bullets are preserved. 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We are unable to accept electronic orders * * for printed documents at this time. * ************************************************************************** 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).