Federal Credit and Insurance

Pursuant to a congressional request, GAO reviewed federal credit assistance and insurance programs, focusing on program growth trends and financial losses.

GAO found that federal credit and insurance programs have increased in size and areas of coverage between fiscal years 1965 and 1988, with: (1) outstanding direct loans growing from $33 billion to $222 billion; (2) outstanding guaranteed loans increasing from $91 billion to $550 billion; (3) government-sponsored enterprises' outstanding loans increasing from $15 billion to $666 billion; and (4) insurance commitments rising from $299 billion to $3.6 trillion. GAO also found that: (1) credit and insurance programs put the government at risk to very large losses, as demonstrated by losses occurring in the savings and loan industry, crop insurance, housing, and other guaranteed loan programs, as well as significant increases in direct and guaranteed loan delinquencies and defaults; (2) federal agencies' long-standing deficiencies in financial management systems and accounting procedures have precluded accurate, comprehensive recording and reporting of the full extent of losses; and (3) credit and insurance programs' general failure to charge fees or premiums to cover all program costs further contributed to losses. GAO believes that Congress and the Office of Management and Budget must be fully aware of such program aspects as costs in terms of losses, recovery of costs through fees and premiums, financing sources, and shortfall amounts to make budgetary decisions and adequately plan for future funding of credit and insurance.