**[SGL BOARD PRESENTATION]{.underline} 2/24/99**

**New Credit Reform Accounts**

**1.**

**Account Title: Subsidy Payable to Financing Account**

**Account Number: 2170**

**Normal Balance: Credit**

**Type of Account: Posting**

**Proposed Definition:** The amount of subsidy payable from a program
account to a financing account for both undisbursed direct loans and
undisbursed guaranteed loans.

**Justification:** Subsidy payments are obligated in a program account
simultaneous to an obligation of direct loans or guaranteed loans in a
financing account. This payable is presently accounted for in account
2110 Accounts Payable. Since the balance in 2110 Accounts Payable is
tracked against account 4901 expended Authority - Unpaid, subcommittee
members suggested the new account would benefit reconciliations. Also,
the amount of subsidy payable will be more easily identified after this
new account is added.

**2.**

**Account Title: Contra Liability for Subsidy Payable to Financing
Account**

**Account Number: 2179**

**Normal Balance: Debit**

**Type of Account: Posting**

**Proposed Definition:** The amount of subsidy payable from a program
account to a financing account for both undisbursed direct loans and
undisbursed guaranteed loans. (Contra account to Account 2170 Subsidy
Payable to Financing Account.)

**Justification:** Previous case studies showed transactions recording
the payable with a debit to prepaid subsidy in account 1450 Prepayments.
When using account 1450, there is an assumption that something had been
paid. Since there is no actual payment, the IRC subcommittee suggested
that using account 1450 is incorrect. No other SGL account was
identified as being an acceptable repository for this data. After adding
Account 2179, the required debit/offset to account 2170 will be easily
identified.

**3.**

**Account Title: Loan Modification Adjustment Transfer Appropriation**

**Account Number: 4125**

**Normal Balance: Debit**

**Type of Account: Posting**

**Proposed Definition**: An amount appropriated to a financing account
from a permanent indefinite appropriation to cover the cost of a
modification adjustment transfer. Modification costs are calculated
using a current discount rate at which a cohort pays or earns interest.
When the cost of a modification is less when calculated at the current
discount rate than at the discount rate at which the cohort pays or
earns interest, a modification adjustment transfer appropriation is
required.

**Justification:** To date, an appropriation for a Modification
Adjustment Transfer is the ONLY time funds are appropriated to a
financing account. A new account will highlight this extraordinary
event.

**SAMPLE TRANSACTIONS**

**EXISTING ACCOUNTS V.S. PROPOSED NEW ACCOUNTS**

**1. Account 2170 Subsidy Payable to Financing Account and Account 2179
Contra Liability for Subsidy Payable to Financing Account**

A. RECORD SUBSIDY IN PROGRAM ACCOUNT. The agency entered into binding
contracts for \$100,000 of direct loans. The OMB subsidy model indicated
a 25% subsidy rate.

B. TRANSFER SUBSIDY TO FINANCING ACCOUNT. The subsidy was transferred
from the program to the financing account at the time of loan
disbursement.

**2. Account 4125 Loan Modification Adjustment Transfer Appropriation**

A. RECORD APPROPRIATION. An appropriation (permanent indefinite) warrant
was received from the Treasury for the modification adjustment transfer
as described in Circular A-11 (1998) Section 33.11(b).