Page 1 GAO-12-870R Treasury’s Centralized Collection Efforts

United States Government Accountability Office

Washington, DC 20548

September 13, 2012

The Honorable Thomas R. Carper

Chairman

The Honorable Scott P. Brown

Ranking Member

Subcommittee on Federal Financial Management, Government

 Information, Federal Services, and International Security

Committee on Homeland Security and Governmental Affairs

United States Senate

Subject: Debt Collection Improvement Act of 1996: Status of Treasury’s 

Centralized Efforts to Collect Delinquent Federal Nontax Debt

This report transmits the enclosed briefing slides1 and related information 

that we presented to your offices on August 29, 2012, in response to your 

request for a description of the status of the Department of the Treasury’s 

(Treasury) centralized debt collection efforts under the Debt Collection 

Improvement Act of 1996 (DCIA).2

 

1

See enc. I for our briefing slides.

DCIA was intended, among other 

things, to maximize collection of delinquent federal nontax debt. DCIA 

requires federal agencies to notify Treasury of federal nontax debt 

delinquent over 180 days for purposes of payment offset and requires 

agencies to refer such debt to Treasury for centralized collection action 

(known as cross-servicing). To facilitate debt collection, DCIA, in concert 

with other federal debt collection laws that the act amended, authorizes 

several debt collection tools and bars delinquent federal nontax debtors 

from receiving additional federal loans, loan insurance, or loan 

guarantees until such debtors resolve their delinquencies. Treasury’s 

centralized delinquent federal nontax debt collection efforts include the 

2

Pub. L. No. 104-134, § 31001, 110 Stat. 1321-358 (Apr. 26, 1996). 

 
Page 2 GAO-12-870R Treasury’s Centralized Collection Efforts

Treasury Offset Program (TOP)3 and the cross-servicing program,4

As discussed with your offices, our objectives were to describe (1) actions 

Treasury has taken to implement its centralized delinquent federal nontax 

debt collection program as authorized by DCIA, and efforts under way or 

planned by Treasury to enhance or supplement its ability to collect 

delinquent federal nontax debt; (2) Treasury’s collection experience over 

the last 5 years (i.e., fiscal years 2007 through 2011) for delinquent 

federal nontax debt relative to the amount of such debt that was referred 

to Treasury for collection; (3) whether agencies have reported referring 

significant amounts of federal nontax debt to Treasury for collection prior 

to or at 180 days delinquent, and if so, Treasury’s collection results for 

such referrals compared to collection results for the debt referred that is 

more than 180 days delinquent; (4) agency exemptions from mandatory 

transfer of delinquent federal nontax debt to Treasury for cross-servicing, 

and Treasury’s actions to evaluate these exemptions and associated 

collections; and (5) Treasury’s mechanisms and controls to help ensure 

that federal agencies do not make new loans, loan insurance, or loan 

guarantees to delinquent federal nontax debtors to the extent required by 

the debtor bar provision of DCIA.

both 

of which are managed by Treasury’s Financial Management Service 

(FMS).

To address these objectives, we reviewed DCIA, pertinent Treasury 

regulations, and Treasury and Office of Management and Budget (OMB) 

guidance concerning delinquent federal nontax debt collection under 

DCIA. In addition, we interviewed FMS officials responsible for TOP and 

the cross-servicing program5

 

3

TOP compares the names and taxpayer identification numbers (TIN) (i.e., Social Security 

numbers or employer identification numbers) of debtors to the names and TINs of eligible 

federal and state payment recipients. If there is a match, the federal or state payment is 

reduced, or offset, in whole or in part, to satisfy the overdue debt, to the extent legally 

allowed. In addition to delinquent federal nontax debt, TOP processes and collects 

delinquent federal tax debt, delinquent child support debt, and certain delinquent debt 

owed to states, including some state income tax debt and unemployment insurance 

compensation debt.

and FMS and Bureau of the Public Debt 

4

Treasury’s cross-servicing program utilizes collection techniques authorized by DCIA and 

other federal debt collection laws to collect delinquent federal nontax debt on behalf of 

federal agencies.

5

DCIA centralized the collection of delinquent nontax debt owed to the federal government 

and gave Treasury significant responsibilities in this area. Within Treasury, FMS is 

charged with, among other things, collecting delinquent federal nontax debt.
Page 3 GAO-12-870R Treasury’s Centralized Collection Efforts

officials responsible for facilitating implementation of the debtor bar 

provision of DCIA, and we reviewed relevant documentation. Also, we 

obtained data from FMS, for fiscal years 2007 through 2011, showing (1) 

the amount of debt in TOP that was eligible for offset at fiscal year-end, 

(2) annual collections for TOP, (3) the amount of debt at the crossservicing program that was eligible for collection at fiscal year-end, and 

(4) annual collections for the cross-servicing program. Further, we 

obtained data from federal agencies’ Treasury Reports on Receivables 

and Debt Collection Activities (TROR),6

This report presents various data obtained from FMS and reported in the 

TRORs. According to an FMS official, the FMS data are unaudited, and to 

the best of our knowledge, the TROR data are unaudited. In some 

instances, differences or inconsistencies exist between the data obtained 

from FMS and the data reported in the TRORs, and in such instances, the 

data have not been reconciled by FMS. We used these data because 

they are the best data available that met our objectives. However, we did 

not attempt to reconcile or assess the reliability of these data.

which show the status, as 

reported by federal agencies to Treasury, of federal nontax debt, 

including delinquencies and collections, and are used by Treasury to 

report on TOP and the cross-servicing program.

We conducted our work from February 2012 to September 2012 in 

accordance with all sections of GAO’s Quality Assurance Framework that 

are relevant to our objectives. The framework requires that we plan and 

perform the engagement to obtain sufficient and appropriate evidence to 

meet our stated objectives and to discuss any limitations in our work. We 

believe that the information and data obtained, and the analyses 

conducted, provide a reasonable basis for any findings and conclusions. 

See enclosure II for additional details on our scope and methodology, 

enclosure III for a description of the status of governmentwide federal 

nontax debt and delinquent debt as reported in the TRORs, and 

enclosure IV for abbreviations.

In summary, according to FMS officials, FMS considers both TOP and the 

cross-servicing program to be fully mature in that all key elements of the 

programs have been implemented. As such, FMS’s current and future 

 

6

Treasury requires federal agencies to prepare TRORs quarterly and verify that the fiscal 

year-end receivable balances reconcile to the agencies’ audited financial statement 

receivable balances.
Page 4 GAO-12-870R Treasury’s Centralized Collection Efforts

efforts will focus on enhancements that will (1) for TOP, facilitate its ability 

to increase federal nontax debt collections through additional offsets and 

(2) for the cross-servicing program, enable it to collect such debt more 

efficiently and effectively. Further, FMS is considering a number of 

initiatives intended to improve centralized collection of delinquent federal 

nontax debt. These initiatives primarily involve increasing the amount of 

debt subject to collection by FMS, bolstering FMS’s set of debt collection 

tools, and enhancing FMS’s internal operations and interactions with 

referring federal agencies. Several of FMS’s initiatives, which are in the 

early stages of development, could, if approved and effectively 

implemented, address long-standing concerns about FMS’s centralized 

debt collection program. We previously reported on certain issues that 

continue to remain. According to FMS officials, the initiatives must be 

vetted by Treasury, OMB, and other stakeholders, as appropriate, prior to 

implementation.

According to data provided by FMS, the amount of delinquent federal 

nontax debt referred to Treasury for collection as of the fiscal year-end for 

the last 5 fiscal years (i.e., fiscal years 2007 through 2011) and the 

amount of collections for those fiscal years were as follows:

• Federal nontax debt referred to TOP and eligible for offset increased 

from $29.8 billion in fiscal year 2007 to $102.0 billion in fiscal year 

2011, and FMS’s annual TOP collections fluctuated, ranging from 

$1.4 billion in fiscal year 2007 to the highest amount for the 5-year 

period of $2.6 billion in fiscal year 2011.

• Federal nontax debt referred to the cross-servicing program and 

eligible for collection increased from $8.6 billion in fiscal year 2007 to 

$17.3 billion in fiscal year 2011, and FMS’s annual cross-servicing 

program collections fluctuated, ranging from $95 million in fiscal year 

2007 to the highest amount for the 5-year period of $193 million in 

fiscal year 2009.

According to the TRORs, federal agencies did not refer a significant7

 

7

For debt referred prior to or at 180 days delinquent as of September 30, 2011, we 

deemed significant any amount (1) over $1 billion, (2) over 5 percent of the total reported 

federal nontax debt referred to TOP or the cross-servicing program, or (3) over 5 percent 

of the total reported federal nontax debt delinquent 180 days or less.

amount of debt prior to or at 180 days delinquent to FMS for TOP or the 
Page 5 GAO-12-870R Treasury’s Centralized Collection Efforts

cross-servicing program. For example, federal agencies referred less 

than 1 percent of their reported nontax debt delinquent 180 days or less 

as of September 30, 2011, to TOP and the cross-servicing program. 

Accordingly, we did not perform any specific analysis of collection results 

for the limited amount of debt referred early to TOP or the cross-servicing 

program.

DCIA authorizes Treasury to grant exemptions from mandatory transfer of 

debt for cross-servicing for specific classes of debt at the request of the 

head of a federal agency or upon the Secretary of the Treasury’s own 

initiative and determination. According to FMS officials, Treasury has 

granted exemptions for certain classes of nontax debt to four agencies—

the Department of Education, the Social Security Administration, the 

Small Business Administration, and the Department of Health and Human 

Services.8

According to FMS officials, FMS’s primary mechanisms used to help 

ensure that delinquent federal nontax debtors do not receive additional 

federal loans, loan insurance, or loan guarantees involve referring 

delinquent federal nontax debt information to credit bureaus as part of the 

cross-servicing program, and administering Debt Check, which is an 

Internet-based information system designed to assist federal agencies in 

identifying delinquent debtors by providing information that is obtained 

from TOP. According to these officials, there is no legislative or regulatory 

requirement for federal agencies to use Debt Check. In addition, while 

FMS officials consider Debt Check a mechanism to help credit agencies 

determine loan eligibility, they do not consider it to be a control to help 

ensure that delinquent debtors do not get additional financial assistance 

in the form of a loan, loan guarantee, or loan insurance. According to data 

provided by FMS, only the Small Business Administration and the 

According to FMS officials, the exemptions, which totaled 

$35.5 billion as reported by the agencies in their TRORs as of September 

30, 2011, were granted during the 1999 to 2002 time frame. These 

officials stated that FMS has not reevaluated the exemptions or assessed 

collections by the agencies for the exempted classes of debt. In addition, 

according to these officials, Treasury has not performed a study to 

compare any of these four federal agencies’ collections of exempted debt 

with FMS’s cross-servicing program capability.

 

8

Treasury has also granted exemptions to all federal agencies (in 2005) for certain debts 

being collected by administrative wage garnishment.
Page 6 GAO-12-870R Treasury’s Centralized Collection Efforts

National Oceanic and Atmospheric Administration have used Debt Check 

during the last 5 calendar years (i.e., 2007 through 2011). In March 2012, 

Debt Check was made available to federal agencies via the Do Not Pay 

tool,9 which is being implemented by Treasury’s Bureau of the Public 

Debt, with oversight and direction from OMB.

We requested comments on a draft of the briefing slides and related 

enclosures from the Commissioner of FMS or his designee. On August 

10, 2012, FMS provided technical comments, which we incorporated as 

appropriate.

We are sending copies of this report to interested congressional 

committees, the Fiscal Assistant Secretary of the Treasury, the 

Commissioner of FMS, and other interested parties. In addition, this 

report is available at no charge on the GAO website at 

http://www.gao.gov. 

If you or your staffs have any questions about this report, please contact 

me at engelg@gao.gov or (202) 512-3406. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. GAO staff who made major contributions to this report 

are listed in enclosure V.

Gary T. Engel

Director

Financial Management and Assurance

Enclosures – 5 

 

9

The Do Not Pay tool, which was established in response to a June 18, 2010, presidential 

memorandum, includes a web-based single entry access portal that federal agencies can 

use to gain access to several data sources to assist in determining whether an individual 

or entity is eligible to receive federal payments or engage in federal contracts or grants.

Agency Comments
Page 7 GAO-12-870R Treasury’s Centralized Collection Efforts

Enclosure I

Debt Collection Improvement Act of 1996: 

Status of Treasury’s Centralized Efforts to Collect 

Delinquent Federal Nontax Debt 

Briefing for the Subcommittee on Federal Financial 

Management, Government Information, Federal Services, and 

International Security

Committee on Homeland Security and Governmental Affairs

United States Senate

August 29, 2012

Enclosure I
Page 8 GAO-12-870R Treasury’s Centralized Collection Efforts

Contents

Introduction

Objectives

Scope and Methodology

Background

Results

Enclosure I
Page 9 GAO-12-870R Treasury’s Centralized Collection Efforts

Introduction

• The Debt Collection Improvement Act of 1996 (DCIA) was intended, among other things, to 

maximize collection of delinquent federal nontax debt.1 DCIA requires federal agencies to 

notify the Department of the Treasury (Treasury) of federal nontax debt delinquent over 180 

days for purposes of payment offset and requires agencies to refer such debt to Treasury for 

centralized collection action (known as cross-servicing). To facilitate debt collection, DCIA, in 

concert with other federal debt collection laws that the act amended, authorizes several debt 

collection tools, including administrative wage garnishment (AWG), credit bureau reporting, 

and referring debt to private collection agencies (PCA), and bars delinquent federal nontax 

debtors from receiving additional federal loans, loan insurance, or loan guarantees until such 

debtors resolve their delinquencies.

• Following Treasury’s implementation of its centralized debt collection program, we issued a 

series of reports that included numerous recommendations to Treasury aimed at improving 

its ability to collect delinquent federal nontax debt.2 Our most recent report in this area was 

issued in 2003. Treasury implemented 27 of our 35 recommendations. 

1Under DCIA, the Department of the Treasury has significant governmentwide responsibilities for collecting federal nontax debts delinquent more than 180 days 

that are referred by federal agencies for collection. Pub. L. No. 104-134, § 31001, 100 Stat. 1321-358 (Apr. 26, 1996). While Treasury has additional debt 

collection-related responsibility(s) under other legislation, this review focuses only on Treasury’s debt collection program as authorized by DCIA. 2Previous GAO products concerning Treasury’s debt collection program include GAO, Debt Collection: Treasury Faces Challenges Implementing Its CrossServicing Initiative, GAO/AIMD-00-234 (Washington, D.C.: Aug. 4, 2000); Debt Collection Improvement Act of 1996: Major Data Sources Inadequate for 

Implementing the Debtor Bar Provision, GAO-02-462 (Washington, D.C.: Mar. 29, 2002); and Debt Collection: Opportunities Exist for Improving FMS’s CrossServicing Program, GAO-04-47 (Washington, D.C.: Oct. 31, 2003).

Enclosure I
Page 10 GAO-12-870R Treasury’s Centralized Collection Efforts

Objectives

You asked us to provide a description of the status of Treasury’s centralized delinquent federal nontax 

debt collection efforts, including the Treasury Offset Program (TOP)3 and the cross-servicing program4 at 

Treasury’s Financial Management Service (FMS). Accordingly, as discussed with your offices, the 

objectives of this engagement were to describe

• (1) actions Treasury has taken to implement its centralized delinquent federal nontax debt collection 

program as authorized by DCIA, and efforts under way or planned by Treasury to enhance or 

supplement its ability to collect delinquent federal nontax debt;

• (2) Treasury's collection experience over the last 5 years (i.e., fiscal years 2007 through 2011) for 

delinquent federal nontax debt relative to the amount of such debt that was referred to Treasury for 

collection;

• (3) whether agencies have reported referring significant amounts of federal nontax debt to Treasury 

for collection prior to or at 180 days delinquent, and if so, Treasury’s collection results for such 

referrals compared to collection results for the debt referred that is more than 180 days delinquent;

• (4) agency exemptions from mandatory transfer of delinquent federal nontax debt to Treasury for 

cross-servicing, and Treasury’s actions to evaluate these exemptions and associated collections; 

and

• (5) Treasury’s mechanisms and controls to help ensure that federal agencies do not make new 

loans, loan insurance, or loan guarantees to delinquent federal nontax debtors to the extent 

required by the debtor bar provision of DCIA. 3TOP compares the names and taxpayer identification numbers (TIN) (i.e., Social Security number or employer identification number) of debtors to the names 

and TINs of eligible federal and state payment recipients. If there is a match, the federal or state payment is reduced, or offset, in whole or in part, to satisfy the 

overdue debt, to the extent legally allowed. In addition to delinquent federal nontax debt, TOP processes and collects delinquent federal tax debt, delinquent 

child support debt, and certain delinquent debt owed to states, including some state income tax debt and unemployment insurance compensation debt. 4Treasury’s cross-servicing program utilizes collection techniques authorized by DCIA and other federal debt collection laws to collect delinquent nontax debt on 

behalf of federal agencies.

Enclosure I
Page 11 GAO-12-870R Treasury’s Centralized Collection Efforts

Scope and Methodology

To address these objectives, we did the following:

• Reviewed DCIA, pertinent Treasury regulations, and Treasury and Office of 

Management and Budget (OMB) guidance concerning the collection of delinquent 

federal nontax debt under DCIA.

• Interviewed responsible FMS officials, and obtained and reviewed pertinent data and 

documents for TOP and the cross-servicing program,5 including FMS’s actions to 

implement TOP and the cross-servicing program; efforts under way or planned by FMS 

to enhance or supplement its ability to collect delinquent federal nontax debt; FMS’s 

collection experience over the last 5 years (i.e., fiscal years 2007 through 2011); federal 

agencies’ referrals of debt prior to or at 180 days delinquent to TOP and the crossservicing program; and exemptions granted by Treasury from mandatory referral of debt 

for cross-servicing.

• Interviewed FMS and Treasury’s Bureau of the Public Debt officials, and reviewed 

relevant documentation, pertaining to mechanisms in place at Treasury to help ensure 

that federal agencies do not make new loans, loan insurance, or loan guarantees to 

delinquent federal nontax debtors to the extent required by the debtor bar provision of 

DCIA.

5DCIA centralized the collection of delinquent nontax debt owed to the federal government and gave Treasury significant responsibilities in this area. Within 

Treasury, FMS is charged with, among other things, the responsibility for delinquent federal nontax debt collection. 

Enclosure I
Page 12 GAO-12-870R Treasury’s Centralized Collection Efforts

Scope and Methodology (cont.)

• We obtained data from FMS, for fiscal years 2007 through 2011, showing (1) the amount of debt in 

TOP that was eligible for offset at fiscal year-end, (2) annual collections for TOP, (3) the amount of 

debt at the cross-servicing program that was eligible for collection at fiscal year-end, and (4) annual 

collections for the cross-servicing program.

• We obtained data from federal agencies’ Treasury Reports on Receivables and Debt Collection 

Activities (TROR),6 which show the status, as reported by federal agencies to Treasury, of federal 

nontax debt, including delinquencies and collections, and are used by Treasury to report on TOP and 

the cross-servicing program.

• This report presents various data obtained from FMS and reported in the TRORs. According to an 

FMS official, the FMS data are unaudited, and to the best of our knowledge, the TROR data are 

unaudited. In some instances, differences or inconsistencies exist between the data obtained from 

FMS and the data reported in the TRORs, and in such instances, the data have not been reconciled by 

FMS. We used these data because they are the best data available that met our objectives. However, 

we did not attempt to reconcile or assess the reliability of these data.

• We conducted our work from February 2012 to September 2012 in accordance with all sections of 

GAO’s Quality Assurance Framework that are relevant to our objectives. The framework requires that 

we plan and perform the engagement to obtain sufficient and appropriate evidence to meet our stated 

objectives and to discuss any limitations in our work. We believe that the information and data 

obtained, and the analyses conducted, provide a reasonable basis for any findings and conclusions. 

• See enclosure II of our full report for additional details on our scope and methodology.

6Treasury requires federal agencies to prepare TRORs quarterly and verify that the fiscal year-end receivable balances reconcile to agencies’ audited financial 

statement receivable balances.

Enclosure I
Page 13 GAO-12-870R Treasury’s Centralized Collection Efforts

Background

• Federal nontax debt includes direct loans, defaulted guaranteed loans, and administrative 

debt. Administrative debt includes debt related to fines, penalties, and salary and benefit 

overpayments.

• Reported federal nontax debt and delinquencies,7 including debt delinquent over 180 days, 

increased markedly over the last 5 years. As reported in the TRORs, from September 30, 

2007, to September 30, 2011, total federal nontax debt increased from $339.6 billion to 

$777.8 billion; federal nontax delinquent debt increased from $64.9 billion to $131.0 billion; 

and federal nontax debt delinquent over 180 days increased from $45.5 billion to $81.3 

billion.

• Federal nontax debt that is written off and classified as currently not collectible (CNC)8 is 

reported in the TRORs separately from other federal nontax debt and delinquencies. As of 

September 30, 2011, federal agencies reported $31.7 billion of CNC debt. Like other 

delinquent federal nontax debt, CNC debt is potentially eligible for referral to Treasury for 

collection.

7According to the Federal Claims Collections Standards (31 C.F.R. § 900.2(b)) and Treasury’s Instructional Workbook for Preparing the 

“Treasury Report on Receivables and Debt Collection Activities”, A Supplement to the Treasury Financial Manual, Volume I-Part 2-Chapter 4100, 

issued June 2008, a debt is delinquent if it has not been paid by the due date specified in the agency’s initial written demand for payment or 

applicable agreement, unless other satisfactory payment arrangements have been made. Although a contract may provide for a “grace” period, 

once that period has expired without payment, the date of delinquency (which is used for aging the debt) is the original due date. 8According to OMB Circular No. A-129, federal nontax debt that is written off can be classified as CNC if the agency intends to take additional 

collection action on the debt. Collection action, including offset, can be taken on CNC debt until such actions are legally precluded or the debt is 

paid, sold, or closed out. Generally, debt that is closed out must be reported to the Treasury’s Internal Revenue Service as potential income to 

the debtor. (See 26 C.F.R. § 6050P). According to FMS, in most cases, federal agencies stop all collection activity once a federal nontax debt is 

closed out.

Enclosure I
Page 14 GAO-12-870R Treasury’s Centralized Collection Efforts

Background (cont.)

• Certain delinquent federal nontax debt is ineligible for referral to Treasury for 

collection through TOP and the cross-servicing program, including debt classified 

as in bankruptcy, forbearance, formal appeals, or foreclosure. Of eligible debt, 

there are two exceptions to the requirement to refer debt for offset—debt owed by 

foreign sovereign nations and debt in litigation at the Department of Justice (DOJ) 

for enforced collection.9 Exceptions for debt referral to Treasury for cross-servicing 

include the offset exception categories, plus debt at federal agencies’ PCAs; debt in 

the process of internal offset at the referring agencies if collectible within three 

years; debt exempted by Treasury from cross-servicing, for example, the 

Department of Education’s (Education) student loan debt; and debt returned from 

the cross-servicing program as uncollectible. In addition, in the TRORs, federal 

agencies report certain delinquent federal nontax debt in “Other” categories, which 

result in the debt being exempted from referral to TOP, the cross-servicing 

program, or both.10

9According to FMS, DOJ refers eligible judgment debt to TOP on behalf of federal agencies.

10In the Delinquent Debt (Over 180 Days Delinquent) Eligible for Referral to Treasury Offset and Cross-Servicing section of the TROR, there are three “Other” 

categories—one for debt exempted from TOP, one for debt exempted from the cross-servicing program, and one for debt exempted from both TOP and the 

cross-servicing program. As of September 30, 2011, federal agencies reported a total of $21.4 billion in these “Other” categories. According to TROR guidance, 

delinquent federal nontax debt reported in the “Other” categories includes debt that is not legally enforceable, debt scheduled for sale, and other debt that is 

exempt from mandatory referral for reasons not otherwise listed on the TROR. Agencies must footnote amounts included as “Other,” with the reason for 

exempting the debt from referral.

Enclosure I
Page 15 GAO-12-870R Treasury’s Centralized Collection Efforts

Background (cont.)

• Federal agencies are required to refer their eligible, nonexempt federal nontax 

debt delinquent over 180 days to TOP for offset and to Treasury or another 

debt collection center for collection.11 Federal agencies are required to certify 

that the debt referred is delinquent, valid, and legally enforceable and not 

subject to any bars against collection and the agency has complied with all 

applicable due process requirements. As of September 30, 2011, before 

exclusions, federal agencies reported in the TRORs that federal nontax debt 

delinquent over 180 days, including CNC debt, totaled $113.0 billion. About 

two-thirds, or $75.3 billion, of this debt was reported in the TRORs as 2 or more 

years delinquent, including $43.6 billion of federal nontax debt delinquent over 

180 days and all of the $31.7 billion of CNC debt.

11In addition to FMS, as of July 18, 2012, there is one other Treasury-designated debt collection center—the Department of Health and Human Services’ (HHS) 

Program Support Center (PSC). PSC has been granted authority to service the following types of debt: (1) HHS debt less than 180 days delinquent, (2) HHS 

debt exempt from mandatory transfer to Treasury for cross-servicing, and (3) HHS debt and debt owed to other federal agencies arising from grant audit and 

program disallowances, but only for 180 days following completion of appeals.

Enclosure I
Page 16 GAO-12-870R Treasury’s Centralized Collection Efforts

Background (cont.)

• As reported by federal agencies in the TRORs, as of September 30, 2011, after 

ineligible and exempt debt was excluded, $68.6 billion of federal nontax debt 

delinquent over 180 days and CNC debt was required to be referred to TOP. Of 

the $68.6 billion, $58.4 billion was reported as referred to TOP, leaving 

$10.2 billion remaining to be referred by the federal agencies.

• As reported by federal agencies in the TRORs, as of September 30, 2011, after 

ineligible and exempt debt was excluded, $20.4 billion of federal nontax debt 

delinquent over 180 days and CNC debt was required to be referred to the 

cross-servicing program. Of the $20.4 billion, $19.3 billion was reported as 

referred to the cross-servicing program, leaving $1.1 billion remaining to be 

referred by the federal agencies.

• See enclosure III of our full report for details on the status of governmentwide 

federal nontax debt and delinquent debt.

Enclosure I
Page 17 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 1: Treasury’s Actions to Implement Centralized 

Debt Collection under DCIA

• According to FMS officials, FMS considers both TOP and the cross-servicing 

program to be fully mature programs, that is, all key elements of the programs 

have been implemented. As such, FMS’s current and future efforts will focus on 

enhancements that will 

• for TOP, facilitate its ability to increase collections through additional 

offsets and

• for the cross-servicing program, enable it to collect more efficiently and 

effectively.

• Further, FMS is considering a number of initiatives intended to improve 

centralized collection of delinquent federal nontax debt. These initiatives 

primarily involve

• increasing the amount of debt subject to collection by FMS, 

• bolstering FMS’s set of debt collection tools, and 

• enhancing FMS’s internal operations and interactions with referring federal 

agencies.

Enclosure I
Page 18 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 1: Treasury’s Actions to Implement Centralized 

Debt Collection under DCIA—TOP

• TOP is used to offset, in whole or in part, federal and state payments to satisfy 

delinquent federal nontax debt of the payment recipient, to the extent legally allowed. 

Federal payments currently available for offset through TOP include12

• federal tax refunds (may offset up to 100 percent);

• federal salaries (may offset up to 15 percent of disposable pay,13 except when 

collecting child support, when the limit increases to 50 to 65 percent);

• Office of Personnel Management retirement annuities (may offset up to 25 

percent);

• benefit payments, including Social Security retirement and Railroad Retirement 

(may offset up to 15 percent on payments over $750); and

• vendor and other miscellaneous payments, including federal employee travel 

advances and reimbursements, Medicare Part A and Part B payments to providers, 

Judgment Fund payments, and certain state payments (may offset up to 100 

percent).

12Certain federal payments are not available for offset, including (1) payments exempted by law, for example, Education’s student loan payments and 

Department of Veterans Affairs’ benefit payments and (2) payments exempted by the Secretary of the Treasury, for example, Social Security Administration 

(SSA) Supplemental Security Income benefit payments and U.S. Department of Agriculture Food and Nutrition Service benefit payments. 13Disposable pay means that part of the debtor's compensation (including, but not limited to, salary, bonuses, commissions, and vacation pay) from an 

employer remaining after the deduction of health insurance premiums and any amounts required by law to be withheld.

Enclosure I
Page 19 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 1: Treasury’s Actions to Implement Centralized 

Debt Collection under DCIA—TOP (cont.)

• Examples of recent and ongoing efforts at FMS to enhance TOP include

• making additional non-Treasury disbursing office (NTDO) payments 

available for offset through TOP,

• increasing participation in the State Reciprocal Program, and 

• implementing a new TOP system.

Enclosure I
Page 20 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 1: Treasury’s Actions to Implement Centralized 

Debt Collection under DCIA—TOP (cont.)

• While Treasury is responsible for disbursing payments for most federal 

agencies, NTDOs also disburse payments on behalf of the federal government. 

According to FMS officials, FMS continues to work with NTDOs to increase 

participation in TOP.

• According to FMS officials, the strategy for bringing additional NTDO payments 

into TOP is twofold: (1) for agencies with delegated disbursing authority, 

Treasury can rescind that authority, and as Treasury begins making those 

payments, the payments can be processed through TOP, and (2) for agencies 

with statutory disbursing authority, Treasury will work with those agencies to 

reach agreements that will allow those payments to be processed through TOP.

• NTDOs that participate in TOP for vendor offset include the Department of 

Defense’s Defense Finance and Accounting Service (DFAS) and Army Corps 

of Engineers and the U.S. Postal Service (USPS).

• Salary-paying agencies that participate in TOP for salary offset include DFAS 

(NTDO), USPS (NTDO), the U.S. Department of Agriculture’s National Finance 

Center, the General Services Administration, and the Department of the 

Interior.

Enclosure I
Page 21 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 1: Treasury’s Actions to Implement Centralized 

Debt Collection under DCIA—TOP (cont.)

• In 2007, FMS initiated a pilot project for the State Reciprocal Program (SRP). 

Under SRP, states refer state debt to TOP for offset against federal vendor 

payments. Likewise, delinquent federal nontax debt is matched against 

payments made by the states, including state tax refunds and state vendor 

payments, as authorized by state laws and the reciprocal agreements.

• Generally, states must pass legislation authorizing participation in the program, 

and states must enter into a reciprocal agreement with FMS. 

• According to FMS officials, as of July 12, 2012, six states were participating in 

SRP—Maryland (2007), New Jersey (2007), New York (2010), Kentucky 

(2011), Wisconsin (2012), and Minnesota (2012).

• According to FMS officials, although not yet participating in SRP, the following 

states have each passed legislation to allow participation in SRP: Illinois, 

Kansas, Louisiana, Massachusetts, Nevada, Oregon, Pennsylvania, Virginia, 

West Virginia, and the District of Columbia.

Enclosure I
Page 22 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 1: Treasury’s Actions to Implement Centralized 

Debt Collection under DCIA—TOP (cont.)

• In fiscal year 2011, FMS began developing a new system, called Treasury 

Offset Program Next Generation (TOP NG), that will replace the older TOP 

system. 

• According to FMS officials, TOP NG is expected to increase collections, 

improve timeliness and quality of debt data, and enhance reporting capabilities. 

According to these officials, specific outcomes to be achieved by TOP NG 

include (1) maximizing collections from offset of grant payments (grant 

payments are currently not being offset); (2) reducing the effort for manual 

payments (i.e., automate certain parts of the process, for example, automate 

notification to the creditor agency of manual check payments); (3) improving the 

effectiveness of matching (i.e., increase matching by using additional 

information from other data sources for partial match solutions); and (4) 

minimizing the inconsistencies between TOP and creditor agencies’ systems 

(i.e., reduce the time lapse for notifying creditor agencies of offset).

Enclosure I
Page 23 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 1: Treasury’s Actions to Implement Centralized 

Debt Collection under DCIA—Cross-Servicing Program • According to FMS officials, FMS considers its cross-servicing program to be fully mature, that is, all key elements 

authorized by DCIA have been implemented.14 As such, FMS’s current and future efforts will focus on 

enhancements that will enable it to collect debt more efficiently and effectively.

• According to FMS officials and cross-servicing program guidance, FMS attempts to collect debt referred to the 

cross-servicing program by initiating the following actions, as appropriate: 

• perform skiptracing, if necessary, which is the process used to locate a debtor or identify a taxpayer 

identification number (TIN);

• send demand letter and attempt phone contact;

• offer payment agreement options (e.g., repayment or compromise agreement);

• report the debt to consumer or commercial credit bureau;

• refer the debt to TOP, based on agreement with the agency holding the debt;

• pursue AWG, based on agreement with the agency holding the debt;

• refer the debt to PCAs;15

• refer the debt to DOJ for litigation, if necessary;

• return the debt to the referring agency; and

• file Internal Revenue Service (IRS) Form 1099C, reporting unpaid debt as potential income to the debtor.

14Although authorized by DCIA, FMS officials told us that FMS has no immediate plans to perform asset sales, liquidate collateral, sell secured debts, or 

publish or otherwise disseminate information regarding the identity of delinquent federal nontax debtors as part of its cross-servicing program. According to 

these officials, FMS has not recently been requested by any federal agency to perform these services. In addition, DCIA included a provision known as 

gainsharing, which was designed to provide agencies an incentive to increase collections of delinquent debt by reimbursing them for certain expenses 

related to collection. According to a FMS official, gainsharing has not been implemented, but it is being considered along with other incentive programs. 15FMS may refer debt to one of four PCA contractors. The PCA can service the debt for up to 270 days, or longer if in a repayment agreement, before 

returning it to FMS. At that time, FMS can refer the debt to a second PCA, which can also service the debt for up to 270 days, or longer if in a repayment 

agreement, before returning it to FMS.

Enclosure I
Page 24 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 1: Treasury’s Actions to Implement Centralized Debt 

Collection under DCIA—Cross-Servicing Program (cont.)

• Examples of recent and ongoing efforts at FMS to improve its cross-servicing 

program include

• issuing a new Treasury Financial Manual (TFM) chapter, Part 4, Chapter 

4000 (TFM 4-4000), Debt Management Services Collection of Delinquent 

Nontax Debt, which describes how FMS provides delinquent nontax debt 

collection services to federal agencies;

• pursuing increased collections through AWG; and

• developing and implementing the “Scorecard” to improve federal agencies’ 

management and reporting of delinquent federal nontax debt.

Enclosure I
Page 25 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 1: Treasury’s Actions to Implement Centralized Debt 

Collection under DCIA—Cross-Servicing Program (cont.)

• FMS issued the new TFM 4-4000 on October 18, 2011. According to FMS officials, the 

new TFM chapter gives FMS greater authority for making collection decisions for debts in 

the cross-servicing program, specifically with regard to making compromises and 

repayment agreements.16

• In the past, in addition to statutory requirements, collection parameters, such as maximum 

repayment periods and limits on repayment and compromise amounts, were established 

by the agency referring the debt. However, under the new TFM guidance, FMS has the 

same authority as the head of the referring agency to determine collection parameters and 

limits on repayment and compromise amounts without first getting approval from the 

referring agency, unless the agency has specific statutory authority to make such 

decisions.

• According to FMS officials, FMS is meeting with federal agencies to discuss the new TFM 

chapter, including FMS’s new authority regarding compromises and repayment 

agreements. FMS officials stated that as of the end of June 2012, FMS has discussed the 

new TFM chapter with 18 federal agencies. In addition, these officials stated that 

discussions and outreach regarding TFM 4-4000 will be an ongoing effort that will continue 

through fiscal year 2013 in the form of individual agency meetings as well as through 

established training and conference venues.

16FMS debt collection staff and PCA personnel are required to attempt to collect delinquent federal nontax debt in full; however, they can enter into repayment or 

compromise agreements with debtors. 

Enclosure I
Page 26 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 1: Treasury’s Actions to Implement Centralized Debt 

Collection under DCIA—Cross-Servicing Program (cont.) • AWG is an authorized collection action under DCIA, but it is not a requirement. While 

federal agencies can administer AWG to collect their own debt,17 FMS must obtain 

authorization from the agencies in order for FMS to use AWG as part of the cross-servicing 

program. 

• According to data provided by FMS, as of April 1, 2012, a total of 27 federal agencies, 

including 18 of the 24 Chief Financial Officers (CFO) Act agencies, have authorized FMS 

to use AWG to collect delinquent federal nontax debt for a total of 239 programs. While 

some agencies, such as the Departments of Education, State, and Veterans Affairs have 

authorized FMS to perform AWG for only one program, other agencies have authorized 

FMS to perform AWG for multiple programs.

• According to data provided by FMS, for fiscal year 2011, FMS had AWG collections for 21 

of the 27 agencies, with collections for the agencies ranging from less than $1,000 for 2 

agencies to over $10 million for 1 agency.

• On October 1, 2009, FMS’s cross-servicing program implemented a matching process with 

the Department of Health and Human Services’ (HHS) National Directory of New Hires 

(NDNH) database, which provides the names, TINs, and addresses of employees and 

their employers. According to FMS officials, because of its improved capability to locate 

debtors’ employment information with the NDNH match, FMS has significantly increased 

its ability to use AWG.

17For example, Education, SSA, and the Small Business Administration administer AWG to collect their own delinquent federal nontax debt.

Enclosure I
Page 27 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 1: Treasury’s Actions to Implement Centralized Debt 

Collection under DCIA—Cross-Servicing Program (cont.)

• According to FMS officials, FMS developed the “Scorecard” as a performance and 

relationship management tool to track federal agencies’ compliance with DCIA and 

sound debt collection practices and to help identify agencies’ debt collection strengths 

and areas for improvement.

• The Scorecard, which includes quantitative and qualitative scoring, is intended to 

measure 

• debt/debtor information (e.g., timeliness of debt certification, completeness of debt 

information, and debt referrals made at least once per quarter);

• utilization of collection tools (e.g., AWG, credit bureau reporting, and TOP);

• TROR reporting accuracy and timeliness;

• meeting write-off and close-out requirements; and

• validity of Treasury-granted exemptions and other exemption claims (i.e., the 

agency’s accuracy of identifying debts as ineligible or exempt from the mandatory 

transfer to Treasury).

• According to FMS officials, FMS began rollout of the Scorecard in fiscal year 2011, with 

plans for completing Scorecards for all of the 24 CFO Act agencies by the end of fiscal 

year 2012. FMS officials consider the Scorecard to be a work in progress and are still 

assessing its usefulness. 

Enclosure I
Page 28 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 1: Initiatives under Consideration by Treasury to 

Enhance or Supplement Centralized Debt Collection

• FMS has identified a series of initiatives intended to improve centralized collection of 

delinquent federal nontax debt. These initiatives primarily involve

• increasing the amount of debt subject to collection by FMS, 

• bolstering FMS’s set of debt collection tools, and 

• enhancing FMS’s internal operations and interactions with referring federal agencies.

• According to FMS officials, the initiatives are predecisional—no decision has been made to 

go forward with the initiatives, which must be vetted by Treasury, OMB, and stakeholders, as 

appropriate, prior to implementation.

• According to FMS officials, in order to implement most of the initiatives, either a change in 

FMS’s authority (i.e., a legislative change) or a change in partnership with outside 

stakeholders (i.e., require referring agencies to partner with FMS, change behaviors, or both) 

would be needed. A small number of initiatives would require only changes controlled 

internally by FMS. These officials stated that implementing some of the initiatives may involve 

difficult public policy trade-offs, and such decisions can only be made by policymakers.

• FMS initiatives under consideration to enhance or supplement centralized debt collection, 

including the type of change and the primary parties involved in implementing the initiative, 

are shown in table 1.

Enclosure I
Page 29 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 1: Initiatives under Consideration by Treasury to 

Enhance or Supplement Centralized Debt Collection (cont.) 

TOP (T) or

crossservicing 

program (CS)

Initiative Primary parties involved in implementation and

type of change required

T Enforce the requirement for federal agencies to refer eligible federal nontax debt 

to TOP at 180 days delinquent.

FMS and outside stakeholders (requires federal agencies to partner with FMS 

and change behaviors)

T Mandate referral of eligible federal nontax debt to TOP at 60 days delinquent. FMS and Congress (requires a change in authority—a legislative change)

T Mandate states’ participation in the state reciprocal program. FMS and Congress (requires a change in authority—a legislative change)

T and CS Reduce the amount of federal nontax debt exempted from TOP or the crossservicing program because of federal agencies’ misclassification of debts as 

ineligible, or exempt, from referral.

FMS and outside stakeholders (requires federal agencies to partner with FMS 

and change behaviors)

T Mandate that additional NTDO payment streams be processed in TOP. FMS and Congress (requires a change in authority—a legislative change)

T Increase offset percentage of certain current payment streams from 15 percent to 

25 percent.

FMS and Congress (requires a change in authority—a legislative change)

T Mandate offset for currently ineligible payment streams, up to 25 percent. FMS and Congress (requires a change in authority—a legislative change)

CS Increase the use and effectiveness of AWG. FMS and outside stakeholders (requires federal agencies to partner with FMS 

and change behaviors); making AWG mandatory would require a legislative 

change

T Enhance the TOP matching process by improving the data-matching algorithm. FMS (requires internal operational improvements at FMS)

CS Improve the ability to quickly identify cases that should be (1) worked internally at 

FMS, (2) routed to an internal specialist, or (3) referred to PCAs or DOJ, to 

optimize collections.

FMS (requires internal operational improvements at FMS)

CS Increase the frequency by which agencies are required to provide proof of debt 

documentation upon referral of debt to the cross-servicing program, specifically for 

debts with large outstanding balances (i.e., debts over $26,000).

FMS and outside stakeholders (requires federal agencies to partner with FMS 

and change behaviors)

Table 1: FMS Initiatives under Consideration to Enhance or Supplement Centralized Debt Collection

Source: FMS. 

Enclosure I
Page 30 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 1: Initiatives under Consideration by Treasury to 

Enhance or Supplement Centralized Debt Collection (cont.)

• Several of these initiatives, which are in the early stages of development, could, 

if approved and effectively implemented, address long-standing concerns about 

FMS’s centralized debt collection program. We previously reported on certain 

issues that continue to remain. 

• These issues include

• debt not promptly referred for collection at 180 days delinquent,

• debt reported as excluded from TOP and cross-servicing program referral,

• federal agencies’ use of AWG, and

• assessment of FMS’s debt collection strategy.

Enclosure I
Page 31 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 1: Initiatives under Consideration by Treasury to 

Enhance or Supplement Centralized Debt Collection (cont.)

• Debt not promptly referred for collection at 180 days delinquent

• In a June 2000 testimony on FMS’s implementation of its cross-servicing 

program, we noted that although FMS had taken steps to encourage 

agencies to refer eligible debt, much of the eligible debt was not being 

promptly referred and the age of the debt referred generally was 

significantly older than 180 days delinquent.18 In our testimony, we stated 

that debt needs to be promptly referred for collection because the 

likelihood of recovering amounts owed decreases dramatically as the debt 

ages.

• During this current review, as previously discussed, we noted that 

$10.2 billion (or about 15 percent) of debt reported in the TRORs as 

required to be referred to TOP, and $1.1 billion (or about 5 percent) of debt 

reported in the TRORs as required to be referred for cross-servicing, had 

not been referred as of fiscal year-end 2011. 

18GAO, Debt Collection: Treasury Faces Challenges Implementing Its Cross-Servicing Initiative, GAO/T-AIMD-00-213 (Washington, D.C.: June 8, 2000).

Enclosure I
Page 32 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 1: Initiatives under Consideration by Treasury to 

Enhance or Supplement Centralized Debt Collection (cont.)

• Debt reported as excluded from TOP and cross-servicing program referral

• In August 2000, we reported that a large amount of debt over 180 days 

delinquent was reported by federal agencies as ineligible for, or excluded 

from, the cross-servicing program (e.g., debt reported in the “Other” 

categories); however, these amounts were not required to be, and were 

not, independently verified.19

• During this current review, as previously discussed, we noted that as of 

September 30, 2011, federal agencies reported a total of $21.4 billion in 

the “Other” categories on the TRORs, indicating that debt was excluded 

from TOP, the cross-servicing program, or both. According to FMS 

officials, FMS was not able to provide explanations for all of the debt in the 

“Other” categories. According to these officials, FMS sometimes 

questioned the validity of certain of the exclusions. Further, there is no 

requirement for independent verification of such exclusions.

19GAO/AIMD-00-234.

Enclosure I
Page 33 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 1: Initiatives under Consideration by Treasury to 

Enhance or Supplement Centralized Debt Collection (cont.)

• Federal agencies’ use of AWG

• In October 2001, we reported that federal agencies were not utilizing AWG as 

authorized by DCIA to collect delinquent federal nontax debt even though, 

according to experts, AWG can potentially be an extremely powerful debt collection 

tool.20

• During this current review, as previously discussed, as of April 2012, data provided 

by FMS show that only 27 federal agencies, including 18 of the 24 CFO Act 

agencies, allowed FMS to perform AWG as part of cross-servicing. According to 

FMS’s data, collections from AWG for fiscal year 2011 totaled $27 million, and 

FMS attributed almost $23 million of that amount to the NDNH match (i.e., the 

NDNH match provided the debtor and employer information necessary for FMS to 

administer AWG). Although FMS officials stated that FMS matches all debts in the 

cross-servicing database to the NDNH data, FMS can only perform AWG for those 

federal agencies that allow it as part of their cross-servicing profile (i.e., those 

agencies that have completed AWG prerequisites, including promulgation of 

regulations and hearing procedures, and have authorized AWG as a collection tool 

for their debts). 

20GAO, Debt Collection Improvement Act of 1996: Agencies Face Challenges Implementing Certain Key Provisions, GAO-02-61T (Washington, D.C.: Oct. 10, 

2001).

Enclosure I
Page 34 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 1: Initiatives under Consideration by Treasury to 

Enhance or Supplement Centralized Debt Collection (cont.)

• Assessment of FMS’s debt collection strategy

• In August 2000, we recommended, among other things, that FMS perform 

a comprehensive review of its cross-servicing process (e.g., analyze the 

types of debt referred to FMS and the associated collection rates; identify 

specific types of debt, if any, that should be sent promptly to the PCAs; 

and identify the appropriate level of involvement by FMS collectors) to 

determine whether FMS’s debt collection strategy was appropriate for 

optimizing collections.21

• During this current review, FMS officials stated that they recognize that 

improvements can be made in FMS’s cross-servicing program to increase 

collections, and FMS is working toward that goal. According to FMS 

officials, efforts currently under way to increase collections include 

identifying potential legislation, modifying FMS’s business process, 

acquiring more sophisticated technology, and using analytics to assess the 

collectibility of debts and determine the most efficient and effective 

collection actions (e.g., service in-house or refer to a PCA).

21GAO/AIMD-00-234.

Enclosure I
Page 35 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 2: Treasury’s TOP and Cross-Servicing Program 

Collections, 2007 through 2011 

• As shown in figure 1, according to data provided by FMS, during each of the last 5 fiscal 

years (i.e., 2007 through 2011), the amount of delinquent federal nontax debt referred to 

TOP and eligible for offset as of fiscal year-end increased, going from $29.8 billion in 

fiscal year 2007 to $102.0 billion in fiscal year 2011. During this same 5-year period, 

FMS’s annual TOP collections fluctuated, ranging from $1.4 billion in fiscal year 2007 to 

the highest amount for the 5-year period of $2.6 billion in fiscal year 2011.22

• Similarly, as shown in figure 2, according to data provided by FMS, during each of the 

last 5 fiscal years (i.e., 2007 through 2011), the amount of delinquent federal nontax 

debt referred to the cross-servicing program and eligible for collection as of fiscal yearend increased, going from $8.6 billion in fiscal year 2007 to $17.3 billion in fiscal year 

2011. During this same 5-year period, FMS’s annual cross-servicing program 

collections fluctuated, ranging from $95 million in fiscal year 2007 to the highest amount 

for the 5-year period of $193 million in fiscal year 2009.23

22TOP assesses the creditor agency a fee of $17 to $29 for each federal or state payment offset to collect a nontax federal debt. The fees are deducted from 

collections, with the agency receiving collections less fees to apply toward the debt. These TOP fees are included in the TOP collection amounts. 23For the cross-servicing program, FMS charges a fee to the creditor agency and, as authorized by the creditor agency, adds this fee to the debt balance—for 

any debt that is delinquent by more than 2 years, the fee is 30 percent of the total payment received, and for any debt delinquent 2 years or less, the fee is 28 

percent of the total payment received. When a debt is collected by a PCA, the applicable fee is allocated as follows: PCAs receive commission fees (i.e., on 

amounts collected by them) at 25 percent for debts more than 2 years delinquent, and at 23 percent for debts delinquent 2 years or less; 2 percent is allocated 

to a bonus pool divided among the PCAs in accordance with contract terms; and 3 percent is retained by FMS. When a debt is collected by DOJ, it charges an 

additional fee of 3 percent of the collection amount on payments received after an account has been referred to DOJ for collection. Fees are deducted from 

collections, with the agency receiving collections less fees to apply toward the debt. These fees for cross-servicing are included, where applicable, in the crossservicing program collection amounts.

Enclosure I
Page 36 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 2: Treasury’s TOP and Cross-Servicing Program 

Collections, 2007 through 2011 (cont.)

Figure 1: Total Delinquent Federal Nontax Debt Eligible for Offset in 

TOP, and Annual TOP Collections, for Fiscal Years 2007 through 2011 

Enclosure I
Page 37 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 2: Treasury’s TOP and Cross-Servicing Program 

Collections, 2007 through 2011 (cont.)

Figure 2: Total Delinquent Federal Nontax Debt Eligible for Collection in FMS’s Cross-Servicing 

Program, and Annual Cross-Servicing Program Collections, for Fiscal Years 2007 through 2011

Enclosure I
Page 38 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 2: Treasury’s TOP and Cross-Servicing Program 

Collections, 2007 through 2011 (cont.)

• Data provided by FMS show that collections under the cross-servicing program 

are the highest during the first 2 years after debt referral. For example, for debts 

referred for cross-servicing during fiscal year 2007 that remained active in 

FMS’s cross-servicing database, FMS and its PCAs collected

• 2.02 percent during fiscal year 2007,

• 2.44 percent during fiscal year 2008, 

• 0.70 percent during fiscal year 2009,

• 0.41 percent during fiscal year 2010, and

• 0.23 percent during fiscal year 2011.

Enclosure I
Page 39 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 3: Early Referrals of Delinquent Federal Nontax 

Debt to Treasury for Collection

• In summary, according to the TRORs, federal agencies did not refer a significant amount of debt prior to 

or at 180 days delinquent to FMS for TOP or the cross-servicing program.24 Accordingly, we did not 

perform any specific analysis of collection results for the limited amount of debt referred early to TOP or 

the cross-servicing program.

• According to FMS officials, and consistent with TFM 4-4000, FMS strongly encourages federal agencies 

to transfer all eligible delinquent federal nontax debt to FMS for debt collection services before it is 180 

days delinquent; however, federal agencies are not required to do so.25

• According to the TRORs, as of September 30, 2011, federal agencies reported referring $228.4 million in 

federal nontax debt to TOP, and $132.8 million of federal nontax debt to the cross-servicing program, prior 

to the debt becoming over 180 days delinquent. 

• According to the TRORs, early referrals of debt prior to or at 180 days delinquent represented only about 

0.4 percent of the reported total of $58.4 billion of federal nontax debt referred to TOP as of 

September 30, 2011, and less than 0.7 percent of the reported total of $19.3 billion of such debt referred 

to the cross-servicing program as of September 30, 2011.

• In addition, while federal agencies reported in the TRORs a total of $49.7 billion of federal nontax debt 

delinquent 180 days or less as of September 30, 2011, only about 0.5 percent of such debt was reported 

as referred to TOP and only about 0.3 percent of such debt was reported as referred to the crossservicing program.

24For debt referred prior to or at 180 days delinquent as of September 30, 2011, we deemed significant any amount (1) over $1 billion, (2) over 5 percent of the 

total reported federal nontax debt referred to TOP or the cross-servicing program, or (3) over 5 percent of the total reported federal nontax debt delinquent 180 

days or less. 

25Federal agencies must certify that debt referred to FMS for collection is delinquent, valid, and legally enforceable; there are no legal bars to collection; and all 

applicable due process requirements have been completed. The certifying official makes this certification to FMS under penalty of perjury.

Enclosure I
Page 40 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 4: Treasury-Granted Exemptions from 

Mandatory Transfer of Debts for Cross-Servicing • In summary, Treasury has granted exemptions from mandatory transfer of debt for cross-servicing 

to four federal agencies for specific types of debt.26 FMS’s guidance for exemptions does not 

require that exemptions be reassessed once granted, and according to Treasury officials, Treasury 

has not reevaluated the exemptions.

• DCIA authorizes Treasury to grant exemptions from mandatory transfer of debt for cross-servicing 

for specific classes of debt at the request of the head of a federal agency, or upon the Secretary of 

the Treasury’s own initiative and determination.

• According to FMS officials, Treasury has granted such exemptions to four agencies, which 

remained in place as of July 18, 2012:

• to the Social Security Administration (SSA) (in 1999) for Supplementary Security Income debt 

and debt of former child beneficiaries in the Old-Age, Survivors, and Disability Insurance 

program;

• to the Small Business Administration (SBA) (in 2000) for disaster loans and collateralized 

business loans in active workout (i.e., an agreement to repay the loan is in process);

• to Education (in 2001) for delinquent and defaulted student loans; and 

• to HHS (in 2002) for health professions debt and debt stemming from unfiled cost reports.

26Treasury has also granted exemptions to all federal agencies (in 2005) for certain debts being collected by administrative wage garnishment.

Enclosure I
Page 41 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 4: Treasury-Granted Exemptions from 

Mandatory Transfer of Debts for Cross-Servicing (cont.)

• According to FMS officials, the criteria for evaluating exemptions is set forth in 

FMS’s Exemption of Classes of Debts from Mandatory Transfer to Treasury: 

Procedures and Standards, dated January 2001.27 FMS officials also stated 

that the criteria used to evaluate exemption requests prior to January 2001 (i.e., 

for SSA’s and SBA’s exemptions) were essentially the same as those outlined 

in FMS’s January 2001 criteria, and those criteria are found in 31 C.F.R. §

285.12, Transfer of Debts to Treasury for Collection. The guidance does not 

include any requirements or procedures for reassessing an exemption once it is 

granted.

• According to a Treasury letter from 2001, Education’s exemption is permanent.

27According to FMS’s Exemption of Classes of Debts from Mandatory Transfer to Treasury: Procedures and Standards, the Secretary of the Treasury will 

determine that granting an exemption is in the best interests of the federal government. Factors to be considered are whether (1) the exemption is the best means 

to protect the federal government’s financial interest, (2) transfer of the debt to FMS would interfere with program goals, and (3) the exemption is consistent with 

the purposes of DCIA. According to FMS officials, since 2001, there have been no revisions or updates to these criteria.

Enclosure I
Page 42 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 4: Treasury-Granted Exemptions from 

Mandatory Transfer of Debts for Cross-Servicing (cont.)

• FMS officials stated that since the exemptions from cross-servicing were 

granted, Treasury has not reevaluated the exemptions or assessed collections 

by the agencies for the exempted classes of debt. According to these officials, 

Treasury has not performed a study to compare any of these four federal 

agencies’ collections of exempted debt with FMS’s cross-servicing program 

capability.

• According to the TRORs prepared by these four agencies, their exemptions 

from cross-servicing totaled a reported $35.5 billion as of September 30, 

2011—Education reported exemptions of $33.8 billion, or about 95 percent of 

total Treasury-granted exemptions from cross-servicing; SSA reported 

exemptions of $1.7 billion; HHS reported exemptions of $61.4 million; and SBA 

did not report any such exempted debt amount as of September 30, 2011. 

Enclosure I
Page 43 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 5: Treasury’s Role in Implementing the Debtor 

Bar Provision of DCIA

• In summary, according to FMS officials, FMS’s primary mechanisms used to help 

ensure that delinquent federal nontax debtors do not receive additional federal loans, 

loan insurance, or loan guarantees are FMS’s credit bureau reporting as part of crossservicing and FMS’s Debt Check. Data provided by FMS show that only two federal 

agencies have used Debt Check during the last 5 calendar years.

• In 1998, Treasury established regulations for implementing DCIA’s debtor bar 

provision,28 which bars delinquent federal nontax debtors from obtaining federal financial 

assistance in the form of certain loans, loan insurance, or loan guarantees29 until the 

debtor resolves the delinquency(s).30

• To facilitate compliance with the debtor bar provision, according to FMS officials, FMS 

has (1) referred delinquent federal nontax debt information to credit bureaus as part of 

the cross-servicing program31 and (2) made such information directly available to federal 

agencies through Debt Check, an Internet-based information system.

2831 U.S.C. § 3720B; 31 C.F.R. § 285.13. 29Exceptions to the debtor bar provision include disaster assistance loans, marketing loans, and certain loan deficiency payments. 30According to Treasury’s regulations, for the purpose of denying federal financial assistance, a person’s delinquent debt is resolved only if the person (1) pays 

or otherwise satisfies the delinquent debt in full; (2) pays the delinquent debt in part if the creditor agency accepts such partial payment as a compromise in lieu 

of payment in full; (3) cures the delinquency under terms acceptable to the creditor agency in that the person pays any overdue payments, plus all interest, 

penalties, late charges, and administrative charges assessed by the creditor agency as a result of the delinquency; or (4) enters into a written repayment 

agreement with the creditor agency to pay the debt, in whole or in part, under terms and conditions acceptable to the creditor agency. In addition, Treasury has 

established 90 days delinquent as the trigger for denying federal financial assistance under the DCIA debtor bar provision. 31 C.F.R. § 285.13(d). 31According to FMS’s Cross-Servicing Implementation Guide, FMS begins credit bureau reporting 60 days after a consumer debt is referred to the crossservicing program and 30 days after a commercial debt is referred. Federal agencies can use credit bureau reports to identify delinquent federal debtors during 

the loan application process.

Enclosure I
Page 44 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 5: Treasury’s Role in Implementing the Debtor 

Bar Provision of DCIA (cont.)

• Implemented in 2003, Debt Check can assist federal agencies with implementing the debtor 

bar provision by providing information on delinquent federal nontax debtors currently 

available for offset in TOP. Debt Check includes the debtor’s name and TIN, and credit 

agency contact information.

• According to FMS officials, there is no legislative or regulatory requirement for federal 

agencies to use Debt Check. In addition, while FMS officials consider Debt Check a 

mechanism to help credit agencies determine loan eligibility, these officials do not consider it 

to be a control to ensure that delinquent debtors do not get additional financial assistance in 

the form of a loan, loan guarantee, or loan insurance. 

• Data provided by FMS show that SBA, which began using Debt Check in 2003, is the only 

federal agency that has consistently used Debt Check. Over the last 5 calendar years (i.e., 

2007 through 2011), according to FMS’s data, SBA has made a total of 26,593 inquires in 

Debt Check. In addition, FMS’s data show that the National Oceanic and Atmospheric 

Administration, which began using Debt Check in 2009, has made a total of 259 inquiries 

from calendar years 2009 through 2011. Further, according to FMS’s data, no other federal 

agency has made any inquiries of Debt Check during the last 5 calendar years.

• According to FMS officials, FMS does not have information on the results of the Debt Check 

inquiries. For example, FMS does not know how many times the agencies’ inquiries resulted 

in identifying delinquent debtors or how the results of the inquiries were ultimately used by 

the agencies.

Enclosure I
Page 45 GAO-12-870R Treasury’s Centralized Collection Efforts

Results

Objective 5: Treasury’s Role in Implementing the Debtor 

Bar Provision of DCIA (cont.)

• On June 18, 2010, the President issued a memorandum for the heads of 

executive departments and agencies directing federal agencies to review 

available databases with relevant information on eligibility before the release of 

any federal funds. The memorandum also directed the establishment of a 

single point of entry through which agencies would access relevant data—in a 

network of databases to be collectively known as the Do Not Pay List—before 

determining eligibility for a benefit, grant, contract award, or other federal 

funding.

• In response to the presidential memorandum, OMB and Treasury established 

the Do Not Pay tool, which includes a web-based single entry access portal that 

federal agencies can use to gain access to several data sources to assist in 

determining whether an individual or entity is eligible to receive federal 

payments or engage in federal contracts or grants. Treasury’s Bureau of the 

Public Debt is responsible for implementing the Do Not Pay tool, with oversight 

and direction from OMB.

• FMS’s Debt Check was made available to federal agencies via the Do Not Pay 

portal in March 2012.

Enclosure I
Enclosure II

Page 46 GAO-12-870R Treasury’s Centralized Collection Efforts

Scope and Methodology

To determine what actions the Department of the Treasury (Treasury) has taken to implement 

its centralized debt collection program as authorized by the Debt Collection Improvement Act of 

1996 (DCIA), and what efforts are under way or planned by Treasury to enhance or supplement 

its ability to collect delinquent federal nontax debt, we reviewed DCIA, pertinent Treasury 

regulations, and Treasury and Office of Management and Budget guidance concerning

delinquent federal nontax debt collection under DCIA. In addition, we interviewed Treasury’s 

Financial Management Service (FMS) officials, and we obtained and reviewed pertinent 

documents related to the Treasury Offset Program (TOP) and the cross-servicing program, 

including information on FMS’s efforts to include additional payment types into TOP, implement 

administrative wage garnishment, and develop the “Scorecard,” a tool for tracking federal 

agencies’ compliance with DCIA. Also, we reviewed, and discussed with FMS officials,

documents pertaining to FMS’s initiatives to improve centralized collection of delinquent federal 

nontax debt that are currently being vetted by Treasury and other stakeholders. 

To determine Treasury's collection experience over the last 5 years (i.e., fiscal years 2007 

through 2011) for delinquent federal nontax debt relative to the amount of such debt that was 

referred to Treasury for collection, we interviewed FMS officials and obtained from FMS 

(1) annual collection data for TOP and the cross-servicing program for each fiscal year and 

(2) the amount of debt in TOP and eligible for offset and the amount of debt in the crossservicing program and eligible for collection, as of each fiscal year-end for comparable years.

We also obtained data from federal agencies’ Treasury Reports on Receivables and Debt 

Collection Activities (TROR), which show the status, as reported by federal agencies to 

Treasury, of federal nontax debt, including delinquencies and collections, and are used by 

Treasury to report on TOP and the cross-servicing program.

1 This report presents various data 

obtained from FMS and reported in the TRORs. According to an FMS official, the FMS data are 

unaudited, and to the best of our knowledge, the TROR data are unaudited. In some instances, 

differences or inconsistencies exist between the data obtained from FMS and the data reported 

in the TRORs, and in such instances, the data have not been reconciled by FMS. We used 

these data because they are the best data available that met our objectives. However, we did 

not attempt to reconcile or assess the reliability of these data. 

To determine whether agencies were reporting having referred significant amounts of federal 

nontax debt to Treasury for collection prior to or at 180 days delinquent and, if so, how

Treasury’s collection results for such referrals compare to collection results for the referred 

debts that are more than 180 days delinquent, we interviewed FMS officials and obtained data 

from the TRORs, as of September 30, 2011, to identify those agencies that reported having 

referred debts to TOP and the cross-servicing program prior to or at 180 days delinquent and 

the associated dollar amounts of such referrals. Based on our findings regarding early referrals, 

we did not attempt to perform any specific analysis of collection results for the limited amount of 

debt referred early to TOP or the cross-servicing program. 

To identify the agencies that have exemptions from mandatory transfer of delinquent federal 

nontax debt to Treasury for cross-servicing and the actions Treasury takes to evaluate these 

exemptions and their associated collections, especially in comparison with its own crossservicing program’s collection capability, we interviewed FMS officials and obtained and 

reviewed pertinent documents, including FMS’s guidance for authorizing such exemptions, 

 

1

Treasury requires federal agencies to prepare the TRORs quarterly and verify that the fiscal year-end receivable 

balances reconcile to the agencies’ audited financial statement receivable balances.
Enclosure II

Page 47 GAO-12-870R Treasury’s Centralized Collection Efforts

Exemption of Classes of Debts from Mandatory Transfer to Treasury, and information related to 

Treasury’s approval of the existing exemptions, including the types of debt exempted for each 

federal agency with an approved exemption(s). We also identified exemptions and the related 

dollar amounts reported by federal agencies in the TRORs as of September 30, 2011. 

To determine what mechanisms and controls are in place at Treasury to help ensure that 

federal agencies do not make new loans, loan insurance, or loan guarantees to delinquent 

federal debtors to the extent required by the debtor bar provision of DCIA, we interviewed FMS 

officials and obtained and reviewed information provided by FMS on Debt Check, including 

pertinent data concerning federal agencies’ use of Debt Check for the last 5 calendar years (i.e., 

2007 through 2011). In addition, we interviewed Treasury’s Bureau of the Public Debt officials 

concerning the Bureau of the Public Debt’s implementation of the new Do Not Pay tool, 

including the availability of Debt Check through the Do Not Pay portal. 

We requested comments on a draft of the briefing slides and the related enclosures from the 

Commissioner of FMS or his designee. On August 10, 2012, FMS provided technical 

comments, which we incorporated as appropriate.

We conducted our work from February 2012 to September 2012 in accordance with all sections 

of GAO’s Quality Assurance Framework that are relevant to our objectives. The framework 

requires that we plan and perform the engagement to obtain sufficient and appropriate evidence 

to meet our stated objectives and to discuss any limitations in our work. We believe that the 

information and data obtained, and the analysis conducted, provide a reasonable basis for any 

findings and conclusions.
Enclosure III

Page 48 GAO-12-870R Treasury’s Centralized Collection Efforts

Status of Governmentwide Federal Nontax Debt and Delinquencies

According to the Treasury Report on Receivables and Debt Collection Activities (TROR),1 total 

federal nontax debt, federal nontax debt delinquencies, and federal nontax debt delinquent over 

180 days reported by federal agencies have increased substantially from fiscal year 2007 

through fiscal year 2011, as shown in figure 3. Specifically, reported federal nontax debt 

increased from $339.6 billion at the end of fiscal year 2007 to $777.8 billion at the end of fiscal 

year 2011, an increase of about 129 percent. Reported federal nontax debt delinquencies also 

increased substantially, rising from $64.9 billion at the end of fiscal year 2007 to $131.0 billion at 

the end of fiscal year 2011, an increase of over 100 percent. Likewise, reported federal nontax 

debt delinquent over 180 days increased from $45.5 billion at the end of fiscal year 2007 to 

$81.3 billion at the end of fiscal year 2011, an increase of about 79 percent. Such increases are 

in marked contrast to the previous 4 fiscal years (i.e., 2003 through 2006). During this time, 

relatively little change is evident in reported amounts of total federal nontax debt, while total 

reported federal nontax debt delinquencies and reported federal nontax debts more than 180 

days delinquent decreased somewhat.

Figure 3: Reported Amounts of Total Federal Nontax Debt, Delinquent Federal Nontax 

Debt, and Federal Nontax Debt Delinquent over 180 Days, Governmentwide, for Fiscal 

Years 2003 through 2011 

Note: To the best of our knowledge, these data are unaudited.

Reported amounts in the TRORs of total federal nontax delinquent debt and federal nontax debt 

delinquent over 180 days as a percentage of total federal nontax debt, each decreased from 

fiscal year 2003 through fiscal year 2011, from about 22 percent and 17 percent, respectively, to 

 

1

To the best of our knowledge, data reported in the TRORs are unaudited.
Enclosure III

Page 49 GAO-12-870R Treasury’s Centralized Collection Efforts

about 17 percent and 11 percent, respectively. Moreover, of the $438.2 billion increase in 

overall reported federal nontax debt from fiscal year 2007 through fiscal year 2011, $373 billion, 

or about 85 percent, was debt held by the Department of Education (Education).2 The increase 

in Education’s debt is due to student loans, many of which will not become due and payable 

until students either graduate or cease attending college. Future delinquencies involving student 

loans may cause delinquencies relative to total debts to increase.

As shown in figure 4, Education and the U.S. Department of Agriculture (USDA) reported 

holding $504.7 billion and $116.2 billion of reported federal nontax debt, respectively, or about 

80 percent of the $777.8 billion total reported federal nontax debt as of September 30, 2011.3

Figure 4: Reported Governmentwide Federal Nontax Debt, by Agency, as of 

September 30, 2011 (Total: $777.8 Billion) 

Other federal agencies reporting 2 percent or more of the total were the Department of the 

Treasury (Treasury), the Department of Housing and Urban Development (HUD), the Small 

Business Administration (SBA), and the Social Security Administration (SSA). Each of the other 

reporting federal agencies’ reported holdings were less than 2 percent of the reported total.

Notes: Percentages do not equal 100 percent because of rounding. To the best of our knowledge, these data are unaudited.

 

2

Education administers the William D. Ford Federal Direct Loan Program, the Federal Family Education Loan (FFEL) 

Program, Federal Pell Grants, and the campus-based student aid programs to help students finance the costs of 

higher education. The Ensuring Continued Access to Student Loans Act of 2008 authorized the Secretary of 

Education, in consultation with the Secretary of the Treasury and under certain circumstances prescribed by law, to 

purchase or enter into forward commitments to purchase FFEL Program loans. Pub. L. No. 110-227, § 7, 122 Stat. 

740, 746-47 (May 7, 2008). This temporary loan purchase authority was to expire on July 1, 2009; however, 

Congress subsequently extended the authority through July 1, 2010. Pub. L. No. 110-350, § 1, 122 Stat. 3947, 3947 

(Oct. 7, 2008). The SAFRA Act, which was enacted as part of the Health Care Education and Reconciliation Act of 

2010, eliminated Education’s authority to make new FFEL Program loans after June 30, 2010, and all federally 

guaranteed student loans are now originated through Education under the William D. Ford Federal Direct Loan 

Program. Pub. L. No. 111-152, title II, subtitle A, § 2201, 124 Stat. 1029, 1071 (Mar. 30, 2010).

3

The nontax debts held by Education and USDA were predominantly direct loans and defaulted guaranteed loans.
Enclosure III

Page 50 GAO-12-870R Treasury’s Centralized Collection Efforts

Most of the delinquent federal nontax debt reported in the TRORs as of September 30, 2011, 

was held by Education. As shown in figure 5, Education held $92.0 billion, or 70.2 percent, of 

the $131.0 billion total. Other federal agencies reporting 2 percent or more of this total were 

SBA, HUD, the Department of Defense (DOD), SSA, and USDA. Each of the other reporting 

federal agencies’ reported holdings were less than 2 percent of the reported total. 

Figure 5: Reported Governmentwide Delinquent Federal Nontax Debt, by Agency, as of 

September 30, 2011 (Total: $131.0 Billion) 

Notes: Percentages do not equal 100 percent because of rounding. To the best of our knowledge, these data are unaudited. 

The majority of the $81.3 billion of federal nontax debt delinquent over 180 days reported in the 

TRORs as of September 30, 2011, was also held by Education. As shown in figure 6, Education 

reported holding $49.4 billion, or 60.8 percent of the total. Other federal agencies reporting 2 

percent or more of this total were SBA, DOD, HUD, USDA, SSA, and the Environmental 

Protection Agency (EPA). Each of the other reporting federal agencies’ reported holdings were 

less than 2 percent of the reported total.
Enclosure III

Page 51 GAO-12-870R Treasury’s Centralized Collection Efforts

Figure 6: Reported Governmentwide Federal Nontax Debt Delinquent over 180 Days, by 

Agency, as of September 30, 2011 (Total: $81.3 Billion) 

Notes:Percentages do not equal 100 percent because of rounding. To the best of our knowledge, these data are unaudited.

Office of Management and Budget (OMB) Circular No. A-129, Policies for Federal Credit 

Programs and Non-tax Receivables, generally requires agencies to write off federal nontax debt 

more than 2 years delinquent.4 Federal nontax debt that is written off can be classified as 

currently not collectible (CNC) if the agency intends to take additional collection action on the 

debt. Otherwise, the debt should be closed out and reported to Treasury’s Internal Revenue 

Service (IRS) as income to the debtor. No further collection action can be taken on debts 

reported to IRS. CNC debt is not included in federal agencies’ nontax receivables and 

delinquent debt balances in the TRORs; however, because CNC debt is eligible for continued 

collection action, debt that is classified as CNC is included when reporting federal nontax debt 

eligible for Treasury’s offset program (TOP) and cross-servicing program in the TRORs. As 

shown in figure 7, total CNC debt reported in the TRORs as of September 30, each year, 

increased from 2007 through 2011.

 

4

According to OMB Circular No. A-129, federal agencies must document and justify to OMB in consultation with 

Treasury any federal nontax debt older than 2 years delinquent that is not written off.
Enclosure III

Page 52 GAO-12-870R Treasury’s Centralized Collection Efforts

Figure 7: Reported Governmentwide Delinquent Federal Nontax Debt Classified as CNC 

for Fiscal Years 2007 through 2011

 

Note: To the best of our knowledge, these data are unaudited.

Moreover, both federal nontax debt delinquent over 180 days and CNC debt are potentially 

eligible for referral to Treasury for collection through TOP and cross-servicing. Combined, 

federal nontax debt delinquent over 180 days and CNC debt reported in the TRORs as of 

September 30, 2011, totaled $113.0 billion ($81.3 billion and $31.7 billion, respectively). 

However, certain delinquent federal nontax debt is ineligible for, or excepted or exempted from, 

referral to Treasury for collection through TOP and the cross-servicing program. As shown in 

table 2, after excluding debt that is ineligible for, or excepted or exempted from, referral for 

offset, $68.6 billion, or about 61 percent, of the $113.0 billion of federal nontax debt delinquent 

over 180 days and CNC debt was reported in the TRORs as being required to be referred to 

TOP as of September 30, 2011. Of the $68.6 billion, $58.4 billion, or about 85 percent, was 

reported as referred to TOP, leaving $10.2 billion, or about 15 percent, remaining to be referred. 

According to the TRORs, of the reported $10.2 billion remaining to be referred to TOP as of 

September 30, 2011, debt held by Education made up $4.7 billion, or about 46 percent. In 

addition, other federal agencies with reported federal nontax debt delinquent over 180 days and 

CNC debt remaining to be referred to TOP as of September 30, 2011, included SSA ($1.3 

billion), the Federal Trade Commission ($1.1 billion), and the Department of Health and Human 

Services (HHS) ($1.0 billion). 
Enclosure III

Page 53 GAO-12-870R Treasury’s Centralized Collection Efforts

Table 2: Reported Governmentwide Federal Nontax Debt Delinquent over 180 Days and 

CNC Debt—Required to Be Referred to TOP, Referred to TOP, and Remaining to Be 

Referred to TOP—as of September 30, 2011 

Dollars in billions

Total governmentwide federal nontax debt delinquent over 180 days and CNC debt $113.0

Debt ineligible for, or excepted or exempted from, TOP referral

Ineligible debt includes debt in bankruptcy, forbearance, formal appeals, and foreclosure. 

Debt excepted from referral requirements includes foreign/sovereign debt and debt in 

litigation for enforced collection. Federal agencies report certain “Other”a debt as exempted 

from TOP referral.

Debt required to be referred to TOP

-$44.4

$68.6

Debt referred to TOP

Balance of debt remaining to be referred to TOP

-$58.4

$10.2

Source: Data reported in the TRORs as of September 30, 2011.

Note: To the best of our knowledge, these data are unaudited.

 

a

According to TROR guidance, federal agencies should use the “Other” categories sparingly and only when the debt truly cannot be 

placed in one of the given categories. Agencies are instructed by Treasury to footnote amounts included as “Other,” with the reason 

for exempting the debt from referral.

As shown in table 3, after excluding debt that is ineligible for, or excepted or exempted from, 

referral for cross-servicing, $20.4 billion (or about 18 percent) of federal nontax debt delinquent 

over 180 days and CNC debt was reported in the TRORs as being required to be referred to 

Treasury or a designated debt collection center for cross-servicing as of September 30, 2011.5

Of the $20.4 billion, $19.3 billion (or about 95 percent) was reported as referred to crossservicing, leaving $1.1 billion (or about 5 percent) remaining to be referred. According to the 

TRORs, of the reported $1.1 billion remaining to be referred to cross-servicing as of September 

30, 2011, most involved debt held by DOD ($491 million), HHS ($288 million), and the 

Securities and Exchange Commission ($161 million). 

 

5

In addition to FMS, as of July 18, 2012, there is one other Treasury-designated debt collection center—the HHS’s

Program Support Center (PSC). PSC has been granted authority to service the following types of debt: (1) HHS debt 

less than 180 days delinquent, (2) HHS debt exempt from mandatory transfer to Treasury for cross-servicing, and 

(3) HHS debt and debt owed to other federal agencies arising from grant audit and program disallowances, but only 

for 180 days following completion of appeals.
Enclosure III

Page 54 GAO-12-870R Treasury’s Centralized Collection Efforts

Table 3: Reported Governmentwide Federal Nontax Debt Delinquent over 180 Days and 

CNC Debt—Required to Be Referred to Cross-Servicing, Referred to Cross-Servicing, and 

Remaining to Be Referred to Cross-Servicing—as of September 30, 2011 

Dollars in billions

Total governmentwide federal nontax debt delinquent over 180 days and CNC debt $113.0

Debt ineligible for, or excepted or exempted, from cross-servicing referral

Ineligible debt includes debt in bankruptcy, forbearance, formal appeals, and foreclosure. 

Excepted debt includes foreign/sovereign debt, debt in litigation for enforced collection, debt 

at federal agencies’ private collection agencies, debt in the process of internal offset at 

referring agencies, debt exempted by Treasury, and debt returned from cross-servicing as 

uncollectible. Federal agencies report certain “Other” debt as exempted from cross-servicing 

referral. 

Debt required to be referred to Treasury or a designated debt collection center for cross-servicing

-$92.6

$20.4

Debt referred to Treasury or a designated debt collection center for cross-servicing

Balance of debt remaining to be referred for cross-servicing

-$19.3

$1.1

Source: Data reported in the TRORs as of September 30, 2011.

Note: To the best of our knowledge, these data are unaudited.

 

As shown in figure 8, of the $113.0 billion of federal nontax debt delinquent over 180 days and 

CNC debt reported as of September 30, 2011, in the TRORs, $43.5 billion, or 38.5 percent, was 

defaulted guaranteed loans; $39.0 billion, or 34.5 percent, was administrative debt; and 

$30.4 billion, or 26.9 percent, was direct loans. The figure also shows the amounts and 

percentages in TOP and at the cross-servicing program by these three debt types. 

Figure 8: Total Governmentwide Debt Delinquent over 180 Days and CNC Debt, by Type 

and Amount in TOP and Cross-Servicing, as of September 30, 2011 (Total: $113.0 Billion) 

Notes: Difference between amount shown in title and the sum of the parts in pie chart is due to rounding. To the best of our 

knowledge, these data are unaudited. a

The TROR defines administrative debt as any federal nontax debt other than a direct loan or a defaulted guaranteed loan, such as, 

debt related to fines, penalties, sales of goods and services, overpayments of salaries and benefits, and travel advances.
Enclosure IV

Page 55 GAO-12-870R Treasury’s Centralized Collection Efforts

Abbreviations

AWG administrative wage garnishment 

CFO chief financial officer

CNC currently not collectible

DCIA Debt Collection Improvement Act of 1996

DFAS Defense Finance and Accounting Service

DOD Department of Defense

DOJ Department of Justice

Education Department of Education

EPA Environmental Protection Agency

FFEL Federal Family Education Loan

FMS Financial Management Service

HHS Department of Health and Human Services

HUD Department of Housing and Urban Development

IRS Internal Revenue Service

NDNH National Directory of New Hires 

NTDO non-Treasury disbursing office

OMB Office of Management and Budget

PCA private collection agency

PSC Program Support Center

SBA Small Business Administration

SRP State Reciprocal Program

SSA Social Security Administration

TFM Treasury Financial Manual

TIN taxpayer identification number

TOP Treasury Offset Program

TOP NG Treasury Offset Program Next Generation

Treasury Department of the Treasury

TROR Treasury Report on Receivables and Debt Collection Activities

USDA U.S. Department of Agriculture

USPS U.S. Postal Service
Enclosure V

Page 56 GAO-12-870R Treasury’s Centralized Collection Efforts

GAO Contact and Staff Acknowledgments

GAO Contact

Gary T. Engel, (202) 512-3406 or engelg@gao.gov 

Staff Acknowledgments

In addition to the contact named above, staff members who made key contributions to the 

review include Kenneth R. Rupar, Assistant Director; Wilfred B. Holloway, Assistant Director; 

Katherine S. Lenane, Assistant General Counsel; Neill W. Martin-Rolsky, Senior Attorney;

Michael D. Hansen; Linda K. Sanders; and Lisa M. Galvan-Treviño.

 

(198707)
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