Federal credit reform act of 1990 pdf

Federal credit assistance supports such private activities as home ownership, postsecondary education, and certain commercial ventures. Treasury securities—expected future cash flows associated with a loan or loan guarantee to a present value at the time of disbursement. Fair-value accounting recognizes market risk—the component of financial risk that remains even after investors have diversified their portfolios as much as possible, and that arises from shifts in current and expected macroeconomic conditions—as a cost to the government.

To incorporate the cost of such risk, fair-value accounting calculates present values using market-based discount rates. Thus, fair-value estimates often imply larger costs to the government for issuing or guaranteeing a loan than do FCRA-based estimates.

Increases in pay for civilian federal workers are indexed to wage and salary increases in the private-sector, as measured by the Employment Cost Index ECI , whereas federal retirement and disability benefits are indexed to price increases as measured by the Consumer Price Index CPI. Department of Labor. Under the terms of the Federal Employees? Pay Comparability Act of P. The annual increases in federal employee pay are based on changes in the cash compensation paid to workers in the private sector, as measured by the ECI.

Under certain circumstances, the President may limit the annual increase in federal pay by executive order. Federal law also requires Social Security benefits and the pensions paid to retired federal employees to be adjusted each year. Congress has linked increases in federal pay to the ECI so that wages for federal employees will remain competitive with wages paid by firms in the private sector.

Congress has linked COLAs for Social Security and federal retirement benefits to the rate of increase in the prices of goods and services in order to protect retirement income from losing purchasing power through the effects of inflation. In general, wage increases reflect both improvements in the productivity of labor and increases in the general level of prices in the economy. Consequently, when measured over long periods of time, wages tend to rise faster than prices.

Because COLAs for retirees do not reflect increases in the productivity of people who are still in the work force, COLAs do not make retirees financially better off. COLAs merely protect retirees from becoming financially worse-off as prices rise over time. Balances of borrowed but undisbursed funds earn interest. Treasury uses the same rate for both the interest paid on borrowed funds and the interest earned on uninvested funds refer to subsection Agencies may carry forward amounts of borrowed but undisbursed funds being held in financing accounts to the next fiscal year only if they are disbursing loans from the cohort.

When the cohort interest rate is reset generally once per cohort after the cohort is 90 percent or more disbursed , agencies must reset the interest rate on any amount carried forward to equal the interest rate applicable to the next fiscal year.

Agencies may use these balances in future years subsequent to the year of the original obligation only to partially finance the disbursement of loans in the same cohort for which the borrowing was originally made. After the agency has disbursed all the loans in the cohort, it must repay Treasury to reduce any balance held in the financing account exceeding needs on the last business day of the fiscal year.

However, if excess funds exist at any time, the agency may make an early repayment of principal. The maturity date for the borrowing from Treasury is based on the time period used in the subsidy calculation, not the contractual term of the agency's or private lender's loan to the borrower.

The period of time used for the subsidy calculation normally exceeds the contractual term of the loan to the borrower. Borrowings from Treasury mature on September 30 of the estimated final year of the cohort.

If the estimated final date of the cohort is other than September 30, the associated borrowing from Treasury matures on the following September When a cohort has finished borrowing to make disbursements, an agency may consolidate all the borrowings from Treasury related to that cohort to obtain a single maturity date.

All borrowings from Treasury should mature on the final year of the cohort; however, if a cohort contains borrowings with multiple maturity dates, the agency can request a consolidation. The agency should send a letter requesting the consolidation to FBB see the Contacts page by the last business day of the fiscal year when the cohort finished disbursing its loans.

The letter must include the balances and maturity dates to be consolidated and the new maturity date for the related borrowings. The new maturity date must remain within the original maturity interval established for the cohort.

An agency may prepay all or part of a borrowing from Treasury without penalty. By October 20 of the current fiscal year, agencies should submit an initial borrowing transaction through the GWA System with their current fiscal year borrowing estimate. They should submit any additional borrowings by the last business day of the month in which they need the funds. All borrowings from Treasury are effective on October 1 of the current fiscal year, regardless of when the agency actually borrowed the funds, except for funds borrowed at the end of the fiscal year to make an annual interest payment.

Borrowings for annual interest payments are effective September For repayments, the effective date equals the date of repayment. All transactions must be "agency certified" by 3 p. When submitting a transaction, the agency must include the following on the Supplemental Worksheet:.

Once the requesting agency has certified a borrowing or repayment transaction, the transaction becomes available for FBB review. FBB reviews the transaction and approves or rejects it based on the accuracy of the data. If the transaction is rejected, it is returned to the agency for correction.

Agencies must use the most current version of the CSC2, available through the OMB contact with primary responsibility for the account, to calculate interest paid to Treasury. Annually, by the last business day of the fiscal year, Treasury requires payment of interest for each financing account through IPAC using Agency Location Code The amount of this transaction must equal the amount that was transmitted through IPAC.

Agencies must audit their accounts and maintain adequate records to support any loan transactions and accrued interest computations submitted to FBB for payment. They should have these records readily available for internal auditors, Treasury, and Government Accountability Office GAO auditors, if necessary. Because agencies earn and pay interest on the fund balance at the same interest rate, there is zero net effect for borrowing early and on an estimated basis.

Agencies should not net the interest earned on uninvested funds against interest expense at yearend. Agencies must report the interest revenue and expense separately. A loan guarantee financing account accumulates uninvested funds as offsetting collections for the following reasons:.

A direct loan financing account accumulates uninvested funds as offsetting collections primarily for two reasons:. Agencies must use the most current version of the CSC2, available through the OMB contact with primary responsibility for the account, to calculate interest earned on uninvested funds.

Treasury processes warrants for definite appropriations of subsidy and administrative expenses enacted by the Congress. The Federal Credit Reform Act of authorizes two different indefinite appropriations.