Reserve Accounting: Rural Telephone Bank's Reserve for Losses Due to Interest Rate Fluctuations
AFMD-89-15
Published: Mar 27, 1989. Publicly Released: Mar 27, 1989.
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Highlights
Pursuant to a legislative requirement, GAO studied the Rural Telephone Bank's (RTB) reserve for losses due to interest-rate fluctuations.
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| Congress should direct the Governor of the Rural Telephone Bank to initially establish the reserve for losses due to interest-rate fluctuations at an amount not to exceed $10 million. | The RTB Board of Directors established the reserve at $10 million per GAO recommendation at its May 1989 Board meeting. | |
| Congress should direct the Governor of the Rural Telephone Bank to distribute amounts over the initially established $10-million level as class B patronage stock dividends to RTB borrowers, in proportion to the interest each borrower paid over the period when the excess was accumulated. | Amounts in excess of $10 million were approved for distribution by the RTB Board of Directors at its May 1989 Board meeting. Distribution was completed by June 30, 1989. | |
| Congress should direct the Governor of the Rural Telephone Bank to charge the reserve for any losses due to interest-rate fluctuations. | The RTB Board of Directors adopted this recommendation at its May 1989 Board meeting. | |
| Congress should direct the Governor of the Rural Telephone Bank to replenish the reserve, as needed, to the established level or a lower level, as the risk of interest losses decreases. | The RTB Board of Directors adopted this recommendation at its May 1989 Board meeting. |
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Topics
Bank reservesDirect loansFederal corporationsFinancial recordsGovernment guaranteed loansInternal controlsLending institutionsLoan interest ratesOff-budget federal entitiesSecurities