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# Guaranty Agency Financial Report (GAFR) Annual Report

# ED Form 2000

# 

**Instruction Guide**

> **December 2004**

## Financial Report Introduction

The financial activity reported in the Federal Fund, Operating Fund and
Balance Sheet sections should reconcile to the amounts reported on the
Guarantor's audited financial statements (accrual basis). If there are
any differences between the net assets on the audited financial
statement and the ending balance as submitted on AR-57, Federal Fund
Balance in the Balance Sheet Section, guarantors must submit a schedule
explaining those differences to the Department. These schedules should
be sent via e-mail to <FSA_GAR@ed.gov>. Data collected will also provide
the Department with a basis for::

-   financial reviews,

-   validating the current and projected financial status of guaranty
    agencies,

-   projecting the impact of changes in revenue, and

-   managing guaranty agency federal funds held by the agency.

## Federal Fund 

> The activity reported in this section should reconcile to the amounts
> reported on the Guarantor's audited financial statements (accrual
> basis). Projected yearly estimates are required for line items AR-16
> through AR-26, with the exception of AR-24, Transfer to Operating Fund
> for Account Maintenance Fee. The ending balance should equal the
> ending balance on AR-57 (Federal Fund Balance Sheet Section).

### AR-15 Beginning Balance (from AR-26 as of 9/30/XX)

**Current Year -** Report prior FY ending balance, AR-26.

**Projected Years -** Same as AR-26, Ending Balance for the previous
fiscal year.

### AR-16 Investment Income

> **Current Year -** Report investment income recognized in the Federal
> Fund, including net increase (decrease) in fair value of investments.
> If the agency is required by State law to combine FFEL program funds
> with other State funds for investment purposes, then the agency must
> establish a method for allocating a portion of the earnings to the
> FFEL program and must maintain documentation on the allocation method.
>
> Do not include interest earned on the Restricted Account, it should be
> reported in item AR-36 Other Revenue (FFEL and Non-FFEL) and earmarked
> for default prevention activities.
>
> Interest activity previously reported on AR-49 (Restricted Account
> Cash, Cash Equivalents and Investments) should be reported here on
> AR-16.

**Projected Years** - Report projected investment income on the Federal
Fund.

### AR-17 Reinsurance from ED

> **Current Year -** Report Federal reinsurance from ED, net of refunds,
> overpayments and repurchases, for defaults, bankruptcies, death,
> disability, closed school, false certification teacher loan
> forgiveness discharges and unpaid refunds. To calculate this amount::
> add Amount Due To/(From) Guarantor for MR-1, Claims Paid plus MR-3,
> Status Changes, minus MR-5 Repurchases-CFY minus MR-6,
> Repurchases-PFY, minus MR-7, Partial Refunds-CFY minus MR-8, Partial
> Refunds-PFY minus MR-9, Overstated Claims for the fiscal year being
> reported.
>
> **Projected Years -** Defaults on loans originated prior to FFY 94
> receive maximum 100% reinsurance. Defaults on loans originated on or
> after FFY 94 through FFY 98 receive a maximum 98% reinsurance. And
> defaults on loans originated on or after FFY 98 receive a maximum of
> 95% reinsurance. Multiply line item AR-21 by the weighted reinsurance
> "percentage".

### AR-18 Collections of Defaulted Loans -- Reinsurance Complement

> **Current Year -** Report the reinsurance complement collected on
> defaulted loans. This amount should equal the twelve months reported
> fiscal year to date (FYTD) on the monthly GAFR, Line Items MR-10
> through MR-13 for the current FFY. For comparison and reasonability
> editing ED will estimate reinsurance complement on MR-10,
> Rehabilitated Loans. Guarantors are required to transfer the
> complement of the reinsurance rate, which was not reimbursed by the
> Department on collections of defaulted loans to the Federal Fund.
>
> **Projected Years -** Report projected amount of the reinsurance
> complement from collections on FFEL loans.

### AR-19 Insurance Premiums 

> **Current Year -** Report insurance premiums (guarantee fees)
> recognized.
>
> **Projected Years --** Enter the amount of projected revenue to be
> recognized.

### AR-20 Other Revenues 

> **Current Year -** Report other revenues included in the Federal Fund
> not reported elsewhere in this section. Include deferred revenues in
> this line item. Report itemized entries (description and amount) to
> support total reported in this line item. (See Attachment A.) Itemized
> entries may include: OIG interest penalty, vehicle sales, audit
> findings, IRS refund reimbursement; 48 hour settlement, utilities, and
> usage fees. These examples are not all inclusive.
>
> **Projected Years -** Report projected revenues included in the
> Federal Fund not reported elsewhere in this section. Report itemized
> entries (description and amount) to support total reported in this
> line item. (See Attachment A.)

### AR-21 Claims Expensed to Lenders

> **Current Year** - Report default, exempted, bankruptcy, death and
> disability, closed schools and false certification and
> lender-of-last-resort default insurance claims expensed during the
> FFY, net of refunds, overpayments, and repurchases for all FFEL
> program loans.
>
> Include amounts attributable to repurchases and amounts on which
> claims have been paid to lenders, but on which reinsurance has not yet
> been received from ED. Also include amounts which are eligible for
> insurance from the guaranty agency, but which are not eligible for
> reinsurance from ED. Subtract from this, amounts for refunds,
> repurchases or overpayments returned by lenders. Do not subtract
> amounts for rehabilitated loans or defaulted loans consolidated under
> the FFEL program.
>
> Amounts for defaulted FFEL program loans consolidated under the
> Federal Direct Loan Program should not be subtracted.
>
> **Projected Years -** Report projected amount of total claims
> expensed. Provide methodology for this estimate.

### AR-22 Recall of Federal Funds to the Restricted Account

> No reporting required for this line item. .

### AR-23 Transfer to Operating Fund for Default Aversion

> **Current Year --** Report net Default Aversion expense recognized for
> delinquent loans for which agencies receive lender requests for
> default aversion assistance and for which payment is authorized under
> the Department's regulation and guidance for the current federal
> fiscal year. Amount should agree or be reconcilable to line AR-30,
> Default Aversion Fee Revenue.
>
> **Projected Years** -- Project net Default Aversion expense to be
> recognized for delinquent loans for which agencies receive lender
> requests for default aversion assistance and for which payment is
> authorized under the Department's regulation and guidance for the
> current federal fiscal year. Amount should agree or be reconcilable to
> line AR-30, Default Aversion Fee Revenue.

### AR-24 Transfer to Operating Fund for Account Maintenance Fee 

> **Current Year --** As applicable, report the transfer amount,
> regardless of the actual transfer, from the Federal Fund for account
> maintenance fee for the current FY. Amount should reconcile to line
> AR-33, Transfer from Federal Fund for Account Maintenance Fee.

### AR-25 Other Expenses 

> **Current Year -** Report other expenses, which are not reported
> elsewhere in the Federal Fund section. Include provision for loan
> losses, the Secretary's Equitable Share recognized on collections of
> defaulted, consolidated, and rehabilitated FFEL loans, and guarantor
> retention on these collections. Report itemized entries (description
> and amount) to support total reported in this line item. (See
> Attachment A.) Itemized entries may include: premium fee refunds to
> lenders, early withdrawal counseling fee, GA portion of \$250M recall,
> refund of insurance premiums, depreciation, IRS tax offset, prior year
> accrual.
>
> **Projected Years -** Report projected other expenses, which are not
> reported elsewhere in the Federal Fund section. Report itemized
> entries (description and amount) to support total reported in this
> line item. (See Attachment A.)

### AR-26 Ending Balance

> **Current Year -** The ending balance must equal the sum of AR-15
> through AR-20 minus AR-21 through AR-26 as well as the ending balance
> on AR-57 (Federal Fund Balance Sheet Section).
>
> **Projected Years** - The projected ending balance must equal the sum
> of AR-15 through AR-20 minus AR-21 through AR-25.

## Supplemental Information

### AR-27 Amount transferred from Federal Fund to Operating Fund for Operating Expenses (Repayable)

> No reporting required for this line item. .

### AR-28 Amount received from Operating Fund to Repay Advance for Operating Expenses

> No reporting required for this line item.

## Operating Fund

The activity reported in this section should reconcile to the amounts
reported on the Guarantor's audited financial statements on an accrual
basis. Projections are required for line items AR-29 thorough AR-40,
except AR-33 and AR-40.

### AR-29 Beginning Balance (from 9/30/XX) 

> **Current Year -** Report prior FFY ending balance, AR-40.
>
> **Projected Years -** Same as AR-40, Ending Balance for the previous
> fiscal year.

### AR-30 Default Aversion Fee Revenue

> **Current Year --** Report DAF revenue recognized for delinquent loans
> for which agencies receive lender requests for default aversion
> assistance and for which payment is authorized by Department's
> regulations and guidance. Amount should reconcile to line AR-23,
> Transfer to Operating Fund for Default Aversion.
>
> **Projected Years --** Report projected DAF revenue to be recognized
> for delinquent loans for which agencies receive lender requests for
> assistance and for which payment is authorized by the Department's
> regulations and guidance. Amount should reconcile to line AR-23,
> Transfer to Operating Fund for Default Aversion.

### AR-31 Loan Processing and Issuance Fee Revenue 

> **Current Year -** Report loan processing and issuance fee revenue
> recognized.

**Projected Years -** Report projected loan processing and issuance fee
recognized.

### AR-32 Account Maintenance Fee Revenue Received from ED 

> **Current Year -** Report account maintenance fees recognized from the
> Department.
>
> **Projected Years -** Report projected account maintenance fees to be
> recognized from the Department.

### AR-33 Transfer from Federal Fund for Account Maintenance Fee 

> **Current Year -** Report account maintenance fees recognized subject
> to Federal Fund settlement (AR-24, Transfer to Operating Fund for
> Account Maintenance Fee) when amount exceeds ED's budgetary cap.

### AR-34 Collections of Defaulted Loans less Reinsurance Complement (GA Collection Retention)

> **Current Year -** Report collection revenue recognized from payments
> to guaranty agency by defaulted borrowers. Amount reported should be
> your agency's share of collections and does not include Secretary's
> Equitable Share of collections. Include receipts from rehabilitated
> loan sales and consolidation of defaulted loans under the FFEL
> program. Do not include amounts reported in AR-18, Reinsurance
> Complement or payments received to consolidate under the Federal
> Direct Loan Program. Direct Loan payments should be reported in AR-36,
> Other Revenue.
>
> **Projected Years --** Report projected collection revenue recognized
> from payments to guaranty agency by defaulted borrowers. Amount
> reported should be your agency share of collections. Include receipts
> from rehabilitated loan sales and consolidation of defaulted loans
> under the FFEL program. Do not include AR-18 (Reinsurance Complement).

### AR-35 Investment Income

> **Current Year -** Enter the amount of all investment income
> recognized in the Operating Fund including net increase (decrease) in
> fair value of investments
>
> Do not include interest earned on the Restricted Account, it should be
> reported in item AR-36, Other Revenue (FFEL and non-FFEL).
>
> **Projected Years -** Report projected earnings on the Operating Fund
> investments.

### AR-36 Other Revenue (FFEL and Non-FFEL)

> **Current Year** - Report other revenues that are FFEL and non-FFEL
> not already reported elsewhere in this section. This amount will
> include interest earned on the interest that was transferred from the
> Restricted Account and payments received to consolidate under the
> Direct Loan Program. Report itemized entries (description and amount)
> to support total reported in this line item. (See Attachment B.)
> Itemized entries may include: service income, default aversion, and
> VFA revenue.
>
> **Project Year -** Report projected other revenues that are FFEL and
> non-FFEL not already reported elsewhere in this section. This amount
> will include interest earned on the interest that was transferred from
> the Restricted Account and payments received to consolidate under the
> Direct Loan Program. Report projected itemized entries (description
> and amount) to support total reported in this line item. (See
> Attachment B.)

### AR-37 Collections of Defaulted Loans (Secretary Equitable Share)

> No reporting required for this line item due to the 48-hour rule.
> Secretary's Equitable Share should be reported in AR-25, Other
> Expenses.

### AR-38 Operating Expenses 

> **Current Year -** Report expenses associated with guaranty agency
> related activities, including application processing, loan
> disbursement, enrollment and repayment status management, default
> aversion activities, default collection activities, school and lender
> training, financial aid awareness and related outreach activities and
> compliance monitoring.
>
> **Projected Years -** Projected expenses associated with guaranty
> agency related application processing, loan disbursement, enrollment
> and repayment status management, default aversion activities, default
> collection activities, school and lender training, financial aid
> awareness and related outreach activities and compliance monitoring.

### AR-39 Other Expenditures (FFEL and Non-FFEL)

> **Current Year** - Report other FFEL and Non-FFEL expenses not
> reported elsewhere in this section. This will include amounts used for
> default prevention activities. Report itemized entries (description
> and amount) to support total reported in this line item. (See
> Attachment B.) Itemized entries may include: 48-hour rule,
> administration costs, transfers to federal fund, and OIG audit
> liabilities.
>
> **Project Year** - Report projected FFEL and Non-FFEL expenses not
> reported elsewhere in this section. This will include amounts used for
> default prevention activities. Report projected itemized entries
> (description and amount) to support total reported in this line item.
> (See Attachment B.)

### AR-40 Ending Balance

> **Current Year -** The ending balance must equal the sum of AR-29
> through AR-36 minus AR-37 through AR-39 = AR-40.
>
> **Projected Years -** The projected ending balance must equal the sum
> of AR-29 through AR-36 minus AR-37 through AR-39 = AR-40.

## Supplemental Information

### AR-41 Amount Received from Federal Fund for Operating Expenses (Repayable)

No reporting required for this line item.

### AR-42 Amount Repaid to Federal Fund for Operating Expenses

> No reporting required for this line item

## Restricted Account

This section reported on all revenues and expenses of the restricted
account that was created to retain the recall amounts required by
Section 422(h) of the HEA. This section is no longer required.

### AR-43 Beginning Balance (from 9/30/XX)

No reporting required for this line item.

### AR-44 Recall of Federal Funds from Federal Fund

No reporting required for this line item.

### AR-45 Investment Income on Restricted Account

> No reporting required for this line item. Amounts previously reported
> here for interest earned on the Restricted Account is now reported in
> AR-25, Other Expenses.

### AR-46 Investment Income on Restricted Account Expensed for Default Prevention 

> No reporting required for this line item. Amounts previously reported
> here for earnings from the Restricted Reserve Account expensed for
> activities to reduce student loan defaults is now reported in AR-39,
> Other Expenditures.

### AR-47 Ending Balance

No reporting required for this line item.

## Balance Sheet Section (Federal Fund)

The balances reported in this section should reconcile to amounts
reported on the Guarantor's audited financial statements Balance Sheet
as of the end of the Federal fiscal year 9/30/XX. The ending balance
AR-57 in this section should equal the ending balance on AR-26 (Federal
Fund Activity Section). All reporting should be on an accrual basis and
in accordance with GAAP.

### AR-48 Cash, Cash Equivalents and Investments

> Report cash, cash equivalents and investment (regardless of maturity
> date of investments) balances. If applicable, report your Voluntary
> Flexible Agreement (VFA) escrow balance in this line item.

### AR-49 Restricted Account Cash, Cash Equivalents and Investments 

> No reporting required for this line item. Do not report escrow
> balances in this line item.

### AR-50 Net Investment in Property, Plant, Equipment and Inventory

> Report balances of property, plant, and equipment less accumulated
> depreciation.

### AR-51 Accounts Receivable from the ED

> Report balances owed to the Federal Fund by ED (i.e., reinsurance and
> other payments).

### AR-52 Other Assets

> Report total balances of other current and non-current asset accounts
> that were not reported in line items AR-48 through AR-51. Report
> itemized entries (description, long-term or short-term, and amount) to
> support total reported in this line item. Short-term itemized entries
> may include: guarantee fee receivable, receivable from Operating Fund,
> and default aversion fee rebate.

### AR-53 Accounts Payable, Accrued Expenses and Other Current Liabilities

> Report liabilities for expenses due, others than ED, including amounts
> due Operating Fund and claim payments payable to lenders, if amount is
> to be paid within 12 months. Report long-term portion in AR-55 (Other
> Liabilities).

### AR-54 Accounts Payable to ED

> Report other liabilities for expenses due ED within the next 12
> months.

### AR-55 Other Liabilities

> Report other liabilities that are not reported in other line items,
> including outstanding federal advances due to ED, and the remaining
> reserve return obligation, to be paid more than 12 months from current
> date (i.e., recall for FY 06 and FY 07). Report Other Short-Term
> Liabilities in AR-53 (Accounts Payable, Accrued Expenses and Current
> Liabilities). Report itemized entries (description, long-term or
> short-term, and amount) to support total reported in this line item.

### AR-56 Allowances and Other Non-Cash Charges to Federal Fund

> Report the net present value of expected future claims, net of
> recoveries, to be paid on guaranteed loans, less expected
> reimbursements of these claims; and, other allowances, such as
> deferred (unearned) guarantee fees, as well as other obligations of
> the Federal Fund.

### AR-57 Federal Fund Balance

> The Federal Fund balance on an accrual basis for the fiscal year being
> reported is calculated by adding line items AR-48 through AR-52 and
> subtracting line items AR-53 through AR-56. This amount should
> represent the equity on the audited balance sheet section of the
> Federal Fund. AR-57 must equal AR-26.