Federal Credit Data (MAX Schedules G, H, U, W, and Y) 33.1. Purpose and scope. These instructions on budget formulation and presentation for Federal credit programs reflect the requirements of the Federal Credit Reform Act of 1990 (Title V of the Congressional Budget Act of 1974). The major purposes of the Act are to: --measure more accurately the costs of Federal credit programs; --place the cost of credit programs on a budgetary basis equivalent to other Federal spending; --encourage the delivery of benefits in the form most appropriate to the needs of beneficiaries; and --improve the allocation of resources among credit programs and between credit and other spending programs. 33.2. Coverage. These instructions apply to all direct loan and loan guarantee programs. Section 506 of the Federal Credit Reform Act exempts certain programs from credit reform accounting. These programs are still required to report other credit data in data sections G, H, and Y (see 33.7, 33.8, and 33.10). 33.3. Requirement for appropriations. New direct loan obligations may be incurred and new loan guarantee commitments may be made only to the extent that: --appropriations of budget authority to cover their costs are made in advance; --a limitation on the use of funds otherwise available for the cost of a direct loan or loan guarantee program is enacted; or --authority is otherwise provided in appropriation acts. This requirement also applies to modifications of direct loans (or direct loan obligations) or loan guarantees (or loan guarantee commitments) that increase their cost. Exemptions from this requirement for programs considered mandatory will be specified by OMB pursuant to section 504(c) of the Federal Credit Reform Act. 33.4. Background. The Federal Credit Reform Act requires that all estimated subsidy costs arising from direct loan obligations and loan guarantee commitments made in 1992 and later years be recorded in program accounts. All other cash flows arising from direct loan obligations and loan guarantee commitments are recorded in separate direct loan and guaranteed loan financing accounts. These financing accounts are not included in the budget totals. The net cash flows for these direct and guaranteed loan transactions are recorded outside the budget totals as a means of financing the deficit. In other words, only the unreimbursed costs of making new loans--the subsidy costs, on a net present value basis, and administrative expenses, on a cash basis--are counted in the budget totals. 33.5. Definitions. This section defines the following key terms used in credit reform. In these definitions, the term "post-1991" means the direct loan obligations or loan guarantee commitments made on or after October 1, 1991, and the resulting direct loans or loan guarantees. The term "pre-1992" means the direct loan obligations or loan guarantee commitments made prior to October 1, 1991, and the resulting direct loans or loan guarantees. ---------------------------------------- Key Terms Subsection ---------------------------------------- Administrative expenses........... (n) Claim payments.................... (p) Cohort............................ (k) Direct loan....................... (e) Direct loan obligation............ (f) Direct loan subsidy cost.......... (g) Financing account................. (b) Gross proceeds.................... (q) Liquidating account............... (c) Loan guarantee.................... (h) Loan guarantee commitment......... (i) Loan guarantee subsidy cost....... (j) Modifications..................... (o) Negative subsidies................ (m) Negative subsidy account.......... (d) Net proceeds...................... (r) Program account................... (a) Reestimates....................... (s) Risk categories................... (l) ---------------------------------------- (a) The program account is the budget account into which an appropriation to cover the subsidy cost of a direct loan or loan guarantee program is made and from which such cost is disbursed to the financing account. Usually, a separate amount for administrative expenses is also appropriated to the program account. (b) The financing account is the non-budget account or accounts associated with each credit program account which holds balances, receives the subsidy cost payment from the credit program account, and includes all other cash flows to and from the Government resulting from post-1991 direct loans or loan guarantees. Each program account is associated with one or two financing accounts, depending on whether the account makes both direct loans and loan guarantees. Separate financing accounts are required for direct loans and loan guarantees. (c) The liquidating account is the budget account that includes all cash flows to and from the Government resulting from pre-1992 direct loans or loan guarantees. All liquidating accounts will be coded as mandatory spending. Cash flows associated with modified direct loans and loan guarantees are treated as exceptions (see section 33.5(o)). (d) A negative subsidy account is the budget account for the receipt and/or expenditure of amounts paid from the financing account when there is a negative subsidy for the original estimate or a downward reestimate (see section 33.5(m)). Special fund expenditure and receipt accounts must be established with Treasury for any program that has negative subsidies or downward reestimates of the subsidy. The accounts are special fund accounts, because the receipts are earmarked for a particular program. (e) A direct loan is a disbursement of funds by the Government to a non-Federal borrower under a contract that requires repayment of such funds with or without interest. The term includes the purchase of, or participation in, a loan made by a non-Federal lender. The term also includes the sale of a Government asset on credit terms of more than 90 days duration. The term does not include the acquisition of federally guaranteed non-Federal loans in satisfaction of default or other guarantee claims (see section 33.5(p)) or the price support loans of the Commodity Credit Corporation. (f) A direct loan obligation is a legal or binding agreement by a Federal agency to make a direct loan when specified conditions are fulfilled by the borrower. Acquisitions of federally guaranteed non-Federal loans in satisfaction of default or other guarantee claims will not be recorded as new direct loan obligations. However, they will be recorded as a disbursement in addendum entries to the guaranteed loan schedule (line 2331) (see section 33.8). For those programs that were financed by the FFB prior to credit reform, pre-1992 loans made by the FFB on behalf of any agency will continue to be recorded as direct loans. Post-1991 loans will be treated in the same manner as loans financed by other means, i.e., the nonsubsidized portion will be financed through the financing accounts and the subsidy value will be paid by the agency program accounts to the financing accounts. (g) The direct loan subsidy cost is the estimated long-term cost to the Government of a direct loan, calculated on a net present value basis, excluding administrative costs. Specifically, the cost of a direct loan shall be the net present value, at the time when the direct loan is disbursed from the financing account, of the following cash flows: --loan disbursement; --repayments of principal; and --payments of interest and other payments by or to the Government over the life of the loan after adjusting for estimated defaults, prepayments, fees, penalties, and other recoveries. The subsidy cost will be estimated and an obligation recorded against budget authority (appropriations) in the credit program account when the direct loan obligation is incurred. Accounts payable (to the direct loan financing account) will be recorded in the amount of the estimated obligation. The subsidy will be outlayed at the time the loan is disbursed. (See the OMB subsidy model and users' guide for information about estimating the subsidy.) (h) A loan guarantee is any guarantee, insurance, or other pledge with respect to the payment of all or a part of the principal or interest on any debt obligation of a non-Federal borrower to a non-Federal lender, but does not include the insurance of deposits, shares, or other withdrawable accounts in financial institutions. (i) A loan guarantee commitment is a legally binding agreement by a Federal agency to make a loan guarantee when specified conditions are fulfilled by the borrower, the lender, or any other party to the guarantee agreement. (j) The loan guarantee subsidy cost is the estimated long-term cost to the Government of a loan guarantee, calculated on a net present value basis, excluding administrative costs. Specifically, the cost of a loan guarantee shall be the net present value, at the time when the guaranteed loan is disbursed by the lender, of the following cash flows: --estimated payments by the Government to cover defaults and delinquencies, interest subsidies, and other payments; and --estimated payments to the Government including origination and other fees, penalties, and recoveries. The subsidy cost will be estimated and an obligation recorded against budget authority (appropriations) in the credit program account when the loan guarantee commitment is made. Accounts payable (to the guaranteed loan financing account) will be recorded in the amount of the estimated obligation. The subsidy will be outlayed at the time the loan is disbursed by the private lender. (See the OMB subsidy model and users' guide for information about estimating the subsidy.) (k) A cohort includes those direct loans or loan guarantees of a program that are subsidized by an appropriation for a fiscal year even if disbursements occur in subsequent years. For direct loans and loan guarantees subsidized by an appropriation available for one fiscal year, the cohort will be defined by that fiscal year. For direct loans and loan guarantees subsidized by multi-year and no-year appropriations, the cohort may be defined either by the year of obligation or by the year of appropriation. The OMB representative with primary budget responsibility for the credit account should be consulted to determine which method is appropriate. Cohort accounting applies only to post-1991 direct loans and loan guarantees and to pre-1992 direct loans and loan guarantees that have been modified. Pre-1992 direct loans that are modified shall constitute a single "cohort". Similarly, pre-1992 loan guarantees that are modified shall constitute a single "cohort". Post-1991 direct loans or loan guarantees will be identified by cohort. They will remain with their original cohort throughout the life of the loans, even if the loan is modified. For purposes of budget presentation, cohorts will be aggregated. However, accounting and other records will be maintained separately for each cohort of loans. (l) Risk categories are the subdivisions of a cohort of direct loans or loan guarantees into groups of loans that are relatively homogeneous in cost, given the facts known at the time of obligation or commitment. These risk categories will group all loans obligated or committed for a program during the year that share characteristics predictive of defaults and other costs. Risk categories will be developed by agencies in consultation with the OMB representative with primary budget responsibility for the credit account. Agencies will submit an explanation of how the risk categories were developed as described in exhibit 33I. The number of categories will be decided by agreements between agencies and their OMB representative. The number will depend on the size of the differential in subsidy cost between categories and the ability to predict it statistically based on facts known at origination. Risk categories may be defined by characteristics or combinations of characteristics of the loan, the project financed, and/or the borrower. Examples of characteristics or indicators that may predict cost include: --the loan-to-value ratio; --the relationship between the loan interest rate and relevant market rates; and --various asset or income ratios. Borrower-category characteristics such as type of school attended for education loans, or country risk categories for international loans, may be taken into account. If multiple characteristics or indicators are used, one may cross-classify another, or mathematical combinations may be used. However the risk category is defined, statistical evidence must be presented, based on historical analysis of program data or comparable credit data, as to the likely costs--whether defaults, other deviations from contract, or other costs--that are expected to be associated with the loans in that category. (m) Negative subsidies will occur in cases where the present value of cash inflows to the Government exceeds the present value of cash outflows. In such cases, appropriations bills must still provide specific authority before direct loans or loan guarantees can be made. Providing such authority will generate proprietary receipts, which are one type of offsetting receipt. As required by the Federal Credit Reform Act they are scored as offsets to discretionary budget authority and outlays for the agency. See sections 14.2 and 21 for a discussion of proprietary receipts. If the estimated subsidy for a risk category within a cohort is less than zero, the following treatment will apply: --a special fund receipt and expenditure account for that program will be used, known as a negative subsidy account (see section 33.5(d)); --an amount equal to the negative subsidy will be obligated in the financing account when the loan is obligated; --an amount equal to the negative subsidy will be paid from the financing account to the receipt account when the loan is disbursed; --these payments will be recorded in the receipt account as proprietary receipts from the public; --these receipts will not be available for obligation or disbursement unless appropriated by law (mandatory programs have a permanent indefinite appropriation); and --any appropriation and expenditure of the receipts will be recorded in the program account. It should be noted that obligations may not be incurred against appropriations of receipts until the receipts have actually been credited to the receipt account. In some cases, the receipts will not be available until after obligations for positive subsidy costs (or, possibly, administrative costs) need to be incurred in order for the program to operate as planned. This is because the receipts from negative subsidies are not credited to the receipt account until the underlying direct or guaranteed loan is disbursed. Such situations may require an appropriation from the general fund sufficient to permit obligations until adequate receipts are available. (n) Administrative expenses are the portion of the total salaries and expenses that are directly related to credit program operations. The Federal Credit Reform Act generally requires administrative expenses for both pre-1992 and post-1991 direct loans and loan guarantees to be included in the program account. Administrative expenses will be included in the liquidating account only if no post-1991 loans or guarantees are obligated or committed and if the terms and conditions of pre-1992 loans or loan guarantees are not modified. The appropriations language for a credit program may provide for the appropriation for administrative expenses to be used to reimburse another account (see section 31.5). Administrative expenses that are tangentially related should not be included in the program account. As an illustration, the cost of auditing credit programs that is financed in the accounts for Inspectors General is not to be included. Administrative expenses include: --the appropriate proportion of administrative expenses that are shared with non-credit programs; --the cost of operating separate offices or units that make policy decisions for credit programs; --the cost of loan systems development and maintenance, including computer costs; (under no circumstance will computer systems costs be paid out of the financing account); --the cost of monitoring credit programs and private lenders for compliance with laws and regulations; --the cost of all activities related to: --credit extension; --loan servicing; --write-off and close out; and --the cost of collecting delinquent loans, except for the costs of foreclosing, managing, and selling collateral that are capitalized or routinely deducted from the proceeds of sales. (o) A modification is a Government action that alters the estimated subsidy cost of an outstanding direct loan (or direct loan obligation) or loan guarantee (or loan guarantee commitment) from the estimate based on the cash flows contained in the most recent budget submitted to Congress--except a Government action that is permitted within the terms of existing contracts or through other existing authorities. Existing authorities are those authorities that apply to specific loans or a specific group of loans, not generic authorities available to an executive branch official. Both a Government action and an alteration in subsidy cost are necessary conditions for a modification, as explained in the following paragraphs; a reestimate, as defined in section 33.5(s), is not a modification. A modification may result from either new legislation or administrative action; it may apply to a single loan or guarantee as well as a group; it may be of any size; it may apply to pre-1992 direct loans and loan guarantees as well as post-1991 direct loans and loan guarantees; and it may affect cash flows either directly or indirectly. Direct modifications change the subsidy cost by altering the terms of existing contracts, by selling loan assets, or by purchasing guaranteed loans. Existing contracts may be altered by such means as forgiveness, forbearance, reductions in interest rates, extensions of maturity, and prepayments without penalty. Such actions are modifications unless they are considered work-outs as defined below, are permitted within the terms of existing contracts, or are permitted through other existing authorities. Indirect modifications change the subsidy cost by legislation that alters the way in which an outstanding portfolio of direct loans or loan guarantees is administered. Examples include a new method of debt collection prescribed by law or a statutory restriction on debt collection. An indirect modification produces a one-time effect on the subsidy cost of outstanding direct loans (and direct loan obligations) and loan guarantees (and loan guarantee commitments). For direct loan obligations and loan guarantee commitments made after the enactment of such legislation, the effects of the legislation are included in the original subsidy cost estimates (or in subsequent cost reestimates) and are not a modification. The term "modification" does not include the routine administrative work-outs of troubled loans or loans in imminent default. Work-outs are actions undertaken to maximize repayments under existing direct loans or to minimize claims under existing loan guarantees. For post-1991 direct loans and loan guarantees, the expected effects of work-outs on cash flow are included in the original estimate of the subsidy cost. Therefore, to the extent that the effects of work-outs on cash flow are the same as originally estimated, they do not alter the subsidy cost. If the effects of work-outs on cash flow are more or less than the original estimate, the differences in cash flow are included in reestimates of the subsidy cost and are not modifications. The term "modification" also does not include actions that are permitted within the terms of existing contracts, such as prepayment without penalty. For pre-1992 direct loans and loan guarantees, the effects of these actions do not have to be estimated. For post-1991 direct loans and loan guarantees, the expected effects of such actions on cash flow are included in the original estimate of the subsidy cost. Therefore, to the extent that the effects of such actions on cash flow are the same as originally estimated, they do not alter the subsidy cost. If the effects of such actions on cash flow are more or less than the original estimate, the differences in cash flow are included in reestimates of the subsidy cost and are not modifications. Neither the term "modification" nor the term "work-out" includes additional disbursements to borrowers that increase the amount of direct loans outstanding. These disbursements are considered to be new loans in the amount of the increment. When direct loans or loan guarantees are modified, the subsidy cost of the modification must be calculated. When post-1991 direct loans or loan guarantees are modified, a modification adjustment transfer between the financing account and the general fund must also be calculated. These calculations are explained in section 33.11(d); their budgetary treatment is explained in section 33.12. (p) Claim payments to private lenders due to defaults of guaranteed loans will be reported in liquidating and guaranteed loan financing accounts as described below (except that no object class data is required for financing accounts). If a loan asset is acquired, the claim payment should be reported as a loan receivable in the program and financing schedule and the object classification schedule (object class 33); in the status of guaranteed loan schedules the addendum entries will be used. If a loan asset is not acquired, the claim payment should be reported in the program and financing and object class schedules as a claim or insurance payment (if nothing of value is received) (object class 42) or as the acquisition of physical assets (if collateral is acquired) (object class 32). (q) Gross proceeds from loan asset sales are the amounts received by the Federal Government on the day of the settlement of the loan sale. Gross proceeds are amounts paid by purchasers less any transaction costs paid on the day of the sale; for example, underwriting, rating agency, and legal fees. The gross proceeds do not include transaction costs such as the financial advisors' fees that are paid as direct obligations by an agency. To the extent that loan assets are sold at a price that results in an increased cost to the Government, these transactions will be treated as a modification and subsidy budget authority and outlays will be scored. (r) Net proceeds from loan asset sales are equal to the gross proceeds less all other costs associated with each sale. (s) Reestimates of the subsidy cost of a cohort of direct loans or guaranteed loans must be made at the beginning of each fiscal year following the year in which the initial disbursement was made, as long as the loans are outstanding. Each risk category must be reestimated separately. The reestimate will be made as explained in section 33.11(e). It will then be compared with the previous estimate; for this purpose, all details of the previous subsidy estimates by risk category should be retained in program records. | Annual reestimates that are both less than $1 million and 5 percent |or less of the pre-reestimate subsidy value currently recorded in that |cohort may be omitted from the current year column of the budget. In |the subsequent budget, the reestimate for that cohort will cover |cumulatively the entire period since the previous published |reestimate. Reestimates must be recorded in the current year column of |the budget for all cohorts that fail to meet this criterion. All increases or decreases in subsidy cost for different risk categories within the same cohort will be netted against each other; that is, risk categories which require increased subsidies may first draw on the excess from any risk categories within the cohort where the reestimate shows a subsidy decrease. No such netting may occur between cohorts. If the reestimate indicates a net increase in the subsidy cost of the cohort as a whole since the last estimate (after transfers to any risk categories within the cohort for which the reestimate indicates a decrease in subsidy cost), an obligation in the amount of the net increase (including interest) must be recorded against permanent indefinite budget authority available to the program account for this purpose. Obligations for subsidy cost increases resulting from reestimates must be recorded separately so that they can be distinguished from obligations for the initially estimated subsidy cost. An outlay will be made from the program account to the financing account at the time the reestimate is made. At the time that an outlay is made from the credit program account, an offsetting collection will be recorded in the appropriate risk categories in the financing account. In the case of direct loans, the offsetting collections from the program account will be used, together with repayments from borrowers, to pay interest and repay principal on borrowing from Treasury and for other expenses. In the case of loan guarantees, the offsetting collections from the program account will be retained as unobligated balances, together with the unobligated balances of the original subsidy payment and fees, until needed to pay default claims and other expenses. The additional balances due to the reestimate will earn interest at the same rate as is paid on other funds held by the financing account for the same cohort as the original direct loan or loan guarantee. If the reestimate indicates a net decrease in the subsidy cost of the cohort as a whole since the last estimate (after transfers to any risk categories within the cohort where the reestimate indicates an |increase in subsidy cost), there is a downward reestimate. To keep |the correct amount of balances in the financing account, an obligation |and a financing disbursement in the amount of the net decrease |(including interest) must be recorded. In the case of a direct loan, the obligation will be financed with authority to borrow from the Treasury. In the case of a loan guarantee, the obligation will be financed with unobligated balances. | For discretionary programs (see the end of this section for |mandatory programs), in the case of either direct loans or loan |guarantees, a financing disbursement will be made from the financing account to a special fund receipt account established for each credit |program. The funds are disbursed to a special fund receipt account to |give credit to the agency with the downward reestimate. MAX schedule N |is required for these special funds if balances are carried forward |(see section 36.6). The receipt will be recorded as an offsetting receipt, which will offset the total budget authority and outlays of the agency and the budget subfunction of the program. If a special fund receipt account for negative subsidies already exists for the credit program, a new Treasury subaccount account for the downward reestimates must be created. Receipts from downward reestimates, like those from negative subsidies, are only available for obligation to the extent provided in advance in appropriations acts (except for mandatory programs). An appropriation of these special fund receipts, which are earmarked for the program, should be requested before requesting a general fund appropriation. The credit reform provisions still apply: current appropriations are required for discretionary subsidy costs, modifications, and administrative costs; permanent appropriations are available for upward reestimates and mandatory programs. | For mandatory programs the treatment is partially different from |discretionary programs because no further appropriations action is |required. The disbursement (including interest) is made directly from |the financing account to the program account where it is immediately |available for obligation. 33.6. Materials and data required. (a) General.--The requirements concerning computer materials in general are described in section 20.1; the credit data entries are described in sections 33.7, 33.8, 33.9, and 33.10. A summary of credit reform requirements is provided below. | A two-digit group code will be used to group data by program. If |additional groups are needed, agencies should contact their OMB |representative. In the MAX system amounts will be automatically |generated for total and subtotal entries, and start of year balances |for the CY through BY+4. In some cases, agencies will be able to override the generated amounts; in other cases, the amounts will be protected. Detailed information is provided in the MAX User's Guide. Separate credit schedules will be required for supplemental requests and proposed legislation items. These schedules will show the effect of the supplemental request or proposed legislation on the information presented in the regular schedules for the program. A narrative statement is required for all credit programs (as described in section 34.5). A written justification is required for all new credit programs or credit programs requiring reauthorization. The justification must address the Federal credit policies and guidelines contained in OMB Circular No. A-129. Each program making post-1991 direct loans or loan guarantees will have at least two and as many as five types of accounts: --a program account; --a financing account for direct loan obligations, if any; --a financing account for loan guarantee commitments, if any; --a receipt account for negative subsidies or downward reeestimates, if any; and --a liquidating account for pre-1992 direct loans and loan guarantees, if any. (b) Summary of MAX line numbers.--The following table lists the range of line numbers and types of data that appear in the MAX data base for credit data. ---------------------------------------------------------------------- MAX schedule A-11 and line no. Description sec. no. ---------------------------------------------------------------------- G (Federal credit data, direct loans,presidential policy, PY-BY+4:) 11xx-12xx Direct loan data (liquidating and financing 33.7 accounts) 33xx Agency debt held by the FFB (liquidating accounts) 33.10 6100-6200 Net interest data and comparable maturity 33.10 (financing accounts only) ---------------------------------------------------------------------- H (Federal credit data, guaranteed loans,presidential policy, PY-BY+4:) 21xx-23xx Guaranteed loan data (liquidating and financing 33.8 accounts) 6100-6200 Net interest data and comparable maturity 33.10 (financing accounts only) ---------------------------------------------------------------------- U (Program account loan levels and subsidy data, presidential policy, PY-BY+4): 11xx Direct loan levels 33.9 13xx Direct loan subsidy data 33.9 21xx Guaranteed loan levels 33.9 23xx Guaranteed loan subsidy data 33.9 35xx Administrative expense data 33.9 ---------------------------------------------------------------------- W (Program account loan levels and subsidy data, baseline estimates, CY-BY+4): 11xx Direct loan levels 33.9 13xx Direct loan subsidy data 33.9 21xx Guaranteed loan levels 33.9 23xx Guaranteed loan subsidy data 33.9 35xx Administrative expense data 33.9 ---------------------------------------------------------------------- Y (Federal credit data, baseline estimates, CY-BY+4): 33xx Agency debt held by the FFB (liquidating accounts 33.10 only) 6100-6200 Net interest data and comparable maturity 33.10 (financing accounts only) ---------------------------------------------------------------------- (c) Summary of credit reform requirements.--The print materials and MAX schedules required for credit liquidating, program, and financing accounts are listed below. References to applicable A-11 sections and exhibits are also provided. SUMMARY OF CREDIT REFORM REQUIREMENTS ---------------------------------------------------------------------- A-11 Section Exhibit Number Number ---------------------------------------------------------------------- LIQUIDATING ACCOUNT ---------------------------------------------------------------------- Print Materials Program and financing schedule.. 33.6 -- Status of direct and/or guaranteed loans............... 33.7, 33.8 -- Financial statements............ 36.3 -- Object classification schedule.. 35.4 -- Narrative statement............. 34.4 -- MAX Schedules A and S......................... 21.3 -- P............................... 33.6(d) -- O, E, F......................... 35.4, 36.3 -- G, and/or H..................... 33.7, 33.8, 33.10 -- Y............................... 33.10 -- C............................... 25.4 -- ---------------------------------------------------------------------- PROGRAM ACCOUNT ---------------------------------------------------------------------- Print Materials Appropriations language......... 31.5 -- Schedule on unavailable collections.................... 33.5(s), 36.6 36C Program and financing schedule.. 33.6(d) 33A Summary of loan levels, subsidy budget authority, and outlays.. 33.9 33B Object classification schedule.. 35.4 -- Narrative statement............. 34.4 -- Risk categories................. 33.5(l) 33I MAX Schedules A and S......................... 21.3 -- U and W......................... 33.9 -- C, P, O......................... 25.4, 33.6, 35.4 -- N............................... 33.5,36.6 -- ---------------------------------------------------------------------- FINANCING ACCOUNT ---------------------------------------------------------------------- Print Materials Program and financing schedule.. 33.6 33C,F Status of direct and/or guaranteed loans............... 33.7, 33.8 33D,G Financial statements............ 36.3 33E,H Narrative statement............. 34.4 -- MAX Schedules A and S......................... 21.3 -- P............................... 33.6(c) -- F............................... 36.3 -- G and/or H...................... 33.7, 33.8, 33.10 -- Y............................... 33.10 -- ---------------------------------------------------------------------- NEGATIVE SUBSIDY ACCOUNT ---------------------------------------------------------------------- Print Materials No additional requirements. All negative subsidy special fund expenditure accounts will be merged with program accounts. MAX Schedules R and L......................... 21.2, 21.4, 25.4 -- ---------------------------------------------------------------------- (d) Program accounts are required for the following: --any program with post-1991 direct loan obligations or loan guarantee commitments; or --any program that modifies the terms and conditions of pre-1992 direct loans or loan guarantees. The budget authority, obligations, and outlays for subsidy costs will be reflected in the program account. In addition, all budget authority, obligations, and outlays for the administrative expenses of a credit program, including those arising from the servicing of pre-1992, loans will be reflected in the program account. Administrative expenses will be included in the liquidating account only if no post-1991 loans or guarantees are obligated or committed and if the terms and conditions of pre-1992 loans or loan guarantees are not modified. The administrative expenses may be expended directly from the program account or, if authorized by appropriation language (see section 31.5), used to reimburse a salaries and expenses account. If amounts appropriated for administrative expenses are authorized to be transferred to a salaries and expenses account to pay administrative expenses, such transfers will be recorded as expenditure transfers. An obligation and outlay will be recorded in the program account and an offsetting collection will be recorded in the salaries and expenses account. In the salaries and expenses account, obligations for administrative expenses will be recorded without necessarily identifying them as credit program expenses. In the program account, all direct expenses will be recorded in the appropriate object class. Administrative expenses transferred to a salaries and expenses account will be recorded in object class 25.3, "Purchases of goods and services from Government accounts". In the salaries and expenses account, obligations for administrative expenses will be recorded in the appropriate object class. Administrative expenses are always discretionary spending. If these expenses are included in a program account that subsidizes a mandatory program, the administrative expenses will be requested as current definite appropriations and coded as discretionary spending in MAX. The account, in this case, will be split between mandatory and discretionary spending. In the "program by activity" section of the program and financing schedule, obligations for subsidy costs, including subsidies for modifications of the terms and conditions of direct and guaranteed loans, as well as obligations for administrative expenses, will adhere to the following standard line number scheme: ---------------------------------------------------------------------- 00.01 Direct loan subsidy 00.02 Guaranteed loan subsidy 00.03 Subsidy for modifications of direct loan terms 00.04 Subsidy for modifications of guaranteed loan terms 00.05 Reestimates of the direct loan subsidy 00.06 Interest on reestimates of the direct loan subsidy 00.07 Reestimates of the guaranteed loan subsidy 00.08 Interest on reestimates of the guaranteed loan subsidy 00.09 Administrative expenses ---------------------------------------------------------------------- In most cases, current definite budget authority is provided in appropriation acts for obligations for subsidy payments (except for entitlements which have permanent indefinite budget authority) and administrative expenses. The Federal Credit Reform Act provides permanent indefinite budget authority for reestimates. The following MAX data are required for the program account. These requirements are summarized on the tables in sections 33.6(b) and (c): --MAX schedule A and U (PY through BY+4); --MAX schedule S and W (CY through BY+4); and --MAX schedules C, P, O, and N (if necessary) (PY through BY). Even if the Administration is proposing to terminate a program in the BY, data are required for all of the above MAX schedules in the program account. (e) Financing accounts will record the cash flows associated with post-1991 direct loan obligations or guaranteed loan commitments. Separate accounts will be used for direct loan obligations and guaranteed loan commitments. These cash flows include loan disbursements, payments for guarantee claims, principal repayments, interest paid on borrowing, interest received from borrowers, interest earned on uninvested funds, interest supplements, and fees and premiums received. The direct loan financing accounts will be the financing mechanism for post-1991 direct loans and for modifications of pre-1992 and post-1991 direct loans. Typically, the direct loan financing accounts will: --make obligations equal to the face value of direct loans; --make disbursements for direct loans; --record offsetting collections equal to direct loan subsidy obligations and subsidy reestimate obligations in the program account; --pay any negative subsidies and negative reestimates of the subsidy to special fund receipt accounts; --receive modification adjustment transfers from the general fund, or make modification adjustment transfers to the general fund, in connection with modifications; --receive repayments of principal and payments of interest; --receive collections on defaulted direct loans; --receive any prepayments or fees associated with disbursed direct loans; --receive any proceeds from the sales of loans or collateral; --record financing authority (authority to borrow, permanent, indefinite) to borrow from Treasury the part of direct loan disbursements not financed by subsidy; --identify separately the portion of the obligated balances that represents undisbursed direct loan obligations and the portion that represents subsidies receivable from the program account by using separate lines, as follows: ---------------------------------------------------------------------- Obligated balances, start of year: 72.10 Receivables from program account (-) 72.90 Unpaid obligations (+) Obligated balances, end of year: 74.10 Receivables from program account (+) 74.90 Unpaid obligations (-) ---------------------------------------------------------------------- --pay interest on borrowings from Treasury (generated automatically by MAX); and --make adjusting payments to liquidating accounts for modifications to pre-1992 direct loans. The following MAX data are required for each direct loan financing account. These requirements are summarized on the tables in sections 33.6(b) and (c): --MAX schedule A and G (PY through BY+4); --MAX schedule S and Y (CY through BY+4); --MAX schedule F (PY-1 through BY); and --MAX schedule P (PY through BY). Even if the Administration is proposing to terminate a program in the BY, data are required for all of the above MAX schedules in the financing accounts. Typically, the guaranteed loan financing accounts will be the reserve against defaults on post-1991 loan guarantees. The guaranteed loan financing accounts will: --pay default claims on post-1991 loan guarantees; --pay interest supplements to lenders; --receive fees or premiums collected on loan guarantee commitments or loan guarantee contracts, collections on defaulted guaranteed loans, and proceeds from sale of collateral; --receive interest on uninvested funds (generated automatically by MAX); --record offsetting collections equal to loan guarantee subsidy obligations and subsidy reestimate obligations in the program account; --pay negative subsidies and negative reestimates of the subsidy to special fund receipt accounts; --receive modification adjustment transfers from the general fund, or make modification adjustment transfers to the general fund, in connection with modifications; --maintain reserves to cover payments for default claims and interest supplements on guaranteed loans; --receive adjusting payments from liquidating accounts for modifications to pre-1992 loan guarantees; --record financing authority (authority to borrow, permanent, indefinite) to borrow from the Treasury for any default claims which can not be financed by unobligated balances; and --pay interest on borrowings from Treasury. The following MAX data are required for each guaranteed loan financing account. These requirements are summarized on the tables in sections 33.6(b) and (c): --MAX schedule A and H (PY through BY+4); --MAX schedule S and Y (CY through BY+4); --MAX schedule F (PY-1 through BY); and --MAX schedule P (PY through BY). Even if the Administration is proposing to terminate a program in the BY, data are required for all of the above MAX schedules in the financing accounts. (f) Liquidating accounts will record the cash flows associated with pre-1992 direct loan obligations or loan guarantee commitments. The liquidating account program and financing schedule will reflect, as appropriate, data related to any pre-1992 direct loan obligations or loan guarantee commitments (except modified direct loans or loan guarantees, which are transferred to the financing accounts). For example, in the liquidating account program and financing schedule: --there will be no post-1991 direct loan obligations or loan guarantee commitments; --loan guarantee claim payments and interest supplements will be made only for pre-1992 guarantee commitments; --no administrative expenses will be shown in the liquidating accounts--all administrative expenses related to pre-1992 obligations and commitments will be shown in the program account (except that administrative expenses will be shown in the liquidating accounts if no post-1991 obligations or commitments are made and if the terms and conditions of pre-1992 direct loans or loan guarantees are not modified); --only loan disbursements, collections of interest, loan prepayments and repayments, proceeds from the sales of loans, credit transactions fees, and other revenues and expenses related to pre-1992 obligations and commitments will be reflected; --unobligated balances will be used to redeem borrowings from the Treasury or the FFB; --if no unobligated balances exist, permanent indefinite budget authority will be used to pay guarantee claims, interest supplements, and interest to Treasury, and to redeem Treasury borrowings; and --unobligated balances that are not needed for expenses or expected expenses or to redeem borrowings will be transferred to the general fund as a capital transfer. The liquidating account status of direct and/or guaranteed loans will reflect disbursements and repayments of pre-1992 loans. Therefore, in the liquidating account status of direct and/or guaranteed loans: --there will be no post-1991 direct loan obligations or guaranteed loan commitments; --direct and guaranteed loan disbursements will be shown only for pre-1992 direct loans or loan guarantees; and --repayments and prepayments will reflect only pre-1992 direct loan obligations and loan guarantee commitments. The following MAX data are required for each liquidating account. These requirements are summarized on the tables in sections 33.6(b) and (c): --MAX schedule A and G and/or H (PY through BY+4) (note that liquidating accounts will be coded as mandatory spending); --MAX schedules C, P, and O (PY through BY); --MAX schedules E and F (PY-1 through BY); and --MAX schedules S and Y (CY through BY+4). (e) Negative subsidy accounts will record cash receipts of amounts paid from the financing account to these special fund receipt accounts when there is a negative subsidy or downward reestimate. No print materials are required for receipt accounts. The following MAX schedules are required for each negative subsidy account: --MAX schedule R (PY through BY+4); and --MAX schedule K (CY through BY+4). 33.7. Direct loan data. A schedule on the status of direct loans will be prepared for all liquidating accounts from which pre-1992 direct loans were obligated and for all direct loan financing accounts from which post-1991 direct loans are obligated. Applicable entries and line codes shown in the table below will be used. The data will be submitted as part of MAX schedule G. Multi-year planning estimates will be submitted for all entries. The 1100 data line series should be used only in direct loan financing accounts. These lines contain data on an agency's direct loan obligations as they relate to enacted or proposed limitations. Agencies should show separately the total amount of the limitations and the portion that is unobligated. Where the limitation is multi-year, the amount of unused limitation will be carried forward and shown on a separate line. The 1200 data line series shows balances and changes in balances of direct loans outstanding and is applicable to both liquidating and direct loan financing accounts. These lines record the cumulative balance of direct loans disbursed less various kinds of repayments plus or minus other adjustments. Repayments, prepayments, and proceeds from loan asset sales (without recourse) credited to appropriation or fund accounts must agree with amounts included for these transactions on line 88.40 (offsetting collections from non-Federal sources) of the program and financing schedule (see section 32.5). The proceeds from discounted prepayment programs that were part of the loan asset sales program should be recorded along with the proceeds from loan asset sales to the public (line 1253). The discount or the difference between the face value of the loan and the proceeds received from discounted prepayments should be recorded along with the discount on loan asset sales to the public (line 1262). DATA REQUIREMENTS FOR MAX SCHEDULE G ---------------------------------------------------------------------- Entry Description ---------------------------------------------------------------------- These data should be provided for PY through BY+4 in the direct loan financing account. No data on loan limitations or loan obligations should be provided in liquidating accounts. Position with respect to appropriations act limitation on obligations: 1111 Limitation on direct Amount of limitation enacted or loans proposed to be enacted in appropriations acts. For discretionary programs, this amount is equal to line 1159 in MAX schedule U. So long as any entry appears on lines 1111 through 1131, this line should remain in MAX and will be listed in the stub column even if no amounts are shown. 1112 Unobligated direct loan Amount of limitation enacted in limitation (-) appropriations acts that is not obligated. Use in past and current years only, unless specifically approved by OMB. 1113 Unobligated limitation Amount of multi-year limitation enacted carried forward in appropriations acts that is not (P.L. xx) obligated and is carried forward. 1131 Direct loan obligations Amount of obligations for direct loans exempt from limitation to the public not subject to a specific limitation in appropriations acts. 1150 Total direct loan The sum of lines 1111 through 1131. obligations: This is the direct loan portion of the credit budget. This amount should be consistent with direct loan obligations recorded in the program and financing schedule of the financing account. ---------------------------------------------------------------------- Cumulative balance of direct loans outstanding: 1210 Outstanding, start of Amount of direct loan principal year outstanding at the beginning of the year. Disbursements: 1231 Direct loan Amounts of disbursements of principal disbursements for direct loans. This does not include amounts shown separately in line 1232. In the liquidating account, this entry will include loans disbursed by the FFB. 1232 Purchase of loan Amount of loans purchased or assets from the public repurchased by the account from non-Federal lenders. | 1233 Purchase of loan Amount of direct loan assets | assets from a liquidating transferred from liquidating account to | account a financing account as a result of a | loan modification. Repayments: 1251 Repayments and Amount of principal repayments or prepayments (-) prepayments. In the liquidating account, this entry will include repayments on loans disbursed by the FFB. 1252 Proceeds from loan Amount of gross proceeds received from asset sales to the public the non-recourse sale of loans to or discounted prepayments non-Federal buyers or the discounted without recourse (-) loan prepayments that were part of the loan asset sales program. 1253 Proceeds from loan Amount of gross proceeds received from asset sales to the public the sale of loans to non-Federal buyers with recourse (-) when loans are sold with recourse to the Federal Government. The Federal Government's liability is scored as a new guaranteed loan commitment (line 2132). The amount of new budget authority resulting from the sale should equal the amounts on line 64.00 of the program and financing schedule. Adjustments: 1261 Capitalized interest Amount of interest due at the end of (+) the year that is capitalized as part of the existing loan principal. 1262 Discount on loan asset Difference between the face value of sales to the public or the loan and the proceeds received by discounted prepayments (-) the account from the sales of loans to non-Federal buyers or discounted loan prepayments that were part of the loan asset sales program. Write-offs for default: 1263 Direct loans (-) Amount of direct loan principal reduced by write-offs for defaults. This line should only be used to indicate write-offs of loans that were initiated as direct loans. (Refer to the definitions for write-offs provided in OMB Circular No. A-129.) 1264 Other adjustments, Proceeds from the sale of collateral net (+ or -) acquired from the foreclosure of direct loans;amount of principal repayments waived as provided by statute, in the event of certain specified contingencies; outstanding balances of loans transferred to or received from other accounts;amount of principal reduced or increased for other reasons. When this line is used, the nature of the adjustment must be explained in a footnote. 1290 Outstanding, end of year Amount of direct loan principal outstanding at the end of the year. The sum of lines 1210 through 1264. ---------------------------------------------------------------------- 33.8. Guaranteed loan data. A schedule on the status of guaranteed loans will be prepared for all liquidating accounts from which pre-1992 loan guarantees were committed and for all guaranteed loan financing accounts from which post-1991 loan guarantees are committed. Applicable entries and line codes shown in the table below will be used. Amounts will be the full principal amounts of loans guaranteed, whether guaranteed in full or in part. The data will be submitted as part of MAX schedule H. Multi-year planning estimates will be submitted for all entries. The 2100 data line should be used only in guaranteed loan financing accounts. These lines collect data on an agency's guaranteed loan commitments as they relate to enacted or proposed limitations. Agencies should show separately the total amount of the limitation and the portion that is uncommitted. Where the limitation is multi-year, the amount of unused limitation will be carried forward and shown on a separate line. Agencies should not count agency guarantees of loans disbursed by the FFB as guaranteed loans; such loans should be treated as direct loans of the agency financed by the FFB. The 2200 data line series shows changes in guaranteed loan balances outstanding and is applicable to both liquidating accounts and guaranteed loan financing accounts. It excludes all guarantees of FFB activity from cumulative balances of guaranteed loans; disaggregates into three categories the write-offs of guaranteed loans due to default; and incorporates other transactions in "other adjustments". Guaranteed loan balances show principal only, even if the agency guarantee covers both the principal and interest. DATA REQUIREMENTS FOR MAX SCHEDULE H ---------------------------------------------------------------------- Entry Description ---------------------------------------------------------------------- These data should be provided Position with respect to for PY through BY+4 in the appropriations act guaranteed loan financing limitation on commitments: account. No data on loan limitations or guarantee commitments should be provided in liquidating accounts. 2111 Limitation on guaranteed Amount of limitation enacted or loans made by private proposed to be enacted in lenders appropriations acts on full principal of commitments to guarantee loans by private lenders. For discretionary programs, this line is equal to line 2159 in MAX schedule U. So long as any entry appears on lines 2111 through 2132, this line should remain in MAX and will be listed in the stub column even if no amounts are shown. 2112 Uncommitted loan Amount of limitation enacted in guarantee limitation (-) appropriations acts on full principal of commitments to guarantee loans by private lenders that is not committed. Use in past and current years only, unless specifically approved by OMB. 2113 Uncommitted limitation Amount of multi-year limitation enacted carried forward in appropriations acts that is not (P.L. xx) committed and is carried forward. 2131 Guaranteed loan Amount of full principal of commitments commitments exempt from to guarantee loans by private lenders limitation that is not subject to limitation. 2132 Guaranteed loan Amount of full principal of guaranteed commitments for loan asset loan commitments made as a result of sales to the public with selling direct loans to non-Federal recourse buyers with recourse to the Federal Government. ---------------------------------------------------------------------- 2150 Total guaranteed loan The sum of lines 2111 through 2132. commitments This is the guaranteed loan portion of the credit budget. ---------------------------------------------------------------------- Cumulative balance of guaranteed loans outstanding: 2210 Outstanding, start of Amount of guaranteed loan principal year outstanding at the beginning of the year. Disbursements: 2231 Disbursements of new Amount of guaranteed loan principal guaranteed loans disbursed. 2232 Guarantees of loans Face value amount of guaranteed loan sold to the public with principal associated with loans sold to recourse non-Federal buyers with recourse to the Federal Government. 2251 Repayments and Amount of principal repayments and prepayments (-) prepayments. Adjustments: 2261 Terminations for Amount of loan principal reduced by default that result in loans terminations for default that receivable (-) subsequently become a loans receivable in which the formerly guaranteed borrower is deemed to owe the agency for the amount of claims paid as a result of the borrower's default. 2262 Terminations for Amount of loan principal reduced by default that result in terminations for default that lead to acquisi- the acquisition of property by the tion of property (-) agency. 2263 Terminations for Amount of loan principal reduced by default that result in claim terminations for default that lead to payments (-) claim payments by the agency that neither result in a direct loan nor the acquisition of property. 2264 Other adjustments, net Amount of loan principal reduced or (+ or -) increased for reasons other than those covered by the lines listed above; outstanding principal balances of guaranteed loans transferred to or received from other accounts. When this line is used, the nature of the adjustment must be explained in a footnote. 2290 Outstanding, end of year Amount of guaranteed loan principal outstanding at the end of the year. The sum of lines 2210 through 2264. ---------------------------------------------------------------------- Memorandum: 2299 Guaranteed amount of Amount of maximum potential Federal guaranteed loans liability for the guaranteed loan outstanding, end of year principal associated with line 2290. To the extent the guarantee covers both principal and interest, this amount must exclude interest. This entry is required even though the amount may be the same as in line 2290. ---------------------------------------------------------------------- Addendum: Cumulative balance of defaulted guaranteed loans that result in loans receivable: 2310 Outstanding, start of Amount of defaulted guaranteed loans year that resulted in the acquisition of a loan receivable outstanding at the beginning of the year. 2331 Disbursements for Amount of disbursements for acquisition guaranteed loan claims of defaulted loans that were previously guaranteed and result in loans receivable, where the borrower is deemed to owe the account for the disbursement. These disbursements include past due interest amounts that were paid under the terms of the loan guarantee, if such amounts were capitalized as part of the loan principal. (This entry will only be used in liquidating accounts and guaranteed loan financing accounts.) 2351 Repayments of loans Proceeds received by the account from receivable (-) the settlement of claims on defaulted guaranteed loans that resulted in loans receivable to be applied to the reduction of the loans receivable outstanding. Exclude any premium realized. (This entry will only be used in liquidating accounts and guaranteed loan financing accounts.) 2361 Write-offs of loans Amount of loans receivable that were receivable (-) initially guaranteed loans reduced by write-offs for default. This line should only be used to indicate write-offs of loans that were initiated as guaranteed loans but were subsequently acquired as loans receivable. (Refer to the definitions for write-offs provided in OMB Circular No. A-129.) (This entry will only be used in liquidating accounts and guaranteed loan financing accounts.) | 2364 Other adjustments, Amount of loans receivable reduced or |net (+ or -) increased for reasons other than those | covered by the lines listed above. When | this line is used, the nature of the | adjustment must be explained in a | footnote. 2390 Outstanding, end of year Amount of defaulted guaranteed loans that resulted in loans receivable outstanding at the end of the year. The sum of lines 2310 through 2364. ---------------------------------------------------------------------- 33.9. Program account data. A summary schedule of loan levels, subsidy budget authority, and outlays by program will be prepared for each program account. Applicable entries and line codes shown in the table below will be used. These data will be displayed by program. The titles of the lines can be tailored on the galleys to identify the program to which the loan level, subsidy rate, budget authority, outlays, and major subsidy assumptions belong. In addition, budget authority and outlays for administrative expenses will be provided. Multi-year planning estimates will be submitted for all entries for all years as part of MAX schedule U. Baseline data will be submitted for the years indicated as part of MAX schedule W. Entries in boldface normally will be generated automatically. DATA REQUIREMENTS FOR MAX SCHEDULES U AND W ---------------------------------------------------------------------- Entry Description ---------------------------------------------------------------------- Direct loan levels supportable by subsidy budget authority: 1150 Direct loan levels Equals the amount of direct loans that can be obligated with the amount of new subsidy budget authority requested or provided in that year. Do not report the unused portion of multi-year loan limitations that are carried forward. In the policy sections for the CY and PY, loan levels do not have to equal enacted loan limitations, as Congress may enact limitations that are not achievable with the subsidy budget authority provided. However, in the BY through BY+4, loan levels supportable by the subsidy requested should equal | the direct loan limitation. Loan | levels supportable by subsidy are | required for baseline CY and BY, but | not for BY+1 through BY+4. Direct loan | limitations are reported in policy | sections only: MAX schedule A, line | 7007 in the program account and MAX | schedule G, line 1111 in direct loan | financing accounts. These data are | required even if the subsidy rate is | zero or negative. 1159 Total direct loan levels The sum of all lines 1150. Direct loan subsidy (in percent): 1320 Subsidy rate The 1320 data line series presents data in percentages on the subsidy costs inherent in making direct loans. In the PY column, the rate should be the reestimated subsidy (see 33.11(e)). In the CY column use the second quarter budget execution rate (see 33.11(b)). Note that the subsidy rate (in percent) must be rounded to the nearest hundredth of one percent and entered into MAX without decimal points. For example, 50.5 percent will be entered as 5050, 5.05 percent as 505, and 0.5 percent as 50. Amounts should be shown, even if zero or negative. Not required for baseline BY+1 through BY+4. 1329 Weighted average subsidy The weighted average sum of all lines rate 1320 above. Direct loan subsidy: 1330 Subsidy budget authority The 1330 data line series presents data in dollars on the subsidy costs inherent in making direct loans. In the CY column, the amount will include reestimates of the subsidy. In the CY column, the amount will equal the amount appropriated for subsidies. The BY column will show the requested subsidy amount and must agree with amounts in appropriations language. | Report even if the subsidy is | negative. Required for baseline CY through BY+4. 1339 Total subsidy budget The sum of all lines 1330 above. authority Direct loan subsidy outlays: 1340 Subsidy outlays The 1340 data line series presents data on the amount of subsidy disbursed. An outlay will be recorded in the program account at the time of disbursement of the loan to the borrower. Both outlays from new budget authority and outlays from balances are reported on this | line. Report even if the subsidy is | negative. Required for baseline CY through BY+4. 1349 Total subsidy outlays The sum of all lines 1340 above. ---------------------------------------------------------------------- Guaranteed loan levels supportable by subsidy budget authority: 2150 Loan guarantee levels The amount of guaranteed loans that can be committed with the amount of new subsidy budget authority requested or provided in that year. Do not report the unused portion of multi-year loan guarantee limitations that are carried forward. In the policy sections for the PY and CY, loan levels do not have to equal enacted loan guarantee limitations, as Congress may enact limitations that are not achievable with the subsidy budget authority provided. However, in the BY through BY+4, loan levels supportable by the subsidy should equal the guaranteed loan limitation but not for baseline BY+1 through BY+4. Guaranteed loan limitations are reported in policy sections only: MAX schedule A, line 7008 and MAX schedule H, line 2111 in guaranteed loan financing acccounts. These data are required even if the subsidy rate is zero or negative. 2159 Total loan guarantee The sum of all lines 2150. levels Guaranteed loan subsidy (in percent): 2320 Subsidy rate The 2320 data line series presents data on the subsidy costs inherent in making guaranteed loans. In the PY, the rate should be the reestimated subsidy (see 33.11(e)). In the CY column use the second quarter budget execution rate (see 33.11(b)). Note that the subsidy rate (in percent) must be rounded to the nearest hundredth of one percent and entered into MAX without decimal points. For example, 50.5 percent will be entered as 5050, 5.05 percent as 505, and 0.5 percent as 50. Amounts should be shown, even if zero or negative. Not required for baseline BY+1 through BY+4. 2329 Weighted average subsidy The weighted average sum of all lines rate 2320 above. Not required for baseline BY+1 through BY+4. Guaranteed loan subsidy: 2330 Subsidy budget authority The 2330 data line series presents data in dollars on the subsidy costs inherent in making guaranteed loans. In the PY column, the amount will include last year's reestimates of the subsidy. In the CY column, the amount will equal the amount appropriated for subsidies. The BY column will show the requested subsidy amount and must agree with amounts in appropriations language. Report even if the subsidy is zero or negative. Required for baseline CY through BY+4. 2339 Total subsidy budget The sum of all lines 2330 above. authority Guaranteed loan subsidy outlays: 2340 Subsidy outlays The 2340 data line series presents data on the amount of subsidy disbursed. An outlay will be recorded in the program account at the time the lender disburses the loan to the borrower. Both outlays from new budget authority and outlays from balances are reported on this line. Report even if the subsidy is negative. Required for baseline CY through BY+4. 2349 Total subsidy outlays The sum of all lines 2340 above. ---------------------------------------------------------------------- Administrative expense data: 3510 Budget authority Budget authority provided or requested for administrative expenses for both direct and guaranteed loan programs. 3590 Outlays Total outlays for administrative expenses. ---------------------------------------------------------------------- 33.10. Non-print credit data. Non-print data will be furnished in MAX schedules G, H, and Y for multi-year planning estimates and the baseline, as explained below. (a) Data required only for liquidating accounts. Data on agency debt to the FFB is reported in the 3300 data line series. This series of lines also includes start of year balances, new borrowing, repayments, and end of year balances. Multi-year planning and baseline estimates will be submitted for the 3300 data line series in MAX schedules G and Y. Prior to enactment of the Gramm-Rudman-Hollings Act, when the FFB was off-budget, it had three types of transactions. With the enactment of the Gramm-Rudman-Hollings law, the distinctions disappeared. Now, all are treated as means of financing to the agencies. In order to track old and new transactions, the lines should be coded with a two-digit suffix as follows, to indentify the transactions: ---------------------------------------------------------------------- .01 FFB loan originations; .02 Sale of loan assets to the FFB; and .03 Sale of debt securities to the FFB. ---------------------------------------------------------------------- (b) Data required only for financing accounts. | Data on interest paid to Treasury and interest received from |Treasury will be included in MAX schedule G (direct loan financing |accounts, H (guaranteed loan financing accounts), and Y (baseline--all |financing accounts). | Net interest paid (line 6100). Over time, financing accounts will |pay interest in some years and receive interest in others. Further, it |is common for direct loan financing account to both earn and pay |interest during every fiscal year. Interest payments should be |reported on a net basis on line 6100 (interest paid, less interest |received). When net interest payments are negative (interest receipts |exceed interest payments), the net amount is a collection and should |be shown as negative amounts. When net interest payments are positive |(interest payments exceed interest receipts), the net amount is an |outlay and should be shown as a positive amount. | Interest received. For a fiscal year in which offsetting collections |exceed gross disbursements, the financing disbursements, net, will be |negative. In that year, such amounts will earn interest at a |disbursement-weighted average rate based on the comparable maturities. |They will continue to do so, year after year, until they are withdrawn |in a year when gross disbursements exceed offsetting collections. | Total earnings of a financing account in any fiscal year are based |on the balances accumulated during the current year and all previous |years. Each year's deposits will earn interest at that year's |disbursement-weighted average rate. | Interest paid. For a fiscal year in which gross disbursements exceed |offsetting collections, the financing disbursements, net, will be |positive. Disbursements in excess of collections require borrowing, |and interest on these borrowing is paid at a disbursement-weighted |average rate based on the comparable maturities. They will continue to |do so until they are paid back in a year when offsetting collections |exceed gross disbursements. | Total interest payments of a financing account in any fiscal year |are based on the balances owed from current year borrowings and |previous year borrowings. Interest on each year's borrowings will be |paid at that year's disbursement-weighted average rate. | Spreadsheet for calculating interest projections. OMB makes a |spreadsheet available to simplify the projection of interest payments |and earnings. If you need a copy, please contact your OMB |representative. Agencies will also report data on comparable maturities for each financing account. These data are needed to estimate total Federal borrowing and interest on the public debt. NON-PRINT DATA REQUIREMENTS FOR MAX SCHEDULES G, H, AND Y ---------------------------------------------------------------------- Entry Description ---------------------------------------------------------------------- LIQUIDATING ACCOUNTS ONLY Agency debt held by the FFB: 3310 Outstanding agency debt, Amount of agency debt issues held by start of year FFB at the beginning of the year. 3330 New agency borrowing Amount of new borrowing from FFB. 3350 Repayments and Amount of repayments made to FFB. prepayments (-) 3390 Outstanding agency debt, Amount of agency debt issues held by end of year FFB at the end of the year. The sum of lines 3310, 3330, and 3350. FINANCING ACCOUNTS ONLY Net interest data: | 6100 Interest payments to The amount of interest expense paid | (+) or received from during the year on amounts borrowed | (-) Treasury from Treasury net of the amount of | interest income received during the | year on amounts on deposit at | Treasury. 6200 Comparable maturity The time between the first disbursement (in years) and the estimated final year of the cohort. The final year of the cohort is the year when the last loan is fully repaid or written off and the books are cleared of any residual assets. For example, if a program makes loans that are repayable over a period of up to 12 years, one additional year is allowed for because of delinquenices or foreclosed collateral, and loans are disbursed over a three year period, the comparable maturity is 15 years, not 16. ---------------------------------------------------------------------- 33.11. Estimating the subsidy. (a) General.--Subsidy estimates for both Presidential policy and the baseline are required for all budget accounts that have post-1991 direct loan obligations or loan guarantee commitments, or that modify pre-1992 direct loan or loan guarantee contracts. The subsidy estimates must be made for each risk category. The OMB model for estimating subsidies will be used for all estimates. The OMB model and users' guide provide an explanation and example of how the subsidy is calculated. These can be obtained from the OMB representative with primary budget responsibility for the credit account. Direct loan and loan guarantee subsidy costs are defined in sections 33.5(g) and 33.5(j). The subsidy cost is the estimated long-term cost to the Government of direct loans or loan guarantees calculated on a net present value basis, excluding administrative costs. The discount rate used to calculate the present value is the average interest rate (yield) on marketable Treasury securities of similar maturity to the direct loan or guaranteed loan, as projected in the economic assumptions for the budget for the quarter in which the direct loan is estimated to be obligated or the loan guarantee to be committed. The rate from this period shall be used for discounting all cash inflows and cash outflows in this period and subsequent periods. The rate projected for the time of loan obligation or guarantee commitment will thus be straight-lined for subsequent disbursements. This rate shall also be used in estimating cash flows that are affected by the interest rate. (b) Presidential policy subsidy estimates.--The steps in calculating the subsidy budget authority and outlays of direct loans and loan guarantees for a risk category (or program) for presidential policy estimates are as follows: 1. For all programs (discretionary and mandatory), separate subsidy estimates will be made for each year, CY through BY+4. The estimates for each year first require estimating the Government's cash flows resulting from the disbursement of the direct loans or guaranteed loans obligated or committed in that year. These cash flows will then be discounted as described above. The resulting difference between the present value of the cash outflows and inflows is the total subsidy (i.e., the subsidy outlays) for the obligations or commitments made in that year. 2. To calculate the subsidy rate for a given year, the subsidy outlays for the obligations or commitments in that year are divided by the estimated direct loan disbursements or disbursements of guaranteed loans by private lenders for these obligations or commitments. 3. Subsidy budget authority for that year is then calculated by multiplying the subsidy rate times the direct loan obligations or loan guarantee commitments. 4. For programs with negative subsidies, the calculation will also be made separately for each year and should be based on an estimate of demand, constrained if necessary by the estimated limitations. Subsidy outlays are then calculated as follows: 5. Subsidy outlays for each fiscal year reflect the estimated subsidies for the loans disbursed in that year, whether the loans or guarantees were obligated or committed in that year or in prior years. (c) Baseline subsidy estimates. The steps in calculating the subsidy budget authority and outlays of direct loans and loan guarantees for a risk category (or program) for the baseline estimates are as follows: (1) For discretionary programs, separate subsidy rate estimates will be made for the CY through BY+4. The subsidy budget authority enacted for the CY (the base year) is inflated to calculate the subsidy budget authority for the BY through BY+4 using the fixed-weight fiscal year GDP deflator (the annual adjustment factor for non-pay costs) from the most recent economic assumptions for the budget. (For the budget, the budget economic assumptions will be used.) (2) For mandatory programs, the subsidy budget authority is estimated using the method in steps A through C below, for each fiscal year BY through BY+4, consistent with the baseline estimate of demand for loans in each program. (A) The Government's cash flows resulting from disbursements of direct loans and guaranteed loans obligated or committed in the CY (the base year) are discounted as described above. The resulting difference between the present value of the cash outflows and inflows is the total subsidy (i.e., the subsidy outlays). (B) To calculate the subsidy rate, the subsidy outlays are then divided by the estimated direct loan disbursements or disbursements of guaranteed loans by private lenders. (C) Subsidy budget authority for mandatory programs for BY through BY+4 is then calculated by multiplying the subsidy rate by the direct loan obligations or loan guarantee commitments. (3) For any programs with negative subsidies, the calculation for BY through BY+4 should be based on a baseline estimate of demand, constrained if necessary by the estimated limitation. The limitation should be estimated by inflating the CY enacted limitation using the fiscal year fixed-weight GDP deflator provided in the economic assumptions for the budget. The subsidy budget authority is estimated using steps A through C. Subsidy outlays are then calculated as follows: (4) Subsidy outlays for each fiscal year reflect the estimated subsidies for the loans disbursed in that year, whether the loans or guarantees were obligated or committed in that year or in prior years. (d) Modifications.--When a direct loan or loan guarantee is modified, directly or indirectly, the subsidy cost of the modification must be calculated. When a post-1991 direct loan or loan guarantee is modified, a modification adjustment transfer between the financing account and the general fund must also be calculated. The budgetary treatment of these two amounts is explained in section 33.12. The calculations are explained below. The subsidy cost of the modification is the difference between the currently estimated net present value of the remaining cash flows under the terms of the previously existing direct loan or guaranteed loan contract contained in the most recent budget submitted to Congress and the currently estimated net present value of the cash flows under the terms of the modified contract. Specifically, the subsidy cost is calculated as follows: (1) Estimate the remaining cash flows expected just before the modification under the loan contract terms assumed in the most recent budget submitted to Congress. These estimates must assume the same deviations (defaults, delinquencies, etc.) from contract terms as assumed for the risk category in which the loan is classified. (2) Discount the cash flows estimated in step 1 by the interest rate (yield) on marketable Treasury securities that is applicable to the quarter when the modification occurs. These securities must have a comparable maturity to the remaining maturity (not the original maturity) of the loan that is being modified (but prior to any modification of the term of the loan). (3) Estimate the cash flows expected under the modified contract terms. For cash flows unaffected by the modified contract terms, these estimates must assume the same deviations (defaults, delinquencies, etc.) from contract terms as assumed for the risk category in which the loan is classified. (4) Discount the cash flows estimated in step 3 by the interest rate (yield) on marketable Treasury securities that is applicable to the quarter when the modification occurs. These securities must have a comparable maturity to the remaining maturity (not the original maturity) of the direct or guaranteed loan (after any modification of the term of the loan). (If a loan asset is sold, the amount in this step equals the net proceeds from the sale.) (5) Subtract the amount calculated in step 4 from the amount calculated in step 2 to produce the estimated subsidy cost resulting from the modification. The results of this calculation will be positive, negative, or zero. A positive estimate would indicate that the Government will incur an additional subsidy cost because of the modification. A negative estimate would indicate that the Government is achieving some savings. A zero estimate would indicate that the modification will not change the subsidy cost. The modification adjustment transfer is the difference between the present value of the estimated change in cash flows due to the modification, calculated using the discount rate applicable when the direct loan or loan guarantee was modified, and the present value of the estimated change in cash flows due to the modification, calculated using the discount rate applicable when the direct loan or guaranteed loan was disbursed. Specifically, it is calculated in the following steps: (6) Take the difference in cash flows due to the modification. This is the amount calculated in step 1 above minus the amount calculated in step 3 above. (7) Calculate the present value of this difference using the interest rate (yield) on marketable Treasury securities that is applicable to the quarter when the direct loan or guaranteed loan was disbursed. These securities must have a comparable maturity to the original maturity of the direct or guaranteed loan. This interest rate is the same interest rate that is used for the cohort of the original direct or guaranteed loan. (8) Compare the amounts calculated in steps 5 and 7, and subtract the smaller amount from the larger amount. This difference is the modification adjustment transfer. (e) Reestimates.-- (1) General. Reestimates of subsidies are made on direct loans and loan guarantees which have been disbursed. Reestimates are calculated once a year for each risk category within a cohort as long as loans are outstanding. Subsidies will be recalculated separately for two different types of reestimates: --the change in interest rate between the time of obligation (or commitment) and the time of disbursement (see (2) below); and --changes in technical/default assumptions (see (3) below). Reestimates are made at the beginning of each fiscal year, starting with the year following the initial disbursement of the loan. (For example, the subsidy for direct or guaranteed loans disbursed during FY 1994 can be reestimated beginning the first day of FY 1995--October 1, 1994.) The reestimate will be recorded in the current year column of the budget. (For example, the reestimate for loans disbursed in FY 1994, which is calculated at the beginning of FY 1995, will be presented in the FY 1995 column of the 1996 Budget.) A closing reestimate will also be made once all the loans in the cohort have been repaid or written off. | Annual reestimates that are both less than $1 million and 5 percent |or less of the pre-reestimate subsidy value currently recorded in that |cohort may be omitted from the current year column of the budget. In |the subsequent budget, the reestimate for that cohort will cover |cumulatively the entire period since the previous published |reestimate. Reestimates must be recorded in the current year column of |the budget for all cohorts that fail to meet this criteria. The budgetary treatment of reestimates is explained in section 33.5(s), with some amplifying explanations made below. Agencies should notify their OMB representative when special fund receipt and expenditure accounts need to be established. There will be no netting between cohorts of upward and downward reestimates (see section 33.5(s) paragraph 2). Additional information on the reestimates by risk category and cohort can be found in the user guide accompanying the OMB subsidy model. Guidance can be obtained from the OMB representative with primary responsibility for the account. (2) An interest rate reestimate will compare the original subsidy estimate (calculated using the interest rate applicable to the time of obligation or commitment) with the subsidy estimate using the interest rate applicable to the time of disbursement, but otherwise using identical assumptions. If a loan disburses over more than one year, and in the first year reestimates are made for both interest and technical/defaults, the interest rate reestimate for the following year disbursements would nevertheless be calculated in comparison to the original estimate (that is, the estimate before the first year's reestimate for technical factors other than interest). The purpose of the interest rate reestimate is to adjust the subsidy estimate for the difference between the interest rate at the time of disbursement (which is the conceptually correct rate and is required by law) and the rate at the time of obligation (which is used for practical reasons). This type of reestimate is therefore made only once for each cohort. In order to calculate the size of this effect, all other assumptions must be held constant. In cases of loans with variable interest rates, this adjustment is made to cash flows as well as the discount rate. The actual reestimate will be made and compared to the original subsidy estimate by risk category. Procedure for calculating the interest rate reestimate: a. Start with the original cash flows used to estimate the subsidy at obligation (on a risk category basis). b. Reestimate the subsidy percent for each risk category based on the interest rate applicable to the time of disbursement. This rate will be the interest rate applicable to that quarter, which is the average for the last five business days of the previous quarter. (These rates are available from the Department of Commerce's Economic Bulletin Board.) For a fixed interest rate program, use the original cash flows and adjust the interest rate assumptions for discounting. For a variable interest rate program, adjust the original cash flows (to reflect the actual interest rate at disbursement) as well as the interest rate to discount cash flows. c. Compare the new subsidy percent to the subsidy percent estimated at the time of obligation, and calculate the difference in percentage points. d. Apply the difference in percentage points to the actual level of loans disbursed in that risk category. This amount is the "interest reestimate". The interest rate reestimate will be included in the program and financing schedule line "Reestimates of direct loan subsidy," or "Reestimates of loan guarantee subsidy," in the program account of the credit program (if the reestimate is positive) or in the financing account of the credit program (if the reestimate is negative). (3) Technical/default reestimates will be made for changes in the technical/default assumptions other than the interest rate that was used to calculate the subsidy. This type of reestimate will compare the subsidy estimate that already includes the reestimate for the actual interest rate with a reestimated subsidy using updated technical information (for defaults, fees, recoveries, etc.). The purpose of the technical/default reestimate is to adjust the subsidy estimate for differences between the original amount and timing of expected cash flows (as estimated at obligation) and the amount and timing that are expected based on actual experience, new forecasts about future economic conditions, and improvements in the methods used to estimate future cash flows. Because actual cash flows are experienced every year and the ability to forecast future years also changes, this reestimate must be done after the end of every fiscal year as long as any loans are outstanding. Procedure for calculating the reestimate for changes in technical/default assumptions: a. For the first technical/default reestimate, start with the original cash flows used to estimate the subsidy at obligation (for each risk category), adjusted only for reestimates of interest rates in the case of variable interest rate programs (see above). For subsequent technical/default reestimates, start with the revised cash flows from the most recent reestimate. b. Reestimate the subsidy percent for each risk category based on actual cash flows to the date of reestimate and updated expectations of delinquencies, defaults, fees, recoveries, and other technical conditions. The present value amounts will be estimated by cohort and will be calculated as of the time the direct or guaranteed loan was disbursed. c. Compare the new subsidy percent to the most recent subsidy percent estimated after the interest rate reestimate and prior technical/default reestimates, and calculate the difference in percentage points. d. Apply the difference in percentage points to the actual level of loans disbursed in that risk category. This amount is the net technical/default reestimate. The technical/default reestimate will be included as an obligation in the program and financing schedule line entitled "Reestimates of direct loan subsidy," or "Reestimates of loan guarantee subsidy," in the program account of the credit program (if the reestimate is positive) or in the financing account of the credit program (if the reestimate is negative). (4) Interest on reestimates. Calculate the interest that would have been earned by each cohort on the amount of the reestimates. This interest is that which would have been earned from the time of disbursement to the time when an amount equal to the reestimate is paid. For interest rate reestimates, this estimate will be made by multiplying the interest reestimate by a factor which corresponds to both the interest rate at disbursement, and the amount of time which has passed since disbursement. For technical/default reestimates, this estimate will be made by multiplying the technical/default reestimate by a factor which corresponds to both the interest rate at disbursement, and the amount of time which has passed since disbursement. These amounts will be included as an obligation in the program and financing schedule on the line entitled "Interest on reestimates of direct loan subsidy," or "Interest on reestimates of loan guarantee subsidy." If the reestimate is upward, these amounts will be in the program and financing schedule of the program account of the credit program. If the reestimate is downward, these amounts will be in the program and financing schedule of the financing account of the credit program. (5) Closing reestimates. Agencies will make a closing technical/default reestimate once all of the loans in a cohort have been either repaid or written off. This reestimate will be based on actual accounting systems data and is to close the accounting books for the cohort. All the procedures are applied that are described above for the technical/default reestimate, and interest on reestimates. Closing entries will be made in the accounting records. The increases or decreases in subsidy cost for different risk categories within the same cohort will be netted against each other; that is, risk categories which require increased subsidies may first draw on the excess from any risk categories within the cohort where the reestimate shows a subsidy decrease. No such netting may occur between cohorts. 33.12. Budgetary treatment of modifications. Modifications are defined in section 33.5(o), and the calculations of the subsidy cost and modification adjustment transfer are explained in section 33.11(d). The subsidy cost calculation will indicate whether the modification results in no change in cost, an increase in cost, or a savings. If there will be no change in the cost, there will be no budgetary effect and nothing needs to be recorded in the budget. If the modification will result in an increase in cost or a savings, the budgetary effect must be recorded as described under Modification cost/savings below. The transactions described under that subsection will be required for all modifications, both to pre-1992 and to post-1991 direct loans and loan guarantees. Additionally, transfers to or from the financing account will be required when modifications are made. The requirements for pre-1992 and post-1991 direct loans and loan guarantees differ and are described in separate subsections below. Modification cost/savings.--The following requirements pertain to the modification of any direct loan (or direct loan obligation) or loan guarantee (or loan guarantee commitment) that results in an increase in cost or a savings: Increase in cost.--At the time that a modification is made, an obligation in the amount of the estimated increase in subsidy cost must be recorded against budget authority in the credit program account. Modifications may be made only to the extent that appropriated budget authority is available in the credit program account to cover the obligation resulting from the modification. At the same time as the obligation is recorded, an outlay in the amount of the increase in the subsidy cost will be made from the program account to the financing account for direct loans or loan guarantees, as appropriate. At the same time that an outlay is made from the program account, an offsetting collection will be recorded in the financing account (line 88.00). In the case of direct loans, the offsetting collections from the program account will be credited to the cohort and risk category of the original direct loan, and will be used, together with repayments from borrowers, to pay interest and repay principal on borrowing from Treasury and for other expenses. In the case of loan guarantees, the offsetting collections from the program account will be credited to the cohort and risk category of the original guaranteed loan, and will be retained as unobligated balances, together with the unobligated balances of the original subsidy payment and fees, until needed to pay default claims and other expenses. The additional balances due to the modification will earn interest at the same rate as is paid on other funds held by the financing account for the same cohort as the original loan guarantee. Savings.--At the time that a modification is made, an obligation in the amount of the estimated decrease in subsidy cost must be recorded in the financing account. In the case of a direct loan modification, the obligation will be recorded against authority to borrow from the Treasury. In the case of a loan guarantee, the obligation will be |recorded against unobligated balances, or, if unobligated balances |are insufficient, against authority to borrow. At the same time as the obligation is recorded, a financing disbursement in the amount of the decrease in the subsidy cost will be made from the financing account to a special fund receipt account established for each credit program. The budgetary treatment of these receipts will be the same as that described for receipts resulting from reestimates that indicate a net decrease in subsidy costs (see section 33.5(s)). Financing account transfers for modifications of pre-1992 direct loans and loan guarantees.--These are direct loans and loan guarantees currently held in liquidating accounts. The requirements for direct and indirect modifications differ and are described in separate subsections below. (The difference between a direct and indirect modification is described in section 33.5(o).) Direct modifications.--The existing direct loan asset or loan guarantee liability will be transferred from the liquidating account to the financing account, and a one-time adjusting payment will be made between the liquidating and financing accounts. The amount of the adjusting payment will be the currently estimated net present value of the Government's remaining cash flows under the terms of the previously existing contract (based on the interest rate applicable to the quarter when the modification occurs). This amount is the result of the first two steps in estimating the subsidy cost of the modification, described in section 33.11(d). All pre-1992 modifications for a given program will be accounted for in a single direct loan cohort or a single loan guarantee cohort. In the case of a direct loan modification, where an asset is transferred from the liquidating account to the financing account, the adjusting payment will be made from the financing account to the liquidating account. An obligation and a disbursement will be recorded in the financing account in the amount of the payment when it is made; a corresponding offsetting collection will be recorded in the liquidating account. All the offsetting collections received by the financing account from the program account for the subsidy cost of the modification will be used for the adjusting payment. The balance of the adjusting payment will be borrowed from Treasury at the same interest rate that is used to calculate the present value of cash flows under the modified contract. Offsetting collections from the direct loan assets over their remaining life will be credited to the financing account and used to pay interest on borrowing from Treasury and to repay the principal on such borrowing. In the liquidating account, the adjusting payment will be recorded as an offsetting collection and used to repay borrowing from Treasury or transferred to the general fund as a capital transfer. In the case of a loan guarantee modification, where a liability is transferred from the liquidating account to the financing account, the adjusting payment will be made from the liquidating account to the financing account. Any unobligated balances of the liquidating account will be used to make the adjusting payment. If unobligated balances are insufficient, the permanent indefinite appropriation to the liquidating account will be used to pay the balance of the adjusting payment. An outlay will be recorded in the liquidating account in the amount of the payment when it is made. In the financing account, the payment will be received as an offsetting collection. The payment of the subsidy from the program account to the financing account will also be received as an offsetting collection. The offsetting collections (both the adjusting payment and the subsidy) will be retained in the balances of the financing account until needed to pay default claims and other expenses. The balances will constitute a cohort, earning interest at the same rate that is used to calculate the present value of cash flows under the modified contract. Indirect modifications.--Because indirect modifications usually affect many loans, a simplified treatment is used. The existing direct loan assets or loan guarantee liabilities will not be transferred from the liquidating account to the financing account. Instead, for modifications that increase the cost of direct loans or loan guarantees, a schedule of payments from the financing account to the liquidating account will be developed that approximates the annual losses or increased expenses of the liquidating account. For modifications that result in savings, a schedule of payments from the liquidating account to the financing account will be developed that approximates the annual increased collections or reduced expenses of the liquidating account. In the financing account, a single cohort will be used for all of these kinds of modifications, and one combined net payment will be made annually to or from the liquidating account. |The balances in the financing account cohort will earn interest. Financing account transfers for modifications of post-1991 direct loans and loan guarantees.--When a post-1991 direct loan or loan guarantee is modified, a modification adjustment transfer must be made between the financing account and the general fund. The purpose of the transfer is to resolve the disconnect between the interest rate used to calculate the cost of the modification and the interest rate at which the cohort borrows or earns interest. The discount rate used to calculate the present value of the modification is the interest rate applicable to the quarter when the loan or guarantee is modified. On the other hand, the interest rate earned on uninvested funds or paid on debt to Treasury is the rate applicable to the quarter when the direct loan or guaranteed loan was disbursed. Therefore, if the subsidy cost were the only transfer made between the financing account and the general fund, the resources of the financing account would be out of balance. Either it would not have enough resources to pay its claims to the public or repay its debt to the Treasury, or else it would have more resources than it needed. This imbalance is eliminated by a modification adjustment transfer between the financing account and the general fund. The transfer is not an outlay or an offsetting collection, because it does not represent a cost of the loan or the guarantee to the Government. It is, instead, a facilitating adjustment that makes the present value of the assets and liabilities held by the financing account come out even. The effects of the modification adjustment transfer on the program and financing schedule of a financing account are summarized below. They distinguish between a loan guarantee and a direct loan; and they distinguish between whether the present value of the modified cash flow is higher using the current interest rate (i.e., the interest rate applicable to the quarter when the loan or guarantee is modified) or using the original interest rate (i.e., the interest rate applicable to the quarter when the direct or guaranteed loan was disbursed). Depending on which present value is higher, the transfer is made from the general fund to the financing account or from the financing account to the general fund. If the cost of the modification is more when calculated at the current interest rate than at the original interest rate (which would often be the case if the current interest rate is lower than the original interest rate), the financing account makes a modification adjustment transfer to the general fund. This transfer is recorded on line 68.27, "Capital transfer to general fund." The transfer produces accompanying transactions with Treasury. --If a loan guarantee is modified, the offsetting collection for the modification cost increases the unobligated balance (line 24.90). The capital transfer to the general fund reduces the amount by which the unobligated balance is increased. (The amount of the increase shown on line 24.90 is net of the capital transfer). Since this balance is held as uninvested funds, subsequent interest on uninvested funds is lower as a result of the capital transfer. --If a direct loan is modified, the offsetting collection for the modification cost is used to reduce debt to Treasury (line 68.47, Portion applied to debt reduction). The capital transfer reduces the amount by which the debt is reduced. (The amount of the increase shown on line 68.47 is net of the capital transfer). Subsequent interest paid to Treasury is higher as a result of the capital transfer. There will be one receipt account to collect the modification adjustment transfers from all financing accounts. --The general fund will collect the modification adjustment transfer in a non-budgetary capital transfer receipt account. If the cost of the modification is less when calculated at the current interest rate than at the original interest rate (which would often be the case if the current interest rate is higher than the original interest rate), the financing account receives a modification adjustment transfer from the general fund. The modification adjustment transfer to a financing account is a permanent indefinite appropriation. It will be recorded on line 60.05, "Appropriation (indefinite)." This transfer produces accompanying transactions with Treasury. --If a loan guarantee is modified, the offsetting collection for the modification cost increases the unobligated balance, specifically, line 24.90 ("Unobligated balance available, end of year: fund balance"). The modification adjustment transfer also increases the unobligated balance, specifically, line 24.40 ("Unobligated balance available, end of year: appropriation"). (Different lines are used to record the additions to unobligated balances from offsetting collections and appropriations.) Since the unobligated balance is held as uninvested funds, subsequent interest on uninvested funds is higher as a result of the modification adjustment transfer. --If a direct loan is modified, the offsetting collection for the modification cost is used to reduce debt to Treasury, as recorded on line 68.47, "Portion applied to debt reduction." The modification adjustment transfer is also used to reduce debt to Treasury, as recorded on line 60.47, "Portion [of permanent indefinite appropriation] applied to debt reduction." (Different lines are used to record the effects of the financing account receiving offsetting collections and appropriations.) Subsequent interest paid to Treasury is lower as a result of the modification adjustment transfer.