oversight

Guaranteed Loan System Checklist: Systems Reviewed Under the Federal Financial Management Improvement Act of 1996 (Exposure Draft)

Published by the Government Accountability Office on 1997-12-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                     .,                                             ,,
                                                                             I




                          United States General Accounting Office            I   1

GAO                       Financial    Management          Series            I




December 1997             Guaranteed Loan
                          System Checklist

                          Systems Reviewed Under the Federal
                          Financial Management Improvement
                          Act of 1996




                          Exposure      Draft




GAO/AIMD-98-21.2.7




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PREFACE

The Federal Financial ,MIagem*ent hnprovement      ,,a”...-.,
                                                         _‘.I6’k,.‘“’
                                                                   ”.,,,Act‘, ,.“,l>*‘./..
                                                                       ;~.‘,     (FFMIA)
                                                                                    ~._
                                                                                     ..,.    of--.-..-,--__!
                                                                                       pI_,__,--  1996 requires, among
other things, that agencies implement and mamtam management systems that comply
with federal financial management systems requirements. These requirements are
detailed in the Financial Management Systems Requirements series issued by the Joint
l!&ncilMI~agement           Improvement
                / -“--‘r--U:dii.~
                            I,...
                               4-..*.IY
                                    _,_,        Program
                                       ;l~~-?,.ir*.n.i.,ni-r
                                                  “d:,*;~&~,&ir (JFMIP)
                                                                 , Ij.,_‘+.i .I..?and in the Office of Man&$%&t
                                                             j._._.
and Budget (OMB) guidance referred to m those documents.

To help agencies review their financial management systems and assist auditors with their
responsibilities under FFMIA,l we have developed eight checklists, which we are issuing
concurrently for comment as exposure drafts. Seven of the checklists reflect the system
requirements defined by JFMIP. The eighth checklist, based on the JFMIP framework
document, describes a single integrated financial management system and is primarily a
reference tool rather than a standard-setting document.

As more system requirements are issued, we intend to develop additional checklists.
When these checklists are issued in final form, they will be available on the Internet on
GAO’s Home Page (www.gao.gov).

Additional copies of the exposure draft of this checklist can be obtained from Room 1100,
700 4th St. NW, U.S. General Accounting Office, Washington, D.C. 20548, or.by calling
(202) 512-6000. Please send comments by February 28, 1998 to Robert W. Gramling,
Director, Corporate Audits and Standards, Accounting and Information Management
Division, at

                               U.S. General Accounting Office
                               441 G Street NW, Room 5089
                               Washington, DC 20548




Assistant Comptroller General
Accounting and Information Management Division




‘The final form of this checklist will be included in GAO’s Financial Audit Manual.

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        Page 2   GAO/AIMD-98-21.2.7   - Proposed Guaranteed   Loan Checklist   (12/97)
CONTENTS


Preface                                                                                                  1

Overview                                                                                                 3
  Authoritative Guidance                                                                                 3
  How to Use This Checklist                                                                              3
  Agency System Architecture                                                                             5

Requirements Checklist                                                                               9
  Lender Management Function                                                                        11
  Guarantee Extension and Maintenance Function                                                      19
  Portfolio Management Function                                                                     29
  Acquired Loan Servicing Function                                                                  36
  Delinquent Debt Collection Function                                                               44




  Abbreviations

  CAM%       credit alert interactive voice response system
  CCLR       claims collection litigation report
  DOJ        Department of Justice
  FFMIA      Federal Financial Management Improvement Act of 1996
  JFMIP      Joint Financial Management Improvement Program
  OGC        office of general counsel
  OMB        Office of Management and Budget




                                                                                                             I-



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Pagk 3                            GAO/AIMD-98-21.2.7   - Proposed Guaranteed   Loan Checklist   (U/97)
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                                                                          ,,i


OVERVIEW


The Federal Financial Management Improvement Act (FFMLA) of 1996, requires, ,among
other things, that agencies implement and maintain financial management systems that
comply with federal financial management systems requirements. These system
requirements are detailed in the Financial Management Systems Requirements series
issued by the Joint Financial Management Improvement Program (JFMIP)~ and Office of
Management and Budget .(OMB                       7, ‘Financial Management Svstems.: The
JFMIP requirements docume                         framework for financial management’ .:
systems, (2) core ~financial ‘systems requirements, and (3) 16 other systems, supporting
agency operations. Figure 1 illustrates how‘ these elements fit together in an agency
systems architecture.                       ‘,I’,            ,’

Figure 1: Agencv Svstems Architecture                                                    :

                                                                                                    ‘.




                                               Guaranteed \       i&n’


                   /        Benefit Paymentr



     I/        I   Insurance Claim
     II   ,I           Svstem                  ‘I   Fllli




Source: JFMIP Federal Financial Management System Requirements documents.

Page 5    ~                                                 GAO/AIMD-98-21.2.7   - Proposed   Guaranteed   Loan Checklist   (12/97)
 To date, JFMIP has issued the framework and core,documents                     and 6, of the. 16,systems
 identified in the architecture.2

 GAC is issuing this and seven other checklists that correspondto the JFMIP documents
 as part of its Financial Management Series. GAO will issue other checklists as additional
 systems requirements are defined.
                                               ‘.
                                                                                                    ,.
 Authoritative      Guidance          ‘: ‘,                                1.
             * 8,              I’.,,...,.      /;:     I1   ,I:’
   OMB Circular A-127, and, .G$Q:‘s ~Imnlementation Guidance for the ,Federal Financial.
  .Management Imnrovement Act ~FFM&)~ of.,*1996 issued ,September 9, 1997, provide the
   basis for assessing c,ompliance with the:Fj’MIAreqmrement   fo.r agencie,s to ,implement
,,’and maintain financial. management, systems that comply substantially vvith, federal
   requirements. 0M:B’s September 1997 implementation’ guidance, identifies various criteria
   that an agency must meet to be in substantial compliance with these requirements.

 The source of all the questions in this checklist is the ,.Joint Financial Management
 Imnrovement Program Federal Financial Management Svstem Reauirements Guaranteed
 Loan Svstem Reauirements (FFMRS-6, December 1993).

 Purpose      of This Guide     and Hovri’to         Use It ‘i

 The purpose of this ‘document is to provide a checklist to assist (1) agencies in
 implementing and monitoring their’ systems and (2) ‘management and auditors in
 reviewing the systems to determine ,if they are in substantial compliance with FFMIA.
 The checklist, the JFMIP source document,“and the two previously mentioned OMB
 documents (Circular A-127 and the September 9, 1997,implementation guidance) should
 be used concurrently by experienced staff.,

 OMB’s 1997 implementation guidance provides indicators for chief financial officers and
 inspector generals to assist them in determining whether the agency’s financial
 management systems substantially comply with federal ‘financial management ‘systems
 requirements. Filling out this checklist will allow agencies to systematically determine
 whether specific systems requirements are being met. Agencies can assess the
 significance of any noncompliances in determining substantial compliance by considering
 the “indicators” in OMB’s 1997, implementation guidance. For example, the annual agency
 assurance statement issued pursuant to section 4 of the Federal Managers’ Financial


2Thus far, the series includes the (1) Framework for Federal Financial Management
@stems, (2) Core Financial Svstem Reauirements, (3) Inventorv Svstem Reauirements, (4)                                i-
Seized/Forfeited Asset Svstem Reauirements, (5) Direct Loan Svstem Reauirements, (6)
Guaranteed Loan Svstem Reauirements, (7) Travel Svstem Reauirements, (8) and                                          t

                                                                                                                      L
Personnel-Pavroll Svstem Reauirements.

Page 6                                        GAO/AIMD-98-21.2.7   - Proposed Guaranteed   Loan Checklist   (12/97)
Integrity Act is one of those indicators. Agencies can use GAO’s checklists to help
determine annual compliance with the section 4 requirement.

The following Guaranteed Loan System Requirements section contains a brief narrative
followed by the checklist, which is organized by ,functions contained in the source JFMIP
document.

In the checklist, two columns follow each question. Use the first column to answer each
question “Yes, ‘I “No,” or “NA.” Use the second column to explain your answer. A “Yes”
answer should.indicate that the agency’s system or systems provide for the capability
described in the question. For each “Yes” answer, briefly describe how the system(s)
contain’the capability and refer to a source that explains or shows the capability.

A “No” anstier.indicates that the capability does not exist. For a “No” answer, the second
column should provide an explanation and a reference to the supporting documentation.
Such explanations could include the following: (1) The agency is working on modifying
or implementing its system(s) to have the capability available in subsequent years. (2)
Management ,believes the capability is not cost effective and will not enhance the systems’
ability to manage operations. Refer to any cost-benefit studies that support such
explanation. If there are none, provide a full explanation.

Not every guide may apply to an agency. Further, while a guide may be applicable to an
agency, certain questions within the guide may not be applicable. Answer such
nonapplicable question(s) with an “NA” and provide an appropriate explanation in the
second column.




Page 7                             GAOKMD-98-21.2.7   - Proposed Guaranteed   Loan Checklist   (E/97)
   :




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Page 8   GAO/AIMD-98-21.2.7             - Proposed Guaranteed                                      Loan Checklist   (12/97)
GUARANTEED-LOAN                 SYSTEM        REQUIREMENTS                                      :’
        .’

The guaranteed loan system requirements document helps agencies identify and meet
government requirements by having the guaranteed loan system interface-with the, core
fmancial system .to validate funds availability, .update budget execution data record
receivables and collections, and process disbursements in accordance with laws and
policies.

‘lhe five functions of’the guaranteed loan system are discussed below.
        ,’
  1,    &ender .Management supports analysis of lenders’ program eligibility and monitors
        lender performance to ensure that only qualified and financially sound lenders
        participate in federal guaranteed loan programs and helps to ensure that the
        government’s .risk exposure and loan losses are held to a minimum. (The checklist
        questions for this area are drawn from pp. 24-32 of the source document.)

 2;       Guarantee Extension and Maintenance supports the accounting and documentation
          requirements for the evaluation of the guarantee request, the extension of the
          guarantee by the federal agency, and the monitoring of the guarantee. (The
      ” ” checklist questions for this area are drawn from pp. 33-44 of the source document.)

 3:      Portfolio,,Manarrement supports the management and evaluation of the guaranteed
         loan program and its portfolios of outstanding guaranteed loans and acquired
         loans. (The. checklist questions for this area are drawn from <pp. 45-52 of the
         source document.)

 4..     Acauired LOan Servicing encompasses the procedures for default claim review and
         payment in accordance with guarantee agreements and regulations, as well as the
         invoicing and collection procedures for acquired loans and the foreclosure and
         liquidation of property for collateralized loans acquired by the government. (The
         checklist questions for this area are drawn from pp. 53-65 of the source document.)

 5.      Delinauent. Debt Collection includes the recovery of delinquent debt through the
         use of dunning letters, offset programs, collection agencies, litigation, and the
         termination of collection action on uncollectible debt. It also includes the
         foreclosure and liquidation of property for collateralized loans acquired by the
         government. (The checklist questions for this area are drawn from pp. 66-76 of the
         source document.)

?lhe checklist questions follow the JFMIP source document. It should be noted that not
all questions will apply in all situations and, as with the use of any checklist, professional

Page 9                                GAOiAIMD-98-21.2.7   - Proposed Guaranteed   Loan Checklist    (E/97)
judgment shotid be ‘exercised. Using the JFMIP source ddcument ‘&ion$ with ,ther’two
previodsly mentioned OMB documents -will help ensure ,that the user, is ‘cog&&t                  of the
background information and definitions riecessary ,to I%ly understand. the questions.
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Page 10                                 GAO/AIMD-98-21.2.7    - Proposed Guaranteed                                Loan Checklist   (12/97)
Guaranteed         Loan System .Requirements                                                           ,”


   Lender      management    function          Yes/no                              Explanation
                                                 NA

  Does the automated system:                                                          _I
                                                                         :           i.
   1.     Record and update lender
          application information,                                       .) ,^
          ensuring that all required
          data are present and valid                                 *:, . ,’
                                                            :        ~
          (e.g., nine-digit numeric
          taxpayer identification                                            ,,.
          number (TIN))?

  2.      Document that any required
          lender application fee has
                                                                                       :;
          been received and calculated
          correctly?

  3.      Provide an automated
          interface with the core                                                                            I
          financial system to record the
          receipt of any application
          fee?

 Does the automated system
 compare lender application
 information against:

  4.      Information on firms
          currently debarred/
          suspended from participating
          in a government contract or
          delinquent on a debt to the
          government?




Page 11                                  GAOKMD-98-21.2.7       - Proposed Guaranteed       Loan Checklist       (E/97)
                                                                                             .,
Guaranteed          Loan    System::&equiretietits


    Lender     management     function           Yes/no                      Explanation
                                 ;,               I NA
                                                    .I.,,
   5.     Qualification requirements
          for principal officers and
          staff?
                                                                 i/,, i
   6.     Information concerning the                                             i
          lender’s financial credentials
          from banking regulatory (
          agencies, rating services, and
          other information sources?
                      _.,

   7.     Lender performance data                                              1.‘.
          from other credit agencies?                                                    ’

  Does the automated system:

   8.     Update the lender
          information store to reflect
          the agency’s decision.on the
          lender application?

  9.      Generate and electronically
          transmit a notice to inform
          the lender of approval or
          disapproval of the lender’s
          application?

  10. Maintain data on lender
      disapprovals as an historical
      reference to support effective
      monitoring of future lenders?




Page 12                                  ‘GAO/AIMD-98-21.2.7   - Proposed Guaranteed   Loan Checklist   (U/97)
Guaranteed                  Loan       System      Requirem+ts                                          :


             -I”     .‘_’          .


   Lender          management           function        ~~;Xes/no,                   Explanation
                                                         ‘, NA

  11. Record text comments                                                                      I
      related to approval or
      disapproval of the lender
      application?

  12. Record relevant data
      concerning the lender
      agreement?

  13. Generate the lender
      agreement for signature by
      the lender?

  14. Document that the lender
      agreement has been
      consummated by’ the agency
      and lender?

  15. Provide a tracking
      mechanism to identify
      expiring agreements needing
      renewal?

  16. Compare lender/servicer
      financial and performance
      information against agency
      portfolio evaluation criteria
      to identify lenders/servicers
      for regular or special review?




Page 13                                            GAO/AIMD-98-21.2.7   - Proposed Guaranteed Loan Checklist   (12/97)
Guaranteed       Loan     System.      Requifegehts                       ,:                 :,..;I


    Lender   management     function       > Yes/no           :_ , .’     Explanation
                                               NA

  17. Compute performance
      statistics for effective
      monitoring, including
      delinquency rates, default
      rates,..,,and claim rates?

  18. Provide the capability to
      record lender/servicer
      financial data, including
      balance sheets, income
      statements, and lender
      profitability? (These reports
      are used to determine the
      overall financial condition of
      the lender/servicer.)
                                                                    .’
  19. Compute a quantified risk for
       each lender/servicer? (The.
      risk is .quantified by
      weighting appropriate risk
      factors (e.g., loan volume,
      delinquency rate, default
      rate) based on the correlation
      between the risk factors and
      lender/servicer performance.)

 20. Compare the quantified
     lender/servicer risk to risk
     rating criteria to assign a risk
     rating to each lender/servicer
     (e.g., high, medium, low)?




Page 14                                GAO/AIMD-98-21.2.7   - Proposed Guaranteed   Loan Checklist    (12/97)
Guaranteed       Loan     System       Requirements


    Lender   management     function          Yes/no                      Explanation
                                                NA

  21. Enter high risk
      lenders/servicers on a
      problem watch list and
      generate a notice to each
      affected lender/servicer?

  22. Provide financial and
      historical information on
      lenders and servicers
      identified for review to the
      review team?

  23. Provide for scheduling and
      tracking of the review team’s
      activities?

  24. Document review results
      including date of review,
      name(s) of reviewer(s), and
      any deficiencies and
      associated explanations?

  25. Record text comments
      relevant to the review
      process?




Page 15                                GAO/AIMD-98-21.2.7   - Proposed Guaranteed   Loan Checklist   (E/97)
Guaranteed       Loan     System      Requirements


    Lender   management    function          Yes/no                      Explanation
                                               NA

  26. Generate a notice to inform
      the lender/servicer of a
      finding of noncompliance                                                     ,.
      (electronically, where
      appropriate), including any
      penalties or sanctions and
      the right to appeal?

  27. Document and track
      corrective action plans
      agreed to by the agency and
      the lender/servicer, including
      proposed resolution dates,
      and update lender/servicer
      data to reflect any changes in
      status resulting from the
      corrective actions?
                                                                                                                  t

  28. Update the status of lenders
      and servicers that do not
      comply with agency
      standards for continued
      program participation, or do
      not correct deficiencies
      identified through reviews in
      a reasonable period of time?
      Provide data to support
      corrective action plans such
      as penalties and/or sanctions?




Page 16                               GAO/AIMD-98-21.2.7   - Proposed Guaranteed        Loan Checklist   (E/97)
Guaranteed       Loan     System      Requirements


   Lender    management    function          Yes/no                     Explanation
                                               NA

 29. Document and track appeals
     received from the lender/
     servicer and agency appeal
     decisions and generate a
     decision notice to the lender/
     servicer?

 30. Record penalties and/or
     sanctions imposed by the
     agency review board on
     those lenders or servicers
     found to be in serious and
     frequent noncompliance with
     federal program standards?

 31. Update the guaranteed loan
     information store to reflect
     the revocation of a guarantee
     and provide an automated
     interface with the core
     financial system to record the
     decommitment of the
     guarantee and the
     deobligation of subsidy when
     a guarantee has been
     revoked?




Page 17                               GAO/AIMD-98-21.2.7   - Proposed Guaranteed   Loan Checklist   (E/97)
Guaranteed           Loan     System       Requiremeats


    Lender     management       function            Yes/no                       Explanation
                                                      NA

  32. Does the system provide at
      least the following types of
      management information:

          -   lender eligibility activity?
          -   completed reviews?
          -   lender performance?
          -   exceptions?




Page 18                                      GAO/AIMD-98-21.2.7   - Proposed   Guaranteed   Loan Checklist   (E/97)
          Guaranteed        Loan     System      Requirements.


                 Guarantee    Extension    and           Yes/No                      Explanation                 ’
                  Maintenance     Function               I NA

           Does the automated system:

            1. Record critical data on the
               lender’s guarantee request to
               supporttheguarantee                   ”              ”
               evaluation process?

            2.    Provide access to guarantee
                  request information to each
                  individual participating in the
                  guarantee decision?

           3.     Record text comments
                  relevant to the guarantee
                  decision?

           4.     Compare borrower
                  information on the lender’s
                  guarantee request to agency
                  program borrower eligibility
                  criteria?

           5.     Check the appropriate system
                  data files to determine
                  whether a lender has recently
                  submitted a duplicate
                  guarantee request for the
                  applicant or a guarantee
                  request for the applicant has
                  been previously denied?




Page 19                                          GAOMMD-98-21.2.7       - Proposed Guaranteed   Loan Checklist       (U/97)
          Guaranteed          Loan    System       Requirements


                   Guarantee    Extension    and          Yes/No                      Explanation
                    Maintenance     Function                NA
          [

              6.    Document that the lender
                    obtained a credit bureau
                    report?

              7.    Compare the applicant’s
                    credit worthiness information
                    to system-stored program
                    creditworthiness criteria and,
                    where a program
                    requirement, assign a credit
                    risk rating to the applicant?

              8.    Document that borrower
                    financial data, repayment
                    ability, and repayment history
                    have been verified?

              9.    Document whether the Credit
                    Alert Interactive Voice
                    Response System (CAIVRS)
                    identified the applicant as a
                    borrower who has previously
                    defaulted on debt to the
                    federal government? (The
                    system should not accept
                    further processing if the
                    lender’s guarantee request
                    does not have a CAlVRS
                    authorization number.)




Page 20                                            GAO/AIMD-98-21.2.7   - Proposed Guaranteed   Loan Checklist   (12/97)
          Guaranteed      Loan    System     Requirements                                             -!I’


              Guarantee    Extension    and           ,Yes/No                         Explanation
               Maintenance     Function     :         : NA

           10. Compute the credit subsidy
                  amount associated with the                              ;
                  guaranteed loan using
                  projected cash flows and the
                  applicable Treasury’ interest
                  rate in accordance with OMB                                 ‘i ‘i
                  Circular Ll‘, A-34?
             -‘-‘-‘-‘--*lr,,r,.S.~~~~~

           11. Provide an automated
               interface with the core
               financial system to determme
               if sufficient funds are
               available in the Program
               Account and if available
               lending limits in the
               Financing Account are
               sufficient to cover the
               subsidy cost and the face
               value of the proposed
               guarantee?

           12. Reflect the approved
               guarantee status?

           13. Accept, identify, track, and
               report supervisor overrides of
               system-generated
               acceptance/rejection
               recommendations?




Page 21                                         GAO/AIMD-98-21.2.7   - Proposed Guaranteed     Loan Checklist   (E/97)
          Guaranteed      Loan    System.Zeqnirements


              Guarantee    Extension    and’               Ye&No           ;r                 :   Explanation        :        ’
               Maintenance     Function                   5u NA;                 ;. >~                     t’ :I:.,,

           14. Create and maintain a system                       ;         I’            a        I.!   I(        I
               record of rejected guarantee                              ,.’                              <”       :
               requests?                                                                                    ‘/I’
                                                                                 ’                                 :
           15. Notify lender of approv&or
               disapproval (electronically
               where appropriate)?
                                               .’          “’
           16. Record the cohort and risk
               category, as defined in O@B
               Circular A-34, associated tith
               the guaranteed loan?

           17. Assign a unique account
               number to the guaranteed i
               loan that remains unchanged
               throughout the life of the                                            ‘t
               guarantee?

           18. Generate a guarantee
               endorsement to confirm that
               the loan is guaranteed and
               transmit it to the lender
               (electronically where
               appropriate)?                                                                                             x

           19. Calculate and record the
               guarantee origination fee in
               accordance with the terms
               and conditions of the
               guarantee agreement?



Page 22                                             GAO/AIMD-98-21.2.7       - Proposed Guaranteed           Loan Checklist       (U/97)
          Guaranteed     Loan    System       .Requirements             :


              Guarantee    Extension    and           Yes/No                v    Explanation
                                                     ‘NA             ,:_,                                         ,’
               Maintenance     Function

           20. If applicable, transmit the                                              ;
               origination fee invoice to the                                       i       .’         1’1
               lender (electronically where                                                        )’ ,‘I
               appropriate)?                  ,.                                                    (,
                                                                                                                  .!

           21. Record collections of      .
               origination fees received?

           22. Record the applicable
               Treasury interest rate for the
               guaranteed loan at the time
               of commitment in accordance
               with OMB Circular A-34?
               (This rate is used in subsidy
               rate calculations.)

           23. Provide an automated
               interface with the core
               financial system to record the
               guaranteed loan commitment,
               the obligation for the related
               subsidy; and the origination
               fee, receivable, and
               collection?

           24. Provide the capability to
               receive electronic
               transmission of disbursement
               data by the lender?




Page 23                                        GAO/AIMD-98-21.2.7   - Proposed Guaranteed        Loan Checklist        (12/97)
          Guaranteed     Loan    System    Requirements                                    ‘,        I; ,._

                                                                                        I I.,
              Guarantee    ExtenSion and            Yes/No                     Explanatisn,,:;
               Maintenance     Function               NA,                                     : ‘,
                                                                                                          ,_.
           25. Record information on loan                            ,I   :                          I
               disbursements by the lender,
               including amounts and                                                                  :
               applicable Treasury interest
               rates, to support interest ’
                                                                .,
               computations and subsidy         .
               reestimates?

           26. Provide an automated                                                ..‘,.
               interface with the core                                                              ‘3
               financial system to record the                                                              ,,,
               outlay of subsidy from the
               Program Account to the
               Financing Account related to
               the lender loan
               disbursement?

           27. Support reevaluation of the
               modified loans in accordance
               with OMB Circular A-34 and
               program policy?

           28. Reflect the modified status of
               the guaranteed loan?




Page 24                                    GAO/AIMD-98-21.2.7    - Proposed Guaranteed          Loan Checklist   (E/97)
          Guaranteed     Loan    System       Requirements               “>       i                   ‘!


              Guarantee   Extension     and         Yes/No                                  ‘Explanation
               Maintenance     Function               NA                 ;*’                 ,. ;

                                                                                .t ..’ i                           1
           29. Establish a new loan account
               and collateral record for each                       /,           j :, :’
               new debt instrument and :                           ,;          ‘, 8,) I. .
                                                                                         .!                    ,’
               assign a unique loan account
               number to the new account
               record? &ir&in    a link                                               ./.
               between the new loan
               account established for the                                              ..,        $1, “,
               neti debt instrument and &e
               old loan account records?

           30. Perform a funds control
               check to verify the
               availability of subsidy
               through an automated
               interface with the core
               financial system?

           31. Provide an automated
               interface with the core                    4
               financial system to record the
               subsidy changes associated
               with the guaranteed loan
               modification?

                                                              ’
           3% Compare guaranteed loan
              data to guaranteed fee
              criteria to determine which
              lenders owe guarantee fees?

           33. Compute the amount of the
               guarantee fee?



Page 25                                       GAO/AIMD-98-21.2.7     - Proposed        Guaranteed Loan Checklist       (12/97)
          Guaranteed     Loan    System       Requirements                   ’         1             ‘. .   .’


              Guarantee    Extension    and          Yes/No                         Explanation!
               Maintenance     Function                NA                /           :     ‘,/,

           34. Compare guaranteed loan fee                     ,;                            .,,,, .-
               data to fee penalty criteria to                                     I.      ..‘. .,
               identify those lenders with                                       .I::                .j
               overdue fee payments?                                             .:            ,, ‘,’
                                                                                                   :, f:
                                                                                  /’
           35. Calculate penalties on loans
               for which lenders have not
               submitted guarantee fee
               payments?                                                                           /..

           36. Generate invoices, including
               penalties assessed for late
               payment, for guarantee fee
               payments due from lenders
               (electronically where
               appropriate)?

           37. Provide an automated
               interface with the core
               financial system to record the
               receipt of guarantee fees
               from lenders?                                                                                               1
           38. Identify guaranteed loans
                                                                                                                           t
                                                                                                                           I-
               requiring interest supplement
               payments?




Page 26                                        GAO/AIMD-98-21.2.7   - Proposed Guaranteed        Loan Checklist   (E/97)
          Guaranteed      Loan    System      Requirements’            .;’     .’                 : “.    :


              Guarantee   Extension     and            Yes/No                       Explanation
               Maintenance     Function                  NA                  : i

           39. Compare current interest
               rates to the interest rates .in
               the agreement to determine
               the appropriate levels of !,
               interest supplements
               required?

           40. Recognize the interest
               supplement payment as an
               interest subsidy expense and
               a loan guarantee interest
               supplement liability?

           41. Provide an automated         ’
               interface with the core
               financial system to initiate
               and record disbursements for
               interest supplement
               payments? (If the guaranteed
               loan system itself handles the
               payment processing, it must
               meet the requirements in the
               core financial system
               requirements related to
               payments and send summary
               data to the core financial
               system.)

           42. Capture the estimated useful
               economic life of the pledged
               collateral and compare it to
               the proposed term of the
               loan?


Page 27                                          GAO/AIMD-98-21.2.7   - Proposed Guaranteed   Loan Checklist   (12&7)
          Guaranteed      Loan    System      Requirements                                           ”        ‘I.


              Guarantee    Extension    and          Yes/ho                            Explanation
               Maintenance     Function                NA

           43. Document that transactions
               over $100,000 have an                                    .’
               appraisal prepared by a                             :
               state-licensed or certified ,,
               appraiser (or in accordance                                        :
               with more stringent appraisal
               requirements of the agency)? _,
                                                                                                         .,
                                                                                 ,:
           44. Compute the loan-to-value
               ratio and flag those loans
               with a ratio exceeding 100
               percent?

           45. Does the system provide at
               least the following types of
               management information:

               -   approval and rejection
                   monitoring?
               - override exceptions?
               - potential application
                  fraud?
               - approval/rejection
                   statistics?
               - detailed transaction
                  history?
               - median loan-to-value
                  ratio?
               - loan guarantee fee
                  collection?
               -- loan guarantee periodic
                  fee collection?
               - exceptions?                                                          ..



Page 28                                       GAO/AIMD-98-21.2.7       - Proposed Guaranteed    Loan Checklist      (12/97)
          Guaranteed      Loan      System       Requirements                                ‘,            :


           Portfolio   management     functJon           Yes/no                     Explanation
                                                        ,’ NA                                                       /

           Does the automated system:
                                                                                        ,’          I ”
            1. Receive and document loan
               guarantee information from
               lenders (electronically where                           ..           :                               I
               appropriate)?                                                                  :’


            2.   Maintain standard
                 information on the history
                 and status of each
                 guaranteed loan (e.g.,
                 borrower identification,
                 amount and nature of debt)?

           “3.   Maintain data from the lender
                 that identifies delinquent
                 accounts and potential
                 defaults?

            4.   Accept lender data by cohort
                 and risk category?

            5.   Provide agency access to the
                 loan status information?




Page 29                                           GAO/AIMD-98-21.2.7   - Proposed Guaranteed       Loan Checklist       (12/97)
          Guaranteed        Loan     System       Requirements                         ;,            ‘,      x~:i :::


           Portfolio    management     function        ’ Yes/no        ::         ‘I        ,ExplanatidiC          - ‘_ ‘,
                                                       ‘, NA

            6.   Compute and maintain
                 program performance trends
                 such as:

                 -- number and dollar value
                    of loans made?
                 -- average loan size?     ’
                 - loans made by
                    geographical region?
                 -- number and amount of
                    defaulted loan accounts?
                 -- number and amount of
                    claims paid?
                 -- amount of loan write-offs?


           7.    Compute and maintain
                                                                                                /;
                 financial measures to help                                                                                                I



                 assess the credit soundness
                 of a loan program such as:

                 -- overall portfolio risk rate?
                 -- Average loan to value
                     ratio (for collateralized
                    programs)?
                 -- write-offs as a percentage
                     of seriously delinquent
                                                                                                                                           ci-
                    acquired loans?
                 -- net proceeds on real
                    property sold compared
                    to appraised value?
                 -- loan loss rates?




Page 30                                           GAO/AIMD-98-21.2.7        - Proposed Guaranteed         Loan Checklist     (12/97) / /
           Guaranteed         Loan System Requirements


            Portfolio     management    function          Yes/no                      Explanation
                                                         ,c. NA

            8.    Compute and maintain                                        ::
                  efficiency measures to help                                            6
                  detern-dne the effectiveness
                  of use of agency resources                                                                  ,’
                  such as:
                                                                                                              ,’
                  -     administrative cost per
                        loan guarantee approved?                        (,
                  -     administrative cost per
                        acquired loan serviced?
                  -     administrative cost per
                        dollar collected?

            Does the guaranteed loan system
            and/or the core financial system:

            9.   Execute SF-1151s and record
                 amounts borrowed from
                 Treasury to cover shortfalls
                 in the subsidy estimates
                 temporarily?

            10. Track the amount of
                uninvested funds in the
                financing account as needed
                to support interest earnings
                calculations?

            11. Compute interest expense on
                borrowings and interest
                earnings on uninvested
                funds?



Pagk ‘31                                           GAO/AIMD-98-21.2.7    - Proposed Guaranteed   Loan Checklist    (E/97)
          Guaranteed         Loan     System       !Requiremefits                      ,-;’                    ‘,


           Portfolio     management     function          Yes/no                              (’t     Exphnation’
                                                            NA

           12. Execute and record
               repayment of principal using
               SF-1151s and interest to
               Treasury using SF-108ls?

                                                                                                                                       ,/
           13. Execute and record receipt                                                                                 ,.
               of interest earnings from
               Treasury on uninvested funds                     :
               using SF-lOUs?

           Does the automated system:
                                                                                                        ,.
           14. Support the reestimate of the                             )            .,.,I            : 1’
               subsidy cost for each cohort                                                           ,!.
               and risk category of loans at
               the beginning of each fisc,al                        .’                 ‘,                 ,,               ,I
               year in accordance with OMB                                                            ;             ‘1,
               Circular A-34? The reestimate                                 .’:: /                                             :
               should be calculated in two                                            .‘_ :               /’
               parts:

                -      the difference in the
                       estimate resulting from
                       changes in the applicable
                       interest rates between the
                       time of obligation and
                       disbursement.
                -      the difference in the
                       estimate resulting from
                       changes in the projected
                       cash flows.




Page 32                                            GAO/AIMD-98-21.2.7         - Proposed            Guaranteed            Loan Checklist    (12/97)
          Guaranteed      Loan      System       Requirements,


           Portfolio   management     function         ,,:Yes/no                      Explanation
                                                           NA:
                                                        , .
           15. Maintain cash flow data that
               permit comparison of actual                                           .I
               cash flows each year (and :
               new estimates of future cash                                                                       /:
                                                                                                                  i.
               flows) to the cash flows used
               in computing the latest loan
               subsidy estimate?
                                                                           ‘,
           16. Document the reasons for
               observed or expected
               changes in cash flows that
               result in a subsidy cost
               increase or decrease and
               whether the changes in cash
               flows are expected to be
               temporary or permanent?
                                                                   i
           17. Compare the current year
               reestimated subsidy cost to
               the latest year reestimated
               subsidy cost to determine
               whether subsidy costs for a
               risk category increased or
               decreased?

           18. Transfer loan subsidy from
               those risk categories with an
               excess of loan subsidy to
               those risk categories in the
               same cohort that are
               deficient in loan subsidy to
               provide adequate funding for
               each risk category?


Page 33                                          GAO/AIMD-98-21.2.7    - Proposed   Guaranteed   Loan Checklist        (12/97)
          Guaranteed      Loan      System        Reauiremeits                  .’                      .i ;, .::Y

                                                                                                                .,.

           Portfolio   management     function’          ~Yesho        1                  Explanatioh             ”
                                                           NA                                              .,
           19. Group those cohorts that                                                                     ,’
               need indefinite appropriation
               loan subsidy funds separately                                                     ‘/
               from those cohorts that have
               excess funds? Request an                                                         ,’,;
               apportionment and obligate                                            ‘:     ,
               funds to cover the subsidy
               increase for those cohorts of                                                                    ,,
               loans that have insufficient
               subsidy? Transfer excess
               subsidy of cohorts of loans to
               the Special Fund Receipt
               Account?

           20. Provide an automated
               interface with the core
               financial system to record the
               transactions associated with
               subsidy reestimates?

           21. Set aside funds to create and
               maintain the working capital
               cash balance in accordance
               with OMB guidance?

           22. Record costs incurred that
               are funded by working
               capital?




Page 34                                           GAO/AIMD-98-21.2.7   - Proposed Guaranteed           Loan Checklist   (E/97)
Guaranteed         Loan      System. Requirements                            c


 Portfolio..    management     functi,on     ., ,Yes/nb                          Explanation
                                                  NA.
         ,,._
 23. Compute the amount of
      Treasury interest earned by
      working capital funds and
      provide this amount to the
    ” cdrk financiSI @Gl%m?

 24. Does the system provide at
     least the following types of
     management information:

       -- detailed transaction
          history?
       - profile of guaranteed loan
          portfolio?
       - program credit reform
          status?




                                           GAO/AIMD-98-21.2.7   - Proposed   Guaranteed   Loan Checklist   (12/97)
          Guaranteed          Loan    System       Requiremetits                  8’ i                                   :,‘,



                 Acquired      loan servicing              Yes/no                        Explanation                 ’
                            function                         NA’

           Does the automated system:
                                                                                             ’ ‘,”                         ‘,
            1.   Record key claim data?                                                     ,. -
                                                                                      ;I!; . _’    ,,
                                                                                                                           j:
                                                                                 ._:.i 8 1: ,,                             :
           2.    Compare the claim
                 application information        to ‘the                      “, ,,           .,         ,,.
                 agency program claim                                                              ,:         ‘I,’
                 application evaluation                                              I,“,,
                 criteria?                                                                                                ;i


           3.    Suspend processing for
                 claims that are incomplete:                                                                              :
                 until corrected?
                                                                                              ‘,
           4.    Identify claims not meeting
                 agency program requirements
                 and notify the lender of the
                 rejection?

           5.    Document information on
                 accepted and rejected claims
                 and the reason for the
                 rejections?

           6.    Reflect the status of the
                 claim?

           7.    Calculate the claim payment
                 to be made, making
                 adjustments for any
                 disallowed amounts?


Page 36                                             GAO/AIMD-98-21.2.7   - Proposed Guaranteed          Loan Checklist          (12/97)’
          Guaranteed         Loan     System    Requirements


                 Acquired      loan servicing          Yes/no                       Explanation
                            function                     NA

            8.   Provide an automated
                 interface with the core
                 financial system to initiate a
                 disbursement of the claim
                 payment to the lender? If the
                 guaranteed loan system
                 processes payments, it must
                 meet the requirements in the
                 core financial system
                 requirements related to
                 payments and send summary
                 data to the core financial
                 system.

            9.   Record acquired loan
                 information and establish a
                 receivable?

           10. Notify the borrower of the
               claim payment?

           11. Compare data on new
               receivables to program
               criteria for pursuing
               repayment?

           12. Compare debtor data against
               program criteria to assess the
               likelihood of repayment?

           13. Identify accounts that should
               be written off?


Page 37                                         GAO/AIMD-98-21.2.7   - Proposed   Guaranteed   Loan Checklist   (12/97)
          Guaranteed        Loan    System    Requirements


               Acquired      loan servicing          Yes/no                     Explanation
                          function                     NA

           14. Identify accounts for which
               collection is to be pursued?

           15. Calculate outstanding
               balances for each loan
               account invoiced, including
               principal, interest, late
               charges, and other amounts
               due?

           16. Identify loan accounts to be
               invoiced based on agency
               program invoicing criteria
               and loan account
               information?

           17. Generate and transmit an
               invoice to each borrower?
               (At a minimum, the invoice
               must include borrower ID,
               amount due, date due, the
               date after which the payment
               will be considered late, and
               the current balance.)

           18. Provide for automatic
               acceleration of delinquent
               rescheduled installment
               payment notes based on an
               acceleration clause indicator?



                                                                                                                     -

Page 38                                       GAO/AIMD-98-21.2.7   - Proposed Guaranteed   Loan Checklist   (E/97)
          Guaranteed         Loan    System    Requirements


                Acquired      loan servicing          Yes/no                      Explanation
                           function                     NA

           19. Track and age receivables by
               type?

           20. Provide an automated
               interface with the core
               financial system to record.
               accrual of interest,
               administrative charges, and
               penalties for delinquent loan
               accounts?

           21. Apply collections according
               to agency program receipt
               application rules to the
               appropriate liquidating or
               financing account? (Actual
               collection sources could
               include cash, check, or credit
               card.)

           22. Record a partial, full, or late
               payment indicator?

           23. Identify payments that cannot
               be applied and document the
               reasons why the payments
               cannot be applied?




Page 39                                        GAO/AIMD-98-21.2.7   - Proposed Guaranteed   Loan Checklist   (U/97)
          Guaranteed        Loan    System    Requirements


               Acquired      loan servicing          Yes/no                       Explanation
                          function                     NA

           24. Provide the capability to
               compare borrower’s
               pre-authorized debits
               received from financial
               institutions and other
               external sources to expected
               collections?

           25. Provide an automated
               interface with the core
               financial system to record the
               collection? (If the guaranteed
               loan system processes
               collections, it must meet the
               requirements in the core
               financial system requirements
               related to collections and
               send summary data to the
               core financial system.)

           26. Provide information on
               collateral for use in the
               foreclosure process?

          27. Update the acquired loan
              information store with
              additional information
              obtained during the
              foreclosure preparation
              process, such as recent
              appraisal values and property
              condition?



Page 40                                       GAO/AIMD-98-21.2.7   - Proposed   Guaranteed   Loan Checklist   (E/97)
          Guaranteed       Loan     System    Requirements


               Acquired      loan servicing            Yes/no                      Explanation
                          function                       NA

           28. Calculate outstanding
               principal, interest, penalties,
               and administrative charges
               for each loan with collateral
               to be foreclosed?

           29. Transmit a foreclosure notice
               to the borrower?

           30. Transmit information
               necessary for the foreclosure
               to the Department of Justice
               and/or agency office of
               general counsel (OGC), as
               applicable?

           31. Record the results of the
               foreclosure proceedings and
               title conveyance to the
               agency?

           32. Provide an automated
               interface of data on acquired
               collateral to the property
               management system for
               management and liquidation
               of the property?




Page 41                                          GAO/AIMD-98-21.2.7   - Proposed Guaranteed   Loan Checklist   (Q/97)




                                                                                                                        L
          Guaranteed       Loan     System    Requirements


               Acquired      loan servicing            Yes/no                     Explanation
                          function                       NA

           33. Provide an automated
               interface to the core financial
               system to record the value of
               the property acquired and to
               reduce the receivable
               amount?

           34. Generate payments to
               property management
               contractors for services
               rendered?

           35. Track, record, and classify
               operations and maintenance
               expenses related to the
               acquired collateral?

           36. Document rental income and
               other collections related to
               the acquired collateral?

           37. Post the expenses and
               income to the core financial
               system through an automated
               interface?

           38. Update the acquired loan
               information store to record
               receipts resulting from the
               liquidation of acquired
               collateral and the disposition
               of collateral?


Page 42                                         GAO/AIMD-98-21.2.7   - Proposed Guaranteed   Loan Checklist   (12/97)
                 Guaranteed        Loan    System       Requirements                                 I,           :’


                      Acquired      loan servicing             Yes/no                     Explanation
                                 function                        NA
          ,: :
                  39. Identify any deficiency
                      balances remaining for the
                      loan after collateral
                      liquidation for further
                      collection activities?
                                                                                                     ‘8, I
                                                                                                                                I:
                  40. Provide an automated                                                                                      I=
                      interface to the core financial                                                                           i
                      system and the property
                      management system to
                      record disposal of the
                      property and associated
                      receipts?

                  41. Does the system provide at
                      least the following types of
                      management information:

                       -    guaranteed loan claim
                            activity?
                       --   summary data of claim
                            losses paid out?
                       --   detailed transaction
                            history?
                       -    standard management
                            control/activity?
                       --   exceptions?
                       --   portfolio sale historical
                            payments?
                      --    portfolio sale
                            performance?
                      --    collateral management
                            activity and expense?



Page 43                                                 GAO/AIMD-98-21.2.7   - Proposed Guaranteed    Loan Checklist   (E/97)
          Guaranteed          Loan     System      Requirements                                      -,



                 Delinquent,,debt     collection           Yes/no                      Explanation
                             function                        NA

           Does the automated system:

            1.     Identify delinquent
                   commercial and consumer
                   accounts for reporting to ’
                   credit bureaus (preferably by
                   electroriic interface) and
                   CAM@ by comparing
                   reporting criteria to                                            -: t
                   delinquent loan data?

           2.      Calculate outstanding
                   balances, including interest,
                   penalties, and administrative
                   charges and include this
                   information in credit bureau
                   records?

           3.     Generate (or include in
                  demand letters) a notice to
                  inform the borrower of the
                  referral of a delinquent debt
                  to a credit bureau in
                  accordance with regulations?

           4.     Maintain    a record of each
                  account    reported to credit
                  bureaus    to allow tracking of
                  referred   accounts?




Page 44                                             GAO/AIMD-98-21.2.7   - Proposed Guaranteed   Loan Checklist   (12/97)
          Guaranteed           Loan     System     Requirements                                  :



                 Delinquent      debt collection          Yes/no                         Explanation
                              function                     .w
            5.     Prepare tapes, on a monthly
                   basis, of delinquent debtors
                   to be included in the CATERS
                   database?                                                                                       ::
                                                                                                       i
                                                                                    ,.
           6.      Generate and transmit
                   dunning letters to debtors                                                     .,
                   with past-due loan accounts?

           7.      Identify debtors who, do not
                   respond to dunning letters
                   within a specified time
                   period?

           8.      Track demand letters and
                   borrower responses to
                   document borrower due
                   process notification (and
                   borrower willingness and
                   ability to repay debt)?

           9.      Track and document debtor
                   appeals received in response
                   to demands for payment?




Page 45                                            GAO/A.IMD-98-21.2.7   - Proposed Guaranteed    Loan Checklist        (12/97)
          Guaranteed         Loan    System     ,.Req.uirements                  :                     .;’   ,


              Delinquent      debt collection           Yes/no                       Explanation
                           function                       NA

            0. Provide automated support to
                the collection process?                                                            ’
                (Support could be provided                                                                       3.
               for activities such as
                contacting a delinquent                                                                          ‘_
               borrower by phone;             ‘_(
                documenting contacts with a
               debtor and the results;
               documenting installment
               payments, rescheduling
               agreements, and debt
               compromise; generating
               management reports; and
               tracking the performance of
               individual agency collectors.)

            1. Compare delinquent account
               data to agency program
               offset referral criteria to
               identify accounts eligible for
               federal tax refund offset,
               federal employee salary
               offset, or administrative
               offset?
                                                                                                                                     -

                                                                                                                                     -
           2. Calculate outstanding
              interest, penalties, and
              administrative charges for                                                                                        I.
              each loan account eligible for                                                                                    nI
                                                                                                                                i-“. -
              offset?



                                                                                                                                L-
                                                                                                                                .-




Page 46                                          GAO/AIMD-98-21.2.7   - Proposed Guaranteed   Loan Checklist          (12/97)
          Guaranteed         Loan System.Requirepetits.                                      :’                          :


              Delinquent      debt collectiov                pi, ’ ., Yes/~o                 .          .i Explan+tion
                           function                  ’          8’;:.; NA                                    ~I
                                                 .
           13. Generate debtor due process                                ‘[ :. : , ; I.L j ;, : ! : ,
               notices of intent to        :                                 ,,-: .,‘Y ,r,, L!<(,_
               implement an administrative                                      , ,/,T((,I,~‘:~
                                                                                   ..,:       -1;. :. :
               offset, tax refund offset, or                              i        Ii,, ,.’ ()        ,:’_. ,, ;
                                                                          I         .:
               salary offset?
                                                                          ! ! I_, I I,,:, .,, jr.,’
           14. Generate files of delinquent
                loan account data-on loans.
                meeting referral criteria for
                each offset type and           ’
                electronically transmit the.
                files to the Internal Revenue
                Service (IRS) for federal tax
             .. refund   offset matching,
                Dkfi&mght’.b;f    D6fens;e”’to;; ., -. .,,
                (DOD) for salary offset
                matching, and to other
                                                                                                   ,.
                agencies that make
                disbursements for
                administrative ..offset                                  :              ,.              _ :’                 ,.
                matching?

           15. Generate salary offset
               requests to employing                     I                     r..,,
               agencies for delinquent                                             .,
               borrowers identified as
               federal employees?                    :                             :              ,’
                                                                                                 ‘.
           16. Update the acquired loan
               information store to reflect
               offset referral status?




Page 47                                         ‘.       GAO/AIMD-98-21.2.7             - Proposed Guaranteed      Loan Checklist   (E/97)




                                  .-   .-
                                                                                                                                             I.
                                           ,,   .,   ,




          Guaranteed       Loan System.‘Requiremenfs                                         ”             ‘, ’       .’ ‘- ..   ‘.




           17. Accept match
               account data an
               acquired loan information j




                agency records and deposit
                data?                                                     ‘.                           j    ~.    3
                                                              .’        .,
                                                         ,,, ,,!,,,, ,, ,,,,          ,,,, ,,
                                                                                                                      !
           19. Update the acquired loan
               information store to reflect
               receipts, adjustments, and’
               status changes?                                                                                            ,‘,
                                                            ,, ,,          ,,
           20. Interface withthe core ’                    ”
               financial system to record
               collections by offset?
                                             ,, , ,/d       ,,_” ;,,/,.,                     ,,
           21. Compare delinquent account                                                I
               data to agency program ” ‘.                                                        “’
               collection agency referral                           ‘.
               criteria to select delinquent
               loan accounts for referral to,
               collection agencies?
                                       ‘: ,,                        ,..,        ;,,




Page 48
                                          ,.                 ..,.....                                                        ..(                                II,                                 ,




                    ;   ,‘,,.,.,,        ,,,;,,   r:_,   ;        ..I          :*;,,..   ;         ,,...   :‘,,                    ,,l_.        ,   ~,   .,,.                           .,.,                  ,.              .    .    ,.



                   I$jl+cpent,,.d~bt             de&$                    I ,,:: ; .(?;/f~’     ;, ; ,(_ : :. .’;’ ‘; j, &qhp+m
                              ““~&&ion                              ;             ,:                           _, I’ ,‘.,,l’
                   ,:’,.        : .;..._ :.,” ‘I ‘.,I,,,‘.,.:\ .,‘. ‘#.:. !,. . ‘m,..,.,
                                                                                       \ ) ‘*- ,,.; :.,i., ,..      ‘.’
             22. Sort and group delinquent                                                                                                                                                                ,, .I                                                                ,
                                                                                                                                                                                         ‘.            “,“’
                                                                                                                                                                                                       ”            i ,, ”                             :
                 loan accounts based on type                                                                                                                                                                                    ),         ,.‘/
                 of debt (consumer or      ’                                                                                                                                                                :.v’           ,!        ,            ‘./,                               /!
                 commercial), age of debt,‘, and                                                                                                                                        ’                     .’          .’ .,  ,e    ‘.           ,/ ‘:
                 location of debtor?                                                                                                                                                                               i.,
                                                                                                                                                                                                              ,.,I i j j
                                                                                                                                                                                                                  ;:m                           ,’ ,, :”
                                                                                                                                                                                          ,         ;          a’.   ,.       /”    _      t
                                                                                                                                                                                                                                          ,- .),
                                                                                                                                                                                                                         !,                   : ,/
             23. Calculate outstanding
                 interest, ,penalties, and. ,‘                                                                                                                                    i )                 .’        ,,,, :.                :
                 administrative charges for’                                                                                                                                                                                       ‘. :
                 each delinquent loan account
                 to be referred?                                                                                                                                                                                                  .:
                                                                                                                                                                                         :                                                           : : ,.
                                                                                                                                                                                                                    , /’
             24. Assign selected delinquent                                                                                                                                                                                                                           /I 4
                ,I loan .acco,unt groupings to                                                                                                                                                                     ,,I.
                   appropriate collection                                                                                                                             ”           ’                                , ‘.   ,:
                   agencies based on collection                                                                                                                                                                     ,:  :    ‘,                               ‘,
                   agency selection criteria for                                                                                                                                                                                                                                     _,
                                                                                                                                                                                                                    i     ,/
                   agency programs?

             25.        &&ment                                          that                 the                  deli&&&t                                                ”       “I’          -’         ’              ‘.        :         ,   I’




                        account has been referred to                                                                                                                                                                                                                      ‘,
                                                                                                                                                                                        .’
                        a collection agency?                                                                                                                                                                                           ?;                          : .’
                                                                                                                                                                                  .(
             26. ” Generate and receive i                                                                                                                                                                                              ,:
                   electronic transmissions of                                                                                                                                                                     Y’,                  ’
                   account balance data and
                   status updates to and from                                                                                                                                                           ,,’
                   collection agencies?      ’                                                                                                                                          !                _’ ._

             27. Record receipts remitted to,                                                                                                                                 ,                         _,                                       j
                 the collection agency and
                 forwarded to the agency?


Page48   :                          ,.                                                                                                     ‘-   G&O/qTMD-98-21.2.7                                                 - Proposed                    Guaranteed         Loan Checklist        (12/97)
          Guaranteed       Loan System ,Requirementg                                  :,, L


             Delinquent      debt collection              Yes/no                          Explanahon
                          function                          NA              :
                                               ~
           28. Update the acquired loan                         j
               information store to reflect
               receipts, adjustments, and                                                       :’ I
               other status changes,                                                                               ’:
               including rescheduling,    ’                                               <
               compromise, and other                                                 .,
               resolution decisions?
                                                                                                   ‘,
           29. Accept and match collection                              :       .”
               agency invoices with agency
               records? Generate payment
               to the collection agency for
               services rendered through the
               ‘core financial system?

           30. Request, reconcile, and
               record returned accounts
               from collection agencies?

          31. Interface with the core
              financial system to record
              collections processed through
              collection agencies?




Page 50                                            GAO/AlMD-98-21.2.7   - Proposed Guaranteed     Loan Checklist        (E/97)
          Guaranteed       Loan System Requireme&s’                                   ‘,.


              Detiquent      debt collection          Yes/no                       Explanation
                          function                     :: NA

           32. Compare delinquent loan
               account information against
               the agency’s litigation referral
               criteria to identify delinquent
               loan accounts eligible for                                     .I
               referral? Support
               identification of accounts to                             :
               be referred to counsel for
               filing of proof of claim based
               on documentation that a’
               debtor has declared
               bankruptcy?

           33. Provide an electronic
               interface with credit bureaus
               to obtain credit bureau
               reports that will enable
               assessment of the debtor’s
               ability to repay before a
               claim is referred to legal
               counsel?

           34. Calculate the outstanding
               balance, including principal,
               interest penalties, and
               administrative charges, for
               each delinquent loan account
               to be referred to legal
               counsel?




Page 51                                        GAO/AIMD-98-21.2.7   - Proposed Guaranteed   Loan Checklist   (12197)
             Delik&nt      ,debt collection,
                        funjztipq,   ., ,, : .. ,,‘. .

          35.. Generate the Claims          1
               Collection Litigation Report
               (CCLR)? (The CCLR is used
               to capture collection actions
               and current debtor
               information and transmit this
               information to Department ‘of
               Justice (DOJ).)

          36. Receive electronic
               transmissions of account, data.                                                                                “i”                          ”

               and status updates to and                                   /’               .‘.,                         ‘,
                                                                                                                                                                   I,,


              from DOJ’s Central Intake                                                                :.‘,


               Facility or the agency’s Office
                                                                                                                   ,.                                          ,
               of ‘General Counsel’s (OGC)
              automated system for                                                     ,’
                                                                                                       ,’                                             I’

                                                                                                                        :,          .‘,..
              referrals?
                                                                                                              ‘,



                                                                  ,’
          37. Update the loan status to”
              reflect referral for litigation
              so that the loan can be
              excluded from other             i
              collection actions and to alert
              the agency to obtain approval
              from counsel before
              accepting voluntary debtor
              payment?

                                                                                > :
                                                                                      .’           i                                        ,.



                                                                                                                                                 ./




                                                         ,.   .




Page 52                                           GAO/AIlb!ID-98:21.‘2.7        - Proposed Guaranteed                               Loan Checklist                       (U/97)‘,
                                                           ,. ,.   ,.   ,,




          Guaranteed        Lo&n System ~&qu$r&jetits~i I’_                           .; ,.
                                 ..,8. ,, ,. ‘.,I ,,,, /,I(. .,,,,, ,., ,




              judgment decisions?




              firqvCl       system to reCord

              litigation?


              account information to.
              agency program write-off

              loan accounts for possible ’
              write-off?




Page 53                                         GA~4IMD~9~21.2~7             - Praposed Guaranteed   Loan Checklist   (E/97)

                                                   ‘.
          Guaranteed        Loan System.:RequJ.reme&s                                           .;.,:,.-1.:: ,I,: ,’ : ,:”‘21;,,I,.:_
                                                                                    ::::.I!: Ltb9:.:


              Delinquent      debt coJlectioh      ;:     #Ye&o                ‘;..I         I. 5%.:1 EkpJanatioh..~~                                        I!
                           function           ’         j, Ni                                    ;:a.. .. ,‘:;                                               i’
                                                                     /
                                                                     -, ‘4
                                                                        ‘.‘:            .;. \I r,,,                  :,*‘/ ‘>,I
           44. Classify debtors based on ’                           !
               financial profile and ability to                      I            ii,. “     .:.
                                                                                 ,” / ,‘. i i “j ,!,,\,: i, “     ;.:2;:  ,:
                                                                                            “1 {-’:1 ).!        ,II1 :i !~      ?_
               repay? (Indicators of the i                           I
               financial well-being of a :                                 : ,, ,v..j .,!‘:;             ,:          >
                                                                                                                     1. _.      I.
                                                                                                    ,>1’.,’        3            :,
               debtor include debtor         :                               I, ,,.z.’’ ;                           ,., ‘3
               financial statements, credit                                                  ”      ,.,i
                                                                                                     1, ,, ,.,!
                                                                                                            ;I        .,’
               bureau reports, and payment
                                     .,.    ,,                            ., .,l .,                    ”‘.                  I, ,
               receipt history.)’                                                          ,,j, !.I’ I              ,, I ,,I
                                                                                                   ,‘. ‘,               _.I
                                                                                               ‘.: 1,                ::.-
           45. Produce a CCLR for each                                                                                                                      !,
               loan account to be referred                                                                                                  .,
               to agency’cour%el’&the       DOJ         “’           j          ,’           ‘.’ ,,                            ,,. *              ,-!!
               for approval of termination of                        :         ‘, ’ ” ,;I*.:’       ,:                                                      ‘I
                                                                                                                              1,_ ,i;
               collection action? Update the
               loan .&&us to reflect ..the . ,’              ,, _,       ., ,“.,~      . _..,_.,
                                                                                             _,          .,                        ,,            ,,.      _,..’
               referral?                     ,                       F              ;! I,,:.: ,, ,’! /i, ,‘.,,, 5’ /,,.
                                                                                                                      I,..’ ii/’ ,’ ,,
                                             I                                        : ‘~; f ~ :,..               ,.;: /.‘(
                                                                                                                  _.,,‘: bht,’
          46. Update the acquired laan I
              information store to reflect... .‘ lIj ..,.,. ‘:                 /,.‘ _-. _,,          .-..I             .,I                         I. ,
              approval or disapproval by                                                  ,*
                                                                                        1 1’  ,. 3:         ,’ ; ,\- ‘,”I ,I                        I.
              agency counsel or the DOJ                                         I , (i -i    11, ,,a , : : j J
              for termination of collection                                     ”! ..i I. / ,/“I,   /,     :,I.;>‘, :, ’
              action?
                              .                                                                    .-,
          47. Update the acquired loan ;                                               I                                 .”            I
              information store and provide                                             2. ‘,;
              an automated interface with                                        -. ..:. ,
              the core financial system to                                      ,1
              record the write-off of the;                                                                    i:,                      I_
              receivable?
                                                                                                                     .




Page 54                                           GAO/AIMD-98U.2.7                  - Proposed Guaranteed                      Loan Checklist                     (H/97)