Summary: Federal agencies use the Office of Management and Budget's (OMB) credit subsidy model to calculate the subsidy cost of direct loan and loan guarantee programs for budget and financial reporting purposes. Beginning in fiscal year 1996, all major agencies are required to prepare annual financial statements and have them audited. In addition, an audited governmentwide financial statement will have to be produced every year starting in fiscal year 1997. With outstanding direct loan and guaranteed loan balances for federal credit programs approaching a reported $1 trillion, accountants and auditors preparing and auditing these financial statements need to be confident that the credit subsidy model calculates a reliable subsidy cost in compliance with applicable legislation and accounting standards. This report discusses whether the credit subsidy model (1) conforms with relevant provisions of applicable legislation and accounting standards, (2) provides reliable results, and (3) is maintained and operated under a system of adequate controls. GAO also identifies supplemental audit steps that auditors should perform to ensure that federal credit agencies are using the credit subsidy model properly.
