Guaranteed Loan Programs Are an Increasing Risk

GAO discussed the government's potential financial burden due to billions of dollars invested in faltering and uncollectible guaranteed loans. GAO noted that: (1) at the end of fiscal year (FY) 1989, the government's guaranteed loans totalled almost $588 billion, with $332 billion in guaranteed housing loans; (2) outstanding loan guarantees were expected to total about $838 billion by the end of FY 1995, while direct loans were expected to decline to about $197 billion; (3) from FY 1985 through FY 1989, the number of oustanding loans increased 43 percent, and terminations for default increased about 77 percent, rising sharply from $6 billion to almost $11 billion; (4) federal agencies administering loan guarantee programs lacked adequate financial management systems and accounting principles, making it difficult for the government to accurately determine the extent of losses; (5) since agencies worked through lenders in dealing with guaranteed loans, agencies could not effectively manage loan guarantee programs; (6) agencies often lacked adequate collection procedures or did not use available collection tools; (7) the Office of Management and Budget took several actions to improve the government's credit program management; and (8) the government should consider several actions in order to improve its loan guarantee programs, lessen vulnerability, and strengthen agencies' financial management.