Rural Development

This testimony discusses the electricity loan program run by the Department of Agriculture's Rural Utilities Service. GAO summarizes the findings of its April 1997 report (GAO/RCED-97-82), which discusses (1) the financial condition of the electricity loan portfolio and (2) the financial characteristics of borrowers having electricity loans. That report presents data on the financial condition of the electricity loan portfolio as of the end of fiscal year 1996 and on the financial characteristics of borrowers having electricity loans as of the end of calendar year 1995.

GAO noted that: (1) the total amount of the outstanding principal on RUS' electricity loans was $32.3 billion at the end of fiscal year (FY) 1996; (2) of this amount, about $8 billion, or almost 25 percent, was owed by 12 borrowers that were experiencing financial problems (i.e., they were delinquent, in bankruptcy, or likely to default on loan repayment in the future); (3) these 12 electricity loan borrowers represent less than 2 percent of the total number of electricity loan borrowers; (4) this relatively high dollar amount of problem loans exits even though RUS had written off some borrowers' debts in recent years; (5) specifically, RUS wrote off almost $1.05 billion in electricity loans during the 5-year period from FY 1992 through FY 1996; (6) the financial characteristics for most of the borrowers were favorable, but some were not; and (7) the year-end reports from the borrowers to RUS showed: (a) almost 99 percent of the 855 electricity loan borrowers had positive equity at the end of 1995; (b) a total of 841 borrowers had equity of $1 million or more; (c) about 96 percent of the 855 electricity loan borrowers made a profit in 1995; (d) a total of 789 borrowers made a profit of $100,000 or more; (e) however, 10 electricity loan borrowers had negative equity at the end of 1995; and (f) 38 electricity loan borrowers did not make a profit in 1995.