TREASURY DIRECTIVE: 34-02
Date: May 25, 1993
Sunset Review: TBD
Expiration Date: TBD
SUBJECT: Credit Management and Debt Collection
1. PURPOSE. This directive establishes policy and assigns responsibilities for managing Treasury credit programs and for collecting loans and other receivables. It sets standards for extending credit, collecting delinquent receivables, and writing off uncollectible accounts.
2. SCOPE. This directive applies to all bureaus, the Departmental Offices (DO), and the Office of Inspector General (OIG).
3. POLICY. It is the policy of the Department of the Treasury that DO, bureaus, and the OIG:
a. initiate aggressive and timely action to collect debts due the Department. After exhausting these collection procedures, DO, bureaus, and the OIG should consider the compromise, suspension, or termination of any unpaid debt. Actions must comply with the "Federal Claims Collection Standards" at 4 Code of Federal Regulations (CFR) Parts 101 - 105, and Treasury Claims Collection regulations at 31 CFR Part 5.
b. establish a comprehensive credit management and debt collection program to assure collection of receivables, to enable management to evaluate credit policies, to provide efficient and effective account servicing, and to improve the accuracy and timeliness of financial reports; and
c. follow the procedures established in the Office of Management and Budget (OMB) Circular A-129 (Revised), "Policies for Federal Credit Programs and Non-Tax Receivables," and "Managing Government Credit," a Supplement to the Treasury Financial Manual (TFM).
4. APPLICABILITY.
a. This directive applies to:
(1) direct, guaranteed and insured loan programs;
(2) financial contracts designed to support borrowing;
(3) grant programs and contracts where financial responsibility is a factor;
(4) employee debt;
(5) administrative debt, such as fines, fees, penalties, and overpayments;
(6) the Internal Revenue Service (IRS) Tax Counseling for the Elderly grant program;
(7) the Federal Financing Bank's loans to private, nongovernmental entities; and
(8) any future Treasury grant or loan programs.
b. Because of exemptions provided in the Debt Collection Act of 1982, as amended, the debt collection provisions of this directive do not apply to debts arising under the Internal Revenue Code, the Social Security Act, the tariff laws of the United States, debts owed by State or local governments, and debts arising between Federal agencies.
5. RESPONSIBILITIES.
a. The Assistant Secretary (Management)/Chief Financial Officer (CFO) is the responsible Credit Management Official for the Department. As the CFO, this official reviews, approves, and provides oversight of the credit management and debt collection systems, and ensures the adequacy of management controls for such systems and the programs they support.
b. The Director, Financial Services Directorate/Deputy CFO shall assist the CFO in fulfilling the official CFO responsibilities and serves as CFO in that official's absence.
c. The Director Office of Accounting and Internal Control DO, shall coordinate the Department's credit management and debt collection programs and provide technical advice to the Deputy CFO. The Director shall serve as Treasury's Debt Collection Official for debts referred by other Federal agencies.
d. The Deputy Assistant Secretary (Administration) Heads of Bureaus, and the Inspector General, as it relates to their respective bureaus and offices, shall designate:
(1) an official to manage the debt collection program within their respective organizations;
(2) a contact to serve as liaison with the Director, Office of Accounting and Internal Control, DO, to collect debts owed by Treasury employees to other Federal agencies;
(3) establish internal management reporting systems to provide timely information on the credit management program and compare credit operations to program objectives; and
(4) develop write-off procedures to identify and remove uncollectible accounts from receivables and close-out procedures to terminate collection activity. Effective write-off and close-out procedures will improve accounting for the costs of credit programs and will allow management to focus its efforts on accounts most likely to be collected.
e. Treasury employees shall satisfy their just financial obligations in a timely manner. Employees shall manage their private financial affairs in a way that will not cause embarrassment to the Department. See the "Standards of Ethical Conduct for Employees of the Executive Branch" at 5 CFR Part 2635, and "Employee Responsibilities and Conduct" at 5 CFR Part 735.
6. CREDIT MANAGEMENT STANDARDS. There are four elements of credit management: credit extension, account servicing, debt collection and write-off. The Department of the Treasury is not a major credit extender. The five major credit agencies are the Small Business Administration, and the Departments of Agriculture, Education, Housing and Urban Development, and Veterans Affairs. Bureaus shall adhere to the following credit management standards.
a. Provide credit only after private sources have refused to extend it.
b. Deny credit to applicants with judgments against them, pursuant to 28 U.S.C. 3201(e) as amended. Except where required by law, no credit will be extended to applicants delinquent on any Federal debt.
c. Have a reasonable expectation that the borrower will repay the loan. A bureau that is a "lender of last resort" still has to determine the degree of risk.
d. Document all debts to support litigation in case the receivables in question become delinquent.
e. Charge administrative costs, penalties, and interest on delinquent debts.
7. COLLECTING DELINQUENT ACCOUNTS. Bureaus shall pursue the following methods to collect delinquent debts. The size, age, and type of debt are essential factors in determining the resources to be expended in recovering the debt. Bureaus shall weigh the costs against the probability of collecting the debt.
a. Workout Groups. Bureaus shall establish groups to resolve delinquent debts. They should have the authority to decide appropriate actions necessary to maximize debt recovery.
b. Credit Bureau Reporting. The Department has agreements with the major credit reporting agencies (credit bureaus) to accept, store and report delinquent consumer and commercial accounts. Bureaus shall refer delinquent accounts over $100 to credit bureaus on a nonexclusive basis. Amounts under $100 may be reported at the discretion of the bureau. For further information, refer to the "Guide to Credit Bureau Reporting."
c. Collection Agencies. Bureaus may contract for the services of private debt collection agencies. These collection services are available through a Federal Supply Schedule contract with private collection firms. Refer to the "Guidelines for the Debt Collection Contract."
d. Administrative Offset. Bureaus may collect delinquent debt by offsetting payments due to the debtor under other Federal loans, grants, or contracts. See 31 CFR Part 5, Subpart D, "Administrative Offset."
(1) The Federal Claims Collection Standards (FCCS) permit administrative offset against money due the debtor from the Civil Service Retirement and Disability Fund. See 4 CFR 102.4.
(2) Bureaus have the authority to offset travel advances or training expenses against accrued pay by the due process requirements of the FCCS for administrative offset under 4 CFR 101-105. Authority for offset against pay for travel advances is provided by 5 U.S.C. 5705. Refer to 5 U.S.C. 4108 for the total amount of training expenses that may be offset against pay.
e. Federal Salary Offset. Delinquent debts owed by current Federal employees may be recovered by using the Federal Salary Offset Program. Bureaus can identify delinquent debtors who are Federal employees by matching their delinquent debtor files with current and retired employee files of the U.S. Office of Personnel Management, the Department of Defense, and the U.S. Postal Service. Refer to the "Guide to Conducting Federal Employee Salary Offset." See 31 CFR Part 5, Subpart B. "Salary Offset."
f. Litigation. Bureaus may refer debts with principal amounts over $600 to the Department of Justice for litigation. Bureaus should terminate collection activity on a claim when the costs of further collection action will exceed the amount that could be recovered.
g. Tax Refund Offset. A delinquent debt can be collected by withholding all or part of a Federal income tax refund. Before a bureau refers a debt to the IRS for tax refund offset, the bureau must have an agreement with the IRS to participate in the tax refund offset program for the year(s) at issue. The agreement must provide that the bureau will use other available debt collection methods, and provide the notice, review and determination prescribed by 31 U.S.C. 3720(A). See 31 CFR Part 5, Subpart C, "Tax Refund Offset." Debts that have been referred for tax refund offset should not be referred to the Department of Justice for litigation.
8. WRITE-OFF AND CLOSE-OUT PROCEDURES. Refer to the TFM Supplement, "Managing Government Credit," Chapter 5, "Write-off and Close-Out."
a. Whenever one or more of the following five criteria apply, bureaus should consider a debt uncollectible and write off the debt.
(1) The debt is legally without merit.
(2) The debt cannot be substantiated.
(3) The costs of further collection action will exceed the amount recoverable.
(4) The bureau is unable to locate the debtor.
(5) The bureau is unable to collect any substantial amount.
b. Bureaus must have their legal counsel's approval to compromise or terminate collection activity on debts greater than $1,500.
c. Bureaus may compromise, suspend, or terminate collection activity on debts up to $100,000. If the principal amount of the debt exceeds $100,000, bureaus must refer the debt to the Department of Justice for its concurrence on compromise, suspension or termination.
d. Bureaus will perform the necessary accounting entries to write off the debt, and remove it from their receivables. Close out occurs when the bureau determines that future collection efforts on a debt would be futile. At that time, the bureau should report debts greater than $600 to the Internal Revenue Service on Form 1099-G, "Certain Government Payments" as taxable income. Bureaus will need to include the debtor's name, address, and taxpayer identification number.
9. CANCELLATION. Treasury Directive 34-02, "Credit Management and Debt Collection," dated January 16, 1992, is superseded.
10. AUTHORITIES.
a. The Budget and Accounting Act of 1921, as amended.
b. OMB Circular A-129 (Revised), "Policies for Federal Credit Programs and Non-Tax Receivables," dated January 11, 1993.
c. 4 CFR Parts 101-105, "Federal Claims Collections Standards."
d. 31 CFR Part 5, "Claims Collection."
e. 5 CFR Part 2635, "Standards of Ethical Conduct for Employees of the Executive Branch."
f. 5 CFR Part 735, "Employee Responsibilities and Conduct."
g. The Debt Collection Act of 1982, as amended.
h. The Deficit Reduction Act of 1984, as amended.
i. The Family Support Act of 1988, (Public Law 100-485).
j. The Chief Financial Officers Act of 1990.
k. The Federal Credit Reform Act of 1990 (Public Law 101-508).
1. The Federal Debt Collection Procedures Act of 1990.
m. The Cash Management Improvement Act Amendments of 1992.
11. REFERENCES.
a. "Managing Government Credit," a Supplement to the Treasury Financial Manual.
b. "Guide to Credit Bureau Reporting," Department of the Treasury, Financial Management Service.
c. "Guidelines for the Debt Collection Contract," Department of the Treasury, Financial Management Service.
d. "Guidelines for the Federal Tax Refund Offset Program," Department of the Treasury, Financial Management Service.
e. "Guide to Conducting Federal Employee Salary Offset," Department of the Treasury, Financial Management Service.
f. "Litigation Referral Process Handbook," Department of the Treasury, Financial Management Service.
g. 28 U.S.C. 3201(e).
h. 5 U.S.C. 5705.
i. 5 U.S.C. 4108.
12. OFFICE OF PRIMARY INTEREST. Office of Accounting and Internal Control, Financial Services Directorate/Deputy CFO, Office of the Assistant Secretary (Management)/CFO.
Deborah M. Witchey
Acting Assistant Secretary (Management)/Chief Financial Officer