Federal Credit Reform

Information On Credit Modifications and Financing Accounts Gao ID: AIMD-93-26 September 30, 1993

Calculating the cost of loan obligation and loan guarantee commitment modifications and maintaining financing accounts were among the many new accounting and reporting requirements placed on agencies by the Federal Credit Reform Act. Although agencies in the past had not generally needed to calculate the cost of loan obligation and loan guarantee commitment modifications, this is an important part of credit reform for budgetary purposes. Further, for the most part, agencies did not update their financial systems or establish new payment control procedures to accommodate the financing accounts created by the act. Instead, several agencies used precredit reform financial systems and controls and made estimates, adjustments, or consolidations to provide financing account data, which can affect the accuracy and the reliability of this information.

GAO found that: (1) of the five lending agencies reviewed, only the Department of Education has credit program modifications that require cost calculations under the Federal Credit Reform Act; (2) Education does not expect that its future loan obligation and loan guarantee commitment modifications will require cost estimates except possibly for loan sales under its construction loan program; (3) the other agencies believe that their loan programs will not generally experience the type of modifications requiring cost estimates; (4) the agencies use various estimating procedures to generate financing account information because their financial systems are not designed to meet the new accounting and financial reporting requirements; and (5) the agencies' financial accounting systems do not provide accurate and reliable data necessary for management budget analyses.

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