###### FEDERAL CREDIT PROGRAM BASIC ACCOUNTING AND REPORTING GUIDE

**FOR DIRECT LOAN AND LOAN GUARANTEE PROGRAMS WITHOUT COLLATERAL**

**(PRE-CREDIT REFORM)**

###### FEDERAL CREDIT PROGRAM 

**BASIC ACCOUNTING AND REPORTING GUIDE**

**FOR DIRECT LOAN AND LOAN GUARANTEE PROGRAMS WITHOUT COLLATERAL**

**(PRE-CREDIT REFORM)**

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###### 

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**PREPARED BY:**

**GENERAL LEDGER AND ADVISORY BRANCH**

**FISCAL ACCOUNTING OPERATIONS**

**BUREAU OF THE FISCAL SERVICE**

**U.S. DEPARTMENT OF THE TREASURY**

**~~~~**

**Overview**

This guide is designed for those who:

· Formulate and execute Federal credit program budgets, including accounting for assets, liabilities, net position, income, expenses, and budgetary resources; 

· Prepare agency financial statements; 

· Audit the agency financial statements; 

· Manage or provide service to participants in direct loan programs; 

· Design and maintain computer systems for financial programs; 

· Instruct others in basic accounting and reporting for direct loan programs. 

The guide is illustrative, rather than authoritative, and is categorized as “other accounting literature” in the hierarchy of accounting principles for Federal entities.[footnoteRef:1] It supersedes the original and subsequent pre-Credit Reform scenarios. Users may download the guide from the Bureau of the Fiscal Service (Fiscal Service) Web site at **www.fiscal.treasury.gov/fsreports/ref/ussgl/approved_scenarios/approved_scenarios.htm#creditreform.** [1: See OMB Bulletin No. 01-09, dated September 2001, §1.2, p.2.] 

In order to understand and gain the most from this guide, the user should have a working knowledge of the following:

· Budgetary and proprietary accounting, related reporting, and terminology;

· The U. S. Standard General Ledger (USSGL) accounts for basic annual operating appropriations and revolving funds;

· The concepts of Federal credit program accounting and reporting, fund structures, and terminology;

· The Credit Reform Act and other requirements established by the Act.

This guide illustrates accounting and reporting for a Federal credit program with direct loans and loan guarantees obligated prior to October 1, 1991, funded by no-year authority from an appropriation carried forward from September 30, 1990, and offsetting collections. Accounting is based on net realizable value (for direct loans and loan assets) or net expected value (for loan guarantee liabilities).[footnoteRef:2]  [2: Paragraph 40 of Statement of Federal Financial Accounting Standards (SFFAS) No. 2 provides that the accounting may be performed on a present value basis at the discretion of program agencies. Present value accounting is covered in the other three guides in this series.] 

The guide covers common transactions and reports with the focus on transactions unique to Federal credit program accounting. For example, the guide does not present undelivered orders with advances, because they are not unique to credit program accounting. It excludes transactions involving collateral and borrowing and repaying monies from Treasury, since they are covered in separate guides. Users may visit the Fiscal Service Web site at **http://tfm.fiscal.treasury.gov/v1/supplements/ussgl.html******to view other guides.

Transactions are presented over a 1-year period for a fictitious Federal agency with a single direct loan and loan guarantee program, which began operations prior to October 1, 1991.

The transactions covered are:

· Formulation, apportionment, and allotment of the budget;

· Payment of administrative expenses;[footnoteRef:3] [3: The illustration is for payment of administrative expenses without prior obligation through undelivered orders or accounts payable. ] 

· Disbursement for new direct loans and commitment of new loan guarantees;

· Collection of guarantee fees;

· Collection of loan principal and interest on direct loans and defaulted guaranteed loans;

· Payment of interest supplements;

· Payment of default claims;

· Assuming defaulted guaranteed loans and interest for direct collection;

· Modification of direct loan and loan guarantee terms, with resulting transfer of the loans and guarantees to the financing fund;

· Accrual of interest from borrowers;

· Write off of bad debts without receiving collateral;

· Accrual of bad debts expense;

· Transfer of excess funds to Treasury; and

· Closing entries.

The guide illustrates the following yearend agency reports and notes: 

· Balance Sheet;

· Statement of Net Cost;

· Statement of Changes in Net Position;

· Statement of Budgetary Resources;

· SF 133: Report on Budget Execution and Budgetary Resources & Schedule P Budget Program and Financing Schedule;

· Credit Program Footnote.

An SF 132: Apportionment and Reapportionment Schedule, is illustrated at the beginning of the year and is revised once during the year. In addition, Appendix 1 provides a listing of key references.

Except for the Request for Apportionment, which is not subject to Federal generally accepted accounting principles (FEDGAAP), these reports are in compliance with FEDGAAP, as promulgated by the Federal Accounting Standards Advisory Board (FASAB) and the U.S. Office of Management and Budget (OMB). Like the journal entries for the underlying transactions, the reports are illustrative. Agencies may have other ways of formatting their reports that meet the authoritative requirements. The SF 132, which is not required to be audited and published with the audited financial statements, is in compliance with OMB regulations. Agencies must prepare and format the SF 132 as illustrated in this guide, unless an agency has direction from or agreement with OMB to do otherwise.

Direct questions regarding this guide to the General Ledger and Advisory Branch at **https://www.fiscal.treasury.gov/fsreports/ref/ussgl/form-issues.htm**, using the USSGL Issue Form, or to:

Manager, General Ledger and Advisory Branch

Fiscal Accounting Operations

Bureau of the Fiscal Service

200 Third StreetParkersburg, WV 26106

The USSGL Web site also includes a list of USSGL representatives and their telephone numbers.

**CONCEPTUAL FRAMEWORK**

The guide uses USSGL account numbers and, generally, titles. When necessary, the guide expands USSGL account titles, using brackets, to capture specific information required for reporting. For example, brackets are used to capture information to separate administrative expense from interest supplement expense, both of which would be merged into account 610000 if no other designation were made. For administrative expense, “[Administrative Expense]” is included after the title for USSGL account 610000, “Operating Expenses/Program Costs.” In the same manner, for interest supplement expense, “[Interest Supplement Expense]” is included after the title for USSGL account 610000. The USSGL Supplement, Section II, contains definitions for USSGL accounts.

Entries are made in general journal form, using USSGL accounts, and are summarized in trial balances for each year. When necessary, the USSGL accounts are subdivided or otherwise supplemented with more detail to provide the illustrated reporting. The entries made and the method chosen to illustrate the detail provide only one way of accounting. Agencies may have other ways of structuring their ledgers and making journal entries that accomplish the same result. 

**ACCOUNT TABLES**

The following account tables identify the accounts used in the guide to record transactions and prepare reports, and the structure under which they fall. Because the transactions are not comprehensive, the tables do not contain all accounts that agencies may use in their actual agency program. The USSGL Supplement, Section I, contains the complete chart of USSGL accounts.

**SCENARIO**

This section presents transactions, including closing entries, along with interim and yearend trial balances for the fiscal year. Users should note the various caveats provided in prior sections of this guide when reviewing the information.

OMB authorized the agency, which operates under no-year authority, to make direct loans and to guarantee 100 percent of loans and interest for program participants prior to fiscal 1992. Loans and guarantees that were obligated before that date are accounted for in the agency’s liquidating fund, illustrated in this scenario. The agency will pay its costs from the unobligated balance of an existing no-year appropriation and new collections and will return monies in excess of the amount per an agreement with OMB. An authorized agency official will provide blanket allotment authority for all realized resources, as they are realized, up to the amount apportioned by OMB. The agency accounts for loans receivable on its books using net realizable value. It accounts for the loan guarantee liability using the net estimated amount payable. The agency does not use present value accounting. Present value accounting is illustrated in the direct loans, loan guarantee, and foreclosed property guides.

Budgetary and proprietary trial balances at the beginning of the year are shown below. Note that loans and interest receivable are divided into those relating to direct loans and those relating to loan guarantees, to facilitate the separate reporting required.[footnoteRef:5] [5: See OMB Bulletin No. 01-09,  instructions for footnote number 8.] 

During the year, the agency expected to receive collections as follows:

Principal on loans receivable	    $850

Interest on loans receivable  	      150

Ongoing guarantee fees from borrowers	       50

$1,050

The agency expected to make the following disbursements:

Beginning undelivered orders	$    300

Beginning accounts payable    	      100

Administrative expenses	      275

Interest supplements      	        25

Default claims	 1,200

$1,900

Per agreement with OMB, the agency will return to Treasury all cash in excess of $3,030.[footnoteRef:7] The $120 expected to be returned at yearend, is computed as follows: [7: The figure here is arbitrary. OMB Circular No. A-11, Section 185.3(k), provides that agencies must transfer unobligated balances of liquidating fund entities at fiscal yearend to the General Fund of the U.S. Government unless OMB approves otherwise (see Section 51.12).] 

Beginning balance of cash	            $4,000

Anticipated cash receipts                                              1,050

Anticipated cash disbursements	   (1,900)

Expected cash balance at yearend                              $3,150

Cash reserve allowed	  (3,030)

Anticipated cash to be returned to Treasury	$   120 [footnoteRef:8] [8: If a cash deficit were projected instead, the agency may have made up the deficit with either appropriations or borrowing. Accounting for receipt and use of appropriations is covered in the direct loans and loan guarantees guide. Accounting for borrowing is covered in the direct loan guide.] 

**TRANSACTIONS**

An SF-132: Apportionment and Reapportionment Schedule, for this transaction appears below.

**Direct Loan and Loan Guarantee Agency**

The agency received the following collections during the year:

Principal on direct loans receivable	$550

Principal on defaulted guaranteed loans receivable	  250

Interest on direct loans receivable	    90

Interest on defaulted guaranteed loans receivable	    70

Ongoing guarantee fees from borrowers    	    55

****

The agency made the following cash disbursements during the year:

Administrative expenses	$   485

Interest supplements	       25

Direct loans	       10

Accounts payable at beginning of year	     100

Defaults	  1,250

The amount paid for administrative expenses included the $300 of undelivered orders at the beginning of the year (bills for which totaled $300) plus an additional $185.

****

The agency acquired receivables on payment of the default claims in the preceding transaction. The agency’s practice is to separately record the interest and principal as shown below.[footnoteRef:11],[footnoteRef:12] [11: Some agencies will record both the principal and interest as a single amount in USSGL account 135000, “Loans Receivable [Defaulted Guaranteed].” This is appropriate if subsequent interest charges are based on the total amount of principal and interest receivable acquired by virtue of the default payment.]  [12: Though shown separately here for purposes of illustration, the agency could combine the entry for this transaction with the proprietary entry in transaction 5.] 

Loan principal - gross	$800

Loan principal - realizable value	230

Loan interest - gross	450

Loan interest - realizable value	375

****

The agency guaranteed the full amount of principal and interest on a $20 loan disbursed this year by the third-party lender involved. The guarantee had been committed prior to fiscal 1992. In accordance with the terms of the guarantee, the agency charged no guarantee fees.  No entries are required.[footnoteRef:13] [13: Under pre-Credit Reform accounting, the budget recognizes cash inflows and outflows related to loan guarantees when they occur, rather than when guarantees are made. Since there was no cash to or from the Government with this transaction, no budgetary entries are prepared. See OMB Circular No. A-11, Sec. 185.3(k), for further information. It would be possible to make a proprietary entry recognizing the estimated bad debts (default) expense related to the guarantee at this time, but the scenario restates bad debt expense via an adjusting entry at yearend instead. Either method is acceptable.] 

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**Information for Modifications**

The agency obtained approval from OMB to modify the terms of direct loans and loan guarantees. The information was as follows:

The agency modified the terms of $100 of direct loans. The net realizable value was $85, and the net present value was $75. The agency was to sell the loans to the financing fund. All interest on the loans had been paid to date.

The agency modified the terms for $275 of guaranteed loans. The expected value of the liability from guaranteeing the loans was $90, and the present value was $83. The agency transferred the guarantees to the financing fund.[footnoteRef:14] [14: Note that this results in a modification of the loan guarantee liability relating to guaranteed loans that have not defaulted. Defaulted guaranteed loans receivable on the agency’s books are not affected by the modification.] 

The agency prepared a new SF-132, which is illustrated below. 

**Direct Loan and Loan Guarantee Agency**

The agency compiled information for a new SF-132 as shown in the table below, with crosswalks shown in square brackets. 

OMB approved the new SF-132 as requested.

**FINANCIAL STATEMENTS**

**Direct Loan and Loan Guarantee Agency**

**SF 133: Report on Budget Execution and Budgetary Resources & Schedule P Budget Program and Financing Schedule**

**for Fiscal Year Ended September 30, FY-L**

BUDGETARY RESOURCES AVAILABLE FOR OBLIGATION

2140 Unobligated balance carried forward, start of year (420100B) (480100B) (490100B)	$3,600

2440 Unobligated balance carried forward, end of year (445000E) (461000E)	3,030

NEW BUDGETARY AUTHORITY (GROSS), DETAIL

6800 Spending authority from offsetting collections (426100E) (426200E) (426300E) (427600E)	1,090

CHANGE IN OBLIGATED BALANCES 

7240 Obligated balance, start of year (480100B) (490100B)	400

7320 Total outlays (gross) (-) (490200E)	(1,953)

OUTLAYS (GROSS), DETAIL 

8700 Total outlays (490200E)	1,953

**OFFSETS**

8800 Federal sources (427600E)	(75)

8840 Non-Federal sources (426100E) (426200E) (426300E)	(1,015)

8890 Total offsetting collections (cash) (-)	(1,090)

NEW BUDGET AUTHORITY AND OUTLAYS 

8900 Budget authority (net)	(1,090)

9000 Outlays (net)	863

**Quantitative Dollar Information for Credit Program Footnote**

This section sets forth the pertinent detail available from the scenario for the required credit program footnote[footnoteRef:18] and characterizes the loan guarantee liability as being “pre-Credit Reform.” [18: See OMB Bulletin No. 01-09, footnote 8.] 

**~~~~APPENDIX: REFERENCES**

This appendix lists some key references and Web sites for users who want to obtain additional information.

**OFFICE OF MANAGEMENT AND BUDGET**

· OMB Bulletin No. 01-09, *Form and Content of Agency Financial Statements*

· OMB Circular No. A-11, *Preparation, Submission, and Execution of the Budget*

· OMB Credit Model

OMB Publications Office at 202-395-7332

Office of Federal Financial Management 202-395-3993

Web site: **www.whitehouse.gov/omb**

**FEDERAL ACCOUNTING STANDARDS ADVISORY BOARD**

Statement of Federal Financial Accounting Standards (SFFAS)

SFFAS No. 1, *Accounting for**Selected Assets and Liabilities*

SFFAS No. 2, *Accounting for Direct Loans and Loan Guarantees*

SFFAS No. 3, *Accounting for**Inventory and Related Property*

SFFAS No. 7, *Accounting for Revenue and Other Financing Sources* (including related implementation guide) 

SFFAS No. 18, *Amendments to Accounting Standards for Direct and Guaranteed Loans*

SFFAS No. 19, *Technical Amendments to Accounting Standards for Direct and Guaranteed Loans*

Statement of Federal Financial Accounting Concepts No. 2, *Entity and Display* (as amended by SFFAS No. 7)

Accounting and Auditing Policy Committee, Technical Release No. 3: *Preparing and Auditing Direct Loan and Loan Guarantee Subsidies Under the Federal Credit Reform Act*

FASAB Staff at 202-512-7350

Web site: **www.fasab.gov**

**TREASURY BUREAU OF THE FISCAL SERVICE**

· *U.S.  Government Standard General Ledger* (codified in *Treasury Financial Manual*)

· *Budgetary Accounting in the Federal Government*

· Illustrative Scenarios in Accounting for Credit Programs (USSGL Division)

· Present Value Monograph

General Ledger and Advisory Branch (Bureau of the Fiscal Service, Treasury).

Pre-Credit Reform	Page 4 of 34	August 2017

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