Note 7. Loan Receivable

FY 2003 Performance and Accountability Report
Bureau of Resource Management
December 2003
Report

Repatriation Direct Loan Program

Repatriation loan obligations made prior to 1992 and the resulting direct loans are reported net of an allowance for uncollectible loans or estimated losses. The loss allowance estimates amounts that the Department does not expect to recover on loans made prior to 1992. These allowances are based upon historical experience.

The Federal Credit Reform Act governs Repatriation loan obligations made after 1991, and the resulting direct loans. The Act requires that the present value of the subsidy costs (i.e., interest rate differentials, interest subsidies, estimated delinquencies and defaults, fee offsets, and other cash flows) associated with the loans be recognized as a cost in the year the loan is disbursed. An analysis of loans receivable, the nature and amounts of the subsidy, and the administrative costs associated with the loans are summarized below.

Repatriation Loans Obligated Prior to 1992
At September 30, 2003 and 2002
(Dollars in Thousands)
  2003 2002
Loans Receivable Gross $ 400  $ 516 
Interest and Penalty Receivable    87     86 
Allowance for Uncollectible Loans  (463)
single underline
 (572)
single underline
Net Loans Receivable $  24 
double underline
$  30 
double underline

Repatriation Loans Obligated after 1991 (Dollars in Thousands)

Repatriation Loans Obligated after 1991
at September 30, 2003
(Dollars in Thousands)
Fiscal Year Loans
Receivable
Gross
Interest, Penalty
And Administrative
Charges Receivable
Allowance for
Subsidy Cost
Net Present Value
Of Assets Related
To Direct Loans
1992 $  105 $ 42 $  105 $   42
1993    104   17     86     35
1994     71   20     68     23
1995    162   46    143     65
1996    415  187    407    195
1997    416  142    395    163
1998    515   75    464    126
1999    324   29    261     92
2000    254   22    193     83
2001    349   65    277    137
2002    437   53    363    127
2003    443   15    355    103
Total $3,595 $713 $3,117 $1,191

 

Repatriation Loans Obligated after 1991
at September 30, 2002
(Dollars in Thousands)
Fiscal Year Loans
Receivable
Gross
Interest, Penalty
And Administrative
Charges Receivable
Allowance for
Subsidy Cost
Net Present Value
Of Assets Related
To Direct Loans
1992 $  105 $ 34 $   97 $   42
1993    104   19     86     37
1994     79   18     68     29
1995    163   42    143     62
1996    530  214    521    223
1997    445  109    388    166
1998    564   75    447    192
1999    322   33    248    107
2000    312   27    237    102
2001    390   52    310    132
2002    338   27    256    109
Total $3,352 $650 $2,801 $1,201

Total Amount of Direct Loans Disbursed (Post-1991)

In 2003, the Department disbursed approximately $843,000 in repatriation loans. In 2002, it disbursed approximately $710,000.

Subsidy Expense for Post-1991 Repatriation Loans

The subsidy expense for the 2003 and 2002 loan program contains the following components (Dollars in Thousands):

Components of the Subsidy Expense for the 2003 and 2002 Loan Program
(Dollars in Thousands)
  2003 2002
Interest Differential    —    —
Default $674 $568
Fees    —    —
Other    —
single underline
   —
single underline
Total $674
double underline
$568
double underline

Subsidy Rates for Direct loans

The Department uses a subsidy rate of 80%. Because the Department has complied with the provisions of the Debt Collection Improvement Act, it has received collections much higher than anticipated.

Schedule for Reconciling Subsidy Cost Allowance Balances (Dollars in Thousands)

Schedule for Reconciling Subsidy Cost Allowances
(Dollars in Thousands)
  Funds
Beginning balance of the subsidy cost allowance - October 1, 2002 $2,801 
Add: subsidy expense for loans disbursed during 2003    674 
Adjustments    (22)
single underline
Ending balance for the subsidy cost allowance before re-estimates  3,453 
Effect of subsidy re-estimate by component:  

Interest rate re-estimate

     — 

Technical/default re-estimate

  (336)
single underline
Ending balance of the subsidy cost allowance $3,117 
double underline

The above schedule reflects the effect of re-estimates; however, the Department has not performed re-estimates as part of its budget process. The above re-estimates are for financial reporting purposes only, and are more fully described below under the Accounts Payable to Treasury section.

Administrative Expenses

Total administrative expense was approximately $603,000 and $607,000 in 2003 and 2002, respectively.

Accounts Payable to Treasury

The Department estimates a subsidy rate based upon collections of 20%. Over the past several years, however, the actual collection rate has been closer to 40%. As a result, the subsidy allowance established at 80% understated the net credit program receivable. A re-estimate of the subsidy rate will correct this by reducing the amount of subsidy allowance. The Department, however, has not yet completed the re-estimation of the subsidy. For financial reporting purposes, the Department reduced the subsidy allowance by approximately $336,000 in 2003, and established that amount as a payable to Treasury. The total amount payable to Treasury is approximately $5.2 million, which represents the cumulative effect of subsidy re-estimates since 1992. Although the Department has not re-estimated, the subsidy allowance reduction is consistent with the reporting requirements of GAAP.

Accounts payable also includes a payable to Treasury of $789,000 resulting from the collection of Pre-Credit Reform loans.

Borrowings from Treasury
at September 30, 2003 and 2002
(Dollars in Thousands)
  2003 2002
Beginning Balance, October 1 $256 $191
Borrowings, Net of Repayments   92
single underline
  65
single underline
Ending Balance, September 30 $348
double underline
$256
double underline