Federal

Financial

Management

System

Requirements

JFMIP-SR-00-01

March 2000

Guaranteed Loan

Systems

Requirements
What is JFMIP?

TheJoint FinancialManagementImprovement Program (JFMIP) isajointandcooperative

undertakingof theU.S.DepartmentoftheTreasury,the General A ccounting Office, the Officeof

Management andBudget,andthe OfficeofPersonnelManagement,working incooperation with

eachotherandother agencies toimprove financial m anagement practicesingovernment. The

Program was givenstatutoryauthorization in the BudgetandAccountingProceduresActof1950

(31USC3511(d)). Leadershipandprogramguidance are providedbythefourPrincipalsofthe

JFMIP--Comptroller Generalofthe UnitedStates, Secretaryof the Treasury,andtheDirectorsof

theOfficeof Managementand Budget,andtheOfficeofPersonnelManagement. EachPrincipal

designatesarepresentativetose rve o n the JFMIP Steering Committee, which is responsible for the

general directionoftheProgram. The JFMIPExecutive Director, and a programagency

representative (who serves for2years)arealsoon theSteering Committee.

TheProgram promotesstrategiesand guides financialmanagementimprovementacross

government; reviews andcoordinates c entral agencies' activities andpolicypromulgations;andacts

ascatalyst and clearinghouse forsharinganddisseminatinginformationabout good financial

management practices. This information sharing isdonethroughconferences andother

educationalevents,newsletters, meetings withinteragencygroupsand agency personnel,and

throughFinanceNet, an electronic clearinghouseont he Internet.

TheJFMIPhasworkedon interagencyprojectsthatdeveloped a financial systemsframework and

financial s ystems requirements. ForthefutureJFMIPplansto assistFederalagencies in improving

theirfinancial systemsthrough its Program Management Office. TheOfficewillworkon

developingandmaintaining Federal governmentwidestandard systemsrequirements documents,

software testing, outreach, and knowledgebase.Thefirst target of opportunity forsoftware testing is

corefinancial systems. The objectives ofthe Office aretode velop systemsrequirements,

communicate andexplainFederalandagency needs, provideagenciesand vendorsinformation to

improve financialsystems,ensurethatproductsmeetrelevantsystemrequirements, and simplifythe

procurement process.

InformationonJFMIPcan be foundatitsweb or

call(202)219-0526.

site atwww.financenet.gov/fed/jfmip/jfmip.htm
Foreword

This is a functional requirements document for guaranteed loan systems requirements. Functional requirements for 

direct loan systems are contained in a separate JFMIP requirements document. This is one of a series of functional

systems requirements documents published by the Joint Financial Management Improvement Program (JFMIP) on 

Federal financial management systems requirements.

All of the JFMIP Federal Financial Management System Requirements (FFMSR) series of documents should be

considered together when determining how best to use information and supporting services to meet the financial

management needs of a Federal agency.

The FFMSR series addresses the goals of the U. S. Government Chief Financial Officers’ (CFO) Council, the

JFMIP, the Federal Credit Policy Working Group (FCPWG), and others, to promote the efficient management of

assets, and to improve financial management systems governmentwide to provide useful financial information on

Federal government operations.

Agencies may develop additional technical and functional system requirements as necessary to support unique

mission responsibilities. Agencies must also develop strategies for interfacing or integrating guaranteed loan

systems with the agency’s core financial system.

We want to take this opportunity to thank agency officials and others in the financial, guaranteed loans, and other

program management communities who contributed to this document. We value their assistance and support. 

With continuing support such as theirs, we can confidently face the financial management challenges in the next

century.

_________________________

Karen Cleary Alderman

Executive Director

March 2000
Table of Contents

Foreword

Acronyms

Illustrations

Introduction ..................................................... 1

Federal Financial Management Framework...................................... 3

Background ..................................................... 8

System Overview .................................................. 10

Introduction to Functional Requirements...................................... 20

Lender Management ................................................ 21

Guarantee Extension and Maintenance ....................................... 28

Portfolio Management ............................................... 36

Acquired Loan Servicing .............................................. 43

Delinquent Debt Collection............................................. 51

Treasury Cross-Servicing .............................................. 59

Other Reporting Requirements ........................................... 63

Records Retention ................................................. 64

Appendix A: References .............................................. 65

Appendix B: Glossary ............................................... 69

Appendix C: Examples of External Reporting Requirements............................ 70

Appendix D: Contributors ............................................. 71
Acronyms

AAPC Accounting and Auditing Policy Committee

ACH Automated Clearing House

CAIVRS Credit Alert Interactive Voice Response System

CCLR Claims Collection Litigation Report

CFO Act Chief Financial Officers Act of 1990

CM Configuration Management

COTS Commercial Off-the-Shelf

DCA Debt Collection Act

DCIA Debt Collection Improvement Act

DOJ Department of Justice

EDA Electronic Debit Account

E-mail Electronic Mail

FASAB Federal Accounting Standards Advisory Board

FCPWG Federal Credit Policy Working Group

FCRA Federal Credit Reform Act

FFMIA Federal Financial Management Improvement Act

FFMSR Federal Financial Management System Requirements

FLSA Fair Labor Standards Act

FMFIA Federal Managers’ Financial Integrity Act

FMS Financial Management Service

GAO General Accounting Office

GMRA Government Management Reform Act

GPRA Government Performance and Results Act

IRS Internal Revenue Service

JFMIP Joint Financial Management Improvement Program

NPR National Performance Review

OGC Office of General Counsel

OMB Office of Management and Budget

OPM Office of Personnel Management

PCMI President’s Council on Management Improvement

PMC President’s Management Council

SAS Statements of Auditing Standards

SF Standard Form

SFFAS Statement of Federal Financial Accounting Standards

SGL Standard General Ledger

SSN Social Security Number

TFM Treasury Financial Manual

TIN Taxpayer Identification Number

TOP Treasury Offset Program
Illustrations

1. Financial System Improvement Projects............................... 4

2. Integrated Model for Federal Information Systems ......................... 6

3. Agency Systems Architecture .................................... 7

4. Guaranteed Loan System Overview ................................ 11

5. Guaranteed Loan Internal and External Information Stores .................... 18

6. Explanation of Icons Used in the Illustrations ........................... 20

7. Overview of the Lender Management Function .......................... 21

8. Lender Management: Lender Eligibility Process ......................... 22

9. Lender Management: Lender/Servicer Monitoring Process .................... 24

10. Overview of the Guarantee Extension and Maintenance Function . ............... 28

11. Guarantee Extension and Maintenance: Guarantee Request Evaluation Process ......... 29

12. Guarantee Extension and Maintenance: Guarantee Origination Process ............. 31

13. Guarantee Extension and Maintenance: Guaranteed Loan Maintenance Process ......... 32

14. Overview of the Portfolio Management Function ........................ 36

15. Portfolio Management: Portfolio Performance Process ..................... 37

16. Portfolio Management: Program Financing Process . ...................... 39

17. Overview of the Acquired Loan Servicing Function . ...................... 43

18. Acquired Loan Servicing: Claim Processing Process . ...................... 44

19. Acquired Loan Servicing: Account Status Maintenance Process ................. 46

20. Overview of the Foreclose and Liquidate Collateral Function .................. 47

21. Foreclose and Liquidate Collateral: Foreclose on Collateral Process ............... 48

22. Foreclose and Liquidate Collateral: Manage/Liquidate Collateral Process ............ 49

23. Overview of the Delinquent Debt Collection Function...................... 51

24. Delinquent Debt Collection: Collection Actions Process ..................... 52

25. Delinquent Debt Collection: Write-offs and Close-outs Process ................. 56

26. Treasury Cross-Servicing . .................................... 59

27. References ............................................ 64

Introduction

As the world’s largest and most complex enterprise, the U. S. Federal government faces tremendous challenges in

the management of guaranteed loan programs. These enormous responsibilities involve the management of billions 

of dollars of resources, and pose tremendous challenges as we rapidly approach the twenty-first century.

The Federal government has consistently recognized the importance of having high quality financial management

systems to support improvement of government operations and provide financial and related information to

program and financial managers. In response, the JFMIP began the process of defining financial management

system requirements by publishing the FFMSR series of requirements documents, beginning with the Core

Financial System Requirements document in January 1988. Since then JFMIP has issued several other publications 

in the FFMSR series. 

In addition to the basic JFMIP systems requirements documents, several Federal organizations and agencies

recognized the need for a comprehensive document describing a variety of general systems requirements e.g.,

system integration, data stewardship, and internal controls. As a result, JFMIP published the Framework for

Federal Financial Management Systems document in January 1995.

The Federal Financial Management Improvement Act (FFMIA) of 1996 mandated that agencies implement and

maintain systems that comply substantially with Federal financial management systems requirements, applicable

Federal accounting standards, and the U.S. Government Standard General Ledger (SGL) at the transaction level. 

The FFMIA statute codified the JFMIP financial systems requirements documents as a key benchmark that agency

systems must meet, in order to be substantially in compliance with systems requirements provisions under FFMIA. 

To support the requirements outlined in the FFMIA, JFMIP is updating publications which are obsolete and is

publishing additional requirements documents. The JFMIP Core Financial System Requirements document was

updated in February, 1999. This document is an update of the December 1993 JFMIP Guaranteed Loan System

Requirements document.

This Guaranteed Loan System Requirements document is intended for guaranteed loan program financial systems

analysts; system accountants; and others who design, develop, implement, operate, and maintain financial

management systems. This includes buying or building systems. This document does not prescribe a single model

for Guaranteed Loan Systems because guarantee programs vary greatly, the requirements contained in this

document are applicable only to the extent that they support the operations of the individual systems. The primary

purposes for this update are to reflect:

• changes in statutes, regulations, and technology that have occurred since the document was originally

published in December 1993, e.g., passage of the CFO Act of 1990, and FFMIA of 1996;

• changes brought about by the National Performance Review (NPR); and

• increased availability of commercial off-the-shelf (COTS) software packages.

The CFO Act strengthened the government’s efforts to improve financial management by:

• assigning clearer financial management responsibilities to senior officials;

• establishing new financial organizations; and

• requiring enhanced financial systems, audited financial statements, and improved planning.

The Government Performance and Results Act (GPRA); Government Management Reform Act (GMRA);

FFMIA; and others further enhanced these responsibilities and requirements.

The Secretary of the Treasury; Director of the Office of Management and Budget; and Comptroller General of the

United States established the Federal Accounting Standards Advisory Board (FASAB) in October 1990, to

Guaranateed Loan System Requirements 1
recommend Federal accounting principles and standards. In October 1999, FASAB was designated by the

American Institute of Certificed Public Accountants (AICPA) as the accounting standards-setting body for the

Federal government. FASAB promulgates accounting standards through issuance of its Statements of Federal

Financial Accounting Standards (SFFAS) and other documents such as interpretations. More information on

FASAB can be found on the website: www.financenet.gov/fed/fasab.

Increasingly, integrated financial management systems are necessary to support program managers, financial

managers, budget officials, and others simultaneously. Data and information supplied by systems to these

individuals are expected to be accurate, timely, and consistent across organizations, agencies, and the Federal

government. Systems and data are shared more and more by multiple organizations, agencies, etc., with common

needs.

Introduction

2 Guaranateed Loan System Requirements
Federal Financial Management Framework

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. Appendix A

is a listing of statutory and regulatory references. This document is one component of a broad program to improve 

Federal financial management which involves the establishment of uniform requirements for financial information,

financial systems, reporting, and financial organizations.

As shown in Illustration 1, standards and systems requirements assist agencies in developing effective and efficient

systems and provide a common framework so that outside vendors or in-house programmers can provide software

more economically. Each agency should integrate its unique requirements with these governmentwide standard

requirements to provide a uniform basis for the standardization of financial management systems as required by the 

CFO Act of 1990, FFMIA of 1996, and others.

Financial management systems in the Federal government must be designed to support the vision articulated by the 

government’s financial management community. This vision requires financial management systems to support the 

partnership between program and financial managers and to assure the integrity of information for decision-making 

and measuring performance. This includes the ability to:

• collect accurate, timely, complete, reliable, and consistent information;

• provide for adequate agency management reporting;

• support governmentwide and agency-wide policy decision-making;

• support the preparation and execution of agency budgets;

• facilitate the preparation of financial statements and other financial reports in accordance with Federal

accounting and reporting standards;

• provide information to central agencies for budgeting, analysis, and governmentwide reporting, including

consolidated financial statements; and

• provide a complete audit trail to facilitate audits.

In support of this vision, the Federal government must establish governmentwide financial management systems

and compatible agency systems, with standardized information and electronic data exchange, to support program

delivery, safeguard assets, and manage taxpayer dollars.

It is critical that financial management systems plans support the agency’s mission and programs, including planned 

changes to them, and that financial management systems plans are incorporated into the agency’s plans for

information technology infrastructure and information systems as a whole. Further, systems design efforts should

include an analysis of how systems improvements, new technology supporting financial management sys tems, and

modifications to existing work processes can together enhance agency operations and improve program and

financial management. Reassessing information and processing needs and redesigning processes, procedures, and

policies are essential steps to meeting user needs.

Integrated Financial Management Systems

Financial management systems must be designed with effective and efficient interrelationships between software,

hardware, personnel, procedures, controls, and data contained within the systems. To be integrated, financial

management systems must have, as a minimum, the following four characteristics:

Guaranateed Loan System Requirements 3
4 Guaranateed Loan System Requirements

Federal Financial Management Framework

Illustration 1

Financial System Improvement Projects

Agency Implementation

! Adaptation

! Procedures

! Training

! Documentation

! Conversion

! Maintenance

Subject of 

this report

! Additional 

 Agency 

 Functional 

 Requirements

! Additional 

 Agency 

 Technical 

 Requirements

! Integration 

 Strategy

! Software/ 

 Hardware 

 Evaluation

! Software 

 Selection

Standards/

Requirements

!

!

!

!

!

!

!

!

!

!

!

 Standard Reporting 

Requirements

 U.S. Government Standard 

General Ledger

 Core Financial System 

Requirements

 Human Resources & 

Payroll Systems 

Requirements

 Travel System 

Requirements

 Seized/Forfeited Asset 

System Requirements

 Direct Loan System 

Requirements

 Guaranteed Loan System 

Requirements

 Inventory System 

Requirements

Managerial Cost 

Accounting 

 Other Standards

System Requirements for 
• standard data classifications (definitions and formats) established and used for recording financial events;

• common processes used for processing similar kinds of transactions;

• internal controls over data entry, transaction processing, and reporting applied consistently; and

• a design that eliminates unnecessary duplication of transaction entry.

The financial management systems policy described in OMB Circular A-127 Financial Management Systems,

requires that each agency establish and maintain a single integrated financial management system. Without a single, 

integrated financial management system to ensure timely and accurate financial data, poor policy decisions are more 

likely to occur, due to inaccurate or untimely information; managers are less likely to be able to report accurately to

the President, the Congress, and the public on government operations in a timely manner; scarce resources are

more likely to be directed toward the collection of information rather than to delivery of the intended programs;

and modifications to financial management systems necessary to keep pace with rapidly changing user requirements 

cannot be coordinated and managed properly. The basic requirements for a single, integrated financial

management system are outlined in OMB Circular A-127.

Having a single, integrated financial management system does not necessarily mean having only one software

application for each agency covering all financial management systems needs. Rather, a single, integrated financial

management system is a unified set of financial systems and the financial portions of mixed systems encompassing

the software, hardware, personnel, processes (manual and automated), procedures, controls, and data necessary to

carry out financial management functions, manage financial operations of the agency, and report on the agency’s

financial status to central agencies, Congress, and the public.

Unified means that systems are planned and managed together, operated in an integrated fashion, and linked

together electronically in an efficient and effective manner to provide agencywide financial system support necessary 

to carry out the agency’s mission and support the agency’s financial management needs.

Integration means that the user is able to have one view into systems such that, at whatever level the individual is

using the system, he or she can get to the information needed efficiently and effectively through e lectronic means. 

However, it does not mean that all information is physically located in the same database.

Interfaces, means that one system feeds data to another system following normal business/transaction cycles such as

salary payroll charges recorded in general ledger control accounts at the time the payroll payments are made. 

Interfaces may be acceptable as long as the supporting detail is maintained and accessible to managers. In such

cases, interface linkages must be electronic unless the number of transactions is so small that it is not cost-beneficial

to automate the interface. Easy reconciliations between systems, where interface linkages are appropriate, must be

maintained to ensure accuracy of the data.

To develop any integrated information system, it is critical that senior systems analysts and systems accountants

identify:

• the scope of the functions to be supported (processes),

• how data quality will be assured (data stewardship),

• the information to be processed (management information),

• how systems fit together to support the functions (systems architecture), and

• safeguards needed to ensure the integrity of operations and data (internal control).

Guaranateed Loan System Requirements 5

 Federal Financial Management Framework
All of these pieces must be brought together in a

model such as the one shown in Illustration 2. 

These pieces must work together to form an

efficient integrated information system. A change 

to any part of the model will require

determination of the implications on other parts

of the model. For example, a new reporting

requirement may require changes throughout the

entire model.

Agency Financial Management Systems

Architecture

Agency financial management systems are

information systems that track financial events

and summarize information to support the

mission of an agency, provide for adequate

management reporting, support agency level

policy decisions necessary to carry out fiduciary

responsibilities, and support the preparation of

auditable financial statements.

Agency financial management systems fall into four categories:

• core financial systems;

• other financial and mixed systems, including guaranteed loan systems,

• shared systems, and

• departmental executive information systems (systems to provide management information to all levels of

management).

These systems must be linked together electronically to be effective and efficient. Summary data transfers must be

provided from agency systems to central systems to permit summaries of management information and a gency

financial performance information on a governmentwide basis.

Subject to governmentwide policies, the physical configuration of financial management systems, including issues

of centralized or decentralized activities, processing routines, data, and organizations, is best left to the

determination of the agency, which can determine the optimal manner in which to support the agency mission. 

The physical design of the system, however, should consider the agency’s organizational philosophy, the technical

capabilities available, and the most appropriate manner to achieve the necessary single, integrated financial

management system for the agency.

The agency systems architecture shown in Illustration 3, provides a logical perspective identifying the relationships

of various agency systems types. Although this does not necessarily represent the physical design of the system, it

does identify the systems types needed to support program delivery/financing and financial event processing for

effective and efficient program execution.

6 Guaranateed Loan System Requirements

Federal Financial Management Framework

Integrated Model for

Federal Information Systems

Data Stewardship

Processes

Management

Information

Systems

Architecture

Illustration 2
Guaranteed Loan Systems

As shown in Illustration 3, guaranteed loan systems are an integral part of the total financial management system

for virtually all Federal agencies. Guaranteed loan systems support programmatic objectives and interact with core

financial systems to validate funds availability; update budget execution data; record receivables and collections, and 

process disbursements.

Guaranateed Loan System Requirements 7

 Federal Financial Management Framework

Core

Financial

System

Property

Management

System

Revenue

System

Budget

Formulation

System

Non-financial

Systems

Travel

System

Seized/

Forfeited

Asset

System

Inventory

System

Insurance Claim

System

Acquisition

System

Grant

System

Benefit Payment

System

Financial

Reporting

System

Human Resources/

Payroll

System

Direct

Loan

System

Guaranteed

Loan

System

Agency Systems Architecture

Illustration 3
Background

This chapter presents a brief history of Federal credit programs, describes the policies that affect Federal credit

programs, and defines the roles and responsibilities of the Federal organizations involved in directing, overseeing,

and implementing credit programs.

History

Federal credit programs provide benefits to certain borrowers or channel additional resources to certain sectors of

the economy. Examples of Federal credit programs include agricultural loans, small business loans, housing

mortgage loans, and student loans. There are two types of Federal loan programs: direct loans and guaranteed

loans. In direct loan programs the Federal government makes a direct disbursement to an approved borrower, and

services and collects the loan. Guaranteed loan programs utilize private sector lenders to originate and service loans, 

with all or a portion of the accrued interest and outstanding balance of the loan guaranteed by the government in

case of borrower default.

Federal credit programs generally are costly to the government because they provide more favorable terms to

borrowers than are available from private lenders, often lending to individuals and businesses who cannot obtain

private financing. Although the government has chosen to carry out these inherently risky loan programs in order

to achieve social purposes, efficient and effective management can minimize losses. Financial syst ems are a key

element in achieving this goal. Financial systems are especially critical to implementing the requirements of the

CFO Act of 1990 as amended, including measures of program performance and financial statements, and the

FCRA of 1990, which sets up new procedures to budget and account for credit subsidies and loan assets and

liabilities.

Policy

The policies governing credit programs and financial systems that affect guaranteed loan systems are listed in

Appendix A.

Roles and Responsibilities of Departments and Agencies

This section identifies the key organizations in the credit management community and the roles they play in

managing Federal credit programs.

Office of Management and Budget. OMB is responsible for reviewing legislation to establish new credit programs

or to expand or modify existing credit programs, reviewing and clearing testimony pertaining to credit programs

and debt collection, reviewing agency budget submissions for credit programs and debt collection activities,

formulating and reviewing credit management and debt collection policy, and approving agency credit management 

and debt collection plans.

Department of the Treasury. The Department of the Treasury, through its FMS, is responsible for monitoring and 

facilitating implementation of credit management and debt collection policy. FMS develops and disseminates as a

supplement to the TFM operational guidelines for agency compliance with Government-wide credit management

and debt collection policy. FMS assists agencies in improving credit management activities and evaluates innovative

credit management practices.

8 Guaranteed Loan System Requirements
Federal Accounting Standards Advisory Board. The FASAB was established in October 1990, by the Comptroller 

General, the Director of OMB, and the Secretary of the Treasury. The Board exists through a memorandum of

understanding among these three principal Federal executives. In October 1999, FASAB was designated by the

AICPA as the accounting standards-setting body for the Federal government. FASAB promulgates accounting

standards through issuance of its Statements of Federal Financial Accounting Standards (SFFAS) and other

documents such as interpretations. More information on FASAB can be found on the website:

www.financenet.gov/fed/fasab.

Accounting and Auditing Policy Committee. The Accounting and Auditing Policy Committee (AAPC) is a

permanent FASAB committee established to improve Federal financial reporting by assisting in providing timely

guidance to prepares and auditors of Federal financial statements. The AAPC receives issues from numerous

sources related to three topical areas: Statement of Federal Financial Accounting Standards (SFFAS), OMB’s Form 

and Content, and audit issues; and recommends guidance. The AAPC has established a credit reform task force

composed of members of Treasury, GAO, OMB, and representatives from all the credit agencies to address all

accounting, auditing, budgeting and reporting issues encountered by agencies subject to the FCRA of 1990.

Federal Credit Policy Working Group. The Federal Credit Policy Working Group (FCPWG) is an interagency

forum that provides advice and assistance to OMB and Treasury in the formulation and implementation of credit

policy. In addition to OMB and the Department of the Treasury, membership includes the Departments of

Agriculture; Commerce; Education; Health and Human Services; Housing and Urban Development; Interior;

Justice; Labor; State; Transportation; and Veterans Affairs; the Agency for International Development; the

Export-Import Bank; the Resolution Trust Corporation; and the Small Business Administration.

Agencies. Each agency is responsible for managing its own credit activities in accordance with its statutory

authorities and the provisions of OMB circulars and other policy guidance. OMB Circular A-129, Appendix A,

outlines the specific functions of the agencies in relation to credit management.

Guaranteed Loan System Requirements 9

Background
System Overview

This chapter provides an overview of guaranteed loan system requirements. The complexity, diversity, and size of

the Federal guaranteed loan programs place unique demands on managers of guaranteed loan program operations. 

The constantly changing requirements of guaranteed loan programs has led management to look not onl y at the

functional capabilities of guaranteed loan systems, but also the managerial environments in which these systems are

supported and/or operated.

All guaranteed loan systems that are being designed and implemented, or are in use, must operate in accordance

with laws, regulations, and judicial decisions. It is the responsibility of each agency to be knowledgeable of the

legal requirements governing its human resources and payroll operations.

This document identifies functional requirements for guaranteed loan systems. Although the document may be

used when developing new guaranteed loan systems, or improving or evaluating current systems, the document

does not provide a specific model for such systems. Functional requirements not mandated by law, regulation,

directive, or judicial decision must result in cost-effective systems that are in the interest of the government. All

possible alternatives for meeting the requirements should be considered.

Functional requirements of the Federal government’s guaranteed loan systems can be segregated into two general

categories, mandatory and value added. Following are definitions for these two categories of requirements:

mandatory - Mandatory requirements describe what the system must do and consists of the minimum

acceptable functionality, necessary to establish a system, or are based on Federal laws and regulations. 

Mandatory requirements are those against which agency heads evaluate their systems to determine substantial

compliance with systems requirements under the FFMIA. These requirements apply to existing systems in

operation and new systems planned or under development.

value-added - 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.

Within this document, requirements are specifically identified as mandatory or value-added. Federa l agencies must

carefully determine which value-added requirements are necessary for each credit program.

Value-added or optional requirements are discussed at various points throughout the document. The burden of

demonstrating that value-added or optional functions are cost effective and clearly in the interest of the government 

rests with agency heads. Further, each agency must develop 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.

The data in these optional processes must be consistent with standard guaranteed loan systems that contain the

official records for the agency. Distributed processing and small end-user computers greatly increase the need for

agency-wide strategic planning for information resources. Incompatible data in separate files or s ystems can

prevent, or make difficult, the integration of data to generate the information required by management.

The remainder of this chapter provides information based on the following three categories:

• Summary of Functions - presents a high-level description of the functions that are supported by guaranteed

loan systems.

• Relationships with Other Systems - describes how guaranteed loan system interact with other systems.

10 Guaranateed Loan System Requirements
• Data Requirements - discusses the types of data needed to perform the various functions of a guaranteed loan 

system.

Summary of Functions

Illustration 4 shows the functions of guaranteed loan systems. The following is a brief description of the major

functions of a guaranteed loan system. The functional requirements chapters provide a detailed description of each

function, including the lower level processes within each function.

Lender Management

The Lender Management function

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

processes within the Lender

Management function include the

Lender Eligibility process and the

Lender/Servicer Monitoring process.

Guarantee Extension and Maintenance

The Guarantee Extension and

Maintenance function 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 processes within the

Guarantee

Extension and Maintenance function

are the Guarantee Request

Evaluation process, the Guarantee

Origination process, and the

Guaranteed Loan Maintenance

process.

Portfolio Management

The Portfolio Management function

supports the management and

evaluation of the guaranteed loan program and its portfolios of outstanding guaranteed loans and acquired loans. 

Guaranateed Loan System Requirements 11

System Overview

Lender

Management

Guarantee

Extension

and Maintenance

Portfolio

Management

Acquired Loan

Servicing

Delinquent Debt

Collection

Treasury

Cross-Servicing

Other Reporting

Requirements

Credit

Information

Sources

Guaranteed

Loan System

Collection

Agencies

Financial

Advisors &

Underwriters

Lenders/

Servicers

Property

Management

System

Core Financial

System

CAIVRS Loan

Screening System

Credit Reform

Subsidy Model

Financial

Institutioins

Borrowers

Other

Federal

Agencies

Illustration 4

Guaranteed Loan System Overview
The processes within the Portfolio Management function are the Portfolio Management process and the Program

Financing process.

Acquired Loan Servicing

The Acquired Loan Servicing function 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 processes within the Acquired Loan Servicing function are the Claim Processing process, the Account Status

Maintenance process, the Foreclose on Collateral process, and the Manage/Liquidate Collateral process.

Delinquent Debt Collection

The Delinquent Debt Collection function includes the recovery of delinquent debt through the use of dunning

letters, offset programs, collection agencies, garnishment of non Federal wages, litigation, and the termination of

collection action on uncollectible debt. It also includes the foreclosure and liquidation of property for collateralized

loans acquired by the government. The processes within the Delinquent Debt Collection function are: Collection

Actions and Write-offs and Close-outs.

Treasury Cross-Servicing

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 processes within cross-servicing

are: Identify Accounts Selected, Monitor Accounts Referred to the Debt Collection Center, and Support an

Agency’s Request to Cross-Service.

Other Reporting Requirements

This chapter provides requirements for two types of reporting: Transaction History and External Reporting

Requirements.

Relationships with Other Systems

The guaranteed loan system must be capable of interfacing with other financial management systems. A brief

description of some of the systems which interact with the guaranteed loan system is provided below.

• The guaranteed loan system interacts 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. The Guaranteed Loan system must be able to

perform automatic system balancing. This system balancing must ensure that guaranty loan partners

involved in a financial information exchange agree on transaction number and dollar values passed,

processed, and rejected. The automated system balancing will include cumulative subsidiary account

balancing to the general ledger. This automated system balancing ensures that guaranty loan partne rs reflect

the same picture of valid transactions over a specified period of time, normally a month. The Guaranteed

Loan system must be capable of supporting Managerial Cost Accounting and credit subsidy re-estimates.

• Guaranteed loan programs and direct loan programs have common processes for managing receivables. 

Defaulted guaranteed loans acquired by the government are serviced and collected in a manner similar to

direct loans. Therefore, an agency with both direct and guaranteed loan programs may have a direct loan

12 Guaranateed Loan System Requirements

System Overview
system and guaranteed loan system that share system capabilities related to collecting delinquent debt. If an

agency acquires property serving as collateral on a defaulted guaranteed loan, the guaranteed loan system will 

provide the property management system with the information needed to manage and liquidate the

collateral.

System Interface Functioning Verification

A team independent of the development organization will perform all verifications to ensure the gua ranty loan

system is capable of interfacing with other financial management systems. Verifications should include the

following:

• Intersystem testing will take place to ensure the guaranty loan system can process incoming and outgoing

data to other interfaces for the guaranty loan program. This testing will ensure the guaranty loan system can

accept data files, process them correctly, and transmit the necessary transactions to other systems.

• All intersystem vendors involved with the testing will create and accept a comprehensive test plan.

• A team independent of the development organization will review requirements, test plans and scenarios,

monitor test execution, and ensure testing objectives are met.

• The team independent of the development organization will work as partner in the development effort,

gaining system-specific knowledge while reviewing processes, outputs, and techniques to ensure compliance

with procedures and quality results.

When issues arise, they will be tracked through a configuration management (CM) tool, and the resolutions will be

included in testing sign-off documentation when resolved. Review other than test execution will include at a

minimum the following:

• Requirements Traceability Matrix - The system shall be able to demonstrate that all development

requirements are incorporated into the final system output through the use of requirements traceability

matrices. These matrices shall be submitted with the Preliminary Design Document and should be updated

with each subsequent step in the enhancement effort (i.e., requirements should be traced through the

Preliminary Design, Detailed Design, specifications, test plans and test results).

• Functional Requirements Document - The system shall perform work needed to accomplish the specified

outcomes, achieve or exceed the specified performance standards, record and reconcile money, and track

report activity.

• Detail Design Document - The detail design shall fully consider requirements for hardware, software ,

integration with other systems, security, telecommunications, data management, manual procedures,

QA/QC, auditability, and capacity planning and management. It should document the design in

system/subsystem specifications, program specifications, and database specifications.

• System Specifications - System/Subsystem specifications, program specifications and database specifications

should all be included within the Detail Design Document. Specifications should include at a minimum

flowcharts, Input/Output processing, and file layouts. 

• Manual Procedures - All system modifications or maintenance changes shall be incorporated into manual

procedures and functions as necessary to keep the procedures up to date. System testing shall ensure that all

related manual procedures perform according to system requirements.

Guaranateed Loan System Requirements 13

System Overview
Post Implementation Testing

After the system is implemented, transactions should be reviewed to make sure that transactions are processing

correctly and the data being produced is reliable. This testing will be conducted with actual production data, and

will be done with the team independent of the development organization verifying expected results. In addition,

whenever possible, daily, monthly, quarterly and fiscal/calendar year-end reports should be reviewe d prior to

dissemination to ensure that the data has updated correctly.

Configuration Management (CM)

The guaranteed loan system must use configuration management that will establish and maintain the security and

integrity of the guaranty loan system throughout its development life cycle. A comprehensive CM must 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.

Data Requirements

The guaranteed loan system stores, accesses, and/or updates seven types of data. In this 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. Actual

data storage (physical databases and files) must be determined by each agency during system development and

implementation based upon the loan program’s statutory requirements, and the agency’s technical environment,

processing volumes, organizational structure, and degree of system centralization or decentralization.

This section defines the seven information stores, five internal and two external, and provides examples of the data

that make up each information store.

Information Stores in the Guaranteed Loan System

The five information stores internal to the system are:

Lender/Servicer Information. This refers to data about the lender necessary to determine the eligibility and

creditworthiness of the lender financial information concerning the level of loans under the lender ’s control; data

about the lender’s level of responsibility extending loans to borrowers both within the agency and outside the

agency; and the status of the various reviews performed on the lender. This information store includes the

following data:

Mandatory

• Lender/Servicer Application Data

• Lender/Servicer Review Data

• Approved Lender/Servicer Data

• Lender/Servicer Status

Guarantee Information. This refers to data about guarantee requests received by the agency. The amount of

information about each individual loan will vary depending on the loan’s size, the lender’s status, the statutory

requirements of an individual loan program and each individual agency’s policies. This information store includes

the following data:

14 Guaranateed Loan System Requirements

System Overview
Mandatory

• Guarantee Data (e.g., lender, loan amount, guarantee level, loan status, subsidy information, inter est 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)

• Guarantee fees due and/or collected

Value-Added

• Rejected Guarantee Data (e.g., lender, reason for rejection)

Claim Information This refers to data about a lender’s claim for payment from the government on a defaulted loan 

under the guarantee agreement. This information store includes the following data:

Mandatory

• Claim Application Data

• Claim Status

Acquired Loan Information. This refers to data associated with a defaulted or delinquent loan guarantee that has

been acquired by the agency. This store will include all loan information plus other data required for loan servicing

and collection activity. This information store includes the following data:

Mandatory

• Acquired Loan Data

• Acquired Loan Status

• Acquired Loan Collateral Data

• Payment History

Program Criteria. This refers to decision-making criteria used by system functions and based on statutes,

regulations, and policies for the guaranteed loan program. This information store includes the following data:

Mandatory

• Lender Eligibility

• Lender Financial Rating

• Lender Risk Rating

• Portfolio Evaluation

• Creditworthiness (Mandatory unless specifically excluded by program requirements)

• Borrower Eligibility

• Guarantee Fees

• Fee Penalty

Guaranateed Loan System Requirements 15

System Overview
• Claim Application Evaluation

• Invoicing

• Receipt Application Rules

• Debt Collection

• CAIVRS Referral

• Credit Bureau Reporting

• Treasury Offset Referral

• Collection Agency Selection

• Litigation Referral

• Write-off

Value-Added

• Close-out

• Loan Sale

Information Stores External to the Guaranteed Loan System

The two information stores external to the system are:

Core Financial System Information. This refers to information for performing funds control checks, initiating or

recording payments, and recording the results of other guaranteed loan financial transactions. This information

store includes the following data:

Mandatory

• Budget Execution Data

• Receivables

• Disbursement Data

• Collections/Receipts

• Administrative Costs

• Principal and Interest Data

• Acquired Asset Data

• Collateral

External Organizational Information. This refers to information coming from outside the agency into the

guaranteed loan system. This information store is composed of the following types of data:

Mandatory

• Lender Rating Data

• Treasury Interest Rates

16 Guaranateed Loan System Requirements

System Overview
• SF-1151’s (Non-Expenditure Transfer Authorization) and SF-1081’s (Voucher and Schedule of Withdrawa ls 

and Credits)

• Loan Status

• Sale Approval

• Collection Activities and Results

• Write-off Approval

• Foreclosure Data

Value-Added

• Sale Proceeds

Relationship of Information Stores

Illustration 5 depicts the relationships between the loan system information stores described above and the

processes within each function which access or update those information stores.

Guaranateed Loan System Requirements 17

System Overview
18 Guaranateed Loan System Requirements

System Overview
Guaranateed Loan System Requirements 19

System Overview
Introduction to Functional Requirements

This chapter describes the functional requirements for a guaranteed loan system. The following fun ctions should be 

supported by the system:

• Lender Management

• Guarantee Extension and Maintenance

• Portfolio Management

• Acquired Loan Servicing

• Delinquent Debt Collection

• Treasury Cross Servicing

• Other Reporting Requirements

The functional requirements identified define the typical processing and data requirements for federal guaranteed

loan programs except some international programs, such as lending to sovereign nations. These requirements do

not include specific or unique requirements of individual guaranteed loan programs. Agencies may determine that it 

is not practical to fully automate all functions based on factors such as loan volume, operating environment,

statutory requirements, and costs. Agencies also may decide that one or more of the guaranteed loan functions may 

be best performed by an outside agency or contractor. Accordingly, it will be necessary for agencies to make

adjustments to adapt to the

requirements to meet their specific

program and system requirements.

The internal management information

requirements identified throughout 

this document are those required to 

establish credit management and

financial reporting systems that are

in compliance with the standards

provided in OMB Circulars A-34,

A-123, A-127, and A-129. 

Agencies’ systems shall be capable

of satisfying the reporting requirements of OMB and Treasury,

including those associated with the

Federal Credit Reform Act of 1990 

and the CFO Act of 1990.

For each function, the narrative is

supported by diagrams showing the 

relationship between processes and

activities and the flow of information.

These diagrams are conceptual in

nature; they do not imply any

physical structure of systems. The

diagrams use conventions adopted

to ensure consistency of presentation.

Explanations of icons used in the

illustrations are explained in

Illustration 6.

20 Guaranateed Loan System Requirements

Explanation of Icons Used in the Illustrations

Illustration 6
Lender Management

Effective lender management is critical if the government is to ensure the availability of credit to eligible borrowers

and use private sector expertise while protecting the government’s interest and minimizing the gove rnment’s risks. 

Effective lender management ensures that lenders adhere to agency-specific financial, program, and performance

requirements as well as government-wide statutory and regulatory requirements.

General Requirements

This section provides the government-wide functional requirements for the Lender Management function of a

guaranteed loan system. Illustration 7 provides an overview of the Lender Management function. As shown, the

Lender Management function consists of the following major processes:

• Lender Eligibility Process, and

• Lender/Servicer Monitoring Process.

Guaranateed Loan System Requirements 21

Lender

Loan

Information

Lender Eligibility

Process

Information

Sources

Lender

Information

Program

Criteria

Core

Financial

System

Lender/Servicer

Monitoring Process

Lender Application 

and Approval

Monitoring Notices 

and Plans

Overview of the Lender Management Function

Illustration 7
Guaranteed loan management starts with ensuring that only financially sound, qualified lenders participate in

guaranteed loan programs. The Lender Eligibility process is comprised of processing lender applications,

evaluating eligibility, approving services, and establishing a lender agreement with accepted lenders. Lender

application data is recorded in the system for both approved and disapproved applications.

As shown in Illustration 8, the Lender Eligibility process consists of the following major activities:

• Process Lender Application,

• Evaluate Lender Eligibility,

• Approve/ Disapprove Lender Application, and

• Establish Lender Agreement

Process Lender Application

This activity captures data about

the lender and the application for

participation in a guaranteed loan

program.

An automated system should:

Mandatory

• Record and update lender

application information,

ensuring that all required

data is present and valid

(e.g., nine-digit numeric

Taxpayer Identification

Number (TIN)).

• Document that any required 

lender application fee has

been received and calculated 

correctly.

• Provide an automated

interface with the core

financial system to record

the receipt of any

application fee.

Evaluate Lender Eligibility

This activity determines the

lender’s eligibility to participate in

federal guaranteed loan programs. 

This determination is made by

comparing application information, recorded in the system in the Process Lender Application process, to

22 Guaranateed Loan System Requirements

Lender Management

Lender

Agreement

Notification

Letter

Lender

Core

Financial

System

Receipt

Management

Program

Criteria

Lender

Eligibility

Criteria

Lender/Servicer

Application Data

Lender/Servicer

Status

Approved

Lender/Servicer

Data

Lender/Servicer

Information

Process

Lender

Application

Establish

Lender 

Agreement

Evaluate

Lender

Eligibility

Approve/

Disapprove

Lender

Application

Information Sources

Rating Services

Banking Regulatory Agencies

Other Credit Agencies

Application

Lender Eligibility Process

Illustration 8
system-stored program lender eligibility criteria. These criteria should include agency eligibility requirements, as

well as OMB Circular A-129 and other government-wide regulatory requirements.

An automated system should compare lender application information against:

Mandatory

• Information on firms currently debarred/suspended from participating in a government contract or

delinquent on a debt to the government.

• Information concerning the lender’s financial credentials from banking regulatory agencies, rating services,

and other information sources.

• Lender performance data.

Value-Added

• Qualification requirements for principal officers and staff.

Approve/Disapprove Lender Application

This activity supports the final review and acceptance or rejection of each lender application based on the lender’s

satisfaction of program lender eligibility criteria. For approved lenders, the agency must consummate an agreement 

in accordance with the requirements defined in OMB Circular A-129.

An automated system should:

Mandatory

• Update the lender information store to reflect the agency’s decision on the lender application.

• Maintain data on lender disapprovals as an historical reference to support effective monitoring of future

lenders.

Value-Added

• Generate and electronically transmit a notice to inform the lender of approval or disapproval of the lender’s

application.

• Record text comments related to approval or disapproval of the lender application.

Establish Lender Agreement

This activity formalizes the agency’s contractual relationship with the approved lender through lender agreements. 

The agreements must state program requirements, lender and agency responsibilities, due diligence standards,

reporting standards, and loan servicer participation requirements.

An automated system should:

Mandatory

• Record relevant data concerning the lender agreement

Guaranateed Loan System Requirements 23

Lender Management
• Document that the lender agreement has been consummated by the agency and lender.

• Provide a tracking mechanism to identify expiring agreements needing renewal.

Value-Added

• Generate the lender agreement for signature by the lender.

This process monitors lender/servicer performance to ensure that both performance and eligibility requirements for

continued participation in guaranteed loan programs are met, and that corrective actions are implemented for

lenders/servicers not in compliance. Lenders transferring and/or assigning the right to service guaranteed loans to a 

loan servicer should use only servicers meeting applicable standards set by the agency. OMB Circular A-129

requires on-site reviews of lenders/servicers at least every two years to review performance and determine eligibility

for continued participation in the guaranteed loan program. Annual or special reviews should be conducted for

high volume lenders/servicers or lenders/servicers with poor performance.

As shown in Illustration 9, the

Lender/Servicer Monitoring

Process consists of the following

major activities:

• Monitor Lender/Servicer

Performance,

• Support Lender/Servicer

Reviews, and

• Assess Corrective Action

Monitor Lender/Servicer

Performance

This activity alerts agency

management to lenders/servicers

requiring review by comparing

system-stored review selection

criteria and other program criteria

to lender/servicer financial and

performance data. Agreements

between lenders and servicers must 

specify that loan servicers must

meet applicable participation

requirements and performance

standards. The agreement should

also specify that servicers acquiring 

loans must provide any

information necessary for the

lender to comply with reporting

requirements to the agency. 

Lenders/servicers that are

considered high risks may be

placed on a watchlist.

24 Guaranateed Loan System Requirements

Lender Management

Corrective

Action Plans

Appeals and

Decision Notice

Watchlist

Notice

Financial

Documents

Notification of

Noncompliance

Lender/

Servicer

Guarantee

Information

Guarantee

Data Lender/Servicer

Review Data

Lender/Servicer

Status

Approved

Lender/Servicer

Data

Lender/Servicer

Information

Financial

Rating Criteria

Risk Rating

Criteria

Portfolio

Evaluation

Criteria

Program

Criteria

Monitor 

Lender/Servicer

Performance

Support

Lender/Servicer

Reviews

Assess

Corrective

Action

Core

Financial

System

Receipt

Management

Funds

Management

Lender/Servicer for Review Noncompliant Lenders

Penalty Fee

Decommitment 

and

Deobligation

Data

Lender/Servicer Monitoring Process

Illustration 9
An automated system should:

Mandatory

• Compare lender/servicer financial and performance information against agency portfolio evaluation c riteria to 

identify lenders/servicers for regular or special review.

• Compute performance statistics for effective monitoring, including delinquency rates, default rates, and claim 

rates.

• 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.

• Compare the quantified lender/servicer risk to risk rating criteria to assign a risk rating to each lender/servicer 

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

Value-Added

• Enter high risk lenders/servicers on a problem watchlist and generate a notice to each affected lender/servicer.

Support Lender/Servicer Reviews

This activity supports on-site reviews of lenders/servicers to evaluate their performance against program standards

and requirements. Agencies should document review findings and submit them to agency review boards .

An automated system should:

Mandatory

• Provide historical performance information on lenders and servicers identified for review to the re view team. 

The preferred method is by electronic means.

Value-Added

• Provide for scheduling and tracking of the review team’s activities.

• Document review results including date of review, Name(s) of reviewer(s), and any deficiencies and associated

explanations.

• Record text comments relevant to the review process.

Assess Corrective Action

This activity supports the assessment of corrective actions by the agency for lenders/servicers in non-compliance

with program requirements. For minor non-compliances, agencies and the lender/servicer should agree on

corrective actions. For serious and frequent offenses, the review board should assess penalties, which may include

loss of guarantees, reprimands, probation, suspension, and decertification. OMB Circular A-129 requires agencies

to define the decertification process and establish timetables by which decertified lenders may apply for

reinstatement.

Guaranateed Loan System Requirements 25

Lender Management
An automated system should:

Mandatory

• 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. 

Provide data to support corrective action plans such as penalties and/or sanctions.

• Record penalties and/or sanctions imposed by the agency review board on those lenders or servicers found to 

be in serious and frequent non-compliance with Federal program standards.

Value-Added

• Generate a notice to inform the lender/servicer of a finding of non-compliance (electronically, where

appropriate), including any penalties or sanctions and the right to appeal.

• 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.

• Document and track appeals received from the lender/servicer and agency appeal decisions and generate a

decision notice to the lender/servicer.

Collateral Requirements

There are no collateral requirements applicable to the Lender Management function.

Internal Management Information Requirements

Listed below are internal management information requirements for the Lender Management function. The

information should be available to agency credit program managers and designated internal review officials on a

periodic or on an as requested basis. This list is not an all inclusive inventory of internal information requirements

for the Lender Management function. Each agency must determine the specific management information needs

necessary to manage its credit programs based on the agency mission and applicable statutory requir ements. In

order to support these needs, a system should provide a user-friendly query tool (preferably graphics-based) that

facilitates reporting rapidly on any required data elements. Agencies must maintain financial accounting

information at appropriate levels of summary for computational and reporting purposes. The main levels are: 

transaction, loan history, risk category, cohort, and account. Each agency must also determine whe ther the

information should be provided on hard copy reports or through system queries.

The guaranteed loan system should provide at least the following types of management information:

• Lender Eligibility Activity . This summary provides 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.

• Completed Reviews. This summary conveys the results of the lender reviews completed during the reporting 

period. The summary describes any recommended actions resulting from the lender reviews.

26 Guaranateed Loan System Requirements

Lender Management
• Lender Performance . This summary presents 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.

• Exceptions. This summary highlights deficiencies in the lender management function. The data summary

should be generated periodically or on demand as needed. An example of exception data is a listing of

lenders that are not in compliance with agency and statutory requirements, and that have not been penalized

or decertified.

Guaranateed Loan System Requirements 27
Guarantee Extension and Maintenance

Guaranteed loan commitments are recorded based on the approval of the request for the guarantee and the

availability of subsidy appropriation and lending limits. Lenders/servicers are required to originate all their

guaranteed loans in accordance with prudent lending practices. Agencies are required to review and approve

guarantee requests from lenders, invoice lenders for the collection of periodic guarantee fees, and make interest

supplement payments to lenders, as necessary.

General Requirements

This section provides the government-wide functional requirements for the Guarantee Extension and Maintenance

function of a guaranteed loan system.

Illustration 10 provides an overview of the Guarantee Extension and Maintenance function. As shown, the

Guarantee Extension and

Maintenance function consists of

the following major processes:

• Guaranteed Request

Evaluation Process,

• Guaranteed Origination

Process, and

• Guaranteed Loan

Maintenance Process

In order to approve a guarantee

request from a lender, agencies

must verify the borrower’s

program eligibility and,

creditworthiness, unless specifically 

excluded by program requirements. 

The extent to which an agency is

involved in the loan origination

process largely depends on the

responsibilities established for each 

lender level. Many loan programs

have preferred lenders, who

maintain data on behalf of the

agency, have responsibility for

determining borrower eligibility

and creditworthiness, and may

disburse funds without prior

approval. The agency must

provide guidance to its lenders for

determining a borrower’s

creditworthiness and train its

personnel to evaluate the lender’s

analysis of creditworthiness.

28 Guaranateed Loan System Requirements

Periodic Fee

Invoice

Guarantee

Request

Guarantee

Endorsement

Lender

Guarantee

Information

Program

Criteria

Guarantee

Request

Evaluation

Process

Guarantee

Origination

Process

Guaranteed

Loan

Maintenance

Process

Core

Financial

System

Approved Loan

Overview of the Guarantee Extension and 

Maintenance Function

Illustration 10
As shown in Illustration 11, the Guarantee Request Evaluation Process consists of the following major activities:

• Process Request for Loan Guarantee,

• Verify Borrower Program Eligibility and Creditworthiness,

• Conduct Funds Control, and

• Approve/Reject Guarantee Request

Process Request for Loan Guarantee.

This activity captures data about a

lender’s guarantee request for a

loan to be issued by the lender.

An automated system should:

Mandatory

• Record critical data on the

lender’s guarantee request to

support the guarantee

evaluation process.

• Provide access to guarantee

request information to each

individual participating in

the guarantee decision.

Value-Added

• Record text comments

relevant to the guarantee

decision.

Verify Borrower Program Eligibility

and Creditworthiness.

This activity verifies the eligibility

of the guaranteed loan borrower. 

The determination is made by

comparing information about the

borrower from the lender’s

guarantee request, recorded in the system in the prior process, to system-stored agency program eligibility criteria.

An automated system where applicable should:

Mandatory

• Compare borrower information on the lender’s guarantee request to agency program borrower eligibility

criteria.

Guaranateed Loan System Requirements 29

Guarantee Extension and Maintenance

Notification

Letter Lender

Core

Financial

System

Funds

Management Borrower Data

Guarantee Data

Rejected

Guarantee

Data

Guarantee

Information

Borrower 

Eligibility

Criteria

Creditworthiness

Criteria

Program

Criteria

Verify Borrower

Program Eligibility

and

Creditworthiness

Conduct

Funds

Control

Guarantee

Request

Process

Request for

Loan

Guarantee

Approve/

Reject

Guarantee

Request

Treasury

Available

Subsidy

Program Lending 

Limits

Treasury

Interest

Rates

Guarantee Request Evaluation Process

Illustration 11
• 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 de nied.

• Document whether the applicant has previously defaulted on debt to the federal government.

• 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.

Value-Added

• Document that the lender obtained a credit bureau report.

• Document that borrower financial data, repayment ability, and repayment history have been verified.

Conduct Funds Control.

An agency must have sufficient subsidy funds available and be within program lending limits (where program limits 

exist) in order to approve a guarantee request and obligate subsidy funds. This activity supports the calculation of

the subsidy cost of guaranteed loans and provides an interface with the core financial system to check subsidy fund

availability and lending limits.

An automated system should:

Mandatory

• 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, A-11,

and SFFAS No 2.

• Provide an automated interface with the core financial system to determine if sufficient funds are available in

the Program Account and if available lending limits in the Financing Account are sufficient to cover the

subsidy cost and the face value of the proposed guarantee.

Approve/Reject Guarantee Request.

This activity supports the final review and acceptance or rejection of each guarantee request based on the borrower’s 

fulfillment of program eligibility and creditworthiness criteria and the availability of subsidy funds and lending

limits.

An automated system should:

Mandatory

• Reflect the approved guarantee status.

• Accept, identify, track, and report supervisor overrides of system-generated acceptance/rejection

recommendations.

• Create and maintain a system record of rejected guarantee requests.

Value-Added

• Notify lender of approval or disapproval (electronically where appropriate).

30 Guaranateed Loan System Requirements

Guarantee Extension and Maintenance
After an agency or lender has approved a guarantee, the guaranteed loan obligation must be recorded in the system

to track the agency’s potential liability. Any origination fee associated with the issuance of the loan guarantee is also 

recorded. The lender must inform the agency of the amount and date of each obligation and or disbursement so

the agency can perform the necessary accounting.

As shown in Illustration 12, the Guarantee Origination Process consists of the following major activities:

• Issue Loan Guarantee, and

• Document Lender Loan Disbursement

Issue Loan Guarantee.

This activity provides eligible

lenders with federal loan guarantee

and records the guarantee

obligation and related origination

fee in accordance with agency

requirements, the Credit

Supplement to the Treasury

Financial Manual," and OMB

Circular A-34, Part VI.

An automated system should:

Mandatory

• Record the cohort and risk

category, as defined in OMB

Circular A-34, associated

with the guaranteed loan.

• Assign a unique account

number to the guaranteed

loan that remains unchanged

throughout the life of the

guarantee.

• Generate a guarantee

endorsement to confirm that

the loan is guaranteed and

transmit it to the lender

(electronically where

possible).

• Calculate and record the

guarantee origination fee in

accordance with the terms and conditions of the guarantee agreement.

• Record collections of origination fees received.

• 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.

Guaranateed Loan System Requirements 31

Guarantee Extension and Maintenance

Lender

Guarantee Data

Guarantee

Information

Guarantee

Edorsement

Fee Invoice

Document

Lender Loan

Disbursement

Treasury

Core

Financial

System

Funds Management

General Ledger

Management

Receipt Management

Approved

Guarantee

Commitment and Obligation Data

Fee

Data

Subsidy

Outlays

Notification

of Lender

Disbursement

Treasury Interest Rates Treasury Interest Rates

Issue

Loan

Guarantee

Origination Fee

Guarantee Origination Process

Illustration 12
Value-Added

• Transmit the origination fee invoice to the lender.

Document Lender Loan Disbursement.

This activity supports the receipt of notification that the loan has been disbursed and records the disbursement

where required by agency programs in accordance with OMB Circular A-34, Part VI.

An automated system should:

Mandatory

• Provide an automated interface with the core financial system to record the outlay of subsidy from the

Program Account.

• Record information on loan

disbursements by the lender,

including amounts and

applicable Treasury interest

rates, to support interest

computations and subsidy

re-estimates, unless

specifically excluded by

program requirements.

Value-Added

• Provide the capability to

receive electronic

transmission of disbursement 

data by the lender.

• Provide the capability for

reporting of loan closing

information.

Guaranteed Loan Maintenance

involves monitoring loans for

compliance with terms, processing

periodic guarantee fee collections,

and processing interest supplement

payments to the lender. As shown

in Illustration 13, the Guaranteed

Loan Maintenance process consists

of the following major activities:

• Document Loan

Modifications,

• Process Fees, and

32 Guaranateed Loan System Requirements

Guarantee Extension and Maintenance

Lender

Periodic

Fee Invoice

Process

Fees

Record

Interest

Suplement

Payments

Core

Financial

System

Funds Management

Payment Management

Receipt Management

Obligations

Fee

Receipt

Interest

Supplement

Payment

Request

Document Loan

Modifications

Guarantee Data

Guarantee

Information

Collateral Data

Guarantee Fee

Criteria

Program

Criteria

Fee Penalty

Criteria Fees

Modification Interest Supplement Payment

Information

Guaranteed Loan Maintenance Process

Illustration 13
• Record Interest Supplement Payments.

Document Loan Modifications.

Modifications to guaranteed loans are government actions that alter subsidy costs. Examples of government actions 

leading to a modification are forgiveness, forbearance, prepayment without penalty, and extensions of maturity

unless such actions are provided for in the original loan agreement. Modifications do not include routine

administrative workouts under the existing terms of the loan guarantee. Subsidy funds must be transferred from

the program account to the financing account to cover the cost of the modification. This is required for all loans,

although systems requirements for pre-1992 loans in liquidating accounts will be different than the system

requirements for post-1991 loans.

An automated system should:

Mandatory

• Support reevaluation of the modified loans in accordance with OMB Circular A-34 and program policy.

• Reflect the modified status of the guaranteed loan.

• Establish a new loan account and collateral record for each new debt instrument and assign a unique loan

account number to the new account record. Maintain a link between the new loan account established for the 

new debt instrument and the old loan account records.

• Perform a funds control check to verify the availability of subsidy through an automated interface with the

core financial system.

• Provide an automated interface with the core financial system to record the subsidy changes associated with

the guaranteed loan modification.

Process Fees.

This activity supports the routine billing and collection of periodic guarantee fees from the lender.

An automated system should:

Mandatory

• Compare guaranteed loan data to guaranteed fee criteria to determine which lenders owe guarantee fees.

• Compute the amount of the guarantee fee.

• Identify those lenders with overdue fee payments and calculate penalties on loans for which lenders have not

submitted guarantee fee payments.

• Generate invoices, including penalties assessed for late payment, for guarantee fee payments due from lenders 

(electronically where possible).

• Provide an automated interface with the core financial system to record the receipt of guarantee fees from

lenders.

Guaranateed Loan System Requirements 33

Guarantee Extension and Maintenance
Record Interest Supplement Payments.

Some guaranteed loans require the agency to pay interest supplements to the lender. Interest supplements are a

form of interest subsidy that enable the borrower to pay lower interest to the lender. This activity identifies those

guaranteed loan agreements that require interest supplement payments to the lender. The actual payment will vary

based upon the type of interest supplements offered through the guarantee programs.

An automated system should:

Mandatory

• Identify guaranteed loans requiring interest supplement payments.

• Compare current interest rates to the interest rates in the agreement to determine the appropriate levels of

interest supplements required.

• Recognize the interest supplement payment as an interest subsidy expense and a loan guarantee interest

supplement liability.

• Provide an automated interface with the core financial system to initiate and record disbursements for

interest supplement payments. If the guaranteed loan system itself handles the payment processing, it must

meet the requirements in the Core Financial System Requirements related to payments and send summary

data to the core financial system.

Collateral Requirements

Some credit programs provide loans to finance the acquisition of an asset that then serves as collateral for the loan. 

OMB Circular A-129 requires that property serving as collateral be appraised by a state licensed or certified

appraiser when the loan amount exceeds a pre-determined amount. Circular A-129 also requires that the useful life

and value of pledged collateral must be recognized in the guaranteed loan system at the time of credit screening. 

The estimated useful life of the collateral should be longer than the loan maturity and the loan-to-value ratio must

be within applicable program requirements.

An automated system should:

Value-Added

• Capture the estimated useful economic life of the pledged collateral and compare it to the proposed term of

the loan.

• Document that transactions over a pre-determined amount identified by program requirements have a

collateral appraisal by a licensed or certified appraiser.

• Compute the loan-to-value ratio and flag those loans with a ratio exceeding applicable program

requirements.

Internal Management Information Requirements

Listed below are internal management information requirements for the Guarantee Extension and Maint enance

function. This information described below should be available to agency credit program managers and designated

internal review officials on a periodic or on an as requested basis. This list is not an all inclusive inventory of

34 Guaranateed Loan System Requirements

Guarantee Extension and Maintenance
internal information requirements for the Guarantee Extension and Maintenance function. Each agency must

determine the specific management information needs necessary to manage its credit programs based on the agency 

mission and applicable statutory requirements. In order to support these needs, a system should provide a

user-friendly query tool (preferably graphics-based) that facilitates reporting rapidly on any required data elements. 

Agencies must maintain financial accounting information at appropriate levels of summary for computational and

reporting purposes. The main levels are: transaction, loan history, risk category, cohort, and account. Each agency

must also determine whether the information should be provided on hard copy reports or through system queries.

The guaranteed loan system should provide at least the following types of management information:

• Approval and Rejection Monitoring. This Summary provides information about all credit applications that

were approved or rejected for a given time period. The data are broken down into separate statistics on

credit approvals and rejections. The approval section indicates the number of approved applications and the

percentage of total applications that they represent. The total requested amount and total approved amount

are shown for each loan origination office. The rejected application section contains the number of rejected

applicants and the percentage of total applications that they represent. The total of all loans requested is also

shown. This data summary also lists the average time spent to process a credit application, from the time of

application until the final decision is made.

• Override Expectations. This summary identifies 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.

• Potential Application Fraud. This summary provides all applications that matched one 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.

• Approval/Rejection Statistics. This summary contains statistics on guarantee approvals and rejections. The

data summary is broken down into separate statistics on guarantee approvals and rejections. The approval

section indicates the number of approved applications and the percentage of total applications that they

represent. The total requested amount and total approved amount are shown for each guarantee origination

office. The rejected application section contains the number of rejected applicants and the percentage of total 

applications that they represent. The total of all guarantees requested is also shown.

• Detailed Transaction History. This summary contains detailed loan guarantee and account data. The data

summary is used for control and tracking and also as an audit trail. The information is presented by

program, for both the current and prior reporting period.

• Median Loan-to-Value Ratio. This summary is used to track the median loan-to-value ratios for guarantees

written by each regional office. The median loan-to-value ratio is the mid-point in the range of portfolio

loan-to-value ratios.

• Loan Guarantee Fee Collection. This summary is used to monitor guarantee origination fee collections.

• Loan Guarantee Periodic Fee Collection. This summary is used to monitor the periodic loan guarantee fee

collection activity.

• Exceptions. This summary highlights deficiencies in guarantee origination processing. The data summary

should be generated periodically or on demand as needed. An example of an exception summary is a listing

of approved requests that have not been processed in a specified period of time.

Guaranateed Loan System Requirements 35

Guarantee Extension and Maintenance
Portfolio Management

Effective administration of guaranteed loan programs depends on agencies gathering and using reliable information 

on the performance of the agency’s loan portfolios. Efficient mechanisms must be in place to provide sufficient

accounting and management information for effective stewardship of the loan portfolio.

Mandatory (All requirements in this Chapter are Mandatory)

General Requirements

This section provides the

government-wide functional

requirements for the Portfolio

Management function of a

guaranteed loan system.

Illustration 14 provides an

overview of the Portfolio

Management function. As shown,

the Portfolio Management

function consists of the following

major processes:

• Portfolio Performance

Process,

• Program Financing Process,

• Support Subsidy estimate,

and

• Portfolio Sales Process

Agencies must maintain adequate

and up-to-date information on the

status of their loan portfolio to

evaluate management and program 

effectiveness. Agencies need

information about the status and

quality of the loan portfolio to

monitor its financial health. As

shown in Illustration 15, the

Portfolio Performance process

consists of the following major

activities:

• Process Guaranteed Loan

Status Reports from

Lender, and

• Compute Portfolio Performance Measures

36 Guaranateed Loan System Requirements

Lender

Portfolio

Performance

Process

Treasury

Guarantee

Information

Program

Criteria

Core

Financial

System

Program

Financing

Process

Status

Report

Reports/

Evaluation

Treasury Interest Rates

Overview of the Portfolio Management Function

Illustration 14
Process Guaranteed Loan Status

Reports from Lender.

Lenders are required under OMB

Circular A-34, Part VI and other

OMB and Treasury documents to

submit information on guaranteed

loan commitments, lender

disbursements, lender collections,

delinquencies, and other data on

the size and health of the

guaranteed loan portfolio.

An automated system should:

• Receive and document loan

guarantee information from

lenders (electronically where

appropriate).

• 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).

• Maintain data from the

lender which identifies

delinquent accounts and

potential defaults.

• Provide agency access to the

loan status information.

• Receive and record lender

substitution and/or transfer data, i.e., secondary market sales (electronically where possible).

• Accept lender data by cohort and risk category.

Compute Portfolio Performance Measures.

This activity supports portfolio reviews that allow agency management to evaluate overall agency program

performance in relation to program goals and performance measures included in the agency’s annual performance

plan, strategic plan, and financial statements. Performance measures inform management how well the program

reaches its intended constituents, how effectively the program uses its allocated resources, and how successfully the

program achieves its intended public policy results. Effective performance measurement should highlight program

trends to prompt reexamination of agency policies as conditions warrant.

The information necessary to compute some of the following measures may not be readily available for all loan

programs, or may be available only at substantial expense. Therefore, the value of a given performance measure

Guaranateed Loan System Requirements 37

Portfolio Management

Reports/

Evaluation Lender

Core

Financial

System

Cost

Management

Program

Criteria

Lender

Eligibility

Criteria

Borrower Data

Collateral Data

Guarantee

Information

Process

Guaranteed

Loan Status

Reports from

Lender

Compute

Portfolio

Performance

Measures

Status

Reports

Guarantee Data

Administrative

Costs

Portfolio Performance Process

Illustration 15
should be examined within the context of the total cost to an agency of using that measure. The examples listed

below are intended as examples and should be tailored to each individual agency’s needs.

An automated system should:

• Compute and maintain program performance information. Some examples of typical program performance

information would include:

• 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

• Compute and maintain financial measures to help assess the credit soundness of a loan program. Some

examples of typical financial measures would include:

• 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

• Maintain portfolio data needed to help determine the effectiveness of use of agency resources such as:

• Administrative cost per loan guarantee approved

• Administrative cost per acquired loan serviced

• Administrative cost per dollar collected

• Time required to process a loan guarantee application

In accordance with the FCRA of 1990 and OMB guidance, agencies have several components to credit program

financing, including Treasury borrowing, subsidy reestimates, and working capital funding. Agencies borrow from

the Treasury when the uninvested fund balance in the Financing Account is insufficient to cover disbursements for

guarantee claims, but this situation should be rare (exception – negative subsidy) since the subsidy amounts are

expected to be sufficient to cover any claims made. Agencies must 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. Finally, agencies may elect to

set aside funds as working capital to finance costs associated with foreclosing, managing, and selling collateral.

Agencies should 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. The guaranteed loan system would 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.

38 Guaranateed Loan System Requirements

Portfolio Management
As shown in Illustration 16, the

Program Financing process

consists of the following major

activities:

• Support Treasury

Borrowing Calculations,

• Support Subsidy

Reestimates,

• Analyze Working Capital

Needs, and

• Analyze Working capital

Needs.

Support Treasury Borrowing

Calculations.

The FCRA of 1990 provides

financing accounts with permanent 

indefinite authority to borrow

from Treasury. The agency is

required to track the amounts of

borrowing, compute interest

expense related to these

borrowings, and compute interest

earned on uninvested funds in

accordance with guidance provided 

by OMB and Treasury. The

transactions to record borrowings

and interest would usually be

processed by the core financial

system with support for the

calculations being provided by the

guaranteed loan system. Unlike a

direct loan program, a guaranteed loan program is not expected to make routine borrowings from Treasury

(exception: negative subsidy). Subsidy amounts should be estimated so as to cover the costs of any payments of

guarantee claims for defaulted loans. The actual organization of system processes between the guaranteed loan

system and the core financial system is at the discretion of the agency.

An automated system should:

• Execute SF-1151’s and record amounts borrowed from Treasury to cover shortfalls in the subsidy estimates

temporarily.

• Track the amount of uninvested funds in the Financing Account as needed to support interest earnings

calculations.

• Compute interest expense on borrowings and interest earnings on uninvested funds.

• Execute and record repayment of principal using SF-1151’s and interest to Treasury using SF-1081’s.

• Execute and record receipt of interest earnings from Treasury on uninvested funds using SF-1081’s.

Guaranateed Loan System Requirements 3 9

Portfolio Management

Guarantee

Information

Guarantee

Data

Support

Treasury

Borrowing

Calculations

Support

Subsidy

Reestimates

Analyze

Working

Capital Needs

Core

Financial

System

General Ledger

Management

Funds

Management

Treasury

Treasury Interest Rates

SF 1151’s

and

SF 1081’s

Borrowed

Principal and

Interest

Earnings

Interest

Expense

Subsidy

Obligations 

and Excess 

Subsidy 

Transfer

Working

Capital

Data

Program Financing Process

Illustration 16
Support Subsidy Estimate

This section outlines the types of data elements which might be included in a loan system and builds upon the

standards set forth in SFFAS No. 2, Accounting for Direct Loans and Loan Guarantees and OMB Bulletins A-11

and A-34. The key to implementing the requirements of these documents is having adequate systems and reliable

data to reasonably calculate the credit subsidy estimate.

Given the diversity of Federal credit programs and, therefore, the wide range in data required to support subsidy

estimates, a loan system should be tailored to the data needs of each loan program. The data elements in a loan

system should be selected to allow for more in-depth analysis of the most significant subsidy estimate assumptions. 

To accomplish this generally the loan system should maintain three types of data. First, information regarding loan 

characteristics should be maintained. Second, relevant economic data should be gathered. Third, data on the actual 

timing and amount of all cash flows related to each loan in the loan system should be collected.

Loan characteristics. The loan system should maintain data that is predictive of loan performance and subsidy

costs. Loan characteristics maintained in a loan system will vary greatly from program to program. For example,

the value of collateral pledged may be highly predictive of recovery rates for some programs. The following is a list

of some of the loan characteristics which agencies should collect. This information should be obtained from either

the loan system, the core financial system, or other data repository within or outside the agency.

• Loan number - Cash flows should be maintained at the individual loan level, even though analysis might

often be done at the cohort level. 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 l oan.

• 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 sc heduled

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. This data is needed both to re-estimat e 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, 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. Track 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

loan-to-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.

Economic data. Nearly all loan programs are affected by trends and fluctuations in the economy. The system

should maintain the primary economic factors which influence loan performance. The critical indicators will vary

across programs. For housing loans, among other factors, property values and house appreciation rates should be

monitored. For programs which determine borrower’s interest rates based on the borrower’s income, all economic

40 Guaranateed Loan System Requirements

Portfolio Management
data on incomes should be maintained in either the guaranteed loan system, the core financial system, or other data

repository within or outside the agency.

Historical cash flows. All cash transactions related to each loan should be maintained in the system to allow for

trend analysis. Since transactions may be identified by a wide variety of transactional codes, agencies should

consider grouping transactions by the type of cash flows that are projected in loan program subsidy estimates. 

These groupings will vary from program to program, depending on the way cash flows are projected for subsidy

estimates. This information should be obtained 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. 

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 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.

Support Subsidy Re-estimates. OMB Circular A-34 and SFFAS No. 2 generally requires that the subsidy cost of a

cohort of guaranteed loans be re-estimated at the beginning of each fiscal year following the year in which the initial 

disbursement was made. A re-estimate of each cohort cash flow should include claims paid and fees collected,

defaults, delinquencies, recoveries, etc. When the agency acquires the guaranteed loan, the re-estimate of each

cohort cash flow should also include prepayments and collections of principal, interest and fees. This activity

examines the results of operations, by risk category (if applicable) and cohort, and adjusts loan subsidy costs

between risk categories (if applicable) within a cohort and for the cohort as a whole to account for changes in

cohort subsidy costs resulting from interest rate changes and differences between estimated cash flows, the actual

performance of the cohort, and expected performance changes in future cash flow. System activities may be located 

in either the Guaranteed loan system or the core financial system, as appropriate.

An automated system should:

• Support the re-estimate 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.

Guaranateed Loan System Requirements 41

Portfolio Management
• 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.

• Compare the current year re-estimated subsidy cost to prior years re-estimated loan subsidy costs to

determine whether subsidy costs for a risk category increased or decreased.

• 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.

• Group those cohorts that need indefinite appropriation loan subsidy funds separately from those cohorts that 

have excess funds. Support the request for an apportionment and obligate funds to cover the subsidy

increase for those cohorts of loans that have insufficient subsidy. Transfer excess subsidy of cohorts of loans

to the Special Fund Receipt Account.

The loan system should support the re-estimate calculation and provide the necessary data to record the re-estimate

in the core financial system.

Collateral Requirements

There are no collateral requirements applicable to the Portfolio Management function.

Internal Management Information Requirements

Listed below are internal management information requirements for the Portfolio Management function. This

information should be available to agency credit program managers and designated internal review officials on a

periodic or on an as requested basis. This list is not an all inclusive inventory of internal information requirements

for the Portfolio Management function. Each agency must determine the specific management information needs

necessary to manage its credit programs based on the agency mission and applicable statutory requir ements. 

Agencies must maintain financial accounting information at appropriate levels of summary for computational and

reporting purposes. The main levels are: transaction, loan history, risk category, cohort, and account. Each agency 

also must determine whether the information should be provided on hard copy reports or through system queries.

The guaranteed loan system should provide at least the following types of management information:

• Detailed Transaction History. This summary identifies, for each cohort, the number and amount of loan

guarantees in each phase of the guaranteed loan lifecycle. The information provided includes 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.

• Profile of Guaranteed Loan Portfolio. This summary provides a year-to-date profile of each guaranteed loan

program, with comparisons to the prior year’s loan guarantee activity.

• Program Credit Reform Status. This summary provides the status of the fiscal year’s credit reform

appropriations and subsidy levels.

42 Guaranateed Loan System Requirements

Portfolio Management
Acquired Loan Servicing

A guaranteed loan is in default when the borrower breaches the loan agreement with the private sector lender. The

guaranteed loan becomes a default to the federal government when the agency repurchases the loan (i.e., the agency 

pays the lender the balance of the borrower’s debt up to the guarantee amount). The repurchased default becomes

a receivable to the agency and is subject to the same debt collection provisions as a direct loan. Lenders of federally

guaranteed loans with collateral maybe required by policy to liquidate, through litigation if necessary, collateral for

delinquent debts before filing a default claim with the agency for any deficient balance.

Mandatory (All requirements in this Chapter are Mandatory)

General Requirements

This section provides the government-wide functional requirements for the Acquired Loan Servicing function of a

guaranteed loan system. It describes requirements for non-collateralized guaranteed loan programs and

collateralized programs where the lender forecloses and liquidates collateral as required by OMB Circular A-129.

• For those programs that

allow lenders to transfer

collateral to the government

for foreclosure and/or

liquidation, the guaranteed

loan system requirements

also include the Foreclose

and Liquidate Collateral

function discussed in the

Collateral Requirements

subsection.

• Those programs that allow

private lenders to transfer

notes to the federal

government should satisfy

the account servicing,

portfolio management, and

delinquent debt

requirements for guaranty

loan systems.

Illustration 17 provides an

overview of the Acquired Loan

Servicing function of a guaranteed

loan system. As shown in the

Illustration, the Acquired Loan

Servicing function consists of the

following major processes:

• Claim Processing Process,

and

• Account Status Maintenance

Process

Guaranateed Loan System Requirements 43

Lender

Borrower

Program

Criteria

Acquired Loan

Informatioin

Core

Financial

System

Account Status

Maintenance

Process

Claim Processing

Process

Claim

Application

Invoice

Claim

Information

{To Delinquent Debt Collection}

{To Foreclose and Liquidate Collateral}

Approved

Claims

Claims

Payments

Collection

Data

Rejected

Applications

Loan

Payment

Overview of the Acquired Loan Servicing Function

Illustration 17
Claim applications are submitted by a lender to an agency as a result of a default by a borrower under a guaranteed

loan. The claim application outlines the best course of action for resolving a delinquent guaranteed loan. Some

agencies require lenders to submit a formal or informal claim proposal which outlines various proposed courses of

action, prior to submitting a claim application. The claim proposal process allows the agency the opportunity to

evaluate the alternatives prior to any definitive action being taken by the lender in the form of a claim application. 

In either case, the claim application will describe the agreed-upon course of action.

Before an agency pays a guarantee claim, the agency must ensure that the lender has exercised due diligence in

accordance with legislative and regulatory guidance for a particular program. The agency also must ensure that the

lender has taken all appropriate steps to collect a debt including foreclosure and liquidation of any collateral.

As shown in Illustration 18, the Claim Processing process consists of the following major activitie s:

• Evaluate Claim Application, and

• Process Authorized Claim

for Payment

Evaluate Claim Application

This activity supports the review

and approval of claim applications. 

This procedure is followed for each 

defaulted guaranteed loan. If the

lender has foreclosed and

liquidated on any collateral, and

still has a balance due, the agency

pays the claim and attempts to

collect the deficient amount based

on statutory requirements and

agency policy.

An automated system should:

• Record key claim data,

maintain data on original

and if applicable, final

claims.

• Compare the claim

application information to

the agency program claim

application evaluation

criteria.

• Suspend processing for

claims that are incomplete

until corrected.

• Identify claims not meeting

agency program

requirements and notify the

lender of the rejection.

44 Guaranateed Loan System Requirements

Acquired Loan Servicing

Lender

Borrower

Core Financial

System

Receipt

Management

 Payment Management

Program

Criteria

Claim Application

Evaluation

Criteria

Claim

Information

Claim Application

Data

Claim Status

Acquired Loan

Data

Acquired Loan

Status

Acquired Loan

Collateral

Data

Acquired Loan

Information

Claim

Application

Evaluate

Claim

Application

Process 

Authorized

Claim for 

Payment

Approved Claims

Claim

Payment

Notification of

Claim Payment

Rejected

Applications

Disbursement/

Claim Payment

Request

Claim Processing Process

Illustration 18
• Document and track information on accepted and rejected claims and the reason for the rejections.

• Reflect the status of the claim.

• Develop edits to address claims issues.

• Record or track claims errors.

Process Authorized Claim for Payment

This activity supports the payment of an approved guaranteed loan claim to the lender.

• Support underlying details.

An automated system should:

• Calculate the claim payment to be made, making adjustments for any disallowed amounts or authorized debt

collection activities.

• Provide an automated interface with the core financial system to initiate a disbursement of the claim payment 

to the lender. If the guaranteed loan system processes payments, it must meet the requirements in the Core

Financial System Requirements related to payments data to the core financial system.

• Record acquired loan information and establish appropriate accounting entries such as a receivable.

This process evaluates receivables created as a result of claims payments to determine the legal and policy basis for

pursuing repayment, and the likelihood of collection. Based on this evaluation, the account is either written-off or

is processed for inclusion in billing and collection activities. Agencies must 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. Borrowers should be encouraged to use pre-authorized debit or credit cards when making loan payments.

System requirements related to collecting delinquent debt are included in the Delinquent Debt Collection function.

As shown in Illustration 19, the Account Status Maintenance process consists of the following major activities:

• Evaluate Delinquent Debtors for Collection or Write-off,

• Invoice Debtor, and

• Apply Collections

Evaluate Delinquent Debtors for Collection or Write-off

This activity determines whether repayment of the receivable created as a result of the claim payme nt will be

pursued by the agency. This determination is made based on statutory authority and requirements, agency policy,

and the likelihood of repayment.

An automated system should:

• Identify accounts for which collection is to be pursued.

• Identify accounts that should be written-off.

Guaranateed Loan System Requirements 45

Acquired Loan Servicing
Invoice Debtor

This activity supports invoicing of

debtors. Most loans are billed

based on a schedule determined at

loan origination, but some may be

based on negotiated payment

schedules.

An automated system should:

• Calculate outstanding

balances for each loan

account invoiced, including

principal, interest, late

charges, and other amounts

due.

• Identify loan accounts to be

invoiced based on agency

program invoicing criteria

and loan account

information

• Generate and transmit an

invoice to each borrower. 

At a minimum, the invoice

must incude borrower ID,

amount due, date due, the

date after which the payment 

will be considered late, and

the current balance.

• Provide for automatic

acceleration of delinquent

installment payment notes

based on the acceleration

clause.

• Track and age receivables by type.

• Provide an automated interface with the Core financial system to record accrual of interest, administrative

charges, and penalties for delinquent loan accounts.

Apply Collections

This activity records collections against non-delinquent debt from borrowers and applies the loan payment receipts

to the debtor’s account in accordance with predetermined receipt application rules.

An automated system should:

• Apply collections according to agency program receipt application rules to the appropriate liquidating or

financing account.

46 Guaranateed Loan System Requirements

Acquired Loan Servicing

Borrower

Core

Financial

System

Receipt

Management

Acquired Loan

Data

Payment

History

Acquired Loan

Status

Acquired Loan

Information

Evaluate

Delinquent

Debtors for

Collection Action

Invoice

Debtor

Apply

Collections

Invoice Financial

Institutions

Debt Collection

Criteria

Invoicing

Criteria

Receipt Application

Rules

Program

Criteria

{To Write-offs/ Close-outs}

Collection

Data

Uncollectible

Accounts

Approval for Pre-authorization Debits

Loan

Payments

Loan

Payments

Account Status Maintenance Process

Illustration 19
• Record a partial, full, or late payment indicator.

• Identify payments that cannot be applied and document the reasons why the payments cannot be applied.

• Provide an automated interface with the core financial system to record the collection. If the guaranteed loan 

system processes collections, it must meet the requirements in the Core Financial System Requirements

related to collections and send summary data to the core financial system.

Collateral Requirements

When a borrower defaults on a collateralized guaranteed loan, the collateral could be liquidated/foreclosed by the

lender, or the collateral could be assigned to the agency. If the lender liquidates the collateral, the agency is

responsible for collecting any

deficient balance through the use of 

various collection tools. If the

agency acquires the collateral, the

disposition of the assets is

determined by the agency’s

property management policies.

This section describes the processes

for foreclosing and liquidating

collateral. Illustration 20 provides

an overview of the Foreclose and

Liquidate Collateral function. As

shown, the Foreclose and Liquidate 

Collateral function includes, as

major processes:

• Foreclose on Collateral

Process, and 

• Manage/Dispose of Collateral 

Process.

As shown in Illustration 21, the

Foreclose on Collateral process

consists of the following major

activities:

• Prepare Foreclosure

Materials, and

• Foreclose.

Prepare Foreclosure Materials.

If the Federal agency, not the

lender, is responsible for liquidating 

collateral associated with a

guaranteed loan in a default

Guaranateed Loan System Requirements 47

Acquired Loan Servicing

Borrower

Acquired

Loan

Information

Core

Financial

System

Property

Management

Systems

Foreclosure

Notice

Expense

Invoice

Purchaser Property

Management

Contractors

Acquired

Loan Servicing

Acquired

Asset

Data

Receipts and

Invoice/

Disbursement

Data

Payments

{To Delinquent

Debt Collection}

Deficiency

Balances

Asset

Data

Collateral

Transfer

Payment for

Collateral

Collateral

Foreclose on

Collateral

Process

Manage/Liquidate

Collateral

Process

Overview of the Foreclose and 

Liquidate Collateral Function

Illustration 20
situation, the agency initiates the

process by preparing for

foreclosure proceedings to take

title to the property, unless

specifically excluded by program

requirements.

An automated system should:

• Provide information on

collateral for use in the

foreclosure process.

• Update the acquired loan

information store with

additional information

obtained during the

foreclosure preparation

process, such as recent

appraisal values and property 

condition.

• Calculate outstanding

principal, interest, and

penalties, for each loan with

collateral to be foreclosed.

Foreclose.

Foreclosing includes monitoring

the foreclosure process and

recording the results.

An automated system should:

• Provide information to

generate a foreclosure notice to the borrower.

• Transmit information necessary for the foreclosure to the Department of Justice and/or agency Office of

General Counsel.

• Record the results of the foreclosure proceedings and title conveyance to the agency.

• Provide an automated interface of data on acquired collateral to the property management system for

management and liquidation of the property.

• Provide an automated interface to the core financial system to record the value of the property acquired and

to reduce the receivable amount.

Collateral acquired by the agency should be liquidated (sold) to provide funds to recover the delinquent debt. Due

to economic conditions, condition of the property, or other factors, the agency may decide to delay liquidation

until conditions are more favorable. In that situation, the property must be managed until it is liquidated; this may

involve making repairs, renting it out, etc.

48 Guaranateed Loan System Requirements

Acquired Loan Servicing

Borrower

Prepare

Foreclosure

Materials

Foreclose

Foreclosure

Notice

DOJ/Agency

C ounsel

Acquired Loan

Data

Acquired Loan

Collateral

Acquired Loan

Information

Core Financial

System

Receipt

Management

General Ledger

Management

Acquired Asset Data

Receivable Adjustments

Collateral

Foreclose and Liquidate Collateral: 

Foreclose on Collateral Process

Illustration 21
As shown in Illustration 22, the

Manage/Liquidate Collateral

consists of the following major

activities:

• Manage Collateral, and

• Dispose of Collateral.

Manage Collateral

This activity supports management

of acquired collateral. If a property

management system exists, some of

these activities may be supported by 

that system rather than the

guaranteed loan system.

An automated system should:

• Generate payments to

property management

contractors for services

rendered.

• Track, record, and classify

operations and maintenance

expenses related to the

acquired collateral.

• Document rental income and

other collections related to

the acquired collateral.

• Post the expenses and income 

to the core financial system

through an automated

interface.

Dispose of Collateral

This activity supports the sale or other disposal of acquired collateral.

An automated system should:

• Update the acquired loan information store to record receipts resulting from the liquidation of acquired

collateral and the disposition of the collateral.

• Identify any deficiency balances remaining for the loan after collateral liquidation for further collection

activities.

• Provide an automated interface to the core financial system and the property management system to record

disposal of the property and associated receipts.

Guaranateed Loan System Requirements 49

Acquired Loan Servicing

Manage

Collateral

Dispose of

Collateral

Expense

Invoice

Property

Management

Contractors

Purchaser

Acquired Loan

Data

Acquired Loan

Collateral

Acquired Loan

Information

Property

Management

Systems

Core Financial

System

Receipt

Management

General Ledger

Management

Payment Management

Disbursement

Data

Income

Data

Asset

Data

Receipts

Asset

Disposal

Asset Data,

Income &

Expenses

Collateral

Payment for

Collateral

Foreclose and Liquidate Collateral:

Manage Liquidate Collateral Process

Illustration 22
Internal Management Information Requirements

Listed below are internal management information requirements for the Acquired Loan Servicing function. The

information described below should be available to agency credit program managers and designated internal review

officials on a periodic or on an as requested basis. This list is not an all inclusive inventory of internal information

requirements for the Acquired Loan Servicing function. Each agency must determine the specific management

information needs necessary to manage its credit programs based on the agency mission and applicable statutory

requirements. Agencies must maintain financial accounting information at appropriate levels of summary for

computational and reporting purposes. The main levels are: transaction, loan history, risk category, cohort, and

account. Each agency also must determine whether the information should be provided on hard copy reports or

through system queries.

The guaranteed loan system should provide at least the following types of management information.

• Guaranteed Loan Claim Activity. This summary is used to monitor trends in claim activity over time. The

information is presented at the cohort level for the current year and the prior years.

• Summary Data of Claim Losses Paid Out. This summary is used to compare the estimated claim losses of

guaranteed loan programs to the actual losses incurred by the program.

• Detailed Transaction History. This summary provides detailed loan account data and payment transaction

activity to provide a detailed history of applied and unapplied payments.

• Standard Management Control/Activity. This summary tracks the status of all loan accounts by summarizing 

loan activity at various critical points of the loan cycle. The collection process summarizes payment activity

to allow agency management to monitor the effectiveness of each activity in the collection process.

Delinquency information is summarized to highlight delinquent debt (collateralized and non-collateralized)

and modified debt. This data summary is produced periodically and provides information for preparing the

SF-220-9 and SF-220-8.

• Exceptions. This summary identifies deficiencies that have occurred in the routine processing and

monitoring of account status. Examples of exceptions include unapplied payments, and delinquent accounts

not eligible for debt collection tools. This summary is generally produced on a periodic basis.

• Portfolio Sale Historical Payments. This summary provides 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.

• Portfolio Sale Performance. This summary provides 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.

• Collateral Management Activity and Expense. This summary provides detailed and summary data of

collateral management activity and expense data for monitoring collateral management activities that affect

the value of the agency-owned property prior to disposition. All income earned and expenses incurred while

the collateral is in the agency’s possession must be recorded and tracked to support the agency’s ability to

recover the expenses.

50 Guaranateed Loan System Requirements

Acquired Loan Servicing
Delinquent Debt Collection

Agencies which repurchase and service their guaranteed loans or are assigned collections rights when loss claims are

paid must comply with the Debt Collection Improvement Act of 1996.OMB Circular A-129 requires agencies to

have a fair but aggressive program to recover delinquent debt. Each agency must establish 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.

Mandatory (All requirements in this Chapter are Mandatory except as indicated)

General Requirements

This section provides the government-wide functional requirements for the Delinquent Debt Collection function of 

a guaranteed loan system.

Illustration 23 provides an

overview of the Delinquent Debt

Collection function. As shown, the 

Delinquent Debt Collection

function consists of the following

major processes:

• Collection Actions Process,

and

• Write-offs and Close-outs

Process.

An agency has considerable

flexibility in determining how to

collect its delinquent debt. The

size, age, and type of debt are

essential factors in determining the

resources to be expended in

recovering debt. OMB Circular

A-129 and the Credit Supplement

to the Treasury Financial Manual

provide guidelines to determine the 

appropriate tools to use to collect

delinquent debt. If collateral is

attached to the guaranteed loan,

foreclosure and liquidation of the

collateral should occur after

providing the debtor reasonable

opportunity to cure the loan. Any

deficiency balance may be pursued

using collection tools such as

litigation or cross servicing.

Guaranteed Loan System Requirements 51

Borrower

Acquired

Loan

Information

Program

Criteria

Core

Financial

System

Dunning

Letters

1099-C

Notification

of 1099-C

Reporting

Uncollectable Accounts

Collection

Actions

Process

Write-offs

and Close-outs

Process

DOJ/Agency

Counsel

IRS

Credit

Information

Sources

Collection

Agencies

Federal

Agencies

{From Acquired

Loan Servicing}

Delinquent

Debt Information

{From

Foreclosure

and

Liquidate

Collateral}

Collection

Activities

and Results

Termination of

Collection Action 

Request and Approval

Overview of the Delinquent Debt Collection Function

Illustration 23
As shown in Illustration 24, the

Collection Actions Process,

Troubled Debt Servicing under

agency program requirements

includes:

• Report Delinquent Debt

• Contact with the Debtor

• Refer for Treasury Offset

• Refer to Collection Agencies

• Refer for Litigation

Activities

• Garnishment of non-Federal

wages

Report Delinquent Debt

This activity reports selected

delinquent account information to

credit bureaus in accordance with

DCIA to indicate the delinquency

status of a debt. Guaranteed

lenders, or when legally authorized 

the agency, must report all non-tax 

commercial and delinquent

consumer accounts in excess of a

pre-determined amount to credit

bureaus.

An automated system should:

• Identify delinquent

commercial and consumer

accounts for reporting to credit bureaus (preferably by electronic interface) by comparing reporting criteria

to delinquent loan data.

• Calculate outstanding balances, including interest, penalties, and administrative charges and include this

information in credit bureau records.

• 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.

Value-Added

• Maintain a record of each account reported to credit bureaus to allow tracking of referred accounts.

• Identify delinquent commercial and consumer accounts for reporting to CAIVRS by comparing reporting

criteria to delinquent loan data.

• 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.

52 Guaranteed Loan System Requirements

Delinquent Debt Collection/Troubled Debt Servicing

Borrower Dunning

Letters

Appeals Notification

of 

Referral

Report

Delinquent

Debt

Contact

with

Debtor

Refer

for

Treasury

Credit Bureaus

Collection Agencies

Other Federal

Agencies

(e.g., IRS)

CAIVRS

Agency OGC/DOJ

Core Financial

System

Receipt

Management

Program

Criteria

CAIVRS 

Referral Criteria

Credit Bureau 

Reporting Criteria

Offset Referral

Criteria

Collection Agency

Referral Criteria

Collection Agency

Selection Criteria

Litigation Referral

Criteria

Loan

Information

Loan Data

Special Collection

Activity Data

Collection Actions Process

Illustration 24
• Prepare data on appropriate medium, on a monthly basis, of delinquent debtors to be included in the

CAIVRS database.

Contact with Debtor

It is critical for an agency to address a delinquency immediately to prevent it from becoming more serious. If the

delinquency is not resolved after the initial contact, the agency should pursue additional contacts as it determines

necessary. If the volume and amount of loans is large enough, agencies may establish workout groups to decide on

appropriate actions to maximize debt recovery.

An automated system should:

• Generate and transmit dunning letters to debtors with past-due loan accounts.

• Identify debtors who do not respond to dunning letters within a specified time period.

• Track demand letters and borrower responses to document borrower due process notification (and borrower

willingness and ability to repay debt).

• Track and document debtor appeals received in response to demands for payment.

• Provide automated support to the collection process. Support could be 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.

Refer for Treasury Offset. The DCIA of 1996 mandates the referral of all Federal debts over 180 days delinquent

to Treasury FMS for the purposes of administrative offset. A delinquent guaranteed debt for administrative offset

is a guaranteed debt the agency has the legal right to pursue and is not being paid voluntarily by the debtor. If the

delinquent debtor is in a voluntary repayment plan acceptable to the creditor agency and is making the payments as

required under the plan, the debt should not be referred for administrative offset. In addition, debts that are in

foreclosure, moratorium, or bankruptcy, or over 10 years old (exception: where accepted by Treasury) cannot be

referred to Treasury for administrative offset. The administrative offset program administered by the Department

of the Treasury is named the Treasury Offset Program (TOP). The DCIA requires FMS, the U.S. Postal Service,

or any other government corporation, or any other disbursing officials of the U.S. designated by the Secretary of

the Treasury, to offset Federal Payments to pay the delinquent debts. When fully implemented, TOP will offset

Federal salaries, IRS refunds, and Federal administrative payments such as payments to vendors. DCIA authorizes

Treasury to charge a fee sufficient to cover the full cost of implementing administrative offset; the agency can either 

pass this fee on to the debtor or absorb it.

An automated system should:

• identify accounts eligible for referral to the TOP.

• 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 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; and an offer to enter into a written repayment agreement with the agency.

• identify, at the end of the notification period, the debtors that remain delinquent and are eligible for referral.

• offset delinquent debts internally before referral to TOP, where applicable.

• transmit to TOP eligible new debts, and increase, decrease, or delete previously reported debts.

Guaranteed Loan System Requirements 53

Delinquent Debt Collection/Troubled Debt Servicing
• apply collections received through the TOP process to debtor accounts in accordance with applicable

payment application rules.

• record offset fees in accordance with agency program requirements.

• update the loan information store to reflect TOP status.

• update the core financial system to record collections from TOP.

• process agency refunds given to borrowers erroneously offset and transmit this information to Treasury in a

timely manner.

• record refunds given by Treasury and adjust the loan information store accordingly.

Garnishment of Non-Federal Wages. The DCIA of 1996 authorizes Federal agencies administratively to garnish

up to 15 percent of the disposable pay of a debtor to satisfy delinquent non-tax debt. Prior to the enactment of the

DCIA, agencies were required to obtain a court judgment before garnishing the wages of non-Federal employees. 

Wage garnishment is a process whereby an employer withholds amounts from an employee’s wages and pa ys those

amounts to the employee’s creditor in satisfaction of a withholding order. At least 30 days before an agency

initiates garnishment proceedings, the agency must give the debtor written notice of its intent.

An automated system should:

• generate 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 the debtor’s

rights.

• document that the wage garnishment order was sent to the employer.

• provide ad hoc reporting capability needed to monitor the amounts recovered through non-Federal wage

garnishment.

• document that the agency provided debtors a hearing, when requested.

• interface with the core financial system to record receipts remitted to the agency.

• apply collections received through wage garnishment according to agency application rules.

Refer to Collection Agencies. This activity determines and refers delinquent loan accounts to collection agencies for 

collection. Agencies can refer debts to a private collection contractor for collection for a period of time determined

by Treasury.

An automated system should:

• Compare delinquent account data to agency program collection agency referral criteria to select delinquent

loan accounts for referral to collection agencies.

• Sort and group delinquent loan accounts based on type of debt (consumer or commercial), age of debt, and

location of debtor.

• Calculate outstanding interest, penalties, and administrative charges for each delinquent loan acco unt to be

referred.

• Assign selected delinquent loan account groupings to appropriate collection agencies based on collection

agency selection criteria for agency programs.

• Document that the delinquent account has been referred to a collection agency.

54 Guaranteed Loan System Requirements

Delinquent Debt Collection/Troubled Debt Servicing
• Generate and receive electronic transmissions of account balance data and status updates to and from

collection agencies.

• Record receipts remitted to the collection agency and forwarded to the agency.

• Update the loan information store to reflect receipts, adjustments, and other status changes, including

rescheduling, compromise, and other resolution decisions.

• Accept and match collection agency invoices with agency records.

• Generate payment to the collection agency for services rendered through the core financial system.

• Request, reconcile, and record returned accounts from collection agencies.

• Interface with the core financial system to record collections processed through collection agencie s.

Refer For Litigation Activities. OMB Circular A-129 requires agencies to refer delinquent accounts to the

Department of Justice (DOJ), or use other litigation authority that may be available, as soon as there is sufficient

reason to conclude that full or partial recovery of the debt can best be achieved through litigation. This activity

determines and refers selected accounts for litigation. Referrals to DOJ should be made in accordance with the

Federal Claims Collections Standards.

An automated system should:

• Compare delinquent loan account information against the agency’s litigation referral criteria to identify

delinquent loan accounts eligible for referral. Support identification of accounts to be referred to counsel for

filing of proof of claim based on documentation that a debtor has declared bankruptcy.

• 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.

• Calculate the outstanding balance, including principal, interest penalties, and administrative charges, for each

delinquent loan account to be referred to legal counsel.

• Generate the Claims Collection Litigation Report (CCLR). The CCLR is used to capture collection actions

and current debtor information and transmit this information to DOJ.

• Receive electronic transmissions of account data and status updates to and from DOJ’s Central Intak e Facility 

or the agency’s Office of General Counsel’s (OGC) automated system for referrals.

• Update the 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.

• Track filing of pleadings and other motions, including proofs of claims in bankruptcy, to ensure swift legal

action and to monitor litigation activity.

• Match agency litigation referrals with DOJ listing of agency litigation referrals.

• Record and track recovery of judgment decisions.

• Update the loan information store to reflect receipts and adjustments.

• Interface with the core financial system to record any collections resulting from litigation.

Guaranteed Loan System Requirements 55

Delinquent Debt Collection/Troubled Debt Servicing
Delinquent Debt Collection: Write-Offs and Close-Outs Process

OMB Circular A-129 and the Credit Supplement to the TFM describe effective write-off and close-out procedures

for delinquent loan accounts. As shown in Illustration 25, the Write-offs and Close-outs process consists of the

following major activities:

• Identify and Document Accounts Selected for Write-off,

• Monitor Written-off Accounts, and

• Document Close-out of Uncollectible Accounts.

Identify and Document Accounts Selected for Write-Off. This activity identifies and processes accounts for

write-off based on past collection history and a system-prepared debtor financial profile. Write-offs of loan

accounts that exceed a pre-determined amount in accordance with program requirements require approval of the

DOJ.

An automated system should:

• Compare delinquent loan

account information to

agency program write-off

criteria to select delinquent

loan accounts for possible

write-off.

• 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.

• Produce a CCLR for each

loan account to be referred

to agency counsel or the

(DOJ) for approval of

termination of collection

action. Update the loan

status to reflect the referral.

• Update the loan information 

store to reflect approval or

disapproval by agency

counsel or the DOJ for

termination of collection

action. 

• Update the loan information 

store and provide an

automated interface with the 

56 Guaranteed Loan System Requirements

Delinquent Debt Collection/Troubled Debt Servicing

Borrower

Notification

of 1099-G

Reporting

Monitor

Written-off

Accounts

Document

Close-out of

Uncollectible

Accounts

Identify and

Document

Accounts 

Selected for

Write-off

DOJ/Agency

Counsel

IRS 1099-G

CCLR

Core Financial

System

Receipt

Management

Loan

Data

Loan

Information

Write-off

Criteria

Program

Criteria

Close-out

Criteria

Approval for

Termination

of Collection Action

Reactivated

Accounts

Close-out

Data

Write-off

Write-offs and Close-outs Process

Illustration 25
core financial system to record the write-off of the receivable.

Monitor Written-Off Accounts. This activity monitors and periodically reevaluates inactive accounts for possible

reclassification.

An automated system should:

• Maintain a suspense file of inactive (written-off) loan accounts.

• Reactivate written-off loan accounts at a system user’s request if the debtor’s financial status or the account

status changes.

Document Close-Out Of Uncollectible Accounts. This activity completes agency action on accounts determined to

be uncollectible. Closed out accounts over a pre-determine amount must be reported to the IRS on Form 1099-C. 

When a debt is reported, the IRS will match the agency’s Form 1099-C report against individual tax returns to

determine if the discharge of the debt has been reported by the debtor as income.

An automated system should:

• Compare loan account data to agency close-out criteria to identify debtor accounts eligible for clo se-out and

1099-C reporting.

• Prepare and send a Form 1099-C to the IRS if the debtor has not responded within the required time

period.

• Update the loan information store to reflect receipts, adjustments, and other status changes, including

rescheduling, compromise, and other resolution decisions.

• Retain electronic summary records of close-out account activity for a period of five years for use in agency

screening of new loan applications.

Collateral Requirements

There are no collateral requirements applicable to the Delinquent Debt Collection function for guaranteed loans. If 

applicable, collateral would have been acquired, foreclosed and liquidated in the prior function up on the default of

the borrower.

Internal Management Information Requirements

Listed below are internal management information requirements for the Delinquent Debt Collection function. The 

information described below should be available to agency credit program managers and designated internal review

officials on a periodic or on an as requested basis. This list is not an all inclusive inventory of internal information

requirements for the Delinquent Debt Collection function. Each agency must determine the specific management

information needs necessary to manage its credit programs based on the agency mission and applicable statutory

requirements. Agencies must maintain financial accounting information at appropriate levels of summary for

computational and reporting purposes. The main levels are: transaction, loan history, risk categor y, cohort, and

account. Each agency also must determine whether the information should be provided on hard copy reports or

through system queries.

The guaranteed loan system should provide at least the following types of management information:

Guaranteed Loan System Requirements 57

Delinquent Debt Collection/Troubled Debt Servicing
• Detailed Transaction History. This summary provides detailed account information by cohort for internal

control and tracking, and, in the absence of an electronic interface to external entities, may be used to transfer 

data from the agency to the external entity to facilitate delinquent debt collection actions. Separate data

summaries are produced for offset referrals, collection agency referrals, litigation referrals, and write-offs and

close-outs.

• Standard Management Control/Activity. This summary tracks the status of all referral activity including

initial referrals, status updates, and account balance updates. Separate and summary listings are produced for 

individual and total reporting and referral activity.

• Exceptions. This summary highlights 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 cannot 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.

• Trend Analysis/Performance. This summary highlights the effectiveness of different delinquent debt

collection techniques over time. The summary indicates the effectiveness of using different types of collection 

actions for different credit programs.

• Collection Contractor Compensation. This summary provides 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.

58 Guaranteed Loan System Requirements

Delinquent Debt Collection/Troubled Debt Servicing
Treasury Cross-Servicing

Mandatory (All requirements in this Chapter are Mandatory)

Cross-servicing occurs when Treasury’s FMS or a Treasury-designated debt collection center provides debt

collection services for other Federal agencies as shown in Illustration 26. The DCIA of 1996 mandates agencies to

refer their delinquent non-tax debt over 180 days delinquent to Treasury or a Debt Collection Center for purposes

of collection. Debt is considered delinquent if it is 180 days past due and is legally enforceable, i.e., there has been

a final agency determination that the debt, in the amount stated, is due and there are no legal bars to collection

action. For example, debts in an appeals process required by statute or regulation should not be transferred to a

Debt Collection Center if collection action during the appeals process is prohibited. There are five specific instances 

where debts are excluded from transfer. They are:

• debts that are in litigation or foreclosure,

• debts that will be disposed of 

under an asset sales program

within one year after

becoming eligible for sale, or 

later than one year if

consistent with an asset sales

program and a schedule

established by the agency

and approved by the

Director of OMB,

• debts that have been referred 

to a private collection

contractor for collection for a 

period of time determined by 

Treasury,

• debts that have been referred 

to a Debt Collection Center

with the consent of Treasury

and for a period of time

determined by Treasury, and

• debts that will be collected

under internal offset if such

offset is sufficient to collect

the debt within three years

after the debt is first

delinquent.

In addition, a specific class of debt

may be excluded by the Secretary

of the Treasury at the request of an

executive, legislative or judicial

agency. Agencies are not required

to transfer to FMS debts which are

over 180 days delinquent until such 

time as a final agency

determination regarding the debt is 

made or the legal bar to further

Guaranateed Loan System Requirements 59

Agency

Letter of

Agreement

Determine collection action

through application of criteria

Routine program management -

servicing, demand letters, due process

notices, debt collection up to referral

Debts delinquent

more than 180 days

Demand Letter

Reports

Debt

repaid/resolved

Offsets

 -Federal salary

 -General

Credit Bureau

reporting (ongoing) “Death” Match

Debt

Collection Center

Accounting

Admin Functions

Reporting

Other Services*

Federal Agency

Collection Centers

Collection

Agencies Litigation Write-off/1099C

* Mortgage servicing, unclaimed assets recovery, consolidated credit reporting, 1099 reporting for vendors

Treasury Cross-Servicing

Illustration 26
collection action is removed. An agency may refer non-tax debt less than 180 days delinquent to FMS, or with the

consent of FMS, to a Treasury-designated debt collection center for appropriate debt collection action.

Before referring debt to a Debt Collection Center, the agency enters into a letter of agreement with Treasury FMS

authorizing FMS to provide debt collection services. This agreement details the limitations and pa rameters

required for the compromise, settlement or termination of collection action.

FMS and other debt collection centers may charge and retain fees (based on actual costs) for debt collection

services. Fees may be added on to the debt as an administrative cost if authorized by law.

Treasury can authorize an agency to “cross-service”, that is, collect debts on behalf of another agency, as a debt

collection center. The agency must submit a proposal to Treasury which contains the documentation supporting its 

request to be designated as a debt collection center. The proposal must indicate what types of debts the agency

wishes to cross-service and its success at collecting its own delinquent accounts. Some agencies may be debt

collection centers satisfactorily “working” their own debts. However, these agencies may not want to cross-service

for other agencies. Treasury will grant a one-year waiver to the transfer provision of the DCIA for debts which are

being collected in an agency’s own debt collection center, provided the agency submits documentation which

indicates the volume and type of debts being worked in the debt collection center, what percentage or proportion it 

represents of the total agency volume, a description of the center’s use of the various debt collection tools, and

historical portfolio performance.

After debts are referred to a designated collection center, the agency retains responsibility for reporting the debts on 

the Report of Receivables Due from the Public. The agency is also responsible for removing accounts from its

receivables when the designated collection center directs it to write-off the debt. However, at the time the debt is

referred to Treasury for cross-servicing, the agency must discontinue all servicing activities. At that time, the

designated collection center has authority to act in the Government’s best interest to service, collect, compromise,

suspend or terminate collection action in accordance with existing laws under which the debts arise and in

accordance with the letter of agreement with the Agency. 

The cross-servicing process consists of the following: 

• identify accounts selected for cross-servicing,

• monitor accounts at the debt collection center, and

• use an agency authorized to “cross-service.”

Identify Accounts Selected. This activity identifies and refers accounts for cross-servicing based on past collection

history and agency servicing requirements. An automated system should:

• compare delinquent loan account information to statutory criteria to select delinquent loan accounts for

possible referral.

• generate notification to the debtor of the agency’s intent to refer the debt to a debt collection center.

• update the loan information store. 

• identify accounts that can no longer be serviced by agency personnel.

Monitor Accounts Referred to the Debt Collection Center. This activity monitors and periodically reevaluates

accounts referred for cross-servicing.

• identify accounts with monetary adjustments that must be reported to the debt collection center.

60 Guaranateed Loan System Requirements

Treasury Cross-Servicing
• provide ad hoc reporting capability needed to monitor the accounts referred to a debt collection center and

the amounts recovered.

• interface with the core financial system to record receipts remitted to the agency.

• apply collections received from the debt collection center according to agency application rules.

• record collection fees in accordance with agency program requirements.

• process agency or debt collection center refunds, notify debt collection center as appropriate, and update the

loan information store.

• notify debt collection center of adjustments, recalls of debt, or collections received by the agency on the

referred debt.

• remove from the accounting and financial records accounts that the debt collection center recommends

should be written off.

Use an Agency Authorized to Cross-Service. This activity determines the agency’s performance in collecting debts. 

An automated system should:

• identify the volume and type of debts serviced.

• identify the tools used by the agency to collect its own debt.

• provide one or more years of information on the average age of debt over 180 days.

• calculate the amount of debt collected using various collection tools.

• accrue late charges, as required by referring agency.

• provide information to referring agency sufficient for the referring agency to satisfactorily complete the

Report on Receivables Due From the Public.

• track, by portfolio, age of debt referred, dollar and number of referrals, collections on referred debts and

report to Treasury on a monthly basis.

• provide information to referring agency as needed i.e., collections received.

• provide ad hoc reporting capability needed to satisfy referring agencies unique information requests such as,

length of workout agreements, percent of debt that can be compromised, etc.

Internal Management Information Requirements

Listed below are internal management information requirements for the Treasury Cross-Servicing function. This

information should be available to agency credit program managers and designated internal review officials on a

periodic or on an as requested basis. This list is not an all inclusive inventory of internal information requirements

for the Treasury Cross-Servicing function. Each agency must determine the specific management information

needs necessary to manage its credit programs based on the agency mission and applicable statutory requirements. 

Agencies must maintain financial accounting information at appropriate levels of summary for computational and

reporting purposes. The main levels are: 

• transaction, 

• loan history, 

Guaranateed Loan System Requirements 61

Treasury Cross-Servicing
• risk category, 

• cohort, and

• account.

Each agency also must determine whether the information should be provided on hard copy reports or through

system queries.

62 Guaranateed Loan System Requirements

Treasury Cross-Servicing
Other Reporting Requirements

This chapter provides requirements for two types of reporting:

Mandatory (All requirements in this Chapter are Mandatory)

• Transaction History, and 

• External Reporting Requirements.

Transaction History

The guaranteed loan system must be capable of producing a complete transaction history of each loan.

External Reporting Requirements

Agencies’ guaranteed loan systems must be 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. These external reports rely on supplemental financial data resident in the guaranteed loan system, although

they are generated from the general ledger. Appendix C contains a listing of some of the major summary level

reports that must be accommodated. Others are identified in the JFMIP Core Financial System Requirements

document; in a variety of governmentwide and agency specific regulations; and the reporting area is in a

continuous state of change, which means that other reports may be identified, virtually at any point in time by an

authoritative body.

Other system outputs are described in the functional requirements chapters of this document. Examples are: 

letters and invoices to lenders and borrowers, SF-1151’s and SF-1080’s used in Treasury borrowing, Treasury

Report on Receivables (TROR) and delinquent debt information sent to credit bureaus, collection agencies, and

the DOJ.

Guaranteed Loan System Requirements 6 3
Records Retention

Mandatory (All requirements in this Chapter are Mandatory)

All records created within the Federal government may be destroyed only with the approval of the National

Archives and Records Administration (NARA), per 36 CFR 1228. For questions regarding the disposition of

Federal records, please contact:

National Archives and Records Administration

7th Street and Pennnsylvania Avenue NW

Washington, DC 20408

The telephone number for the Life Cycle Management Division is 301/713-7110.

64 Guaranteed Loan System Requirements
Appendix A: References

This appendix displays statutory and regulatory requirements applicable to guaranteed loan programs as shown in

Illustration 27.

65 Guaranteed Loan System Requirements

JFMIP

!

!

!

Framework for 

Federal Financial 

Management 

Systems

Core Financial 

System 

Requirements

Other

Proposed

Legislation

!

!

!

Federal Financial 

Assistance 

Management 

Improvement Act of 

1998

Government Waste, 

Fraud, and Error Act 

of 1998

Other

Acts

!

!

!

!

!

!

!

!

!

!

!

Federal 

Managers’Financial 

Integrity act of 1982

Chief Financial 

Officers Act of 1990

Government 

Management 

Reform Act of 1994

Federal Financial 

Management 

Improvement Act of 

1996

Federal Credit 

Reform Act of 1990

Government 

Performance and 

Results Act of 1993

Debt Collection Act 

of 1982

Debt Collection 

Improvement Act of 

1996

Information 

Technology 

Management 

Reform Act of 1996

Federal Financial 

Management Act of 

1994

Prompt Payment Act

OMB

!

!

!

!

!

!

!

!

Circular A-11, 

Preparation and 

Submission of 

Budget Estimates

Circular A-34, 

Instruction on 

Budget Execution

Circular A-123, 

Management 

Accountability and 

Control

Circular A-127, 

Financial 

Management 

Systems

Circular A-129, 

Policies for Federal 

Credit Programs and 

Non-Tax 

Receivables

Circular A-130, 

Management of 

Federal Information 

Resources

Circular A-134, 

Financial Accounting 

Principles and 

Standards

Bulletin 97-01 (Oct 

96) Form and 

Content of Agency 

Financial Statements

Bulletin 98-08 (Aug 

98) Audits of Federal 

Financial Statements

JFMIP 

Guaranteed Loan

System

Requirements

Illustration 27
Debt Collection Act of 1982 (as amended). The Debt Collection Act prescribes the policies and procedures for

executive agencies in Federal debt collection activities.

Debt Collection Improvement Act of 1996. The Debt Collection Act of 1996 provided several new tools to help

Federal agencies collect delinquent non-tax debt. It centralized many debt collection operations w ithin the

Treasury’s Financial Management Service (FMS) and created a Treasury Offset Program enabling FMS to offset

Federal debts by “withholding” payments to delinquent debtors. In addition the Act:

• required agencies to obtain taxpayer identifying numbers.

• barred agencies from giving financial assistance to those already delinquent on Government debt.

• allowed agencies to establish procedures for garnishing non-Federal wages to recover delinquent debts not in

repayment status.

• required agencies to transfer debts over 180 days delinquent to the Treasury for collection, unless the debts

are in a specified exempt status.

• required Treasury to take action to collect referred debts including referral to another collection center, to

private collection agencies or DOJ.

• allowed agencies to retain fees charged for services from collection and to retain a portion of collections for

improving debt collection activities.

• required agencies to provide debtors all due process rights, including the ability to verify, challenge, and

compromise claims encouraged agencies, when appropriate, to sell delinquent debt.

• required agencies to submit debts for offset.

• simplified salary offset processes, by formally establishing an interagency consortium and allowing agencies to 

make routine adjustments to pay, without using salary offset procedures.

• mandated electronic funds transfer.

Chief Financial Officers Act of 1990 (CFO Act). The CFO Act provides new tools to improve the management of

the Federal Government. It establishes Chief Financial Officers in 23 major executive agencies as well as a new

Deputy Director for Management and a Controller in the Office of Management and Budget. The CFO Act

reinforces the need for and development of Federal accounting standards; supports integration and modernization

of the Government’s financial systems; and requires the preparation of annual audited financial statements.

Government Management Reform Act (GMRA) of 1994/Federal Financial Management Act (FFMA) of 1994 The

GMRA expands the CFO Act and the FMFIA, Title IV of the GMRA, known as The Federal Financial

Management Act, contains the financial management provisions. The FFMA requires the Treasury Department to

prepare each year a Government-wide, consolidated financial statement that the Comptroller General then audits. 

Pursuant to the GMRA, several agencies participated in a pilot program in which they issue accountability reports,

consolidating their reporting under several statutes, including the CFO, Federal Managers’ Financial Integrity

(FMFIA), GPR, Prompt Payment, and Debt Collection Acts. The accountability reports include program and

financial information, such as the audited financial statements and performance measures reflecting performance in

meeting key agency goals, as well as the Government Performance and Results Act of 1993 (GPRA). The GPRA

requires agencies to develop strategic plans, set performance goals, and report annually on actual performance

compared to goals.

Federal Credit Reform Act of 1990. The Federal Credit Reform Act prescribes policies and requirements to achieve 

four objectives: to measure more accurately the costs of Federal credit programs; to place the cos t of credit

programs on a budgetary basis equivalent to other Federal spending; to encourage the delivery of benefits in the

66 Guaranteed Loan System Requirements

Appendix A: References
form most appropriate to the needs of beneficiaries; and to improve the allocation of resources among credit

programs and between credit and other spending programs.

Federal Managers’ Financial Integrity Act (1982). The FMFIA requires that all executive agencies implement,

maintain, and report on internal accounting and administrative controls. These controls must provide reasonable

assurances that (i) obligations and costs comply with applicable law; (ii) funds, property, and other assets are

safeguarded against waste, loss, unauthorized use, or misappropriation; and (iii) revenues and expenditures are

properly recorded and accounted for. Agency heads must annually evaluate and report on the control and financial

systems that protect the integrity of Federal programs. The FMFIA encompasses program, operational, and

administrative areas as well as accounting and financial management. 

OMB Circular A-11, Preparation and Submission of Budget Estimates (updated annually). Circular A-11 sets forth 

the policies and procedures for preparation and submission of agency budget estimates to the Office of

Management and Budget.

OMB Circular A-34 - Instructions on Budget Execution. Credit Apportionment and Budget Execution (October

1991). Circular A-34, sets forth the requirements for apportionment and budget execution for all guarantee loan

programs covered by the Federal Credit Reform Act of 1990.

OMB Circular A-123, Internal Control Systems (June 1995). Circular A-123 prescribes policies and procedures to

be followed by executive departments and agencies in establishing, maintaining, and reporting on the internal

controls in their program and administrative activities.

OMB Circular A-127, Financial Management Systems (July 1993). Circular A-127 sets forth policies for financial

management systems development, operations, and evaluation. The circular establishes specific objectives related to

financial management and accounting.

OMB Circular A-129, Policies for Federal Credit Programs and Non-Tax Receivables (January 1993). Circular

A-129 prescribes policies and procedures for justifying, designing, and managing Federal credit programs and for

collecting non-tax receivables. The circular discusses principles for designing credit programs, including the

preparation and review of legislation and regulations; budgeting for the costs of credit programs and minimizing

unintended costs to the Government; and improving the efficiency and effectiveness of Federal credit programs. It

also sets standards for extending credit, servicing credit and non-tax receivables, and collecting delinquent debt.

OMB Circular A-130, Transmittal Memorandum 3 Management of Federal Information Resources (February

1996). Circular A-130 establishes policies and procedures to be followed by executive departments and agencies in

managing information, information systems, and information technology. The February 1996 revision of the

Circular contains updated guidance in the “Security of Federal Automated Information Resources,” Appendix III,

and makes minor technical revisions to reflect the Paperwork Reduction Act of 1995.

OMB Circular A-134, Financial Accounting Principles and Standards (May 1993). This Circular establishes the

policies and procedures for approving and publishing financial accounting principles and standards. It also

establishes the procedures for OMB review of FASAB statements of accounting principles, standards, or concepts. 

If such a FASAB recommendation is agreed to by the Director of OMB, the Secretary of the Treasury, and the

Comptroller General, the Director of OMB issues a Statement of Federal Financial Accounting Standards (SFFAS).

OMB Bulletin 97-01 (October 1996), and successor bulletins, Form and Content of Agency Financial Statements. 

This Bulletin defines the form and content of the financial statements of the executive agencies. It incorporates the

concepts and standards contained in the Statements of Federal Financial Accounting Concepts (SFFACs) and

Statements of Federal Financial Accounting Standards (SFFASs) recommended by the Federal Accounting

Guaranteed Loan System Requirements 67

Appendix A: References
Standards Advisory Board (FASAB) and approved as of October 1996. This Bulletin explains the financial

accounting of “Direct Loans and Loan Guarantees, Non-Federal Borrowers.”

OMB Bulletin 98-08 (August 1998), Audits of Federal Financial Statements. This Bulletin establishes minimum

requirements for audits of Federal financial statements. The Bulletin’s requirements implement the audit provisions 

of the CFO Act, the GMRA, and the FFMIA.

Statement of Federal Financial Accounting Standards Number 2, Accountinf for Direct Loans and Loan

Guarantees. The Statement provides accounting standards for Federal direct loans and loan guarantees. The

standards require that direct loans obligated and loan guarantees committed after September 30, 1991, be

accounted for on a present value basis. The use of the present value accounting method is consistent with the intent 

of the Federal Credit Reform Act of 1990.

68 Guaranteed Loan System Requirements

Appendix A: References
Appendix B: Glossary

Requirements JFMIP systems requirements are either mandatory or value added. The definitions of these two categories 

are:

Mandatory Mandatory requirements describe what the system must do and consists of the minimum

acceptable functionality necessary to establish a system, or are based on Federal laws and regulations. 

Mandatory requirements are those against which agency heads evaluate their systems to determine

substgantial compliance with systems requirements under the FFMIA. These requirements apply to

existing systems in operation and new systems planned or under development.

Value-addedValue 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 bests

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.

Servicer A financial institution, private service provider, corporation, government cross-servicing organization or

other organization that provides services in support of grants management programs or systems.

Guaranteed Loan System Requirements 69
Appendix C: Examples of External Reporting Requirements

Title Title Purpose Level Frequency Guideline

Apportionment

and

Reapportionment 

Schedule

SF-132

Request for and

status of

apportionments and 

reapportionments

Appropriation/Fund

Account 

Initial/As

required

OMB

Circular 

A-34

Report on Budget 

Execution SF-133

Report on

utilization and

status of budget

resources

Appropriation/Fund

Account 

Monthly/

Final

OMB

Circular 

A-34

Federal Agencies,

Centralized

Trial-Balance

System (FACTS)

Electronic

Reporting

replacement 

of

SF-220

SF-220-1

SF-222

SF-223

Report data for

consolidation from

FACTS into the

U.S. Government

Consolidated

Financial Statement

Appropriation/Fund

Group

Quarterly/

Annually

1 TFM

2-4000

Federal Agencies;

Centralized

Trial-Balance

System (FACTS

II)

Electronic

Reporting

replacement 

of SF-133

and

TFS-2108

Federal Agencies;

Centralized

Trial-Balance

System (FACTS II)

into the U.S.

Government

Consolidated

Financial Statement 

Appropriation/Fund

Group

Quarterly/

Annually

1 TFM

2-4000

Treasury Report

on Receivables TROR

Provides

information for

monitoring status of 

guaranteed loans

Supporting form for

SF-220

Quarterly/

Annually

1 TFM 

2-4000

70 Guaranteed Loan System Requirements
Guaranteed Loan System Requirements 71

Appendix D: Contributors

Joint Financial Management Improvement Program Steering

Committee

Donald Hammond, Chair

Department of the Treasury

Karen Cleary Alderman

Executive Director, JFMIP

William B. Early, Jr.

General Services Administration

Jeffrey C. Steinhoff

U.S. General Accounting Office

J. Gilbert Seaux

Office of Personnel Management

Sheila Conley

Office of Management and Budget

Former Members

Thomas R. Bloom

General Services Administration

Norwood (Woody) Jackson

Office of Management and Budget

Joint Financial Management Improvement Program

Karen Cleary Alderman

Executive Director, JFMIP

Dennis Mitchell

Systems Accountant

Lawrence Kitt

Women’s Executive Leadership Program

Immigration and Naturalization Service

Small Business Administration

Gregory A. Walter (Project Sponsor)

James Phillips (Project Team Leader)

William George

Department of Housing and Urban Development

Victoria L. Bateman

Richard E. Braun

Doretha S. Dabney

Department of Agriculture

Christine Burgess

Department of Education

Frank Ramos

Tony Magro

John Bollinger

John Rabil

Ronald Coats

United States Information Agency

Cameron Weber

Mike Hase

Department of Veterans Affairs

Terry Murphy

Dean Errigo

U.S. General Accounting Office

Robert Gramling

Daniel Blair

Marcia Carlsen

Office of Management and Budget

Jean Holcombe

Andrew Gillen