FISCAL YEAR 2006 REPORT

TO THE CONGRESS

U.S. GOVERNMENT RECEIVABLES 

AND 

DEBT COLLECTION ACTIVITIES 

OF FEDERAL AGENCIES 

Department of the Treasury

July 2007
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

1

FISCAL YEAR 2006 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

D – LEGISLATIVE AGENDA.......................................................................................................................... 3

II - GOVERNMENT DEBT PORTFOLIO, COLLECTIONS AND WRITE-OFFS............................. 4

A - FISCAL YEAR-END DATA....................................................................................................................... 4

1. Receivables and Delinquencies.................................................................................................. 4

2. Collections .................................................................................................................................. 7

3. Write-offs.................................................................................................................................... 9

4. Interest, Penalties and Costs.................................................................................................... 10

B - ANALYSIS OF MANDATORY REFERRAL TO TREASURY UNDER THE DCIA........................................... 10

III - GOVERNMENT-WIDE DELINQUENT DEBT COLLECTION ACTIVITIES ........................ 12

A - USE OF PRIVATE COLLECTION AGENCIES (PCAS)............................................................................... 12

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

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

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

B - TREASURY OFFSET PROGRAM (TOP) .................................................................................................. 14

1. Description................................................................................................................................ 14

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

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

C - CROSS-SERVICING AT FMS ................................................................................................................. 17

1. Description................................................................................................................................ 17

2. Referrals.................................................................................................................................... 18

3. Collections ................................................................................................................................ 18

D - OTHER DEBT COLLECTION ACTIVITIES AT FMS ................................................................................. 19

1. Debt Check – Barring Delinquent Debtors.............................................................................. 19

2. Revised Treasury Report on Receivables................................................................................. 19

3. Training Initiatives................................................................................................................... 19

4. Response to Hurricane Katrina ............................................................................................... 19

5. FedDebt..................................................................................................................................... 20

6. Reorganization of Debt Functions at FMS ............................................................................. 20

E – HHS’S DEBT COLLECTION CENTER .................................................................................................... 21

1. Description................................................................................................................................ 21

2. Referrals to PSC....................................................................................................................... 21

3. Collections at PSC.................................................................................................................... 22

F - LITIGATION AT THE DEPARTMENT OF JUSTICE (DOJ).......................................................................... 23

1. Description................................................................................................................................ 23

2. Referrals.................................................................................................................................... 23

3. Collections ................................................................................................................................ 24

IV – SPECIFIC AGENCY ACTIVITIES ................................................................................................ 25

A - EDUCATION STUDENT LOANS ............................................................................................................. 25

B - HUD AND SBA LOAN ASSET SALES ................................................................................................... 26

APPENDIX I: FEDERAL RECEIVABLES AND DELINQUENT DEBT........................................... 28

APPENDIX II: SOURCES OF DATA ..................................................................................................... 29
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

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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. This report includes 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 

about total receivables, collections on receivables, delinquencies, collections on 

delinquencies, and write-offs. 

As a point of clarification, receivables and delinquencies as reported on the TROR do not 

include debts that have been written-off. Debts that are written-off are classified as either 

Currently-Not-Collectible (CNC), or closed out on the TROR. Though written-off and 

not counted as receivables or delinquencies in the TROR, debts that are classified as 

CNC are included when determining eligibility for referral to Treasury for mandatory 

offset and Cross-Servicing. See Analysis of Mandatory Referral to Treasury Under the 

DCIA, Part II, Section B of this report. 

This report 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 by certain 

Federal agencies. 

C - ACCOMPLISHMENTS AND SUCCESSES

• Through September 30, 2006, $27.8 billion has been collected to pay delinquent debts 

through the Treasury Offset Program (TOP) and Cross-Servicing Program (CrossServicing) since the enactment of the DCIA in April 1996. 

• The Federal Government collected $164.4 billion in fiscal year (FY) 2006 on all of its 

non-tax receivables. 

• In FY 2006, the Department of Justice (DOJ) collected $3.6 billion in cash recoveries 

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

DOJ has collected a total of $15 billion through civil litigation in the last five fiscal 

years. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

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• In FY 2006, private collection agencies (PCAs) under contract with the Department 

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

the Department of the Treasury’s Financial Management Service (FMS) had referrals 

of $17.5 billion in delinquent Federal debt. These PCAs collected $739.6 million in 

FY 2006, up 7 percent from the $693.5 million collected in FY 2005. 

• In FY 2006, the Department of Housing and Urban Development (HUD) completed 

loan asset sales of performing and non-performing loans totaling $785 million in 

unpaid principal balances. These sales generated $414 million in gross proceeds. In 

the last five fiscal years HUD has sold $4.89 billion in loan assets, generating $2.9 

billion in gross proceeds. 

• Total collections by FMS on delinquent debts through TOP and Cross-Servicing were 

$3.34 billion in FY 2006. This is the highest amount collected by FMS in a single 

fiscal year since FMS began government-wide delinquent debt collection programs in 

1996. Annual collections through these programs have averaged over $3.1 billion 

during the last five years. 

D – LEGISLATIVE AGENDA

In FY 2006, Treasury submitted for consideration two legislative proposals designed to 

increase delinquent debt collection: 

1. Authorize the offset of Federal tax refund payments to collect delinquent state 

unemployment insurance debts, and

2. Eliminate the 10-year statute of limitations for collection of delinquent Federal 

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

FEDERAL AGENCIES 

 

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0%

50%

100%

Distribution of Receivables and Delinquencies 

as of 9/30/06

Administrative Debt* $53.9 $14.1

Defaulted Guaranteed

Loans

$35.7 $23.3

Direct Loans $229.2 $27.4

Receivables in 

Billions

Delinquencies 

in Billions

II - GOVERNMENT DEBT PORTFOLIO, COLLECTIONS AND 

WRITE-OFFS 

A - FISCAL YEAR-END DATA

1. Receivables and Delinquencies 

• Total receivables increased by $8.5 billion in FY 2006, from the amount reported at 

the end of FY 2005, after three consecutive years of slight declines. Total 

delinquencies increased by $2.9 billion in FY 2006. However, this was mainly 

because of an unusually large amount of debt that was written off in the previous 

year. Compared to FY 2003 and FY 2004, FY 2006 delinquent debt decreased by $6 

billion. (See analysis on Page 7.) As previously stated in part I.B, Page 2, receivables 

and delinquencies as reported on 

the TROR do not include debts 

that have been written-off. 

 

• At the end of FY 2006, Federal 

loan programs (direct and 

guaranteed) comprised 83 percent 

of total receivables, unchanged 

from the end of FY 2005. Federal 

loan programs comprised 78 

percent of total delinquencies, up 

slightly from 76 percent at the end 

of FY 2005. 

$315.0 $312.3 $310.8 $310.3 $318.8

$0

$50

$100

$150

$200

$250

$300

$350

Dollars in Billions

2002 2003 2004 2005 2006

Fiscal Year

TOTAL RECEIVABLES

$63.0 $70.1 $71.0

$62.0 $64.9

$0

$10

$20

$30

$40

$50

$60

$70

$80

Dollars in Billions

2002 2003 2004 2005 2006

Fiscal Year

TOTAL DELINQUENT DEBT

*Examples: Fines, penalties and overpayments. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

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Federal loan programs are authorized when 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, normally delinquencies will correspondingly increase. 

• The two agencies with the largest total receivables at the end of FY 2006 are 

Education ($123 billion) and the Department of Agriculture (USDA) ($103.9 billion). 

Receivables from these two agencies comprise 72 percent of the Government’s total 

receivables (Education 39 percent and USDA 33 percent). 

• Two types of Education receivables accounted for almost all of its receivables: 

Federal Direct Student Loans ($101 billion), and Defaulted Guaranteed Student 

Loans ($21.1 billion). 

• Four program areas of the USDA accounted for over $100 billion of its receivables: 

Rural Utilities Service ($38.0 billion); Rural Development & Farm Service Agency 

($32.8 billion); Commodity Credit Corporation ($19.1 billion); and Rural 

Development ($11.7 billion). 

Analysis of Receivables Data 

• Total receivables increased in FY 2006 after three consecutive years of slight 

declines. A previous FY 2002 peak in total receivables coincided with a 

reclassification of $11.9 billion of defaulted guaranteed loan receivables by Education 

in FY 2002 that were formerly classified as written-off/CNC. 

• FY 2006 receivables increased, in large part, because write-offs leveled off after a 

substantial increase in FY 2005. During FY 2006, Federal agencies wrote off $10.1 

billion in receivables, compared to $16.1 billion in FY 2005 and a total of $7.2 billion 

in each of the fiscal years 2003 and 2004. 

 

• Education’s direct student loan portfolio has grown significantly over the last several 

years and it appears this trend will continue. Education’s direct loan portfolio has 

increased from $71.8 billion at the end of FY 2001 to $101 billion at the end of FY 

2006, and by $3.2 billion in FY 2006 alone. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

6

Additional Delinquent Debt Data

 

• At the end of FY 2006, $55.7 billion (86 percent) of the Government’s delinquent 

debts were distributed among six agencies: Education, the Department of Defense 

(DOD), USDA, SBA, the Social Security Administration (SSA), and HHS. 

Total delinquencies increased by 

$2.9 billion since the last fiscal 

year. However, the increase was 

primarily in the youngest 

delinquent debts. Debts more than 

2 years delinquent decreased by 

$4.2 billion, from $30.4 billion at 

the end of FY 2005 to $26.2 

billion at the end of FY 2006. 

• Education was the agency with 

the largest amount of total 

delinquencies ($38.6 billion), 

delinquencies 181 days to 2 years 

old ($11.4 billion), and 

delinquencies between 2 years 

and 6 years old ($4.8 billion). 

• Several agencies’ total delinquencies in 

FY 2006 changed significantly from 

the previous fiscal year. The chart to 

the right details these net changes. 

• Education's delinquencies grew as a 

result of the growth of direct loan 

receivables. From FY 2005 to FY 

2006, direct loan delinquencies 

increased by $3.1 billion, while 

defaulted guaranteed loan 

delinquencies increased by only $710 

million. 

• SBA’s delinquencies decreased by 

$502 million in FY 2006 due to its $661 million increase in write-offs. It is noted that 

SBA has not conducted any asset sales since FY 2003. (See page 26.) 

• A substantial increase in write-offs during FY 2006 at the SEC ($1.1 billion) resulted 

in the substantial decrease in FY 2006 year-end delinquencies. 

Delinquencies (in millions) 

Agency FY 2006 

Change from 

FY 2005 

Education $38,591 $3,640

SSA $3,263 $399

DHS $1,085 $602

AID $780 $221

CFTC $507 $315

SBA $3,154 ($502)

FCC $529 ($496)

SEC $219 ($1,144)

EPA $211 ($737)

0%

20%

40%

60%

80%

100%

Aging of Government-wide Delinquencies 

> 10 yrs $9.6 $10.4 $10.9 $7.1 $9.2

6-10 yrs $7.8 $12.4 $12.8 $8.0 $4.7

2-6 yrs $18.5 $14.6 $15.0 $15.4 $12.3

181 days-2 yrs $18.5 $17.9 $14.8 $14.8 $18.1

1-180 days $8.6 $14.8 $17.5 $16.7 $20.6

2002 2003 2004 2005 2006
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

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$118.5

$119.6 $121.9 $145.0

$164.4

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

Dollars in Billions

2002 2003 2004 2005 2006

Fiscal Year

TOTAL COLLECTIONS ON RECEIVABLES

Analysis of Delinquent Debt Data

• There is a correlation between the $2.9 billion increase in delinquencies during FY 

2006 and the decrease in write-offs during the same period. While it is possible that 

agencies will continue to write off their older delinquent debts, it was expected that 

there would be a leveling off of write-offs after FY 2005 when many agencies 

implemented Write-Off/CNC for the first time. Accordingly, it should not be assumed 

that the large scale reduction in delinquencies that occurred in FY 2005 represents a 

trend that is likely to continue. 

• As a result of the decline of delinquencies more than 2 years old by $4.2 billion in FY 

2006, the Federal Government’s portfolio of delinquent debt is less aged. The ratio of 

delinquencies less than 6 years old to total delinquencies increased from 76 percent at 

the end of FY 2005 to 79 percent in FY 2006. Also, the ratio of delinquencies less 

than 2 years old to total delinquencies increased from 51 percent at the end of FY 

2005 to 60 percent in FY 2006. 

• Education’s total delinquencies have increased from $19.2 billion at the end of FY 

2001 (34 percent of the Government’s total delinquencies) to $38.6 billion at the end 

of FY 2006 (60 percent of the Government’s total delinquencies). Key factors in the 

increase of Education's total delinquencies during this period were the reclassification 

to delinquent status in FY 2002 of $14.3 billion in receivables formerly classified as 

written-off/CNC and an increase of $10.4 billion in direct loan delinquencies from 

FY 2001 to FY 2006. Since the total dollar value of Education’s direct loan portfolio 

continues to increase, it follows that the total dollar value of Education’s 

delinquencies will increase as well. 

2. Collections 

• Total collections on 

receivables in FY 2006 

increased substantially in 

FY 2006 (by $19.4 billion) 

over FY 2005 collections. 

(See chart to the right.)

• In FY 2006, collections on 

receivables increased in 

each of the three types of 

receivables over the 

previous fiscal year: 

Administrative debt (by 

$12.2 billion); defaulted 

guaranteed loans (by $1.2 

billion); and direct loans 

(by $6.0 billion). 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

8

Collections 

(in millions) 

Agency FY 

2006 

Change 

from 

FY 2005 

Net Change in 

Receivables 

FY 2005 to 

FY 2006 

(in millions)

Education $36,584 $9,423 $4,045

HHS $24,625 $7,664 $2,044

Interior $12,951 $2,229 $306

Energy $5,826 $1,329 $32

DOD $11,890 $980 $593

Ex/Im Bank $2,655 $834 -$687

Treasury $2,270 $637 $136

0%

50%

100%

Distribution of Receivables and Collections 

as of 9/30/06

Administrative Debt $53.9 $95.4

Defaulted Guaranteed

Loans

$35.7 $6.7

Direct Loans $229.2 $60.9

Receivables in 

Billions

Collections in 

Billions

• The seven agencies that reported 

the largest increases in collections 

in FY 2006 over amounts collected 

in FY 2005 are listed in the chart to 

the right. These seven agencies 

accounted for $23.1 billion in 

increased collections in FY 2006. 

• As the chart indicates, there is not 

always a direct correlation between 

the net change in collections and 

the net change in receivables at 

specific agencies. 

• While the largest percentage of 

receivables is direct loans, most 

collections reported by the 

agencies fall under the category 

of Administrative debt (58 

percent). 

Analysis

• Government-wide collections 

have steadily increased over the 

last several years due to 

increases in collections at 

Education. Education’s 

collections have grown from $9.3 billion in FY 2001 to $36.6 billion in FY 2006, 

including a $9.4 billion increase in FY 2006. This increase parallels the increase in 

Education’s direct student loan portfolio; direct student loan collections in FY 2006 

were $33.1 billion, 91 percent of Education’s total collections during the fiscal year. 

Note: In FY 2006, Education began to break out its loan consolidations from the 

amount it reports as Collections on Receivables in the Treasury Report on 

Receivables (TROR). It had previously reported those consolidations with collections 

because it considers them to be collections. Therefore, Education’s consolidations 

have been added to its collections in this report to arrive at the total collections 

amount for the agency. 

• While the increase in government-wide collections in FY 2006 greatly exceeds the 

increase in collections at Education alone, the variability of this statistic indicates that 

it cannot be concluded that the total increase in government-wide collections 

represents an established trend. Of the six other agencies that evidenced the largest 

increases in collections in FY 2006 over FY 2005, two reported decreases in 

collections in FY 2005 from FY 2004: DOD - $1 billion and Export-Import Bank - 

$619 million. Also, of the agencies with large increases in collections from FY 2004 

to FY 2005, three reported decreases in FY 2006: USDA - $2.6 billion; Tennessee 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

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$6.8 $7.2 $7.2

$16.1

$10.1

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

Dollars in Billions

2002 2003 2004 2005 2006

Fiscal Year

TOTAL WRITE-OFFS

Valley Authority (TVA) - $536 million; and Department of Homeland Security 

(DHS) - $461 million. 

• Collections as a percentage of year-end receivables vary greatly for the three types of 

receivables (Administrative debt – 177 percent; Defaulted Guaranteed Loans – 19 

percent; and Direct Loans – 27 percent). These differences reflect the types of debts 

and corresponding collections. Administrative debts are often paid in full at the time 

of collection, so collections during the fiscal year include those made on receivables 

that no longer appear as receivables at year-end. Defaulted Guaranteed Loans are 

predominantly delinquent receivables (65 percent), so a lesser rate of collections can 

be expected on these receivables. Direct Loans that are not delinquent (88 percent of 

year-end Direct Loans) are routinely set up to be paid in installments over a period of 

years, so only a percentage of the total receivable amount is collected each year. 

• The largest segment of Government collections, Administrative debt, showed some 

volatility over the last five years (FY 2002 - $73.6 billion; FY 2003 - $68.3 billion; 

FY 2004 - $70.6 billion, FY 2005 - $83.2 billion; and FY 2006 - $95.4 billion). This 

is evidenced in Administrative debt collections at agencies such as USDA, HHS, and 

TVA. Because of the FY 2003 decrease in this category of government collections, it 

is not yet possible to predict with certainty that government-wide collections will 

continue to increase on an annual basis. 

• Large increases or decreases in collections at individual agencies from one year to the 

next do not necessarily result from corresponding increases or decreases in year-end 

receivables. 

3. Write-offs 

• Total write-offs in FY 2006 decreased 

from FY 2005 by $6 billion. However, 

this decrease occurred after an $8.9 

billion increase in FY 2005, 

attributable, to a great extent, to large, 

one-time write-offs in that year by the 

Federal Communications Commission 

(FCC) and the Department of Energy. 

The FY 2006 total is still more than 

$2.8 billion higher than the totals in FY 

2004 and FY 2003. 

• Write-offs increased at many individual 

agencies in FY 2006. Among the more significant increases were those at the ExportImport Bank ($1.2 billion), the Securities & Exchange Commission (SEC) ($1.1 

billion), the Environmental Protection Agency (EPA) ($702 million) and SBA ($661 

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

FEDERAL AGENCIES 

 

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• The substantial increase in write-offs in FY 2005 resulted from greater adherence by 

agencies to established write-off policy (See OMB Circular No. A-129). Beginning in 

third quarter of FY 2004, OMB specifically started monitoring the Federal program 

agencies’ write-off policies and practices. FMS published additional guidance on 

write-off during FY 2004, and provides ongoing training to the agencies on write-off 

policy. Additionally, OMB continues to monitor agency adherence to write-off 

policy. It should be noted that while OMB guidance generally requires write-off 

when debts are two years delinquent, agencies should not write off debts when 

material collections can be documented to occur after two years. 

Analysis

There was a substantial increase in write-offs during FY 2005 as many agencies, in order 

to achieve compliance with OMB Circular A-129, began to write off their debts greater 

than 2 years delinquent and either close them out or place them in a CNC status. 

(Collection may continue on debts in a CNC status.) In addition, two agencies, the FCC 

and Energy, had certain very large debts in their portfolios that were appropriate for 

write-off and those agencies completed that process in FY 2005. It was expected that 

write-offs would level off in subsequent years as agencies continue this procedure each 

year for their debts as they age. The reduction of write-offs in FY 2006 is evidence of that 

trend. 

4. Interest, Penalties and Costs 

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

with applicable loan documents and statutory requirements. See, e.g., 31 U.S.C. 3717. Of 

the $318.8 billion in receivables at the end of FY 2006, $7.2 billion represents unpaid 

interest, penalties and administrative costs. 

B - ANALYSIS OF MANDATORY REFERRAL TO TREASURY UNDER THE DCIA

• The DCIA specifically mandates that Federal agencies transfer non-tax debts more 

than 180 days delinquent to Treasury for collection through TOP and/or CrossServicing. 

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. In the 

analysis, delinquent debts reported as CNC are added to debts reported as more than 

180 days delinquent to determine the “Starting Amount” for calculating the amounts 

eligible for referral. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

11

$0.0

$20.0

$40.0

$60.0

$80.0

In Billions

Mandatory Referral of Debt to Treasury

Starting Amount $64.0 $67.8 $68.2 $66.6 $69.8 

TOP Eligibility $31.4 $33.4 $31.8 $33.8 $35.5 

Cross-servicing Eligibility $8.5 $10.1 $7.7 $8.9 $10.0 

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006

• 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 

appeals or forbearance; debts in litigation or that have been referred for litigation to 

DOJ; debts in foreclosure or in bankruptcy; and foreign sovereign debts. Additional 

exemptions from Cross-Servicing include debts at PCAs, debts being collected by 

internal offset, and debts exempted from Cross-Servicing by Treasury. These 

exemptions are subtracted from the Starting Amount to determine “TOP Eligibility” 

and “Cross-Servicing Eligibility.” 

• At the end of FY 2006, debts eligible for referral to TOP increased by $1.7 billion and 

debts eligible for Cross-Servicing increased by $1.1 billion from amounts reported in 

FY 2005. During FY 2006, FMS and the reporting agencies continued to work 

cooperatively to improve the accuracy of these eligibility numbers. 

Detailed data for 11 agencies with the largest dollar amounts of receivables in FY 2006 

can be found on the Federal Receivables and Delinquent Debt table in Appendix I. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

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III - GOVERNMENT-WIDE DELINQUENT DEBT COLLECTION 

ACTIVITIES

A - USE OF PRIVATE COLLECTION AGENCIES (PCAS) 

1. Description 

• Education, FMS, and HHS have each established contracts with PCAs to collect non-tax 

debts owed to the Federal Government. PCAs assist Federal agencies in many ways, 

including establishing repayment agreements and resolving debts administratively (e.g., 

by determining if a debtor is bankrupt, disabled or deceased). 

• 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 17 PCAs as quickly as 

possible. Education’s PCAs also initiate Education’s use of administrative wage 

garnishment as a debt collection tool. 

• FMS’s PCA contract is used as part of its Cross-Servicing Program. Debts that are not 

collected or resolved, generally within 30 days after transfer to FMS for CrossServicing, are referred to a PCA for collection action. FMS's PCAs also utilize 

administrative wage garnishment as an effective collection tool. 

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

provides centralized debt collection services for HHS’s 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. 

• The Internal Revenue Service (IRS) initiated a limited program in September, 2006 with 

contract awards to a small number of PCAs. 

2. Referrals 

In FY 2006, $17.5 billion in 

Federal non-tax debts were 

referred to PCAs for collection 

action. Referrals increased from 

the previous fiscal year mostly 

due to an increase in Education’s 

referrals back to a level closer to 

that of FY 2004. A decrease at the 

agency in FY 2005 was primarily 

caused by the transition in that 

year to new PCA contracts and 

contractors. During the transition 

Referrals to PCAs 

(in millions) 

Agency FY 2003 FY 2004 FY 2005 FY 2006 

HHS $65 $66 $45 $68

FMS $3,631 $2,292 $2,280 $3,500

Education $10,679 $14,256* $11,376 $13,952

Totals $14,375 $16,614* $13,701 $17,520

*Indicates corrections from amounts reported in the FY 2004 Report.
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

13

period, only a limited number of accounts were referred to the new contractors, and the old 

contractors held on to previously assigned accounts for a longer period of time 

than normal.

3. Collections 

• Total PCA collections 

were $739.6 million in 

FY 2006, a 7 percent 

increase over FY 2005 

collections. Total PCA 

collections have increased 

in each of the last four 

fiscal years. 

*Includes collections by administrative wage garnishment

 Collections by PCAs 

 (in millions) 

Agency FY2003 FY2004 FY2005 FY 2006 

HHS $9.5 $7.5 $10.1 $9.6

FMS* $73.3 $70.4 $80.3 $78.2

Education* $464 $532.5 $603.1 $651.8

Totals $546.8 $610.4 $693.5 $739.6
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

14

B - TREASURY OFFSET PROGRAM (TOP) 

1. Description

TOP is a debt collection program that includes both Offset and the Federal Payment Levy 

Program (FPLP). 

Offset

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

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

A payee's name and taxpayer identification number (TIN) 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 2006, payment types subject to offset included Office of Personnel Management 

(OPM) retirement payments, IRS tax refund payments, vendor payments (including 

vendor payments disbursed by DOD), Federal employee travel payments, Federal salary 

payments, and Social Security benefit payments. 

• In FY 2006, the number of states and territories participating in the State Income Tax 

Offset program was 37, along with the District of Columbia. FMS is currently working 

with two more states, North Dakota and Connecticut, to bring them into the program in 

FY 2007. 

Federal Payment Levy Program 

• The Federal Payment Levy Program (FPLP) is a program whereby delinquent Federal 

income tax debts are collected by levying non-tax payments, as authorized by the 

Taxpayer Relief Act of 1997. FPLP includes levy of vendor, Federal employee salary, 

OPM retirement, and Social Security benefit payments. It is accomplished through a 

process almost identical to offset, that is by matching delinquent debtor data with 

payment record data. This automated collection of the debt at the time of payment 

occurs after the delinquent taxpayer has been afforded due process, in accordance 

with the Internal Revenue Code. 

• In FY 2006, the collaborative efforts of the Federal agencies represented on the 

Federal Contractor Tax Compliance (FCTC) task force have resulted in the following: 

accelerated IRS notice and review process by the matching of tax debts in TOP with 

data on new contract awards; the completed or planned addition of “payment types” 

to FPLP (Type A, i.e., individual payments key-entered into a personal computer, 

completed; Automated Clearing House/Corporate Trade Exchange (ACH-CTX) and 

Fedwire, in progress; Corp of Engineers and Postal Service vendor payments, to be 

added in Summer, 2007); and the development of a regulatory, programming, and 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

15

$31.02

$71.20

$3.21

$81.16

$31.58

$75.12

$4.13

$80.44

$34.34

$79.63

$5.26

$105.42

$35.63

$84.61

$5.76

$129.53

$37.48

$88.31

$6.13

$139.71

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

Dollars in Billions

TOTAL DEBT REFERRALS TO THE TREASURY OFFSET PROGRAM

Federal Tax $81.16 $80.44 $105.42 $129.53 $139.71 

State Income Tax $3.21 $4.13 $5.26 $5.76 $6.13 

Child Support $71.20 $75.12 $79.63 $84.61 $88.31 

Federal Nontax Debt $31.02 $31.58 $34.34 $35.63 $37.48 

Sep. 2002 Sep. 2003 Sep. 2004 Sep. 2005 Sep. 2006

operational process to add a debt indicator flag on the Central Contractor Registration 

(CCR). This flag will require contracting officers to use payment methods that are 

subject to TOP rather than purchase cards. The task force is currently examining ways 

to levy Part A and B payments to Medicare providers. 

Reciprocal Agreements with States

• In FY 2006, FMS prepared a regulation to implement a provision in the DCIA that 

authorizes states to enter into reciprocal agreements with Treasury to collect unpaid 

state debt by offset of Federal non-tax payments and the Federal government to 

collect delinquent non-tax debt by offset of state payments. The regulation was 

published in January, 2007. Three states, Maryland, New Jersey and Kentucky, will 

participate in a pilot program which is scheduled to begin in late Spring, 2007. 

2. Referrals 

• As of September 30, 2006, the largest component of TOP’s delinquent debtor database 

was $139.71 billion in Federal income tax debts, available for matching to identify 

potential levies. $53.11 billion of these tax debts have been "turned on" by IRS, that is 

due process has been completed and payments are subject to continuous levy. 

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

resulted in more delinquent child support obligations being referred to TOP in each of 

$186.59

$191.27

$224.64

$255.54

$271.63 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

16

the last four fiscal years. Referrals of $88.31 billion as of September 30, 2006, represent 

a 24 percent increase in referrals from September 30, 2002. 

• Referrals of non-tax debts increased to $37.48 billion as of September 30, 2006, an 

increase over last year’s amount of $35.63 billion. As of September 30, 2006, 

100 percent of the non-tax debts eligible for mandatory referral to TOP have been 

referred. (See pages 10-11 for a discussion of non-tax debts eligible for referral to TOP.) 

 

• Referrals of state income tax debts increased by 10 percent, from $5.76 billion at the 

end of FY 2005 to $6.13 billion at the end of FY 2006.

3. Collections 

Total collections through TOP were $3.2 billion in FY 2006. Since enactment of the 

DCIA in April 1996, $27.6 billion has been collected through TOP. The chart below 

summarizes collections through TOP for the last five fiscal years. 

Collections Through TOP In Millions of Dollars 

Type of Collection FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 

Administrative Offset* $84 $88 $109 $123 $144 

Tax Refund Offset – Child 

Support (excluding tax 

rebates) 

$1,463 $1,428 $1,487 $1,580 $1,582 

Tax Refund Offset – Federal 

Non-tax Debt (excluding tax 

rebates) 

$1,048 $1,025 $974 $990 $989 

Tax Refund Offset – State 

Income Tax Debt (excluding 

tax rebates) 

$119 $152 $218 $232 $216 

Tax Refund Offset – Tax 

Rebates*** N/A $207 -- -- -- 

Continuous Tax Levy $60 $89 $114 $197 $303 

Total Collected $2,769 $2,990*** $2,902 $3,123** $3,234 

 *Collection of Federal non-tax debts and child support debts by offsetting Federal non-tax 

payments. 

 **Numbers in column do not equal total due to rounding. 

 ***Tax rebate offsets for FY 2003 are for offsets of advance child tax credit payments. 

• Total collections through TOP increased in FY 2006 by $112 million over total 

collections in FY 2005, due, in large part, to increases in Tax Levy and 

Administrative Offset. 

• Collections under the Federal Payment Levy Program (FPLP) in FY 2006 were $303 

million, a 54 percent increase over the $197 million collected in FY 2005. The large 

increase reflects the continued maturation of the tax levy program in TOP and the efforts 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

17

of the multi-agency task force. IRS maintains control over which Federal tax debts can 

be collected through the levy process. 

• In FY 2006, administrative offset collections totaled $144 million, $21 million more 

than the total collected in FY 2005. 

C - CROSS-SERVICING AT FMS

1. Description 

• Cross-Servicing is the process whereby agencies refer Federal non-tax 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, referral of debts to TOP, credit bureau 

reporting, use of PCAs, referral of debts to DOJ for litigation, and administrative 

wage garnishment (AWG). 

• AWG became available to Federal agencies in Cross-Servicing in FY 2001. Fifteen 

agencies currently utilize AWG in the program, and $5.6 million was collected 

through AWG in FY 2006. FMS continues to encourage Federal agencies to authorize 

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

• The FMS task orders with its PCAs were extended through June 30, 2007 to allow 

FMS sufficient time to award and implement new task orders. On March 12, 2007, 

FMS awarded five new PCA task orders under GSA’s Financial and Business 

Solutions Schedule. The task orders were awarded for one year, with four one-year 

option periods available. FMS anticipates debt referrals under the new task orders to 

begin during the first week of July, 2007. 

• Pursuant to legislation allowing access to the HHS Office of Child Support 

Enforcement’s National Directory of New Hires (NDNH), FMS has developed 

requirements for a process whereby FMS would receive address and employer 

information, as well as verified and corrected, if necessary, name and Taxpayer 

Identification Number (TIN), for debtors that have been referred to Cross-Servicing. 

The information could be used by FMS and its PCAs to contact debtors to attempt to 

resolve the debt, or to initiate AWG when the debt cannot be otherwise resolved. 

FMS is working with HHS on plans for a test match in FY 2007 to determine the 

specific information that would be received so that a cost-benefit analysis can be 

performed. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

18

CROSS-SERVICING REFERRALS

$8.1 $7.9 $7.9 $7.5 $8.2

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

Dollars in 

Billions

Referred by End

of FY

$7.9 $7.9 $7.5 $8.2 $8.1 

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006

$24.2

$42.9

$18.5

$35.2

$73.3

$25.7

$32.6

$70.4

$24.7

$49.9

$80.3

$27.8

$25.3

$78.2

$28.0

$0.0

$50.0

$100.0

$150.0

$200.0

Dollars in 

Millions

CROSS SERVICING & PRIVATE COLLECTION AGENCY 

(PCA) COLLECTIONS 

TOP $18.5 $25.7 $24.7 $27.8 $28.0

PCA $42.9 $73.3 $70.4 $80.3 $78.2

FMS $24.2 $35.2 $32.6 $49.9 $25.3

FY 

2002

FY 

2003

FY 

2004

FY 

2005

FY 

2006

2. Referrals 

• The calculation of the amount 

of debts eligible for referral is 

described in this report in 

Section II-B, Page 10. 

• At the end of FY 2006, $8.1 

billion in delinquent debts 

were at FMS for CrossServicing, a slight decrease in 

the amount at FMS at the end 

of FY 2005. 

• As of September 30, 2006, 89 percent of all eligible debts were submitted to FMS for 

Cross-Servicing. (See Page 10 for a discussion of non-tax debts eligible for referral to 

Cross-Servicing.) 

3. Collections 

• Since the inception of 

the Cross-Servicing 

Program, FMS and the 

PCAs have collected 

$767.9 million. 

• In FY 2006, FMS and its 

PCAs collected $131.4 

million while 

transitioning to FedDebt, 

FMS’s new debt 

collection system. 

• In addition to collecting 

debts, PCAs under contract with FMS also helped resolve delinquent debts by 

identifying those that are not collectible due to reasons such as bankruptcy or death. 

With the implementation of FedDebt in late September, 2005, FMS introduced a new 

Administrative Resolution (AR) category, “Entity Out of Business.” Since the type of 

debt eligible for this AR category is commercial, the dollar value of debt resolved 

was substantially higher in FY 2006 ($962 million) than in prior years (e.g., $128 

million in FY 2005) when a large volume of resolved accounts were consumer and 

often of lesser dollar value. Since the inception of the Cross-Servicing Program in 

1998, PCAs have resolved debts valued at over $1.45 billion. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

19

D - OTHER DEBT COLLECTION ACTIVITIES AT FMS 

1. 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. 

Debt Check is an initiative under the FMS debt program that is being employed to help 

agencies electronically identify delinquent debtors and potentially bar them from 

receiving Federal loans, loan insurance, or loan guarantees. Presently, at least three other 

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 GSA sponsored web site listing those people or vendors barred from 

Federal procurement activities. 

2. Revised Treasury Report on Receivables 

FMS completed a revision of the TROR form, an updated Instructional Workbook, and 

system development for the revised form. The TROR provides information on the status 

of Federal receivables and collection, write-off and close-out of delinquent Federal nontax debts. The revised form provides more useful credit management and debt collection 

information for agency management and is easier for agencies to prepare. The TROR 

revision was developed through an inter-agency focus group made up of members from 

15 Federal agencies, and the final product was reviewed by OMB. FMS implemented the 

revised TROR government-wide for first quarter, FY 2007 reporting. 

3. Training Initiatives 

Each year FMS develops a training plan that includes workshops and conferences, in its 

continuing effort to keep Federal agencies apprised of important developments regarding 

the DCIA and the debt program. From October 2005 through December 2006, FMS 

sponsored over 30 workshops and conferences open to all Federal agencies with 

approximately 1,600 agency participants in attendance. These training sessions covered 

topics such as general debt collection training (called “Debt Collection 101”), how to 

report on the TROR, and FedDebt implementation. Training was provided not only in 

Washington, DC, but throughout the country including in Atlanta, GA; St. Louis, MO; 

Albuquerque, NM; and Columbus, OH. FMS also provided specialized training sessions 

to twenty individual agencies, as requested by those agencies. 

4. Response to Hurricane Katrina 

The destruction brought on by Hurricanes Katrina, Wilma and Rita (KWR) created 

tremendous problems for many citizens, and the President directed Federal agencies to do 

all in their power to assist the victims of that disaster. On September 7, 2005, FMS issued 

a bulletin to agencies that participate in its Cross-Servicing Program soliciting their input 

on whether they wished to suspend collection action for 120 days for all debts of debtors 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

20

living in Federally designated disaster areas. In response to the bulletin, 14 agencies 

requested that we suspend collection action. Further, as a result of the circulation of the 

bulletin, Federal agencies not participating in the Cross-Servicing Program also 

considered whether or not temporary suspension of delinquent debt collection in the 

affected areas was appropriate. Agencies participating directly in TOP were contacted to 

determine what action they would take. Four agencies suspended collection action against 

individuals in the affected areas. Four other agencies reported that they would not 

suspend collection action, but would evaluate any offsets on a case by case basis. 

Note: It is anticipated that KWR-related delinquent debt will be referred in FY 2007 by at 

least two agencies: FEMA and SBA. 

5. FedDebt 

• FedDebt, implemented in 2005, is part of FMS’s Enterprise Architecture initiative, 

which ensures that all of FMS's systems are being developed, maintained, and 

operated under a single standard. FedDebt is a web-based system that improves the 

Federal agencies' access to FMS’s debt collection operations through a single debt 

management interface. FedDebt also provides FMS with operational efficiencies so 

that similar functions that were managed by different areas within FMS’s debt 

collection operations can be combined to provide better customer service. 

• The current phase of the FedDebt system provides on-line access to the Federal 

agencies and the PCAs who previously did not have access to the Cross-Servicing 

system, and improves control over the cross-servicing of debts at FMS from the 

referral by the Federal agency through the debt collection process. The system also 

provides more flexibility in handling the wide variety of delinquent debts referred by 

the Federal agencies. In the future, FedDebt will be enhanced to provide single signon access to both the Offset (TOP) and Cross-Servicing lines of business. 

6. Reorganization of Debt Functions at FMS 

In order to streamline operations, improve efficiencies, and yield significant net savings 

over the long term, FMS completed a realignment of a major portion of its debt 

management business functions. This realignment took advantage of the implementation 

of FedDebt. As part of the realignment, certain operations were transferred from 

Headquarters in Washington, DC, to the Birmingham Debt Management Operations 

Center (BDMOC) in Birmingham, AL. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

21

$2.17

$1.42

$1.31 $1.45

$1.80

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

Dollars in billions

Referrals to PSC

Referrals $2.17 $1.42 $1.31 $1.45 $1.80 

FY 

2002

FY 

2003

FY 

2004

FY 

2005

FY 

2006

E – HHS’S 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 11 different agencies 

within HHS and several agencies outside of HHS. 

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

the PSC to collect 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 May 2002 designation was renewed in May 2005, extending it five 

years. 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 

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's conduit for referrals of delinquent debts to FMS for both 

TOP and Cross-Servicing. 

2. Referrals to PSC 

• Debt referrals to PSC 

decreased significantly after 

2002 due to the change in debt 

collection center designation 

in 2002. That change resulted 

in Medicare Secondary Payer 

debts being referred to FMS 

for Cross-Servicing rather than 

to the PSC. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

22

$403.5

$545.5 $544.6

$453.9 $463.2

$0.0

$200.0

$400.0

$600.0

Dollars in Millions

PSC Collections

Collections $403.5 $545.5 $544.6 $453.9 $463.2 

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006

Health Profession Debt

$263.4 $239.4

$356.8 $307.4 $351.2

$70.0 $79.8 $84.5 $94.4 $89.8

$0.0

$100.0

$200.0

$300.0

$400.0

$500.0

Dollars in millions

Delinquencies

> 180 days

$356.8 $351.2 $307.4 $263.4 $239.4 

Collections $70.0 $79.8 $84.5 $94.4 $89.8 

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006

• PSC receivables do not include amounts referred to FMS for Cross-Servicing. PSC 

referrals of HHS delinquent debts to FMS for Cross-Servicing totaled $3.97 billion at 

the end of FY 2006. 

3. Collections at PSC 

• Since the inception of its debt 

collection program in 1995, 

PSC has collected over $3.7 

billion. 

• Collections increased by $9.3 

million in FY 2006 from FY 

2005. The decrease in 

collections in FY 2005 from 

the FY 2004 amount was the 

result of the number of full 

monetary payments on 

disallowance debts which 

occurred in FY 2004.

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 33 percent, while annual 

collections have increased 

by 22 percent. A decrease 

in FY 2006 from FY 2005 

was primarily due to full 

payment from nursing schools 

in FY 2005 at time of closing.
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

23

F - LITIGATION AT THE DEPARTMENT OF JUSTICE (DOJ) 

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 has the option to 

refer agency debts to DOJ. 

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

accounts from debtors. In some cases, DOJ seizes and sells debtor-owned real estate 

and other property to enforce collection. DOJ also may garnish a higher percentage of 

the debtors’ wages than AWG allows. The courts can 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 16 

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. For this 

reason, both the numbers of debts 

referred and their value can vary 

greatly from year to year. However, 

the average value of a debt referred 

has increased substantially in recent 

years. 

• Debt referrals vary greatly in 

amount, complexity and 

collectibility. Referrals include loans 

with clear debtor liability as well as 

multi-jurisdictional fraud cases which require extensive and lengthy investigation 

over a period of years to be resolved. 

Fiscal 

Year 

Total Civil 

Referrals - new 

debts opened 

Value of New 

Debts 

(in billions) 

2002 8,443 $3.0 

2003 11,557 $2.1 

2004 7,165 $2.5 

2005 6,723 $5.0 

2006 7,913 $6.1 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

24

$2.2

$3.1

$2.5

$3.6 $3.6

$0.0

$1.0

$2.0

$3.0

$4.0

Dollars in Billions

FY

2002

FY

2003

FY

2004

FY

2005

FY

2006

CASH COLLECTIONS FROM CIVIL LITIGATION 

AT DOJ 

3. Collections

• The amount DOJ collects in 

any fiscal year includes 

recoveries for debt referred 

in prior fiscal years. 

• DOJ has collected $15 

billion from civil litigation 

over the last five fiscal 

years. 

• 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. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

25

IV – SPECIFIC AGENCY ACTIVITIES

A - EDUCATION STUDENT LOANS

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

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

Education’s demonstrated expertise in collecting student loan debts. Federal Student 

Aid debt collection activities at Education are centralized in Education’s Borrower 

Services-Collections (BSC). BSC 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. Additionally, BSC collects on student grant overpayments, which represent a 

very small amount of BSC’s total delinquent debt portfolio. 

• Total student loan receivables (principal and interest) serviced by BSC have increased 

from $12.7 billion at FY 2002 year-end to $20.7 billion at FY 2006 year-end; and 

collections have increased from $1.33 billion in FY 2002 to $2.31 billion in FY 2006. 

Education’s Use of Debt Collection Tools 

(in millions)

Collection Tools FY 2002 

Collections 

FY 2003 

Collections

FY 2004 

Collections

FY 2005 

Collections 

FY 2006 

Collections 

Private Collection Agency $260 $322 $362 $378 $410

Litigation (DOJ) $30 $27 $22 $18 $16

Internal Offset $3 $2 $2 $1 $3

AWG (at Education and PCAs) $136 $150 $186 $237 $251

Treasury Offset $368 $398 $389 $415 $402

Other Tools at Education $68 $59 $59 $50 $51

Total Loan Consolidations 

(at Education and at PCAs) $365 $290 $206 $197 $224

Total Loan Rehabilitations 

(at Education and at PCAs) $102 $369 $587 $786 $954

• Recoveries from TOP decreased, by 3.1 percent, from FY 2005 to FY 2006. 

Education still relies heavily on PCAs and refers every eligible debt as quickly as 

possible to one of its 17 PCAs. Education effectively uses AWG to collect debts, 

primarily through its PCAs, which collected $241 million of the $251 million 

collected through AWG in FY 2006. Education also uses loan consolidations and loan 

rehabilitations to further reduce delinquencies by moving debts back into current 

repayment status. 

• Collections by PCAs and by AWG have steadily increased over the last five 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 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

26

percent in FY 2006. The decline in costs is the direct result of reduced negotiated 

rates in the FY 2000 and FY 2004 PCA task orders and increased usage of lower cost 

PCA recovery tools such as loan rehabilitation. 

• PCAs rehabilitated $900 million in defaulted loans in FY 2006, up significantly from 

the $786 million in FY 2005. New laws enacted as of July 1, 2006 allow borrowers to 

rehabilitate if they make 9 consecutive on-time monthly payments in a 10 month 

period, which is the preferred method for borrowers to cure defaults (other than 

paying the debt in full). 

• Education has continued its successful matching program with HHS’s National 

Directory of New Hire Database that, for FY 2006, resulted in the capture of new 

debtor location information on over 1.5 million accounts. Use of the New Hire 

Database led to an additional $565.5 million in student loan recoveries. 

• Due to contractual issues, BSC did not receive the software components to its updated 

system that were needed to participate in TOP salary offset. BSC is currently in 

negotiations to determine when a new system will be up and running. In the interim, 

Education uses all other available debt collection tools to collect debts owed by 

Federal employees. 

B - HUD AND SBA LOAN ASSET SALES

Dept. of Housing and Urban 

Development 

Small Business 

Administration Fiscal 

Year Unpaid 

Principal 

Balance 

Gross 

Proceeds 

Unpaid 

Principal 

Balance 

Gross 

Proceeds 

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

2002 $502 million $291 million $1.27 billion $871 million 

2003 $1 billion $510 million $651 million $444 million 

2004 $1.2 billion $777 million 0 0 

2005 $1.4 billion $908 million 0 0 

2006 $785 million $414 million 0 0 

TOTALS $5.5 billion $3.3 billion $4.3 billion $2.9 billion 

• HUD and SBA established Loan Asset Sales programs to sell performing and nonperforming loans to the public. HUD’s Federal Housing Administration (FHA) has an 

active asset sales program with the objective of maximizing the recovery from the 

payment of insurance claims by selling multi-family and healthcare (formerly FHAinsured) mortgages to the private sector. FHA has also been conducting a 

demonstration in which it acquires and sells defaulted single-family mortgages. An 

evaluation is ongoing of the single-family sales program to determine its financial and 

mission success. The drop in unpaid principal and sales proceeds is due in large part 

to the success of the ongoing sales program in reducing and maintaining the multi-
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

27

family and healthcare portfolio. SBA’s asset sales program included the sale of direct 

loans and defaulted guaranteed loans. 

• SBA did not conduct asset sales during the period of FY 2004 through FY 2006. 

However, SBA anticipates publishing regulations in FY 2007 that clarify its authority 

to include business loans in public sales. The agency hopes to begin loan sales in FY 

2008 in partnership with the Federal Deposit Insurance Corporation (FDIC). 

• Over the last six fiscal years, SBA and HUD have sold $9.8 billion in loan assets and 

collected $6.2 billion in gross proceeds from these sales. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

28

APPENDIX I: FEDERAL RECEIVABLES AND DELINQUENT DEBT

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

delinquencies greater than 180 days, and debts that have been written off and classified as 

Currently-Not-Collectible (CNC) for the credit agencies with the highest ending balances 

at the end of FY 2006. The table groups all other agencies into a single category. At the 

end of FY 2006, 95 percent of the receivables belonged to the 11 agencies listed in the 

table below. 

Federal Receivables and Delinquent Debt

as of September 30, 2006 

(in millions) 

Agency Ending 

Balance 

Collections Writeoffs Delinquencies Delinquencies 

> 180* 

 Currently 

Not 

Collectible 

Education $123,004 $36,585 $652 $38,592 $22,777 $351

USDA $103,945 $26,155 $931 $3,745 $3,288 $618

SSA $13,662 $2,896 $1,124 $3,263 $2,244 $9,070

HUD $11,226 $4,970 $169 $506 $417 $217

SBA $11,012 $1,708 $1,161 $3,154 $2,886 $1,804

DOD $8,951 $11,890 $309 $4,889 $4,460 $237

EX/IM1 $8,414 $2,655 $1,504 $2,010 $1,832 0

HHS $7,305 $24,626 $764 $2,089 $1,529 $7,448

AID2 $7,141 $729 $1 $780 $751 $0.6

Energy $4,127 $5,826 $2 $149 $106 $2,108

FATP3 $3,579 $1,183 $37 $1,447 $1,432 0

All Other $16,456 $45,198 $3,396 $4,328 $4,776 $1,266 

Gov’t 

Total $318,822 $164,421 $10,050 $64,862 $44,272 $25,724

1

Export Import Bank 

2

Agency for International Development 

3

Funds Appropriated to the President 

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

written off during FY 2006. 

“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. 

 

* Does not include write-offs reported as CNC. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 

 

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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 

2006, 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, Borrower Services-Collections 

 Department of the Treasury, Financial Management Service 

 Department of Health and Human Services, Program Support Center 

B & C & D – Treasury Offset Program & Cross-Servicing & Other Debt Collection 

 Activities at FMS 

 Source – Department of the Treasury, Financial Management Service 

E – HHS’ Debt Collection Center 

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

F – 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, Borrower Services-Collections 

 B – SBA and HUD Loan Asset Sales

 Sources – U.S. Small Business Administration 

 Department of Housing and Urban Development