Review of Rural Telephone Bank's 1994 Loan Interest Rate Calculation

GAO is required to review each year the interest rate charged to borrowers, referred to as the cost of money rate, as set by the Rural Telephone Bank for the preceding fiscal year. The Rural Telephone Bank now calculates the following two rates: (1) the interest rate used for advances made during fiscal year 1994 on loans approved before fiscal year 1992 (referred to as loans from the liquidating account) and (2) the interest rate used for advances made during fiscal year 1994 on loans approved during or after fiscal year 1992 (referred to as loans from the financing account). The Rural Telephone Bank's fiscal year 1994 cost of money rates were pegged at 6.15 percent and 6.40 percent for advances from the liquidating account and financing account, respectively. GAO found these rate determinations to be in accordance with the law.

GAO found that the RTB interest rate: (1) for loans prior to FY 1992 was 6.15 percent; (2) for loans approved during or after FY 1992 was 6.40 percent; and (3) determinations for FY 1994 were in accordance with the requirements of section 1411(c) of the Omnibus Budget Reconciliation Act of 1987 and 7 CFR Part 1610.