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Financial Audit: Farmers Home Administration's Losses Have Increased Significantly

AFMD-89-20 Published: Dec 20, 1988. Publicly Released: Dec 20, 1988.
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Highlights

GAO examined the Farmers Home Administration's (FmHA): (1) financial statements for the year ended September 30, 1987; (2) internal accounting control system; and (3) compliance with laws and regulations.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Agriculture The Secretary of Agriculture should direct the Administrator, FmHA, to ensure that the procedures are fully implemented for conducting an annual risk assessment of the FmHA loan portfolio and for producing loss estimates based on these assessments, as required by Office of Management and Budget Circular A-129.
Closed – Implemented
FmHA implemented a loan classification system for estimating the allowance for loan losses in 1989. However, weaknesses exist in the system which cause the data produced by the system to be unreliable. AFMD-90-37 contains recommendations on these matters.
Department of Agriculture The Secretary of Agriculture should direct the Administrator, FmHA, to ensure that: (1) AMAS is thoroughly tested; (2) internal control procedures are in place to reconcile detailed AMAS files to the general ledger on a daily basis; and (3) operating instructions and internal control procedures are fully documented.
Closed – Implemented
Operating instructions and internal control procedures are now documented based upon GAO review of internal controls during the FY 1989 audit. All AMAS borrower account activity was reconciled to the general ledger, effective October 1989.
Department of Agriculture The Secretary of Agriculture should direct the Administrator, FmHA, to require that the unclosed loan report be reconciled against field office records and that all discrepancies be promptly resolved to ensure that all closed loan guarantees are entered into the guaranteed loan accounting system (GLAS).
Closed – Implemented
Report Code (RC) 532, Report of Unclosed Guaranteed Loans, is sent quarterly to field offices which requires reconciliation with Finance Office records for all guaranteed loans except for those with interest rate buydowns. All unclosed loans have been entered into GLAS effective October 1989.
Department of Agriculture The Secretary of Agriculture should direct the Administrator, FmHA, to complete all acquired property system modifications within reasonable time frames to ensure that: (1) all detailed files are balanced with the general ledger; (2) acquired property is recorded at fair value at the time of acquisition; and (3) gains and losses on the acquisition of property are properly recorded.
Closed – Implemented
Acquired Property Tracking System modifications were implemented on February 27, 1991, including provisions for recording property at fair-market value, recognizing gains and losses, recording costs, balancing to the general ledger, and edit checks to detect unusual valuations of property. County offices completed reviewing and reconciling accounts and certifying balances in October 1991.

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Topics

Accounting proceduresCivil auditsDelinquent loansFair market valueFederal agency accounting systemsFederal property managementFinancial recordsFinancial statement auditsGovernment collectionsInternal controlsLoan interest ratesManagement information systems