Credit Reform

As part of GAO's investigation of several highly technical issues related to implementation of the Federal Credit Reform Act of 1990, this report examines agencies' budgetary treatment of negative subsidies--in which receipts exceed outlays--and whether this treatment could harm program management and budgeting. GAO discusses how the Office of Management and Budget has treated negative subsidies of the Federal Housing Administration's Mutual Mortgage Insurance Fund and the Export-Import Bank in the budget. GAO also notes the budget treatment of the Government National Mortgage Association's negative subsidy receipts. Further, the report discusses an alternative to appropriating the present value of estimated negative subsidy receipts. Further, the report discusses estimated negative subsidy receipts and the additional legislative requirements imposed on the Federal Housing Administration's Mutual Mortgage Insurance program.

GAO found that: (1) the Credit Reform Act does not specifically address credit programs' negative subsidies; (2) Congress has appropriated estimated negative subsidy receipts to cover MMI administrative costs; (3) under Office of Management and Budget guidance, negative subsidies are not available for obligation until they have been actually appropriated and credited to receipt accounts; (4) the credit reform requirement that budget authority be available before the obligations or commitment of direct loan guarantees could cause expenditure delays or reductions; (5) current budgetary treatment of negative subsidies could create an incentive for negative subsidy estimates to influence estimates of administrative costs and vice versa; (6) although legislation calls for programs with both positive and negative subsidies to receive appropriations equal to their net subsidy cost estimates, these programs may not have sufficient budget authority to make all planned subsidized loans; (7) Congress has provided the Export-Import Bank (EximBank) with a general fund appropriation to prevent a lack of sufficient budget authority, but that practice does not conform to the act; (8) budget authority difficulties could be avoided by appropriating an amount equal to the gross subsidy cost from general funds with negative subsidy receipts used to reimburse the general fund; and (9) FHA, EximBank, and the Government National Mortgage Association treat negative subsidies in their budgets in accordance with appropriation, other statutory, and program requirements, but not in accordance with credit reform requirements.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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