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Chapter 1 Introduction

Purpose of Managing Federal Receivables

The purpose of "Managing Federal Receivables," is to provide

Federal agencies with a general overview of standards, guidelines,

and procedures for the successful management of Federal activities

ranging from the extension of credit or financial assistance to

closing-out uncollectible debts. Agency personnel who manage

Federal credit programs and accounts receivable should also

familiarize themselves with the laws, regulations, policies and

procedures specific to their agency’s programs. Agencies

should use the parts of these guidelines which pertain to their

credit management and debt collection activities and types of debt. 

The appendices include various checklists, documents and the

appropriate references to assist agencies in managing their credit

and debt collection activities. A glossary of relevant terms is also

included at the end of the document. This edition supersedes the

prior version of “Managing Federal Receivables” dated July 1994.

Since 1994, many changes have been made to Federal credit

extension and debt collection policies and procedures. Federal

agencies are now required to use credit reports as a screening tool

and have applicants certify the accuracy of their initial application

for assistance. There are also several new delinquent debt

collection techniques, most notably, the requirement to refer debts

that are delinquent 180 days or more to Treasury’s (Treasury)

Financial Management Service (FMS). This document provides

guidance on these and other changes to laws and policies

governing Federal receivables management and is consistent with

the Debt Collection Act of 1982, as amended by the Debt

Collection Improvement Act of 1996 (DCIA); the revised Federal

Claims Collection Standards (FCCS -31 CFR Parts 900-904)

published November 22, 2000; and the revised Office of

Management and Budget (OMB) Circular No. A-129 published

November 29, 2000.
Introduction

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Scope and Coverage

This document covers credit extension and receivables

management functions related to:

C all direct loans where the Federal Government has

disbursed funds to a borrower and enters into a contract

with the borrower for repayment;

C defaulted guaranteed loans where, under a guarantee or

insurance agreement, the Federal Government has

reimbursed a private financial institution or other entity for

a borrower's default and assumed responsibility for

recovering any outstanding amounts;

C financial contracts designed to support borrowing;

C grant programs and contracts where financial

responsibility is a factor; and

C administrative debt, such as fines, fees, penalties and

overpayments.

The standards, guidelines and procedures described in this

document generally must be followed by all Federal agencies for

all types of debt, unless otherwise provided by law. The standards,

guidelines and procedures do not apply if they are statutorily

prohibited or are inconsistent with statutory requirements. See, for

example, Chapter 6, Delinquent Debt Collection, Overview (page

6-1). 

For the purposes of this document, the term "Federal agency"

includes all Federal agencies and Government corporations defined

under 5 U.S.C. 105 and all other Federal instrumentalities, unless

the application of a particular portion of this document is

specifically prohibited by statute. The term “Federal agency” also

includes judicial and legislative agencies to the extent authorized

by law. See, for example, 31 U.S.C. 3701 et seq. requiring judicial

 and legislative agencies to collect delinquent debts using specified

collection remedies.
Introduction

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Key Related Legislation, Regulations and Guidance

This document incorporates the relevant provisions of the:

C Federal Claims Collection Act of 1966 (FCCA) which

authorized agencies to collect delinquent debt; 

C Debt Collection Act of 1982 (DCA) which expanded the

Federal Government's right to use debt collection tools

such as offset, credit bureau reporting and private debt

collection agencies;

C Deficit Reduction Act of 1984 which added tax refund

offset as a debt collection tool; 

C Chief Financial Officers Act of 1990 (CFO Act) which

instituted effective financial management practices for the

Federal Government and provided for the improvement of

the Government's financial management, accounting, and

internal control systems;

C Federal Credit Reform Act of 1990 which required

agencies to estimate a credit program's subsidy cost for

direct and guaranteed loans for inclusion in budget outlays;

C Federal Debt Collection Procedures Act of 1990

(FDCPA) which established a uniform process through the

court system for collecting debts owed the Federal

Government and provides for uniform procedures for

enforcing judgments to collect Federal debts;

C Administrative Dispute Resolution Act of 1990 (ADRA)

which temporarily raised the authority of agencies to

compromise, suspend, and terminate collection action to

$100,000 and gives the Attorney General the authority to

increase this threshold administratively. This authority was

made permanent by the Debt Collection Improvement Act

of 1996;
Introduction

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C Cash Management Improvement Act Amendments of

1992 (CMIAA) which expanded the use of tax refund

offset;

C Omnibus Budget Reconciliation Act of 1993 (OMBRA),

as amended, which mandated that agencies, including the

Federal Deposit Insurance Corporation (FDIC) and the

National Credit Union Administration, report discharged

debts to the Internal Revenue Service as income to the

debtors;

C Department of Justice 1994 Appropriation Act which

authorized the Department of Justice to charge a 3%

administrative fee on amounts collected;

C Debt Collection Improvement Act of 1996 (DCIA) which

centralized offset and other administrative debt collection

procedures at the Treasury; bars delinquent debtors from

obtaining Federal loans, loan insurance or loan guarantees;

mandates credit bureau reporting; and authorizes

administrative wage garnishment; 

C General Accounting Office Act of 1996 which transferred

from the General Accounting Office to Treasury certain

authorities, including the authority to promulgate the

Federal Claims Collections Standards with the Department

of Justice;

C Federal Claims Collections Standards (FCCS) (revised

November 22, 2000) which clarified and simplified

Federal debt collection procedures and reflects changes

under the DCIA and the General Accounting Office Act of

1996;

C Treasury Regulations which establish rules for certain

debt collection tools such as centralized administrative

offset, cross-servicing and administrative wage

garnishment, as well as standards for barring delinquent

debtors;
Introduction

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Federal Claims Collection Act 

Debt Collection Act 

Deficit Reduction Act 

Debt Collection Improvement Act 

CFO Act, Credit Reform, 

FDCPA, ADRA, CMIAA, 

OMBRA, DOJ Act 

Federal Claims Collection 

Standards 

OMB Circular A-129 

Agency Implementing Regulations 

and Standards 

Managing Federal Receivables 

Credit Bureau Reporting Guide 

Treasury Report on Receivables 

(TROR) 

C Office of Personnel Management Salary Offset

Regulations which established rules and process for

offsetting the salaries of federal employees to collect

delinquent nontax debt; and

C OMB Circular No. A-129 “Policies for Federal Credit

Programs and Non-Tax Receivables” which established

policies and procedures for justifying, designing and

managing Federal credit programs and for collecting

outstanding receivables.

 Key Credit Related Laws and Policies
Introduction

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Responsibilities of Departments and Agencies

The successful implementation of a governmentwide credit

management/debt collection program depends upon the active

participation and support of several key agencies:

Office of Management and Budget (OMB)

C reviews legislation to establish new credit programs or

modify existing credit programs;

C monitors agency conformance with the Federal Credit

Reform Act;

C formulates and reviews agency credit reporting standards

and requirements;

C reviews testimony pertaining to credit programs and debt

collection activities;

C reviews agency budget submissions for credit programs

and debt collection activities;

C develops and maintains the Federal credit subsidy

calculator used to calculate the cost of credit programs;

C formulates and reviews credit management and debt

collection policy;

C approves agency credit management and debt collection

plans;

C provides training to credit agencies;

C chairs the Federal Credit Policy Working Group

(FCPWG) which provides advice and assistance to 

agencies in the formulation and implementation of

credit/debt policy governmentwide;

C resolves interagency issues;
Introduction

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C sets credit management and debt collection program

priorities; and

C approves the asset management portions of the Chief

Financial Officer Status Report and Five-Year Plans.

Department of the Treasury’s Financial Management Service

C serves as part of the FCPWG;

C develops and publishes, with the Department of Justice,

the FCCS;

C works with OMB to develop Federal credit policies

and/or review legislation to create new credit programs or

to expand or modify existing programs;

C promulgates governmentwide debt collection regulations

implementing the debt collection provisions of the DCIA

and other debt collection laws;

C provides collection services for delinquent non-tax

Federal debts (referred to as “cross-servicing”), and

maintains a private collection contract for referral and

collection of delinquent debts;

• maintains a governmentwide delinquent debtor database

and conducts offsets of Federal payments, including tax

refunds, under the Treasury Offset Program;

C works with Federal program agencies to identify debt that

is eligible for mandatory and voluntary referral to

Treasury for cross-servicing and offset, and to establish

target dates for referral;

C issues operational and procedural guidelines regarding

governmentwide credit management and debt collection;

C assists in improving credit and debt management activities

governmentwide;
Introduction

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C tracks Federal Government receivables through the

Treasury Report on Receivables and agency

implementation of credit and debt management initiatives;

C develops guidelines and procedures on credit accounting

and management information;

C provides operational assistance and consulting services to

agencies;

C provides training on credit management and debt

collection related topics nationwide; and

C reports to Congress on governmentwide debt collection

activities.

Department of Justice

C litigates on behalf of the Federal Government;

C approves compromises and terminations of collection

action for debts over $100,000;

C develops and publishes, with Treasury, the FCCS;

C manages the Nationwide Central Intake Facility (NCIF) to

track and monitor agency referrals to the Department of

Justice;

C works with the program agencies to facilitate referrals to

the Department of Justice and resolve problems; and

C administers private counsel and special assistant U.S.

attorney programs to collect Federal Government debt.

Program Agencies

Each agency is ultimately responsible for managing its own

receivables activities and shall manage credit programs and nontax receivables in accordance with applicable statutory authorities

and prescribed policies to protect the Federal Government’s assets

and minimize losses in relation to social benefits provided.
Introduction

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Each agency shall ensure that:

C Federal credit program legislation, regulations and policies

are designed and administered in compliance with

prescribed legislative and regulatory requirements and that

the costs of credit programs covered by the Federal Credit

Reform Act of 1990 are budgeted for and controlled in

accordance with the principles of that Act (unless an

agency is expressly exempted from the statute);

C every effort is made to prevent future delinquencies by

following appropriate screening standards and procedures

for determining creditworthiness and to determine whether

the DCIA bars a loan applicant from loan assistance;

C lenders participating in guaranteed loan programs meet all

applicable financial and programmatic requirements;

C informed and cost effective decisions are made concerning

portfolio management, giving full consideration to options

such as contracting for loan servicing functions or selling

the portfolio;

C the full range of available and appropriate delinquent debt

collection techniques are used, such as those found in this

document (see Chapter 6, Delinquent Debt Collection), the

Federal Claims Collection Standards and Treasury

regulations. Debt collection techniques include demand

letters, administrative offset, salary offset, tax refund

offset, private collection agencies, cross-servicing by

Treasury, administrative wage garnishment, and litigation;

C delinquent debts are written-off as soon as they are

determined to be uncollectible, but no later than two (2)

years from the date of delinquency (see Chapter 7,

Termination of Collection Action, Write-off and Close

Out/Cancellation of Indebtedness);

C timely and accurate financial management and

performance data are submitted to OMB and Treasury so

that the Government’s credit management and debt

collection programs and policies can be evaluated;
Introduction

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C regulations and forms are amended to comply with

statutory and regulatory requirements;

C credit management/debt collection tools and techniques

appropriate for the type and size of the agency's debts are

implemented;

C its personnel receive training on agency and

governmentwide credit and debt management regulations

and procedures;

C the agency provides for receivables reporting and account

tracking systems to inform its own management, OMB,

and FMS of essential credit information and to ensure

accurate financial reporting on the Treasury Report on

Receivables (see Chapter 4, Account Servicing); 

C the agency develops and implements portfolio

performance-based systems to ensure management and

staff accountability in administering and managing

receivables activities;

C the agency develops and implements the capability to

track and monitor key indicators of portfolio performance;

C the agency separates individual responsibility for credit

activity, for example, differentiating between extending

credit and servicing accounts; and

• the agency maximizes the use of available technology and

systems to facilitate program operations.
Introduction

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Key Participants in the Receivables Management Program

In order to establish these objectives, OMB Circular No. A-129

requires that each agency shall:

(1) as appropriate, establish in accordance with OMB Circular

No. A-129, Section I, Subsection 4. b. (1), a board to

coordinate agency-wide credit management and debt

collection activities and to ensure full consideration of

credit management and debt collection issues by all

interested and affected organizations within the agency. At

a minimum, the board should include the agency Chief

Financial Officer (CFO) and the senior officials for

program offices with credit activities or non-tax

receivables. The board may seek input from the agency’s

Inspector General based on findings and conclusions from

past audits and investigations;

(2) ensure that the statutory and regulatory requirements and

standards set forth in OMB Circular No. A-129,

governmentwide regulations (e.g., FCCS and Treasury

regulations), and the supplementary guidance set forth in

this document are incorporated into agency regulations and

procedures for credit programs and debt collection

activities;

OMB 

Policy, Oversight 

Federal Agencies 

Implementation, Reporting 

DOJ 

FCCS, (with 

Treasury), Litigation

GOVERNMENTWIDE 

RECEIVABLES 

MANAGEMENT 

PROGRAM 

FMS

FCCS (with DOJ) , 

Delinquent Debt 

Collection, Regulations, 

Guidelines, Consulting, 

Training 
Introduction

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(3) propose new or revised legislation, regulations, and forms

as necessary to ensure consistency with the provisions of

OMB Circular No. A-129;

(4) submit proposed legislation and testimony affecting credit

programs for review under the OMB Circular No. A-19

legislative clearance process, and budget proposals for

review under the OMB Circular No. A-11 budget

justification process;

(5) periodically evaluate Federal credit programs to assure

their effectiveness in achieving program goals;

(6) assign to the agency CFO, in accordance with the Chief

Financial Officers Act of 1990, responsibility for directing,

managing, and providing policy guidance and oversight of

agency financial management personnel, activities, and

operations, including the implementation of asset

management systems for credit management and debt

collection;

(7) prepare, as part of the agency CFO Financial Management

5-Year Plan, a Credit Management and Debt Collection

Plan for effectively managing credit extension, account

servicing, portfolio management and delinquent debt

collection. The plan must comply with the standards OMB

Circular No. A-129; and

(8) ensure that information contained in loan applications and

documents pertaining to individuals is managed in

accordance with the Privacy Act of 1974, as amended, and

the Right to Financial Privacy Act of 1978, as amended. 
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Program Review

Proposals submitted to OMB for new programs and for

preauthorizing, expanding or significantly increasing funding for

existing credit programs should be accompanied by a written

review which examines at a minimum:

C Federal objectives to be achieved;

C justification for the use of a credit subsidy;

C estimated benefits of the program or program change;

C the effects on private capital markets;

C the estimated subsidy level; and

C the administrative resource requirements.

Form of Assistance

When Federal credit assistance is necessary to meet a Federal

objective, loan guarantees should be favored over direct loans,

unless attaining the Federal objective requires a subsidy, as defined

by the Federal Credit Reform Act of 1990, deeper than can be

provided by a loan guarantee. For further information on Form

of Assistance, see OMB Circular No. A-129, Section II.2.

Financial Standards

In accordance with the Credit Reform Act of 1990, each agency

must analyze and control the risks and costs of its programs. An

agency must develop statistical models predictive of default and

other deviations from loan contracts. An agency is required to

estimate subsidy costs and obtain budget authority to cover such

costs before obligating direct loans and committing loan

guarantees. Instructions for budget justification and subsidy cost

estimation under the Federal Credit Reform Act of 1990 are

provided in OMB Circular No. A-11, and instructions for budget

execution are provided in OMB Circular No. A-34. For further

information on Financial Standards, see OMB Circular 

No. A-129, Section II. 3.
Introduction

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The Credit Management and Debt Collection Cycle

The DCIA and OMB Circular No. A-129 have placed increased

emphasis on credit management and debt collection. New tools

and techniques have been introduced to reduce the Federal

Government’s risk of losses and strengthen the Government’s

ability to collect its debts. The major elements of the “credit

management and debt collection cycle” will be explained in this

document as follows:

C credit extension - screen applicants for creditworthiness

and financial responsibility, including the required use of

credit reports; verify the accuracy of applicant credit

information and whether the applicant owes delinquent

Federal debts (and is barred by the DCIA from obtaining

loan assistance); and determine the applicant’s inability to

obtain funding from private sector markets;

C account servicing - bill and collect accounts, including

automating this process and reporting current (nondelinquent) consumer and commercial accounts to credit

reporting agencies (also known as credit bureaus) on a

routine, non-exclusive basis. Lenders participating in the

Federal Government’s guaranteed loan programs are also

required to report accounts to credit bureaus;

C debt collection - collect delinquent accounts, including the

referral of delinquent debts to FMS for collection, offset,

administrative wage garnishment, referral to private

collection agencies, referral to the Department of Justice

for litigation, and reporting of delinquent consumer and

commercial accounts to credit bureaus; 

C write-off/currently-not-collectible - remove the account

from the agency’s receivables, determine whether the debt

is “currently not collectible” and place the account on a

subsidiary ledger for continued collection activity;

C write-off/close out - cease all collection action on

uncollectible debt and report the discharged debt amount to

the Internal Revenue Service (IRS) as potential income to

the debtor. 
Introduction

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Each element of the cycle applies to guaranteed and direct loan

activities. Individual elements, such as account servicing, debt

collection, and write-off, apply to defaulted guaranteed loans,

grants, contracts, and administrative debt. 

Document Organization

This document is divided into eight (8) chapters, with Chapters 3

through 7 covering the elements of the credit management and

debt collection cycle. The chapters are:

• Chapter 1 - Introduction;

• Chapter 2 - Budget and Legislative Policy for Credit

Programs;

• Chapter 3 - Credit Extension;

C Chapter 4 - Account Servicing;

• Chapter 5 - Management of Guaranteed Lenders and

Servicers;

• Chapter 6 - Delinquent Debt Collection;

• Chapter 7 - Termination of Collection Action, Write-off

and Close-Out/Cancellation of Indebtedness; and

• Chapter 8 - Portfolio Sales.

Separate detailed guidance on reporting debts to credit bureaus is

available in the “Guide to the Federal Credit Bureau Program,”

which is available on FMS’s web site at www.fms.treas.gov. Other

credit management and debt collection guidance is also available

on the FMS web site.

Inquiries

For information on this or other FMS publications/activities,

please contact the Financial Management Service, Director,

Agency Liaison and Reporting Division, Debt Management

Service (DMS) at 202-874-6660 or the Director, Agency

Enterprise Solutions Division, Federal Finance at 202-874-6638.