Need for Improved Budgetary Controls Over Federal Credit Programs

T-AFMD-90-18: Published: Apr 11, 1990. Publicly Released: Apr 11, 1990.

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GAO discussed the need for improved budgetary controls over federal credit programs. GAO found that: (1) significant growth in federal credit and insurance programs has increased the risk of large budgetary losses to the federal government; (2) between fiscal years 1985 and 1989, annual loans receivable write-offs increased from about $1 billion to about $4 billion; (3) newer loan guarantees posed greater risks than those made in earlier years because many new loan guarantee programs involved loans with little or no marketable property as security; (4) at least $325 billion was needed to pay off federal insurance obligations; (5) the government's 1987 and 1988 deposit insurance and financial statements showed a weakened fund, a record number of bank failures in 1988, and a fund balance that dropped to about $14 billion, producing the lowest-ever ratio of the balance to insured deposits; (6) despite some differences, budget organizations endorsed considering total subsidy costs for proposed direct loans and loan guarantees and appropriating funds for the subsidy costs before the loans and guarantees are made; (7) a proposal to reform the government's deposit insurance would treat it as a type of loan guaranty and require appropriations for estimated costs not covered by insurance fees and premiums; and (8) loan guarantees need recognition and appropriations for the expected costs not covered by fees and premiums.

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