REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 1 FEDERAL AGENCIES

FISCAL YEAR 2002 REPORT TO THE CONGRESS

U.S. GOVERNMENT RECEIVABLES AND

DEBT COLLECTION ACTIVITIES

OF

FEDERAL AGENCIES

I - EXECUTIVE SUMMARY ..................................................................................................................... 2

A - LEGISLATIVE REQUIREMENT TO REPORT .............................................................................................. 2

B - SCOPE OF REPORT ................................................................................................................................. 2

C - ACCOMPLISHMENTS AND SUCCESSES.................................................................................................... 2

II - GOVERNMENT DEBT PORTFOLIO, COLLECTIONS AND WRITE-OFFS............................ 3

A - FISCAL YEAR END DATA ...................................................................................................................... 3

1. Receivables and Delinquent Debt...................................................................................................... 3

2. Collections and Write-offs ................................................................................................................. 5

3. Analysis of Mandatory Referral to Treasury Under the DCIA ........................................................ 6

B - KEY TRENDS ......................................................................................................................................... 7

III - GOVERNMENT-WIDE COLLECTION ACTIVITIES .................................................................. 7

A - USE OF PRIVATE COLLECTION AGENCIES ............................................................................................. 7

1. Description ......................................................................................................................................... 7

2. Referrals............................................................................................................................................. 8

3. Collections.......................................................................................................................................... 8

B - TREASURY OFFSET PROGRAM (TOP) .................................................................................................... 9

1. Description ......................................................................................................................................... 9

2. Referrals.......................................................................................................................................... 10

3. Collections........................................................................................................................................ 11

C - CROSS-SERVICING AT FMS................................................................................................................. 12

1. Description ....................................................................................................................................... 12

2. Referrals........................................................................................................................................... 12

3. Collections........................................................................................................................................ 13

D – HHS’ DEBT COLLECTION CENTER ..................................................................................................... 13

1. Description ....................................................................................................................................... 13

2. Referrals to PSC .............................................................................................................................. 14

3. Collections........................................................................................................................................ 14

4. Health Profession Debt................................................................................................................... 14

E - LITIGATION AT THE DEPARTMENT OF JUSTICE..................................................................................... 15

1. Description ....................................................................................................................................... 15

2. Referrals........................................................................................................................................... 15

3. Collections........................................................................................................................................ 16

IV – SPECIFIC AGENCY ACTIVITIES ................................................................................................ 17

A - EDUCATION STUDENT LOANS ............................................................................................................. 17

B - SBA AND HUD LOAN ASSET SALES................................................................................................... 18

C – DEBT CHECK – BARRING DELINQUENT DEBTORS .............................................................................. 18

APPENDIX I: FEDERAL RECEIVABLES AND DELINQUENT DEBT ........................................... 20

APPENDIX II: SOURCES OF DATA...................................................................................................... 21
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 2 FEDERAL AGENCIES 

I - EXECUTIVE SUMMARY 

A - Legislative Requirement to Report 

The Debt Collection Act of 1982 as amended by the Debt Collection Improvement Act of 

1996 (DCIA) directs the Secretary of the Treasury (Secretary) to report to Congress 

annually on the management of debt collection activities by the head of each Federal 

agency. The report is also to include the information that the agency heads provide to the 

Secretary on the status of loans and accounts receivable that each manages. 

See 31 U.S.C. § 3719. 

B - Scope of Report 

This report summarizes the information provided by Federal agencies concerning their 

receivables as reported to the Department of the Treasury (Treasury) and as contained in 

Treasury’s Report on Receivables Due from the Public (TROR). It includes information 

concerning total receivables, collections on receivables, delinquencies, collections on 

delinquencies and write-offs. It also summarizes key Government-wide actions to collect 

delinquent debt, a specific concern that led to the passage of the DCIA. Additionally, this 

report highlights several special and/or unique collection activities and accomplishments 

of certain Federal agencies. 

C - Accomplishments and Successes 

• Through September 30, 2002, $15.1 billion has been collected through the Treasury 

Offset Program (TOP) and Cross-Servicing Program (Cross-Servicing) since the 

enactment of DCIA in April 1996. 

• The Federal Government collected $118.5 billion in fiscal year (FY) 2002 on all of its 

nontax receivables, which was $8.8 billion more than FY 2001 collections. 

• At the end of FY 2002, Federal agencies’ compliance with the provisions of the 

DCIA mandating the referral of debts to Treasury improved to 93 percent of eligible 

debts for offset (as compared to 92 percent in 2001) and 96 percent of eligible debt 

for Cross-Servicing (as compared to 74 percent in 2001). 

• In FY 2002, the Department of Justice (DOJ) collected $2.2 billion in cash recoveries 

on delinquent debts owed to Federal agencies through its financial litigation program. 

DOJ has collected a total of $10.9 billion through civil litigation in the last five fiscal 

years. 

• As of September 30, 2002, private collection agencies (PCAs) under contract with the 

Department of Education (Education), the Department of Health and Human Services 

(HHS) and Treasury had referrals of $15.7 billion in Federal debt, and in FY 2002 

these PCAs collected $443 million. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 3 FEDERAL AGENCIES 

• In FY 2002, the Department of Housing and Urban Development (HUD) and the 

Small Business Administration (SBA) completed loan asset sales of performing and 

non-performing loans totaling $1.1 billion in unpaid principal balances. These sales 

generated $698 million in gross proceeds. 

• Total collections by Treasury’s Financial Management Service (FMS) on delinquent 

debts through TOP and Cross-Servicing were $2.84 billion in FY 2002. This is the 

fourth consecutive year in which collections have exceeded $2.6 billion dollars. 

II - GOVERNMENT DEBT PORTFOLIO, COLLECTIONS AND WRITE-OFFS 

TOTAL RECEIVABLES TOTAL DELINQUENT DEBT 

$282.0 $289.5 $315.00 

$60.0 $58.0 $63.00 $70 $350 

$300 $53.3 

$56.2 $273.5 $270.6 $60 

Dollars in Billions 

Dollars in Billions $50 

$40 

$30 

$20 

$250 

$200 

$150 

$100 

$10 

$0 

$50 

$0 

1998 1999 2000 2001 2002 

Fiscal Year 

1998 1999 2000 2001 2002 

Fiscal Year 

A - Fiscal Year End Data 

1. Receivables and Delinquent Debt 

• The two agencies with the largest total receivables at the end of FY 2002 are 

Education ($105.3 billion) and the Department of Agriculture (USDA) ($102 billion). 

Receivables from these two agencies comprise 65.8 percent of the Government’s total 

receivables. 

• Two distinct programs accounted for over $100 billion of Education receivables: 

Federal Direct Loans ($82.2 billion) and Guaranteed Student Loans ($22 billion). 

• Five programs of the USDA accounted for over $100 billion of their receivables: 

Rural Development & Farm Service Agency ($37.2 billion); Rural Communication 

Development ($31.7 billion); Commodity Credit Corporation ($21.2 billion); Rural 

Development ($9.9 billion); and Federal Crop Insurance ($1.2 billion). 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 4 FEDERAL AGENCIES 

• At the end of FY 2002, Federal loan programs (direct and guaranteed) comprised 83.6 

percent of total receivables, and 70.3 percent of total delinquencies was attributable to 

loan programs. Federal loan programs are authorized where private sector credit is 

unavailable or inadequate and a Federal objective is to be achieved. Accordingly, 

Federal loan receivables occur in programs that serve the public interest and are of 

relatively high risk. As these receivables increase, delinquencies will 

correspondingly increase. 

Type of 

Receivable 

Total 

Receivables 

as of 

(in billions) 

Percentage of 

Total 

Receivables 

Delinquencies 

as of 9/30/02 

(in billions) 

Delinquencies 

as a 

Percentage of 

Receivables 

Direct Loan $222.7 70.7 $18.0 8.1 

Administrative* $51.5 16.3 $18.7 36.4 

Defaulted 

Guaranteed 

Loan 

$40.8 13.0 $26.3 64.5 

Gov't Totals $315.0 100 $63.0 20.0 

9/30/02 

*Includes fines, penalties and overpayments, etc. 

• As the chart above indicates, 70.7 percent of the Government’s receivables were 

direct loans, however, direct loan delinquencies as a percentage of receivables, is only 

8.1 percent. Defaulted guaranteed loans are 13.0 percent of the Government’s 

receivables, and they represent 64.5 percent of the delinquencies as a percentage of 

receivables. 

• At the end of FY 2002, $48.4 billion (77 percent) of the Government’s delinquent 

debts were distributed among six agencies: Education, Federal Communications 

Commission (FCC), USDA, HHS, Export-Import Bank, and Department of Defense 

(DoD). 

• Debts delinquent less than 180 days totaled $8.6 billion at the end of FY 2002, or 

13.7 percent of the total amount of delinquent debts. This was a decrease of $6.3 

billion from the end of FY 2001. 

• Debts more than 180 days 

delinquent totaled $54.4 

billion at the end of FY 

2002, as compared to 

$41.4 billion at the end of 

FY 2001. Agencies 

reporting significant 

changes in FY 2002 were 

Education and DoD, with 

increases of $10.2 and 

$1.3 billion respectively. 

Time Delinquent 

$ Amount 

of Debts 

(in 

billions) 

Ratio to all 

debts > 180 

days 

delinquent 

(percent) 

181-365 days 5.5 10.1 

1-2 years 13.0 23.9 

2-6 years 18.5 34.0 

6-10 years 7.8 14.3 

Over 10 years 9.6 17.6 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 5 

2. Collections and Write-offs 

• Total collections on TOTAL COLLECTIONS ON RECEIVABLES 

receivables increased by $120 $109.7 $118.50 

$8.8 billion in $100 FY 2002, an 8 percent 

increase over FY 2001 $80

collections. $60 

• Agencies that reported $40 

significant increases in 

collections were Interior $20 

(an increase of $5.6 $0

billion), Education (an 1998 1999 2000 2001 2002

increase of $2.7 billion), Fiscal Year 

and HUD (an increase of 

$2.6 billion). 

TOTAL WRITE-OFFS 

$10 

• Total write-offs decreased by $1.7 

billion in FY 2002, a 20 percent $8 

decrease over FY 2001 write-offs. $6 USDA write-offs decreased by $3 

billion and DoD write-offs decreased $4

by a half billion dollars over FY 2001 

write-offs. Collectively, SBA, $2 

Education and HHS reported a $1.6 

billion increase in write-offs over FY $0 

2001. 1998 1999 2000 2001 2002 

$4.5 

$7.1 

$6.2 

$8.5 

$6.8 

Fiscal Year 

• Agencies charge interest, penalties, and administrative costs on receivables in 

accordance with applicable loan documents and statutory requirements. See 

31 U.S.C. 3717. Of the $315 billion in receivables at the end of FY 2002, $8 billion 

represents unpaid interest, penalties and administrative costs. Dollars in Billions Dollars in Billions 

$87.6 

$94.2 $99.4 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 6 

3. Analysis of Mandatory Referral to Treasury Under the DCIA 

Debts Eligible for Referral to TOP and Cross-Servicing 

(in billions) 

For FY 2001 

(As of 

9/30/00) 

For FY 2002 

(As of 9/30/01) 

For FY 2003 

(As of 

9/30/02) 

Total CNC* and Debt > 180 

Days Delinquent but < 10 years 

Delinquent 

$61.8 $63.3 $64.0 

Eligible to Refer for Offset $31.3 $33.5 $31.3 

Eligible to Refer for CrossServicing $6.9 $8.2 $8.5 

*“Currently Not Collectible” – delinquent debts written off but not closed out (see Appendix I). 

• The DCIA specifically mandates that Federal agencies, with certain exemptions, 

transfer nontax debt more than 180 days delinquent to Treasury for collection through 

TOP and/or Cross-Servicing. 

• Each year, an analysis is done to determine the dollar amount of delinquent debts 

eligible for referral to TOP and Cross-Servicing in the upcoming fiscal year. For FY 

2002, this analysis has been incorporated as part of agencies’ reporting for the TROR, 

and provides referral eligibility information for FY 2003. 

• In the analysis, delinquent debts reported as currently not collectible (CNC) are added 

to debts reported as more than 180 days but less than 10 years delinquent to 

determine the starting amount for calculating the amounts eligible for referral. 

• Certain debts are not eligible for referral to Treasury for either TOP or CrossServicing because of various exemptions permitted under the DCIA or otherwise 

required by law. Debts exempt from both TOP and Cross-Servicing include those in 

bankruptcy, appeals, or forbearance; debts referred to DOJ for litigation; debts in 

foreclosure; and foreign sovereign debts. Additional exemptions from CrossServicing include debts at private collection agencies (PCAs), debts being collected 

by internal offset, and debts exempted from Cross-Servicing by Treasury. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 7 

B - Key Trends 

• Growth in the Federal Government’s portfolio in the last few years can be attributed 

to increases in Education’s receivables. Education’s receivables rose $22 billion in 

FY 2002 to $105.3 billion, as compared to $83.2 billion at the end of FY 2001, and 

$69.8 billion at the end of FY 2000. Education’s receivables represented 33.4 percent 

of the Government’s total receivables at the end of FY 2002, up from 28.7 percent at 

the end of FY 2001. 

• Overall, the Department of Education’s total delinquencies increased from $19.2 

billion at the end of FY 2001 to $22.5 billion at the end of FY 2002 (an increase of 17 

percent). Since Education’s receivables are increasing at a faster rate than total 

delinquencies, Education’s ratio of delinquencies to receivables declined to 21.4 

percent at the end of FY 2002, compared to 23.1 percent in FY 2001 and 26.7 percent 

in FY 2000. 

• USDA’s receivables and delinquencies have remained fairly constant over the last 

three fiscal years. Receivables and delinquencies totaled $104.7 billion and $6.3 

billion, respectively, at the end of FY 2000; $103.1 billion and $6.2 billion, 

respectively, at the end of FY 2001; and $102 billion and $6.9 billion, respectively, at 

the end of FY 2002. 

Governmentwide FY 2000 FY 2001 FY 2002 

Debts >180 days delinquent $38.1 billion $41.4 billion $54.4 billion 

As a % of total receivables 13.5 14.4 17.3 

• At the end of FY 2002, debts more than 180 days delinquent rose by $13 billion. 

Four agencies reported the following increases: Education $10.2 billion, DoD $1.3 

billion, SSA $750 million and USDA $700 million. It should be noted that 

Education’s increase in debts greater than 180 days delinquent in FY 2002 

corresponded with a $6.9 billion decrease in debts less than 180 days delinquent. 

Detailed data for 12 specific agencies for FY 2002 can be found on the Federal 

Receivables and Delinquent Debt table in Appendix I. 

III - GOVERNMENT-WIDE COLLECTION ACTIVITIES 

A - Use of Private Collection Agencies 

1. Description 

• Education, Treasury, and HHS have each established contracts with private collection 

agencies (PCAs) to collect debts owed to the Federal Government. In addition to 

collecting debts, PCAs also help Federal agencies establish repayment agreements and 

resolve debts administratively (e.g., by determining if a debtor is bankrupt, disabled or 

deceased). 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 8 

• Education uses PCAs to collect its portfolio of defaulted student loan debts. Education 

relies heavily on PCAs and refers every eligible debt to one of its twelve PCAs as 

quickly as possible. Education’s PCAs also implement Education’s use of administrative 

wage garnishment as a debt collection tool. 

• Treasury’s PCA contract is administered by FMS and is used as part of its CrossServicing program. Debts that are not collected or resolved within 30 days after transfer 

to FMS for Cross-Servicing are referred to a PCA for collection action. 

• HHS’ PCA contract is administered by its Program Support Center (PSC), which 

provides centralized debt collection services for HHS’ agencies and bureaus, and several 

other Federal agencies. PSC refers debts to its PCA if payment in full is not made or a 

repayment agreement has not been established within 45 days after the PSC receives the 

debt for collection action. 

2. Referrals 

• At the end of FY 2002, 

$15.7 billion in Federal 

debts were referred to 

PCAs for collection 

action. This represents a 

30.5 percent increase in 

referrals from the end of 

FY 2000. For FMS, 

referrals have increased 

by 31 percent since FY 

2001. 

3. Collections 

• Collections by PCAs 

have increased at all three 

agencies in the last two 

fiscal years. Total PCA 

collections were $443 

million in FY 2002, a 

37.1 percent increase 

over FY 2000 collections. 

*Includes collections by administrative wage garnishment 

Referrals to PCAs 

(in millions) 

Agency FY2000 FY2001 FY2002 

HHS $317 $378 $339 

FMS $2,613 $3,645 $4,775 

Education $9,100 $8,700 $10,588 

Totals $12,030 $12,723 $15,702 

Collections by PCAs 

(in millions) 

Agency FY2000 FY2001 FY2002 

HHS $7. 5 $16.6 $13.8 

FMS $21.8 $27.8 $42.9 

Education* $322 $351 $386 

Totals $351.3 $395.4 $443 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 9 

B - Treasury Offset Program (TOP) 

1. Description 

TOP is a debt collection program that encompasses both "offsets" and "continuous 

levies." 

Offset 

• Offset is a program whereby Federal payments are reduced or "offset" to satisfy a 

person's overdue Federal nontax debt, child support obligation, or state income tax debt. 

A payee's name and taxpayer identification number are matched against a Treasury/FMS 

database of delinquent debtors for automated offset of funds. Offset funds are then used 

to satisfy payment of the delinquent debt to the extent allowed by law. 

• For FY 2002, payment types subject to offset include Office of Personnel Management 

retirement payments, Internal Revenue Service (IRS) tax refunds, vendor payments, 

Federal employee travel payments, some Federal salary payments, and Social Security 

benefit payments. 

• Offset of Federal salary payments through TOP has been implemented in partnership 

with USDA’s National Finance Center and the Department of the Interior, both which 

process payroll for numerous federal agencies. TOP provides a more efficient process 

than the non-centralized salary offset process currently used by Federal agencies. FMS 

plans to implement salary offset with DoD, U. S. Postal Service, General Services 

Administration, and Department of Veterans Affairs. Implementation with DoD and 

U.S. Postal Service is planned for FY 2003. 

• Offset of Social Security benefit payments, which began in May 2001, was implemented 

in stages to ensure that payment recipients receive appropriate notices of potential 

offsets, as well as the opportunity to take action to avoid offsets. This specific offset 

program was fully implemented in 2002. 

• In January 2000, FMS began collecting state income tax debts by offsetting Federal 

income tax refunds, as authorized by the 1998 Internal Revenue Service Restructuring 

and Reform Act. In FY 2002, the number of states and territories participating was 

25, plus the District of Columbia. 

Continuous Tax Levy 

• In July 2000, FMS initiated Continuous Tax Levy, a program whereby delinquent 

Federal income tax debts are collected by levying nontax payments, as authorized by 

the Taxpayer Relief Act of 1997. Continuous Tax Levy includes levy of vendor, 

Federal employee salary, Office of Personnel Management retirement, and Social 

Security benefit payments. Continuous Tax Levy is accomplished through a process 

almost identical to that of offset, that is, matching of delinquent debtor data with 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 10 

payment record data and automated collection of the debt at the time of payment, after 

the delinquent taxpayer has been afforded due process. 

2. Referrals 

TOTAL DEBT REFERRALS TO THE TREASURY OFFSET PROGRAM 

$16.92 

$41.20 

$23.28 $26.84 $28.78 $31.02 

$0.00 

$50.00 

$100.00 

$150.00 

$200.00 

Dollars in Billions 

Federal Tax N/A N/A $54.69 $82.53 $81.16 

State Income Tax N/A N/A $0.39 $2.37 $3.21 

Child Support $41.20 $47.15 $52.73 $68.37 $71.20 

Federal Nontax Debt $16.92 $23.28 $26.84 $28.78 $31.02 

Sep. 1998 Sep. 1999 Sep. 2000 Sep. 2001 Sep. 2002 

$182.05 $186.59 

$82.53 $81.16 

$134.66 

$0.39 

$54.69 

$2.37 $3.21 

$70.4 $58.1 

$47.15 $52.73 

$68.37 $71.20 

• As of September 30, 2002, the largest component of TOP’s delinquent debtor database 

was the $81.16 billion in Federal income tax debts submitted for continuous tax levy. 

• Efforts by states, HHS’ Office of Child Support Enforcement (OCSE), and FMS to refer 

more delinquent child support obligations to TOP have resulted in referrals of $71.2 

billion as of September 30, 2002, a 73 percent increase in referrals from September 30, 

1998. 

• Referrals of nontax debts increased to $31.02 billion as of September 30, 2002, an 83 

percent increase in referrals from September 30, 1998. As of September 30, 2002, 93 

percent of all debts eligible for referral to TOP are being referred. 

• Referrals of state income tax debts rose to $3.2 billion, an increase of $840 million 

(35 percent) from the end of FY 2001. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 11 

3. Collections 

• Total collections through TOP were $2.77 billion in FY 2002. Since enactment of 

the DCIA in April 1996, $14.9 billion has been collected through TOP. The chart 

below summarizes collections through TOP for the last four fiscal years. 

Collections Through TOP In Millions of Dollars 

Type of Collection FY 1999 FY 2000 FY 2001 FY 2002 

Administrative Offset* $6 $17 $25 $84 

Tax Refund Offset – Child 

Support (excluding tax rebates) 

$1,343 $1,389 $1,377 $1,463 

Tax Refund Offset – Federal 

Nontax Debt (excluding tax 

rebates) 

$1,259 $1,167 $1,147 $1,048 

Tax Refund Offset – State 

Income Tax Debt (excluding tax 

rebates) 

N/A $23 $79 $119 

Tax Refund Offset – Tax Rebates N/A N/A $471 N/A 

Continuous Tax Levy N/A $0.1 $16 $60 

Total Collected $2,608 $2,597** $3,117** $2,769 

*Collection of Federal nontax debts and child support debts by offsetting Federal 

nontax payments. 

**Numbers do not equal total due to rounding. 

• Total collections through TOP increased in FY 2002 by $128 million over total 

collections in FY 2001 (excluding offsets of the advance tax refund payments, which 

totaled $471 million in FY 2001). 

• In FY 2002, administrative offset collections were $84 million, a 229 percent increase 

over FY 2001 collections. FY 2002 was the first full year that included offsets of 

Social Security payments to collect Federal nontax debt, a process that was 

incorporated into TOP in FY 2001, beginning May 2001. 

• Total tax refund offset collections (not including tax rebates) for child support debts, 

Federal nontax debts and state income tax debts have remained relatively constant 

over the last four fiscal years at $2.6 billion. Child support collections totaled $1.46 

billion, which was an increase of $86 million over FY 2001 collections. 

• Total collections of state income tax debts by offsetting Federal tax refunds increased by 

almost $25 million over the $94.5 million collected in FY 2001 (FY 2001 included 

offsets of tax rebates). 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 12 

• Collections under Continuous Tax Levy, totaled $60 million in FY 2002, a 264 percent 

increase over the $16.5 million collected in FY 2001. The IRS maintains control over 

which Federal tax debts can be collected through the levy process. 

C - Cross-Servicing at FMS 

1. Description 

• Cross-Servicing is the process whereby agencies refer Federal nontax debts more than 

180 days delinquent to FMS for collection. Treasury applies a variety of collection 

tools once agencies refer their debts. Collection tools include: Treasury demand 

letters; telephone calls to debtors; and referral of debts to TOP, credit bureaus, one or 

more of the PCAs on Treasury's contract, and DOJ for litigation. 

• In FY 2001, administrative wage garnishment (AWG) as a debt collection tool 

became available to Federal agencies through Cross-Servicing. Four agencies 

currently utilize AWG through the program. FMS continues encouraging Federal 

agencies to authorize the use of this debt collection tool through Cross-Servicing. 

2. Referrals CROSS-SERVICING REFERRALS 

• The calculation of the amount of 

debts eligible for referral is 

described in this report in 

Section II A-3, above. 

Historically, the calculation for 

Cross-Servicing referrals was 

cumulative from the beginning 

of the program. As of 

March 31, 2001, the calculation 

of Cross-Servicing referrals has 

been modified/reduced to 

exclude those debts no 

longer actively collected at 

$6.8 $6.4 $6.9 $8.2 $7.9 

$2.9 $4.6 $5.1 

$0.0 

$2.0 

$4.0 

$6.0 

$8.0 

$10.0 

Dollars in 

Billions 

Eligible for 

Referral 

$6.8 $6.4 $6.9 $8.2 

Referred by 

End of FY 

$2.9 $4.6 $5.1 $7.9 

FY 1999 FY 2000 FY 2001 FY 2002 

FMS. CROSS-SERVICING REFERRALS 

100 96 

• Referral rates of eligible debt 

have continually increased 

over the last three fiscal Percent of 

years from 43 percent at the eligible debts 

referred 

end of FY 1999 to 96 percent 

at the end of FY 2002. 

80 

60 

40 

20 

0 

74 72 

43 

FY 1999 FY 2000 FY 2001 FY 2002 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 13 

3. Collections 

• Since the inception of the CROSS SERVICING & PRIVATE COLLECTION AGENCY 

Cross-Servicing program, 

FMS and the PCAs have 

brought in $215.6 million 

in collections. 

• In FY 2002, FMS and its 

PCAs collected 

approximately $86 

million*, an increase of 

$28.9 million (51 percent) 

over FY 2001 collections. 

*Number does not equal 

graph totals due to rounding 

$8.5 $10.9 $0.0 

$50.0 

$100.0 

TOP N/A $8.4 $10.4 $18.5 

PCA $14.9 $21.8 $27.8 $42.9 

FMS $8.5 $10.9 $18.6 $24.2 

FY 1999 FY 2000 FY 2001 FY 2002 

• In each of the three categories of collections (referrals to TOP, collections by PCAs 

and collections at FMS's Debt Management Operations Center) there were increases 

in FY 2002 over the previous fiscal year. TOP collections through Cross-Servicing 

rose by 78 percent, PCA collections increased by 55 percent, and collections at the 

Debt Management Operations Center rose by 30 percent. 

D – HHS’ Debt Collection Center 

1. Description 

• The Program Support Center (PSC), established in 1995, is an operating division 

within HHS that collects debts on a fee-for-service basis for 10 different 

agencies/bureaus within HHS and 10 agencies outside of HHS. 

• In January 1999, Treasury granted a three-year debt collection center designation to 

the PSC for three types of HHS debts: Health Profession debts, Unfiled Cost Report 

debts, and Medicare Secondary Payer debts. 

• In May 2002, PSC's designation as a debt collection center was renewed and revised 

by Treasury. The current debt collection center designation covers HHS debts less 

than 180 days delinquent, HHS debts exempt from mandatory transfer to Treasury 

(i.e., Health Profession debts and Unfiled Cost Report debts), and grant audit and 

program disallowances owed to HHS and other agencies for a period of 180 days 

following the completion of any appeals. 

• PSC uses all appropriate and available debt collection tools to collect debts referred 

for collection, including: demand letters and telephone calls, internal offsets, credit 

bureau reporting, referrals to TOP, referrals to PCAs, and litigation. In addition, PSC Dollars in Millions 

$18.5 

(PCA) COLLECTIONS 

$14.9 $21.8 

$8.4 

$18.6 

$27.8 

$10.4 

$24.2 

$42.9 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 14 

applies special debt collection tools available to certain debt types. For example, PSC 

uses denial of Medicare/Medicaid participation and publication of debtor information 

in collecting Health Profession debts, where appropriate. 

• PSC also serves as HHS' conduit for referrals of delinquent debts to FMS for both 

TOP and Cross-Servicing. 

2. Referrals to PSC 

PSC Receivables 

• Debt referrals to the PSC have 

remained relatively stable over the 

last five years, with total receivables 

ranging from $2.15 billion to $2.34 

billion. 

• Referral numbers do not include 

amounts referred to FMS for CrossServicing. PSC referrals of HHS 

delinquent debts to FMS for CrossServicing totaled $4.1 billion as of 

September 30, 2002. 

3. Collections PSC Collections 

• Since the inception of its debt 

collection program in 1995, PSC 

has brought in over $1.7 billion in 

collections. 

• Collections over the last five years 

evidence a general trend toward 

increased collections. A sharp 

increase began in FY 2001 

primarily due to increases in 

administrative (grant disallowance) 

$0.0 

$200.0 

$400.0 

$600.0 

Dollars in Millions 

Total Collected $137.3 $190.4 $216.9 $442.5 $403.5 

FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 

debt collections. Health Profession Debt 

4. Health Profession Debt 

• Over the last five years, PSC has 

been especially effective in 

collecting Health Profession debts. 

During this time, debts more than 

180 days delinquent have 

decreased by 27 percent, while 

collections have increased by 51 

percent. 

$356.8 $413.5 $490.3 $440.2 $433.4 

$46.3 $51.3 $54.6 $64.5 $70.0 

$0.0 

$100.0 

$200.0 

$300.0 

$400.0 

$500.0 

Dollars in millions 

Delinquencies 

> 180 days 

$490.3 $440.2 $433.4 $413.5 $356.8 

Collections $46.3 $51.3 $54.6 $64.5 $70.0 

FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 

$0.00 

$0.50 

$1.00 

$1.50 

$2.00 

$2.50 

$3.00 

Dollars in billions

Receivables $2.18 $2.22 $2.15 $2.34 $2.17 

FY 

1998 

FY 

1999 

FY 

2000 

FY 

2001 

FY 

2002 

$2.18 $2.22 $2.15 $2.34 $2.17 

$442.5 $403.5 

$190.4 $216.9 

$137.3 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 15 

E - Litigation at the Department of Justice 

1. Description 

• DOJ serves as the Federal Government’s “collector of last resort.” When a Federal 

agency cannot collect a debt administratively using debt collection tools such as those 

available under the DCIA, the agency may refer the debt to DOJ to pursue enforced 

collection through the courts. FMS’s Cross-Servicing program also refers agency 

debts to DOJ when designated by an agency. 

• With judicial oversight, DOJ enforces collection by seizing bank, stock and similar 

accounts from debtors and garnishing a higher percentage of debtors’ wages than 

AWG allows. In some cases, DOJ seizes and sells debtor-owned real estate and other 

property to enforce collection. The courts can also assist in establishing and 

enforcing payment arrangements for some debtors. 

• DOJ incorporates administrative debt collection tools, such as TOP, into the array of 

litigation tools available to enforce the collection of debts. 

• DOJ supplements its litigation resources by contracting with private counsel in 15 

judicial districts, and it plans to expand this program to additional districts in the 

future. 

2. Referrals 

• Federal creditor agencies determine 

when to refer debts to DOJ. Both the 

numbers of debts referred and their 

value vary greatly from year to year 

for this reason. 

• Debt referrals vary greatly in 

amount, complexity and 

collectibility. Referrals include loans 

with clear debtor liability as well as 

multi-jurisdictional fraud cases that 

require extensive investigation over a 

period of years to be resolved. 

Fiscal 

Year 

Total Civil 

Referrals- new 

debts opened 

Value of New 

Debts 

(in billions) 

1998 44,876 $2.8 

1999 88,228 $2.8 

2000 50,572 $5.6 

2001 24,357 $5.4 

2002 8,443 $3.0 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 16 

3. Collections 

• The amount DOJ CASH COLLECTIONS FROM CIVIL LITIGATION

collects in any fiscal AT DOJ 

year includes $4.0

recoveries for debt 

referred in prior fiscal $3.0

years.

• DOJ has collected $2.0 

$10.9 billion from 

civil litigation over $1.0 

the last five fiscal 

years. $0.0 

FY FY FY FY FY 

1998 1999 2000 2001 2002 

• DOJ has placed a 

greater emphasis on using its own litigation resources in recent years to pursue those 

who defraud America’s taxpayers. Much of the increase in the amounts collected by 

DOJ in recent years reflects the success of these efforts. 

• More than 50 percent of the funds DOJ collects are received as electronic fund transfers. 

DOJ also accepts credit card payments and payments in foreign currency. In FY 2001, 

DOJ implemented a new program called EZPay that debits debtor bank accounts on a 

schedule authorized by the debtor. Dollars in Billions 

$3.1 $2.9 

$2.20 

$1.2 

$1.5 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 17 

IV – SPECIFIC AGENCY ACTIVITIES 

A - Education Student Loans 

• Since November 1998, Treasury has exempted student loan debts collected at 

Education from the mandatory transfer to Treasury for Cross-Servicing, based on 

Education’s demonstrated expertise in collecting student loan debts. The Office of 

Postsecondary Education debt collection activities are centralized in the Debt 

Collection Service (DCS). DCS services Education's defaulted student loans (loans 

delinquent more than 270 days). Use of the full range of debt collection tools 

outlined in Education’s own statutes and the DCIA is authorized once the loan 

reaches default status. 

• Total student loan receivables serviced by DCS have increased from $11.6 billion at 

FY 1999 year-end to $13.9 billion at FY 2002 year-end. Total delinquencies have 

increased from $9.7 billion at FY 1999 year-end to $10.01 billion at FY 2002 yearend; and collections have increased from $1.14 billion in FY 1999 to $1.33 billion in 

FY 2002. 

Education’s Use of Debt Collection Tools 

(in millions) 

Collection Tools FY 1999 

Collections 

FY 2000 

Collections 

FY 2001 

Collections 

FY 2002 

Collections 

Private Collection 

Agency $191 $228 $229 $260 

Litigation (DOJ) $19 $25 $30 $30 

Internal Offset $5 $5 $3 $3 

AWG (at agency and 

PCAs) $71 $110 $134 $136 

Treasury Offset $505 $431 $450 $368 

Other at Agency $83 $65 $64 $170 

Total Loan 

Consolidations (at 

agency and at PCAs) 

$336 $389 $464 $365 

• Recoveries from TOP declined during FY 2002. Contributing to the decline in offsets 

were the slowing economy and the across-the-board income tax rebates for the 2001 

tax year. Education still relies heavily on PCAs and refers every eligible debt as 

quickly as practicable to one of its twelve PCAs. Education effectively uses AWG to 

collect debts, primarily through its PCAs, which collected $126 million of the $136 

million collected through AWG in FY 2002. Education also uses loan consolidations 

and loan rehabilitations to further reduce delinquencies by moving debts back into 

current repayment status. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 18 

• Collections by PCAs and by AWG have steadily increased over the last four years. 

Regarding PCAs, Education also tracks collection costs as a percent of collections. 

These costs have shown a declining trend from 18.6 percent in FY 1999 to 15.6 

percent in FY 2002. 

• Education has successfully implemented a matching program with HHS and the 

National Directory of New Hire Database that, for FY 2002, resulted in the capture of 

new debtor location information on over one million accounts, which led to an 

additional $269 million in student loan recoveries. 

B - SBA and HUD Loan Asset Sales 

Fiscal 

Year 

Small Business 

Administration 

Dept. of Housing and Urban 

Development 

Unpaid 

Principal 

Balance 

Gross 

Proceeds 

Unpaid 

Principal 

Balance 

Gross 

Proceeds 

2000 $1.2 billion $530 million $480 million $ 467 million 

2001 $2.4 billion $1.6 billion $623 million $432 million 

2002 $562 million $407 million $502 million $291 million 

TOTALS $4.2 billion $2.5 billion $1.6 billion $1.2 billion 

• SBA and HUD have established loan asset sales programs to sell performing and nonperforming loans to the public. SBA’s asset sales program has included the sale of 

direct loans and defaulted guaranteed loans. HUD’s Federal Housing Administration 

is taking action to sell HUD’s entire inventory of single family and multifamily 

mortgage notes held by the Secretary of HUD. 

• Over the last three fiscal years, SBA and HUD have sold $5.8 billion in loan assets 

and collected $3.7 billion in gross proceeds from these sales. Each sale has resulted in 

the collection of more than the estimated value of holding the loan assets to maturity. 

C – Debt Check – Barring Delinquent Debtors 

• Federal agencies are required to deny loans, loan insurance, and loan guarantees to 

entities that owe delinquent non-tax debt to the Federal government pursuant to 31 

U.S.C. § 3720B and 31 C.F.R. § 285.13. Executive Order 13019 extends this bar to 

delinquent child support debtors whose debts have been referred to TOP for 

administrative offset. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 19 

• Debt Check is a program tool provided by FMS that will allow agencies and outside 

lenders to check whether or not applicants for Federal loans, loan insurance or loan 

guarantees owe delinquent child support or delinquent nontax debt to the Federal 

government. A roll out of Debt Check is scheduled to begin in February 2003. 

• Presently, at least three options exist for agencies and outside lenders to collect 

information on applicants: credit bureau reports, the Credit Alert Interactive Voice 

Response System (CAIVRS) managed by HUD, and the General Services 

Administration (GSA) sponsored web site listing those people or vendors barred from 

Federal procurement activities. Debt Check will complement these and other 

systems, serving as an additional source of debt information. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 20 

APPENDIX I: FEDERAL RECEIVABLES AND DELINQUENT DEBT 

The table below presents the ending balances, collections, write-offs, delinquencies, and 

delinquencies greater than 180 days for the credit agencies with the highest ending 

balances at the end of FY 2002. The table groups all other agencies into a single category. 

At the end of FY 2002, 93 percent of the receivables belonged to the 12 agencies listed in 

the tables below. The balance is owed to the remaining 52 agencies (grouped into the “all 

other” category). 

$12,041 $1,193 $22,479 $20,017 

$23,016 $1,369 $6,999 $6,528 

$8,222 $16 $1,130 $879 

$2,567 $954 $2,078 $1,287 

$2,025 $86 $4,161 $2,162 

$14,432 $989 $5,177 $4,595 

$791 $2 $663 $630 

$7,810 $190 $4,383 $3,830 

$4,245 $12 $2,271 $2,245 

$5,865 $54 $5,226 $5,172 

$1,546 $1,169 $1,668 $1,402 

$2,890 $251 $1,181 $898 

$33,010 $495 $5,549 $4,755 

Amounts reported as write-offs represent the dollar amount of uncollectible receivables 

written off during FY 2002. 

“Currently Not Collectible” (CNC) represents the dollar amount of all debts that have 

been written off by the agency but not yet closed out. Debts classified as CNC for any 

reporting period continue to be reported in that category in subsequent reporting periods 

until closed out or collected. 

1

 Does not include delinquencies reported as Currently Not Collectible. 

Federal Receivables and Delinquent Debt 

as of September 30, 2002 

(in millions) 

Agency Ending 

Balance 

Collections Writeoffs Delinquencies Delinquencies 

> 1801

 Currently 

Not 

Collectible 

Education $105,291 

$102,084 

$12,934 

$12,748 

$12,037 

$10,107 

$9,213 

$6,608 

$6,521 

$6,290 

$5,531 

$3,549 

$22,130 

$556 

USDA $570 

HUD $0 

SSA $7,414 

EXIM $0 

HHS $2,640 

AID $0 

DoD $65 

Energy $0 

FCC $3 

SBA $126 

VA $0 

All Other $202 

Gov’t 

Total $315,043 $118,460 $6,780 $62,965 $54,400 $11,576 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 21 

APPENDIX II: SOURCES OF DATA 

Data contained in this report were obtained from the following sources: 

Part II – Government Debt Portfolio, Collection and Write-offs and 

Appendix I 

Source – Treasury Report on Receivables Due From the Public – Fourth Quarter 

2002, as reported by Federal agencies to the Department of the Treasury. 

Part III – Government-Wide Collection Activities 

A – Use of Private Collection Agencies 

Sources – Department of Education, Debt Collection Service 

Department of the Treasury, Financial Management Service 

Department of Health and Human Services, Program Support Center 

B & C – Treasury Offset Program and Cross-Servicing 

Source – Department of the Treasury, Financial Management Service 

D – HHS’ Debt Collection Center 

Source – Department of Health and Human Services, Program Support Center 

E – Litigation at the Department of Justice 

Source – Department of Justice, Office of Debt Collection Management 

Part IV – Specific Agency Activities 

A – Education Student Loans 

Source - Department of Education, Debt Collection Service 

B – SBA and HUD Loan Asset Sales 

Sources – U.S. Small Business Administration 

Department of Housing and Urban Development