- The Washington Times - Thursday, July 16, 2015

The Department of Transportation has fallen dangerously behind on its debt collection, putting hundreds of millions of tax dollars at risk of default as Congress debates multibillion-dollar transportation legislation.

From fiscal year 1999 through Sept. 30, 2013, the department’s reported delinquent debt — money loaned to states for transportation projects or overdue payments from individuals for civil fines and penalties — increased over 300 percent from roughly $170 million to $737 million, according to the latest audit from the department’s inspector general.

Auditors are concerned that the actual debt could be greater than reported because the department has done a poor job of reporting how much debt it has collected and how much it owes the Treasury.

“The longer the debts remain delinquent, the greater the risk of them going uncollected,” investigators wrote in the report, hinting that taxpayers may pay the price if Congress has to write off debts.

The audit was released as the House passed a five-month transportation funding extension this week that would transfer $8 billion from the Treasury Department to the Highway Trust Fund to address overspending needs.

Watchdogs say the report highlighting outstanding debts and shoddy record-keeping should prompt Congress to take a deeper look at the Transportation Department’s troubled finances before signing a blank check whenever an agency demands more money.

Congress is currently debating how best to fund the nation’s bloated highway programs. This new report illustrates just how poorly managed the Department of Transportation is run,” said Nicole Kaeding, a budget analyst at the Cato Institute. “The delinquent debt is a small portion of transportation spending over the last 15 years, but it represents why Congress should always be hesitant to fund agencies at their requested levels.”

For failing to collect millions of dollars in outstanding debt at the risk of hundreds of millions of taxpayer dollars, the Department of Transportation wins this week’s Golden Hammer, a distinction awarded by The Washington Times to highlight examples of wasteful federal spending.

“These agencies complain about the Budget Control Act caps all the time. New rule: If you’re owed nearly $1 billion that you just haven’t bothered to collect, you don’t get to complain about the BCA,” said Ryan Ellis, a tax policy director at Americans for Tax Reform.

Sen. John Thune, South Dakota Republican and chairman of the Senate Commerce, Science and Transportation Committee, has urged Transportation Department officials to implement the inspector general’s recommendations “without delay.”

“The increasing delinquent debt and inadequate safeguards at the Department of Transportation are concerning,” he said.

Investigators attributed the rising debt to ineffective internal controls, including inadequate policies for debt collecting, reporting, training and oversight.

The Transportation Department continually underreported its debt to the Treasury while overreporting its collections, according to the report. In fiscal year 2013, the department underreported its delinquent debt to the Treasury by about $7.3 million.

At the same time, the department told investigators that it can’t be sure exactly how much debt it has collected because the amount it reports to the Treasury is the amount that other agencies have collected on the department’s behalf and does not include the debt the department has collected itself.

Transportation Department staff who report and collect delinquent debt are not required to undergo training to acquire the knowledge and skills needed to effectively perform their duties, including training offered by the Treasury. But the Treasury’s guidance states that agencies “shall ensure that their personnel receive training on agency and governmentwide credit and debit management regulations and procedures,” according to the report.

Steve Ellis, vice president of Taxpayers for Common Sense, said federal agencies across the board are unable to keep track of money that goes in and out of the door, which “translates to lost taxpayer dollars.”

“This is money that we are leaving on the table,” said Mr. Ellis. “When you’re looking at an enormous national deficit and debt, we need to be searching under the couch cushions for any money we can find, not collecting more debt.”

Investigators made six recommendations for improvement, which the Transportation Department agreed to carry out.

Blair Anderson, the department’s acting financial officer and assistant secretary for budget and programs, said in a written response that the department “continues to strengthen the reporting and management of its delinquent debt portfolio.”

In defense of the agency, Mr. Anderson said it has made significant strides in recent years to improve its reporting to the Treasury, with a referral rate of 99.9 percent in the fourth quarters of 2013 and 2014.

The House’s latest $8 billion transportation funding patch is the 34th short-term measure passed since 2008 to address overspending on highway infrastructure as the department struggles with the money it receives from the gas tax. Even if the $750 million in debts were collected, it wouldn’t be nearly enough to match the funding needed for the Highway Trust Fund.

But the latest debt report still indicates serious problems with financial management within the agency and should prompt Congress to scrutinize a potential long-term transportation bill more carefully and hold the department accountable.

“The purpose of the inspector general’s report is not just to tell the agency, ‘Here’s what we should fix,’ it also brings attention of these issues to the public and to Congress so they can deal with the problem, hold the agency accountable and hold their feet over the fire,” Mr. Ellis said.

The Transportation Department’s delinquent debt is a small drop in the bucket when compared with the amount of debt compounded over the years across federal agencies.

According to the inspector general’s report, delinquent debt across federal agencies totaled $212.5 billion in fiscal year 2013, an increase of $49.8 billion from the previous year.

“The hundreds of millions of dollars in new delinquent debt at the Department of Transportation is a symptom of an economy that continues to flounder and a federal government that has failed to prioritize protecting taxpayer dollars,” said Richard Manning, president of Americans for Limited Government. “The fact that this extends across the entire government is proof that this isn’t an agency or department problem, but instead a problem that Congress needs to address through reforming the existing laws.”

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