-“- *I If Il(’ IWO FINANCIAL AUDIT Rural Electrification Administration’s Financial Statements for 1988 and 1987 ,_ 26 HI IIIlllllllla 141569 United States GAO General Accounting Office Washington, D.C. 20648 Accounting and Financial Management Division B-231262 June 13,199O The Honorable Clayton K. Yeutter The Secretary of Agriculture Dear Mr. Secretary: This report presents our opinion on the Rural Electrification Adminis- tration’s (HEX) financial statements for the fiscal year ended Septem- ber 30, 1988. Reports on REA'S internal accounting controls and on its compliance with laws and regulations are also provided. Under authority of the Rural Electrification Act of 1936, as amended, REA makes direct loans and guarantees loans made by other qualified lenders to suppliers of electric and telephone service in rural areas. REA also makes grants and loans for the purpose of promoting rural eco- nomic development and job-creation projects. We contracted with an independent certified public accounting firm to conduct a financial and compliance audit of REA for the year ended Sep- tember 30, 1988. We determined the scope of the audit work; monitored its progress at all key points; reviewed the working papers of the certi- fied public accountants, KPMG Peat Marwick; and performed other pro- cedures as we deemed necessary. Our work also included a review of the loan loss exposure for approximately $3 billion of REA loans and $2 bil- lion of loan guarantees because of the sensitive nature of ongoing negoti- ations between REA and the borrowers. Our examinations were conducted in accordance with generally accepted government auditing standards. In our opinion, and consistent with the opinion of KPMG Peat Marwick, REA'S financial statements present fairly, in all material respects, its financial position as of September 30, 1988, and the results of its opera- tions and cash flows for the year then ended, in conformity with gener- ally accepted accounting principles, Several of REA's major electric program borrowers are experiencing severe financial difficulties due to their participation in the financing of large power plants, some of which are nuclear. REA is involved in litiga- tion with certain of these borrowers. Although REA'S financial state- ments include an estimate of probable future losses associated with these loans, REA is unable to predict their ultimate impact on its finan- cial position. Page1 GAO/AFMD-90-73REA's1988FiiancialStatements B.281262 , We audited the September 30, 1987, financial statements, which are presented for comparative purposes. Our opinion on REA'S fiscal year 1987 statement of financial position was unqualified. However, because 1987 was the first year that REA'S financial statements had been audited, scope limitations with respect to opening balances for net loans receivable precluded us from expressing an opinion on the statements of operations and cash flows. The report by KPMG Peat Marwick on internal accounting controls, with which we concur, discloses four reportable conditions which could adversely affect the organization’s ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. The reportable conditions were that (1) REA'S methodology for estimating its provision for losses on loans and guarantees had not been updated, (2) adequate procedures were lacking for transferring borrower monitoring responsibility from the “workout team,” which resolves loan collection problems with finan- cially troubled borrowers, to operations personnel, (3) REA was inappro- priately continuing to recognize interest revenue on delinquent loans, and (4) REA'S controls to monitor expenditures made through the U.S. Department of Agriculture’s National Finance Center did not provide conclusive assurance that purchase orders and invoices were properly processed. KPMG Peat Marwick reported, and we concur, that the first two conditions are material weaknesses. KPMG Peat Marwick presented recommendations, with which we con- cur, to correct the weaknesses discussed in its report on internal accounting controls. REA has stated that it agrees with the findings and that (1) it has revised the procedures used to estimate its provision for losses on loans and guarantees it has made, (2) documented procedures will be developed to ensure the proper transition of borrowers from the “workout team” to operations personnel, (3) it now fully reserves inter- est accrued on delinquent loans, and (4) steps have been taken to improve controls over expenditures made through the National Finance Center. KPMG Peat Marwick’s report on compliance with laws and regulations, with which we also concur, disclosed nothing to indicate that REA had not complied with such applicable laws and regulations which could have a material effect on the financial statements. However, KPMG Peat Marwick noted two compliance items which should be highlighted. Spe- cifically, REA did not meet the $933,075,000 minimum amount of rural electric loan guarantee commitments authorized for fiscal year 1988 by Page 2 GAO/AFMD-90-73RJL4’s1988Financial Statements . B231262 Public Law 100-202. RElA guaranteed loans totalling $774,672,000, which was the total amount of loans applied for during the year. In addition, because the loan application and grant award process had not been finalized as of September 30,1988, REA did not make loans or grants from the rural economic development subaccount during fiscal year 1988, as required by Public Law 100-203. During the course of its audit, KPMG Peat Marwick also identified sev- eral matters which, although not material to the financial statements, were communicated for REA'S consideration in a separate management letter. We are sending copies of this report to the Director of the Office of Man- agement and Budget, the Secretary of the Treasury, and interested con- gressional committees. Sincerely yours, Donald H. Chapin Assistant Comptroller General Page 3 GAO/AFMD-99-78 REA’s 1988 Financial Statements Contents Letter Auditors’ Opinion Auditors’ Report on Internal Accounting Controls Auditors’ Report on 11 Compliance With Laws and Regulations Financial Statements 13 Statements of Financial Position 13 Statements of Operations 14 Statements of Changes in Equity 16 Statements of Cash Flows 18 Notes to Financial Statements 20 Y Abbreviation REA Rural Electrification Administration Page 4 GAO/AFMD-00-73 l&4’s l@sB FinmcSal Statements Page 6 GAO/AFMD-90-73 REA’e 1988 Fhancial Statements Auditors’ Opinion -Peat Marwick Csrtiflrd Public Accountant8 2001 M. Street. N.W. Washington. DC 20036 The Comptroller General U.S. General Accounting Office The Administrator Rural Electrification Administration: We have audited the accompanying statement of financial position of Rural Electrification Administration as of September 30, 1988, and the related statementa of operations, changes in equity, and cash flows for the year then ended. There financial statements are the responsibility of Rural Electrification Adminietration’r management. Our responsibility is to express an opinion on there financial statements baaed on our audit. We did not audit the loan loss exposure of loans totaling $3,139,004,928 (9 percent of total aerets) which are included in loans receivable in the accompanying financial statemente. Additionally, we did not audit the loss exposure for guaranteed loans totaling $2,349,661,006 (82 percent of total guarantees) that are included in the guaranteed loane which are not reflected on the statement of financial position in the accompanying financial statements. but are disclosed in note l(d). Accordingly, the statement of financial position includes $1,125,158,000 of loan loee allowances and $346,842,000 of accrual for probable losses on guaranteed loans that were audited by other auditors. In addition, the statement of operations includes $492.809.460 of provision for losrer on loans and 666,817,181 of provision for losses on guaranteed loans that were audited by other auditors. The other auditors’ report has been furniehed to us, and our opinion, insofar as it relates to the amounts included for allowance for loan lore and accrual for probable losses on guaranteed loans for the aforaentioned lending arrangementa. is based solely on the report of other auditore. The statement of financial position of Rural Electrification Administration ar of September 30, 1987, prior to restatement as described in note 10, was audited by other auditors whose report dated June 1, 1988 expreeeed an unqualified opinion. The other auditors’ report dated June 1, 1988 did not expreer an opinion on the statements of operations and cash flows for the fircal year ended September 30, 1987 since certain information with reepect to valuation of net loans receivable at October 1, 1986 was not readily available. We also reviewed the adjustments described in note 10 that were applied to rertate the September 30, 1987 financial statement.. In our opinion, such adjustments were appropriate and have been properly applied. Page 0 GAO/AFMD-90-73 REA’s 1988 Financial Statements Auditora’ Opinion I We conducted our audit in accordance with generally accepted auditing standards end - isrued by the Comptroller General of the United Staten. Those standard8 reqkre that we plan and perform the audit to obtain rearonable aeeurance about whether the financial statements are free of material mimetatement. An audit includes examining, on a test balia, evidence eupporting the amount6 and dieclosures in the financial statements. An audit also includes aaseesing the accounting principles used and significant ertimetee made by management, ar well a8 evaluating the overall financial atatement presentation. We believe that our audit and the report of other auditors provide a rearonable basis for our opinion. In our opinion, baaed on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material reepects, the financial porition of Rural Electrification Administration at September 30, 1988, and the rerulte of ite operationr and ite cash flows for the year then ended in conformity with generally accepted accounting principle6 a8 defined in Title 2 of the General Accounting Office’s Policy and Procedure8 Manual for Guidance of Federal Agencies. Ae diecureed in note l(c), esveral of REA’e major electric program borrowers are experiencing severe financial difficultiee relating to their participation in the financing of large power plants, some of which are nuclear. RFA is involved in substantial litigation with certain of these borrowers. The financial statement8 include an ertimate of probable future losses associated with there loana. Eowevar, REA in unable to predict their ultimate impact on REA’e financial position. In addition to this report on our audit of the Rural Electrification Administration’s September 30, 1988 financial etatemants, we are also reporting on our study and evaluation of internal accounting controls and compliance with laws and regulationa. During our audit, we identified matters that do not affect the fair presentation of the financial statements, but nonetheleer warrant management’s attention. We are reporting them separately to the General Accounting Office and the Rural Electrification Administration. June 30, 1989 Y Page 7 GAO/AFMLHBO-73 REA’s 1988 Financial Statementa Auditors’ Report on Internd Accounting Controls 1 M Peat Marwick Cortlfied PublicAccountant1 2001 M. Street. N.W. Washington. DC 20036 The Comptroller General U.S. General Accounting Office The Administrator Rural Electrification Administration: We have audited the financial statements of Rural Electrification Administration (RIM) a# of and for the year ended September 30, 1988, and have iaaued our report thereon dated June 30, 1989. We conducted our audit in accordance with generally accepted auditing atandardr and Oovarnmant iesued by the Comptroller General of the United Staten. Those etandards reluire that we plan and perform the audit to obtain reasonable assurance about whether the financial statement6 are free of material q ieatatement. In planning and performing our audit of the financial statements of RRA for the year ended Eeptember 30, 1988, we performed a study of the internal control rtructure in order to determine our auditing procedures for the purpore of exprerring our opinion on the financial statementr and not to provide armtrance on the internal control structure. The management of RIM is responsible for establishing and maintaining an internal control rtructure. In fulfilling thiB responribility. estimates and judgmenta by management are required to aaaeaa the expected benefit0 and related coata of internal control structure policies and procedures. The objectiver of an internal control structure are to provide management with rearonable, but not abrolute, assurance that aacletr are rafeguarded against form from unauthorized use or dirporition , and that traneactione are executed in accordance with management’r authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principlee. Becauee of inherent limitations in any internal control structure, errore or irregulsritiee may nevertheless occur and not be detected. Aleo, projection of any evaluation of the structure to future periods is subject to the rick that procedures may become inadequate because of changem in conditiona or that the effectivenemo of the design and operation of policiee and procedure@ may deteriorate. Page 8 GAO/APMD-8C-73 PEA’s 1988 Pimamcial Statementa Auditora’ Report on Internal Accounting Controls For the purpose of this report, we have classified the significant internal control structure policies and procedures in the following categories: loan receipt*, loan dirbursements, treasury, and financial reporting. Our study included all of the control categories listed above and it war more limited then would be necearary to exprere an opinion on the internal control l tructure taken ae a whole or on any of the control categories. We noted certain matters involving the internal control structure and its operation that we consider to be reportable conditions under standards ertablished by the American Institute of Certified Public Accountants. Reportable condition@ involve matter0 coming to our attention relating to rignificant deficioncier in the decign or operation of the internal control structure that, in our judgment, could adverrely affect the organization’s ability to record, procers, stamnarica, and report financial data consistent with the arrertionr of management in the financial rtatements. The reportable conditions we noted are ae follows: . RIIA hao not updated ita methodology for ertimating the provision for 108s on loans and guaranteed loans since the early 1970’s. The method presently uoed does not conaider prevailing economic conditione, the quality and quantity of loans in the portfolio, or other relevant factors. In addition, REA relies on limited financial analysis and unaudited financial information for annual evaluation8 of borrowers’ financial statur. Furthermore, RlIA has not developed specific procedures to monitor and evaluate electric borrowerr involved in significant long-term construction; electric borrowers who cannot. by law, pledge their anmet aa loan security; or cable television borrowers. We recoaunend that RI&A revise its method for evaluating the financial condition of its borrowers and the adequacy of the provision for losseo on loans and guaranteed loane. . Formal procedures do not exist for the tranrition of borrower monitoring reoponoibility from the workout team, that resolves loan collection problems with financially troubled borrowera, to the operation@ personnel, once a settlement has been reached on a troubled loan. We recnrmend that important information concerning events that occurred during the workout phase be formally documented and communicated to the operationa personnel who are reoponeible for monitoring the loan. . RRA continuer to accrue intereet on delinquent loans receivable. Accrued interest over which collectibility ie queetionable should be reoerved. We recommend that RRA establish a policy to fully reoerve interant on loans delinquent for more than 90 days. . RRA maintains a log of purchase orders sent to NFC but does not receive reports from NFC indicating that such purchase orders have been processed. Furthermore, copies of invoices sent to the National Finance Center (NFC) for payment are not maintained by REA. Finally, REA does not reconcile reports of invoices paid by NFC to REA’e purchase order log to enable RIM to monitor outstanding purchase order-r. We recommend that REA maintain copieo of all documentation rent to NFC for procersing and that monthly reporte concerning procereing activity be raquerted from NFC and be reconciled to REA’e recordr. In addition. the report of invoices paid by NFC should be used to update RJ!.A’s purchase order log. Y Page 9 GAO/AFMD-90-78 REA’s 1988 Financial Statements r Auditors on Internal Report Accounthg Controls A material weakness in a reportable condition in which the design or operation of the specific internal control structure elements does not reduce to a relatively low level the risk that errors or irregularities in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their asoigned functions. Our coneideration of the internal control structure would not necessarily dieclore all matter0 in the internal control structure that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditionr that are alro considered to be material weaknesses as defined above. We believe the first two conditions reported in the sixth paragraph are material weaknesses as defined in the inmediately previous paragraph. We also noted other mattero involving the internal control structure and its operation that we have reported to the management of REA in a separate letter dated June 30, 1989. This report is intended for the information of RIM and the General Accounting Office. Thio reotriction io not intended to limit the distribution of this report, which is a matter of public record. June 30, 1989 Page 10 GAO/APMD-SO-73 PEA’s 1988 FXnancM Statements Auditors’ Repop~rt on Compliance With Laws and Regulations m Peat Marwick Cwtlflad Public Accountant8 2001 M. Street. NW. Washington. DC 20038 The Comptroller General U.8. General Accounting Office The Administrator Rural Electrification Administration: We have audited the financial statements of the Rural Electrification Administration (REA) as of and for the year ended September 30, 1988, and have issued our report thereon dated June 30, 1989. We conducted our audit in accordance with generally accepted auditing standards and - issued by the Comptroller General of the United 8tatea. Those standards reiuire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material mirrtatement. Compliance with lawn and regulations applicable to RRA is the responsibility of WA’s management. Ao part of obtaining reasonable assurance about whether the financial rtatements are free of material miclotatement, we performed teats of REA’r compliance with certain provisions of the Rural Electrification Act of 1936, ar amended (7 U.S.C. 901-95Ob), aa amended; the Anti-Deficiency Act (31 U.S.C. 1341, 1342, 1511-15171, and the Continuing Appropriations Act for fiscal year 1988 (Public Law 100-202). Bowever, our objective was not to provide an opinion on overall compliance with such laws. The results of our teats indicate that, with respect to the items tested, REA complied, in all material respects, with certain provisions of the laws referred to in the preceding paragraph of this report, and with respect to items not tested, nothing came to our attention that caused us to believe that RRA had not complied, in all material respects, with those lawr. Bowever, we noted two item we believe should be highlighted. l The continuing resolution for fircal year 1988 (Public Law 100-202) provided RM cosrsit to guarantee not less than $933,075,000 nor more than $2,100,615,000 in rural electric guarantee commitments during fiscal year 1988. Sowever, RRA granted guarantees of only $774,672,000 during fiscal year 1988. Our audit tests determined that of the amount of electric Page 11 GAO/APMD-90-73 REA’s 1988 Financial Statementa Auditors’ Report on Compliance With Laws and Regulations guaranteed loano applied for during fiscal year 1988, no amounts were denied. Thus, RRA was not able to obligate the minimum amount available to it for electric guarantee commitments because demand for ouch guarantees fell short of the minimum requirement. l Public Law loo-203 requires that zero interest loans and grants shall be made during each fiscal year to the full extent of the amounts held by the rural economic development subaccount. RIM made no loans or grants from the rural economic development oubeccount during fiscal year 1988 because the grant award process had not been finalired as of September 30, 1988. This report is intended for the information of RICA and the General Accounting Office. The rartriction io not intended to limit the distribution of thie roport, which is a mattor of public record. June 30, 1989 Page 12 GAO/AFMD-9G-79 REA’s 1988 Financial Statements l!?inacid Statements Statwnontr of Flnsncial Position September 30, 1988 and 1987 (Dollars in Thousands) (as %ated) Loans receivable, net of allowance for loan loaser of $1,791,972,000 and $990.400,000 at September 30, 1988 and 1987, respectively (notes 2, 3 and 4) $ 34.497.412 36.390.302 Accrued interest receivable 62,299 130,299 Funda with U.8. Treasury 198,731 83,677 Accountr receivable 6,351 Other arrets -..-A- s-34.612.994 Liabilities: Intragovernmental debt (notes 3 and 4) 31,992,200 34,085,806 Notea payable (note 51 568,778 - Accrual for probable lorsoe on guaranteed loans 367,756 291,841 Accrued interest payable 26,918 20,918 Other liabilities (note 6) 4.0492.922 Total liabilities 32.959.70134.401.487 Equity: Investment of otherr r Clam B stock, $1 par value (note 7) 181,403 165,320 Class C atock, $1,000 par value (note 7) 6,787 2,949 Rortricted capital (note 91 98,268 76,781 Patronage capital earned 36.81033.Q20 Total investment of other@ -278.970 Equity of the U.S. governmentr Unexpended appropriations - undelivered orders 2,758 1,038 Invested capital 1,565 1,559 Donated capital (note 8) 505,950 477,240 Cumulative results of operations (note 10) 968.121-..uuaa Total equity of the U.S. government t.478.394- Total equity 1,801.662 2,211,507 Coreritmentr and contingencies (notes lc and 2) s-36.612.994 See accompanying notes to financial statements. Page 13 GAO/AFMD-88-73 REA’s 1988 Financial Statements Financial Statements Statement8 of Operations Years ended September (Dollars 30, in Thouoands) 1988 and 1987 1 u&a lsz (unaudited - as restated) Interest income: Intereet on loans $ 2.320.264 2.673.089 Interest earned on Funds with U.S. Treasury 27.4757.467 Total intereot income 2,347,739 2.680.556 Interest expense - intereot on borrowings (2.236.414) cLa.2&m) Net interest income 111.325155.828 Provision for losses on: Insured loans (note 2) (801,572) (563,070) Guaranteed loans -.-uuu) (291.841) Total provision for losses (877.487) (854.911) Net interest income after provision for loseeo -.faklm -1 Other income (expenses): Appropriations realized 27,555 25,983 Prepayment penalty income 268 1,442 Other income Other expenses (28.g662) (26,l::) Loas on diacounted loan prepayments (note 11) (299.015) Net other income (expenses) (1.041) (297.706) Net lose $(747.203) (996.789) See accompanying note8 to financial otatsmente. Page 14 GAO/AFMD90-73REA's 1988 Financial Statementa Financial Statement.9 Page 16 GAO/AFMD-90-73 RJU’s 1988 Financial Statements Nnsndal Statements $tatementr of Chanaeo in Eauitv Years ended September 30, 1988 and 1987 (Dollars in Thousands) Restricted Restricted capital - capital - reserve for designated for interest rate Class B Class C contingencies fluctuations stock stock (note 9) (note 9L Pimcal year 1987 balances and transactions (unaudited) : Balance. September 30. 1986 9 149,452 1,730 64,707 Net income ior the year ended September 30, 1987 (as restated - note LO) 1987 appropriations for RTB Stock 1987 appropriations for interest subeidiaa and losses Cash dividends on Class A stock heuanco of Class B stock (net of reaciraions) 2,777 Stock dividends on Class B stock 13,091 Cash dividends on Class C stock ($85 per *hare) Iosuanca of Claoe C stock 1.219 Amount designated for contingencies 12,074 Change in unliquidated obligetions Other Balance, Soptsmber 30, 1987 (as restated) 165.320 2,949 76.781 liacal year 1988 balances and transactions: Ret income for the year ended September 30, 1988 1988 appropriations for RTB stock 1988 appropriations for interest rubridioa and losses Tranafor to reaervo for interoat rate fluctuationa, Jenuary 1. 1988 (98,256) 98,256 Cash dividends paid on Class A stock Iaeunnce of Claea B rtock (net of rescissions) 4,800 Stock dividenda on Class B stock 11,295 Lmuance of Clase C rtock 3,838 Cash dividends on Class C rtock (g85 per share) Clams C rtock cash dividends declared but not pafd ($85 per ehare) Amount dosignatod for contingencioe 21,475 Adjuatmont to Clara B stock dividends (12) Chengo in unliquidatod appropriations Other Balance, September 30, 1988 $181.403 See eccompanying notes to financial statements, Y Page 16 GAO/AF’MD-90-73 REA’s 1988 Financial Statements Flnandal Statements Patronagc Cumulative capital Unexpanded Invested Donated results of earned appropriations capital capital operations Total 25,313 298 1,409 448.530 2.471.216 3.162.655 42,410 (1.039.207) (996,789) 28,710 28,710 21,591 21,591 (9,399) (9.399) 2,777 (13,091) (147) (147) 1,219 (12,074) 740 740 150 150 33,020 1,038 1,559 477,240 1.453.600 2,211,507 47,260 (814,463) (767,203) 28,710 28,710 328,984 328,984 (9,873) (9,873) 4.800 (11,295) 3,838 (251) (251) (576) (576) (21.475) 1,720 1,720 6 6 Page 17 GAO/AFMD-90-73 REA's 1988 Financial Statements Financial Statements Statements of Cash Flows Yearr ended September 30, 1988 and 1987 (Dollars in Thourands) u84 lsz (unaudited - ae restated) Funds from operating activitier; Interert received $ 2,415,739 2,368,479 Intereet paid (2,230,414) (2,518,322) Appropriationr received for operations 29,275 26,723 Appropriationa expended for operations (27,555) (25,983) Adminirtrative expenrer paid and other, net 3.m 1.6X Net fundr provided from (ured by) operating activitier 19o.m (147.427) Fundr from investing activitier: Collectione on loanr 2,805,850 1,798,503 Advancer on loanr (1,712,896) (1.390,438) Overpaymente by borrowere, net of refund8 96 85 Purchase of property and equipment, net (6) 407 Proceeda from maturing invertmentr 128 Net fund6 provided from inventing activities 408 a Fundr from financing activitier: Appropriationr for RTB rtock 28,710 28,710 Repaymente on Federal Financing Bank borrowinga (2,363,320) (1,502,582) Borrowinga from Federal Financing Bank 269,714 19225,041 Proceeds from irruance of notee payable 568,778 Paymente on U.8. trearury borrowingr (32;,773) Borrowings from U.8. treasury 319,774 Proceedr from ieruance of stock 8,638 28.808 Appropriations for intereet eubeidiea and 108ree 328,984 21,591 Dividendr paid (10.124) (9.546) Net fundr provided from (used by) financing actfvitiee aa.lauQ) (213.977) Net increaee in Funds with U.8. Treasury 115,054 47.281 Funde with U.S. Treaaury, beginning of year 83.m 36a Funds with U.8. Trearury, end of year $198,731 83gU (Continued) Page 18 GAO/AFMD-W73 REA’s 1988 Financial Statements Financial Statements (Dollars in Thousands) l23B l.9.8.2 (unaudited - as restated) Reconciliation of net lose to net funds provided from (used by) operating activities: Net lore S(767.203) (996.789) Adjuetments to reconcile net lose to net funds provided from (used by) operating activitiee: Provision for loaner on insured loans 801,572 563,070 Provirion for loerrcs on guaranteed loans 75,915 291,841 Lore on diecounted loan prepayments 299,015 Changer in arsete end liabilities: Decreare (increaee) in accrued interest receivable 68,000 (306,220) (Increase) decrease in accounts receivable 6,326 (325) (Increase) decrease in other assets (530) 2,609 Increare (dkcreaae) in other liabilities 1,127 (1,119) Increase in accrued interest payable 6,000 491 Dividends declared but not paid (577) Total adjuetmente -849.362 Net funds provided from (used by) operating activitiee $190.630 (147.427) See accompanying notee to financial statements. Page 19 GAO/AFMD-90-73 REA’s 1988 Financial Statements Financial Stntementa Note8 to Financial Statement8 (a) Witx The Rural Electrification Administration (RF.A) is a credit agency of the U.8. Department of Agriculture establirhed by the Rural Electrification Act of 1936 to assist in financing electric and telephone organizations serving rural areas. The Rural Electrification Administration maintains one general fund and three revolving funde, including a revolving fund known ae the Rural Telephone Bank, a governnrent corporation, which is combined in these financial rtatementr. The financial statements include all funds for which REA I# rerponeible and are presented on the accrual baoie of accounting as required by Title 2 of the U.S. General Accounting Office’e (GAO) Policy and Procedures Manual for Guidance of Federal Agencier . All significant intra-agency balances and transactions have been eliminated. WA financer ite loan progreme through available receipts and, when necerlary, by long-term and interim borrowings from the U.S. Department of the Treasury and Federal Financing Bank (FFB). (See also note 4.) Revolving fundo were established in the early 19706 to maintain the rural electric and telephone programs with the intention of making them aelf-sustaining. However, R8A receives annual appropriationo for administrative expenditures ae described below; cable televieion progrem loeser; and interest euboidies and losses, which, by law, are not considered incurred for the rural electric and telephone programs. Appropriationr are provided by the Congress on an annual basis to fund capital expenditures, loan lorrer and such administrative expenditure6 se personnel compensation and fringe benefite, rents, connnunicatione and utilitier. The budgetary procarr doer not distinguish between operating and capital expenditures. For budgetary purposes, both are recognized ae a use of budgetary resources; however, for financial reporting purpoees, under accrual accounting, operating expenditures are recognilced currently while expenditures for capital assets are capitalized and recognized as expenreo when they are consuned in REA’s operationr. Financing sources for there expenses, which derive from both current- and prior- year appropriations, are recognized on this same basis. (Continued) Page 20 GAO/AFMD-90-73REA’s 1988Financial Statements Financial Statements 2 Interest income on loans is accrued at the contractual rate on the outstanding principal amount. REA maker inrurcd and guaranteed loans from the Rural Electrification and Telephone Revolving Fund (RETRF). the Rural Telephone Bank (RTB), and the Rural Comnnu&zations Development Fund (RCDF). The RETRF insured loan program authorizes the Administrator of REA to grant loans to rural electric and telephone utilities. These loans are repaid over 35 years with principal amortization generally beginning 3 yeare after the date of the note. Origination fees are not charged. The interest rate on loans made prior to May 11, 1973, was 2 percent. However, since 1973. the interest rate has been 5 percent, although some loanr may still be made at 2 percent in casea involving extreme financial hardship. REA makes certain loans through financing provided by FFB. Al though loana are executed between the borrower and FFB with RM unconditionally guaranteeing repayment , REA makes all decisions concerning loan origination and bears ultimate risk for loan collection. Therefore, loans made through FFB financing are considered to be assets of REA. Interest rates on these loans are determined at the time funds are advanced and are based upon the average U.S. Treasury rate, plur 0.125 percent. FFB loans mature at varying periods between 2 and 7 years, or at 35 years. Loans which mature in 2 to 7 years generally may be extended for 8 maximum of 35 years. Loans made through FFB financing are reflected as loans receivable in the accompanying financial statement8 with a corresponding intergovernmental debt liability. RTB’e insured loan program wae ertablirhed as a supplemental source of financing for the growing capital needs of rural telephone utilities. RTB lends at rates approximately equal to its cost of money. RCDF insured or guaranteed loans to both cooperative and commercial borrowera for community antenna televioion services and facilities. RCDF has not made any new loans since 1981. Loans are carried at the principal amount outstanding less an allowance to reflect their ultimate collectibility. REA bases its loan loes eotimatee on delinquency rates, current economic conditions, borrowera’ credit histories, and borrowers’ financial conditions. (Continued) Page 21 GAO/AFMD-90-73REA’s 1988Financial Statements . Financial Statements 3 Since 1984, several of RIM’s major electric program borrowers are experiencing severe financial difficulties due to their participation in the financing of large power plants, some of which are nuclear. During construction of a number of projects, cost overruns and delays in operation have occurred. In addition, load growth and economic conditions have substantially changed since IlEA’s initial loan review. Where states do not allow construction work-in-progress costs to be considered for the determination of electric rates, the owners cannot obtain rate increasea to meet revenue requirements and debt acrvice payments until the plants become operational. Furthermore, nuclear power has created unrest among consumers, causing substantial difficulty for owners in obtaining a license for the operation of nuclear plants. In some cases, nuclear plants sit idle or are abandoned. Until the plants become operational, no revenue can be generated and, therefore, some borrowers have not met their debt service requirements. A few borrowers have filed for bankruptcy due to their severe financial distress. IlEA is also involved in substantial litigation with a few borrowers who are experiencing severe financial difficulties. MA’s practice of restructuring the debt of its troubled borrowers was considered in developing allowances for loan losses. REA restructuring agreements often incorporate the issuance of additional guarantees as well as the issuance of contingent notes, for which repayment is contingent upon future events, such as sustained load growth. Because of the troubled borrower situations, significant uncertainties exist relating to the ultimate recovery of RtIA’s outstanding exposure in these lending arrangements. The ultimate financial effect of the resolution of these matters cannot presently be determined. In fiscal years 1988 and 1987, RIM increased the allowance for loan losses to more adequately reflect the downward trend in market conditions. In 1987, the increase pertaining to fiscal year 1987 could not be distinguished from amounts pertaining to prior years. Therefore, the full amount of the adjustment was recognized in fiscal year 1987. As of September 30, 1988 and 1987, the allowance for losses account amounted to $1,791.972,000 and $990,400,000, respectively. Additionally, accrued interest on potential problem loans is excluded from income with an offsetting increase in a specific allowance account when management determines such exclusion is warranted. (Continued) Page 22 GAO/AFMD-90-73 WA’s 1988 Financial Statements 4 Financial Statements 4 (d) Cuarantard As of September 30, 1988 and 1987, R8A is contingently liable for $2,868,266,000 and $1,478,357,000 in guaranteed loans, respectively. These guaranteed loans are not included in loans receivable on the accompanying statement of financial position. Estimated losses on anticipated defaults of guaranteed loans are recognized as expenses and a corresponding accrual for probable losses is established. This liability represents the estimated cost of defaults for those guaranteed loans which will not be repaid based on (1) prior delinquency experience and (2) management’s assessment of the borrower’s financial condition. R&A provided an accrual for probable losses on guaranteed loans in fiscal years 1988 and 1987 due to the downward trend in market conditions. (See note l(c) above.) In 1987. the amount of the increase in the accrual pertaining to fiscal year 1987 could not be distinguished from amount8 pertaining to prior years, and the full amount of the adjustment was recognized in fiscal year 1987. As of Eeptember 30, 1988 and 1987, the accrual for probable losses on guaranteed loans amounted to $367,756,000 and $291,841,000, respectively. The change in the accrual for probable losses during fiscal year 1988 represents a $75,915,000 provision for losses as reflected in the accompanying statement of operations. (e) Csrfificatsr of BsnaficialOmrarshiD Certificatea of Beneficial Ownership (CBOs) are RRA-backed securities which represent FFB’s participation in a pool of R8A’s insured loans receivable. The issuance of a CBO is recorded as a borrowing and the corresponding interest is expensed. (f) Vearnsdn the U.S. Treasurv Each of the revolving funds earns interest on its cash held in thb U.S. Treasury if the fund has outstanding borrowings with the U.S. Treasury and owes interest on those borrowings. The amount of interest earned per month is limited to the interest owed on U.S. Treasury borrowings. R&A’s financial activities interact with and are dependent upon those of the federal government as a whole. Thus, REA’s financial rtatementr do not reflect the results of all financial decisions and activities applicable to REA’s operations, as if it were a stand-alone entity. (Continued) Page 23 GAO/AFMD-90-73 REA’s 1988 Financial Statements . Pinancial Statements 5 RIM’s financial rtatements are not intended to report the agency’s proportionate share of the federal deficit or of public borrowing, including interest thereon. Financing for budget appropriations reported on REA’s statements of operations and changes in cash flows could derive from tax revenues or public borrowing or both; the ultimate source of this financing, whether it be tax revenues or public borrowing, has not been specifically allocated to REA. During fiscal year 1988 and 1987, the majority of REA’s employees participated in the contributory Civil Service Retirement System (CSRS) or Federal Employees Retirement System (FERS), to which REA made matching contributions. Such contributions are recognized as expenres in the statements of operations. Bowever, REA does not report CSRE and FER8 assets, accumulated plan benefits, or unfunded liabilities, if any, applicable to its employees since this data is only reported in total by the Office of Personnel Management. REA is an instrumentality of the United States and, as such, is not subject to income taxes. Certain amounts for 1987 have been reclassified to conform to the current year presentation. As of Beptembar 30, 1988 and 1987, loans receivable and the allowance for loan losses amounted to (dollars in thousands); 1988 1987 Loan Net Loan Net tlllmmLAllDnancsrsceivablaamount:Bllonanceraceivebla RETRF: Insured $ 15.638.295 572,117 15.066.178 14,741,580 109,246 14,632,334 FFB 19.219,423 1,209.619 18.009,804 21,173,537 874,359 20,299,178 RTB 1.413,411 5,512 1,407,899 1.446.603 5,295 1,441,308 RCDF -4.724 13.531-1.50017.482 Total 8 36.289.384 L.791.972-37.380.702p9o.4oo36.390.302 Because RM does not maintain amortization tables on loans receivable, the amount of loans receivable scheduled for collection in each of the next 5 years is not available. (Continued1 Page 24 GAO/AFMD-30-73 REA’s 1933 Financial Statements . * FInanclal Statements 6 The activity in the allowance for loan losses for the fiscal years ended September 36, 1988 and 1987, is as follows (dollars in thousands-): iiiis%s BTBBCPE Beginning balance October 1, 1986 $ 35,926 385,000 4,904 2,205 428,035 Loans written off, net (694) (694) Provisions for loan losses 73,320 489,359 391 563,070 Recoveries A A -ill) (11) Ending balance September 30, 1987 109,246 874,359 5,295 1.500 990,400 Loan0 written off, net Provisions for loan lorrer 462,871 335,260 217 3,224 801,572 Recoverier L 2: Ending balancr Beptamber 30, 1988 $ 572.117 AJ.aQuuuu As of 8eptembrr 30, 1988, loans that have been authorised but not yet disbursed conrirt of (dollars in thousands): RETRF $ 7,205,861 RTB 688,174 RCDF $2.895.394 The following preoents a rummclry of loans receivable on which the accrual of interest has been discontinued because circumstances indicate collection is doubtful (dollars in thourands): Aggregate nonaccruing loans $2.564.642 - Grow intorest income that would have been recorded during the year on nonaccrual loans $213.080 - (Continued) Page 26 GAO/AF’MD-90-73 REA’s 1988 Financial Statement8 FlnancLal Statements 7 The following prerente a runmary of loano receivable on which the loan tarme have been rertructurrd to provide a reduction or deferral of interert and/or principal because of a deterioration in the financial position of the borrower (dollars in thousands): Outrtanding balance of restructured loana $2.440.5682.393.416 Crorr interert income that would have been recorded during the year if the reetructurad loanr had been current in accordance with their original termo S-154.370 Interest actunlly recorded on rsetructursd loana during the year $112.207123.913 Cormnitmentr for additional fund8 to borrowers with restructured loans at September 30, 1988 amounted to approximately $3,4139,000. REA originate0 certain electric and telephone loans at 2 percent and 5 percent. There rtated rate8 were below the U.S. Treasury rates, the rates at which REA could borrow money when the lonnr were originated (market interest reten). In addition, reveral loans receivable have undergone troubled debt rertructuringr which rerulted in restructured loans with interert retea below the market interest rates. To offeet the costs of lending at below-market interart ratea, REA has certain noninterest-bearing borrowingr from the U.S. Trerrury. Federal accounting principlea governing the recording of interest rate rubridirr and diacountr on below market interest rate receivables and liabilitirr are undergoing reexamination by the Congress, the Executive Branch, and the GAO. The prermt interpretation of these matters by GAO ir thet dirclorure of the effectr of interest rate rubeidiee and discounts on below market interert rate receivableo and liabilities is required but need not be recorded in the financial l tatemente. Accordingly, REA has not recognized the tort of interest rate rubsidier or discounts on loan8 receivable originated at below-market interest rates or noninterert-bearing borrowings in the accompanying financial etatements. (Continued) Page 20 GAO/AFMLMW73 RJZA’s 1988 Financial Statements Flnenclel Statements s The eetinated effect of recognizing the interart rate subsidies end dircounta on below-market intereot rete loans receivable end noninterest-beering borrowing0 on RlU’o financial atetemente as of September 30, 1988, aaeuming borrower repayment according to the terms of the loen, would be aa follow; (dollars in*thoueende)r t of v Loana, iseued et market rates t 18.709.254 Loenm, iaeued et 2%, 5%. or which have been rertructured Loene receivable, 81 preseutly recorded, net of allowance for loan loeees 34,497,412 Interest rate rubridy discount -1 Loene receivable, net of allowance for loan losaea, no edjurted for interest rete aubridy 29.978.303 Accrued intereat receivable, Fundr with U.S. Treasury, eccounte receivable end other aerate 263a Tote1 eeeete. 8~ adjusted for interert rate rubsidy $30.242.254 (Continued) Page 27 GAO/AFMD-80-73 REA’s 1988 Financial Statements FinemAd Statements 9 Liabilitteo: Intragovexnmental debt: FPB $ 23,344,091 RETRP Treerury borrowings 7,864,743 Other Treasury borrowings Intragovernmentsl debt 31,992,200 Discount on U.S. Trearury borrowingo L3.648.187) Intregovemmental debt, net of discount 28,344.013 Notee payebla. accrual for probable loseea on guarenteed loene, accrued interert payable end other liabilitiee 967.m Total liebilitier, net of discount Equity: Invertment of other-9 323368 Equity of the U.S. government, 81 prerently recorded 1,478,394 Prior period effect of recording interert rate rubridy dircount and discount on U.S. Treasury borrowing@ (885,172) Current yeer impect of recording interert rate rubridy dircount end dircount on U.S. Trearury borrowingr 14.25Q Equity of the U.S. government, net of diecounte 607.&Q Total equity, net of dircount 930&Q Tote1 liebilitier end equity, net of dircount $30.242.254 (Continued) Page 28 GAO/AFMD-90-73 BEA’s 1988 FInancid Statements Financial Statements 10 Net loss, es presently recorded $ cLcaz!Z) Interest income - emortization of interest rate subsidy discount 194,078 Interest expense - amortization of discount on U.S. Treasury borrowings (143,657) Interest rete subsidy to borrowers - issuance of new loena in 1988 (36.121) Net increase in income due to imputed interest Net loss, es adjusted for imputed interest $ G!zGw If the $4,519,109,000 unamortized interest rate subsidy on loans receivable were reported on the statement of financial position, then the ellowance for losses on loans would be established based on the discounted loenr receivable. It is estimeted that the allowance for losses would be reduced by en ismaterial amount, end, therefore, has not been reflected in the effects on the financial statements showo above. (Continued) Pa@ 29 GAO/AFMD-90-73 REA’s 1988 Financial Statements Financial Statements 11 (4) Intrapovernmantal As of September 30, 1988 and 1987, REA borrowings consist of the following (dollars in thousands): FFB Borrowings: Direct loans made through FFB financing $ 19,204,884 21,196,490 Certificetes of Beneficial Ownership (CBOe) 4.139.2074.241.207 23.344.09125.437.697 Treasury borrowings: RETRF, due 613011993 - 12/31/2016, noninterest bearing 7,864,743 7,064,743 RTB, due 613012024 - 673072036. interest accrues et 7.25 percent - 14.625 percent 758,762 758,762 RCDF, due 973072016 - 973072021, interest eccrues et 10.5 percent - 15.14 percent 24.6& 8.64u REA borrows funds from FFB to finance certain loans. These loans serve es collateral for the FFB borrowingr. FFB borrowinga beer interest et rater ranging from 6.197 percent to 15.128 percent end meture es the related loans receivable become due, through 2023. Interest rates on the related loans receivable are equal to the interest rate8 on FFB borrowings. Because FFB borrowings mature as the related loans receivable become due, end amortization tables on loans receivable ere not qeinteined, the amount of intergovernmental debt payable in each of the next 5 years is not available. In 1987, the method of recording CBOs was changed to conform with generally accepted accounting principles for federal agencies, which requires the issuance of CBOs to be recorded as a borrowing end corresponding interest to be expenred. R8A has CBOs with maturity dates rsnging from December 31, 1988 to March 31, 2016. Interest rates on CBOs very from 7.664 percent to 15.325 percent. (Continued) Page 30 GAO/APMD-88.73 REA’s 1888 Plnftnclal Statement8 . Y Financial Statements 12 (5) N.o..Pavsble In conjunction with the restructuring of several loans receivable during fiscal year 1988, RRA assumed notes payable totaling $568,778,000 with interest rater which range from 8.1775 percent to 10.7825 percent, maturing through the yeer 2017. Principal payments on notes payable are due as follows (in thousands): Yeer ending September 30; 1989 $ 2,451 1990 3,819 1991 4,553 1992 5,061 1993 5,643 Thereafter 547.251 Total $558.778 (6) & Included in other liabilities at September 30, 1988 is $403,991 relating to the rural economic development subaccount, This subaccount was established by R8A under the authority of Public Law loo-203 Section 1403 (December 22, 1987) end is credited on e monthly basis with e portion of the interest IlEA eerns on cushion of credit payments made to REA after October 1, 1987. REA is authorieed to provide grants or zero interest loans to borrowers under this Act for the purpose of promoting rural economic development end job creation projects, including funding for project feasibility studies, etart-up costs, incubator projects, end other reasonable exponseo for the purpooe of fostering rural development. The law further requires that such loene end grants shell be made during each fiscal year to the full extent of the amounts held by the rural economic development subaccount, subject only to limitations as may be from time-to-time imposed by law. As of September 30, 1988, RRA has not extended any loans or granta under this program because the grant-awarding process has not been finalized. (7) -a - cia&dBack - Rural Class B stock is issued only to loan customers of RTB and is voting stock. Each customer is required to purchase such stock in the amount of 5 percent of the approved loan amount for construction purposes. RTB may not pey cash dividends on Class B stock, but holders are entitled to patronage refunds in the form of Class B stock dividends calculated at a specified percentage of interest income on loans to Class B stockholders, approved each year by the RTB Board (10 percent in 1988 and 12 percent in 1987). (Continued) Page 31 GAO/AFMD-90-73 REA’s 1988 Fincial Statements I. Financial Statements 13 Class B stock is nontransferable, except in connection with the assumption by the transferee with the approval of the Rural Telephone Bank Governor of all or part of the transferor’s loan from RTB. A borrower, upon retiring debt with RTB, may exchange Clase B stock for Class C stock. Otherwise, the borrower retains possession. Class B stock can be redeemed only after all sharer of Class A stock, which ia nonvoting RTB stock owned by the government, have been redeemed and retired. Class A stock is to be redeemed and retired by RTB as soon as practicable after September 30, 1995, but not to the extent that RTB’s Board determines that such retirement will impair operations of RTB. (See note 8 for further details on Class A stock.) Subscriptions receivable for Class B stock are not reflected in the accompanying financial statements. When RTB makes the first advance under each loan, it issues the stock applicable to the total loan and charges loans receivable for the full amount of the Class B stock. In the event of rescission of part of the loan commitment subsequent to issuance of the stock, RTB rescinds the applicable portion of Class B stock and reduces loans receivable. Subscriptions receivable amounted to $18,036,000 and $26.456.000 for the fiscal years ended September 30. 1988 and 1987. The number of shares of Class B stock issued and outstanding at September 30, 1988 and 1987 was 181,403.OOO and 165,320,000, respectively. Class C stock is issued only to RTB borrowers, or to corporations and public entities eligible to borrow from RTB under Section 408 of the Act, or by organizations controlled by such borrowers, corporations, and public entities, and is voting stock. RTB may pay dividends on Class C stock (8.5 percent in 1988 and 1987). The number of share8 of Class C stock issued and outstanding as of September 30, 1988 and 1987 was 6,787 and 2,949, respectively. (8) Dclnatcd Public Laws 92-12 and 97-98 authorize the Congress, beginning in fiscal year 1971 through 1991, to appropriate no more than $30 million per year to R8A for the purchase of RTB Class A stock. The laws contemplate that the Congress will continue to annually appropriate funds until such purchases equal $600,000,000. During each of fiscal years 1988 and 1987, RSA received $28,710,000 in donated capital. As of September 30, 1988 and 1987 donated capital amounted to $505,950,000 and $477,240,000. RTB Class A stock has been eliminated in combination. (Continued) Page 32 GAO/AFMD-80-73 REA’s 1988 Financial Statements Flnanclal Statements 14 (9) Rssfrictsd - Rural Prior to the passage of the Omnibus Reconciliation Act of 1987, passed on December 22, 1987, not less than 10 percent of the patronage capital of RTB for each f ircal year, as determined by the RTB Board of Directors, was designated to be placed in a contingency reserve. The new law required that the contingency reserve be transferred to a reserve for interert rate fluctuations. At September 30, 1988 and 1987, restricted capital was $98.268.000 and $76,781,000, respectively. (10) Priar RM restructured several loans with effective restructuring dates prior to September 30, 1987. Certain activity relating to these restructured loans was improperly recorded in the prior period. RFA has recorded adjustments to reflect the proper loan receivable balances for these loans as of September 30, 1987. The net result of these adjustments on the accompanying financial statements was a $40,488,000 decrease of loans receivable and a corresponding decrease of cumulative results of operations as of September 30, 1987. (11) Loss on - Public Law 99-509 allowed borrowers of RETRF insured loans to prepay such loans during fiscal year 1987 at the lesser of the outstanding principal balance due on the loan or the loan’s present value discounted from the face value at maturity at the rate oet by the Administrator. REA sustained losses on the prepayments of these loans during fiscal year 1987 of $299,015,000. Section 1401 of the Cmnibus Reconciliation Act of 1987 (Public Law 100-203) and 8ection 1011 of the Omnibus Reconciliation Act of 1986 (7 U.S.C 936(a)) required RBA to accept certain FFB-financed loan prepayments at book value without prepayment penalties during fiscal year8 1988 and 1987. Likewise, RBA was allowed to prepay FFB borrowings, used to finance these loans, without prepayment penalty. Total waived prepayment penal tie6 amounted to approximately $450,000,000 and $161,000,000 in fiscal yearn 1988 and 1987. respectively. The amount of prepaid FFB loanr approximated $2,000,000,000 and $580,000,000 in 1988 and 1987, respectively. (Continued) Page 33 GAO/AFMD-8873 REA’s 1988 Financial Statements Financial Statements 15 (13) Subssausnt On March 30, 1989, the RTB Board ‘of Directors amended the Bylaws of the RTB regarding the allocation of patronage capital for fiscal years after 1987. Any amounts in the reserve for interest rate fluctuations clasrif ied as restricted capital on the accompanying statement of financial position (see note 9). in excess of $10,000,000 shall be allocated ao Class B stock dividends to those borrowers holding Class B stock during the fiscal year the amounts were earned. (14) Bn to Bw The following schedule reconciles total expense as reported in the accompanying Combined Statements of Operations, with negative outlays as reported in the Office of Management and Budget Report, SF-133, “Report on Budget &ecution,” for the year ended September 30, 1988 (dollars in thousands ) : Total expensesr Interest expense $ 2.236.414 Provision for loeses 877,487 Other expenses S$3.142.267 Budgetary outlays not included as expensea: Loans made 1,712,896 Dividends paid 10,124 Other 530 1.723.950 Items not requiring outlays: Provirion for lorees (877,487) Decrease in accounta receivable (6,326) Increase in accounts payable and other liabilities (1,127) Excess of interest accrued on borrowing6 over interest paid (6,000) Other ..(1.509) -1 Offsetting collections credited: Interest received (2.415.739) Loan collections “my; Proceeds from issuance of stock , Appropriations for interest subsidies and losses (328.984) Proceedr from note payable (568,778) Prepayment premiums received Other income ‘2i82; Overpayments by borrowers, net of refunds (96) &i&hXd) Net receipts (negative outlays) $ GLu4.487) (017108) Page 34 GAO/AFMD-90-73 REA’s 1988 Financial Statements .---- ~.--.- l_l, ._.___-_-_____-__. -_---.-_ ._.--..__.- -..-.--.-- “. .^ ..-.-..----- ____.-I-.. --- ‘I’ht~rt~ is a 25”~ discorrnl, on orders for 100 or more copiw mailtd to a singha acldrt*ss.
Financial Audit: Rural Electrification Administration's Financial Statements for 1988 and 1987
Published by the Government Accountability Office on 1990-06-13.
Below is a raw (and likely hideous) rendition of the original report. (PDF)