Proposals for Improved Credit Program Budgeting

T-AFMD-87-5: Published: Mar 4, 1987. Publicly Released: Mar 4, 1987.

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GAO discussed the administration's plans for improving the management of, and budgeting for, federal credit assistance programs. GAO noted that the objectives of the improvement are to: (1) reduce the government's costs of managing credit programs; (2) provide incentives to federal credit program managers to better document their loan portfolios; (3) measure and budget for credit program subsidies; and (4) reduce the deficit in years of portfolio sales. Under the new approach, all new federal direct loans would be sold without federal guarantees or other recourse to the buyer. The budget would show the subsidy outlays involved in new loans. GAO also noted that: (1) the proposed approach would not account for all of the government's costs of making loans; (2) the proposed approach might not adequately protect the government's financial interests, since an excessive requirement for the prompt sale of loans could artificially depress sales proceeds; and (3) sales of loan assets will not solve the deficit problem. In addition, GAO noted that: (1) any new credit approach should ensure that borrowers are not adversely affected by the sales of their loans; and (2) credit program reform should include steps to ensure accountability and independent financial audits of credit programs and funds.

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