Maritime Administration:

Efforts To Improve Data on the Federal Ship Financing Program

RCED-87-58: Published: Aug 28, 1987. Publicly Released: Aug 28, 1987.

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In response to a congressional request, GAO examined the Maritime Administration's (MARAD) Federal Ship Financing Program and its estimated $5-billion portfolio of loan guarantees.

GAO found that: (1) MARAD considered 20 percent of the program loans to be at risk of default; (2) in 1986, default payments exceeded $1.2 billion; and (3) since the fund was not self-supporting, it needed approximately $1.4 billion in supplemental appropriations to repay outstanding loans. GAO also found that: (1) MARAD borrowed from the Treasury to cover the bulk of its 1987 program expenses; (2) improper and inadequate cost accounting procedures and underestimation of 1986 default payments caused the program's financial problems; and (3) MARAD plans to take corrective action to minimize its data problem.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: MARAD will state in future annual reports and budget documents that the fund is no longer self-supporting.

    Recommendation: The Secretary of Transportation should direct the Administrator, MARAD, to improve the financial information in the MARAD annual report and budget documents by clearly stating that the fund is no longer self-supporting. This statement should continue to appear in future annual reports and budget documents until the fund's own revenues are sufficient to pay all expenses, including default payments, within the same fiscal year, and Treasury borrowings within the next fiscal year, without the aid of supplemental appropriations.

    Agency Affected: Department of Transportation

  2. Status: Closed - Implemented

    Comments: MARAD will document the process for compiling a list of companies considered to be at risk of default.

    Recommendation: The Secretary of Transportation should direct the Administrator, MARAD, to document the MARAD process for compiling a list of companies that are considered to be at risk of default to ensure that each company's circumstances are reviewed thoroughly and consistently.

    Agency Affected: Department of Transportation

  3. Status: Closed - Implemented

    Comments: MARAD will document its process for estimating the liability for potential losses on outstanding loan guarantees.

    Recommendation: The Secretary of Transportation should direct the Administrator, MARAD, to document the process used to estimate MARAD liability for potential losses on outstanding loan guarantees. Documentation should include a description of how each company's circumstances and market segment were considered in preparing the estimate.

    Agency Affected: Department of Transportation

  4. Status: Closed - Implemented

    Comments: MARAD will report the uncorrected areas at the end of 1987.

    Recommendation: The Administrator, MARAD, should report at the end of this calendar year to the Secretary of Transportation on those financial reporting areas identified in this report where corrective action has not been taken, including any areas in the MARAD accounting system that do not conform with the Comptroller General's principles, standards and related requirements.

    Agency Affected: Department of Transportation: Maritime Administration

 

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