REPORT TO CONGRESS: DEBT COLLECTION ACTIVITIES OF FEDERAL AGENCIES 1 

ANNUAL REPORT TO THE CONGRESS

U.S. GOVERNMENT

DEBT COLLECTION ACTIVITIES 

OF

FEDERAL AGENCIES

EXECUTIVE SUMMARY............................................................................................... 2 

BACKGROUND................................................................................................................ 4 

ACCOMPLISHMENTS................................................................................................... 5 

GOVERNMENT DEBT PORTFOLIO, COLLECTIONS AND WRITE-OFFS....... 7 

TABLE I: DELINQUENT DEBT WALKDOWN.................................................................................................. 9 

AGENCY DEBT REFERRALS .................................................................................... 10 

OFFSET AND CROSS-SERVICING REFERRALS ............................................................................................. 11 

INCREASE AGENCY DEBT REFERRAL TO TREASURY.................................................................................. 12 

TREASURY OFFSET PROGRAM .............................................................................. 13 

TAX REFUND OFFSET AND TREASURY OFFSET PROGRAM......................................................................... 13 

FEDERAL NON-TAX DEBT COLLECTIONS .................................................................................................. 14 

CHILD SUPPORT COLLECTIONS.................................................................................................................. 15 

CROSS-SERVICING ..................................................................................................... 15 

THE CROSS-SERVICING PROGRAM............................................................................................................. 15 

PRIVATE COLLECTION AGENCIES .............................................................................................................. 17 

PCA COLLECTIONS ................................................................................................................................... 17 

ASSET SALES OF NON-TAX DEBT OWED TO THE UNITED STATES............ 18 

DEBT WRITE-OFF POLICY ....................................................................................... 18 

MONITOR COMPLIANCE WITH THE DCIA ......................................................... 19 

CONCLUSION................................................................................................................ 19 

APPENDIX I: REPORT ON RECEIVABLES DUE FROM THE PUBLIC: KEY 

INDICATORS OF RECEIVABLES AND COLLECTIONS PERFORMANCE............ 20 

APPENDIX II: FEDERAL RECEIVABLES, CONTINGENT LIABILITIES, AND 

DELINQUENT DEBT.................................................................................................... 21 

RECEIVABLES AND DELINQUENCIES AS OF SEPTEMBER, 1998................................................................... 21 

COLLECTIONS AND WRITE-OFFS AS OF SEPTEMBER 30, 1998 ................................................................... 22 
REPORT TO CONGRESS: DEBT COLLECTION ACTIVITIES OF FEDERAL AGENCIES 2 

EXECUTIVE SUMMARY 

In Fiscal Year 1999,1 increased management attention by program agencies and improved 

use of debt collection tools by the Department of the Treasury (Treasury), resulted in 

major advancements in Federal Government debt collection programs. Collections by 

Treasury of non-tax debt for the year totaled $2.63 billion. 

Treasury Offset Program (TOP). The $572 million increase in tax refund offset 

collections over the previous year was the most important 1999 debt collection 

accomplishment. For Fiscal Year 1999, tax refund collections totaled $2.6 billion. 

Increases were achieved in both of the Treasury Offset Program (TOP) components: 

Federal non-tax debt collections increased $395 million to $1.26 billion and child support 

collections increased $177 million to $1.34 billion. 

This significant increase in collections was achieved as a result of the successful merger 

of the Tax Refund Offset Program and the TOP, and is a tribute to the cooperation of the 

Financial Management Service (FMS), the Internal Revenue Service, the Federal Reserve 

System, and the federal credit agencies. 

Cross-Servicing and Private Collection Agency (PCA) Collections. In Fiscal Year 1999, 

FMS and the PCAs under contract with FMS collected a total amount of $23.5 million. 

Since 1997, FMS and the PCAs have brought in $34.1 million in collections and have 

established $106.77 million in repayment agreements. As of September 30, 1999, PCAs 

under the Department of Education’s (Education) debt collection contract were servicing 

$8 billion in delinquent student loans. From October 1, 1998, through September 30, 1999, 

the PCAs collected $238 million of Education’s defaulted student loan debts and 

consolidated $299 million. 

Delinquent Debt Portfolio and Referrals to Treasury. At the end of Fiscal Year 1998, the 

Government’s outstanding guaranteed loans and non-tax receivables totaled nearly 

$1.2 trillion, with $60 billion of that debt considered delinquent. The DCIA specifically 

mandates that Federal agencies, with certain exemptions, transfer non-tax receivables 

more that 180 days delinquent to Treasury for collection. In Fiscal Year 1998, non-tax 

debt more than 180 days delinquent decreased $800 million from $47.2 billion at the end 

of Fiscal Year 1997 to $46.4 billion at the end of Fiscal Year 1998. 

FMS and creditor agencies have worked to increase delinquent debt referrals to Treasury. 

The value of debts in the TOP debtor database as of September 30, 1999, totaled $70.5 

billion ($23.3 billion in Federal non-tax debt and $47.2 billion child support), which is 

1

 Data from agencies on the status of their receivables used in this report reflects Fiscal Year 1998 data, 

which is the latest verified and comprehensive data available when this report was drafted. Treasury will 

provide 1999 data in the 2000 report. 
REPORT TO CONGRESS: DEBT COLLECTION ACTIVITIES OF FEDERAL AGENCIES 3 

$11.7 billion more than in 1998. Cross-servicing referrals increased $1 billion in Fiscal 

Year 1999. 

Other Key Accomplishments. The Department of Justice (DOJ), the Department of 

Health and Human Services (HHS), and the Small Business Administration (SBA) also 

contributed significantly to the debt collection accomplishments in 1999. DOJ collected 

more than $1 billion through financial litigation. HHS assisted in the collection of $15.5 

billion in delinquent child support obligations. SBA completed its first loan asset sale, 

collecting $195 million in proceeds. 

In addition to improved collections, Treasury is able to provide a more accurate report on 

the Government’s debt portfolio, having significantly revised Treasury’s Report on 

Receivables due from the Public (TROR). 

Challenges Remaining. 

FMS will continue to add payment streams, such as Federal benefit payments and Federal 

salary payments, into the TOP process. In addition, FMS will be implementing system 

enhancements to TOP in Fiscal Year 2000 that will enable Federal tax debt to be 

collected through IRS continuous tax levy and state tax debt to be collected through 

payment offset. Other challenges will be continuing to work with agencies to identify 

and remove any barriers to referral of eligible debts to Treasury, setting agency referral 

schedules, and implementing administrative wage garnishment. 
REPORT TO CONGRESS: DEBT COLLECTION ACTIVITIES OF FEDERAL AGENCIES 4 

BACKGROUND 

The Debt Collection Improvement Act of 1996 (DCIA) directs the Secretary of the 

Treasury (Secretary) to report annually to Congress on the management of debt collection 

activities by the head of each Federal agency including the information provided to the 

Secretary on the status of loans and accounts receivable that are managed by the head of 

the agency. See 31 U.S.C. § 3719. 

Federal agencies are responsible for managing their own receivables activities and must 

develop and implement a comprehensive receivables management plan, including a 

strategy for collecting delinquent debt, specifically adapted to each agency's type(s) of 

debt. Agencies, in accordance with the Federal Claims Collection Standards (FCCS) 

(4 CFR § 101-105) and the Office of Management and Budget (OMB) Circular A-129, 

are responsible for: implementing debt collection tools and techniques that are 

appropriate for the type and size of each agency's debts; maintaining receivables 

reporting systems and account tracking systems; and developing and implementing the 

capability to track and monitor key indicators of economic and portfolio performance. 

Congress gave significant responsibility to Treasury under the DCIA to maximize the 

collection of non-tax delinquent debt owed to the Federal Government. The DCIA 

specifically mandates that Federal agencies, with certain exemptions, transfer non-tax debt 

more than 180 days delinquent to Treasury for collection. To collect these debts, Treasury 

applies a variety of debt collection tools, including offset of Federal payments (including tax 

refunds), cross-servicing, credit bureau reporting and referrals to DOJ. 

Offset is a program whereby Federal payments are reduced or "offset" to satisfy a person's 

overdue Federal debt. A payee's name and taxpayer identification number are matched 

against a Treasury database of delinquent debtors for automatic offset of funds. Offset 

funds are then used to satisfy payment of the delinquent debt to the extent allowed by law. 

Current payment types subject to offset include Office of Personnel Management (OPM) 

retirement payments, IRS tax refunds, vendor payments, and some Federal salary payments. 

Cross-servicing is a program consisting of a variety of collection tools that are applied 

once agencies refer their debts to Treasury or other agencies that have been designated by 

Treasury as debt collection centers. Currently, Treasury is the only agency to which debt 

referrals are made under the DCIA. Collection tools include Treasury demand letters, 

telephone calls to debtors, referral of debts to TOP, and the use of one or more of twelve 

PCAs on Treasury's contract. 
REPORT TO CONGRESS: DEBT COLLECTION ACTIVITIES OF FEDERAL AGENCIES 5 

ACCOMPLISHMENTS 

• 	 Collections totaled $2.63 billion in Fiscal Year 1999. Tax refund offset collections 

totaled $2.6 billion, which is $572 million more than last year's figures for the same 

time period. 

• 	 The most important debt collection accomplishment for Treasury in 1999, as well as 

the most challenging and successful, was the merger of the Tax Refund Offset 

Program with the Treasury Offset Program. The merger, which was implemented in 

January 1999, streamlined and improved operations by providing a single point of 

contact for agencies to simultaneously refer debts for both tax refund offset and other 

administrative offset programs. 

• 	 The value of debts in the TOP debtor database as of September 30, 1999, was $70.5 

billion ($23.3 billion in Federal non-tax debt and $47.2 billion in child support 

obligations), which is $11.7 billion more than in 1998. 

• 	 The $2.6 billion collected through tax refund offset included increases in both the 

non-tax debt and the child support components of TOP. Federal non-tax debt 

collections were $1.26 billion, an increase of $395 million over Fiscal Year 1998. 

• 	 In Fiscal Year 1999, $1.34 billion in delinquent child support obligations were 

collected by tax refund offsets, which exceeds collections during Fiscal Year 1998 by 

$177 million. Treasury plays a significant role in collecting delinquent child support 

obligations owed to, or being enforced by, states and territories. Delinquent child 

support obligations are matched against tax refund payments and, at the State's 

option, against vendor and OPM retirement payments. 

• 	 HHS’ Child Support Enforcement Program supports children by assisting states in 

locating parents, establishing paternity, and enforcing child support orders. Fiscal 

Year 1999 child support collections were $15.5 billion, an increase of more than 

seven percent over Fiscal Year 1998. 

• 	 For the fifth consecutive year, DOJ collected over $1 billion in delinquent debts owed 

to Federal agencies through its financial litigation program. 
REPORT TO CONGRESS: DEBT COLLECTION ACTIVITIES OF FEDERAL AGENCIES 6 

• 	 Treasury designated Education a debt collection center to continue to service its own 

student loan debt because it successfully utilizes all appropriate debt collection tools in 

accordance with Government-wide regulations. Education relies heavily on PCAs to 

conduct its debt collection activities. As of September 30, 1999, Education’s PCAs 

were servicing $8 billion in delinquent student loans. From October 1, 1998, through 

September 30, 1999, the PCAs collected $238 million of Education’s defaulted student 

loan debts and consolidated $299 million. 

• 	 Education converted the Office of Student Financial Assistance into the 

Government's first-ever Federal performance-based organization. The objective of 

the conversion is to improve the management of all student aid programs. 

• 	 SBA has an asset sales team in place to sell its current portfolio of direct loans and 

defaulted guaranteed loans in 1999, 2000, and 2001. These sales are significant 

events in completing the transition from emphasizing loan servicing to lender 

oversight at SBA. In 1999, SBA completed one loan portfolio sale with proceeds 

totaling $195 million. 

• 	 The major Federal housing assistance agencies -- HUD, the Government National 

Mortgage Association, USDA, and VA -- established a "Housing Consortium" to 

share improved ideas and improved practices in the management of the Federal 

portfolio of single-family housing loans. In 1999, the agencies agreed to test a 

centralized data warehouse approach to collecting and analyzing monthly status 

information on direct and guaranteed loans. 
REPORT TO CONGRESS: DEBT COLLECTION ACTIVITIES OF FEDERAL AGENCIES 7 

GOVERNMENT DEBT PORTFOLIO, COLLECTIONS AND WRITE-OFFS 

At the end of 19982

, the Budget of the United States Government, Fiscal Year 1999, 

reported nearly $1.2 trillion in outstanding guaranteed loans and non-tax receivables. 

Approximately five percent of that total, $60 billion, was delinquent. This is an $8.1 

billion increase from $51.9 billion in 1997. Of the $60 billion in non-tax delinquent debt, 

$46.4 billion was delinquent more than 180 days, compared to $47.2 billion reported in 

Fiscal Year 1997. Of the $60 billion in non-tax delinquent debts, more than $40 billion 

was at the five major credit agencies: the Department of Housing and Urban 

Development (HUD), Education, SBA, the Veterans' Administration (VA), and the 

United States Department of Agriculture (USDA). 

TOTAL DELINQUENT DEBT 

$70 

$60 

Dollars in Billions 

$50 

$40 

$30 

$20 

$50.0 $51.1 $51.4 $51.9 

$60.0 

$10 

$0 

1994 1995 1996 1997 1998 

Fiscal Year 

Major increases in the non-tax delinquent portfolio for Fiscal Year 1998 resulted from: 

• 	 an increase of $2.6 billion in Education's delinquent assigned guaranteed student loan 

portfolio, an increase of $11.2 billion in Education’s direct loan receivables, and an 

increase of $2.6 billion in interest and late charges on defaulted student loans. These 

changes are, in part, attributable to Education's inclusion of short-term delinquent 

debt on the most recent Treasury report, large annual growth in the department's 

portfolio, and maturation of the direct loan assets; 

• 	 a $2.3 billion delinquency at the Federal Communications Commission (FCC) due to 

bankruptcy declarations by three bidders for purchase of airwave licenses; and 

• 	 an increase of $1 billion in the Medicare program delinquencies due to an increase in 

participation in the program. 

2 Report on Receivables Due from the Public (TROR) data in this report covers Fiscal Year 1998 with comparisons to 

1997 data. This represents the most current data available when this report was drafted. Treasury will provide 1999 

data in the 2000 report. 
REPORT TO CONGRESS: DEBT COLLECTION ACTIVITIES OF FEDERAL AGENCIES 8

Dollars in Billions Dollars in Billions 

TOTAL COLLECTION OF RECEIVABLES 

$120 

$100 

$80 

$60 

$40 

$20 

$0 

1994 1995 1996 1997 1998 

$101.6 $102.3 

$95.4 $101.6 

$87.6 

Fiscal Year 

TOTAL WRITE-OFFS 

$10 

$9 

$8 

$7 

$6 

$5 

$4 

$3 

$2 

$1 

$0 

1994 1995 1996 1997 1998 

$9.8 

$5.0 $4.9 

$6.1 

$4.5 

Fiscal Year 

• 	 Total collections decreased $14 billion in 

Fiscal Year 1998 (non-credit receivable 

collections decreased $11.3 billion and loan 

receivable collections decreased $2.7 billion). 

Non-credit collections fluctuate annually due 

to nonrecurring and unique circumstances. 

For example, in 1997 the Federal Deposit 

Insurance Corporation (FDIC) capitalized the 

Savings Association Insurance Fund (SAIF) 

through a one-time special assessment to 

achieve the fund’s designated reserve ratio of 

$1.25 for every $100 of insured deposits. 

This caused a nonrecurring FDIC collection 

of $4 billion. 

HUD loan receivable collections were $5.2 

billion in 1996, $4.2 billion in 1997 and $1.4 

billion in 1998. HUD did not sell assets in 

1998 which led to the $3.8 billion decrease in 

loan collections. HUD conducted asset sales in 

1996 and 1997. 

• 	 Total write-offs in Fiscal Year 1998 

decreased $1.6 billion. However, the 

$4.5 billion in write-offs is consistent with 

historical trends which range from $4 to 

$6 billion. 

Fiscal Year 1997 contained noticeable 

increases due to VA and HUD loan write-offs. 

Fiscal Year 1994 also contained increases due 

to USDA, Education, and FDIC write-offs 

totaling $2 billion each. 

An increase in write-offs is expected once 

agencies implement the proposed 

Government-wide write-off policy to be 

issued by OMB. The new policy will 

require agencies to write off debt that is 

more than 2 years delinquent. 

Detailed data for the 24 CFO agencies can be found on the Federal Government's Key 

Indicators of Receivables and Collections Performance in Appendices I and II. 
REPORT TO CONGRESS: DEBT COLLECTION ACTIVITIES OF FEDERAL AGENCIES 9 

Table I: Delinquent Debt Walkdown 

Certain debts are not eligible for referral to Treasury for either offset or cross-servicing 

because of various exemptions permitted under the DCIA or otherwise required by law. 

As a result, of the $46.4 billion in debt that was more than 180 days delinquent, 

$29.9 billion is eligible for referral to Treasury for offset, and $6.8 of the $29.9 billion is 

also eligible for referral to Treasury for cross-servicing (See Table I). 

In July 1999, the Department of Defense (DOD) identified a $1.3 billion delinquent debt 

as not eligible for referral to Treasury which reduced the amount previously reported in 

the Federal Financial Management Status Report and Five Year Plan as eligible for 

referral to offset from $31.2 billion to $29.9 billion and cross-servicing from $8.1 billion 

to $6.8 billion. 

Table I: Summary Analysis of Delinquent Debt for the Federal Government 

(Comparison of FY1997 and FY1998) 

Estimated Delinquent

Debt 

($ in billions)

1997 

Estimated Delinquent

Debt 

($ in billions)

1998 

Change from 

FY1997 

To 

FY1998 

Total Government $51.9 $60.0 15.6% 

Less Than 180 Days ($4.7) ($13.6) 189.4% 

Delinquent Debt Over 180 Days $47.2 $46.4 -1.7% 

Debt Excluded from Offset 

In Bankruptcy ($3.4) ($3.1) -8.8% 

Foreign Debt ($3.9) ($3.6) -7.7% 

In Forbearance or In Appeals ($6.4) ($6.4) 0% 

In Foreclosure ($3.6) ($2.4) -33.3% 

Other (Accelerated Debt Not Due) ($0.9) ($1.0) 11.1% 

Subtotal ($18.2) ($16.5) -9.3% 

Eligible to Refer to Treasury for Offset $29.0 $29.9 3.1% 

Debt Excluded from Cross-Servicing 

Cross-Servicing Exemptions ($5.9) ($16.6) 181.4% 

At DOJ ($3.9) ($4.9) 25.6% 

Eligible for Internal Offset ($0.7) ($1.0) 42.9% 

At Third Party ($10.4) ($0.7) -93.3% 

Other $0.4 $0.2 -62.5% 

Subtotal ($20.5) ($23.1) 12.4% 

Eligible to Refer to Treasury for CrossServicing $8.5 $6.8 -19.4% 
REPORT TO CONGRESS: DEBT COLLECTION ACTIVITIES OF FEDERAL AGENCIES 10 

AGENCY DEBT REFERRALS 

In order to improve the Government’s delinquent debt portfolio and encourage Federal 

agencies to refer their delinquent debts to Treasury, FMS is working with creditor agencies 

to help them analyze their debts and better manage their delinquent debt portfolios. FMS is 

working with agencies to identify and resolve any barriers to referral of eligible debts to 

Treasury; establish agency referral schedules; develop a compliance plan and tracking 

mechanism; and assess the value and collectability of delinquent non-tax debt. 

As part of this effort, FMS has significantly revised Treasury’s Report on Receivables 

Due from the Public (TROR), a document that includes quarterly receivables reports 

from Federal agencies. The TROR is used to manage the Federal receivables portfolio, 

and is the basis for much of the information and statistics included in this report. TROR 

revisions were made not only to satisfy the requirements of the DCIA, but also to provide 

a more accurate report of the Government’s debt portfolio. The revised TROR identifies 

eligible debts for referral to FMS and tracks collection efforts by agencies. The revised 

TROR was implemented in April of 1999 with an Internet-based application which 

provides on-line access to data for internal and external stakeholders. 
REPORT TO CONGRESS: DEBT COLLECTION ACTIVITIES OF FEDERAL AGENCIES 11 

Offset and Cross-Servicing Referrals 

As of September 30, 1999, $23.3 billion, or 78%, of the amount of debts eligible for 

referral for offset has been referred, leaving a balance of $6.6 billion. Of the $6.8 billion 

eligible for referral for cross-servicing, $2.9 billion, or 43%, has been referred, leaving a 

balance of $3.9 billion. (As mentioned previously, DOD has identified a $1.3 billion 

delinquent debt that is not eligible to be referred to Treasury which has reduced the 

amount previously reported as eligible for referral to offset from $31.2 billion to $29.9 

billion and cross-servicing from $8.1 billion to $6.8 billion.) 

Debts Eligible for Referral to TOP 

for FY99 

22% 

78% 

Amount Referred ($23.3B) Amount Not Referred ($6.6B) 

Debts Eligible for Referral to CrossServicing for FY99 

43% 

57% 

Amount Referred ($2.9B) Amount Not Referred ($3.9B) 
REPORT TO CONGRESS: DEBT COLLECTION ACTIVITIES OF FEDERAL AGENCIES 12 

Increase Agency Debt Referral to Treasury 

At the March 18, 1999 Federal Credit Policy Working Group (FCPWG) meeting, it was 

agreed that agencies should establish target dates and amounts for referral of debts more 

than 180 days delinquent. The 1999 goals for referral of debts by the major debt 

collection agencies are provided in Table II and are included in OMB's and the Chief 

Financial Officer (CFO) Council's Federal Financial Management Status Report and 

Five-Year Plan. Treasury has also requested referral schedules from all remaining CFO 

agencies. 

Table II: Debt Referral Goals for 1999 1 

Agency Treasury Offset Percent 

of Eligible Debt to be 

Referred in 1999 

Cross-Servicing Percent 

of Eligible Debt to be 

Referred in 1999 

USDA 90% 80% 

Education 2 100% 100% 

HUD 3 28% 39% 

SBA 100% 100% 

VA 4 90% 1% 

1 Table 9, Chapter 4, 1999 Federal Financial Management Status Report and Five-Year Plan 2

 Education's cross-servicing numbers only include institutional liability debt. 3 HUD has scheduled an asset sale in the amount of $1.14 billion for 2000. HUD continues to refer Title I 

debts monthly, which are approximately 39 percent of its eligible debt for cross-servicing and 28 percent 

for offset. 4 VA’s preparation for year 2000 system changes will prevent them from referring debts electronically for 

cross-servicing in 1999. 
REPORT TO CONGRESS: DEBT COLLECTION ACTIVITIES OF FEDERAL AGENCIES 13 

TREASURY OFFSET PROGRAM 

Tax Refund Offset and Treasury Offset Program 

FMS' most significant accomplishment over the past year was the successful merger of the 

Tax Refund Offset and the Treasury Offset Programs. In 1998, IRS and FMS jointly 

developed a one-year transition plan which called for a partial merger in January 1998 and a 

full merger in January 1999. As a result of effective collaboration and teamwork among 

IRS, the Federal Reserve System and FMS, the full merger was successfully completed and 

the first offsets began on January 18, 1999. Tax refund offsets have two components, 

Federal non-tax debts and child support obligations. 

TAX REFUND OFFSET REFERRALS 

As a result of the merger, FMS’ 

delinquent debtor database as of 

September 30, 1999, contained debts 

valued at $70.5 billion. This 

represents an increase of 

$11.7 billion from the prior year. 

$17.6 

$41.2 

$23.3 

$47.2 

$0.0 

$20.0 

$40.0 

$60.0 

$80.0 

Dollars in Billions 

Child Support $41.2 

Federal Non-tax Debt $17.6 

Sep. 98 Sep. 99 

$70.5 $58.8 

$47.2 

$23.3 
REPORT TO CONGRESS: DEBT COLLECTION ACTIVITIES OF FEDERAL AGENCIES 14 

FISCAL YEAR TO DATE

TAX REFUND OFFSET COLLECTIONS

Through September 30.1999

0 

500,000,000 

1,000,000,000 

1,500,000,000 

2,000,000,000 

2,500,000,000 

1999 16,314,329 31,517,873 42,589,038 42,589,038 807,384,155 1,598,234,173 2,136,270,106 2,520,283,786 2,552,516,632 2,592,353,516 2,574,111,990 2,601,859,079 

1998 15,949,145 30,093,201 40,682,286 40,682,286 608,753,813 1,157,878,921 1,521,321,061 1,874,870,254 1,946,020,254 1,978,992,005 2,002,369,032 2,029,637,189 

OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP 

Total tax refund offset collections for Fiscal Year 1999 were $2.6 billion -- $572 million 

more than the amount collected during Fiscal Year 1998. 

FMS attributes the dramatic increase in tax refund offset collections to a number of factors, 

including: 1) system enhancements FMS made that allow offset matching on both social 

security numbers on joint tax returns; 2) an increase in debt referrals of $11.7 billion for 

child support and Federal non-tax debt, from $58.8 billion in Fiscal Year 1998 to $70.5 

billion in Fiscal Year 1999; 3) system flexibility that allows creditor agencies to add and 

update debt records on a continuous basis; and 4) an increase in the average amount and 

number of tax refund payments due in part to new tax credits. 

Federal Non-Tax Debt Collections 

As of January 1999, delinquent Federal non-tax debts are being collected through offset of 

tax refunds and other Federal payments under the merged TOP. In Fiscal Year 1999, 

Federal non-tax debt collections through offset of tax refunds totaled $1.26 billion, an 

increase of $395 million over Fiscal Year 1998. 

Federal non-tax payment offset collections for Fiscal Year 1999 were $5,910,837, which is 

$2,224,524 more than total collections from the prior year which totaled $3,686,313. The 

payment types that are currently part of administrative offset are OPM retirement, vendor, 

and some Federal salary payments. Total collections through offset of non-tax payments 

since the inception of TOP are $10.16 million. As of September 30, 1999, 31 agencies have 

referred $23.3 billion to TOP, representing an increase of $5.7 billion over the previous 

year. 
REPORT TO CONGRESS: DEBT COLLECTION ACTIVITIES OF FEDERAL AGENCIES 15 

Child Support Collections 

States are required to refer delinquent child support obligations for collection through tax 

refund offset. In Fiscal Year 1999, child support collections from tax refund offsets totaled 

$1.34 billion, an increase of more than $177 million over Fiscal Year 1998. As of 

September 30, 1999, all of the states, two territories and Washington, DC have referred 

$46.6 billion to TOP for offset of tax refund payments. 

Executive Order 13019 directed Treasury to assist the states in collecting delinquent child 

support debts through offset on non-tax payments. Committed to improving the 

collection of delinquent child support obligations, Treasury participates in an interagency task force on child support collection with officials from the Office of Child 

Support Enforcement, HHS and DOJ. State referrals for collection through offset of 

non-tax payments is strictly voluntary. The challenge in the year 2000 is to increase the 

number of states that fully participate in offset of non-tax payments. 

As of September 30, 1999, 30 entities (states, territories, etc.) referred debts for offset of 

non-tax payments. Child support collections for Fiscal Year 1999 were $1,000,492 while 

collections for all of 1998 were $648,280. Child support collections through offset of nontax payments have totaled $1,682,667 million since the program’s inception in May 1997. 

Treasury is working with those states that are not participating in non-tax payment offsets to 

encourage them to take advantage of this collection tool. 

CROSS-SERVICING 

The Cross-Servicing Program 

Cross-servicing is the process whereby agencies refer Federal non-tax debts more than 180 

days delinquent to Treasury for collection. Debts more than 180 days delinquent are 

referred to FMS' Birmingham Debt Management Operations Center (BDMOC) for crossservicing. Within 5 days of receipt of the debt, the BDMOC sends an initial demand letter 

on Treasury letterhead. The BDMOC works the debt for 30 days. If the debtor is 

unresponsive, the debt is then referred to one of the 12 PCAs. 
REPORT TO CONGRESS: DEBT COLLECTION ACTIVITIES OF FEDERAL AGENCIES 16 

Since 1997 when the PCA 

contractual arrangement was 

established, FMS and the PCAs have 

brought in $34.1 million in 

collections and have established 

$106.77 million in repayment 

agreements. In Fiscal Year 1999, 

FMS and the 12 PCAs under contract 

with FMS collected a total of $23.5 

million. BDMOC cumulative 

collections through September 30, 

1999, were $16.7 million and 

arranged repayment agreements

totaled $69.77 million. As of 

September 30, 1999, FMS crossservicing collections for Fiscal Year 1999 totaled $8.6 million. 

Referrals to FMS through September 30, 1999, totaled over $2.9 billion, an increase of 

$1 billion from October 1998. The number of Federal agencies participating in crossservicing has increased from 36 to 39 during the past year. 

CROSS-SERVICING REFERRALS 

3 

2.5 

2 

1.5 

1 

0.5 

0 

Oct. 1997 Sep. 1998 Sep. 1999 

0.46 

1.9 

2.9 

CROSS SERVICING & PRIVATE COLLECTION AGENCY (PCA) 

CUMULATIVE COLLECTIONS 

$16.7 

$17.4 

$0.0 

$10.0 

$20.0 

$30.0 

$40.0 

Dollars in Millions 

PCA Collections $17.4 

BDMOC 

Collections 

$16.7 

Sep. 1999 

$34.1 

Dollars in Billions 
REPORT TO CONGRESS: DEBT COLLECTION ACTIVITIES OF FEDERAL AGENCIES 17 

Private Collection Agencies 

PCAs use a variety of tools in collecting debt that has been referred to them. PCAs have the 

ability to locate delinquent debtors and utilize collection strategies tailored to agencyspecific requirements. To ensure that an appropriate balance is maintained between the 

vigorous pursuit of collections and the fair and equitable treatment of debtors, FMS 

monitors each PCA. In addition, FMS conducts on-site reviews to ensure PCA compliance 

with all applicable State and Federal laws, physical and personnel security guidelines, 

directives pertaining to resolution of complaints and collection strategies, and system 

requirements. The Treasury PCA contract has been in place for almost two years and there 

have been no substantiated debtor complaints and collections have been steadily increasing. 

Treasury designated Education a debt collection center to continue to service its own student 

loan debt because it successfully utilizes all appropriate debt collection tools in accordance 

with Government-wide regulations. Education relies heavily on PCAs to conduct its debt 

collection activities. As of September 30, 1999, Education’s PCAs were servicing 

$8 billion in delinquent student loans, and cumulative referrals to PCAs (including rereferrals) during Fiscal Year 1999 totaled $8.8 billion. From October 1, 1998, through 

September 30, 1999, the PCAs collected $238 million of Education’s defaulted student loan 

debts and consolidated $299 million. 

PCA Collections 

PCAs collected $14.9 million of the $23.5 million collected in Fiscal Year 1999, and FMS 

collected $8.6 million. In February 1999, PCA collections exceeded $1 million in one 

month for the first time. Collections for July, August, and September 1999 totaled $1.58 

million, $1.65 million and $1.73 million respectively. 

In addition, repayment 

agreements totaling more than 

$37 million have been 

established through the 

collection efforts of the PCAs; 

when combined with the efforts 

of the BDMOC, this brings total 

repayment agreements to 

$106.77 million. 

Dollars in Millions 

REPAYMENT AGREEMENTS 

150 

100 

50 

0 

69.77 

37 

$106.77 

Sep. 1999 

PCAs 

BDMOC 
REPORT TO CONGRESS: DEBT COLLECTION ACTIVITIES OF FEDERAL AGENCIES 18 

ASSET SALES OF NON-TAX DEBT OWED TO THE UNITED STATES 

The DCIA authorized agencies to sell any non-tax debts owed to the United States that 

are more than 90 days delinquent, subject to the Federal Credit Reform Act of 1990. The 

Administration’s budget policy is that agencies are required to sell any non-tax debts that 

are delinquent for more than one year for which collection action has been terminated if 

the Secretary determines that the sale is in the best interest of the United States. 

Agencies are: required to use competitive procedures to sell the debts; authorized to pay 

contractor fees for assistance in conducting the sale out of sale proceeds; required to sell 

the debts for cash or a combination of cash and profit participation if such an 

arrangement is more advantageous to the Government; and required to make the sales 

without recourse. 

Beginning in Fiscal Year 1999, credit agencies with over $100 million in loan assets that 

are one year old are expected to sell loan assets with the exception of: 

• loans to foreign countries or entities; 

• 	 loans in structured forbearance, when conversion to repayment status is expected 

within 24 months or after statutory requirements are met; 

• loans that are written off as unenforceable due to death, disability, or bankruptcy; 

• 	 loans that have been submitted to Treasury for offset and are expected to be 

extinguished within three years; and 

• loans in adjudication or foreclosure. 

DEBT WRITE-OFF POLICY 

FCPWG formed an Ad Hoc Committee on Write-Offs to review and revise the current 

write-off policy and propose changes to OMB Circular A-129 “Policies for Federal 

Credit Programs and Non-Tax Receivables,” as appropriate for debts unlikely to be 

collected. The resulting report recommended that Federal agencies establish a standard 

to write-off delinquent debt older than 2 years. OMB Circular A-129 is currently in the 

process of being revised in order to reflect this new policy. 
REPORT TO CONGRESS: DEBT COLLECTION ACTIVITIES OF FEDERAL AGENCIES 19 

MONITOR COMPLIANCE WITH THE DCIA 

The President’s Council on Integrity and Efficiency (PCIE) conducted a review of nontax delinquent Federal debt to determine the amount of non-tax delinquent debts that 

exists and the Federal Government’s ability to collect these debts. The review evaluated 

each individual agency’s portfolio management activities with the goal of improving the 

efficiency of each agency’s delinquent debt reporting practices and to ensure agency 

compliance with the DCIA. The following agencies participated in the PCIE review: the 

Department of Transportation, SBA, the Social Security Administration, the National 

Aeronautic Space Administration, DOJ, the General Services Administration, the 

National Endowment for the Arts, Education, VA, Consumer Product Safety 

Commission, the Department of State, the Office of Personnel Management, the 

Department of Commerce, the Tennessee Valley Authority, the U.S. International Trade 

Commission, the FCC, the Railroad Retirement Board, and the Federal Trade 

Commission. 

CONCLUSION 

Fiscal Year 1999 ended with the Federal Government having collected $2.63 billion from 

payment offsets and cross-servicing arrangements, having significantly expanded the 

value of the debts in the TOP debtor database, and having improved the efficiency of the 

Government’s debt collection operations. These results are mostly due to increased 

management attention to debt collection strategies and practices, and to improved 

utilization of debt collection tools. The achievements of Fiscal Year 1999 position 

Treasury and the Federal program agencies to turn in an even better performance in 

Fiscal Year 2000. 

In order to sustain the momentum achieved in Fiscal Year 1999 and to increase 

collections in Fiscal Year 2000, FMS and Federal agencies will need to overcome a 

number of challenges. FMS will continue to add payment streams, such as Federal 

benefit payments and Federal salary payments, into the TOP process. In addition, FMS 

will implement system enhancements to TOP in Fiscal Year 2000 that will enable Federal 

tax debt to be collected through IRS continuous tax levy and state debt to be collected 

through payment offset. Other challenges which FMS and Federal agencies will work 

together to overcome include identifying and removing barriers to referral of eligible 

debts to Treasury, setting agency referral schedules, and implementing administrative 

wage garnishment. 
REPORT TO CONGRESS: DEBT COLLECTION ACTIVITIES OF FEDERAL AGENCIES 20 

APPENDIX I: REPORT ON RECEIVABLES DUE FROM THE PUBLIC: KEY 

INDICATORS OF RECEIVABLES AND COLLECTIONS PERFORMANCE 

TOTAL RECEIVABLES TOTAL COLLECTION OF RECEIVABLES 

$300 

$120 

$250 

$100 

$200 $80 

$150 $60 

$100 

$247.0 $246.0 $248.2 $259.1 $273.5 

$40 

$50 $20 

$0 $0 

$101.6 $103.3 $101.2 $101.6 

$87.6 

Dollars in Billions 

Dollars in Billions 

1994 1995 1996 1997 1998 1994 1995 1996 1997 1998 

Fiscal Year Fiscal Year 

TOTAL DELINQUENT DEBT 

TOTAL DELINQUENT DEBT OVER 180 DAYS $70 

Dollars in Billions Dollars in Billions 

$60 $50 

$50 $45 

$40 

$40 $35 

$30 $30 $25 

$40.5 

$46.9 $46.1 $47.2 $46.4 

$20 $20 

$10 $15 

$10 

$0 $5 

1994 1995 1996 1997 1998 $0 

Fiscal Year 1994 1995 1996 1997 1998 

Fiscal Year 

TOTAL WRITE-OFFS 

$10 

$9 

$8 

$7 

$6 

$5 

$4 

$3 

$2 

$1 

$0 

1994 1995 1996 1997 1998 

$9.8 

$5.0 $4.9 

$6.1 

$4.5 

Fiscal Year 

$50.0 $51.1 $51.4 $51.9 

$60.0 

Dollars in Billions 
REPORT TO CONGRESS: DEBT COLLECTION ACTIVITIES OF FEDERAL AGENCIES 21 

APPENDIX II: FEDERAL RECEIVABLES, CONTINGENT LIABILITIES, AND 

DELINQUENT DEBT 

Receivables and Delinquencies as of September, 1998 (Dollars in Millions) 1 

Agency Guaranteed 

Loans 

Outstanding 

Non-Credit 

Receivables 

Loan 

Receivables2 

Total 

Receivables 

Total 

Delinquencies 

Percent of 

Receivables 

Delinquent 

Percent of 

Change in 

Delinquencies 

1998 vs. 1997 

Percent of 

Total 

Portfolio 

Delinquent 

USDA $21,477 $2,616 $101,776 $104,392 $6,371 6% -15% 5% 

DOC $30 $274 $304 $106 35% 10% 23% 

DOI $153 $4,409 $369 $4,778 $501 10% -22% 10% 

DOJ $0 $64 $0 $64 $48 75% 0% 75% 

DOL $173 $0 $173 $100 58% 12% 58% 

State $0 $155 $4 $159 $8 5% 14% 5% 

Treasury $0 $180 $2,122 $2,302 $163 7% -35% 7% 

OPM $0 $253 $0 $253 $106 42% 18% 42% 

SSA $0 $5,727 $0 $5,727 $835 15% 12% 15% 

NRC $0 $7 $2 29% 0% 29% 

VA $196,357 $1,436 $2,267 $3,703 $1,572 42% -1% 1% 

GSA $0 $46 $2 $48 $27 56% -16% 56% 

FEMA $0 $351 $51 15% 89% 15% 

DOT $2,855 $809 $214 26% 18% 6% 

AID 615 $12 $13,314 $13,326 $912 7% -3% 4% 

SBA $37,499 $0 $9,478 $9,478 $1,727 18% -3% 4% 

HHS $0 $9,781 $558 $10,240 $5,202 51% 25% 51% 

NASA $19 $0 $19 $8 42% -43% 42% 

EX/IM Bank $24,419 $9 $9,430 $9,439 $2,594 27% -2% 8% 

HUD 841 $937 $12,937 $13,874 $2,519 18% 53% 1% 

DOE $0 $6,837 $64 $6,901 $2,325 34% 0% 34% 

Education 322 $709 $58,667 $59,376 $28,272 28% 17% 

DOD $5,330 $0 $5,330 $2,684 50% -14% 50% 

EPA $1,121 $132 $1,253 $855 68% 28% 68% 

All Other $8,204 $3,748 $17,386 $21,233 $2,801 13% 131% 10% 

Total $890,903 $43,946 $229,593 $273,539 $60,003 22% 16% 5% 

$161 

$0 

$7 $0 

$103 $248 

$244 $565 

$11,

$0 

$477,

$110, 48% 

$0 

1. This information was reported by Federal agencies on the Treasury Report on Receivables Due from the Public. 2. Loan receivables consist of direct loans and loans acquired as a result of claims paid on defaulted guaranteed loans. 
REPORT TO CONGRESS: DEBT COLLECTION ACTIVITIES OF FEDERAL AGENCIES 22 

Collections and Write-Offs as of September 30, 1998 (Dollars in Millions) 1 

Agency Non-Credit 

Receivables 

Collected 

Loan 

Receivables 

Collected 2 

Total 

Receivables 

Collected 

Total WriteOffs Percent of 

Change in 

Collections 1998 

vs. 1997 

USDA $2,060 $16,074 $18,134 $519 0% 

DOC $22 $151 $0 8% 

DOI $934 $18 $952 $37 -23% 

DOJ $55 $0 $55 $9 -41% 

DOL $0 $103 $19 -1% 

State $0 $106 $0 -2% 

Treasury 395 $461 $1,856 $2 -36% 

OPM $159 $0 $159 $4 -9% 

SSA $1,925 $0 $1,925 $595 -11% 

NRC $0 $459 $0 0% 

VA $869 $1,369 $2,238 $219 9% 

GSA $336 $0 $336 $3 -80% 

FEMA $14 $9 $23 $2 -56% 

DOT $18 $141 $34 -43% 

AID $386 $392 $1 57% 

SBA $0 $1,656 $1,656 $486 1% 

HHS $13,263 $30 $13,293 $87 21% 

NASA $98 $0 $98 $0 -25% 

EX/IM Bank $65 $1,197 $1,262 $42 -34% 

HUD 912 $1,409 $4,321 $283 -39% 

DOE $4,188 $8 $4,196 $17 -13% 

Education $3,357 $3,413 $588 33% 

DOD 970 $0 $8,970 $151 -12% 

EPA $475 $13 $489 $11 21% 

All Other $21,349 $1,545 $22,894 $1,395 -27% 

Total $60,048 $27,572 $87,620 $4,504 -14% 

$129 

$103 

$106 

$1,

$459 

$123 

$6 

$2,

$56 

$8,

1. This information was reported by Federal agencies on the Treasury Report on Receivables Due from the Public. 

2. Loan receivables consist of direct loans and loans acquired as a result of claims paid on defaulted guaranteed loans.