Summary: The Rural Utilities Services (RUS) has exercised broad authority in restructuring the loans of two generation and transmission (G&T) borrowers, including acquisition of third-party non-RUS guaranteed debt, and providing significant concessions to the borrows, such as noninterest bearing notes, contingent payments, and forgiveness of federal government's losses. Although RUS generally followed its policies and procedures for restructuring loans of two financially troubled borrowers, GAO found one instance in which RUS' policies were not fully used and other instances in which procedures could be improved. RUS' procedures lack detailed written criteria for determining when a borrower should be added or removed from RUS' list of financially troubled borrowers. RUS estimated that it could lose approximately $185 million on loans restructured for the first borrower and between $110 and $120 million for the second borrower. The Rural Development Service (RD) did not include in the fiscal year 1999 financial reports the estimated loss of $185 million it anticipates will occur as a result of restructuring loans for one borrower, and included only $30 million of the estimated $110 to $120 million anticipated loss on the restructured loan for the other borrower. These errors occurred because the accounting department lacked documented procedures to ensure that debt forgiveness and losses resulting from restructuring loans were properly reported in the financial statements.
