FISCAL YEAR 2005 REPORT 

TO THE CONGRESS 

U.S. GOVERNMENT RECEIVABLES 

AND 

DEBT COLLECTION ACTIVITIES 

OF FEDERAL AGENCIES 

Department of the Treasury 

March 2006 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF FEDERAL

AGENCIES

FISCAL YEAR 2005 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

E – DECISION BY THE UNITED STATES SUPREME COURT..........................................................................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 ..............................................................................................................................13

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

B - TREASURY OFFSET PROGRAM (TOP)...............................................................................................13

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

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

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

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

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

2. Referrals ..............................................................................................................................17

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

D - OTHER DEBT COLLECTION ACTIVITIES AT FMS...............................................................................18

1. Debt Check – Barring Delinquent Debtors ...........................................................................18

2. Issuance of Guidance - Managing Federal Receivables .......................................................19

3. Revised Treasury Report on Receivables ..............................................................................19

4. Training Initiatives ..............................................................................................................19

5. Response to Hurricane Katrina ............................................................................................20

6. FedDebt Implementation......................................................................................................20

7. 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).......................................................................22

1. Description...........................................................................................................................22

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

3. Collections ...........................................................................................................................23

IV – SPECIFIC AGENCY ACTIVITIES.............................................................................................24

A - EDUCATION STUDENT LOANS .........................................................................................................24

B - HUD AND SBA LOAN ASSET SALES................................................................................................25

APPENDIX I: FEDERAL RECEIVABLES AND DELINQUENT DEBT..........................................26

APPENDIX II: SOURCES OF DATA..................................................................................................27

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

AGENCIES 

2

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-notcollectible (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, 2005, $24.4 billion has been collected to pay delinquent debts 

through the Treasury Offset Program (TOP) and Cross-Servicing Program (Cross-Servicing) 

since the enactment of DCIA in April 1996. 

• The Federal Government collected $145 billion in fiscal year (FY) 2005 on all of its nontax 

receivables, up $23.1 billion from the $121.9 billion collected in FY 2004. 

• In FY 2005, the Department of Justice (DOJ) collected $3.6 billion in cash recoveries on 

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

collected a total of $14.3 billion through civil litigation in the last five fiscal years. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF FEDERAL 

AGENCIES 

3

• In FY 2005, 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 $13.7 billion in delinquent Federal debt. These PCAs collected $693.5 

million in FY 2005, up 14 percent from the $610 million collected in FY 2004. 

• In FY 2005, the Department of Housing and Urban Development (HUD) completed loan 

asset sales of performing and non-performing loans totaling $1.4 billion in unpaid principal 

balance. These sales generated $908 million in gross proceeds. In the last five fiscal years 

HUD has sold $4.7 billion in loan assets, generating $2.9 billion in gross proceeds. 

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

through TOP and Cross-Servicing were $3.25 billion in FY 2005. 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 

$3.0 billion during the last five years. 

D – LEGISLATIVE AGENDA 

In FY 2004, at the request of the Office of Management and Budget (OMB), Treasury proposed 

four legislative changes aimed at increasing delinquent debt collection. Two were enacted in FY 

2005. They were: 

1. increase the amount of a vendor payment that may be continuously levied to collect 

Federal tax debts from 15 percent to 100 percent; and 

2. allow Treasury access to information contained in HHS’s New Hire Database for the 

purpose of Federal debt collection. 

The remaining two, listed below, were not enacted: 

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. 

E – DECISION BY THE UNITED STATES SUPREME COURT 

On December 7, 2005, the United States Supreme Court ruled, in a unanimous decision, that the 

Government could offset social security benefit payments to collect student loans that had been 

outstanding for more than 10 years. The court held that the 1991 amendments to the Higher 

Education Act, which eliminated all statutes of limitations on the collection of student loan debt, 

applied to the offset of social security benefits even though such offsets were not authorized until 

five years later. This decision resolves a split in the Courts of Appeals over this issue. 

Approximately $8 million per year is collected through the Treasury Offset Program by 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF FEDERAL 4 

AGENCIES 

offsetting social security payments to collect student loans over 10 years old and that number is 

expected to grow. 

II - GOVERNMENT DEBT PORTFOLIO, COLLECTIONS AND WRITEDollars in Billions 

OFFS 

TOTAL RECEIVABLES 

$350 

$300 

$250 

$200 

$150 

$100 

$50 

$0 

2001 2002 2003 2004 2005 

$289.5 $315.0 $312.3 $310.8 $310.3 

Fiscal Year 

A - FISCAL YEAR END DATA 

1. Receivables and Delinquencies 

Dollars in Billions 

TOTAL DELINQUENT DEBT 

$80 

$70 

$60 

$50 

$40 

$30 

$20 

$10 

$0 

2001 2002 2003 2004 2005 

$56.2 $63.0 

$70.1 $71.0 

$62.0 

Fiscal Year 

• Total receivables declined slightly in FY 2005 from the amount reported at the end of FY 

2004. This is the third consecutive year that a slight decline in total receivables was reported. 

Total delinquencies decreased by $9 billion in FY 2005. The slight decline in receivables 

and the substantial decline in delinquent debt can be attributed to a substantial increase in 

write-offs ($8.9 billion) in FY 2005 over write-offs during FY 2004. As previously stated in 

part I.B above, receivables and delinquencies as reported on the TROR do not include debts 

that have been written-off. 

• At the end of FY 2005, Federal 

loan programs (direct and 

guaranteed) comprised 83 percent 

of total receivables, down from 85 

percent at the end of FY 2004. 

Federal loan programs comprised 

76 percent of total delinquencies, 

up slightly from 75 percent at the 

end of FY 2004. 

Distribution of Receivables and Delinquencies 

as of 9/30/05 

0% 

50% 

100% 

Administrative Debt* $52.2 $14.7 

Defaulted Guaranteed 

Loans 

$36.9 $22.9 

Direct Loans $221.2 $24.4 

Receivables in 

Billions 

Delinquencies in 

Billions 

*Includes fines, penalties and overpayments, etc. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF FEDERAL 

AGENCIES 

5

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 2005 are Education 

($119 billion) and the Department of Agriculture (USDA) ($102.2 billion). Receivables from 

these two agencies comprise 71 percent of the Government’s total receivables (Education 38 

percent and USDA 33 percent). 

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

Direct Student Loans ($97.8 billion), and Defaulted Guaranteed Student Loans ($20.2 

billion). 

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

Utilities Service ($34.1 billion); Rural Development & Farm Service Agency ($33.3 billion); 

Commodity Credit Corporation ($21.8 billion); and Rural Development ($11.1 billion). 

Analysis of Receivables Data 

• Total receivables have declined slightly in each of the last three fiscal years. The 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. 

• The decline in receivables in FY 2005 is not part of a continuing trend because, as previously 

indicated, the slight decline was due to a substantial increase in write-offs during the fiscal 

year. Significant increases in receivables in FY 2005 over FY 2004 year end totals at 

Education ($5.8 billion), USDA ($3.2 billion), and the Small Business Administration (SBA) 

($1.2 billion), were offset by the substantial increase in total write-offs. During FY 2005, 

Federal agencies wrote off $16.1 billion in receivables, compared to $7.2 billion in total 

write-offs each of 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 $97.8 billion at the end of FY 2005, and by $5.7 

billion in FY 2005 alone. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF FEDERAL 6 

AGENCIES 

Additional Delinquent Debt Data 

• At the end of FY 2005, $50 billion (80.6 percent) of the Government’s delinquent debts were 

distributed among five agencies: Education, the Department of Defense (DOD), USDA, 

SBA, and the Social Security Administration (SSA). 

• Total delinquencies decreased by Aging of Government-wide Delinquencies $9 billion since the last fiscal 

year, primarily in the oldest 

delinquent debts. Debts more 

than 6 years delinquent decreased 

by $8.6 billion, from $23.7 billion 

at the end of 

FY 2004 to $15.1 billion at the 

end of FY 2005.

• Education was the agency with 

the largest total delinquencies 

($35 billion), amount of 

delinquencies 181 days to 2 years 

old ($7.6 billion), and 

delinquencies between 2 years 

and 6 years old ($7.0 billion). 

0% 

20% 

40% 

60% 

80% 

100% 

> 10 yrs $9.6 $10.4 $10.9 $7.1 

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

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

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

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

2002 2003 2004 2005 

• Several agencies’ total delinquencies in 

FY 2005 significantly changed 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 2004 to FY 2005, direct loan 

delinquencies increased by $1.2 billion, 

while defaulted guaranteed loan 

delinquencies increased by less than $0.1 

billion. 

• SBA’s delinquencies in its guaranteed loan program have increased significantly since the end 

of FY 2003 ($1.5 billion) to the end of FY 2005 ($3.3 billion). It is noted that SBA has not 

conducted any asset sales since FY 2003. (See page 25 below.) SSA’s delinquencies 

increased parallel to the increase of its receivables ($459 million more than in FY 2004). 

• Substantial increases in write-offs during FY 2005 at USDA ($1.9 billion), Federal 

Communications Commission (FCC) ($5.4 billion), Department of Energy (Energy) 

Delinquencies (in millions) 

Agency FY 2005 

Change from 

FY 2004 

Education $34,951 $1,341 

SBA $3,656 $585 

SSA $2,863 $381 

USDA $3,889 ($2,359) 

FCC $1,025 ($5,660) 

Energy $122 ($2,156) 

VA $611 ($440) 

Transportation $206 ($338) 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 7 

($2.1 billion), and Department of Transportation (Transportation) ($358 million) resulted in 

the substantial decreases in FY 2005 year-end delinquencies at those agencies. 

Analysis of Delinquent Debt Data 

• There is a direct correlation between the $9 billion reduction in delinquencies during 

FY 2005 and the substantial increase in write-offs during the same period. While it 

is possible that agencies will continue to write-off their older delinquent debts, there 

remains a finite amount of delinquencies more than 6 years old. 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 6 years old by $8.6 billion in FY 

2005, 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 67 percent at 

the end of FY 2004 to 76 percent in FY 2005. 

• 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 $35.0 billion at the end 

of FY 2005 (56 percent of the Government’s total delinquencies). Key factors in the 

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

in FY 2002 of $14.3 billion in receivables formerly classified as written-off/CNC and 

an increase of $7.3 billion in direct loan delinquencies from FY 2001 to FY 2005. 

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 

$160 

• Total collections on $140 

receivables in FY 2005 $120 

increased substantially in $100 FY 2005 (by $23.1 billion) 

over FY 2004 collections. $80 

$60 

• In FY 2005, collections on $40 receivables increased in 

$109.7 $118.5 $119.6 $121.9 

$145.0 

each of the three types of $20 

receivables over the $0 

previous fiscal year: 2001 2002 2003 2004 2005 

administrative debt (by Fiscal Year 

$12.5 billion); defaulted 

guaranteed loans (by $1.1 

Dollars in Billions 

billion); and direct loans (by $9.5 billion). 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 8 

• The six agencies that reported the 

largest increases in collections in 

FY 2005 over amounts collected in 

FY 2004 are listed in the chart to 

the right. These six agencies 

accounted for $21.6 billion in 

increased collections in FY 2005 

(93.5 percent of the Government’s 

total increase). 

• As the chart indicates, there is not 

always a direct correlation between 

Collections 

(in millions) 

Net Change in 

Receivables 

FY 2004 to 

FY 2005 

(in millions) Agency FY 2005 

Change 

from 

FY 2004 

Education $27,162 $7,358 $5,823 

Homeland 

Security $2,629 $2,429 $41 

USDA $28,801 $6,017 $3,240 

HHS $16,961 $1,910 -$440 

Interior $10,721 $1,916 -$103 

TVA $7,588 $1,922 -$19 

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 on the 

TROR fall under the category 

of administrative debt (57.4 

percent). 

Analysis 

• Government-wide collections 

have steadily increased over the 

last several years due to 

increases in collections at 

Education. Education’s 

Distribution of Receivables and Collections 

as of 9/30/05 

0% 

50% 

100% 

Administrative Debt* $52.2 $83.2 

Defaulted Guaranteed 

Loans 

$36.9 $6.9 

Direct Loans $221.2 $54.9 

Receivables in 

Billions 

Collections in 

Billions 

*Includes fines, penalties and overpayments, etc. 

collections have grown from $9.3 billion in FY 2001 to $27.2 billion in FY 2005, 

including a $7.4 billion increase in FY 2005. This increase parallels the increase in 

Education’s direct student loan portfolio; direct student loan collections in FY 2005 

were $25.4 billion – 94 percent of Education’s total collections during the fiscal year. 

• While the increase in government-wide collections in FY 2005 greatly exceeds the 

increase in collections at Education alone, it should not be concluded that the total 

increase in government-wide collections represents an established trend. Of the five 

other agencies that evidenced the largest increase in collections in FY 2005 over FY 

2004, four reported decreases in collections in FY 2004 from FY 2003 levels. The 

agencies that had those decreases were: USDA - $2.6 billion; HHS - $1 billion; 

Department of Interior (Interior) - $45 million; and Tennessee Valley Authority 

(TVA) - $1.3 billion. The other agency, Department of Homeland Security 

(Homeland Security), did not report on the TROR in FY 2003, so a comparison to 

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

FEDERAL AGENCIES 9 

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

receivables (Administrative Debt – 159 percent; Defaulted Guaranteed Loans – 19 

percent; and Direct Loans – 25 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 (62 percent), so a lesser rate of collections can 

be expected on these receivables. Direct Loans that are not delinquent (89 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 

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

FY 2004 - $70.6 billion and FY 2005 - $83.2 billion). The volatility in this segment 

is evidenced in collections at agencies such as HHS, Interior and TVA. Because of 

the volatility in this portion of Government collections, there is no 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 or in corresponding increases or decreases in yearend receivables. 

3. Write-offs 

TOTAL WRITE-OFFS 

• Total write-offs in FY 2005 $18 

substantially increased over the FY $16 

2004 total (by $8.9 billion). $14 

$12 

• Substantial increases in write-offs $10 

during FY 2005 occurred at four $8 

agencies: FCC ($5.4 billion), Energy $6 

($2.1 billion), USDA ($1.9 billion) and $4 

Transportation ($358 million). The $2 

increase in write-offs at these agencies $0 

$8.5 

$6.8 $7.2 $7.2 

$16.1 

2001 2002 2003 2004 2005 account for the large increase in total 

write-offs during the fiscal year. Fiscal Year

• 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 agencies’ write-off 

policies and practices. FMS published additional guidance on write-off during FY 

2004, and provided training on write-off policy in FY 2004. In FY 2005, OMB 

continued to monitor agencies adherence to write-off policy, and FMS increased its 

training and guidance to agencies on this topic. It should be noted that while OMB 

guidance generally requires write-off when debts are two years delinquent, agencies Dollars in Billions 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 10 

cannot write-off debts where material collections can be documented to occur after 

two years. 

Analysis 

The substantial increase in write-offs during FY 2005 provides evidence that substantial 

fluctuations in write-offs can significantly affect the year end totals of receivables and 

delinquencies. Write-offs do not affect collections, since agencies write-off uncollectible 

delinquent debts. However, future annual write-off levels are not predictable. 

Reductions in delinquencies in FY 2005, especially the oldest delinquencies (over 6 years 

delinquent), reduces the amount of debts for which write-off might be appropriate in the 

near future. Additionally, while government-wide write-off totals were relatively 

consistent from FY 2002 to FY 2004, there was a significant volatility in write-off 

numbers at the agency level. Thus, it is questionable whether the higher level of writeoff achieved in FY 2005 will be repeated in future fiscal years. 

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 $310.3 billion in receivables at the end of FY 2005, $6.9 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 nontax 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 but less than 10 years delinquent to determine the “Starting 

Amount” for calculating the amounts eligible for referral. Note that agencies, 

such as Education, that are not subject to the 10 year statute of limitations for 

collection through offset, include debts greater than 10 years delinquent in calculating 

their Starting Amounts. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 11 

• 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 referred to DOJ for litigation; debts in foreclosure or in 

bankruptcy; and foreign sovereign debts. Additional exemptions from CrossServicing 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.” 

Mandatory Referral of Debt to Treasury 

$0.0 

$20.0 

$40.0 

$60.0 

$80.0 

In Billions 

Starting Amount $64.0 $67.8 $68.2 $66.6 

TOP Eligibility $31.4 $33.4 $31.8 $33.8 

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

FY 2002 FY 2003 FY 2004 FY 2005 

• At the end of FY 2005, debts eligible for referral to TOP increased by $2 billion and 

debts eligible for Cross-Servicing increased by $1.2 billion from amounts reported in 

FY 2004. During FY 2005, 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 2005 

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 12 

III - GOVERNMENT-WIDE DELINQUENT DEBT COLLECTION 

ACTIVITIES 

A - USE OF PRIVATE COLLECTION AGENCIES (PCAS) 

1. Description 

• Education, Treasury, and HHS have each established contracts with 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). 

• 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 seventeen (17) PCAs 

as quickly as possible. Education’s PCAs also initiate 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. FMS's PCAs 

have also begun using 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 American Jobs Creation Act signed by the President on October 22, 2004, 

created section 6306 of the Internal Revenue Code permitting private sector debt 

collection companies to collect federal tax debts. The Internal Revenue Service (IRS) 

is using competitive procurement process and is working with the General Services 

Administration (GSA) in this effort. The first collection efforts under a limited 

implementation phase are projected to begin in calendar year 2006. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 13 

2. Referrals 

In FY 2005, $13.7 billion in 

Federal debts were referred to 

PCAs for collection action. 

Referrals decreased from the 

previous fiscal year primarily 

due to a substantial decrease 

in referrals by Education. The 

decrease at Education was due 

mostly to the transition to new 

PCA contracts and 

contractors. During the 

*Indicate corrections from amounts reported in the FY 2004 Report. 

Referrals to PCAs 

(in millions) 

Agency FY 2002 FY 2003 FY 2004 FY 2005 

HHS $339 $65 $66 $45 

FMS $4,775 $3,631 $2,292 $2,280 

Education $10,588 $10,679 $14,256* $11,376 

Totals $15,702 $14,375 $16,614* $13,701 

transition 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 

$693.5 million in 

FY 2005, a 14 percent 

increase over FY 2004 

collections. Total PCA 

collections have increased 

in each of the last four 

fiscal years. 

*Includes collections by administrative wage garnishment 

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 (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. 

Collections by PCAs 

(in millions) 

Agency FY2002 FY2003 FY2004 FY 2005 

HHS $13.8 $9.5 $7.5 $10.1 

FMS* $42.9 $73.3 $70.4 $80.3 

Education* $386 $464 $532.5 $603.1 

Totals $443 $546.8 $610.4 $693.5 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 14 

• For FY 2005, 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. 

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

with USDA’s National Finance Center, Interior, the U.S. Postal Service and DOD's 

Defense Finance and Accounting Service. TOP provides a more efficient process than 

the alternative non-centralized salary offset process. In FY 2005, FMS completed the 

implementation of salary offset with GSA, the last of the four payroll providers selected 

as part of the E-Payroll initiative. 

• 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 2005, the number of states and territories participating in this 

process was 37, along with 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, OPM retirement, and Social Security benefit payments. 

Continuous Tax Levy is accomplished through a process almost identical to that of 

offset, which is matching of 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 2004, a multi-agency task force was established to improve the process for 

levying DOD contract payments. A number of action items were identified by the 

task force, including: maximizing delinquent tax debts available for matching; 

maximizing DOD payments available for matching; increasing data exchanges 

between FMS and DOD; and establishing a process to validate TINs of Federal 

contractors. As a result of the implementation of several of the action items 

identified, collections through tax levy increased significantly in FY 2005. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 15 

2. Referrals 

TOTAL DEBT REFERRALS TO THE TREASURY OFFSET PROGRAM 

$28.78 

$68.37 

$2.37 

$82.53 

$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 

-$30.00 

$20.00 

$70.00 

$120.00 

$170.00 

$220.00 

$270.00 

Dollars in Billions 

Federal Tax $82.53 $81.16 $80.44 $105.42 $129.53 

State Income Tax $2.37 $3.21 $4.13 $5.26 $5.76 

Child Support $68.37 $71.20 $75.12 $79.63 $84.61 

Federal Nontax Debt $28.78 $31.02 $31.58 $34.34 $35.63 

Sep. 2001 Sep. 2002 Sep. 2003 Sep. 2004 Sep. 2005 

$182.05 $186.59 

$191.27 $224.64 

$255.54 

• As of September 30, 2005, the largest component of TOP’s delinquent debtor database 

was $129.53 billion in Federal income tax debts, available for matching to identify 

potential levies. Of this amount, $36.43 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’ Office of Child Support Enforcement (OCSE), and FMS have 

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

the last four fiscal years. Referrals of $84.61 billion as of September 30, 2005, represent 

a 24 percent increase in referrals from September 30, 2001. 

• Referrals of nontax debts increased to $35.63 billion as of September 30, 2005, a slight 

increase over last year’s amount of $34.34 billion. As of September 30, 2005, 

100 percent of the nontax debts eligible for mandatory referral to TOP have been 

referred. (See page 10 for a discussion on nontax debts eligible for referral to TOP.) 

• Referrals of state income tax debts increased by 10 percent, from $5.26 billion at the 

end of FY 2004 to $5.76 billion at the end of FY 2005. 
-- --

REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 16 

3. Collections 

Total collections through TOP were $3.1 billion in FY 2005. Since enactment of the 

DCIA in April 1996, $23.8 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 2001 FY 2002 FY 2003 FY 2004 FY 2005 

Administrative Offset* $25 $84 $88 $109 $123 

Tax Refund Offset – Child 

Support (excluding tax 

rebates) 

$1,377 $1,463 $1,428 $1,487 $1,580 

Tax Refund Offset – Federal 

Nontax Debt (excluding tax 

rebates) 

$1,147 $1,048 $1,025 $974 $990 

Tax Refund Offset – State 

Income Tax Debt (excluding 

tax rebates) 

$79 $119 $152 $218 $232 

Tax Refund Offset – Tax 

Rebates*** $471 N/A $207 

Continuous Tax Levy $16 $60 $89 $114 $197 

Total Collected $3,117** $2,769 $2,990*** $2,902 $3,123** 

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

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 2005 by $221 million over total 

collections in FY 2004. While all types of collections in TOP increased in FY 2005, 

increases in two types (tax refund offset - child support, and tax levy) accounted for 

most of the total increase (79.6 percent). 

• Tax refund offset collections in FY 2005 increased by $93 million for child support 

debts and $16 million for Federal nontax debts, as compared to FY 2004 totals. 

• Collections under Continuous Tax Levy in FY 2005 were $197 million, a 72.8 percent 

increase over the $114 million collected in FY 2004. The large increase reflects the 

continued maturation of the tax levy program in TOP and the efforts of the multi-agency 

task force. IRS maintains control over which Federal tax debts can be collected through 

the levy process. 

• In FY 2005, administrative offset collections were $123 million, $14 million more 

than the total collected in FY 2004. 

• In FY 2005, total collections of state income tax debts by offsetting Federal tax 

refunds also increased by $14 million over the total collected in FY 2004. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 17 

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, referral of debts to TOP, credit bureau reporting, 

use of PCAs, and referral of debts to DOJ for litigation. 

• Administrative wage garnishment (AWG) became available to Federal agencies 

through Cross-Servicing in FY 2001. Fourteen agencies currently utilize AWG 

through the program, which resulted in $3.7 million in collections from AWG in FY 

2005. FMS continues to encourage Federal agencies to authorize the use of this debt 

collection tool through Cross-Servicing. 

• Currently, FMS has five task orders with private collection agencies to perform debt 

collection services. The task orders were awarded using GSA's Financial and 

Business Solutions Schedule on October 1, 2001, and they will expire on September 

30, 2006. FMS plans to award new task orders using the same GSA Schedule by 

September 30, 2006. 

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

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

requirements for a process whereby FMS will receive address and employer 

information, as well as verified and corrected, if necessary, name and TIN, for 

debtors that have been referred to Cross-Servicing. The information will be used by 

FMS and PCAs to contact debtors to attempt to resolve the debt, or to initiate AWG 

when the debt cannot be otherwise resolved. FMS anticipates that the process will be 

implemented early in FY 2007. 

2. Referrals 

• The calculation of the amount 

CROSS-SERVICING REFERRALS 

of debts eligible for referral is 

described in this report in 

Section II-B, above. The 

calculation of Cross-Servicing 

referrals excludes those debts 

no longer actively collected at 

FMS. 

$8.2 

$5.1 

$7.9 $7.9 $7.5 

$0.0 

$2.0 

$4.0 

$6.0 

$8.0 

$10.0 

Dollars in 

Billions 

Referred by End 

of FY 

$5.1 $7.9 $7.9 $7.5 $8.2 

FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 18 

• At the end of FY 2005, $8.2 billion in delinquent debts were at FMS for CrossServicing, a 9 percent increase in the amount at FMS at the end of FY 2004. The 

increase in referrals was due to increased referrals from HHS, Federal Trade 

Commission, and Securities Exchange Commission. 

• As of September 30, 2005, 92 percent of all eligible debts were submitted to FMS for 

Cross-Servicing. (See page10 for a discussion on nontax debts eligible for referral to 

Cross-Servicing.) 

3. Collections CROSS SERVICING & PRIVATE COLLECTION AGENCY 

(PCA) COLLECTIONS 

• Since the inception of 

the Cross-Servicing 

program, FMS and the 

PCAs have brought in 

$637.9 million in 

collections. 

• In FY 2005, FMS and its 

PCAs collected $158 

million, a 24 percent 

increase in collections 

over the amount 

collected in FY 2004. 

The $30 million increase 

in the collection amount over FY 2004 was primarily the result of increases in 

collections on HHS debt referrals ($16 million) and HUD debt referrals ($7 million). 

$18.6 $0.0 

$50.0 

$100.0 

$150.0 

$200.0 

TOP $10.4 $18.5 $25.7 $24.7 $27.8 

PCA $27.8 $42.9 $73.3 $70.4 $80.3 

FMS $18.6 $24.2 $35.2 $32.6 $49.9 

FY 

2001 

FY 

2002 

FY 

2003 

FY 

2004 

FY 

2005 

• In addition to collecting debts, PCAs under contract with FMS also helped resolve 

delinquent debts by identifying debts that are not collectible due to reasons such as 

bankruptcy or death. In FY 2005, PCAs resolved debts valued at $128 million, $17 

million more than the amount of resolutions during FY 2004. Since the inception of 

the Cross-Servicing program in 1998, PCAs have resolved debts valued at over $489 

million. 

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, which became operational in February 2003, is an initiative under the FMS 

debt program that is being employed to help agencies electronically identify delinquent Dollars in Millions 

$25.7 $24.7 

$27.8 

$18.5 $73.3 $70.4 

$80.3 

$27.8 

$10.4 

$24.2 

$42.9 

$35.2 $32.6 $49.9 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 19 

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. Issuance of Guidance - Managing Federal Receivables 

In May 2005, FMS promulgated a revision of “Managing Federal Receivables,” a 

guidance document for Federal agencies and their employees. This document, available 

on FMS’s website at http://fms.treas.gov/debt/Guidance_MFR.html, includes chapters on 

Delinquent Debt Collection (Chapter 6) and Termination of Collection Action, Write-off 

and Close-out/Cancellation of Indebtedness (Chapter 7). These two chapters provide 

agencies with a single source for clear and comprehensive discussions of governmentwide delinquent debt collection policies, and termination and write-off policies. The 

chapters incorporate and clarify important concepts from numerous other sources, 

including the Federal Claims Collection Standards, Treasury debt collection regulations, 

OMB Circular No. A-129, OPM regulations on salary offset, and IRS rules on discharge 

of indebtedness reporting. 

3. Revised Treasury Report on Receivables 

In FY 2005, FMS completed a revised Treasury Report on Receivables (TROR) form, an 

Instructional Workbook and various technical requirements documents for system 

development. 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 plans implementation of the revised 

report government-wide in FY 2007. 

4. 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 2004 through November 2005, FMS 

sponsored over 25 workshops and conferences open to all Federal agencies with 

approximately 1,400 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; Chicago, IL; 

Albany, NY; Charleston, SC; Albuquerque, NM; and Denver, CO. FMS also provided 

specialized training sessions to six individual agencies, as requested by those agencies. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 20 

5. Response to Hurricane Katrina 

The destruction brought on by Hurricane Katrina 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 living in federally 

designated disaster areas. This bulletin resulted in 14 agencies requesting that we 

suspend collection action. Tangentially, as a result of the circulation of the FMS 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 also 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. 

6. FedDebt Implementation 

• On October 1, 2005, FMS implemented the first phase of FedDebt. FedDebt 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 initial phase of the FedDebt system provides on-line access to the Federal 

agencies and the PCAs who previously did not have any access to the CrossServicing 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 

incorporate all of FMS's debt collection systems including TOP. 

7. Reorganization of Debt Functions at FMS 

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

over the long term, FMS is in the process of realigning a major portion of its debt 

management business functions. This realignment takes advantage of the implementation 

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

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

Center (BDMOC). Operations transferred include debt operations, testing, operational 

agency liaison, systems development and maintenance, TROR administration, Web 

development, and Business Continuity Planning. Functions that will remain at 

Headquarters include program and administrative management, accounting, program-
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 21 

wide agency liaison, agency liaison for TROR, training, private collection agency 

oversight, and referral of debts to DOJ for litigation. 

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 10 different agencies 

within HHS and 10 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. 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. 

Referrals to PSC 

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. 

$0.00 

$0.50 

$1.00 

$1.50 

$2.00 

$2.50 

$3.00 

Dollars in billions 

Referrals $2.34 $2.17 $1.42 $1.31 $1.45 

FY 

2001 

FY 

2002 

FY 

2003 

FY 

2004 

FY 

2005 

$2.34 $2.17 

$1.42 

$1.31 $1.45 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 22 

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

referrals of HHS delinquent debts to FMS for Cross-Servicing totaled $3.4 billion at 

the end of FY 2005. 

3. Collections at PSC 

• Since the inception of its debt PSC Collections 

collection program in 1995, 

PSC has brought in over $3.2 

billion in collections. 

• A sharp increase in collections 

began in FY 2001 primarily 

due to increases in 

administrative (grant audit and 

program disallowance) debt 

collections. 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. 

$0.0 

$200.0 

$400.0 

$600.0 

Dollars in Millions 

Collections $442.5 $403.5 $545.5 $544.6 $453.9 

FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 

Health Profession Debt 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 36 percent, 

while annual collections 

have increased by 46 

percent. 

$263.4 $307.4 

$413.5 $356.8 $351.2 

$70.0 $79.8 $84.5 $94.4 $64.5 

$0.0 

$100.0 

$200.0 

$300.0 

$400.0 

$500.0 

Dollars in millions 

Delinquencies 

> 180 days 

$413.5 $356.8 $351.2 $307.4 $263.4 

Collections $64.5 $70.0 $79.8 $84.5 $94.4 

FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 

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. 

$442.5 $403.5 

$545.5 $544.6 

$453.9 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 23 

• 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. Both 

the numbers of debts referred and 

their value vary greatly from year to 

year for this reason. Although the 

number of referrals to DOJ has 

declined in recent years, the average 

value of a debt referred has 

increased substantially. 

• 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) 

2001 24,357 $5.4 

2002 8,443 $3.0 

2003 11,557 $2.1 

2004 7,165 $2.5 

2005 6,723 $5.0 

3. Collections 

CASH COLLECTIONS FROM CIVIL LITIGATION 

AT DOJ 

• The amount DOJ collects in $4.0 any fiscal year includes 

recoveries for debt referred 

in prior fiscal years. $3.0 

• DOJ has collected $14.3 $2.0 

billion from civil litigation 

over the last five fiscal $1.0 

years. 

$0.0 

• DOJ has placed a greater FY FY FY FY FY 

2001 2002 2003 2004 2005 

litigation resources in 

emphasis on using its own 

Dollars in Billions 

$2.9 $3.1 

$3.6 

$2.2 $2.5 

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 24 

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 $13.7 billion at FY 2001 year-end to $18.9 billion at FY 2005 year-end; and 

collections have increased from $1.37 billion in FY 2001 to $2.08 billion in FY 2005. 

Education’s Use of Debt Collection Tools 

(in millions) 

Collection Tools FY 2001 

Collections 

FY 2002 

Collections 

FY 2003 

Collections 

FY 2004 

Collections 

FY 2005 

Collections 

Private Collection Agency $229 $260 $322 $362 $378 

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

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

AWG (at Education and PCAs) $134 $136 $150 $186 $237 

Treasury Offset $450 $368 $398 $389 $415 

Other Tools at Education $39 $68 $59 $59 $50 

Total Loan Consolidations 

(at Education and at PCAs) $464 $365 $290 $206 $197 

Total Loan Rehabilitations 

(at Education and at PCAs) $25 $102 $369 $587 $786 

• Recoveries from TOP increased, by 7 percent, from FY 2004 to FY 2005. Education 

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

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

through its PCAs, which collected $225 million of the $237 million collected through 

AWG in FY 2005. 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 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 25 

16.6 percent in FY 2005. 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 $786 million in defaulted loans in FY 2005, up substantially from 

the $587 million in FY 2004. Student loan statutes allow borrowers to rehabilitate if 

they make 12 consecutive on-time monthly payments, 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 2005, resulted in the capture of new 

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

Database led to an additional $468 million in student loan recoveries. 

• BSC does not currently participate in the salary offset component of TOP, but plans 

to do so in FY 2006 when it phases in the applicable software component as part of 

its comprehensive upgrade of its debt collection systems. 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 

Fiscal 

Year 

Dept. of Housing and Urban 

Development 

Small Business 

Administration 

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 

TOTALS $4.7 billion $2.9 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 is taking 

action to sell HUD’s entire inventory of single family and multifamily mortgage notes 

held by the Secretary of HUD. SBA’s asset sales program included the sale of direct 

loans and defaulted guaranteed loans. 

• SBA did not conduct any asset sales in FYs 2004 and 2005, and has no plans for 

future sales at this time. However, SBA is exploring the possibility of partnering with 

another Federal agency to include groups of loans in another agency's sales. 

• Over the last five fiscal years, SBA and HUD have sold $9 billion in loan assets and 

collected $5.8 billion in gross proceeds from these sales. 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 26 

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 for the credit agencies with the highest ending balances at the 

end of FY 2005. The table groups all other agencies into a single category. At the end of 

FY 2005, 95 percent of the receivables belonged to the 11 agencies listed in the table 

below. 

$27,162 $1,015 $34,951 $22,688 

$28,801 $2,619 $3,889 $3,334 

$6,428 $44 $541 $432 

$2,591 $842 $2,864 $2,019 

$1,820 $269 $1,920 $1,761 

$10,911 $194 $4,592 $3,951 

$1,171 $755 $559 $530 

$1,260 $500 $3,656 $2,966 

$4,496 $2,111 $122 $95 

$16,961 $782 $1,803 $1,314 

$1,045 $16 $1,408 $1,383 

$42,375 $6,914 $9,572 $4,776 

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 2005. 

“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 Currently Not Collectible. 

Federal Receivables and Delinquent Debt 

as of September 30, 2005 

(in millions) 

Agency Ending 

Balance 

Collections Writeoffs Delinquencies Delinquencies 

> 180* 

Currently 

Not 

Collectible 

Education $118,959 

$102,242 

$12,504 

$13,314 

$9,061 

$8,358 

$6,297 

$8,296 

$4,095 

$5,261 

$5,706 

$16,229 

$419 

USDA $626 

HUD $227 

SSA 

EXIM1 

$8,592 

0 

DOD 

AID2 

$315 

0 

SBA $1,587 

Energy $2,112 

HHS 

FATP3 

$6,864 

0 

All Other $1,266 

Gov’t 

Total $310,322 $145,021 $16,061 $61,992 $45,249 $22,008 
REPORT TO CONGRESS: RECEIVABLES AND DEBT COLLECTION ACTIVITIES OF 

FEDERAL AGENCIES 27 

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 

2005, 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