Rural Development: Assessment of Data Used to Support Non-Housing Direct Loan Programs Subsidy Cost Estimates

The Department of Agriculture's Rural Development Service (RDS) long-standing problems with estimating the cost of its credit programs in accordance with the Federal Credit Reform Act of 1990 and federal accounting standards continues to be a major factor in preventing Agriculture from achieving an unqualified opinion on its consolidated financial statements. This correspondence focuses on RDS's efforts to improve its credit program cost estimates for its major non-housing direct loan programs. Reliable data is essential if RDS is to prepare reasonable subsidy cost estimates. GAO found that the data in RDS's three loan accounting systems that are used to calculate key cash flow assumptions for the major non-housing direct loan programs are generally accurate. The assumptions that RDS has determined to be key for calculating the subsidy cost estimates for these programs are the average borrower interest rate and average loan term. For this program, RDS staff identified the average borrower interest rate as the key cash flow assumption.