oversight

Anti-Car Theft Act: Issues Concerning Additional Federal Funding of Vehicle Title System

Published by the Government Accountability Office on 1999-08-13.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 United States General Accounting Office

GAO              Report to the Chairman, Subcommittee
                 on Consumer Affairs, Foreign Commerce
                 and Tourism, Committee on Commerce,
                 Science, and Transportation, U.S. Senate

August 1999
                 ANTI-CAR THEFT
                 ACT
                 Issues Concerning
                 Additional Federal
                 Funding of Vehicle
                 Title System




GAO/GGD-99-132
United States General Accounting Office                                                            General Government Division
Washington, D.C. 20548




                                    B-281671
                                    August 13, 1999

                                    The Honorable John Ashcroft
                                    Chairman, Subcommittee on Consumer Affairs,
                                     Foreign Commerce and Tourism
                                    Committee on Commerce, Science,
                                     and Transportation
                                    United States Senate

                                    Dear Mr. Chairman:
                                                                                                     1
                                    Congress passed the Anti-Car Theft Act of 1992 in response to what it
                                    considered to be the nation’s number one property crime—motor vehicle
                                    theft. Title II of the act required the designation or establishment of a
                                    National Motor Vehicle Title Information System (NMVTIS). The act
                                    requires that NMVTIS, among other things, allow users to instantly and
                                    reliably validate out-of-state motor vehicle titles for states that are retitling
                                    a vehicle and provide a history of the vehicle being retitled (e.g., the
                                    vehicle’s previously recorded odometer reading and any salvage
                                    information). The Department of Justice is responsible for NMVTIS’
                                    development and implementation. The American Association of Motor
                                                                         2
                                    Vehicle Administrators (AAMVA) has a cooperative agreement with
                                                                                                                    3
                                    Justice to develop and test NMVTIS. AAMVA is working with seven states
                                    to have them develop and test the capability to interface their motor
                                    vehicle titling systems with NMVTIS.

                                    In your letter dated July 23, 1998, you expressed concern about the
                                    development of NMVTIS. Accordingly, we agreed with your office to
                                    determine (1) the current status of NMVTIS and (2) whether Justice had
                                    evaluated NMVTIS’ expected costs and benefits to ensure that additional
                                    federal investment in NMVTIS is justified. We interviewed Justice and
                                    AAMVA officials and reviewed NMVTIS-related information regarding
                                    NMVTIS’ development, operational testing, and cost estimate
                                    determination. We discussed with these officials NMVTIS’ design and
                                    implementation. Also, we visited with officials in Virginia and Arizona,

                                    1
                                        P.L. 102-519, Oct. 25, 1992, 49 U.S.C. Chapter 305, 311.
                                    2
                                     AAMVA is a voluntary, nonprofit, tax exempt, educational association representing U.S. and Canadian
                                    officials who are responsible for the administration and enforcement of motor vehicle laws.
                                    3
                                     The seven states are Arizona, Florida, Indiana, Kentucky, Massachusetts, New Hampshire, and
                                    Virginia. We use the term “states” to include the 50 states and the District of Colombia.




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                   which are participating in NMVTIS and are in different stages of progress
                   in developing the capability to interface their state motor vehicle titling
                   systems with NMVTIS, and Texas and the District of Columbia, which are
                   currently not participating in NMVTIS. We surveyed the 4 states that we
                                            4
                   visited and the 47 states that we did not visit to obtain their views
                   regarding NMVTIS. See appendix I for a more detailed discussion of our
                   objectives, scope, and methodology, including our state survey.

                   We conducted our work between September 1998 and June 1999 in
                   accordance with generally accepted government auditing standards. We
                   requested comments on a draft of this report from Justice and AAMVA
                   officials. Their comments are discussed in the appropriate sections of the
                   report and near the end of this letter.

                   Justice has not evaluated NMVTIS’ expected life-cycle costs and benefits
Results in Brief   to ensure that additional federal funding is justified. The Clinger-Cohen Act
                          5
                   of 1996 and best practices used by public and private organizations to
                   manage information technology investments suggest that such an
                   evaluation will provide an analytical basis for informed investment
                   decisions.

                   As of March 1999, AAMVA expected the development and implementation
                   of NMVTIS to cost about $34 million. AAMVA is expected to update this
                   estimate when its seven-state test of NMVTIS is finished. AAMVA
                   estimated that test would be completed within the first quarter of calendar
                   year 2000. Through fiscal year 1999, Congress has provided Justice and the
                   Department of Transportation (DOT) with about $8 million of an expected
                                                             6
                   $22 million federal investment in NMVTIS. The states and AAMVA and its
                   contractors would be expected to provide the remaining $12 million.

                   NMVTIS was designed to allow users to electronically validate an existing
                   vehicle title and title-related information. However, a potential barrier to
                   electronically validating titles and title-related information could be the
                   lack of full participation by all state departments of motor vehicles.
                   Although 43 states of the 47 states responding to our survey thought that
                   4
                    We received responses from the 4 states that we visited and from 43 of the 47 remaining states. The
                   responses were from all 7 participating states and 40 nonparticipating states.
                   5
                    The Clinger-Cohen Act of 1996 (P.L. 104-106) generally directs agencies to consider alternative
                   solutions to information technology problems, to perform life-cycle cost benefits analyses, and to
                   select the most appropriate alternative. The Clinger-Cohen Act does not directly apply to NMVTIS,
                   since it is being developed and operated by a third party, AAMVA. However, the principles of Clinger-
                   Cohen provide an effective framework of information technology investment management.
                   6
                       DOT was initially responsible for NMVTIS.




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               they could implement NMVTIS and 32 states of the 40 nonparticipating
               states had expressed an interest in doing so, 27 of the 47 states were
               concerned about how they would fund NMVTIS.

               We are recommending in this report that the Attorney General (1) perform
               a life-cycle cost benefit analysis to determine if additional federal
               investment in NMVTIS is justified and (2) provide additional federal funds
               for NMVTIS only if such funding is supported by the analysis.

               The Anti-Car Theft Act was designed to reduce automobile theft by making
Background     the selling of stolen cars and parts more difficult. According to 1992
               congressional testimony, thieves turned stolen cars into money in three
               ways. They (1) took the stolen car to a chop shop where the car was
               dismantled and its parts were sold as replacement parts for other vehicles,
               (2) obtained an apparently valid title for the car and then sold it to a third
               party (the area that NMVTIS is expected to address), or (3) exported the
               vehicle for sale abroad. In 1995, the National Insurance Crime Bureau
               (NICB) estimated that the value of stolen vehicles, which are subsequently
                                                                 7
               titled each year, amounted to over $240 million. NICB estimated that the
               loss associated with total vehicle theft and fraud was in excess of $7.6
                                 8
               billion, annually.

                The Anti-Car Theft Act originally required DOT to develop a national
               motor vehicle title information system by designating an existing system or
               establishing a new system. The act was amended by the Anti-Car Theft
               Improvements Act of 1996, which, among other things, transferred
               responsibility for development and implementation of NMVTIS from DOT
               to Justice. In an August 22, 1996, memorandum, the Deputy Attorney
               General delegated responsibility for implementing the NMVTIS project to
               the Federal Bureau of Investigation (FBI). According to Justice, the FBI’s
               role with respect to NMVTIS is to

             • ensure that the system meets the intent of the act as it pertains to the FBI
               and law enforcement activity;
             • ensure that the system meets the law enforcement needs of state, local,
               and federal law enforcement agencies;



               7
                NICB is a private, nonprofit organization that provides investigative resources and information to its
               membership of property and casualty insurance companies. See National Motor Vehicle Title
               Information System (NMVTIS): Fraud Cost Analysis Report, National Insurance Crime Bureau, (1995).
               8
                   According to an NICB official, this estimate does not include losses due to odometer fraud.




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                             • provide guidance to AAMVA, the system administrator, concerning law
                               enforcement issues and items related to system testing and national
                               implementation; and
                             • analyze the issue of the use and dissemination of vehicle theft data.

                               Justice’s Office of Justice Programs provides funding for NMVTIS.

                               According to Justice and DOT officials, Congress has provided, through
                               appropriation acts and congressional guidance in conference reports,
                               about $8 million to conduct the test of NMVTIS during fiscal years 1996
                               through 1999. DOT awarded $890,000 in fiscal year 1996 to AAMVA. After
                               receiving responsibility for NMVTIS in 1996, Justice awarded $1 million in
                               fiscal year 1997 Byrne Discretionary Grant Program funding to AAMVA.
                               According to AAMVA, it has passed the $1.89 million it has received from
                               DOT and Justice to the seven participating states.

                               In June 1999, Justice awarded $2.8 million in fiscal year 1998 funds to
                               AAMVA to (1) continue funding the participating states, (2) add new states,
                               and (3) recover some of its costs as a technical assistance provider to the
                               seven participating states. According to AAMVA, $2 million is for the states
                               and $800,000 is for AAMVA. Justice added that AAMVA cannot draw on
                               these funds until a memorandum of understanding between it and the FBI
                               is executed. The conference report accompanying the fiscal year 1999
                                                                                                        9
                               appropriations states that Justice is to spend $3.15 million for NMVTIS.

NMVTIS’ Potential Benefits     NMVTIS is being designed and tested by AAMVA and is intended to, if fully
                               implemented, deter trafficking in stolen vehicles by making it harder for
                               thieves to obtain seemingly valid titles for stolen vehicles by retitling them
                               in another state. This is because, using NMVTIS, the copy of the motor
                               vehicle title presented for retitling would be electronically validated
                               against the database of the state that originally titled the vehicle. Thus,
                               NMVTIS would help prevent thieves from obtaining good titles to vehicles
                               that they intend to resell. In addition, when the title is reissued in another
                               state, NMVTIS would electronically cancel the motor vehicle title in the
                               originating state. Presently, retitling between states is done manually, with
                               states mailing information about a vehicle being retitled. According to
                               AAMVA officials, NMVTIS would also prevent fraudulent use of duplicate
                               motor vehicle titles.



                               9
                                H.R. Conf. Rep. 105-825 (1998) accompanying the Departments of Commerce, Justice and State, the
                               Judiciary, and Related Agencies Appropriations Act, 1999, P.L. 105-277.




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  NMVTIS is also intended to protect prospective purchasers by
  accomplishing the following:

• Make “title washing” more difficult. Title washing is a type of title fraud in
  which vehicle brand history is removed from the title by retitling the
  vehicle in another state that does not carry a particular brand. This is done
  to make it easier to pass the vehicle to a third party who is otherwise
                         10
  unaware of the brand.

• Provide access to brand data that would help purchasers to determine the
  market value and safety of the vehicle prior to purchase.

• Provide odometer readings, which would help purchasers determine if the
  vehicle mileage has been improperly rolled back to a lower number.


  AAMVA expects titling states, law enforcement agencies, car dealers,
  insurance companies, and individual prospective purchasers to use
  NMVTIS. According to AAMVA, private companies and individuals would
  be able to access NMVTIS to verify titles and check vehicle history
  information, such as previous odometer readings and title brands.
  However, private companies and individuals currently do not have access
  to the stolen vehicle file in NMVTIS. According to AAMVA officials,
  AAMVA is working with Justice and other law enforcement officials who
  are involved with overseeing and managing the system containing stolen
  vehicle data to see if these data can be made available to private
  companies and individuals.

  The act authorized system users to be charged a fee for obtaining data.
  AAMVA said that it is constructing the system so that state departments of
  motor vehicles and law enforcement agencies are to be exempt from the
  fee. According to AAMVA officials, no fees have been charged to any user,
  as of July 20, 1999. They added that AAMVA and its contractors have been
  absorbing all costs associated with NMVTIS’ operations and no federal
  funds have been used to support its operations, as of July 20, 1999.

  While the U.S. Customs Service did not provide direct input or
  coordination to Justice or AAMVA during NMVTIS’ development, it

  10
    A vehicle’s “brand” indicates that a qualifier is attached to the title. This qualifier indicates some
  imperfection in the vehicle. Examples include vehicles that have a junk or salvage status or have had
  water damage from a flood. At least one state has a “reconstructed” brand that indicates a salvage
  vehicle that has been rebuilt. NMVTIS uses a uniform set of codes to interpret various types of brands,
  which are often different in each state.




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                             anticipates realizing many benefits from NMVTIS when it becomes fully
                             operational. Customs expects to be able to connect its computer systems
                             to NMVTIS. Customs also expects that NMVTIS will be able to provide it
                             with a greater ability to identify and detect stolen vehicles before they are
                             exported from the United States. According to AAMVA officials, AAMVA
                             expects to work with Customs to test NMVTIS at two ports.

NMVTIS’ Design, Testing,     AAMVA’s design of NMVTIS includes the following four files:
and Evaluation             • A theft file, which contains information on all vehicles reported stolen
                             nationwide and is a “mirror” image of the FBI’s national stolen vehicle
                                                                                    11
                             database from its National Crime Information Center. The FBI pointed
                             out that the act does not mandate the use of Center data and the use of the
                             Center mirror image was approved only for the seven participating states.

                           • A brand file, which maintains data on vehicle brands from various sources,
                             including insurance companies and junk and salvage yard operators.

                           • A manufacturers’ certificate of origin (MCO) file, which contains vehicle
                             origination information from the manufacturer, such as make, model, or
                             color.

                           • A vehicle identification number (VIN) pointer file, which electronically
                             directs a NMVTIS user to the state where the vehicle was last titled and
                             would be used to validate the previous title and obtain various vehicle
                             history information.


                             NICB, which is an AAMVA contractor, has developed and is maintaining
                             the theft file, which it received from the National Crime Information
                             Center. AAMVA will provide the brand file. The MCO file and VIN pointer
                             file have been developed and are being maintained by The Polk Company,
                                                                   12
                             which is also an AAMVA contractor.



                             11
                               Information on stole vehicles is contained in the National Crime Information Center. The center is a
                             computerized criminal justice information system in which federal and state law enforcement agencies
                             maintain and share millions of records in 14 files, including files on fugitives, missing persons, and
                             stolen vehicles.
                             12
                                The Polk Company is a privately held, for-profit company that has developed national information
                             systems and information products for the motor vehicle marketplace.




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                        To test NMVTIS in operation, AAMVA agreed with seven states to have
                        them develop their computer software to interface with NMVTIS. The test
                        in the seven participating states is to allow for an evaluation of the

                    •   technical feasibility of NMVTIS,
                    •   degree of success in meeting the 1992 Act’s requirements,
                    •   areas that would benefit from federal rulemaking,
                    •   estimated costs of implementation and operation, and
                    •   time it will take the remaining states to develop interfaces to NMVTIS.


                        As of March 18, 1999, the seven participating states were developing the
                        capability to interface with NMVTIS files and were in various stages of
                        testing the interface. AAMVA expects completion of the test within the
                        first quarter of calendar year 2000 and its evaluation of the results shortly
                        thereafter. AAMVA has prepared an evaluation plan for testing NMVTIS.
                        The evaluation plan includes an assessment of NMVTIS’ ability to meet the
                        act’s requirements. According to AAMVA officials, AAMVA expected to
                        complete its preliminary evaluation of NMVTIS by the end of July 1999.

                        AAMVA’s March 19, 1999, cost estimate for a fully implemented NMVTIS is
AAMVA’s Estimated       $33.9 million—that is, $24.2 million for states to develop new systems or
Cost of NMVTIS          adapt existing ones to link with NMVTIS and $9.7 million for AAMVA and
                        its contractors to develop and implement NMVTIS. AAMVA expects the
                        federal government to fund $22.2 million, which is to be used to offset
                        $16.5 million of the states’ costs and to reimburse AAMVA for $5.7 million
                        in its role as the technical assistance provider. AAMVA and its contractors
                        will be responsible for the additional $4 million. AAMVA expects the states
                        to fund their remaining costs ($7.7 million). NMVTIS’ operation and
                        maintenance costs will be the responsibility of the states and AAMVA and
                        its contractors. As previously mentioned, the states and AAMVA and its
                                                                                             13
                        contractors can charge system users a fee for information provided.

                        According to AAMVA, its estimate of the costs the states would incur is
                        based on the participating states’ actual costs plus other factors, such as
                        inflation. AAMVA estimated that the development costs for other states
                        would average about $425,000 per state. In developing its estimate, AAMVA
                        stated that it assumed that the 7 participating states’ costs would be
                        representative of the nonparticipating states, and that the other 44 states
                        would participate in NMVTIS. According to AAMVA officials, Indiana,

                        13
                             States and law enforcement agencies are exempt from fees.




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                                                                                                  14
                        Kentucky, and Virginia have fully implemented NMVTIS. The other four
                        states may continue to incur additional unanticipated costs, which could
                        impact AAMVA’s projected cost estimate for the nonparticipating states.

                        As previously discussed, AAMVA expects to report on the results of the
                        participating states’ efforts to interface their titling systems with NMVTIS
                        in calendar year 2000. At that time, on the basis of the updated costs of 7
                        states and contractors, as well as its own costs, an AAMVA official said
                        that AAMVA will revise the projected costs for the 44 nonparticipating
                        states and NMVTIS’ total cost.

                        Assuming that AAMVA’s test of NMVTIS proves that NMVTIS will work as
Barriers to Realizing   designed and will provide the benefits intended by the Anti-Car Theft Act,
NMVTIS’ Potential       those benefits will be diminished if all states do not participate in NMVTIS.
Benefits                Of the 40 nonparticipating states responding to our survey, 32 states said
                        that they were interested in participating in NMVTIS. According to 27 of
                        the 47 responding states, the lack of funding is a major reason for
                        nonparticipation. In addition, there are technical issues that may limit the
                        effectiveness of NMVTIS, and Justice has raised issues about AAMVA’s
                        accounting deficiencies regarding the use of the federal funds.

Less Than All States’   The Anti-Car Theft Act did not mandate that all states participate in
                        NMVTIS. However, the National Highway Transportation Safety
Participation           Administration has reported that all states need to participate in NMVTIS
                        to ensure the act’s effectiveness in preventing title fraud. AAMVA and
                        NICB have also stated that less than full participation by all states could
                        make the vehicle history information, including title brands, incomplete
                        since the nonparticipating states would not be providing data on-line. Also,
                        instant title verification available from the VIN pointer file, or any vehicle
                        history information maintained by nonparticipating states (such as vehicle
                        title brands), would not be available through NMVTIS.

                        AAMVA officials said that periodic updates of the VIN pointer and brand
                        files with data from nonparticipating states are planned. These updates
                        would provide some nonparticipating state data to those files, although
                        those files would not be as effective as they could be if all states were
                        participating in NMVTIS.




                        14
                          According to AAMVA officials, a state has implemented NMVTIS if it can perform all NMVTIS-related
                        transactions.




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  We surveyed all 50 states and the District of Columbia to determine their
  interest in participating in NMVTIS and their views on NMVTIS. We found
  the following:

• 43 of the 47 total respondents (participants and nonparticipants) thought
  NMVTIS could be implemented in their state;

• 32 of 40 nonparticipating states responding to our survey expressed
  interest in participating in NMVTIS, and, of the 8 other states, 2 said they
  were planing to express interest in participating and 6 said resources or
  other priorities precluded their participation; and

• 27 of 47 states indicated that funding or resources could be a barrier to
  their successful implementation of NMVTIS.


  An AAMVA official believes that federal funding to states would help
  alleviate the funding barriers. He told us that 23 states had expressed their
  written interest to AAMVA about participating in NMVTIS. AAMVA
  officials added that they would not ask additional states to commit to
  participate in NMVTIS until additional federal funding becomes available.

  According to AAMVA officials, nonparticipating states would not be able to
  use NMVTIS to immediately verify out-of-state vehicle titles or obtain
  vehicle history information, including any brands, prior to issuing a new
  title. In addition, AAMVA officials told us that, when a state that is
  participating in NMVTIS retitles a vehicle previously titled in another state,
  it could not electronically and instantly cancel the old title if that other
  state is not participating in NMVTIS. According to AAMVA officials,
  participating states would have to rely on a mailed notification they
  receive from the nonparticipating state that issued the old title.

  The Anti-Car Theft Act, as amended, required Justice to report to Congress
  by October 1998 on states’ participation in NMVTIS and barriers to state
  participation. As of April 22, 1999, FBI officials said that the report is in the
  process of being completed.

  In commenting on a draft of this report, AAMVA said that on the basis of
  its experiences, states become more motivated to participate in the system
  as states in close proximity to them implement the system. It added that,
  on the basis of discussions and increased interest, it expects all states to
  participate in NMVTIS within a reasonable time period.




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Duplicate VINs            Three of the seven participating states indicated that they are experiencing
                          problems with duplicate VINs. AAMVA officials told us that duplicate VINs
                          are caused by data entry errors, fraudulent title documents, or states that
                          did not cancel their title record when the vehicle was retitled in a new
                          state. AAMVA has developed procedures for overcoming the problem
                          relating to duplicate VINs in the pointer file. While VINs may be duplicated
                          in the pointer file, the states of title and the title numbers will not be
                          duplicated. According to AAMVA officials, the states and AAMVA can use
                          these additional identifiers to distinguish the vehicles with duplicate VINs
                          and correct the problem by manually matching the correct title of the
                          vehicle to the correct VIN.

                          An AAMVA official said that the participating states and AAMVA are
                          currently working on a solution to the duplicate VIN problem with respect
                          to the theft and brand files. This is necessary because the NMVTIS theft
                          and brand files have no other identifiers to distinguish vehicles with the
                          same VIN. Also, according to AAMVA officials, as more states join
                          NMVTIS, the duplicate VINs would be eliminated through troubleshooting
                          efforts. AAMVA believes that, eventually, duplicate VINs would become a
                          rare occurrence.

Incomplete MCO File       As of May 14, 1999, the MCO file in NMVTIS was incomplete. According to
                          AAMVA officials, the MCO file did not contain data from all manufacturers.
                          AAMVA and The Polk Company are presently working on getting all
                          manufacturers to provide information. According to AAMVA officials, the
                          major domestic vehicle manufacturers are now reporting to the MCO file,
                          and The Polk Company is working on getting foreign manufacturers to also
                          provide information.

                          According to AAMVA officials, states believe that the MCO file is of value
                          because electronic verification of MCO data would be handled like title
                          data. They added that adding the MCO data is expected to take time
                          because the MCO data are not required by law.

AAMVA Needs to Address    On January 28, 1999, Justice audited AAMVA to determine if AAMVA was
                          properly accounting for the receipt and expenditure of fiscal year 1997
Accounting Deficiencies   funds. Justice reported that AAMVA (1) allowed excessive consultant fees,
                          which exceeded the maximum allowable amount by $89,371; (2) could not
                          provide supporting documentation for payments totaling $300,000 to
                          Arizona; (3) did not maintain adequate support for amounts claimed on
                          their quarterly financial reports; and (4) did not adequately administer
                          contractual arrangements with the states. Justice awarded $2.8 million in
                          fiscal year 1998 funds to AAMVA. However, release of the funds is



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                       contingent on AAMVA’s satisfactory resolution of deficiencies contained in
                       the Justice audit report. The impact of Justice’s decision to hold up the
                       release of the funds on AAMVA’s timetable for full implementation of
                       NMVTIS is not known.

                       According to Justice, most of these deficiencies have been resolved;
                       however, the Office of Justice Programs will not release more funds until
                       all deficiencies have been resolved. According to AAMVA officials, as of
                       July 27, 1999, AAMVA has provided all the required documentation to
                       Justice and, therefore, in its opinion, the accounting issues should not be
                       an impediment to the release of the funds.

                       Justice has not evaluated NMVTIS’ expected life-cycle costs and benefits
Justice Has Not        to ensure that additional federal funding is justified. The Clinger-Cohen Act
Determined If NMVTIS   of 1996 and the best practices used by public and private organizations to
Warrants Additional    manage information technology investment would provide an analytical
                       basis for informed investment management decisions.
Federal Investment
                       Neither the FBI nor the Office of Justice Programs has performed the
                       analysis. Justice assigned responsibility for overseeing development of
                       NMVTIS to the FBI, but FBI officials told us their assigned responsibility
                       did not extend to life-cycle cost benefit analysis and economically
                       justifying NMVTIS. The FBI officials agreed, however, that such an analysis
                       should be done.

                       As previously discussed, AAMVA will evaluate the results of the efforts of
                       the seven participating states to interface with NMVTIS. Its evaluation
                       should provide important data that Justice should include in its life-cycle
                       cost benefit analysis. While AAMVA’s evaluation will be limited to the
                       seven participating states, Justice should use the results to assess the
                       ability of the states to address the problems initially identified (e.g.,
                       duplicate VINs and incomplete MCO file). In addition, Justice could
                       analyze the estimated costs to the federal government by using the current
                       costs of the seven states. In estimating the benefits from NMVTIS, Justice
                       will have to determine the likelihood that the 44 nonparticipating states
                       will join NMVTIS. If less than full state participation is expected, Justice
                       will then have to assess the impact on the ability of NMVTIS to provide the
                       expected benefits.

                       Despite not having done the analysis to determine if NMVTIS is worth
                       continued federal investment, Justice is planning to fund additional states
                       after the accounting deficiencies are addressed. AAMVA does not expect
                       the final evaluation of the results from the participating states to be



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                      available before early in calendar year 2000. AAMVA’s plans call for
                      moving forward with implementation this year. AAMVA pointed out that
                      the preliminary evaluation, which will include an evaluation of the system
                      design feasibility, is due at the end of July 1999.

                      AAMVA plans to (1) add three or four states to NMVTIS and provide
                      federal funds to the states for their interface with NMVTIS, (2) begin a test
                      with law enforcement users, and (3) visit seven additional states to
                      prepare them for interfacing with NMVTIS. AAMVA plans to add the
                      remaining states between fiscal years 2000 and 2003. AAMVA anticipates a
                      fully implemented NMVTIS by 2004, which will include all 50 states and the
                      District of Columbia in a nationwide system.

                      The results of AAMVA’s test of NMVTIS may provide data for Justice to
Conclusions           determine whether NMVTIS, as designed, could achieve the benefits
                      envisioned in the Anti-Car Theft Act. However, more federal funding will
                      be needed to fully implement NMVTIS. The full benefits may not be
                      achieved if some states do not participate in NMVTIS. Therefore, we
                      believe it would be unwise to commit additional federal funding until (1)
                      AAMVA has completed the preliminary evaluation of the current test and
                      (2) Justice has analyzed whether the benefits of NMVTIS, as designed, and
                      less-than-full participation in NMVTIS would justify the continued federal
                      investment.

                      We recommend that the Attorney General (1) perform a life-cycle cost
Recommendations       benefit analysis to determine if additional federal investment in AAMVA’s
                      design of NMVTIS is justified and (2) provide additional federal funds for
                      NMVTIS only if such funding is supported by the analysis.

                      Justice and AAMVA provided their comments on a draft of this report on
Agency Comments and   July 22 and 20, 1999, respectively. Justice and AAMVA provided technical
Our Evaluation        comments, which we included where appropriate. Justice officials
                      generally concurred with the draft report. They said that the Office of
                      Justice Programs agrees that life-cycle cost benefit analysis is a good idea
                      and will perform this analysis using funds from the fiscal year 1999
                      earmark. Justice officials said that to maintain the ongoing development of
                      NMVTIS and to determine whether it merits additional funding before an
                      evaluation can be undertaken in 2000, the Office of Justice Programs has
                      stipulated that AAMVA must demonstrate that three of the participating
                      states are fully operational before funds may be obligated for new states.
                      In addition, the Office of Justice Programs will not obligate funds from the
                      1999 earmark for further expansion of NMVTIS until the life-cycle cost
                      benefit analysis has been completed. Justice officials said that, under the



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B-281671




proposed memorandum of understanding, the FBI would participate with
AAMVA in the evaluation of the analysis of the seven participating states.

AAMVA officials said that our recommendation to put the system on hold
until a life-cycle cost benefit analysis can be done would interrupt the
system in each state, delay new states’ implementations, and interrupt the
momentum of the system and result in increased costs. AAMVA
recommended that its preliminary report serve as justification for
continued federal funding until Justice completes its analysis. AAMVA
expects that the preliminary results will show NMVTIS’ feasibility.

We recognize that time will be needed to perform a life-cycle cost benefit
analysis, and that such an analysis may cause some delay in NMVTIS’
implementation, which may contribute to additional costs. However, using
additional federal funds without such an analysis could result in much
greater costs if NMVTIS were to prove to be ineffective.

As agreed with your office, unless you publicly announce its contents
earlier, we plan no additional distribution of this report until 30 days from
its date. At that time, we will send copies to Senator Richard H. Bryan,
Ranking Minority Member of this Subcommittee, and to Senator Robert C.
Byrd, Senator Orrin G. Hatch, Senator Patrick J. Leahy, and Senator Ted
Stevens and Representative John Conyers, Jr., Representative Henry J.
Hyde, Representative David Obey, and Representative C.W. Bill Young in
their capacities as Chairman or Ranking Minority Member of Senate or
House Committees. We are also sending copies of this report to the
Honorable Jacob J. Lew, Director, OMB; the Honorable Janet Reno, the
Attorney General; and representatives of AAMVA; NICB; and The Polk
Company. We will also make copies available to others upon request.




Page 13              GAO/GGD-99-132 National Motor Vehicle Title Information System
B-281671




If you have any questions regarding this letter, please contact me or James
M. Blume at (202) 512-8777. Key contributors to this assignment were
Ronald J. Salo, Michael H. Harmond, and Anne M. Rhodes-Kline.

Sincerely yours,




Norman J. Rabkin
Director, Administration of
 Justice Issues




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Page 15   GAO/GGD-99-132 National Motor Vehicle Title Information System
Contents



Letter                                                                                                 1


Appendix I                                                                                            18

Objectives, Scope, and
Methodology




                         Abbreviations

                         AAMVA       American Association of Motor Vehicle Administrators
                         DOT         Department of Transportation
                         FBI         Federal Bureau of Investigation
                         MCO         manufacturer's certificate of origin
                         NICB        National Insurance Crime Bureau
                         NMVTIS      National Motor Vehicle Title Information System
                         VIN         vehicle identification number




                         Page 16           GAO/GGD-99-132 National Motor Vehicle Title Information System
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Appendix I

Objectives, Scope, and Methodology


              Our objectives were to (1) determine the current status of the National
              Motor Vehicle Title Information System (NMVTIS) and (2) determine
              whether Justice had evaluated NMVTIS’ expected costs and benefits to
              ensure that additional federal investment in the system is justified. We
              analyzed NMVTIS cost data and expected benefits and the barriers that
              could prevent the benefits from being fully realized. In doing our analysis,
              we relied on the Clinger-Cohen Act of 1996 guidance for criteria regarding
              an effective framework for information technology investment
              management.

              We spoke with officials from the Department of Justice, the Federal
              Bureau of Investigation (FBI), the American Association of Motor Vehicle
              Administrators (AAMVA), and AAMVA’s two contractors—The Polk
              Company and the National Insurance Crime Bureau. Specifically, we
              discussed their efforts regarding the life-cycle process of system design
              and implementation consistent with best practices in both the public and
              private sectors of information technology investments. We also met with
              officials from two of the seven participating states (Arizona and Virginia)
              regarding their progress in the NMVTIS test. We selected Arizona and
              Virginia because they had completed or were expected to complete
              programming of their titling processes in preparation for beginning the test
              of NMVTIS. In addition to Arizona and Virginia, we met with officials from
              two nonparticipating states, Texas and the District of Columbia, which we
              selected primarily because of their proximity to the two participating
              states we visited.

              We obtained AAMVA’s cost estimate for a fully implemented system in all
              50 states and the District of Columbia and their basis for that estimate. We
              obtained, from Justice and AAMVA officials, federal funding appropriated
              as well as anticipated funding. We also obtained from AAMVA officials the
              distribution of the federal funding to seven states. We spoke with officials
              from AAMVA and its contractors and Arizona and Virginia about the
              proposed fee structure to recover NMVTIS operational costs in addition to
              their development costs for the system. These state officials were selected
              because they were in different stages of developing the capability of
              interfacing with NMVTIS.

              To identify the expected benefits of NMVTIS and potential barriers to
              achieving those benefits, we contacted officials from Justice, the FBI,
              AAMVA, and the states. These officials provided us with their views on the
              benefits to be derived from the system’s implementation and their
              individual perspectives on barriers that may prevent NMVTIS from
              realizing these benefits.



              Page 18              GAO/GGD-99-132 National Motor Vehicle Title Information System
Appendix I
Objectives, Scope, and Methodology




We surveyed officials in the 50 states and the District of Columbia to
obtain their views on NMVTIS-related issues. These officials were
responsible for the titling of motor vehicles in their states. The survey
addressed the states’ (1) willingness to participate in NMVTIS, ability to
implement NMVTIS, and current titling capabilities; (2) expected costs; (3)
expected benefits of the system; and (4) barriers affecting states’ decisions
to join the system. We received responses from the 7 participating states
and from 40 of the 44 nonparticipating states.

We conducted our work between September 1998 and June 1999 in
accordance with generally accepted government auditing standards. We
requested comments on a draft of this report from Justice and AAMVA
officials. Their comments are discussed near the end of the letter.




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