United States General Accounting Office

Washington, DC 20548

Accounting and Information

Management Division

B-285669

July 2000

HEADS OF DEPARTMENTS AND AGENCIES

The Federal Financial Management Improvement Act (FFMIA) of 1996 requires, among other

things, that agencies implement and maintain financial management systems that

substantially comply with federal financial management systems requirements. These

requirements are detailed in the Financial Management Systems Requirements series issued

by the Joint Financial Management Improvement Program (JFMIP) and in Office of

Management and Budget (OMB) Circular A-127, Financial Management Systems, and OMB’s

Implementation Guidance for the Federal Financial Management Improvement Act (FFMIA)

of 1996, issued September 9, 1997. JFMIP intends for the requirements to promote

understanding of key financial management systems concepts and requirements, to provide a

framework for establishing integrated financial management systems to support program and

financial managers, and to describe specific requirements of individual types of financial

management systems.

We are issuing this checklist that reflects JFMIP’s revised Guaranteed Loan System

Requirements (March 2000) to assist (1) agencies in implementing and monitoring their

guaranteed loan systems and (2) managers and auditors in reviewing their guaranteed loan

systems to determine if they substantially comply with FFMIA. This checklist is not required

to be used in assessing the guaranteed loan system. It is provided as a tool for use by

experienced staff. This checklist, the JFMIP source document, and the two previously

mentioned OMB documents should be used concurrently. Experienced judgment must be

applied in the interpretation and application of this tool to enable a user to consider the

impact of the completed checklist on an entire guaranteed loan system and whether the

system, as a whole, substantially complies with requirements.

Additional copies of the exposure draft can be obtained from Room 1100, 700 4th Street NW,

U.S. General Accounting Office, Washington, DC 20548, or by calling (202) 512-6000, or TDD

(202) 512-2537. This exposure draft replaces GAO’s previously issued exposure draft of the

Guaranteed Loan System Checklist (December 1997) and is available on the Internet on

GAO’s Home Page (www.gao.gov) under “Other Publications.” Please send comments by

October 31, 2000, to Bruce Michelson, Assistant Director, Corporate Audits and Standards,

Accounting and Information Management Division, at

U.S. General Accounting Office

441 G Street NW, Room 5089

Washington, DC 20548

or by e-mail at michelsonb.aimd@gao.gov.

Jeffrey C. Steinhoff

Assistant Comptroller General
GAO

United States General Accounting Office

Exposure Draft

August 2000 GUARANTEED LOAN

SYSTEM

REQUIREMENTS

Checklist for

Reviewing Systems

Under the Federal

Financial Management

Improvement Act

GAO/AIMD-21.2.7
GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

______________________________________________________________________________

CONTENTS

______________________________________________________________________________

Overview 3

Authoritative Guidance 4

How to Use This Checklist 5

Guaranteed Loan System Requirements 7

System Overview 9

Introduction to Functional Requirements 21

Lender Management 22

Guarantee Extension and Maintenance 31

Portfolio Management 45

Acquired Loan Servicing 57

Delinquent Debt Collection/Troubled Debt Servicing 69

Treasury Cross-Servicing 84

Other Reporting Requirements 89

Records Retention 90

Figure

Figure 1: Agency Systems Architecture 3

Abbreviations

CAIVRS Credit Alert Interactive Voice Response System

CFO chief financial officer

CM configuration management

COTS commercial off-the-shelf

DOJ Department of Justice

FCRA Federal Credit Reform Act

FFMIA Federal Financial Management Improvement Act

FMFIA Federal Managers’ Financial Integrity Act

FMS Financial Management Service

IRS Internal Revenue Service

JFMIP Joint Financial Management Improvement Program

NPR National Performance Review

OGC Office of the General Counsel

OMB Office of Management and Budget

OPM Office of Personnel Management

SF standard forms

SFFAS Statement of Federal Financial Accounting Standards

SSN Social Security Number

TIN taxpayer identification number

TOP Treasury offset program
Page 2 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

(BLANK)
Page 3 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

______________________________________________________________________________

OVERVIEW

______________________________________________________________________________

The Federal Financial Management Improvement Act (FFMIA) of 1996 requires, among

other things, that agencies implement and maintain financial management systems that

substantially comply with federal financial management systems requirements. These

system requirements are detailed in the Financial Management Systems Requirements

series issued by the Joint Financial Management Improvement Program (JFMIP)1

and

Office of Management and Budget (OMB) Circular A-127, Financial Management Systems.

JFMIP requirements documents identify (1) a framework for financial management

systems, (2) core financial systems requirements, and (3) 16 other financial and mixed

systems supporting agency operations, not all of which are applicable to all agencies.

Figure 1 is the JFMIP model that illustrates how these systems interrelate in an agency's

overall systems architecture.

Figure 1: Agency Systems Architecture

Source: JFMIP Guaranteed Loan System Requirements (March 2000).

1

JFMIP is a joint cooperative undertaking of the Office of Management and Budget, the

General Accounting Office, the Department of Treasury, and the Office of Personnel

Management, working in cooperation with each other and with operating agencies to

improve financial management practices throughout the government. The program was

initiated in 1948 by the Secretary of the Treasury, the Director of the Bureau of the

Budget (now OMB), and the Comptroller General and was given statutory authorization

in the Budget and Accounting Procedures Act of 1950. The Civil Service Commission,

now the Office of Personnel Management (OPM), joined JFMIP in 1966.
Page 4 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

To date, JFMIP has issued the framework and systems requirements for the core financial

system and 7 of the 16 systems identified in the architecture. (See figure 1.) 2

We are issuing this checklist that reflects JFMIP’s revised Guaranteed Loan System

Requirements (March 2000) to assist (1) agencies in implementing and monitoring their

guaranteed loan systems and (2) managers and auditors in reviewing agency guaranteed

loan systems to determine if they substantially comply with FFMIA. This checklist is not

required to be used in assessing the guaranteed loan system. It is provided as a tool for

use by experienced staff. This checklist, the JFMIP source document, OMB Circular

A-127, and OMB’s Implementation Guidance for the Federal Financial Management

Improvement Act (FFMIA) of 1996, issued September 9, 1997, should be used

concurrently. Experienced judgment must be applied in the interpretation and

application of this tool to enable a user to consider the impact of the completed checklist

on the entire guaranteed loan system and whether the system, as a whole, substantially

complies with requirements.

Authoritative Guidance

OMB Circular A-127 and OMB’s implementation guidance provide the basis for assessing

whether agencies implement and maintain their financial management systems in

substantial compliance with FFMIA. The implementation guidance identifies various

criteria that an agency must meet to substantially comply with these requirements. One

of the criteria listed in the OMB guidance is the JFMIP systems requirements series.

The source of all the questions in this checklist is the JFMIP Guaranteed Loan System

Requirements (JFMIP-SR-00-01, March 2000). This document provides high level

functional requirements for guaranteed loan systems that will provide the capability for

financial managers and others to control and account for guaranteed loan program assets,

liabilities, and resources as defined in governmentwide and agency-specific statutes,

regulations, and guidelines. The March 2000 document is an update of the December

1993 JFMIP Guaranteed Loan System Requirements document. The primary purposes of

this update are to reflect (1) changes in statutes, regulations, and technology that have

occurred since the document was originally published (e.g., passage of the Chief

Financial Officers Act of 1990, FFMIA of 1996), (2) changes brought about by the National

Performance Review (NPR), and (3) increased availability of commercial off-the-shelf

(COTS) software packages. It should be noted, however, that the checklist is based on

the existing published JFMIP standards and that changes in laws, regulations, and

standards and practices since the standards were issued are not included in the checklist.

The revised JFMIP document segregates functional requirements into two general

categories, mandatory and value-added. The mandatory requirements, based on federal

2

Thus far, the series includes the (1) Framework for Federal Financial Management

Systems, (2) Core Financial System Requirements, (3) Inventory System Requirements,

(4) Seized Property and Forfeited Assets System Requirements, (5) Direct Loan System

Requirements, (6) Guaranteed Loan System Requirements, (7) Travel System

Requirements, (8) Human Resources & Payroll Systems Requirements, and (9) System

Requirements for Managerial Cost Accounting. In early 1998, JFMIP decided to initiate

projects to update system requirements documents that were not current with regulations

and legislation. JFMIP also planned to initiate projects to complete the remaining

systems requirements where none currently exist.
Page 5 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

laws and regulations, describe what the system must do and consist of the minimum

acceptable functionality necessary to establish a system. Mandatory requirements are

those against which agency heads evaluate their systems to determine substantial

compliance with system requirements under FFMIA. These requirements apply to

existing systems in operations and new systems planned or under development. The

checklist uses “(M)” immediately following the question to indicate that it is mandatory

for the system to do that.

The value-added requirements describe features or characteristics and may consist of any

combination of the following: (1) using state-of-the-art technology, (2) employing the

preferred or best business practices, or (3) meeting the special management needs of an

individual agency. Value-added, optional, and other similar terminology may be used to

describe this category of requirements. Agencies should consider value-added features

when judging systems options. The need for these value-added features in agency

systems is left to the discretion of each agency head. The checklist uses “(V)”

immediately following the question to indicate that the item is value-added rather than

mandatory.

How to Use This Checklist

OMB’s 1997 implementation guidance provides chief financial officers and inspectors

general with a means for determining whether their agencies’ financial management

systems substantially comply with federal financial management systems requirements.

The annual reporting required pursuant to section 4 of the Federal Managers’ Financial

Integrity Act (FMFIA) is one of the means to assist agencies in the determination of

substantial compliance. Agencies can also use this checklist as a tool to help determine

annual compliance with section 4 of this act.3

Filling out this checklist will allow agencies to systematically determine whether specific

system requirements are being met. In determining substantial compliance, agencies

should assess the results of the completed checklist on the guaranteed loan system

requirements taken as a whole.

3

In addition, the Chief Financial Officers’ (CFO) Council has charged the Financial

Systems Committee with developing implementation guidance for performing FFMIA and

other compliance reviews. The CFO Council and JFMIP plan to jointly issue the

guidance.

The checklist contains three columns with the first citing the question followed by either

“(M)” for mandatory requirements or “(V)” for value added. Use the second column to

answer each question “yes,” “no,” or “na.” Use the third column to explain your answer.

A “yes” answer should indicate that the agency’s guaranteed loan system provides for the

capability described in the question. For each “yes” answer, the third column should

contain a brief description of how the guaranteed loan system satisfies that capability and

should also refer to a source that explains or shows the capability.

A “no” answer indicates that the capability does not exist. For a “no” answer, the third

column should provide an explanation and, where applicable, a reference to any related

supporting documentation (e.g., the agency is working on modifying or implementing its

guaranteed loan system to have the capability available in subsequent years; management

believes the capability is not cost effective and will not enhance the guaranteed loan
Page 6 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

system’s ability to manage operations). Cost-benefit studies, or other reasoning, that

supports a “no” answer should be identified in the explanation column. If there are no

cost-benefit studies or other support, a full explanation should be provided.

“No” answers should not be viewed individually or taken out of context. Rather, “no”

answers should be assessed as to their impact on the overall guaranteed loan system and

the extent to which the “no” answers inhibit the entire guaranteed loan system from

meeting substantial compliance.

Certain questions within the checklist may not be applicable to the agency. Answer such

nonapplicable question(s) with “na” and provide an appropriate explanation in the third

column.
Page 7 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

______________________________________________________________________________

GUARANTEED LOAN SYSTEM REQUIREMENTS

______________________________________________________________________________

The guaranteed loan system requirements document provides an overview of guaranteed

loan system requirements (the checklist questions for this area are drawn from pp. 10-17

of the JFMIP source document); introduction to functional requirements (the checklist

questions for this area are drawn from p. 20 of the JFMIP source document); functional

requirements for the seven functions described below: (1) lender management,

(2) guarantee extension and maintenance, (3) portfolio management, (4) acquired loan

servicing, (5) delinquent debt collection, (6) Treasury cross-servicing, and (7) other

reporting requirements and records retention requirements (the checklist questions for

this area are drawn from p. 64 of the JFMIP source document).

1. Lender management supports analysis of lenders’ program eligibility and monitors

lender performance to ensure that only qualified and financially sound lenders

participate in federal guaranteed loan programs. (The checklist questions for this

area are drawn from pp. 21-27 of the JFMIP source document.)

2. Guarantee extension and maintenance supports the accounting and

documentation requirements for the evaluation of the guarantee request, the

extension of the guarantee by the federal agency, and the monitoring of the

guarantee. (The checklist questions for this area are drawn from pp. 28-35 of the

JFMIP source document.)

3. Portfolio management supports the management and evaluation of the guaranteed

loan program and its portfolios of outstanding guaranteed loans and acquired

loans. (The checklist questions for this area are drawn from pp. 36-42 of the

JFMIP source document.)

4. Acquired loan servicing encompasses the procedures for default claim review and

payment in accordance with guarantee agreements and regulations, as well as the

invoicing and collection procedures for acquired loans and the foreclosure and

liquidation of property for collateralized loans acquired by the government. (The

checklist questions for this area are drawn from pp. 43-50 of the JFMIP source

document.)

5. Delinquent debt collection/troubled debt servicing includes the recovery of

delinquent debt through the use of dunning letters, offset programs, collection

agencies, garnishment of nonfederal wages, litigation, and termination of

collection action on uncollectible debt. It also includes the foreclosure and

liquidation of property for collateralized loans acquired by the government. (The

checklist questions for this area are drawn from pp. 51-58 of the JFMIP source

document.)

6. Treasury cross-servicing occurs when Treasury’s Financial Management Service

(FMS) or a Treasury-designated debt collection center provides debt collection

services for other federal agencies. (The checklist questions for this area are

drawn from pp. 59-62 of the JFMIP source document.)
______________________________________________________________________________

Guaranteed Loan System Requirements

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Page 8 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

7. Other reporting requirements provides for two types of reporting (1) transaction

history and (2) external reporting requirements. (The checklist questions for this

area are drawn from p. 63 of the JFMIP source document.)

The checklist questions follow the JFMIP source document. It should be noted that not

all questions will apply in all situations and, as with the use of any checklist, professional

judgment should be exercised. Using the JFMIP source document and its “Appendix B:

Glossary,” which defines terms used, along with the two previously mentioned OMB

documents, will help ensure that the user is cognizant of the background information

necessary to fully understand the questions.
______________________________________________________________________________

Guaranteed Loan System Requirements

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Page 9 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

System overview

Yes/no

na Explanation

1. Does the guaranteed loan

system being designed and

implemented, or in use, operate

in accordance with laws,

regulations, and judicial

decisions? It is the

responsibility of the agency to

be knowledgeable of the legal

requirements governing its

system. (M)

2. Do functional requirements not

mandated by law, regulation,

directive, or judicial decision

result in cost-effective systems

that are in the interest of the

government? (M)

3. Have all possible alternatives

for meeting the requirements

been considered? (M)

4. Has the agency carefully

determined which value-added

requirements are necessary for

each credit program? (M)

5. Has the agency developed an

efficient, effective, and

economical strategy for

interfacing, or logically

integrating, its guaranteed loan

systems (or subsystems) with

other systems (or subsystems)

that provide information to, or

utilize information from,

standard guaranteed loan

systems? (M)

6. Are the data in optional

processes consistent with

standard guaranteed loan

systems that contain the official

records for the agency? (M)
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Page 10 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

System overview

Yes/no

na Explanation

Relationship with other systems

7. Is the system capable of

interfacing with other financial

management systems (e.g., the

core financial system, the

managerial cost accounting

system, common processes for

managing receivables,

capabilities related to collecting

delinquent debt, and the

property management system)?

(M)

8. Does the system interact with

the core financial system to

perform fund control checks,

initiate or record payments, and

record the results of other

guaranteed loan-related

financial transactions, and

acknowledge receipt of

financial information exchange?

(M)

9. Does the system perform

automatic system balancing?

(M)

10. Does the system balancing

ensure that guaranty loan

partners involved in a financial

information exchange agree on

transaction number and dollar

values passed, processed, and

rejected? (M)

11. Does the automated system

balancing include cumulative

subsidiary account balancing to

the general ledger? (M)

12. Does the automated system

balancing ensure that guaranty

loan partners reflect the same

picture of valid transactions
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System overview

Yes/no

na Explanation

over a specified period of time,

normally a month? (M)

13. Is the system capable of

supporting managerial cost

accounting and credit subsidy

reestimates? (M)

14. If the agency acquires property

serving as collateral on a

defaulted guaranteed loan, does

the system provide the property

management system with the

information needed to manage

and liquidate the collateral?

(M)

Relationship with other

systems –

system interface functioning

verification

15. Does a team, independent of the

development organization,

perform all verifications to

ensure that the system is

capable of interfacing with

other financial management

systems? (M)

16. Does verification include

intersystem testing to ensure

that the system can process

incoming and outgoing data for

other interfaces for the

guaranty loan program? This

testing will ensure that the

guaranty loan system can

accept data files, process them

correctly, and transmit the

necessary transactions to other

systems. (M)

17. Does verification include having

all intersystem vendors involved

with the testing create and
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Guaranteed Loan System Requirements

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Page 12 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

System overview

Yes/no

na Explanation

accept a comprehensive test

plan? (M)

18. Does verification include having

a team, independent of the

development organization,

review requirements, test plans,

and scenarios; monitor test

execution; and ensure that

testing objectives are met? (M)

19. Does verification include the

team, independent of the

development organization,

working as a partner in the

development effort, gaining

system-specific knowledge

while reviewing processes,

outputs, and techniques to

ensure compliance with

procedures and quality results?

(M)

20. Are issues, when they arise,

tracked through a configuration

management (CM) tool? (M)

21. Are resolutions included in

testing sign-off documentation

when issues are resolved? (M)

22. Does the review, other than test

execution, include, at a

minimum, the following:

requirements traceability

matrix, functional requirements

document, detail design

document, system

specifications, and manual

procedures? (M)

Relationship with other

systems –

system interface functioning

verification –
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Guaranteed Loan System Requirements

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Page 13 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

System overview

Yes/no

na Explanation

requirements traceability

matrix

23. Is the system able to

demonstrate that all

development requirements are

incorporated into the final

system output through the use

of requirements traceability

matrices? (M)

24. Are the matrices submitted with

the preliminary design

document? (M)

25. Are the matrices updated with

each subsequent step in the

enhancement effort (i.e.,

requirements should be traced

through preliminary design,

detailed design, specifications,

test plans, and test results)?

(M)

Relationship with other

systems –

system interface functioning

verification –

functional requirements

document

26. Does the system perform work

needed to accomplish the

specified outcomes, achieve or

exceed the specified

performance standards, record

and reconcile money, and track

report activity? (M)

Relationship with other

systems –

system interface functioning

verification –

detail design document
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Page 14 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

System overview

Yes/no

na Explanation

27. Does the detail design fully

consider requirements for

hardware, software, integration

with other systems, security,

telecommunications, data

management, manual

procedures, quality

assurance/quality control

(QA/QC), auditability, and

capacity planning and

management? (M)

28. Does the detail design

document the design in

system/subsystem

specifications, program

specifications, and database

specifications? (M)

Relationship with other

systems –

system interface functioning

verification –

system specifications

29. Are system/subsystem

specifications, program

specifications, and database

specifications all included

within the detail design

document? (M)

30. Do the specifications include, at

a minimum, flowcharts,

input/output processing, and

file layouts? (M)

Relationship with other

systems –

system interface functioning

verification –

manual procedures

31. Are all system modifications or

maintenance changes

incorporated into manual
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Guaranteed Loan System Requirements

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Page 15 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

System overview

Yes/no

na Explanation

procedures and functions as

necessary to keep the

procedures up-to-date? (M)

32. Does system testing ensure that

all related manual procedures

perform according to system

requirements? (M)

Relationship with other

systems –

post-implementation testing

33. Are transactions reviewed to

make sure that they are

processing correctly and that

the data being produced are

reliable after the system is

implemented? (M)

34. Is the testing conducted with

actual production data? (M)

35. Is the testing done with the

team, independent of the

development organization,

verifying expected results? (M)

36. Are daily, monthly, quarterly,

and fiscal/calendar year-end

reports reviewed prior to

dissemination, whenever

possible, to ensure that the data

have been updated correctly?

(M)

Relationship with other

systems –

configuration management

37. Is configuration management

(CM) used to establish and

maintain the security and

integrity of the system

throughout its development life

cycle? (M)
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Guaranteed Loan System Requirements

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Page 16 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

System overview

Yes/no

na Explanation

38. Does the comprehensive CM

provide all project team

members with a consistent level

of understanding of the system

engineering process, maintain

systems stability, and reduce

technical risk associated with

the development effort? (M)

Data requirements

39. Does the system store, access,

and/or update these seven types

of data:

• Lender/servicer

information?

• Guarantee information?

• Claim information?

• Acquired loan information?

• Program criteria?

• Core financial system

information?

• External organizational

information?

In the JFMIP document, a

grouping of related types of

data is referred to as an

information store. The term

information store (rather than

database or file) is used to

avoid any reference to the

technical or physical

characteristics of the data

storage medium. (M)

40. Has the agency determined the

actual data storage (physical

databases and files) during

system development and

implementation based on the

loan program’s statutory

requirements and the agency’s

technical environment,

processing volumes,
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Guaranteed Loan System Requirements

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Page 17 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

System overview

Yes/no

na Explanation

organizational structure, and

degree of system centralization

or decentralization? (M)

Data requirements –

information stores internal to

the guaranteed loan system –

lender/servicer information

41. Does the information store

include the following data:

• Lender/servicer application

data?

• Lender/servicer review

data?

• Approved lender/servicer

data?

• Lender/servicer status?

(M)

Data requirements –

information stores internal to

the guaranteed loan system –

guarantee information

42. Does the information store

include the following data:

• Guarantee data (e.g., lender,

loan amount, guarantee

level, loan status, subsidy

information, interest rate,

and loan terms)?

• Collateral data (e.g.,

appraised value, status;

mandatory unless

specifically excluded by

program requirements)?

• Borrower data (e.g.,

borrower’s name, address,

social security number

(SSN) or taxpayer

identification number (TIN),

financial data)?
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Guaranteed Loan System Requirements

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System overview

Yes/no

na Explanation

• Guarantee fees due and/or

collected? (M)

43. Does the information store

include rejected guarantee data

(e.g., lender, reason for

rejection)? (V)

Data requirements –

information stores internal to

the guaranteed loan system –

claim information

44. Does the information store

include the following data:

• Claim application data?

• Claim status? (M)

Data requirements –

information stores internal to

the guaranteed loan system –

acquired loan information

45. Does the information store

include the following data:

• Acquired loan data?

• Acquired loan status?

• Acquired loan collateral

data?

• Payment history? (M)

Data requirements –

information stores internal to

the guaranteed loan system –

program criteria

46. Does the information store

include the following data:

• Lender eligibility?

• Lender financial rating?

• Lender risk rating?

• Portfolio evaluation?
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Guaranteed Loan System Requirements

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Page 19 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

System overview

Yes/no

na Explanation

• Creditworthiness?

(Mandatory unless

specifically excluded by

program requirements.)

• Borrower eligibility?

• Guarantee fees?

• Fee penalty?

• Claim application

evaluation?

• Invoicing?

• Receipt application rules?

• Debt collection?

• CAIVRS (credit alert

interactive voice response

system) referral?

• Credit bureau reporting?

• Treasury offset referral?

• Collection agency selection?

• Litigation referral?

• Write-off? (M)

47. Does the information store

include the following data:

• Close-out?

• Loan sale? (V)

Data requirements –

information stores external to

the guaranteed loan system –

core financial system

information

48. Does the information store

include the following data:

• Budget execution data?

• Receivables?

• Disbursement data?

• Collections/receipts?

• Administrative costs?

• Principal and interest data?

• Acquired asset data?

• Collateral? (M)
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Page 20 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

System overview

Yes/no

na Explanation

Data requirements –

information stores external to

the guaranteed loan system –

external organizational

information

49. Does the information store

include the following data:

• Lender rating data?

• Treasury interest rates?

• SF-1151s (Non-Expenditure

Transfer Authorization) and

SF-1081s (Voucher and

Schedule of Withdrawals

and Credits)?

• Loan status?

• Sale approval?

• Collection activities and

results?

• Write-off approval?

• Foreclosure data? (M)

50. Does the information store

include sale proceeds? (V)
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Page 21 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Introduction to functional

requirements

Yes/no

na Explanation

1. Are the following functions

supported by the system?

• Lender management?

• Guarantee extension and

maintenance?

• Portfolio management?

• Acquired loan servicing?

• Delinquent debt collection?

• Treasury cross-servicing?

• Other reporting

requirements? (M)
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 22 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Lender management

Yes/no

na Explanation

General requirements –

lender eligibility process –

process lender application

1. Does the automated system

record and update lender

application information,

ensuring that all required data

are present and valid (e.g., ninedigit numeric taxpayer

identification number (TIN))?

(M)

2. Does the automated system

document that any required

lender application fee has been

received and calculated

correctly? (M)

3. Does the automated system

provide an automated interface

with the core financial system

to record the receipt of any

application fee? (M)

General requirements –

lender eligibility process –

evaluate lender eligibility

4. Does the automated system

compare lender application

information against information

on firms currently

debarred/suspended from

participating in a government

contract or delinquent on a debt

to the government? (M)

5. Does the automated system

compare lender application

information against information

concerning the lender’s

financial credentials from

banking regulatory agencies,
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 23 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Lender management

Yes/no

na Explanation

rating services, and other

information sources? (M)

6. Does the automated system

compare lender application

information against lender

performance data? (M)

7. Does the automated system

compare lender application

information against qualification

requirements for principal

officers and staff? (V)

General requirements –

lender eligibility process –

approve/disapprove lender

application

8. Has the agency consummated

an agreement in accordance

with the requirements defined in

OMB Circular A-129, Policies for

Federal Credit Programs and

Non-Tax Receivables (January

1993), for approved lenders?

(M)

9. Does the automated system

update the lender information

store to reflect the agency’s

decision on the lender

application? (M)

10. Does the automated system

maintain data on lender

disapprovals as an historical

reference to support effective

monitoring of future lenders?

(M)

11. Does the automated system

generate and electronically

transmit a notice to inform the

lender of approval or
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 24 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Lender management

Yes/no

na Explanation

disapproval of the lender’s

application? (V)

12. Does the automated system

record text comments related to

approval or disapproval of the

lender application? (V)

General requirements –

lender eligibility process –

establish lender agreement

13. Does the agreement (agency’s

contractual relationship with

the approved lender) state

program requirements, lender

and agency responsibilities, due

diligence standards, reporting

standards, and loan servicer

participation requirements?

(M)

14. Does the automated system

record relevant data concerning

the lender agreement? (M)

15. Does the automated system

document that the lender

agreement has been

consummated by the agency

and lender? (M)

16. Does the automated system

provide a tracking mechanism

to identify expiring agreements

needing renewal? (M)

17. Does the automated system

generate the lender agreement

for signature by the lender? (V)

18. Are annual or special reviews

conducted for high-volume

lenders/servicers or

lenders/servicers with poor

performance? (M)
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 25 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Lender management

Yes/no

na Explanation

General requirements --

lender/servicer monitoring

process –

monitor lender/servicer

performance

19. Do agreements between lenders

and servicers specify that loan

servicers must meet applicable

participation requirements and

performance standards? (M)

20. Does the agreement also specify

that servicers acquiring loans

must provide any information

necessary for the lender to

comply with reporting

requirements to the agency?

(M)

21. Does the automated system

compare lender/servicer

financial and performance

information against agency

portfolio evaluation criteria to

identify lenders/servicers for

regular or special review? (M)

22. Does the automated system

compute performance statistics

for effective monitoring,

including delinquency rates,

default rates, and claim rates?

(M)

23. Does the automated system

compute a quantified risk for

each lender/servicer? The risk

is quantified by weighting

appropriate risk factors (e.g.,

loan volume, delinquency rate,

default rate) based on the

correlation between the risk

factors and lender/servicer

performance. (M)
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 26 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Lender management

Yes/no

na Explanation

24. Does the automated system

compare the quantified

lender/servicer risk to risk

rating criteria to assign a risk

rating to each lender/servicer

(e.g., high, medium, low)? (M)

25. Does the automated system

enter high-risk lenders/servicers

on a problem watchlist and

generate a notice to each

affected lender/servicer? (V)

General requirements --

lender/servicer monitoring

process –

support lender/servicer reviews

26. Does the agency document the

on-site review findings of

lenders/servicers to evaluate

their performance against

program standards and

requirements and submit them

to agency review boards? (M)

27. Does the automated system

provide historical performance

information on lenders and

servicers identified for review to

the review team? (M)

28. Does the automated system

provide for scheduling and

tracking of the review team’s

activities? (V)

29. Does the automated system

document review results

including date of review,

name(s) of reviewer(s), and any

deficiencies and associated

explanations? (V)
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 27 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Lender management

Yes/no

na Explanation

30. Does the automated system

record text comments relevant

to the review process? (V)

General requirements --

lender/servicer monitoring

process –

assess corrective action

31. For minor noncompliances, do

the agencies and lender/servicer

agree on corrective actions?

(M)

32. Has the agency defined the

decertification process and

established timetables by which

decertified lenders may apply

for reinstatement in accordance

with OMB Circular A-129? (M)

33. Does the automated system

update the status of lenders and

servicers that do not comply

with agency standards for

continued program participation

or do not correct deficiencies

identified through reviews in a

reasonable period of time? (M)

34. Does the automated system

provide data to support

corrective action plans such as

penalties and/or sanctions?

(M)

35. Does the automated system

record penalties and/or

sanctions imposed by the

agency review board on those

lenders or servicers found to be

in serious and frequent

noncompliance with federal

program standards? (M)
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 28 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Lender management

Yes/no

na Explanation

36. Does the automated system

generate a notice to inform the

lender/servicer of a finding of

noncompliance (electronically,

where appropriate), including

any penalties or sanctions and

the right to appeal? (V)

37. Does the automated system

document and track corrective

action plans agreed to by the

agency and the lender/servicer,

including proposed resolution

dates, and update

lender/servicer data to reflect

any changes in status resulting

from the corrective actions?

(V)

38. Does the automated system

document and track appeals

received from the

lender/servicer and agency

appeal decisions and generate a

decision notice to the

lender/servicer? (V)

Collateral requirements

(Note: There are no collateral

requirements applicable to the

lender management function.)

Internal management

information requirements

39. Are the internal management

information requirements

(lender eligibility activity,

completed reviews, lender

performance, exceptions)

available to agency credit

program managers and

designated internal review

officials on a periodic or on an

as requested basis? (M)
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 29 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Lender management

Yes/no

na Explanation

40. Has the agency determined the

specific management

information needs necessary to

manage its credit programs

based on the agency’s mission

and its applicable statutory

requirements? (M)

41. Does the system, in order to

support the above needs,

provide a user-friendly query

tool (preferably graphics-based)

that facilitates reporting rapidly

on any required data elements?

(M)

42. Does the agency maintain

financial accounting

information at appropriate

levels of summary (transaction,

loan history, risk category,

cohort, account) for

computational and reporting

purposes? (M)

43. Has the agency determined

whether the information should

be provided on hard copy

reports or through system

queries? (M)

Internal management

information requirements –

lender eligibility activity

44. Does the lender eligibility

summary provide information

about the number of lender

applications received, approved,

and disapproved in a period?

The purpose of this data

summary is to monitor the

lender application activity of the

agency and the disposition of

the lender applications. (M)
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 30 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Lender management

Yes/no

na Explanation

Internal management

information requirements –

completed reviews

45. Does the summary convey the

results of the lender reviews

completed during the reporting

period? (M)

46. Does the summary describe any

recommended actions resulting

from the lender reviews? (M)

Internal management

information requirements –

lender performance

47. Does the summary present the

overall performance of each

lender’s portfolio, including

total losses across fiscal years?

The purpose of this data

summary is to identify lenders

with consistently high default

rates or other poor performance

for agency review and

evaluation. (M)

Internal management

information requirements –

exceptions

48. Does the summary highlight

deficiencies in the lender

management function? An

example of exception data is a

list of lenders who are not in

compliance with agency and

statutory requirements and who

have not been penalized or

decertified. (M)

49. Is the data summary generated

periodically or on demand as

needed? (M)
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 31 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Guarantee extension and

maintenance

Yes/no

na Explanation

General requirements

1. Does the agency provide

guidance to its lenders for

determining a borrower’s

creditworthiness? (M)

2. Does the agency train its

personnel to evaluate the

lender’s analysis of

creditworthiness? (M)

General requirements –

guaranteed request evaluation

process –

process request for loan

guarantee

3. Does the automated system

record critical data on the

lender’s guarantee request to

support the guarantee

evaluation process? (M)

4. Does the automated system

provide access to guarantee

request information to each

individual participating in the

guarantee decision? (M)

5. Does the automated system

record text comments relevant

to the guarantee decision? (V)

General requirements –

guaranteed request evaluation

process –

verify borrower program

eligibility and creditworthiness

6. Does the automated system,

where applicable, compare

borrower information on the

lender’s guarantee request to
______________________________________________________________________________

Guaranteed Loan System Requirements

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Page 32 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Guarantee extension and

maintenance

Yes/no

na Explanation

agency program borrower

eligibility criteria? (M)

7. Does the automated system,

where applicable, check the

appropriate system data files to

determine whether a lender has

recently submitted a duplicate

guarantee request for the

applicant or a guarantee request

for the applicant has been

previously denied? (M)

8. Does the automated system,

where applicable, document

whether the applicant has

previously defaulted on debt to

the federal government? (M)

9. Does the automated system,

where applicable, compare the

applicant’s creditworthiness

information to system-stored

program creditworthiness

criteria and assign a credit risk

rating to the applicant, unless

specifically excluded by

program requirements? (M)

10. Does the automated system,

where applicable, document

that the lender obtained a credit

bureau report? (V)

11. Does the automated system,

where applicable, document

that the borrower’s financial

data, repayment ability, and

repayment history have been

verified? (V)

General requirements –

guaranteed request evaluation

process –

conduct funds control
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 33 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Guarantee extension and

maintenance

Yes/no

na Explanation

12. Does the automated system

provide the information needed

to compute the credit subsidy

amount associated with a loan

guarantee using projected cash

flows and the applicable

Treasury interest rate in

accordance with OMB Circular

A-34, Instructions on Budget

Execution; OMB Circular A-11,

Preparation and Submission of

Budget Estimates (updated

annually); and Statement of

Federal Financial Accounting

Standards (SFFAS) No. 2,

Accounting for Direct Loans and

Loan Guarantee. (M)

13. Does the automated system

provide an automated interface

with the core financial system

to determine if (1) sufficient

funds are available in the

program account and, if

available, (2) lending limits in

the financing account are

sufficient to cover the subsidy

cost and the face value of the

proposed guarantee? (M)

General requirements –

guaranteed request evaluation

process –

approve/reject guarantee

request

14. Does the automated system

reflect the approved guarantee

status? (M)

15. Does the automated system

accept, identify, track, and

report supervisor overrides of

system-generated

acceptance/rejection

recommendations? (M)
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 34 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Guarantee extension and

maintenance

Yes/no

na Explanation

16. Does the automated system

create and maintain a system

record of rejected guarantee

requests? (M)

17. Does the automated system

notify the lender of approval or

disapproval (electronically

where appropriate)? (V)

General requirements –

guaranteed origination

process –

issue loan guarantee

18. Does the automated system

record the cohort and risk

category, as defined in OMB

Circular A-34, Instructions on

Budget Execution, associated

with the guaranteed loan? (M)

19. Does the automated system

assign a unique account number

to the guaranteed loan that

remains unchanged throughout

the life of the guarantee? (M)

20. Does the automated system

generate a guarantee

endorsement to confirm that the

loan is guaranteed and transmit

it to the lender (electronically

where possible)? (M)

21. Does the automated system

calculate and record the

guarantee origination fee in

accordance with the terms and

conditions of the guarantee

agreement? (M)

22. Does the automated system

record collections of origination

fees received? (M)
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 35 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Guarantee extension and

maintenance

Yes/no

na Explanation

23. Does the automated system

provide an automated interface

with the core financial system

to record the guaranteed loan

commitment, the obligation for

the related subsidy, and the

origination fee, receivable, and

collection? (M)

24. Does the automated system

transmit the origination fee

invoice to the lender? (V)

General requirements –

guaranteed origination

process –

document lender loan

disbursement

25. Does the automated system

provide an automated interface

with the core financial system

to record the outlay of subsidy

from the program account?

(M)

26. Does the automated system

record information on loan

disbursements by the lender,

including amounts and

applicable Treasury interest

rates, to support interest

computations and subsidy

reestimates, unless specifically

excluded by program

requirements? (M)

27. Does the automated system

provide the capability to receive

electronic transmission of

disbursement data by the

lender? (V)

28. Does the automated system

provide the capability for
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 36 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Guarantee extension and

maintenance

Yes/no

na Explanation

reporting loan closing

information? (V)

General requirements –

guaranteed loan maintenance

process –

document loan modifications

29. Does the automated system

support reevaluation of the

modified loans in accordance

with OMB Circular A-34 and

program policy? (M)

30. Does the automated system

reflect the modified status of

the guaranteed loan? (M)

31. Does the automated system

establish a new loan account

and collateral record for each

new debt instrument? (M)

32. Does the automated system

assign a unique loan account

number to the new account

record? (M)

33. Does the automated system

maintain a link between the new

loan account established for the

new debt instrument and the old

loan account records? (M)

34. Does the automated system

perform a funds control check

to verify the availability of

subsidy through an automated

interface with the core financial

system? (M)

35. Does the automated system

provide an automated interface

with the core financial system

to record the subsidy changes
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 37 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Guarantee extension and

maintenance

Yes/no

na Explanation

associated with the guaranteed

loan modification? (M)

General requirements –

guaranteed loan maintenance

process –

process fees

36. Does the automated system

compare guaranteed loan data

to guaranteed fee criteria to

determine which lenders owe

guarantee fees? (M)

37. Does the automated system

compute the amount of the

guarantee fee? (M)

38. Does the automated system

identify those lenders with

overdue fee payments and

calculate penalties on loans for

lenders who have not submitted

guarantee fee payments? (M)

39. Does the automated system

generate invoices, including

penalties assessed for late

payment, for guarantee fee

payments due from lenders

(electronically where possible)?

(M)

40. Does the automated system

provide an automated interface

with the core financial system

to record the receipt of

guarantee fees from lenders?

(M)

General requirements –

guaranteed loan maintenance

process –

record interest supplement

payments
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 38 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Guarantee extension and

maintenance

Yes/no

na Explanation

41. Does the automated system

identify guaranteed loans

requiring interest supplement

payments? (M)

42. Does the automated system

compare current interest rates

to the interest rates in the

agreement to determine the

appropriate levels of interest

supplements required? (M)

43. Does the automated system

recognize the interest

supplement payment as an

interest subsidy expense and a

loan guarantee interest

supplement liability? (M)

44. Does the automated system

provide an automated interface

with the core financial system

to initiate and record

disbursements for interest

supplement payments? (M)

45. If the guaranteed loan system

handles the payment

processing, does it meet the

requirements in the Core

Financial System Requirements

related to payments and send

summary data to the core

financial system? (M)

Collateral requirements

46. Does the automated system

capture the estimated useful

economic life of the pledged

collateral and compare it to the

proposed term of the loan? (V)

47. Does the automated system

document that transactions over

a predetermined amount
______________________________________________________________________________

Guaranteed Loan System Requirements

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Page 39 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Guarantee extension and

maintenance

Yes/no

na Explanation

identified by program

requirements have a collateral

appraisal by a licensed or

certified appraiser? (V)

48. Does the automated system

compute the loan-to-value ratio

and flag those loans with a ratio

exceeding applicable program

requirements? (V)

Internal management

information requirements

49. Are the internal management

information requirements

(approval and rejection

monitoring, override

expectations, potential

application fraud,

approval/rejection statistics,

detailed transaction history,

median loan-to-value ratio, loan

guarantee fee collection, loan

guarantee periodic fee

collection, and exceptions)

available to agency credit

program managers and

designated internal review

officials on a periodic or on an

as requested basis? (M)

50. Has the agency determined the

specific management

information needs necessary to

manage its credit programs

based on the agency’s mission

and its applicable statutory

requirements? (M)

51. Does the system, in order to

support the above needs,

provide a user-friendly query

tool (preferably graphics-based)

that facilitates reporting rapidly
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 40 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Guarantee extension and

maintenance

Yes/no

na Explanation

on any required data elements?

(M)

52. Does the agency maintain

financial accounting

information at appropriate

levels of summary (transaction,

loan history, risk category,

cohort, account) for

computational and reporting

purposes? (M)

53. Has the agency determined

whether the information should

be provided on hard copy

reports or through system

queries? (M)

Internal management

information requirements –

approval and rejection

monitoring

54. Does the approval and rejection

monitoring summary provide

information about all credit

applications that were approved

or rejected for a given time

period? (M)

55. Are the data broken down into

separate statistics on credit

approvals and rejections? (M)

56. Does the approval section

indicate the number of

approved applications and the

percentage of total applications

that they represent? (M)

57. Are the total requested amount

and the total approved amount

shown for each loan origination

office? (M)
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 41 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Guarantee extension and

maintenance

Yes/no

na Explanation

58. Does the rejected application

section contain the number of

rejected applicants and the

percentage of total applications

they represent? (M)

59. Is the total of all loans requested

also shown? (M)

60. Does the summary also list the

average time spent to process a

credit application, from the time

of application until the final

decision is made? (M)

Internal management

information requirements –

override expectations

61. Does the override expectations

summary identify all credit

application decisions that

override the action

recommended by the automated

system processes? Overrides

can occur in two situations: an

application is approved even

though the borrower’s program

eligibility or creditworthiness

assessment is not acceptable

under agency program

management criteria, or an

application is rejected even

though the applicant’s program

eligibility and creditworthiness

are acceptable under agency

program management criteria.

(M)

Internal management

information requirements –

potential application fraud

62. Does the potential application

fraud summary provide all

applications that matched one
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 42 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Guarantee extension and

maintenance

Yes/no

na Explanation

or more pending or recently

rejected applications?

Comparison is based on four

criteria: applicant name,

applicant address, applicant

phone number, and applicant

taxpayer identification number

(TIN). If a pending application

matches any of these criteria,

the data fields that matched and

the original application and

pending application

identification numbers will

appear on this data summary

with primary application

identification information. (M)

Internal management

information requirements –

approval/rejection statistics

63. Does the approval/rejection

statistics summary contain

statistics on guarantee

approvals and rejections? (M)

64. Is the data summary broken

down into separate statistics on

guarantee approvals and

rejections? (M)

65. Does the approval section

indicate the number of

approved applications and the

percentage of total applications

that they represent? (M)

66. Are the total requested amount

and total approved amount

shown for each guarantee

origination office? (M)

67. Does the rejected application

section contain the number of

rejected applicants and the
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 43 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Guarantee extension and

maintenance

Yes/no

na Explanation

percentage of total applications

that they represent? (M)

68. Is the total of all guarantees

requested also shown? (M)

Internal management

information requirements –

detailed transaction history

69. Does the detailed transaction

history summary contain

detailed loan guarantee and

account data? The data

summary is used for control and

tracking and also as an audit

trail. (M)

70. Is the information presented by

program for both the current

and prior reporting period?

(M)

Internal management

information requirements –

median loan-to-value ratio

71. Is the median loan-to-value ratio

summary used to track the

median loan-to-value ratios for

guarantees written by each

regional office? The median

loan-to-value ratio is the midpoint in the range of portfolio

loan-to-value ratios. (M)

Internal management

information requirements –

loan guarantee fee collection

72. Is the loan guarantee fee

collection summary used to

monitor guarantee origination

fee collections? (M)
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 44 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Guarantee extension and

maintenance

Yes/no

na Explanation

Internal management

information requirements –

loan guarantee periodic fee

collection

73. Is the loan guarantee periodic

fee collection summary used to

monitor the periodic loan

guarantee fee collection

activity? (M)

Internal management

information requirements –

exceptions

74. Does the exceptions summary

highlight deficiencies in

guarantee origination

processing? (M)

75. Is the exceptions summary (e.g.,

a list of approved requests that

have not been processed in a

specified period of time)

generated periodically or on

demand as needed? (M)
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 45 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Portfolio management

Yes/no

na Explanation

General requirements –

portfolio performance process –

process guaranteed loan status

reports from lender

1. Does the automated system

receive and document loan

guarantee information from

lenders (electronically where

appropriate)? (M)

2. Does the automated system

maintain standard information

on the history and status of each

guaranteed loan (e.g., borrower

identification, amount and

nature of debt, loan originator,

holder, and/or servicer)? (M)

3. Does the automated system

maintain data from the lender

that identifies delinquent

accounts and potential defaults?

(M)

4. Does the automated system

provide agency access to the

loan status information? (M)

5. Does the automated system

receive and record lender

substitution and/or transfer

data, i.e., secondary market

sales (electronically where

possible)? (M)

6. Does the automated system

accept lender data by cohort

and risk category? (M)

General requirements –

portfolio performance process –

compute portfolio performance

measures
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Portfolio management

Yes/no

na Explanation

7. Does the system’s performance

measurement highlight program

trends to prompt reexamination

of agency policies as conditions

warrant? (M)

8. Is the value of a given

performance measure examined

within the context of the total

cost to the agency using the

measure? (M)

9. Does the automated system

compute and maintain program

performance information (e.g.,

number and dollar value of

loans made, average loan size,

loans made by geographical

region, number and amount of

defaulted loans, number and

amount of claims paid, amount

of loan write-offs)? (M)

10. Does the automated system

compute and maintain financial

measures to help assess the

credit soundness of a loan

program (e.g., overall portfolio

risk rate, average loan-to-value

ratio (for collateralized

programs), write-offs as a

percentage of seriously

delinquent acquired loans, net

proceeds on real property sold

compared to appraised value,

loan loss rates, recovery rates,

loan currency rates)? (M)

11. Does the automated system

maintain portfolio data needed

to help determine the

effectiveness of use of agency

resources (e.g., administrative

cost per loan guarantee

approved, administrative cost

per acquired loan serviced,
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Portfolio management

Yes/no

na Explanation

administrative cost per dollar

collected, time required to

process a loan guarantee

application)? (M)

12. Does the agency reestimate

subsidy costs upwards or

downwards to reflect

differences in interest rates,

technical assumptions, and

expected changes in current and

future conditions that have

occurred between the time of

budget formulation and loan

disbursement? (M)

13. Does the agency use the funds

management function of the

core financial system to record

the appropriations,

apportionments, and limitations

associated with the program

account and financing account

for each credit program? (M)

14. Does the system access the core

financial system to perform

funds control validation?

Accounting for and controlling

administrative expenses related

to credit programs can be

accomplished in the core

financial system, so this activity

would not normally be included

in the guaranteed loan system.

(M)

General requirements –

program financing process –

support Treasury borrowing

calculations

15. Are subsidy amounts estimated

so as to cover the costs of any

payments of guarantee claims

for defaulted loans? (M)
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Guaranteed Loan System Requirements

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Portfolio management

Yes/no

na Explanation

16. Does the automated system

execute SF-1151s and record

amounts borrowed from

Treasury to cover temporary

shortfalls in the subsidy

estimates? (M)

17. Does the automated system

track the amount of uninvested

funds in the financing account

as needed to support interest

earnings calculations? (M)

18. Does the automated system

compute interest expense on

borrowings and interest

earnings on univested funds?

(M)

19. Does the automated system

execute and record repayment

of principal using SF-1151s and

interest to Treasury using SF1081s? (M)

20. Does the automated system

execute and record receipt of

interest earnings from Treasury

on univested funds using

SF-1081s? (M)

General requirements –

program financing process –

support subsidy reestimates

21. Does the reestimate of each

cohort cash flow include claims

paid and fees collected,

defaults, delinquencies,

recoveries, etc.? (M)

22. Does the reestimate of each

cohort cash flow include

prepayments and collections of

principal, interest, and fees
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Portfolio management

Yes/no

na Explanation

when the agency acquires the

guaranteed loan? (M)

23. Does the automated system

support the reestimate of the

subsidy cost for each cohort

and risk category of loans at the

beginning of each fiscal year in

accordance with OMB Circular

A-34 and SFFAS No. 2? (M)

24. Does the automated system

maintain cash flow data that

permits comparison of actual

cash flows each year (and new

estimates of future cash flows),

as well as historical data from

prior years to the cash flows

used in computing the latest

loan subsidy estimate? (M)

25. Does the automated system

compare the current year

reestimated subsidy cost to

prior years reestimated loan

subsidy costs to determine

whether subsidy costs for a risk

category increased or

decreased? (M)

26. Does the automated system

transfer loan subsidy from those

risk categories with an excess

of loan subsidy to those risk

categories in the same cohort

that are deficient in loan

subsidy to provide adequate

funding for each risk category?

(M)

27. Does the automated system

group those cohorts that need

indefinite appropriation loan

subsidy funds separately from

those cohorts that have excess

funds? (M)
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Guaranteed Loan System Requirements

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Page 50 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Portfolio management

Yes/no

na Explanation

28. Does the automated system

support the request for an

apportionment and obligate

funds to cover the subsidy

increase for those cohorts of

loans that have insufficient

subsidy? (M)

29. Does the automated system

transfer excess subsidy of

cohorts of loans to the specialfund receipt account? (M)

30. Does the system support the

reestimate calculation and

provide the necessary data to

record the reestimate in the

core financial system? (M)

General requirements –

support subsidy estimate –

loan characteristics

31. Does the loan system maintain

data that are predictive of loan

performance and subsidy costs?

Loan characteristics maintained

in a loan system will vary

greatly from program to

program. (M)

32. Is the information obtained

from either the loan system, the

core financial system, or other

data repository within or

outside the agency? (M)

33. Does the agency collect at least

the following loan

characteristics:

• Loan number? Cash flows

should be maintained at the

individual loan level, even

though analysis might often

be done at the cohort level.
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Page 51 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Portfolio management

Yes/no

na Explanation

Cash flows, such as receipts

from property disposition,

must be tracked back to the

original loan via the loan

number or other data

element used to identify the

original loan.

• Date of obligation? This

information is necessary for

reviewing historical cohort

data, since cohorts are

defined by year of

obligation, and for relating

loan behavior to other dated

variables.

• Loan terms and conditions?

A system should maintain

the actual loan terms,

including maturity, interest

rate, and up-front and/or

annual fees. These data are

critical for comparing actual

payments to scheduled

payments and for measuring

the relationship between

default risk and loan terms

and conditions. The system

should be able to calculate

and report, as necessary, the

aggregate repayment

schedule for a cohort.

• Changes in loan terms and

conditions? Any change in

terms and conditions needs

to be recorded in addition to

the original terms and

conditions, not in place of

them. These data are

needed both to reestimate

the subsidy cost and to

establish a basis for

estimating new subsidies.

• Borrower location?

Agencies may choose to

collect several location

elements, such as zip code,

congressional district code,
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Portfolio management

Yes/no

na Explanation

approving office code, and

servicing office code for

regional analysis.

• Borrower creditworthiness?

Since creditworthiness may

be a strong predictor of

defaults, the loan system

should include measures of

the financial condition of

the business or individual

receiving the loan and past

credit experience, unless

specifically excluded by

program requirements.

• Loan use? Tracking the

intended loan use may

reveal a significant variance

in cost depending on the use

of loan proceeds.

• Program-specific data?

Other loan characteristics

may also be important in

predicting default. The loanto-value ratio is a critical

data element for predicting

housing loan defaults; for

student loans, the type of

educational institution may

be important; the value of

collateral is required unless

specifically excluded by

program requirements. (M)

General requirements –

support subsidy estimate –

economic data

34. Does the system maintain the

primary economic factors that

influence loan performance?

The critical indictors will vary

across programs. For housing

loans, among other factors,

property values and house

appreciation rates should be

monitored. For programs that
______________________________________________________________________________

Guaranteed Loan System Requirements

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Portfolio management

Yes/no

na Explanation

determine a borrower’s interest

rates based on the borrower’s

income, all economic data on

incomes should be maintained

in either the guaranteed loan

system, the core financial

system, or another data

repository within or outside the

agency. (M)

General requirements –

support subsidy estimate –

historical cash flows

35. Are all cash transactions related

to each loan maintained in the

system to allow for trend

analysis? (M)

36. Has the agency considered

grouping transactions by the

type of cash flows that are

projected in loan program

subsidy estimates since

transactions may be identified

by a wide variety of

transactional codes? These

groupings will vary from

program to program, depending

on the way cash flows are

projected for subsidy estimates.

Examples of information

groupings, which may be

modified to fit actual loan

programs, include:

• Guaranteed amount.

• Disbursement amount and

disbursement rate for each

year.

• Up-front fee.

• Annual fees.

• Interest subsidies.

• Claims paid and guarantees

terminated.

• Defaulted loan data
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Portfolio management

Yes/no

na Explanation

including both the timing

and amount.

• Delinquencies.

• Recoveries (including both

the timing and amount) on

defaulted loans by recovery

method such as sale of

collateral or offset

programs.

• Loan-to-value ratios.

• Scheduled principal and

interest payments (if the

agency acquires and

services the loan).

• Actual principal and interest

payments (if the agency

acquires and services the

loan).

• Prepayment including

timing and amount.

• Repayment activity. (M)

37. Does the agency obtain the

above information from either

the guaranteed loan system, the

core financial system, or other

data repository (such as

microfiche or CD-ROM that

permits easy retrieval of data)

within or outside the agency?

(M)

Collateral requirements

(Note: There are no collateral

requirements applicable to the

portfolio management function.)

Internal Management

Information Requirements

38. Are the internal management

information requirements (e.g.,

detailed transaction history,

profile of guaranteed loan

portfolio, and program credit
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Portfolio management

Yes/no

na Explanation

reform status) available to

agency credit program

managers and designated

internal review officials on a

periodic or on an as requested

basis? (M)

39. Has the agency determined the

specific management

information needs necessary to

manage its credit programs

based on the agency’s mission

and applicable statutory

requirements? (M)

40. Does the agency maintain

financial accounting

information at appropriate

levels of summary for

computational and reporting

purposes (transaction, loan

history, risk category, cohort,

and account)? (M)

41. Has the agency determined

whether the information should

be provided on hard copy

reports or through system

queries? (M)

42. Does the system provide at least

the following types of

management information:

• Detailed transaction

history?

• Profile of guaranteed loan

portfolio?

• Program credit reform

status? (M)

Internal management

information requirements –

detailed transaction history
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Guaranteed Loan System Requirements

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Portfolio management

Yes/no

na Explanation

43. Does the detailed transaction

history summary identify, for

each cohort, the number and

amount of loan guarantees in

each phase of the guaranteed

loan life cycle? (M)

44. Does the information provided

include the number of loans

current and delinquent, the

number of loans for which a

claim has been submitted, and

the total number and value of

loans in the portfolio? (M)

Internal management

information requirements –

profile of guaranteed loan

portfolio

45. Does the profile of guaranteed

loan portfolio summary provide

a year-to-date profile of each

guaranteed loan program, with

comparisons to the prior year’s

loan guarantee activity? (M)

Internal management

information requirements –

program credit reform status

46. Does the program credit reform

status summary provide the

status of the fiscal year’s credit

reform appropriations and

subsidy levels? (M)
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Acquired loan servicing

Yes/no

na Explanation

General requirements

1. Has the agency ensured that the

lender has taken all appropriate

steps to collect a debt including

foreclosure and liquidation of

any collateral? (M)

General requirements –

claim processing process –

evaluate claim application

2. If the lender has foreclosed and

liquidated any collateral and still

has a balance due, does the

agency pay the claim and

attempt to collect the deficient

amount based on statutory

requirements and agency

policy? (M)

3. Does the automated system

record key claim data, maintain

data on original and, if

applicable, final claims? (M)

4. Does the automated system

compare the claim application

information to the agency

program claim application

evaluation criteria? (M)

5. Does the automated system

suspend processing for claims

that are incomplete until

corrected? (M)

6. Does the automated system

identify claims not meeting

agency program requirements

and notify the lender of the

rejection? (M)

7. Does the automated system

document and track information
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Acquired loan servicing

Yes/no

na Explanation

on accepted and rejected claims

and the reason for the

rejections? (M)

8. Does the automated system

reflect the status of the claim?

(M)

9. Does the automated system

have edits to address claims

issues? (M)

10. Does the automated system

record or track claims errors?

(M)

General requirements –

claim processing process –

process authorized claim for

payment

11. Does this activity support

underlying details for the

payment of an approved

guaranteed loan claim to the

lender? (M)

12. Does the automated system

calculate the claim payment to

be made, making adjustments

for any disallowed amounts or

authorized debt collection

activities? (M)

13. Does the automated system

provide an automated interface

with the core financial system

to initiate a disbursement of the

claim payment to the lender?

(M)

14. If the system processes

payments, does it meet the

requirements in the Core

Financial System Requirements
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Acquired loan servicing

Yes/no

na Explanation

related to payment data in the

core financial system? (M)

15. Does the automated system

record acquired loan

information and establish

appropriate accounting entries,

such as a receivable? (M)

16. Does the agency ensure that

invoices are generated promptly

and that efficient mechanisms

are in place to collect and

record payments and to provide

support for loan servicing? (M)

17. Are borrowers encouraged to

use preauthorized debit or

credit cards when making loan

payments? (M)

General requirements –

account status maintenance

process –

evaluate delinquent debtors for

collection or write-off

18. Does the automated system

identify accounts for which

collection is to be pursued?

(M)

19. Does the automated system

identify accounts that should be

written-off? (M)

General requirements –

account status maintenance

process –

invoice debtor

20. Does the automated system

calculate outstanding balances

for each loan account invoiced,

including principal, interest, late
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Acquired loan servicing

Yes/no

na Explanation

charges, and other amounts

due? (M)

21. Does the automated system

identify loan accounts to be

invoiced based on agency

program invoicing criteria and

loan account information? (M)

22. Does the automated system

generate and transmit an

invoice to each borrower? (M)

23. Does the invoice include, at a

minimum, borrower ID, amount

due, date due, the date after

which the payment will be

considered late, and the current

balance? (M)

24. Does the automated system

provide for automatic

acceleration of delinquent

installment payment notes

based on the acceleration

clause? (M)

25. Does the automated system

track and age receivables by

type? (M)

26. Does the automated system

provide an automated interface

with the core financial system

to record accrual of interest,

administrative charges, and

penalties for delinquent loan

accounts? (M)

General requirements –

account status maintenance

process –

apply collections

27. Does the automated system

apply collections according to
______________________________________________________________________________

Guaranteed Loan System Requirements

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Acquired loan servicing

Yes/no

na Explanation

agency program receipt

application rules to the

appropriate liquidating or

financing account? (M)

28. Does the automated system

record a partial, full, or late

payment indicator? (M)

29. Does the automated system

identify payments that cannot

be applied? (M)

30. Does the automated system

document the reasons why the

payments cannot be applied?

(M)

31. Does the automated system

provide an automated interface

with the core financial system

to record the collection? (M)

32. If the system processes

collections, does it meet the

requirements in the Core

Financial System Requirements

related to collections? (M)

33. If the system processes

collections, does it send

summary data to the core

financial system? (M)

Foreclose and liquidate

collateral requirements –

foreclose on collateral process—

prepare foreclosure materials

34. Does the automated system

provide information on

collateral for use in the

foreclosure process? (M)

35. Does the automated system

update the acquired loan
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Acquired loan servicing

Yes/no

na Explanation

information store with

additional information obtained

during the foreclosure

preparation process, such as

recent appraisal values and

property condition? (M)

36. Does the automated system

calculate outstanding principal,

interest, and penalties for each

loan with collateral to be

foreclosed? (M)

Foreclose and liquidate

collateral requirements –

foreclose on collateral process—

foreclose

37. Does the automated system

provide information to generate

a foreclosure notice to the

borrower? (M)

38. Does the automated system

transmit information necessary

for the foreclosure to the

Department of Justice and/or

agency Office of General

Counsel? (M)

39. Does the automated system

record the results of the

foreclosure proceedings and

title conveyance to the agency?

(M)

40. Does the automated system

provide an automated interface

of data on acquired collateral to

the property management

system for management and

liquidation of the property?

(M)

41. Does the automated system

provide an automated interface
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Acquired loan servicing

Yes/no

na Explanation

to the core financial system to

record the value of the property

acquired and to reduce the

receivable amount? (M)

Foreclose and liquidate

collateral requirements –

manage/dispose of collateral

process –

manage collateral

42. Does the automated system

generate payments to property

management contractors for

services rendered? (M)

43. Does the automated system

track, record, and classify

operations and maintenance

expenses related to the acquired

collateral? (M)

44. Does the automated system

document rental income and

other collections related to the

acquired collateral? (M)

45. Does the automated system post

the expenses and income to the

core financial system through

an automated interface? (M)

Foreclose and liquidate

collateral requirements –

manage/dispose of collateral

process –

dispose of collateral

46. Does the automated system

update the acquired loan

information store to record

receipts resulting from the

liquidation of acquired collateral

and the disposition of the

collateral? (M)
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Guaranteed Loan System Requirements

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Acquired loan servicing

Yes/no

na Explanation

47. Does the automated system

identify any deficiency balances

remaining for the loan after

collateral liquidation for further

collection activities? (M)

48. Does the automated system

provide an automated interface

to the core financial system and

the property management

system to record disposal of the

property and associated

receipts? (M)

Internal management

information requirements

49. Are the following minimum

internal management

information requirements

available to agency credit

program managers and

designated internal review

officials on a periodic or on an

as requested basis:

• Guaranteed loan claim

activity?

• Summary data of claim

losses paid out?

• Detailed transaction

history?

• Standard management

control/activity?

• Exceptions?

• Portfolio sale historical

payments?

• Portfolio sale performance?

• Collateral management

activity and expense? (M)

50. Has the agency determined the

specific management

information necessary to

manage its credit programs
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Guaranteed Loan System Requirements

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Acquired loan servicing

Yes/no

na Explanation

based on the agency’s mission

and applicable statutory

requirements? (M)

51. Does the agency maintain

financial accounting

information at appropriate

levels of summary (transaction,

loan history, risk category,

cohort, and account) for

computational and reporting

purposes? (M)

52. Has the agency determined

whether the information should

be provided on hard copy

reports or through system

queries? (M)

Internal management

information requirements –

guaranteed loan claim activity

53. Is the summary used to monitor

trends in claim activity over

time? (M)

54. Is the information presented at

the cohort level for the current

year and prior years? (M)

Internal management

information requirements –

summary data of claim losses

paid out

55. Is the summary used to

compare the estimated claim

losses of guaranteed loan

programs to the actual losses

incurred by the program? (M)

Internal management

information requirements –

detailed transaction history
______________________________________________________________________________

Guaranteed Loan System Requirements

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Page 66 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Acquired loan servicing

Yes/no

na Explanation

56. Does the summary provide

detailed loan account data and

payment transaction activity to

give a detailed history of applied

and unapplied payments? (M)

Internal management

information requirements –

standard management

control/activity

57. Does the summary track the

status of all loan accounts by

summarizing loan activity at

various critical points of the

loan cycle? (M)

58. Does the collection process

summarize payment activity to

allow agency management to

monitor the effectiveness of

each activity in the collection

process? (M)

59. Is the delinquency information

summarized to highlight

delinquent debt (collateralized

and noncollateralized) and

modified debt? (M)

60. Is this data summary produced

periodically? (M)

61. Does the summary provide

information for preparing the

SF-220-9 and SF-220-8? (M)

Internal management

information requirements –

exceptions

62. Does the summary identify

deficiencies that have occurred

in the routine processing and

monitoring of account status?

Examples of exceptions include
______________________________________________________________________________

Guaranteed Loan System Requirements

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Acquired loan servicing

Yes/no

na Explanation

unapplied payments and

delinquent accounts not eligible

for debt collection tools. (M)

63. Is the summary generally

produced periodically? (M)

Internal management

information requirements –

portfolio sale historical

payments

64. Does the summary provide a

detailed payment history for

each loan included in the

portfolio selected for sale?

Historical payment data is

critical in order to assess the

investment value of the

portfolio to be offered for sale

and in determining the structure

and terms of the sale. (M)

Internal management

information requirements –

portfolio sale performance

65. Does the summary provide the

rating agencies and financial

advisors with statistics to more

effectively evaluate portfolio

characteristics performance?

Statistics include loan-to-value

ratios, effective yields, and loss

estimates. (M)

Internal management

information requirements –

collateral management activity

and expense

66. Does the summary provide

detailed and summary data of

collateral management activity

and expense data for monitoring

collateral management activities
______________________________________________________________________________

Guaranteed Loan System Requirements

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Acquired loan servicing

Yes/no

na Explanation

that affect the value of the

agency-owned property prior to

disposition? (M)

67. Is all income earned and are

expenses incurred while the

collateral is in the agency’s

possession are these recorded

and tracked to support the

agency’s ability to recover the

expenses? (M)
______________________________________________________________________________

Guaranteed Loan System Requirements

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Delinquent debt collection/

troubled debt servicing

Yes/no

na Explanation

1. Does the agency that

repurchases and services its

guaranteed loans or are

assigned collection rights when

loss claims are paid comply

with the Debt collection

Improvement Act of 1996? (M)

2. Has the agency established a

collection strategy consistent

with its statutory program

authority that seeks to return

the debtor to a current payment

status or, failing that, maximize

the collections that can be

realized? (M)

General requirements –

collection actions process –

report delinquent debt

3. Does the automated system

identify delinquent commercial

and consumer accounts for

reporting to credit bureaus

(preferably by electronic

interface) by comparing

reporting criteria to delinquent

loan data? (M)

4. Does the automated system

calculate outstanding balances,

including interest, penalties, and

administrative charges, and

include this information in

credit bureau records? (M)

5. Does the automated system

generate (or include in demand

letters) a notice to inform the

borrower of the referral of a

delinquent debt to a credit

bureau in accordance with

regulations? (M)
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Guaranteed Loan System Requirements

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Page 70 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Delinquent debt collection/

troubled debt servicing

Yes/no

na Explanation

6. Does the automated system

maintain a record of each

account reported to credit

bureaus to allow tracking of

referred accounts? (V)

7. Does the automated system

identify delinquent commercial

and consumer accounts for

reporting to CAIVRS by

comparing reporting criteria to

delinquent loan data? (V)

8. Does the automated system

generate (or include in demand

letters) a notice to inform the

borrower of the referral of a

delinquent debt to CAIVRS in

accordance with regulations?

(V)

9. Does the automated system

prepare data on appropriate

medium, on a monthly basis, of

delinquent debtors to be

included in the CAIVRS

database? (V)

General requirements –

collection actions process –

contact with the debtor

10. Does the automated system

generate and transmit dunning

letters to debtors with past-due

loan accounts? (M)

11. Does the automated system

identify debtors who do not

respond to dunning letters

within a specified time period?

(M)

12. Does the automated system

track demand letters and

borrower responses to
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Guaranteed Loan System Requirements

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Delinquent debt collection/

troubled debt servicing

Yes/no

na Explanation

document borrower due

process notification (and

borrower willingness and ability

to repay debt)? (M)

13. Does the automated system

track and document debtor

appeals received in response to

demands for payment? (M)

14. Does the system provide

automated support to the

collection process? (M)

15. If so, is support provided for

activities such as contacting a

delinquent borrower by phone;

documenting contacts with a

debtor and the results;

documenting installment

payments, rescheduling

agreements, and debt

compromise; generating

management reports; and

tracking the performance of

individual agency collectors?

(M)

General requirements –

collection actions process –

refer for Treasury offset

16. Does the automated system

identify accounts eligible for

referral to the Treasury offset

program (TOP)? (M)

17. Does the automated system

generate written notification to

the borrower that includes the

following:

• The nature and the amount

of the debt?

• The intention of the agency

to collect the debt through
______________________________________________________________________________

Guaranteed Loan System Requirements

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Page 72 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Delinquent debt collection/

troubled debt servicing

Yes/no

na Explanation

administrative offset?

• An explanation of the rights

of the debtor?

• An offer to provide the

debtor an opportunity to

inspect and copy the

records of the agency with

respect to the debt?

• An offer to enter into a

written repayment

agreement with the agency?

(M)

18. Does the automated system

identify, at the end of the

notification period, the debtors

who remain delinquent and are

eligible for referral? (M)

19. Does the automated system

offset delinquent debts

internally before referral to

TOP, where applicable? (M)

20. Does the automated system

transmit to TOP eligible new

debts, and increase, decrease,

or delete previously reported

debts? (M)

21. Does the automated system

apply collections received

through the TOP process to

debtor accounts in accordance

with applicable payment

application rules? (M)

22. Does the automated system

record offset fees in accordance

with agency program

requirements? (M)

23. Does the automated system

update the loan information

store to reflect TOP status?

(M)
______________________________________________________________________________

Guaranteed Loan System Requirements

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Page 73 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Delinquent debt collection/

troubled debt servicing

Yes/no

na Explanation

24. Does the automated system

update the core financial system

to record collections from TOP?

(M)

25. Does the automated system

process agency refunds given to

borrowers erroneously and

offset and transmit this

information to Treasury on

time? (M)

26. Does the automated system

record refunds given by

Treasury and adjust the loan

information store accordingly?

(M)

General requirements –

collection actions process –

garnishment of nonfederal

wages

27. Does the agency give the debtor

at least 30-days written notice of

its intent to initiate garnishment

proceedings? (M)

28. Does the automated system

generate a written notice

informing the borrower of the

agency’s intention to initiate

proceedings to collect the debt

through deductions from pay,

the nature and amount of the

debt to be collected, and

debtors’ rights? (M)

29. Does the automated system

document that the wage

garnishment order was sent to

the employer? (M)

30. Does the automated system

provide an ad hoc reporting

capability needed to monitor the
______________________________________________________________________________

Guaranteed Loan System Requirements

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Page 74 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Delinquent debt collection/

troubled debt servicing

Yes/no

na Explanation

amounts recovered through

nonfederal wage garnishment?

(M)

31. Does the automated system

document that the agency

provided debtors with a hearing,

when requested? (M)

32. Does the automated system

interface with the core financial

system to record receipts

remitted to the agency? (M)

33. Does the automated system

apply collections received

through wage garnishment

according to agency application

rules? (M)

General requirements –

collection actions process –

refer to collection agencies

34. Does the automated system

compare delinquent account

data to agency program

collection and agency referral

criteria to select delinquent loan

accounts for referral to

collection agencies? (M)

35. Does the automated system sort

and group delinquent loan

accounts based on type of debt

(consumer or commercial), age

of debt, and location of debtor?

(M)

36. Does the automated system

calculate outstanding interest,

penalties, and administrative

charges for each delinquent loan

account to be referred? (M)
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Guaranteed Loan System Requirements

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Page 75 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Delinquent debt collection/

troubled debt servicing

Yes/no

na Explanation

37. Does the automated system

assign selected delinquent loan

account groupings to

appropriate collection agencies

based on collection agency

selection criteria for agency

programs? (M)

38. Does the automated system

document that the delinquent

account has been referred to a

collection agency? (M)

39. Does the automated system

generate and receive electronic

transmissions of account

balance data and status updates

to and from collection agencies?

(M)

40. Does the automated system

record receipts remitted to the

collection agency and

forwarded to the agency? (M)

41. Does the automated system

update the loan information

store to reflect receipts,

adjustments, and other status

changes, including rescheduling,

compromise, and other

resolution decisions? (M)

42. Does the automated system

accept and match collection

agency invoices with agency

records? (M)

43. Does the automated system

generate payment to the

collection agency for services

rendered through the core

financial system? (M)

44. Does the automated system

request, reconcile, and record
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Guaranteed Loan System Requirements

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Page 76 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Delinquent debt collection/

troubled debt servicing

Yes/no

na Explanation

returned accounts from

collection agencies? (M)

45. Does the automated system

interface with the core financial

system to record collections

processed through collection

agencies? (M)

General requirements –

collection actions process –

refer for litigation activities

46. Are referrals to the Department

of Justice (DOJ) made in

accordance with the Federal

Claims Collections Standards?

(M)

47. Does the automated system

compare delinquent loan

account information against the

agency’s litigation referral

criteria to identify delinquent

loan accounts eligible for

referral? (M)

48. Does the automated system

support identification of

accounts to be referred to

counsel for filing of proof of

claim based on documentation

that a debtor has declared

bankruptcy? (M)

49. Does the automated system

provide an electronic interface

with credit bureaus to obtain

credit bureau reports that will

enable assessment of the

debtor’s ability to repay before a

claim is referred to legal

counsel? (M)

50. Does the automated system

calculate the outstanding
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 77 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Delinquent debt collection/

troubled debt servicing

Yes/no

na Explanation

balance, including principal,

interest penalties, and

administrative charges, for each

delinquent loan account to be

referred to legal counsel? (M)

51. Does the automated system

generate the claims collection

litigation report (CCLR)? (M)

52. Does the CCLR capture

collection actions and current

debtor information and

transmit this information to

DOJ? (M)

53. Does the automated system

send and receive electronic

transmissions of account data

and status updates to and from

DOJ’s Central Intake Facility or

the agency’s Office of General

Counsel’s (OGC) automated

system for referrals? (M)

54. Does the automated system

update loan status to reflect

referral for litigation so that the

loan can be excluded from other

collection actions and to alert

the agency to obtain approval

from counsel before accepting

voluntary debtor payment? (M)

55. Does the automated system

track filing of pleadings and

other motions, including proofs

of claims in bankruptcy, to

ensure swift legal action and to

monitor litigation activity? (M)

56. Does the automated system

match agency litigation referrals

with the DOJ list of agency

litigation referrals? (M)
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Guaranteed Loan System Requirements

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Page 78 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Delinquent debt collection/

troubled debt servicing

Yes/no

na Explanation

57. Does the automated system

record and track recovery of

judgment decisions? (M)

58. Does the automated system

update the loan information

store to reflect receipts and

adjustments? (M)

59. Does the automated system

interface with the core financial

system to record any collections

resulting from litigation? (M)

General requirements –

write-off and close-outs

process –

identify and document accounts

selected for write-off

60. Does the automated system

compare delinquent loan

account information to agency

program write-off criteria to

select delinquent loan accounts

for possible write-off? (M)

61. Does the automated system

classify debtors based on

financial profile and ability to

repay? Indicators of the

financial well-being of a debtor

include debtor financial

statements, credit bureau

reports, and payment receipt

history. (M)

62. Does the automated system

produce a CCLR for each loan

account to be referred to agency

counsel or DOJ for approval of

termination of collection

action? (M)
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 79 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Delinquent debt collection/

troubled debt servicing

Yes/no

na Explanation

63. Does the automated system

update the loan status to reflect

the referral? (M)

64. Does the automated system

update the loan information

store to reflect approval or

disapproval by agency counsel

or the DOJ for termination of

the collection action? (M)

65. Does the automated system

update the loan information

store and provide an automated

interface with the core financial

system to record the write-off of

the receivable? (M)

General requirements –

write-off and close-outs

process –

monitor written-off accounts

66. Does the automated system

maintain a suspense file of

inactive (written-off) loan

accounts? (M)

67. Does the automated system

reactivate written-off loan

accounts at a system user’s

request if the debtor’s financial

status or the account status

changes? (M)

General requirements –

write-off and close-outs

process –

document close-out of

uncollectible accounts

68. Does the automated system

compare loan account data to

agency close-out criteria to

identify debtor accounts eligible
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 80 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Delinquent debt collection/

troubled debt servicing

Yes/no

na Explanation

for close-out and 1099-C

reporting? (M)

69. Does the automated system

prepare and send a Form 1099-C

to the Internal Revenue Service

(IRS) if the debtor has not

responded within the required

time period? (M)

70. Does the automated system

update the loan information

store to reflect receipts,

adjustments, and other status

changes, including rescheduling,

compromise, and other

resolution decisions? (M)

71. Does the automated system

retain electronic summary

records of close-out account

activity for 5 years for use in

agency screening of new loan

applications? (M)

Collateral requirements

(Note: There are no collateral

requirements applicable to the

portfolio management function.)

Internal management

information requirements

72. Are the internal management

information requirements

(detailed transaction history,

standard management

control/activity, exceptions,

trend analysis/performance,

collection contractor

compensation) available to

agency credit program

managers and designated

internal review officials on a
______________________________________________________________________________

Guaranteed Loan System Requirements

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Page 81 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Delinquent debt collection/

troubled debt servicing

Yes/no

na Explanation

periodic or on an as requested

basis? (M)

73. Has the agency determined the

specific management

information needs necessary to

manage its credit programs

based on the agency mission

and applicable statutory

requirements? (M)

74. Is the agency maintaining

financial accounting

information at appropriate

levels of summary (transaction,

loan history, risk category,

cohort, and account) for

computational and reporting

purposes? (M)

75. Has the agency determined

whether the information should

be provided on hard copy

reports or through system

queries? (M)

Internal management

information requirements –

detailed transaction history

76. Does the detailed transaction

history summary provide

detailed account information by

cohort for internal control and

tracking, and, in the absence of

an electronic interface to

external entities, can the history

be used to transfer data from

the agency to the external entity

to facilitate delinquent debt

collection actions? (M)

77. Are separate data summaries

produced for offset referrals,

collection agency referrals,
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 82 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Delinquent debt collection/

troubled debt servicing

Yes/no

na Explanation

litigation referrals, and writeoffs and close-outs? (M)

Internal management

information requirements –

standard management

control/activity

78. Does the standard management

control/activity summary track

the status of all referral activity

including initial referrals, status

updates, and account balance

updates? (M)

79. Are separate and summary lists

produced for individual and

total reporting and referral

activity? (M)

Internal management

information requirements –

exceptions

80. Does the exceptions summary

highlight deficiencies that have

occurred in the referral

process? Examples of subjects

for periodic exception

information include delinquent

accounts eligible for reporting

that have not been reported,

defaulted rescheduled loans,

account referrals that can not

be processed, collection agency

resolution percentage, accounts

without foreclosure or collateral

management activity for a

specified period of time,

accounts referred for litigation

for which no litigation decision

has been recorded, and

delinquent accounts without

activity for long periods of time

that have not been written-off.

(M)
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 83 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Delinquent debt collection/

troubled debt servicing

Yes/no

na Explanation

Internal management

information requirements –

trend analysis/performance

81. Does the trend analysis/

performance summary highlight

the effectiveness of different

delinquent debt collection

techniques over time? (M)

82. Does the summary indicate the

effectiveness of using different

types of collection actions for

different credit programs? (M)

Internal management

information requirements –

collection contractor

compensation

83. Does the collection contractor

compensation summary provide

monthly account analyses to

calculate, track, and verify

compensation for each

contractor providing collection

services to an agency? This

information aids in the

verification of invoices received

from the contractor and

highlights the differences in fee

schedules among contractors.

(M)
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 84 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Treasury cross-servicing

Yes/no

na Explanation

1. Has the agency entered into a

letter of agreement with

Treasury Financial Management

Service (FMS) authorizing FMS

to provide debt collection

services before referring debt to

a debt collection center? (M)

2. Does the agreement detail the

limitations and parameters

required for the compromise,

settlement, or termination of

collection action? (M)

3. If applicable, has the agency

submitted a proposal to

Treasury that contains the

documentation supporting its

request to be designated as a

debt collection center? (M)

4. Does the proposal indicate what

types of debts the agency

wishes to cross-service and its

success at collecting its own

delinquent accounts? (M)

5. Has the agency discontinued all

servicing activities at the time

the debt is referred to Treasury

for cross-servicing? (M)

Identify accounts selected

6. Does the automated system

compare delinquent loan

account information to

statutory criteria to select

delinquent loan accounts for

possible referral? (M)

7. Does the automated system

generate notification to the

debtor of the agency’s intent to
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 85 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Treasury cross-servicing

Yes/no

na Explanation

refer the debt to a debt

collection center? (M)

8. Does the automated system

update the loan information

store? (M)

9. Does the automated system

identify accounts that can no

longer be serviced by agency

personnel? (M)

Monitor accounts referred to

the debt collection center

10. Does the automated system

identify accounts with monetary

adjustments that must be

reported to the debt collection

center? (M)

11. Does the automated system

provide an ad hoc reporting

capability needed to monitor the

accounts referred to a debt

collection center and the

amounts recovered? (M)

12. Does the automated system

interface with the core financial

system to record receipts

remitted to the agency? (M)

13. Does the automated system

apply collections received from

the debt collection center

according to agency application

rules? (M)

14. Does the automated system

record collection fees in

accordance with agency

program requirements? (M)

15. Does the automated system

process agency or debt
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 86 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Treasury cross-servicing

Yes/no

na Explanation

collection center refunds, notify

the debt collection center as

appropriate, and update the

loan information store? (M)

16. Does the automated system

notify the debt collection center

of adjustments, recalls of debt,

or collections received by the

agency on the referred debt?

(M)

17. Does the automated system

remove from the accounting and

financial records accounts that

the debt collection center

recommends should be written

off? (M)

Use an agency authorized to

cross-service

18. Does the automated system

identify the volume and type of

debts serviced? (M)

19. Does the automated system

identify the tools used by the

agency to collect its own debt?

(M)

20. Does the automated system

provide one or more years of

information on the average age

of debt over 180 days? (M)

21. Does the automated system

calculate the amount of debt

collected using various

collection tools? (M)

22. Does the automated system

accrue late charges, as required

by the referring agency? (M)
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 87 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Treasury cross-servicing

Yes/no

na Explanation

23. Does the automated system

provide information to the

referring agency sufficient for

the referring agency to

satisfactorily complete the

Report on Receivables Due

From the Public? (M)

24. Does the automated system

track, by portfolio, age of debt

referred, dollar and number of

referrals, collections on referred

debts and monthly report to

Treasury? (M)

25. Does the automated system

provide information to the

referring agency as needed, i.e.,

collections received? (M)

26. Does the automated system

provide ad hoc reporting

capability needed to satisfy

referring agencies’ unique

information requests, such as

length of workout agreements

and percent of debt that can be

compromised? (M)

Internal management

information requirements

27. Are the internal management

information requirements

available to agency credit

program managers and

designated internal review

officials on a periodic or on an

as requested basis? (M)

28. Has the agency determined the

specific management

information needs necessary to

manage its credit programs

based on the agency mission
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 88 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Treasury cross-servicing

Yes/no

na Explanation

and applicable statutory

requirements? (M)

29. Does the agency maintain

financial accounting

information at appropriate

levels of summary for

computational and reporting

purposes (transaction, loan

history, risk category, cohort,

and account)? (M)

30. Has the agency determined

whether the information should

be provided on hard copy

reports or through system

queries? (M)
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 89 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Other reporting requirements

Yes/no

na Explanation

Transaction history

1. Is the system capable of

producing a complete

transaction history of each

loan? (M)

External reporting

requirements

2. Is the system capable of

supporting the external

reporting requirements of OMB

and Treasury, including those

associated with the Federal

Credit Reform Act (FCRA) of

1990 and the CFO Act of 1990?

(M)
______________________________________________________________________________

Guaranteed Loan System Requirements

______________________________________________________________________________

Page 90 GAO/AIMD-21.2.7 – Guaranteed Loan Checklist ED (7/00)

Records retention

Yes/no

na Explanation

1. Is the destruction of agency

records, created within the

federal government, approved

by NARA per 36 CFR 1228? For

questions regarding the

disposition of federal records,

contact:

Life Cycle Management

Division

National Archives and

Records Administration

7th Street and Pennsylvania

Avenue NW

Washington, DC 20408.

The telephone number is (301)

713-7110. (M)

(922288)
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