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GAO-12-870R: 

United States Government Accountability Office: 
Washington, DC 20548: 

September 13, 2012: 

The Honorable Thomas R. Carper: 
Chairman: 
The Honorable Scott P. Brown: 
Ranking Member: 
Subcommittee on Federal Financial Management, Government Information, 
Federal Services, and International Security: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

Subject: Debt Collection Improvement Act of 1996: Status of Treasury’s 
Centralized Efforts to Collect Delinquent Federal Nontax Debt: 

This report transmits the enclosed briefing slides[Footnote 1] and 
related information that we presented to your offices on August 29, 
2012, in response to your request for a description of the status of 
the Department of the Treasury’s (Treasury) centralized debt 
collection efforts under the Debt Collection Improvement Act of 1996 
(DCIA).[Footnote 2] DCIA was intended, among other things, to maximize 
collection of delinquent federal nontax debt. DCIA requires federal 
agencies to notify Treasury of federal nontax debt delinquent over 180 
days for purposes of payment offset and requires agencies to refer 
such debt to Treasury for centralized collection action (known as 
cross-servicing). To facilitate debt collection, DCIA, in concert with 
other federal debt collection laws that the act amended, authorizes 
several debt collection tools and bars delinquent federal nontax 
debtors from receiving additional federal loans, loan insurance, or 
loan guarantees until such debtors resolve their delinquencies. 
Treasury’s centralized delinquent federal nontax debt collection 
efforts include the Treasury Offset Program (TOP)[Footnote 3] and the 
cross-servicing program.[Footnote 4] 

As discussed with your offices, our objectives were to describe (1) 
actions Treasury has taken to implement its centralized delinquent 
federal nontax debt collection program as authorized by DCIA, and 
efforts under way or planned by Treasury to enhance or supplement its 
ability to collect delinquent federal nontax debt; (2) Treasury’s 
collection experience over the last 5 years (i.e., fiscal years 2007 
through 2011) for delinquent federal nontax debt relative to the 
amount of such debt that was referred to Treasury for collection; (3) 
whether agencies have reported referring significant amounts of 
federal nontax debt to Treasury for collection prior to or at 180 days 
delinquent, and if so, Treasury’s collection results for such 
referrals compared to collection results for the debt referred that is 
more than 180 days delinquent; (4) agency exemptions from mandatory 
transfer of delinquent federal nontax debt to Treasury for cross-
servicing, and Treasury’s actions to evaluate these exemptions and 
associated collections; and (5) Treasury’s mechanisms and controls to 
help ensure that federal agencies do not make new loans, loan 
insurance, or loan guarantees to delinquent federal nontax debtors to 
the extent required by the debtor bar provision of DCIA. both 
of which are managed by Treasury’s Financial Management Service (FMS). 

To address these objectives, we reviewed DCIA, pertinent Treasury 
regulations, and Treasury and Office of Management and Budget (OMB) 
guidance concerning delinquent federal nontax debt collection under 
DCIA. In addition, we interviewed FMS officials responsible for TOP 
and the cross-servicing program[Footnote 5] and FMS and Bureau of the 
Public Debt officials responsible for facilitating implementation of 
the debtor bar provision of DCIA, and we reviewed relevant 
documentation. Also, we obtained data from FMS, for fiscal years 2007 
through 2011, showing (1) the amount of debt in TOP that was eligible 
for offset at fiscal year-end, (2) annual collections for TOP, (3) the 
amount of debt at the cross-servicing program that was eligible for 
collection at fiscal year-end, and (4) annual collections for the 
cross-servicing program. Further, we obtained data from federal 
agencies’ Treasury Reports on Receivables and Debt Collection 
Activities (TROR),[Footnote 6] which show the status, as reported by 
federal agencies to Treasury, of federal nontax debt, including 
delinquencies and collections, and are used by Treasury to report on 
TOP and the cross-servicing program. 

This report presents various data obtained from FMS and reported in 
the TRORs. According to an FMS official, the FMS data are unaudited, 
and to the best of our knowledge, the TROR data are unaudited. In some 
instances, differences or inconsistencies exist between the data 
obtained from FMS and the data reported in the TRORs, and in such 
instances, the data have not been reconciled by FMS. We used these 
data because they are the best data available that met our objectives. 
However, we did not attempt to reconcile or assess the reliability of 
these data. which show the status, as reported by federal agencies to 
Treasury, of federal nontax debt, including delinquencies and 
collections, and are used by Treasury to report on TOP and the cross-
servicing program. 

We conducted our work from February 2012 to September 2012 in 
accordance with all sections of GAO’s Quality Assurance Framework that 
are relevant to our objectives. The framework requires that we plan 
and perform the engagement to obtain sufficient and appropriate 
evidence to meet our stated objectives and to discuss any limitations 
in our work. We believe that the information and data obtained, and 
the analyses conducted, provide a reasonable basis for any findings 
and conclusions. See enclosure II for additional details on our scope 
and methodology, enclosure III for a description of the status of 
governmentwide federal nontax debt and delinquent debt as reported in 
the TRORs, and enclosure IV for abbreviations. 

In summary, according to FMS officials, FMS considers both TOP and the 
cross-servicing program to be fully mature in that all key elements of 
the programs have been implemented. As such, FMS’s current and future 
efforts will focus on enhancements that will (1) for TOP, facilitate 
its ability to increase federal nontax debt collections through 
additional offsets and (2) for the cross-servicing program, enable it 
to collect such debt more efficiently and effectively. Further, FMS is 
considering a number of initiatives intended to improve centralized 
collection of delinquent federal nontax debt. These initiatives 
primarily involve increasing the amount of debt subject to collection 
by FMS, bolstering FMS’s set of debt collection tools, and enhancing 
FMS’s internal operations and interactions with referring federal 
agencies. Several of FMS’s initiatives, which are in the early stages 
of development, could, if approved and effectively implemented, 
address long-standing concerns about FMS’s centralized debt collection 
program. We previously reported on certain issues that continue to 
remain. According to FMS officials, the initiatives must be vetted by 
Treasury, OMB, and other stakeholders, as appropriate, prior to 
implementation. 

According to data provided by FMS, the amount of delinquent federal 
nontax debt referred to Treasury for collection as of the fiscal year-
end for the last 5 fiscal years (i.e., fiscal years 2007 through 2011) 
and the amount of collections for those fiscal years were as follows: 

* Federal nontax debt referred to TOP and eligible for offset 
increased from $29.8 billion in fiscal year 2007 to $102.0 billion in 
fiscal year 2011, and FMS’s annual TOP collections fluctuated, ranging 
from $1.4 billion in fiscal year 2007 to the highest amount for the 5-
year period of $2.6 billion in fiscal year 2011. 

* Federal nontax debt referred to the cross-servicing program and 
eligible for collection increased from $8.6 billion in fiscal year 
2007 to $17.3 billion in fiscal year 2011, and FMS’s annual cross-
servicing program collections fluctuated, ranging from $95 million in 
fiscal year 2007 to the highest amount for the 5-year period of $193 
million in fiscal year 2009. 

According to the TRORs, federal agencies did not refer a significant 
[Footnote 7] amount of debt prior to or at 180 days delinquent to FMS 
for TOP or the cross-servicing program. For example, federal agencies 
referred less than 1 percent of their reported nontax debt delinquent 
180 days or less as of September 30, 2011, to TOP and the cross-
servicing program. Accordingly, we did not perform any specific 
analysis of collection results for the limited amount of debt referred 
early to TOP or the cross-servicing program. 

DCIA authorizes Treasury to grant exemptions from mandatory transfer 
of debt for cross-servicing for specific classes of debt at the 
request of the head of a federal agency or upon the Secretary of the 
Treasury’s own initiative and determination. According to FMS 
officials, Treasury has granted exemptions for certain classes of 
nontax debt to four agencies— the Department of Education, the Social 
Security Administration, the Small Business Administration, and the 
Department of Health and Human Services.[Footnote 8] According to FMS 
officials, the exemptions, which totaled $35.5 billion as reported by 
the agencies in their TRORs as of September 30, 2011, were granted 
during the 1999 to 2002 time frame. These officials stated that FMS 
has not reevaluated the exemptions or assessed collections by the 
agencies for the exempted classes of debt. In addition, according to 
these officials, Treasury has not performed a study to compare any of 
these four federal agencies’ collections of exempted debt with FMS’s 
cross-servicing program capability. 

According to FMS officials, FMS’s primary mechanisms used to help 
ensure that delinquent federal nontax debtors do not receive 
additional federal loans, loan insurance, or loan guarantees involve 
referring delinquent federal nontax debt information to credit bureaus 
as part of the cross-servicing program, and administering Debt Check, 
which is an Internet-based information system designed to assist 
federal agencies in identifying delinquent debtors by providing 
information that is obtained from TOP. According to these officials, 
there is no legislative or regulatory requirement for federal agencies 
to use Debt Check. In addition, while FMS officials consider Debt 
Check a mechanism to help credit agencies determine loan eligibility, 
they do not consider it to be a control to help ensure that delinquent 
debtors do not get additional financial assistance in the form of a 
loan, loan guarantee, or loan insurance. According to data provided by 
FMS, only the Small Business Administration and the Page 6 GAO-12-870R 
Treasury’s Centralized Collection Efforts National Oceanic and 
Atmospheric Administration have used Debt Check during the last 5 
calendar years (i.e., 2007 through 2011). In March 2012, Debt Check 
was made available to federal agencies via the Do Not Pay tool, 
[Footnote 9] which is being implemented by Treasury’s Bureau of the 
Public Debt, with oversight and direction from OMB. 

Agency Comments: 

We requested comments on a draft of the briefing slides and related 
enclosures from the Commissioner of FMS or his designee. On August 10, 
2012, FMS provided technical comments, which we incorporated as 
appropriate. 

We are sending copies of this report to interested congressional 
committees, the Fiscal Assistant Secretary of the Treasury, the 
Commissioner of FMS, and other interested parties. In addition, this 
report is available at no charge on the GAO website at [hyperlink, 
http://www.gao.gov]. 

If you or your staffs have any questions about this report, please 
contact me at engelg@gao.gov. or (202) 512-3406. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff who made major 
contributions to this report are listed in enclosure V. 

Signed by: 

Gary T. Engel: 
Director: 
Financial Management and Assurance: 

Enclosures – 5. 

Footnotes: 

[1] See enclosure I for our briefing slides. 

[2] Pub. L. No. 104-134, § 31001, 110 Stat. 1321-358 (Apr. 26, 1996). 

[3] TOP compares the names and taxpayer identification numbers (TIN) 
(i.e., Social Security numbers or employer identification numbers) of 
debtors to the names and TINs of eligible federal and state payment 
recipients. If there is a match, the federal or state payment is 
reduced, or offset, in whole or in part, to satisfy the overdue debt, 
to the extent legally allowed. In addition to delinquent federal 
nontax debt, TOP processes and collects delinquent federal tax debt, 
delinquent child support debt, and certain delinquent debt owed to 
states, including some state income tax debt and unemployment 
insurance compensation debt. 

[4] Treasury’s cross-servicing program utilizes collection techniques 
authorized by DCIA and other federal debt collection laws to collect 
delinquent federal nontax debt on behalf of federal agencies. 

[5] DCIA centralized the collection of delinquent nontax debt owed to 
the federal government and gave Treasury significant responsibilities 
in this area. Within Treasury, FMS is charged with, among other 
things, collecting delinquent federal nontax debt. 

[6] Treasury requires federal agencies to prepare TRORs quarterly and 
verify that the fiscal year-end receivable balances reconcile to the 
agencies’ audited financial statement receivable balances. 

[7] For debt referred prior to or at 180 days delinquent as of 
September 30, 2011, we deemed significant any amount (1) over $1 
billion, (2) over 5 percent of the total reported federal nontax debt 
referred to TOP or the cross-servicing program, or (3) over 5 percent 
of the total reported federal nontax debt delinquent 180 days or less. 

[8] Treasury has also granted exemptions to all federal agencies (in 
2005) for certain debts being collected by administrative wage 
garnishment. 

[9] The Do Not Pay tool, which was established in response to a June 
18, 2010, presidential memorandum, includes a web-based single entry 
access portal that federal agencies can use to gain access to several 
data sources to assist in determining whether an individual or entity 
is eligible to receive federal payments or engage in federal contracts 
or grants. 

[End of section] 

Enclosure I: 

Debt Collection Improvement Act of 1996: Status of Treasury’s 
Centralized Efforts to Collect Delinquent Federal Nontax Debt: 

Briefing for the Subcommittee on Federal Financial Management, 
Government Information, Federal Services, and International Security: 

Committee on Homeland Security and Governmental Affairs: 
United States Senate: 
August 29, 2012: 

Contents: 

Introduction; 
Objectives; 
Scope and Methodology; 
Background; 
Results. 

Introduction: 

The Debt Collection Improvement Act of 1996 (DCIA) was intended, among 
other things, to maximize collection of delinquent federal nontax 
debt.[Footnote 1] DCIA requires federal agencies to notify the 
Department of the Treasury (Treasury) of federal nontax debt 
delinquent over 180 days for purposes of payment offset and requires 
agencies to refer such debt to Treasury for centralized collection 
action (known as cross-servicing). To facilitate debt collection, 
DCIA, in concert with other federal debt collection laws that the act 
amended, authorizes several debt collection tools, including 
administrative wage garnishment (AWG), credit bureau reporting, and 
referring debt to private collection agencies (PCA), and bars 
delinquent federal nontax debtors from receiving additional federal 
loans, loan insurance, or loan guarantees until such debtors resolve 
their delinquencies. 

Following Treasury’s implementation of its centralized debt collection 
program, we issued a series of reports that included numerous 
recommendations to Treasury aimed at improving its ability to collect 
delinquent federal nontax debt.[Footnote 2] Our most recent report in 
this area was issued in 2003. Treasury implemented 27 of our 35 
recommendations. 

Objectives: 

You asked us to provide a description of the status of Treasury’s 
centralized delinquent federal nontax debt collection efforts, 
including the Treasury Offset Program (TOP)[Footnote 3] and the cross-
servicing program4at Treasury’s Financial Management Service (FMS). 
Accordingly, as discussed with your offices, the objectives of this 
engagement were to describe: 

* (1) actions Treasury has taken to implement its centralized 
delinquent federal nontax debt collection program as authorized by 
DCIA, and efforts under way or planned by Treasury to enhance or 
supplement its ability to collect delinquent federal nontax debt; 

* (2) Treasury's collection experience over the last 5 years (i.e., 
fiscal years 2007 through 2011) for delinquent federal nontax debt 
relative to the amount of such debt that was referred to Treasury for 
collection; 

* (3) whether agencies have reported referring significant amounts of 
federal nontax debt to Treasury for collection prior to or at 180 days 
delinquent, and if so, Treasury’s collection results for such 
referrals compared to collection results for the debt referred that is 
more than 180 days delinquent; 

* (4) agency exemptions from mandatory transfer of delinquent federal 
nontax debt to Treasury for cross-servicing, and Treasury’s actions to 
evaluate these exemptions and associated collections; and; 

* (5) Treasury’s mechanisms and controls to help ensure that federal 
agencies do not make new loans, loan insurance, or loan guarantees to 
delinquent federal nontax debtors to the extent required by the debtor 
bar provision of DCIA. 

Scope and Methodology: 

To address these objectives, we did the following: 

* Reviewed DCIA, pertinent Treasury regulations, and Treasury and 
Office of Management and Budget (OMB) guidance concerning the 
collection of delinquent federal nontax debt under DCIA. 

* Interviewed responsible FMS officials, and obtained and reviewed 
pertinent data and documents for TOP and the cross-servicing program, 
[Footnote 5] including FMS’s actions to implement TOP and the cross-
servicing program; efforts under way or planned by FMS to enhance or 
supplement its ability to collect delinquent federal nontax debt; 
FMS’s collection experience over the last 5 years (i.e., fiscal years 
2007 through 2011); federal agencies’ referrals of debt prior to or at 
180 days delinquent to TOP and the cross-servicing program; and 
exemptions granted by Treasury from mandatory referral of debt for 
cross-servicing. 

* Interviewed FMS and Treasury’s Bureau of the Public Debt officials, 
and reviewed relevant documentation, pertaining to mechanisms in place 
at Treasury to help ensure that federal agencies do not make new 
loans, loan insurance, or loan guarantees to delinquent federal nontax 
debtors to the extent required by the debtor bar provision of DCIA. 

* We obtained data from FMS, for fiscal years 2007 through 2011, 
showing (1) the amount of debt in TOP that was eligible for offset at 
fiscal year-end, (2) annual collections for TOP, (3) the amount of 
debt at the cross-servicing program that was eligible for collection 
at fiscal year-end, and (4) annual collections for the cross-servicing 
program. 

* We obtained data from federal agencies’ Treasury Reports on 
Receivables and Debt Collection Activities (TROR),[Footnote 6] which 
show the status, as reported by federal agencies to Treasury, of 
federal nontax debt, including delinquencies and collections, and are 
used by Treasury to report on TOP and the cross-servicing program. 

* This report presents various data obtained from FMS and reported in 
the TRORs. According to an FMS official, the FMS data are unaudited, 
and to the best of our knowledge, the TROR data are unaudited. In some 
instances, differences or inconsistencies exist between the data 
obtained from FMS and the data reported in the TRORs, and in such 
instances, the data have not been reconciled by FMS. We used these 
data because they are the best data available that met our objectives. 
However, we did not attempt to reconcile or assess the reliability of 
these data. 

* We conducted our work from February 2012 to September 2012 in 
accordance with all sections of GAO’s Quality Assurance Framework that 
are relevant to our objectives. The framework requires that we plan 
and perform the engagement to obtain sufficient and appropriate 
evidence to meet our stated objectives and to discuss any limitations 
in our work. We believe that the information and data obtained, and 
the analyses conducted, provide a reasonable basis for any findings 
and conclusions. 

* See enclosure II of our full report for additional details on our 
scope and methodology. 

Background: 

Federal nontax debt includes direct loans, defaulted guaranteed loans, 
and administrative debt. Administrative debt includes debt related to 
fines, penalties, and salary and benefit overpayments. 

Reported federal nontax debt and delinquencies,[Footnote 7] including 
debt delinquent over 180 days, increased markedly over the last 5 
years. As reported in the TRORs, from September 30, 2007, to September 
30, 2011, total federal nontax debt increased from $339.6 billion to 
$777.8 billion; federal nontax delinquent debt increased from $64.9 
billion to $131.0 billion; and federal nontax debt delinquent over 180 
days increased from $45.5 billion to $81.3 billion. 

Federal nontax debt that is written off and classified as currently 
not collectible (CNC)[Footnote 8] is reported in the TRORs separately 
from other federal nontax debt and delinquencies. As of September 30, 
2011, federal agencies reported $31.7 billion of CNC debt. Like other 
delinquent federal nontax debt, CNC debt is potentially eligible for 
referral to Treasury for collection. 

Certain delinquent federal nontax debt is ineligible for referral to 
Treasury for collection through TOP and the cross-servicing program, 
including debt classified as in bankruptcy, forbearance, formal 
appeals, or foreclosure. Of eligible debt, there are two exceptions to 
the requirement to refer debt for offset—debt owed by foreign 
sovereign nations and debt in litigation at the Department of Justice 
(DOJ) for enforced collection.[Footnote 9] Exceptions for debt 
referral to Treasury for cross-servicing include the offset exception 
categories, plus debt at federal agencies’ PCAs; debt in the process 
of internal offset at the referring agencies if collectible within 
three years; debt exempted by Treasury from cross-servicing, for 
example, the Department of Education’s (Education) student loan debt; 
and debt returned from the cross-servicing program as uncollectible. 
In addition, in the TRORs, federal agencies report certain delinquent 
federal nontax debt in “Other” categories, which result in the debt 
being exempted from referral to TOP, the cross-servicing program, or 
both.[Footnote 10] 

Federal agencies are required to refer their eligible, nonexempt 
federal nontax debt delinquent over 180 days to TOP for offset and to 
Treasury or another debt collection center for collection.[Footnote 
11] Federal agencies are required to certify that the debt referred is 
delinquent, valid, and legally enforceable and not subject to any bars 
against collection and the agency has complied with all applicable due 
process requirements. As of September 30, 2011, before exclusions, 
federal agencies reported in the TRORs that federal nontax debt 
delinquent over 180 days, including CNC debt, totaled $113.0 billion. 
About two-thirds, or $75.3 billion, of this debt was reported in the 
TRORs as 2 or more years delinquent, including $43.6 billion of 
federal nontax debt delinquent over 180 days and all of the $31.7 
billion of CNC debt. 

As reported by federal agencies in the TRORs, as of September 30, 
2011, after ineligible and exempt debt was excluded, $68.6 billion of 
federal nontax debt delinquent over 180 days and CNC debt was required 
to be referred to TOP. Of the $68.6 billion, $58.4 billion was 
reported as referred to TOP, leaving $10.2 billion remaining to be 
referred by the federal agencies. 

As reported by federal agencies in the TRORs, as of September 30, 
2011, after ineligible and exempt debt was excluded, $20.4 billion of 
federal nontax debt delinquent over 180 days and CNC debt was required 
to be referred to the cross-servicing program. Of the $20.4 billion, 
$19.3 billion was reported as referred to the cross-servicing program, 
leaving $1.1 billion remaining to be referred by the federal agencies. 

See enclosure III of our full report for details on the status of 
governmentwide federal nontax debt and delinquent debt. 

Results: 

Objective 1: Treasury’s Actions to Implement Centralized Debt 
Collection under DCIA: 

According to FMS officials, FMS considers both TOP and the cross-
servicing program to be fully mature programs, that is, all key 
elements of the programs have been implemented.As such, FMS’s current 
and future efforts will focus on enhancements that will: 

* for TOP, facilitate its ability to increase collections through 
additional offsets and; 

* for the cross-servicing program, enable it to collect more 
efficiently and effectively. 

Further, FMS is considering a number of initiatives intended to 
improve centralized collection of delinquent federal nontax debt. 
These initiatives primarily involve: 

* increasing the amount of debt subject to collection by FMS, 

* bolstering FMS’s set of debt collection tools, and; 

* enhancing FMS’s internal operations and interactions with referring 
federal agencies. 

Objective 1: Treasury’s Actions to Implement Centralized Debt 
Collection under DCIA—-TOP: 

TOP is used to offset, in whole or in part, federal and state payments 
to satisfy delinquent federal nontax debt of the payment recipient, to 
the extent legally allowed. Federal payments currently available for 
offset through TOP include:[Footnote 12] 

* federal tax refunds (may offset up to 100 percent); 

* federal salaries (may offset up to 15 percent of disposable pay, 
[Footnote 13] except when collecting child support, when the limit 
increases to 50 to 65 percent); 

* Office of Personnel Management retirement annuities (may offset up 
to 25 percent); 

* benefit payments, including Social Security retirement and Railroad 
Retirement (may offset up to 15 percent on payments over $750); and; 

* vendor and other miscellaneous payments, including federal employee 
travel advances and reimbursements, Medicare Part A and Part B 
payments to providers, Judgment Fund payments, and certain state 
payments (may offset up to 100 percent). 

Examples of recent and ongoing efforts at FMS to enhance TOP include: 

* making additional non-Treasury disbursing office (NTDO) payments 
available for offset through TOP, 

* increasing participation in the State Reciprocal Program, and, 

* implementing a new TOP system. 

While Treasury is responsible for disbursing payments for most federal 
agencies, NTDOs also disburse payments on behalf of the federal 
government. According to FMS officials, FMS continues to work with 
NTDOs to increase participation in TOP. 

According to FMS officials, the strategy for bringing additional NTDO 
payments into TOP is twofold: (1) for agencies with delegated 
disbursing authority, Treasury can rescind that authority, and as 
Treasury begins making those payments, the payments can be processed 
through TOP, and (2) for agencies with statutory disbursing authority, 
Treasury will work with those agencies to reach agreements that will 
allow those payments to be processed through TOP. 

NTDOs that participate in TOP for vendor offset include the Department 
of Defense’s Defense Finance and Accounting Service (DFAS) and Army 
Corps of Engineers and the U.S. Postal Service (USPS). 

Salary-paying agencies that participate in TOP for salary offset 
include DFAS (NTDO), USPS (NTDO), the U.S. Department of Agriculture’s 
National Finance Center, the General Services Administration, and the 
Department of the Interior. 

In 2007, FMS initiated a pilot project for the State Reciprocal 
Program (SRP). Under SRP, states refer state debt to TOP for offset 
against federal vendor payments. Likewise, delinquent federal nontax 
debt is matched against payments made by the states, including state 
tax refunds and state vendor payments, as authorized by state laws and 
the reciprocal agreements. 

Generally, states must pass legislation authorizing participation in 
the program, and states must enter into a reciprocal agreement with 
FMS. 

According to FMS officials, as of July 12, 2012, six states were 
participating in SRP—Maryland (2007), New Jersey (2007), New York 
(2010), Kentucky (2011), Wisconsin (2012), and Minnesota (2012). 

According to FMS officials, although not yet participating in SRP, the 
following states have each passed legislation to allow participation 
in SRP: Illinois, Kansas, Louisiana, Massachusetts, Nevada, Oregon, 
Pennsylvania, Virginia, West Virginia, and the District of Columbia. 

In fiscal year 2011, FMS began developing a new system, called 
Treasury Offset Program Next Generation (TOP NG), that will replace 
the older TOP system. 

According to FMS officials, TOP NG is expected to increase 
collections, improve timeliness and quality of debt data, and enhance 
reporting capabilities. According to these officials, specific 
outcomes to be achieved by TOP NG include (1) maximizing collections 
from offset of grant payments (grant payments are currently not being 
offset); (2) reducing the effort for manual payments (i.e., automate 
certain parts of the process, for example, automate notification to 
the creditor agency of manual check payments); (3) improving the 
effectiveness of matching (i.e., increase matching by using additional 
information from other data sources for partial match solutions); and 
(4) minimizing the inconsistencies between TOP and creditor agencies’ 
systems (i.e., reduce the time lapse for notifying creditor agencies 
of offset).  

Objective 1: Treasury’s Actions to Implement Centralized Debt 
Collection under DCIA—Cross-Servicing Program: 

According to FMS officials, FMS considers its cross-servicing program 
to be fully mature, that is, all key elements authorized by DCIA have 
been implemented.[Footnote 14] As such, FMS’s current and future 
efforts will focus on enhancements that will enable it to collect debt 
more efficiently and effectively. 

According to FMS officials and cross-servicing program guidance, FMS 
attempts to collect debt referred to the cross-servicing program by 
initiating the following actions, as appropriate: 

* perform skiptracing, if necessary, which is the process used to 
locate a debtor or identify a taxpayer identification number (TIN); 

* send demand letter and attempt phone contact; 

* offer payment agreement options (e.g., repayment or compromise 
agreement); 

* report the debt to consumer or commercial credit bureau; 

* refer the debt to TOP, based on agreement with the agency holding 
the debt; 

* pursue AWG, based on agreement with the agency holding the debt; 

* refer the debt to PCAs;[Footnote 15]  

* refer the debt to DOJ for litigation, if necessary; •return the debt 
to the referring agency; and; 

* file Internal Revenue Service (IRS) Form 1099C, reporting unpaid 
debt as potential income to the debtor. 

Examples of recent and ongoing efforts at FMS to improve its cross-
servicing program include: 

* issuing a new Treasury Financial Manual (TFM) chapter, Part 4, 
Chapter 4000 (TFM 4-4000), Debt Management Services Collection of 
Delinquent Nontax Debt, which describes how FMS provides delinquent 
nontax debt collection services to federal agencies; 

* pursuing increased collections through AWG; and; 

* developing and implementing the “Scorecard” to improve federal 
agencies’ management and reporting of delinquent federal nontax debt. 

FMS issued the new TFM 4-4000 on October 18, 2011. According to FMS 
officials, the new TFM chapter gives FMS greater authority for making 
collection decisions for debts in the cross-servicing program, 
specifically with regard to making compromises and repayment 
agreements.[Footnote 16]  

In the past, in addition to statutory requirements, collection 
parameters, such as maximum repayment periods and limits on repayment 
and compromise amounts, were established by the agency referring the 
debt. However, under the new TFM guidance, FMS has the same authority 
as the head of the referring agency to determine collection parameters 
and limits on repayment and compromise amounts without first getting 
approval from the referring agency, unless the agency has specific 
statutory authority to make such decisions. 

According to FMS officials, FMS is meeting with federal agencies to 
discuss the new TFM chapter, including FMS’s new authority regarding 
compromises and repayment agreements. FMS officials stated that as of 
the end of June 2012, FMS has discussed the new TFM chapter with 18 
federal agencies. In addition, these officials stated that discussions 
and outreach regarding TFM 4-4000 will be an ongoing effort that will 
continue through fiscal year 2013 in the form of individual agency 
meetings as well as through established training and conference venues. 

AWG is an authorized collection action under DCIA, but it is not a 
requirement. While federal agencies can administer AWG to collect 
their own debt,[Footnote 17] FMS must obtain authorization from the 
agencies in order for FMS to use AWG as part of the cross-servicing 
program. 

According to data provided by FMS, as of April 1, 2012, a total of 27 
federal agencies, including 18 of the 24 Chief Financial Officers 
(CFO) Act agencies, have authorized FMS to use AWG to collect 
delinquent federal nontax debt for a total of 239 programs. While some 
agencies, such as the Departments of Education, State, and Veterans 
Affairs have authorized FMS to perform AWG for only one program, other 
agencies have authorized FMS to perform AWG for multiple programs. 

According to data provided by FMS, for fiscal year 2011, FMS had AWG 
collections for 21 of the 27 agencies, with collections for the 
agencies ranging from less than $1,000 for 2 agencies to over $10 
million for 1 agency. 

On October 1, 2009, FMS’s cross-servicing program implemented a 
matching process with the Department of Health and Human Services’ 
(HHS) National Directory of New Hires (NDNH) database, which provides 
the names, TINs, and addresses of employees and their employers. 
According to FMS officials, because of its improved capability to 
locate debtors’ employment information with the NDNH match, FMS has 
significantly increased its ability to use AWG. 

According to FMS officials, FMS developed the “Scorecard” as a 
performance and relationship management tool to track federal agencies’
 compliance with DCIA and sound debt collection practices and to help 
identify agencies’ debt collection strengths and areas for improvement. 

The Scorecard, which includes quantitative and qualitative scoring, is 
intended to measure: 

* debt/debtor information (e.g., timeliness of debt certification, 
completeness of debt information, and debt referrals made at least 
once per quarter); 

* utilization of collection tools (e.g., AWG, credit bureau reporting, 
and TOP); 

* TROR reporting accuracy and timeliness; •meeting write-off and close-
out requirements; and; 

* validity of Treasury-granted exemptions and other exemption claims 
(i.e., the agency’s accuracy of identifying debts as ineligible or 
exempt from the mandatory transfer to Treasury). 

According to FMS officials, FMS began rollout of the Scorecard in 
fiscal year 2011, with plans for completing Scorecards for all of the 
24 CFO Act agencies by the end of fiscal year 2012. FMS officials 
consider the Scorecard to be a work in progress and are still 
assessing its usefulness.  

Objective 1: Initiatives under Consideration by Treasury to Enhance or 
Supplement Centralized Debt Collection: 

FMS has identified a series of initiatives intended to improve 
centralized collection of delinquent federal nontax debt. These 
initiatives primarily involve: 

* increasing the amount of debt subject to collection by FMS, 

* bolstering FMS’s set of debt collection tools, and, 

* enhancing FMS’s internal operations and interactions with referring 
federal agencies. 

According to FMS officials, the initiatives are predecisional—no 
decision has been made to go forward with the initiatives, which must 
be vetted by Treasury, OMB, and stakeholders, as appropriate, prior to 
implementation. 

According to FMS officials, in order to implement most of the 
initiatives, either a change in FMS’s authority (i.e., a legislative 
change) or a change in partnership with outside stakeholders (i.e., 
require referring agencies to partner with FMS, change behaviors, or 
both) would be needed. A small number of initiatives would require 
only changes controlled internally by FMS. These officials stated that 
implementing some of the initiatives may involve difficult public 
policy trade-offs, and such decisions can only be made by policymakers. 

FMS initiatives under consideration to enhance or supplement 
centralized debt collection, including the type of change and the 
primary parties involved in implementing the initiative, are shown in 
table 1. 

Table 1: FMS Initiatives under Consideration to Enhance or Supplement 
Centralized Debt Collection: 

TOP(T) or cross-servicing program (CS): T; 
Initiative: Enforce the requirement for federal agencies to refer 
eligible federal nontax debt to TOP at 180 days delinquent. 
Primary parties involved in implementation and type of change 
required: FMS and outside stakeholders (requires federal agencies to 
partner with FMS and change behaviors) 

TOP(T) or cross-servicing program (CS): T; 
Initiative: Mandate referral of eligible federal nontax debt to TOP at 
60 days delinquent. 
Primary parties involved in implementation and type of change 
required: FMS and Congress (requires a change in authority—a 
legislative change) 

TOP(T) or cross-servicing program (CS): T; 
Initiative: Mandate states’ participation in the state reciprocal 
program.
Primary parties involved in implementation and type of change 
required: FMS and Congress (requires a change in authority-—a 
legislative change). 

TOP(T) or cross-servicing program (CS): T and CS; 
Initiative: Reduce the amount of federal nontax debt exempted from TOP 
or the cross-servicing program because of federal agencies’ 
misclassification of debts as ineligible, or exempt, from referral. 
Primary parties involved in implementation and type of change 
required: FMS and outside stakeholders (requires federal agencies to 
partner with FMS and change behaviors). 

TOP(T) or cross-servicing program (CS): T; 
Initiative: Mandate that additional NTDO payment streams be processed 
in TOP. 
Primary parties involved in implementation and type of change 
required: FMS and Congress (requires a change in authority-—a 
legislative change). 

TOP(T) or cross-servicing program (CS): T; 
Initiative: Increase offset percentage of certain current payment 
streams from 15 percent to 25 percent. 
Primary parties involved in implementation and type of change 
required: FMS and Congress (requires a change in authority—-a 
legislative change). 

TOP(T) or cross-servicing program (CS): T; 
Initiative: Mandate offset for currently ineligible payment streams, 
up to 25 percent. 
Primary parties involved in implementation and type of change 
required: FMS and Congress (requires a change in authority—-a 
legislative change) 

TOP(T) or cross-servicing program (CS): CS; 
Initiative: Increase the use and effectiveness of AWG. 
FMS and outside stakeholders (requires federal agencies to partner 
with FMS and change behaviors); making AWG mandatory would require a 
legislative change. 

TOP(T) or cross-servicing program (CS): T; 
Initiative: Enhance the TOP matching process by improving the data-
matching algorithm. 
Primary parties involved in implementation and type of change 
required: FMS (requires internal operational improvements at FMS). 

TOP(T) or cross-servicing program (CS): CS; 
Initiative: Improve the ability to quickly identify cases that should 
be (1) worked internally at FMS, (2) routed to an internal specialist, 
or (3) referred to PCAs or DOJ, to optimize collections.
Primary parties involved in implementation and type of change 
required: FMS (requires internal operational improvements at FMS). 

TOP(T) or cross-servicing program (CS): CS; 
Initiative: Increase the frequency by which agencies are required to 
provide proof of debt documentation upon referral of debt to the cross-
servicing program, specifically for debts with large outstanding 
balances (i.e., debts over $26,000). 
Primary parties involved in implementation and type of change 
required: FMS and outside stakeholders (requires federal agencies to 
partner with FMS and change behaviors). 

Source: FMS. 

[End of table] 

Several of these initiatives, which are in the early stages of 
development, could, if approved and effectively implemented, address 
long-standing concerns about FMS’s centralized debt collection 
program. We previously reported on certain issues that continue to 
remain. 

These issues include: 

* debt not promptly referred for collection at 180 days delinquent, 

* debt reported as excluded from TOP and cross-servicing program 
referral, 

* federal agencies’ use of AWG, and, 

* assessment of FMS’s debt collection strategy. 

Debt not promptly referred for collection at 180 days delinquent: 

* In a June 2000 testimony on FMS’s implementation of its cross-
servicing program, we noted that although FMS had taken steps to 
encourage agencies to refer eligible debt, much of the eligible debt 
was not being promptly referred and the age of the debt referred 
generally was significantly older than 180 days delinquent.[Footnote 
18] In our testimony, we stated that debt needs to be promptly 
referred for collection because the likelihood of recovering amounts 
owed decreases dramatically as the debt ages. 

* During this current review, as previously discussed, we noted that 
$10.2 billion (or about 15 percent) of debt reported in the TRORs as 
required to be referred to TOP, and $1.1 billion (or about 5 percent) 
of debt reported in the TRORs as required to be referred for cross-
servicing, had not been referred as of fiscal year-end 2011. 

Debt reported as excluded from TOP and cross-servicing program 
referral: 

* In August 2000, we reported that a large amount of debt over 180 
days delinquent was reported by federal agencies as ineligible for, or 
excluded from, the cross-servicing program (e.g., debt reported in the 
“Other” categories); however, these amounts were not required to be, 
and were not, independently verified.[Footnote 19] 

* During this current review, as previously discussed, we noted that 
as of September 30, 2011, federal agencies reported a total of $21.4 
billion in the “Other” categories on the TRORs, indicating that debt 
was excluded from TOP, the cross-servicing program, or both. According 
to FMS officials, FMS was not able to provide explanations for all of 
the debt in the “Other” categories. According to these officials, FMS 
sometimes questioned the validity of certain of the exclusions. 
Further, there is no requirement for independent verification of such 
exclusions. 

Federal agencies’ use of AWG: 

* In October 2001, we reported that federal agencies were not 
utilizing AWG as authorized by DCIA to collect delinquent federal 
nontax debt even though, according to experts, AWG can potentially be 
an extremely powerful debt collection tool.[Footnote 20]  

* During this current review, as previously discussed, as of April 
2012, data provided by FMS show that only 27 federal agencies, 
including 18 of the 24 CFO Act agencies, allowed FMS to perform AWG as 
part of cross-servicing. According to FMS’s data, collections from AWG 
for fiscal year 2011 totaled $27 million, and FMS attributed almost 
$23 million of that amount to the NDNH match (i.e., the NDNH match 
provided the debtor and employer information necessary for FMS to 
administer AWG). Although FMS officials stated that FMS matches all 
debts in the cross-servicing database to the NDNH data, FMS can only 
perform AWG for those federal agencies that allow it as part of their 
cross-servicing profile (i.e., those agencies that have completed AWG 
prerequisites, including promulgation of regulations and hearing 
procedures, and have authorized AWG as a collection tool for their 
debts). 

Assessment of FMS’s debt collection strategy: 

* In August 2000, we recommended, among other things, that FMS perform 
a comprehensive review of its cross-servicing process (e.g., analyze 
the types of debt referred to FMS and the associated collection rates; 
identify specific types of debt, if any, that should be sent promptly 
to the PCAs; and identify the appropriate level of involvement by FMS 
collectors) to determine whether FMS’s debt collection strategy was 
appropriate for optimizing collections.[Footnote 21]  

* During this current review, FMS officials stated that they recognize 
that improvements can be made in FMS’s cross-servicing program to 
increase collections, and FMS is working toward that goal. According 
to FMS officials, efforts currently under way to increase collections 
include identifying potential legislation, modifying FMS’s business 
process, acquiring more sophisticated technology, and using analytics 
to assess the collectibility of debts and determine the most efficient 
and effective collection actions (e.g., service in-house or refer to a 
PCA). 

Results: 

Objective 2: Treasury’s TOP and Cross-Servicing Program Collections, 
2007 through 2011: 

As shown in figure 1, according to data provided by FMS, during each 
of the last 5 fiscal years (i.e., 2007 through 2011), the amount of 
delinquent federal nontax debt referred to TOP and eligible for offset 
as of fiscal year-end increased, going from $29.8 billion in fiscal 
year 2007 to $102.0 billion in fiscal year 2011. During this same 5-
year period, FMS’s annual TOP collections fluctuated, ranging from 
$1.4 billion in fiscal year 2007 to the highest amount for the 5-year 
period of $2.6 billion in fiscal year 2011.[Footnote 22]  

Similarly, as shown in figure 2, according to data provided by FMS, 
during each of the last 5 fiscal years (i.e., 2007 through 2011), the 
amount of delinquent federal nontax debt referred to the cross-
servicing program and eligible for collection as of fiscal year-end 
increased, going from $8.6 billion in fiscal year 2007 to $17.3 
billion in fiscal year 2011. During this same 5-year period, FMS’s 
annual cross-servicing program collections fluctuated, ranging from 
$95 million in fiscal year 2007 to the highest amount for the 5-year 
period of $193 million in fiscal year 2009.[Footnote 23] 

Figure 1: Total Delinquent Federal Nontax Debt Eligible for Offset in 
TOP, and Annual TOP Collections, for Fiscal Years 2007 through 2011: 

[Refer to PDF for image: vertical bar graph] 

Fiscal year: 2007; 
Total delinquent federal nontax debt eligible for offset in TOP as of 
September 30: $29.8 billion; 
Total annual collections from TOP for the fiscal year: $1.4 billion. 

Fiscal year: 2008; 
Total delinquent federal nontax debt eligible for offset in TOP as of 
September 30: $31.9 billion; 
Total annual collections from TOP for the fiscal year: $2.2 billion. 

Fiscal year: 2009; 
Total delinquent federal nontax debt eligible for offset in TOP as of 
September 30: $48.1 billion; 
Total annual collections from TOP for the fiscal year: $1.8 billion. 

Fiscal year: 2010; 
Total delinquent federal nontax debt eligible for offset in TOP as of 
September 30: $78.1 billion; 
Total annual collections from TOP for the fiscal year: $2.2 billion. 

Fiscal year: 2011; 
Total delinquent federal nontax debt eligible for offset in TOP as of 
September 30: $102.0 billion; 
Total annual collections from TOP for the fiscal year: $2.6 billion. 

Source: Unaudited data provided by FMS. 

[End of figure] 

Figure 2: Total Delinquent Federal Nontax Debt Eligible for Collection 
in FMS’s Cross-Servicing Program, and Annual Cross-Servicing Program 
Collections, for Fiscal Years 2007 through 2011: 

[Refer to PDF for image: vertical bar graph] 

Fiscal year: 2007; 
Total delinquent federal nontax debt eligible for collection through 
the cross-servicing program as of September 30: $8.625 billion; 
Total annual collections from the cross-servicing program for the 
fiscal year: $95 million. 

Fiscal year: 2008; 
Total delinquent federal nontax debt eligible for collection through 
the cross-servicing program as of September 30: $10.614 billion; 
Total annual collections from the cross-servicing program for the 
fiscal year: $110 million. 

Fiscal year: 2009; 
Total delinquent federal nontax debt eligible for offset in TOP Total 
delinquent federal nontax debt eligible for collection through the 
cross-servicing program September 30: $12.166 billion; 
Total annual collections from the cross-servicing program for the 
fiscal year: $193 million. 

Fiscal year: 2010; 
Total delinquent federal nontax debt eligible for collection through 
the cross-servicing program as of September 30: $15.768 billion; 
Total annual collections from the cross-servicing program TOP for the 
fiscal year: $123 million. 

Fiscal year: 2011; 
Total delinquent federal nontax debt eligible for collection through 
the cross-servicing program as of September 30: $17.345 billion; 
Total annual collections from the cross-servicing program for the 
fiscal year: $138 million. 

Source: Unaudited data provided by FMS. 

[End of figure]  

Data provided by FMS show that collections under the cross-servicing 
program are the highest during the first 2 years after debt referral. 
For example, for debts referred for cross-servicing during fiscal year 
2007 that remained active in FMS’s cross-servicing database, FMS and 
its PCAs collected: 

* 2.02 percent during fiscal year 2007, 
* 2.44 percent during fiscal year 2008, 
* 0.70 percent during fiscal year 2009, 
* 0.41 percent during fiscal year 2010, and, 
* 0.23 percent during fiscal year 2011. 

Results: 

Objective 3: Early Referrals of Delinquent Federal Nontax Debt to 
Treasury for Collection: 

In summary, according to the TRORs, federal agencies did not refer a 
significant amount of debt prior to or at 180 days delinquent to FMS 
for TOP or the cross-servicing program.[Footnote 24] Accordingly, we 
did not perform any specific analysis of collection results for the 
limited amount of debt referred early to TOP or the cross-servicing 
program. 

According to FMS officials, and consistent with TFM 4-4000, FMS 
strongly encourages federal agencies to transfer all eligible 
delinquent federal nontax debt to FMS for debt collection services 
before it is 180 days delinquent; however, federal agencies are not 
required to do so.[Footnote 25] 

According to the TRORs, as of September 30, 2011, federal agencies 
reported referring $228.4 million in federal nontax debt to TOP, and 
$132.8 million of federal nontax debt to the cross-servicing program, 
prior to the debt becoming over 180 days delinquent. 

According to the TRORs, early referrals of debt prior to or at 180 
days delinquent represented only about 0.4 percent of the reported 
total of $58.4 billion of federal nontax debt referred to TOP as of 
September 30, 2011, and less than 0.7 percent of the reported total of 
$19.3 billion of such debt referred to the cross-servicing program as 
of September 30, 2011. 

In addition, while federal agencies reported in the TRORs a total of 
$49.7 billion of federal nontax debt delinquent 180 days or less as of 
September 30, 2011, only about 0.5 percent of such debt was reported 
as referred to TOP and only about 0.3 percent of such debt was 
reported as referred to the cross-servicing program. 

Results: 

Objective 4: Treasury-Granted Exemptions from Mandatory Transfer of 
Debts for Cross-Servicing: 

In summary, Treasury has granted exemptions from mandatory transfer of 
debt for cross-servicing to four federal agencies for specific types 
of debt.[Footnote 26] FMS’s guidance for exemptions does not require 
that exemptions be reassessed once granted, and according to Treasury 
officials, Treasury has not reevaluated the exemptions. 

DCIA authorizes Treasury to grant exemptions from mandatory transfer 
of debt for cross-servicing for specific classes of debt at the 
request of the head of a federal agency, or upon the Secretary of the 
Treasury’s own initiative and determination. 

According to FMS officials, Treasury has granted such exemptions to 
four agencies, which remained in place as of July 18, 2012: 

* to the Social Security Administration (SSA) (in 1999) for 
Supplementary Security Income debt and debt of former child 
beneficiaries in the Old-Age, Survivors, and Disability Insurance 
program; 

* to the Small Business Administration (SBA) (in 2000) for disaster 
loans and collateralized business loans in active workout (i.e., an 
agreement to repay the loan is in process); 

* to Education (in 2001) for delinquent and defaulted student loans; 
and; 

* to HHS (in 2002) for health professions debt and debt stemming from 
unfiled cost reports. 

According to FMS officials, the criteria for evaluating exemptions is 
set forth in FMS’s Exemption of Classes of Debts from Mandatory 
Transfer to Treasury: Procedures and Standards,dated January 2001. 
[Footnote 27] FMS officials also stated that the criteria used to 
evaluate exemption requests prior to January 2001 (i.e., for SSA’s and 
SBA’s exemptions) were essentially the same as those outlined in FMS’s 
January 2001 criteria, and those criteria are found in 31 C.F.R. § 
285.12, Transfer of Debts to Treasury for Collection. The guidance 
does not include any requirements or procedures for reassessing an 
exemption once it is granted. 

According to a Treasury letter from 2001, Education’s exemption is 
permanent. 

FMS officials stated that since the exemptions from cross-servicing 
were granted, Treasury has not reevaluated the exemptions or assessed 
collections by the agencies for the exempted classes of debt. 
According to these officials, Treasury has not performed a study to 
compare any of these four federal agencies’ collections of exempted 
debt with FMS’s cross-servicing program capability. 

According to the TRORs prepared by these four agencies, their 
exemptions from cross-servicing totaled a reported $35.5 billion as of 
September 30, 2011—Education reported exemptions of $33.8 billion, or 
about 95 percent of total Treasury-granted exemptions from cross-
servicing; SSA reported exemptions of $1.7 billion; HHS reported 
exemptions of $61.4 million; and SBA did not report any such exempted 
debt amount as of September 30, 2011.  

Results: 

Objective 5: Treasury’s Role in Implementing the Debtor Bar Provision 
of DCIA: 

In summary, according to FMS officials, FMS’s primary mechanisms used 
to help ensure that delinquent federal nontax debtors do not receive 
additional federal loans, loan insurance, or loan guarantees are FMS’s 
credit bureau reporting as part of cross-servicing and FMS’s Debt 
Check. Data provided by FMS show that only two federal agencies have 
used Debt Check during the last 5 calendar years. 

In 1998, Treasury established regulations for implementing DCIA’s 
debtor bar provision,[Footnote 28] which bars delinquent federal 
nontax debtors from obtaining federal financial assistance in the form 
of certain loans, loan insurance, or loan guarantees[Footnote 29] 
until the debtor resolves the delinquency(s).[Footnote 30]  

To facilitate compliance with the debtor bar provision, according to 
FMS officials, FMS has (1) referred delinquent federal nontax debt 
information to credit bureaus as part of the cross-servicing program 
[Footnote 31] and (2) made such information directly available to 
federal agencies through Debt Check, an Internet-based information 
system. 

Implemented in 2003, Debt Check can assist federal agencies with 
implementing the debtor bar provision by providing information on 
delinquent federal nontax debtors currently available for offset in 
TOP. Debt Check includes the debtor’s name and TIN, and credit agency 
contact information. 

According to FMS officials, there is no legislative or regulatory 
requirement for federal agencies to use Debt Check. In addition, while 
FMS officials consider Debt Check a mechanism to help credit agencies 
determine loan eligibility, these officials do not consider it to be a 
control to ensure that delinquent debtors do not get additional 
financial assistance in the form of a loan, loan guarantee, or loan 
insurance. 

Data provided by FMS show that SBA, which began using Debt Check in 
2003, is the only federal agency that has consistently used Debt 
Check. Over the last 5 calendar years (i.e., 2007 through 2011), 
according to FMS’s data, SBA has made a total of 26,593 inquires in 
Debt Check. In addition, FMS’s data show that the National Oceanic and 
Atmospheric Administration, which began using Debt Check in 2009, has 
made a total of 259 inquiries from calendar years 2009 through 2011. 
Further, according to FMS’s data, no other federal agency has made any 
inquiries of Debt Check during the last 5 calendar years. 

According to FMS officials, FMS does not have information on the 
results of the Debt Check inquiries. For example, FMS does not know 
how many times the agencies’ inquiries resulted in identifying 
delinquent debtors or how the results of the inquiries were ultimately 
used by the agencies. 

On June 18, 2010, the President issued a memorandum for the heads of 
executive departments and agencies directing federal agencies to 
review available databases with relevant information on eligibility 
before the release of any federal funds. The memorandum also directed 
the establishment of a single point of entry through which agencies 
would access relevant data—-in a network of databases to be 
collectively known as the Do Not Pay List—before determining 
eligibility for a benefit, grant, contract award, or other federal 
funding. 

In response to the presidential memorandum, OMB and Treasury 
established the Do Not Pay tool, which includes a web-based single 
entry access portal that federal agencies can use to gain access to 
several data sources to assist in determining whether an individual or 
entity is eligible to receive federal payments or engage in federal 
contracts or grants. Treasury’s Bureau of the Public Debt is 
responsible for implementing the Do Not Pay tool, with oversight and 
direction from OMB. 

FMS’s Debt Check was made available to federal agencies via the Do Not 
Pay portal in March 2012. 

Briefing Slides Footnotes: 

[1] Under DCIA, the Department of the Treasury has significant 
governmentwide responsibilities for collecting federal nontax debts 
delinquent more than 180 days that are referred by federal agencies 
for collection. Pub. L. No. 104-134, §31001, 100 Stat. 1321-358 (Apr. 
26, 1996). While Treasury has additional debt collection-related 
responsibility(s) under other legislation, this review focuses only on 
Treasury’s debt collection program as authorized by DCIA. 

[2] Previous GAO products concerning Treasury’s debt collection 
program include GAO, Debt Collection: Treasury Faces Challenges 
Implementing Its Cross-Servicing Initiative, [hyperlink, 
http://www.gao.gov/products/GAO/AIMD-00-234] (Washington, D.C.: Aug. 
4, 2000); Debt Collection Improvement Act of 1996: Major Data Sources 
Inadequate for Implementing the Debtor Bar Provision, [hyperlink, 
http://www.gao.gov/products/GAO-02-462] (Washington, D.C.: Mar. 29, 
2002); and Debt Collection: Opportunities Exist for Improving FMS’s 
Cross-Servicing Program, [hyperlink, 
http://www.gao.gov/products/GAO-04-47] (Washington, D.C.: Oct. 31, 
2003). 

[3] TOP compares the names and taxpayer identification numbers (TIN) 
(i.e., Social Security number or employer identification number) of 
debtors to the names and TINs of eligible federal and state payment 
recipients. If there is a match, the federal or state payment is 
reduced, or offset, in whole or in part, to satisfy the overdue debt, 
to the extent legally allowed. In addition to delinquent federal 
nontax debt, TOP processes and collects delinquent federal tax debt, 
delinquent child support debt, and certain delinquent debt owed to 
states, including some state income tax debt and unemployment 
insurance compensation debt. 4Treasury’s cross-servicing program 
utilizes collection techniques authorized by DCIA and other federal 
debt collection laws to collect delinquent nontax debt on behalf of 
federal agencies. 

[5] DCIA centralized the collection of delinquent nontax debt owed to 
the federal government and gave Treasury significant responsibilities 
in this area. Within Treasury, FMS is charged with, among other 
things, the responsibility for delinquent federal nontax debt 
collection. 

[6] Treasury requires federal agencies to prepare TRORs quarterly and 
verify that the fiscal year-end receivable balances reconcile to 
agencies’ audited financial statement receivable balances. 

[7] According to the Federal Claims Collections Standards (31 C.F.R. 
§900.2(b)) and Treasury’s Instructional Workbook for Preparing the “
Treasury Report on Receivables and Debt Collection Activities”, A 
Supplement to the Treasury Financial Manual, Volume I-Part 2-Chapter 
4100, issued June 2008, a debt is delinquent if it has not been paid 
by the due date specified in the agency’s initial written demand for 
payment or applicable agreement, unless other satisfactory payment 
arrangements have been made. Although a contract may provide for a “
grace” period, once that period has expired without payment, the date 
of delinquency (which is used for aging the debt) is the original due 
date. 8According to OMB Circular No. A-129, federal nontax debt that 
is written off can be classified as CNC if the agency intends to take 
additional collection action on the debt. Collection action, including 
offset, can be taken on CNC debt until such actions are legally 
precluded or the debt is paid, sold, or closed out. Generally, debt 
that is closed out must be reported to the Treasury’s Internal Revenue 
Service as potential income to the debtor. (See 26 C.F.R. §6050P). 
According to FMS, in most cases, federal agencies stop all collection 
activity once a federal nontax debt is closed out. 

[8] According to OMB Circular No. A-129, federal nontax debt that is 
written off can be classified as CNC if the agency intends to take 
additional collection action on the debt. Collection action, including 
offset, can be taken on CNC debt until such actions are legally 
precluded or the debt is paid, sold, or closed out. Generally, debt 
that is closed out must be reported to the Treasury’s Internal Revenue 
Service as potential income to the debtor. (See 26 C.F.R. §6050P). 
According to FMS, in most cases, federal agencies stop all collection 
activity once a federal nontax debt is closed out. 

[9] According to FMS, DOJ refers eligible judgment debt to TOP on 
behalf of federal agencies. 

[10] In the Delinquent Debt (Over 180 Days Delinquent) Eligible for 
Referral to Treasury Offset and Cross-Servicing section of the TROR, 
there are three “Other” categories—one for debt exempted from TOP, one 
for debt exempted from the cross-servicing program, and one for debt 
exempted from both TOP and the cross-servicing program. As of 
September 30, 2011, federal agencies reported a total of $21.4 billion 
in these “Other” categories. According to TROR guidance, delinquent 
federal nontax debt reported in the “Other” categories includes debt 
that is not legally enforceable, debt scheduled for sale, and other 
debt that is exempt from mandatory referral for reasons not otherwise 
listed on the TROR. Agencies must footnote amounts included as “Other,”
with the reason for exempting the debt from referral. 

[11] In addition to FMS, as of July 18, 2012, there is one other 
Treasury-designated debt collection center—the Department of Health 
and Human Services’ (HHS) Program Support Center (PSC). PSC has been 
granted authority to service the following types of debt: (1) HHS debt 
less than 180 days delinquent, (2) HHS debt exempt from mandatory 
transfer to Treasury for cross-servicing, and (3) HHS debt and debt 
owed to other federal agencies arising from grant audit and program 
disallowances, but only for 180 days following completion of appeals. 

[12] Certain federal payments are not available for offset, including 
(1) payments exempted by law, for example, Education’s student loan 
payments and Department of Veterans Affairs’ benefit payments and (2) 
payments exempted by the Secretary of the Treasury, for example, 
Social Security Administration (SSA) Supplemental Security Income 
benefit payments and U.S. Department of Agriculture Food and Nutrition 
Service benefit payments. 

[13] Disposable pay means that part of the debtor's compensation 
(including, but not limited to, salary, bonuses, commissions, and 
vacation pay) from an employer remaining after the deduction of health 
insurance premiums and any amounts required by law to be withheld. 

[14] Although authorized by DCIA, FMS officials told us that FMS has 
no immediate plans to perform asset sales, liquidate collateral,sell 
secured debts, or publish or otherwise disseminate information 
regarding the identity of delinquent federal nontax debtors as part of 
its cross-servicing program. According to these officials, FMS has not 
recently been requested by any federal agency to perform these 
services. In addition, DCIA included a provision known as gain 
sharing, which was designed to provide agencies an incentive to 
increase collections of delinquent debt by reimbursing them for 
certain expenses related to collection. According to a FMS official, 
gain sharing has not been implemented, but it is being considered 
along with other incentive programs. 

[15] FMS may refer debt to one of four PCA contractors. The PCA can 
service the debt for up to 270 days, or longer if in a repayment 
agreement, before returning it to FMS. At that time, FMS can refer the 
debt to a second PCA, which can also service the debt for up to 270 
days, or longer if in a repayment agreement, before returning it to 
FMS. 

[16] FMS debt collection staff and PCA personnel are required to 
attempt to collect delinquent federal nontax debt in full; however, 
they can enter into repayment or compromise agreements with debtors. 

[17] For example, Education, SSA, and the Small Business 
Administration administer AWG to collect their own delinquent federal 
nontax debt. 

[18] GAO, Debt Collection: Treasury Faces Challenges Implementing Its 
Cross-Servicing Initiative, [hyperlink, 
http://www.gao.gov/products/GAO/T-AIMD-00-213] (Washington, D.C.: June 
8, 2000). 

[19] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-234]. 

[20] GAO, Debt Collection Improvement Act of 1996: Agencies Face 
Challenges Implementing Certain Key Provisions, [hyperlink, 
http://www.gao.gov/products/GAO-02-61T] (Washington, D.C.: Oct. 10, 
2001). 

[21] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-234]. 

[22] TOP assesses the creditor agency a fee of $17 to $29 for each 
federal or state payment offset to collect a nontax federal debt. The 
fees are deducted from collections, with the agency receiving 
collections less fees to apply toward the debt. These TOP fees are 
included in the TOP collection amounts. 

[23] For the cross-servicing program, FMS charges a fee to the 
creditor agency and, as authorized by the creditor agency, adds this 
fee to the debt balance—for any debt that is delinquent by more than 2 
years, the fee is 30 percent of the total payment received,and for any 
debt delinquent 2 years or less, the fee is 28 percent of the total 
payment received. When a debt is collected by a PCA, the applicable 
fee is allocated as follows: PCAs receive commission fees (i.e., on 
amounts collected by them) at 25 percent for debts more than 2 years 
delinquent, and at 23 percent for debts delinquent 2 years or less; 2 
percent is allocated to a bonus pool divided among the PCAs in 
accordance with contract terms; and 3 percent is retained by FMS. When 
a debt is collected by DOJ, it charges an additional fee of 3 percent 
of the collection amount on payments received after an account has 
been referred to DOJ for collection. Fees are deducted from 
collections, with the agency receiving collections less fees to apply 
toward the debt. These fees for cross-servicing are included, where 
applicable, in the cross-servicing program collection amounts. 

[24] For debt referred prior to or at 180 days delinquent as of 
September 30, 2011, we deemed significant any amount (1) over $1 
billion, (2) over 5 percent of the total reported federal nontax debt 
referred to TOP or the cross-servicing program, or (3) over 5 percent 
of the total reported federal nontax debt delinquent 180 days or less. 

[25] Federal agencies must certify that debt referred to FMS for 
collection is delinquent, valid, and legally enforceable; there are no 
legal bars to collection; and all applicable due process requirements 
have been completed. The certifying official makes this certification 
to FMS under penalty of perjury. 

[26] Treasury has also granted exemptions to all federal agencies (in 
2005) for certain debts being collected by administrative wage 
garnishment. 

[27] According to FMS’s Exemption of Classes of Debts from Mandatory 
Transfer to Treasury: Procedures and Standards, the Secretary of the 
Treasury will determine that granting an exemption is in the best 
interests of the federal government. Factors to be considered are 
whether(1) the exemption is the best means to protect the federal 
government’s financial interest, (2) transfer of the debt to FMS would 
interfere with program goals, and (3) the exemption is consistent with 
the purposes of DCIA. According to FMS officials, since 2001, there 
have been no revisions or updates to these criteria. 

[28] 31 U.S.C. §3720B; 31 C.F.R. §285.13. 

[29] Exceptions to the debtor bar provision include disaster 
assistance loans, marketing loans, and certain loan deficiency 
payments. 

[30] According to Treasury’s regulations, for the purpose of denying 
federal financial assistance, a person’s delinquent debt is resolved 
only if the person (1) pays or otherwise satisfies the delinquent debt 
in full; (2) pays the delinquent debt in part if the creditor agency 
accepts such partial payment as a compromise in lieu of payment in 
full; (3) cures the delinquency under terms acceptable to the creditor 
agency in that the person pays any overdue payments, plus all 
interest, penalties, late charges, and administrative charges assessed 
by the creditor agency as a result of the delinquency; or (4) enters 
into a written repayment agreement with the creditor agency to pay the 
debt, in whole or in part, under terms and conditions acceptable to 
the creditor agency. In addition, Treasury has established 90 days 
delinquent as the trigger for denying federal financial assistance 
under the DCIA debtor bar provision. 31 C.F.R. §285.13(d). 

[31] According to FMS’s Cross-Servicing Implementation Guide, FMS 
begins credit bureau reporting 60 days after a consumer debt is 
referred to the cross-servicing program and 30 days after a commercial 
debt is referred. Federal agencies can use credit bureau reports to 
identify delinquent federal debtors during the loan application 
process. 

[End of enclosure] 

Enclosure II: Scope and Methodology 

To determine what actions the Department of the Treasury (Treasury) 
has taken to implement its centralized debt collection program as 
authorized by the Debt Collection Improvement Act of 1996 (DCIA), and 
what efforts are under way or planned by Treasury to enhance or 
supplement its ability to collect delinquent federal nontax debt, we 
reviewed DCIA, pertinent Treasury regulations, and Treasury and Office 
of Management and Budget guidance concerning delinquent federal nontax 
debt collection under DCIA. In addition, we interviewed Treasury’s 
Financial Management Service (FMS) officials, and we obtained and 
reviewed pertinent documents related to the Treasury Offset Program 
(TOP) and the cross-servicing program, including information on FMS’s 
efforts to include additional payment types into TOP, implement 
administrative wage garnishment, and develop the “Scorecard,” a tool 
for tracking federal agencies’ compliance with DCIA. Also, we 
reviewed, and discussed with FMS officials, documents pertaining to 
FMS’s initiatives to improve centralized collection of delinquent 
federal nontax debt that are currently being vetted by Treasury and 
other stakeholders. 

To determine Treasury's collection experience over the last 5 years 
(i.e., fiscal years 2007 through 2011) for delinquent federal nontax 
debt relative to the amount of such debt that was referred to Treasury 
for collection, we interviewed FMS officials and obtained from FMS (1) 
annual collection data for TOP and the cross-servicing program for 
each fiscal year and (2) the amount of debt in TOP and eligible for 
offset and the amount of debt in the cross-servicing program and 
eligible for collection, as of each fiscal year-end for comparable 
years. We also obtained data from federal agencies’ Treasury Reports 
on Receivables and Debt Collection Activities (TROR), which show the 
status, as reported by federal agencies to Treasury, of federal nontax 
debt, including delinquencies and collections, and are used by 
Treasury to report on TOP and the cross-servicing program.[Footnote 1] 
This report presents various data obtained from FMS and reported in 
the TRORs. According to an FMS official, the FMS data are unaudited, 
and to the best of our knowledge, the TROR data are unaudited. In some 
instances, differences or inconsistencies exist between the data 
obtained from FMS and the data reported in the TRORs, and in such 
instances, the data have not been reconciled by FMS. We used these 
data because they are the best data available that met our objectives. 
However, we did not attempt to reconcile or assess the reliability of 
these data. 

To determine whether agencies were reporting having referred 
significant amounts of federal nontax debt to Treasury for collection 
prior to or at 180 days delinquent and, if so, how Treasury’s 
collection results for such referrals compare to collection results 
for the referred debts that are more than 180 days delinquent, we 
interviewed FMS officials and obtained data from the TRORs, as of 
September 30, 2011, to identify those agencies that reported having 
referred debts to TOP and the cross-servicing program prior to or at 
180 days delinquent and the associated dollar amounts of such 
referrals. Based on our findings regarding early referrals, we did not 
attempt to perform any specific analysis of collection results for the 
limited amount of debt referred early to TOP or the cross-servicing 
program. 

To identify the agencies that have exemptions from mandatory transfer 
of delinquent federal nontax debt to Treasury for cross-servicing and 
the actions Treasury takes to evaluate these exemptions and their 
associated collections, especially in comparison with its own cross-
servicing program’s collection capability, we interviewed FMS 
officials and obtained and reviewed pertinent documents, including 
FMS’s guidance for authorizing such exemptions, 

Exemption of Classes of Debts from Mandatory Transfer to Treasury, and 
information related to Treasury’s approval of the existing exemptions, 
including the types of debt exempted for each federal agency with an 
approved exemption(s). We also identified exemptions and the related 
dollar amounts reported by federal agencies in the TRORs as of 
September 30, 2011. 

To determine what mechanisms and controls are in place at Treasury to 
help ensure that federal agencies do not make new loans, loan 
insurance, or loan guarantees to delinquent federal debtors to the 
extent required by the debtor bar provision of DCIA, we interviewed 
FMS officials and obtained and reviewed information provided by FMS on 
Debt Check, including pertinent data concerning federal agencies’ use 
of Debt Check for the last 5 calendar years (i.e., 2007 through 2011). 
In addition, we interviewed Treasury’s Bureau of the Public Debt 
officials concerning the Bureau of the Public Debt’s implementation of 
the new Do Not Pay tool, including the availability of Debt Check 
through the Do Not Pay portal. 

We requested comments on a draft of the briefing slides and the 
related enclosures from the Commissioner of FMS or his designee. On 
August 10, 2012, FMS provided technical comments, which we 
incorporated as appropriate. 

We conducted our work from February 2012 to September 2012 in 
accordance with all sections of GAO’s Quality Assurance Framework that 
are relevant to our objectives. The framework requires that we plan 
and perform the engagement to obtain sufficient and appropriate 
evidence to meet our stated objectives and to discuss any limitations 
in our work. We believe that the information and data obtained, and 
the analysis conducted, provide a reasonable basis for any findings 
and conclusions. 
 
Enclosure II Footnote: 

[1] Treasury requires federal agencies to prepare the TRORs quarterly 
and verify that the fiscal year-end receivable balances reconcile to 
the agencies’ audited financial statement receivable balances. 

[End of enclosure] 

Enclosure III: Status of Governmentwide Federal Nontax Debt and 
Delinquencies: 

According to the Treasury Report on Receivables and Debt Collection 
Activities (TROR),[Footnote 1] total federal nontax debt, federal 
nontax debt delinquencies, and federal nontax debt delinquent over 180 
days reported by federal agencies have increased substantially from 
fiscal year 2007 through fiscal year 2011, as shown in figure 3. 
Specifically, reported federal nontax debt increased from $339.6 
billion at the end of fiscal year 2007 to $777.8 billion at the end of 
fiscal year 2011, an increase of about 129 percent. Reported federal 
nontax debt delinquencies also increased substantially, rising from 
$64.9 billion at the end of fiscal year 2007 to $131.0 billion at the 
end of fiscal year 2011, an increase of over 100 percent. Likewise, 
reported federal nontax debt delinquent over 180 days increased from 
$45.5 billion at the end of fiscal year 2007 to $81.3 billion at the 
end of fiscal year 2011, an increase of about 79 percent. Such 
increases are in marked contrast to the previous 4 fiscal years (i.e., 
2003 through 2006). During this time, relatively little change is 
evident in reported amounts of total federal nontax debt, while total 
reported federal nontax debt delinquencies and reported federal nontax 
debts more than 180 days delinquent decreased somewhat. 

Figure 3: Reported Amounts of Total Federal Nontax Debt, Delinquent 
Federal Nontax Debt, and Federal Nontax Debt Delinquent over 180 Days, 
Governmentwide, for Fiscal Years 2003 through 2011: 

[Refer to PDF for image: vertical bar graph] 

Fiscal year: 2003; 
Total federal nontax debt as of September 30: $312.3 billion; 
Total delinquent federal nontax debt as of September 30: $70.1 billion; 
Total federal nontax debt over 180 days as of September 30: $52.9 
billion. 

Fiscal year: 2004; 
Total federal nontax debt as of September 30: $310.8 billion; 
Total delinquent federal nontax debt as of September 30: $71 billion; 
Total federal nontax debt over 180 days as of September 30: $50.6 
billion. 

Fiscal year: 2005; 
Total federal nontax debt as of September 30: $310.3 billion; 
Total delinquent federal nontax debt as of September 30: $62 billion; 
Total federal nontax debt over 180 days as of September 30: $44.6 
billion. 

Fiscal year: 2006; 
Total federal nontax debt as of September 30: $318.8 billion; 
Total delinquent federal nontax debt as of September 30: $64.9 billion; 
Total federal nontax debt over 180 days as of September 30: $44.1 
billion. 

Fiscal year: 2007; 
Total federal nontax debt as of September 30: $339.6 billion; 
Total delinquent federal nontax debt as of September 30: $64.9 billion; 
Total federal nontax debt over 180 days as of September 30: $45.5 
billion. 

Fiscal year: 2008; 
Total federal nontax debt as of September 30: $366.6 billion; 
Total delinquent federal nontax debt as of September 30: $74.5 billion; 
Total federal nontax debt over 180 days as of September 30: $53.7 
billion. 

Fiscal year: 2009; 
Total federal nontax debt as of September 30: $525 billion; 
Total delinquent federal nontax debt as of September 30: $107.2 
billion; 
Total federal nontax debt over 180 days as of September 30: $59.3 
billion. 

Fiscal year: 2010; 
Total federal nontax debt as of September 30: $625.8 billion; 
Total delinquent federal nontax debt as of September 30: $103.6 
billion; 
Total federal nontax debt over 180 days as of September 30: $69.3 
billion. 

Fiscal year: 2011; 
Total federal nontax debt as of September 30: $777.8 billion; 
Total delinquent federal nontax debt as of September 30: $131 billion; 
Total federal nontax debt over 180 days as of September 30: $81.3 
billion. 

Source: Data reported in the TRORs for fiscal years 2003 through 2011. 

Note: To the best of our knowledge, these data are unaudited. 

[End of figure] 

Reported amounts in the TRORs of total federal nontax delinquent debt 
and federal nontax debt delinquent over 180 days as a percentage of 
total federal nontax debt, each decreased from fiscal year 2003 
through fiscal year 2011, from about 22 percent and 17 percent, 
respectively, to about 17 percent and 11 percent, respectively. 
Moreover, of the $438.2 billion increase in overall reported federal 
nontax debt from fiscal year 2007 through fiscal year 2011, $373 
billion, or about 85 percent, was debt held by the Department of 
Education (Education).[Footnote 2] The increase in Education’s debt is 
due to student loans, many of which will not become due and payable 
until students either graduate or cease attending college. Future 
delinquencies involving student loans may cause delinquencies relative 
to total debts to increase. 

As shown in figure 4, Education and the U.S. Department of Agriculture 
(USDA) reported holding $504.7 billion and $116.2 billion of reported 
federal nontax debt, respectively, or about 80 percent of the $777.8 
billion total reported federal nontax debt as of September 30, 2011. 
[Footnote 3] Other federal agencies reporting 2 percent or more of the 
total were the Department of the Treasury (Treasury), the Department 
of Housing and Urban Development (HUD), the Small Business 
Administration (SBA), and the Social Security Administration (SSA). 
Each of the other reporting federal agencies’ reported holdings were 
less than 2 percent of the reported total. 

Figure 4: Reported Governmentwide Federal Nontax Debt, by Agency, as 
of September 30, 2011 (Total: $777.8 Billion): 

[Refer to PDF for image: pie-chart] 

Education: 64.9%; $504.7 billion; 
USDA: 14.9%; $116.2 billion; 
Treasury: 2.8%; $21.6 billion; 
HUD: 2.4%; $19.0 billion; 
SBA: 2.1%; $16.6 billion; 
SSA: 2.0%; $15.9 billion; 
All other/less than 2% each: 10.8%; $83.8 billion. 

Source: Data reported in the TRORs as of September 30, 2011. 

Notes: Percentages do not equal 100 percent because of rounding. To 
the best of our knowledge, these data are unaudited. 

[End of figure] 

Most of the delinquent federal nontax debt reported in the TRORs as of 
September 30, 2011, was held by Education. As shown in figure 5, 
Education held $92.0 billion, or 70.2 percent, of the $131.0 billion 
total. Other federal agencies reporting 2 percent or more of this 
total were SBA, HUD, the Department of Defense (DOD), SSA, and USDA. 
Each of the other reporting federal agencies’ reported holdings were 
less than 2 percent of the reported total. 

Figure 5: Reported Governmentwide Delinquent Federal Nontax Debt, by 
Agency, as of September 30, 2011 (Total: $131.0 Billion): 

[Refer to PDF for image: pie-chart] 

Education: 70.2%; $92.0 billion; 
SBA: 5.0%; $6.6 billion; 
HUD: 4.3%; $5.6 billion; 
SSA: 3.6%; $4.7 billion; 
USDA: 3.2%; $4.2 billion; 
All other/less than 2% each: 9.6%; $12.6 billion. 

Source: Data reported in the TRORs as of September 30, 2011. 

Notes: Percentages do not equal 100 percent because of rounding. To 
the best of our knowledge, these data are unaudited. 

[End of figure] 

The majority of the $81.3 billion of federal nontax debt delinquent 
over 180 days reported in the TRORs as of September 30, 2011, was also 
held by Education. As shown in figure 6, Education reported holding 
$49.4 billion, or 60.8 percent of the total. Other federal agencies 
reporting 2 percent or more of this total were SBA, DOD, HUD, USDA, 
SSA, and the Environmental Protection Agency (EPA). Each of the other 
reporting federal agencies’ reported holdings were less than 2 percent 
of the reported total. 

Figure 6: Reported Governmentwide Federal Nontax Debt Delinquent over 
180 Days, by Agency, as of September 30, 2011 (Total: $81.3 Billion): 

[Refer to PDF for image: pie-chart] 

Education: 60.8%; $49.4 billion; 
SBA: 7.4%; $6.0 billion; 
DOD: 5.8%; $4.7 billion; 
HUD: 5.7%; $4.6 billion; 
USDA: 4.4%; $3.6 billion; 
SSA: 4.2%; $3.4 billion; 
EPA: 2.2%; $1.8 billion; 
All other/less than 2% each: 9.6%; $7.8 billion. 

Source: Data reported in the TRORs as of September 30, 2011. 

Notes: Percentages do not equal 100 percent because of rounding. To 
the best of our knowledge, these data are unaudited. 

[End of figure] 

Office of Management and Budget (OMB) Circular No. A-129, Policies for 
Federal Credit Programs and Non-tax Receivables, generally requires 
agencies to write off federal nontax debt more than 2 years 
delinquent.[Footnote 4] Federal nontax debt that is written off can be 
classified as currently not collectible (CNC) if the agency intends to 
take additional collection action on the debt. Otherwise, the debt 
should be closed out and reported to Treasury’s Internal Revenue 
Service (IRS) as income to the debtor. No further collection action 
can be taken on debts reported to IRS. CNC debt is not included in 
federal agencies’ nontax receivables and delinquent debt balances in 
the TRORs; however, because CNC debt is eligible for continued 
collection action, debt that is classified as CNC is included when 
reporting federal nontax debt eligible for Treasury’s offset program 
(TOP) and cross-servicing program in the TRORs. As shown in figure 7, 
total CNC debt reported in the TRORs as of September 30, each year, 
increased from 2007 through 2011. 

Figure 7: Reported Governmentwide Delinquent Federal Nontax Debt 
Classified as CNC for Fiscal Years 2007 through 2011: 

[Refer to PDF for image: vertical bar graph] 

Fiscal year: 2007; 
Amount: $16.0 billion. 

Fiscal year: 2008; 
Amount: $18.0 billion. 

Fiscal year: 2009; 
Amount: $24.0 billion. 

Fiscal year: 2010; 
Amount: $28.4 billion. 

Fiscal year: 2011; 
Amount: $31.7 billion. 

Source: Data reported in the TRORs for fiscal years 2077 through 2011. 

Note: To the best of our knowledge, these data are unaudited. 

[End of figure] 

Moreover, both federal nontax debt delinquent over 180 days and CNC 
debt are potentially eligible for referral to Treasury for collection 
through TOP and cross-servicing. Combined, federal nontax debt 
delinquent over 180 days and CNC debt reported in the TRORs as of 
September 30, 2011, totaled $113.0 billion ($81.3 billion and $31.7 
billion, respectively). 

However, certain delinquent federal nontax debt is ineligible for, or 
excepted or exempted from, referral to Treasury for collection through 
TOP and the cross-servicing program. As shown in table 2, after 
excluding debt that is ineligible for, or excepted or exempted from, 
referral for offset, $68.6 billion, or about 61 percent, of the $113.0 
billion of federal nontax debt delinquent over 180 days and CNC debt 
was reported in the TRORs as being required to be referred to TOP as 
of September 30, 2011. Of the $68.6 billion, $58.4 billion, or about 
85 percent, was reported as referred to TOP, leaving $10.2 billion, or 
about 15 percent, remaining to be referred. According to the TRORs, of 
the reported $10.2 billion remaining to be referred to TOP as of 
September 30, 2011, debt held by Education made up $4.7 billion, or 
about 46 percent. In addition, other federal agencies with reported 
federal nontax debt delinquent over 180 days and CNC debt remaining to 
be referred to TOP as of September 30, 2011, included SSA ($1.3 
billion), the Federal Trade Commission ($1.1 billion), and the 
Department of Health and Human Services (HHS) ($1.0 billion). 

Table 2: Reported Governmentwide Federal Nontax Debt Delinquent over 
180 Days and CNC Debt—Required to Be Referred to TOP, Referred to TOP, 
and Remaining to Be Referred to TOP-—as of September 30, 2011: 

Total governmentwide federal nontax debt delinquent over 180 days and 
CNC debt: $113.0 billion. 

Debt ineligible for, or excepted or exempted from, TOP referral: 
-$44.4 billion; 
Ineligible debt includes debt in bankruptcy, forbearance, formal 
appeals, and foreclosure. Debt excepted from referral requirements 
includes foreign/sovereign debt and debt in litigation for enforced 
collection. Federal agencies report certain “Other”[A] debt as 
exempted from TOP referral. 

Debt required to be referred to TOP: $68.6 billion. 

Debt referred to TOP: -$58.4 billion. 

Balance of debt remaining to be referred to TOP: $10.2 billion. 

Source: Data reported in the TRORs as of September 30, 2011. 

Note: To the best of our knowledge, these data are unaudited. 

[A] According to TROR guidance, federal agencies should use the “Other”
categories sparingly and only when the debt truly cannot be placed in 
one of the given categories. Agencies are instructed by Treasury to 
footnote amounts included as “Other,” with the reason for exempting 
the debt from referral. 

[End of table] 

As shown in table 3, after excluding debt that is ineligible for, or 
excepted or exempted from, referral for cross-servicing, $20.4 billion 
(or about 18 percent) of federal nontax debt delinquent over 180 days 
and CNC debt was reported in the TRORs as being required to be 
referred to Treasury or a designated debt collection center for cross-
servicing as of September 30, 2011.[Footnote 5] Of the $20.4 billion, 
$19.3 billion (or about 95 percent) was reported as referred to cross-
servicing, leaving $1.1 billion (or about 5 percent) remaining to be 
referred. According to the TRORs, of the reported $1.1 billion 
remaining to be referred to cross-servicing as of September 30, 2011, 
most involved debt held by DOD ($491 million), HHS ($288 million), and 
the Securities and Exchange Commission ($161 million). 

Table 3: Reported Governmentwide Federal Nontax Debt Delinquent over 
180 Days and CNC Debt—Required to Be Referred to Cross-Servicing, 
Referred to Cross-Servicing, and Remaining to Be Referred to Cross-
Servicing-—as of September 30, 2011: 

Total governmentwide federal nontax debt delinquent over 180 days and 
CNC debt: $113.0 billion. 

Debt ineligible for, or excepted or exempted, from cross-servicing 
referral: -$92.6 billion; 
Ineligible debt includes debt in bankruptcy, forbearance, formal 
appeals, and foreclosure. Excepted debt includes foreign/sovereign 
debt, debt in litigation for enforced collection, debt at federal 
agencies’ private collection agencies, debt in the process of internal 
offset at referring agencies, debt exempted by Treasury, and debt 
returned from cross-servicing as uncollectible. Federal agencies 
report certain “Other” debt as exempted from cross-servicing referral. 

Debt required to be referred to Treasury or a designated debt 
collection center for cross-servicing: $20.4 billion. 

Debt referred to Treasury or a designated debt collection center for 
cross-servicing: -$19.3 billion. 

Balance of debt remaining to be referred for cross-servicing: $1.1 
billion. 

Source: Data reported in the TRORs as of September 30, 2011. 

Note: To the best of our knowledge, these data are unaudited. 

[End of table] 

As shown in figure 8, of the $113.0 billion of federal nontax debt 
delinquent over 180 days and CNC debt reported as of September 30, 
2011, in the TRORs, $43.5 billion, or 38.5 percent, was defaulted 
guaranteed loans; $39.0 billion, or 34.5 percent, was administrative 
debt; and $30.4 billion, or 26.9 percent, was direct loans. The figure 
also shows the amounts and percentages in TOP and at the cross-
servicing program by these three debt types. 

Figure 8: Total Governmentwide Debt Delinquent over 180 Days and CNC 
Debt, by Type and Amount in TOP and Cross-Servicing, as of September 
30, 2011 (Total: $113.0 Billion): 

[Refer to PDF for image: illustration] 

Total defaulted guaranteed loans: $43.5 billion (38.5%): 
* In TOP: $27.3 billion (62.8%); 
* At cross-servicing: $6.3 billion (14.5%). 

Total direct loans: $30.4 billion (26.9%): 
* In TOP: $19.0 billion (62/5%); 
* At cross-servicing: $1/1 billion (3.6%). 

Total administrative debt[A]: $39.0 billion (34.5%): 
* In TOP: $12.0 billion (30.8%); 
* At cross-servicing: $11.8 billion (30.3%). 

Source: Data reported in the TRORs as of September 30, 2011. 

Notes: Difference between amount shown in title and the sum of the 
parts in pie chart is due to rounding. To the best of our knowledge, 
these data are unaudited. 

[A] The TROR defines administrative debt as any federal nontax debt 
other than a direct loan or a defaulted guaranteed loan, such as, debt 
related to fines, penalties, sales of goods and services, overpayments 
of salaries and benefits, and travel advances. 

[End of figure] 

Enclosure III Footnotes: 

[1] To the best of our knowledge, data reported in the TRORs are 
unaudited. 

[2] Education administers the William D. Ford Federal Direct Loan 
Program, the Federal Family Education Loan (FFEL) Program, Federal 
Pell Grants, and the campus-based student aid programs to help 
students finance the costs of higher education. The Ensuring Continued 
Access to Student Loans Act of 2008 authorized the Secretary of 
Education, in consultation with the Secretary of the Treasury and 
under certain circumstances prescribed by law, to purchase or enter 
into forward commitments to purchase FFEL Program loans. Pub. L. No. 
110-227, § 7, 122 Stat. 740, 746-47 (May 7, 2008). This temporary loan 
purchase authority was to expire on July 1, 2009; however, Congress 
subsequently extended the authority through July 1, 2010. Pub. L. No. 
110-350, § 1, 122 Stat. 3947, 3947 (Oct. 7, 2008). The SAFRA Act, 
which was enacted as part of the Health Care Education and 
Reconciliation Act of 2010, eliminated Education’s authority to make 
new FFEL Program loans after June 30, 2010, and all federally 
guaranteed student loans are now originated through Education under 
the William D. Ford Federal Direct Loan Program. Pub. L. No. 111-152, 
title II, subtitle A, § 2201, 124 Stat. 1029, 1071 (Mar. 30, 2010). 

[3] The nontax debts held by Education and USDA were predominantly 
direct loans and defaulted guaranteed loans. 

[4] According to OMB Circular No. A-129, federal agencies must 
document and justify to OMB in consultation with Treasury any federal 
nontax debt older than 2 years delinquent that is not written off.  

[5] In addition to FMS, as of July 18, 2012, there is one other 
Treasury-designated debt collection center—the HHS’s Program Support 
Center (PSC). PSC has been granted authority to service the following 
types of debt: (1) HHS debt less than 180 days delinquent, (2) HHS 
debt exempt from mandatory transfer to Treasury for cross-servicing, 
and (3) HHS debt and debt owed to other federal agencies arising from 
grant audit and program disallowances, but only for 180 days following 
completion of appeals. 

[End of enclosure] 

Enclosure IV: Abbreviations: 

AWG: administrative wage garnishment: 

CFO: chief financial officer: 

CNC: currently not collectible: 

DCIA: Debt Collection Improvement Act of 1996: 

DFAS: Defense Finance and Accounting Service: 

DOD: Department of Defense: 

DOJ: Department of Justice: 

Education: Department of Education: 

EPA: Environmental Protection Agency: 

FFEL: Federal Family Education Loan: 

FMS: Financial Management Service: 

HHS: Department of Health and Human Services: 

HUD: Department of Housing and Urban Development: 

IRS: Internal Revenue Service: 

NDNH: National Directory of New Hires: 

NTDO: non-Treasury disbursing office: 

OMB: Office of Management and Budget: 

PCA: private collection agency: 

PSC: Program Support Center: 

SBA: Small Business Administration: 

SRP: State Reciprocal Program: 

SSA: Social Security Administration: 

TFM: Treasury Financial Manual: 

TIN: taxpayer identification number: 

TOP: Treasury Offset Program: 

TOP: NG Treasury Offset Program Next Generation: 

Treasury: Department of the Treasury: 

TROR: Treasury Report on Receivables and Debt Collection Activities: 

USDA: U.S. Department of Agriculture: 

USPS: U.S. Postal Service: 

[End of enclosure] 

Enclosure V: GAO Contact and Staff Acknowledgments 

GAO Contact: 
Gary T. Engel, (202) 512-3406 or engelg@gao.gov 

Staff Acknowledgments: 

In addition to the contact named above, staff members who made key 
contributions to the review include Kenneth R. Rupar, Assistant 
Director; Wilfred B. Holloway, Assistant Director; Katherine S. 
Lenane, Assistant General Counsel; Neill W. Martin-Rolsky, Senior 
Attorney; Michael D. Hansen; Linda K. Sanders; and Lisa M. Galvan-
Treviño. 

[End of section] 

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