Feds missed nearly $500 million in debts because of ‘software error’

The federal government missed nearly $500 million in uncollected debts because of a “software error” at the Treasury Department, according to a new audit released Monday by the Office of Special Counsel.

Government officials said the error has been corrected and they are going back to try to recover the money owed. As of May, about $13 million of the total has been reclaimed.

The debts were held by a wide range of federal agencies but had been turned over to the Treasury Department for collection.

But the department’s system was set up so that it could only send demand letters to debtors who had a primary address listed. Establishments that listed only a business address gummed up the system and prevented collections from starting, the Treasury inspector general said in a report to the Office of Special Counsel, which first flagged the issue.

A whistleblower revealed the problem in 2019 to OSC, warning of uncollected debts at the Occupational Safety and Health Administration (OSHA). The inspector general found nearly $97 million in uncollected debt at OSHA.

That triggered a broader look, and investigators discovered dozens of other agencies faced similar problems. The error led to nearly $135 million in uncollected debt at the Defense Department, $28 million at the Security and Exchange Commission (SEC) and $30 million at Treasury itself.

“The audit shows the scope and magnitude of this problem were far more significant than previously known,” said Special Counsel Henry J. Kerner. “The whistleblower’s disclosure made it possible for the federal government to initiate collection of nearly a half-billion dollars in uncollected debts.”

More than $3 million of the debt owed to OSHA has been reclaimed, and nearly $10 million owed to the other agencies has also been recaptured, the OSC said.

Roughly half of the outstanding debt is listed as inactive and unable to be collected by the Treasury Department using the tools available. That debt has been “returned” to the original agencies.

The Treasury Department agreed with the inspector general’s findings and took corrective action, Linda Claire Chero, the acting assistant commissioner of debt management services said.

“A system error resulted in the failure of the Bureau to properly process certain debts referred by the U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA). The system error also resulted in the failure of the Bureau to properly process certain debts owed by other federal agencies,” Ms. Chero wrote.