Testimony is presented concerning the financial burden the United States government is expected to endure from the billions of dollars in loans it has guaranteed (and continues to guarantee) for business, education, housing, and other purposes, many of which are in areas now experiencing economically hard times. The testimony discusses predicting potential areas of loan defaults and ways of maximizing the collection of guaranteed loans once they have been terminated by grantor lenders. Further, the potential losses for the government are estimated for each of the governmental departments, including the Department of Agriculture, the Department of Education, the Veteran's Administration, and the Department of Housing and Urban Development. In addition, recommendations are given on the use of financial statements and other financial information for improving agency financial management. Finally, the administration's initiatives for improving the management of guaranteed loans are discussed as well as the actions that can be taken to lessen the government's vulnerability to loan losses. (GLR)
Authors
- Authorizing Institution
- General Accounting Office, Washington, DC.
- Peer Reviewed
- F
- Publication Type
- Legal/Legislative/Regulatory Materials
- Published in
- United States of America
Table of Contents
- For Release on 2
- Delivery 2
- GN Expected at 2
- Donald H. Chapin 2
- Before the 2
- GAOT-AFMD-90-29 2
- The signals are clear--loan 3
- It is unclear though the extent to which losces from 3
- This need not be the case. 3
- Agencies are permivted to use a number of tools 4
- Particularly encouraging among these initiatives is movement 4
- FEDERALLY GUARANTEED LOANS 5
- EXPOSE THE GOVERNMENT TO 5
- POTENTIALLY SIGNIFICANT LOSSES 5
- As the nations largest source of credit the federal 5
- Loan guarantees are 5
- The government has about 110 loan guarantee programs many 5
- Since that time guaranteed loan programs have been 5
- Federal guaranteed loan programs have grown dramatically 5
- Attachment I shows the growth in outstanding guaranteed loans 6
- Direct loan programs had also been growing until recent 6
- Administration FmHA has been gradually shifting from direct 6
- Currently outstanding loan guarantees are expected to total 6
- Re uire Increased 6
- This potential future liability is especially disturbing 7
- Veterans Affairs VA and Education respectively. 7
- About 40 HUD programs are aimed at providing affordable 7
- The Department of Agricultures FmHA administers 19 loan 8
- -- The Department of Educations guaranteed student 1Dan 8
- Education paid over 8
- However much of the federal governments future liability 10
- While a complete and valid balance sheet for the federal 10
- Early irdications of an eventual breakdown in loan guarantee 10
- The tendency has been to manage programs based on 10
- The role of 10
- As a result of the 1988 financial audit FHA adjusted its 11
- Federal Housing Ldministration Funds 1987 11
- Financial Statements GAOAFMD-90-36 February 9 11
- At the time of our audit FmHA increased its 12
- Our audit of FmHAs financial statements the 12
- Among reasons for the qualification the 12
- Farmers Home Administrations Losses Have 12
- Statements for 1988 and 1937 GAOAFMD-90-37 JanuPry 25 19. 12
- 2 requires us to annually audit 13
- We have found however that 13
- Veterans Administrations Financial Statements 13
- We have not yet dete-mined whethe. the funds fiscal year 1990 14
- PRESENTS UNUSUAL PROBLEMS 14
- -- In Septembet 1989 we 15
- In addition this report disclosed that 16
- HUDs revw of lenders who approve guaranteed loans without 16
- -- In January 1988 we 16
- 200 such reviews in flscal year 1987. More recently we 16
- 199 Education had increased its monitoring to 519 lender 16
- Potential Default and Cost 16
- 1 effectively using private collection firms 17
- 4 charging additional interest penalties nd administrative 17
- IMPROVING MANAGEMENT OF GUARANTEED LOANS 18
- Improved management of the governments credit programs 18
- ACTIONS THAT CAN BE TAKEN TO 20
- This wovid help ensure that good collection 22
- Agencies have placed too little emphasis on reliable 22
- Accordingly the Congress should require that 22
- -- The current cash-based budget misrepresents the cos s of 22
- In addition to these actions financial management at the 23
- Financial Officer CFO 23
- The CF would be responsible for ensuring that 1 23
- Inclilding those related to receivables and delinquencies for loan 23
- Otherwise the CFO will only be able to encourage actions in 23
- Strong well qualified agerly CFOs are an essential part of the 23
- We have worked with the Committee as it endeavors to 24
- S.2840 if enacted would help tremendously in 24
- Mr. Chairman that concludes my formal statement. 24
- Guaranteed Loans 26
- 9 8 7 6 5 2 27
- Agriculture 27
- Agriculture 2 Other 1 28
