U.S. Department of State

Note 7. Loan Receivable

FY 2003 Performance and Accountability Report

Bureau of Resource Management

December 2003

Report

Repatriation Direct Loan Program

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

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

Repatriation Loans Obligated Prior to 1992
At September 30, 2003 and 2002
(Dollars in Thousands)

	2003	2002
Loans Receivable Gross	$ 400	$ 516
Interest and Penalty Receivable	87	86
Allowance for Uncollectible Loans	(463)	(572)
Net Loans Receivable	$  24	$  30

Repatriation Loans Obligated after 1991 (Dollars in Thousands)

Repatriation Loans Obligated after 1991
at September 30, 2003
(Dollars in Thousands)

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

 

Repatriation Loans Obligated after 1991
at September 30, 2002
(Dollars in Thousands)

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

Total Amount of Direct Loans Disbursed (Post-1991)

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

Subsidy Expense for Post-1991 Repatriation Loans

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

Components of the Subsidy Expense for the 2003 and 2002 Loan Program
(Dollars in Thousands)

	2003	2002
Interest Differential	—	—
Default	$674	$568
Fees	—	—
Other	—	—
Total	$674	$568

Subsidy Rates for Direct loans

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

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

Schedule for Reconciling Subsidy Cost Allowances
(Dollars in Thousands)

	Funds
Beginning balance of the subsidy cost allowance - October 1, 2002	$2,801
Add: subsidy expense for loans disbursed during 2003	674
Adjustments	(22)
Ending balance for the subsidy cost allowance before re-estimates	3,453
Effect of subsidy re-estimate by component:
Interest rate re-estimate	—
Technical/default re-estimate	(336)
Ending balance of the subsidy cost allowance	$3,117

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

Administrative Expenses

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

Accounts Payable to Treasury

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

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

Borrowings from Treasury
at September 30, 2003 and 2002
(Dollars in Thousands)

	2003	2002
Beginning Balance, October 1	$256	$191
Borrowings, Net of Repayments	92	65
Ending Balance, September 30	$348	$256