Federal Credit Programs:

Agencies Had Serious Problems Meeting Credit Reform Accounting Requirements

AFMD-93-17: Published: Jan 6, 1993. Publicly Released: Jan 6, 1993.

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GAO reviewed issues involving: (1) the Office of Management and Budget's (OMB) requirements for implementing the Federal Credit Reform Act of 1990; and (2) agencies' capabilities to account for domestic lending programs under credit reform and to calculate the federal government's cost for these programs.

GAO found that: (1) the OMB approach to accounting for the cost of loans and loan guarantees specifically covered by the act and to preparing related subsidy cost estimates for the budget is consistent with the act's provisions; (2) agencies' initial efforts to comply with OMB credit reform requirements were seriously hampered by severe and long-standing financial systems and control problems that would have required correction regardless of changes necessary to implement the act; (3) agencies had to rely on information that has historically been incomplete and unreliable; (4) most agencies are accounting for and reporting on pre- and post-credit reform loans and loan guarantees inconsistently, since the act and OMB requirements apply only to direct and guaranteed loans beginning with fiscal year 1992; and (5) agencies projected that implementing credit reform will take several years and will require extensive financial systems modifications and additional staff to meet the new requirements.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: While OMB's Director has not issued a directive, OMB is approaching the need for resources for sufficient staff and systems to implement credit reform in several ways. For example, for the past 2 years or more, OMB has held formal reviews with agencies on their financial management plans; part of these reviews has involved responding to the changes required for credit reform. OMB has tried to do this in the context of overall financial management planning in conjunction with the agencies' chief financial officers. There has been an extensive amount of work between OMB and agenices to help them move toward fuller implementation of credit reform and, for most of these agencies, it has meant revising the way they allocate resources. OMB is working greater consideration of ongoing management concerns into the budget. Under OMB 2000, OMB financial managers are working directly with OMB budget examiners, which gives better understanding and higher visibility to credit management concerns.

    Recommendation: The Director, OMB, should direct agency and OMB budget examiners to ensure that agency budget requests include sufficient resources to provide the necessary expertise to implement credit reform and to make the financial systems changes necessary to upgrade and modify their credit program financial systems and controls.

    Agency Affected: Executive Office of the President: Office of Management and Budget

  2. Status: Closed - Not Implemented

    Comments: OMB has not implemented this recommendation and does not plan to because OMB believes that its credit reform implementation instructions to agencies are consistent with the Credit Reform Act's requirements. Also OMB believes that the agencies' data on pre-credit reform loans are not sufficiently reliable to allow consistent reporting for pre- and post-credit reform loans and loan guarantees.

    Recommendation: The Director, OMB, should develop methods, such as the use of sampling techniques to develop estimates, for reporting pre-credit reform direct and guaranteed loans on a more accurate present value basis, so that an historical perspective is available to appraise post-credit reform estimates and financial reporting for them will be consistent with that of post-credit reform loans and loan guarantees.

    Agency Affected: Executive Office of the President: Office of Management and Budget

 

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