Department of the Treasury

Office of Inspector General

Statement of Richard B. Calahan

Deputy Inspector General

before the

House Committee on Government Reform and Oversight

Subcommittee on Government Management,

Information and Technology

June 5, 1998

Mr. Chairman and Distinguished Members of the Subcommittee:

Mr. Chairman, members of the Subcommittee, I am pleased to appear before you today to discuss the Financial Management Service’s (FMS) efforts to implement aspects of the Debt Collection Improvement Act of 1996 (DCIA).

The overall purpose of the DCIA was to strengthen the Federal government’s ability to collect delinquent debt. Some of the tools provided by the Act to enable the Government to achieve better debt collection successes include: centralizing certain Federal non-tax debt operations within the Department of the Treasury (Treasury); mandating the use of electronic funds transfer; and creating a Treasury offset program. As you know, Congress intended Treasury to act as the coordinator of Government-wide debt collection activities. As the coordinator, Treasury would provide a mechanism for effective administrative offset and act as a clearinghouse to assure that Federal debts are collected in a timely and efficient manner. Treasury delegated primary responsibility for implementation of the DCIA provisions to FMS.

We recently issued a draft audit report to FMS which focused on their efforts to develop a new automated information system, the Grand Treasury Offset Program, otherwise referred to as GTOP. Our conclusion was that overall this development effort was not well planned or well managed. While FMS has not had sufficient time to formally respond to our report, recent events at FMS would appear to support our report’s conclusions.

Let me briefly summarize for you the findings from our report. Before I do this, I want to preface my remarks by pointing out that after we concluded our audit field work there were significant changes to the executive management at FMS, including the appointment of a new Commissioner, Richard L. Gregg. As stated previously, we only issued our formal draft to Mr. Gregg three days ago; so FMS has not had the opportunity to provide us with their corrective actions. We did however, provide the results of our audit in February. Since February, we have met with FMS, and they have indicated concurrence with our recommendations.

We also noted that shortly after the changes in management, we found a number of positive steps have been taken to overcome the problems that caused delays in getting GTOP operational. In our report we expressed concern that despite these positive steps, FMS’ strategy was to split their efforts between the development of GTOP while enhancing ITOP (Interim Treasury Offset Program) without the benefit of adequate functional requirements. It is our understanding that after a cost of over $7 million, FMS has terminated further development of GTOP and plans to focus their efforts on enhancing the existing system ITOP. With this decision, it would appear that at least one recommendation in our report has been acted on. However, considering the number of problems we identified in FMS’ development of GTOP, it is essential that they exercise strong management control over the current effort to develop an automated system and effectively execute sound system life cycle planning requirements as outlined in the Clinger-Cohen Act and OMB guidance. Among the more significant weaknesses we found in our audit were:

FMS did not adequately define its business requirements for

implementation of the DCIA provisions and had not developed a sound business case for the development of GTOP. Without this, FMS did not have the analysis needed to assure that GTOP would provide the added benefit to justify the cost, and would address all the requirements for successfully carrying out the DCIA provisions, especially as it related to offset of federal payments.

FMS had not developed an adequate project management plan to effectively monitor the development of GTOP. Project management also suffered from a lack of continuity. Since development of GTOP began, FMS assigned three project managers. Key issues were not addressed, such as who would maintain the system, what contingency plans would be implemented in the event of delays, and how would agency participation be phased in. Also, FMS did not timely develop an acceptance testing plan. When the contractor delivered the GTOP application software in October 1997, FMS was not prepared to perform acceptance testing.
FMS did not determine the overall costs to acquire, develop, and maintain GTOP or establish a process to capture actual cost, such as in-house labor. For one key component, the development of the GTOP software application, the cost more than doubled from $3 million to $6.1 million when additional requirements were identified and added.
FMS either did not always provide the contractor with needed requirements and specifications or provided specifications that were too vague. FMS relied on the contractor to develop the business requirements for GTOP. Consequently, the contractor was left to its own resources to develop a system to process payment and debt data coming from many different agencies. This increased the risk that GTOP would not operate as intended.
Lastly, FMS did not adequately ensure that the contractor would develop a system that would meet customer agency needs. For example, the initial task order required the contractor to develop a fully tested and operational interface with approximately four non-Treasury Disbursing Offices. Instead, the contractor delivered one standard payment interface and a reversal process to which these agencies must adhere.

All of this points to a systems development effort that was not well planned or managed. In another review we currently have on-going, we are taking a broader look at FMS’ overall strategic planning process. What we are finding is that FMS’ difficulties with implementation of DCIA are symptomatic of fundamental weaknesses in their strategic planning process. These fundamental weaknesses will need to be corrected if FMS is to be successful as they move forward to fully implement the DCIA.

In conclusion, the DCIA is an important legislative tool to help the Government improve its track record on the management and collection of delinquent debt. At the same time, implementation is a very complex and difficult task requiring close coordination, both within and outside Treasury. There are numerous issues to be addressed and obstacles to overcome. FMS has recently taken a number of steps to get the implementation effort back on track. We intend to conduct additional audits over the next several years on various aspects of the DCIA that will assess the effectiveness of FMS’ implementation efforts.