ES, IG-99-031, NASA's Non-Tax Delinquent Debt

NASA'S NON-TAX DELINQUENT DEBT
IG-99-031

Executive Summary

Background
The Debt Collection Improvement Act (DCIA) of 1996 requires Federal agencies to aggressively pursue the collection of debt once it becomes delinquent (past due more than 30 days). The Act also requires agencies to transfer non-tax debt more than 180 days delinquent to the Department of the Treasury for collection. NASA reported $29.7 million and $17.8 million in receivables due from the public at the end of fiscal years (FY's) 1997 and 1998, respectively.⁽¹⁾ Of those amounts, about $3 million was delinquent more than 30 days at the end of both fiscal years.⁽²⁾ The majority of those receivables represent vendor payments, amounts due from employees, and other administrative accounts.

Objectives
The overall audit objective was to assess the collectibility of the delinquent debt and to determine whether the reported amount accurately represents the universe of such debt.
This audit is part of a President's Council on Integrity and Efficiency Government-wide review of non-tax delinquent debt.
We performed audit fieldwork at four NASA installations: Goddard Space Flight Center (Goddard), NASA Headquarters, Johnson Space Center (Johnson), and Kennedy Space Center (Kennedy). These four locations comprised 81 percent of NASA's accounts receivable due from the public for FY's 1997 and 1998. Additional details on the objectives, scope, and methodology are in Appendix A.

Results of Audit
NASA has made significant progress towards meeting the requirements of the DCIA and makes efforts to collect its receivables. For example, NASA has included the DCIA requirements in the Agency's Financial Management Manual (FMM) and has transferred delinquent bills to the Treasury for collection. In addition, the installations we reviewed were processing and tracking bills to debtors, and the receivables balances reported by the Agency as of September 30, 1997, and 1998, were generally reliable.
However, we identified opportunities for NASA to enhance its collection of receivables:

Improve the timeliness of the collection of receivables by strengthening NASA installation compliance with FMM requirements to transfer to the Treasury debts that are more than 180 days delinquent and to consistently bill debtors prior to the transfer. The Agency has neither aggressively pursued nor collected all debts due the Government (Finding A).
Increase efficiencies in Agency collections management by establishing procedures to ensure that Agency accounting offices are notified of all receivables. The Agency cannot ensure consistency in the collection of receivables without those procedures (Finding B).
More effectively protect the Government's interest by following up on debts owed to the Agency by employees who have not completed NASA-funded academic courses. The Agency may not have been reimbursed for courses that were not completed successfully (Finding C).
Improve the delinquent debt ratio by accurately reporting delinquent debts to the Treasury. NASA has reported a higher amount of delinquent debts to the Treasury than actually existed (Finding D).
The improvements would increase NASA's assurance that receivables are established, recorded, and collected and that penalties and administrative fees are regularly assessed.
We also identified minor instances in which installations incorrectly posted receivables in the accounting records and did not promptly correct them (see Appendix B).

Recommendations
We recommend that management strengthen internal controls to ensure compliance with NASA FMM requirements for timely debt collection and measure this compliance through the establishment of performance metrics related to the debt collection process. Management should also establish procedures to ensure that all amounts due the Agency are processed by the cognizant accounts receivable office and that reimbursement is made to the Government if NASA-funded courses are not successfully completed.

Management's Response
Management either agreed or concurred in principle with each recommendation. The complete text of the response is in Appendix D. We consider management's comments responsive.

FOOTNOTES

1. Many of these receivables are with reimbursable customers who provided NASA with an advance that could liquidate the receivable. According to the Chief of the NASA Accounting, Reporting and Analysis Branch, in FY 1998, the Agency requested the installations to bill and collect on reimbursable receivables through liquidation of the related advances in a more timely manner. This action provided a more accurate reflection of NASA's financial condition. The result was an $11.9 million (40 percent) reduction from FY 1997 to FY 1998 of total receivables reported to Treasury.

2. Of the delinquencies, 192 receivables totaling $1.5 million were also more than 180 days delinquent as of September 30, 1997, and 183 receivables totaling $2.1 million were also more than 180 days delinquent as of September 30, 1998.

Background	The Debt Collection Improvement Act (DCIA) of 1996 requires Federal agencies to aggressively pursue the collection of debt once it becomes delinquent (past due more than 30 days). The Act also requires agencies to transfer non-tax debt more than 180 days delinquent to the Department of the Treasury for collection. NASA reported $29.7 million and $17.8 million in receivables due from the public at the end of fiscal years (FY's) 1997 and 1998, respectively.⁽¹⁾ Of those amounts, about $3 million was delinquent more than 30 days at the end of both fiscal years.⁽²⁾ The majority of those receivables represent vendor payments, amounts due from employees, and other administrative accounts.
Objectives	The overall audit objective was to assess the collectibility of the delinquent debt and to determine whether the reported amount accurately represents the universe of such debt. This audit is part of a President's Council on Integrity and Efficiency Government-wide review of non-tax delinquent debt. We performed audit fieldwork at four NASA installations: Goddard Space Flight Center (Goddard), NASA Headquarters, Johnson Space Center (Johnson), and Kennedy Space Center (Kennedy). These four locations comprised 81 percent of NASA's accounts receivable due from the public for FY's 1997 and 1998. Additional details on the objectives, scope, and methodology are in Appendix A.
Results of Audit	NASA has made significant progress towards meeting the requirements of the DCIA and makes efforts to collect its receivables. For example, NASA has included the DCIA requirements in the Agency's Financial Management Manual (FMM) and has transferred delinquent bills to the Treasury for collection. In addition, the installations we reviewed were processing and tracking bills to debtors, and the receivables balances reported by the Agency as of September 30, 1997, and 1998, were generally reliable. However, we identified opportunities for NASA to enhance its collection of receivables: Improve the timeliness of the collection of receivables by strengthening NASA installation compliance with FMM requirements to transfer to the Treasury debts that are more than 180 days delinquent and to consistently bill debtors prior to the transfer. The Agency has neither aggressively pursued nor collected all debts due the Government (Finding A). Increase efficiencies in Agency collections management by establishing procedures to ensure that Agency accounting offices are notified of all receivables. The Agency cannot ensure consistency in the collection of receivables without those procedures (Finding B). More effectively protect the Government's interest by following up on debts owed to the Agency by employees who have not completed NASA-funded academic courses. The Agency may not have been reimbursed for courses that were not completed successfully (Finding C). Improve the delinquent debt ratio by accurately reporting delinquent debts to the Treasury. NASA has reported a higher amount of delinquent debts to the Treasury than actually existed (Finding D). The improvements would increase NASA's assurance that receivables are established, recorded, and collected and that penalties and administrative fees are regularly assessed. We also identified minor instances in which installations incorrectly posted receivables in the accounting records and did not promptly correct them (see Appendix B).
Recommendations	We recommend that management strengthen internal controls to ensure compliance with NASA FMM requirements for timely debt collection and measure this compliance through the establishment of performance metrics related to the debt collection process. Management should also establish procedures to ensure that all amounts due the Agency are processed by the cognizant accounts receivable office and that reimbursement is made to the Government if NASA-funded courses are not successfully completed.
Management's Response	Management either agreed or concurred in principle with each recommendation. The complete text of the response is in Appendix D. We consider management's comments responsive.