United States Government Publishing Office publisher pbl distributor dst United States Government Accountability Office Accounting and Information Management Division author aut Government Organization text government publication eng GAOREPORTS Legislative Agency Publications gao legislative 2010-08-12 U.S. Government Printing Office 1997-08-29 monographic deposited born digital 40 p. GA 1.13:AIMD-97-145 https://www.govinfo.gov/app/details/GAOREPORTS-AIMD-97-145 P0b002ee18038309b f:ai97145 DGPO 2010-08-12 2011-03-24 GAOREPORTS-AIMD-97-145 machine generated eng fdlp REPORT GAOREPORTS-AIMD-97-145 AIMD-97-145 Direct loans Government guaranteed loans Financial statements Computer modeling Computer software verification and validation Federal agency accounting systems Accounting procedures Credit Auditing procedures Subsidies OMB Credit Subsidy Model Letter Report AIMD Pursuant to a legislative requirement, GAO reviewed the Office of Management and Budget's (OMB) Credit Management Subsidy Model (CSM), focusing on whether the CSM: (1) conforms with relevant provisions of applicable legislation and accounting standards; (2) provides reliable results; and (3) is maintained and operated under a system of adequate controls. An additional objective was to identify supplemental audit steps that auditors should perform to ensure that federal credit agencies are using the CSM properly. GAO contracted with the independent public accounting firm of Ernst & Young LLP to evaluate OMB's written representations (assertions) about the CSM's capabilities and opine on whether they are fairly stated in all material respects.<p/>GAO noted that: (1) OMB's assertions on the CSM thoroughly explain the CSM's capabilities, limitations, and user agency responsibilities; (2) Ernst & Young concluded that OMB's assertions on the CSM are fairly stated in all material aspects and recommended several steps OMB should take to improve the reliability of CSM results and controls surrounding it; (3) based on GAO's review of Ernst & Young's work, GAO generally concurs with its conclusion and recommendations; (4) the Federal Credit Reform Act of 1990 and related federal accounting standards define the cost (subsidy) of a direct loan or loan guarantee as the estimated long-term cost to the government on a net present value basis at the time when a loan is disbursed; (5) the operation of the CSM conforms with this definition in that the model computes a subsidy cost by calculating the estimated net present value, at the time of loan disbursement, of agency-generated cash flows over the life of the loan; (6) OMB's assertions state that because of several limitations in the CSM's design, the subsidy cost calculated by the CSM may differ from a theoretically precise result; (7) for all but one of the limitations, credit agencies and their auditors can take steps to minimize or eliminate the impact of the limitations on the subsidy cost calculation; (8) the impact on the subsidy cost calculation of the limitation involving the use of nonstandard equations for discounting certain projected cash flows, however, is more difficult to evaluate and cannot be minimized by credit agencies and their auditors; (9) several weaknesses were identified relating to controls surrounding the development, maintenance, and use of the CSM; (10) GAO believes that if OMB implements a validation, verification, and testing approach (VV&T) or similar process, improves documentation, and provides guidance to credit agencies on controlling access to the CSM, the basic control weaknesses identified by Ernst & Young will be addressed; (11) OMB's assertions also state that user agencies are responsible for properly using the CSM; (12) consequently, when obtaining assurance that CSM subsidy cost calculations are correct, auditors will need to ensure that agencies are properly using the CSM; and (13) to help auditors obtain this assurance, GAO identified, with assistance from OMB staff, a series of supplemental audit procedures for auditors to follow when auditing federal credit agencies' financial statements and subsidy cost calculations. https://www.govinfo.gov/content/pkg/GAOREPORTS-AIMD-97-145/html/GAOREPORTS-AIMD-97-145.htm https://www.govinfo.gov/content/pkg/GAOREPORTS-AIMD-97-145/pdf/GAOREPORTS-AIMD-97-145.pdf GAO/AIMD-97-145 https://www.govinfo.gov/app/details/GAOREPORTS-AIMD-97-145 Letter Report GAO/AIMD-97-145; Credit Reform: Review of OMB's Credit Subsidy Model; Direct loans Government guaranteed loans Financial statements Computer modeling Computer software verification and validation Federal agency accounting systems Accounting procedures Credit Auditing procedures Subsidies OMB Credit Subsidy Model