A number of federal agencies have set up loan and loan guarantee programs that violate government guidelines and cost millions of dollars in lost revenues, the General Accounting Office has concluded in a recent study.
For example, the GAO said, the failure of the Commerce Department's Economic Development Administration to charge a loan guarantee fee for its regular business development program has cost the government $3.2 million in lost revenues since 1977.
At the Small Business Administration, the official most knowledgeable about the creation of the local development loan program was unaware of the Office of Management and Budget guidelines, officially known as Circular A-70. SBA officials had set a 1 percent loan guarantee fee that, contrary to the OMB rules, did not cover the cost of running the program, the GAO said.
The GAO report (RCED 83-22) said that eight of the 11 programs it reviewed did not charge fees large enough to recover program costs; two of the programs increased the government's financial risk by millions of dollars by not requiring lenders to bear any risk on guaranteed loans, and two programs increased federal tax losses by guaranteeing tax-exempt obligations, in direct conflict with the circular.
"A-70 was issued to help provide effective and economical federal credit assistance programs by prescribing, for example, that certain fees be charged, that private lenders share financial risk on guaranteed obligations, that excessive interest rates be controlled and that guarantees of tax-exempt obligations be avoided," the GAO said. It added that the consequences of the agencies' failure to follow the rules were "serious," and recommended that OMB take immediate action to correct the problem.
But OMB Deputy Director Joseph R. Wright Jr. responded that the GAO's review was "too narrow in its scope" because the Reagan administration is trying to restrict government credit in general. He said OMB does not have the time or staff now to rewrite the circular so that agencies can understand it.