Civil Debt Collection Reconciliation Process

Report No. 02-08
March 2002
Office of the Inspector General

JUSTICE MANAGEMENT DIVISION RESPONSE TO THE DRAFT REPORT

		U.S. Department of Justice
		Washington, DC 20530 March 13, 2002

MEMORANDUM

Thank you for the opportunity to comment on the draft Audit Report. I generally agree with the factual information put forth in your report and concur that a strengthened reconciliation process will contribute to improvements in the Department’s quarterly reporting of financial litigation activities.

Background:

Currently the Office of Debt collection Management (DCM) is responsible for preparing the report on Departmentwide Financial Litigation Activities, The Executive Office for U.S. Attorneys, DCM’s Nationwide central Intake Facility, and the litigating divisions submit quarterly financial litigation reports (FLRs) to DCM. DCM then compiles the data into a single Departmentwide report. As discussed in this draft report, the auditors found discrepancies in the cash collections reported by the various components in their FLRs as compared to the cash collections reported on the Departmentwide FLRs by DCM.

DCM adjusts the cash collection figures on the FLR to agree with reports provided by DCM’s Debt Accounting Operations Group (DAOG). This is done in an effort to provide the Attorney General with accurate and reliable cash collection figures provided by the accounting group charged with maintaining such records.

DAOG is the operational unit responsible for the accounting and disbursing of collections on debts handled by the U.S. Attorneys, private counsel, and the Department’s litigating divisions. In this capacity, DAOG must comply with all applicable Government accounting standards, including the monthly reconciliation with Treasury on its General Ledger account fund balances. In addition, DAOG is audited annually as part of the Working Capital Fund Financial Statement Audit. Compliance with these generally accepted accounting standards ensures the cash collection figures reported by DAOG are accurate. DAOG sends monthly reports of all transactions received and deposited with Treasury to each component for reconciliation purposes. Each component is required to reconcile its source documents and system maintained data with the accounting records provided monthly by DAOG; bringing any discrepancies to the attention of the DAOG.

Conclusions:

On page 6 you accurately report, “Each month, the USAOs and the litigating divisions must verify their deposits to collections recorded in the Debt Module by the DAOG and follow up with the DAOG on discrepancies identified. Neither the DAOG nor the DCM reconciles deposits made by the USAOs or the litigating divisions to the lockboxes because the current state of automation of the civil debt collection process prevents this, and neither DCM nor DAOG has access to required source documents. Instead, they rely on the USAOs and the litigating divisions to verify that their collections are deposited and recorded in the General Ledger."

Yet, on page 11, your report concludes, “On a quarterly basis, the DCM should reconcile quarterly collection activity reported by the USAOs and litigating divisions with the deposit information provided to them by the DAOG.” This conclusion is not supported by the facts presented in your report. The fact is that the USAOs and the litigating divisions are provided with the information required to reconcile their data with DAOG and should be held responsible for doing so.

Recommendations:

You recommend, “...that the Assistant Attorney General for Administration:

1. Ensure that procedures are instituted to reconcile amounts reported as collected by the United States Attorneys and the litigating divisions against the amounts reported as collected and deposited in the Department’s Treasury account.”

I agree with your recommendation and will institute procedures that will require the USAOs and the litigating divisions to ensure that cash collection figures presented in their quarterly FLRs have been reconciled to cash collections deposited with Treasury as reported by DAOG. Reasons for any legitimate deviation from the reconciled collection amounts (such as timing differences) should be documented in the FLR package.

Further, DAOG will work with each component to provide any additional summary level reports that may be helpful to them in conducting the reconciliation process.

Thank you for your continued interest in the Department’s debt collection programs.