Legislative Change Needed To Improve Budget Treatment of Certificates of Beneficial Ownership

The Farmers Home Administration (FmHA) administers three public enterprise revolving funds which are largely financed through the sale of interest bearing Certificates of Beneficial Ownership (CBO's). A number of undesirable consequences result from the legal requirement that FmHA record the sale of CBO's as a sale of assets in the budget. The reporting procedure the FmHA is required to use (1) does not conform to established reporting principles, (2) results in an understatement of FmHA and Federal outlays, and (3) creates inconsistency in the budget. As a result proceeds from the sale of CBO's are recorded as an offsetting collection, which is deducted from outlays and reduces the requirement for budget authority at the account level.