INSTRUCTIONS FOR CALCULATING SUBSIDY REESTIMATES FOR THE FY 2002 BUDGET
(includes use of “reest02.wk4” worksheet)
A. Introduction
Reestimates of subsidy cost
estimates are made on all direct loans and loan guarantees that have been
disbursed. The purpose of reestimates
is to account for differences between actual and estimated cash flows, as well
as expected changes to future cash flows.
Reestimates must be made at the end of fiscal year for as long as the
loans are outstanding, unless a different plan is approved by OMB.
Reestimates are calculated
on a cohort basis. If risk categories
are used, then each risk category must be reestimated separately.
For FY 2002, subsidy
reestimates must be made using either version r.9, dated 8/1/94, of the OMB Credit
Subsidy Model or the November 26, 1999, rev.1 version of the OMB Credit Subsidy
Calculator.[1] Do not use any other version to calculate
reestimates. The following
framework is used to calculate reestimates:
1. Starting points  (a) The starting point for comparison
and calculating the cumulative reestimate is always the original subsidy rate
estimate (%) made at the point of loan obligation (or guarantee
commitment). (b) The starting point for
updating cashflow inputs to the OMB credit subsidy model will always be the
cashflows from the most recent Budget, which may have been updated for any
modifications as defined in OMB Circular A11, Section 85.3(n) and undergone
previous reestimates. Hence, the
cashflows from the most recent reestimate must be saved and maintained in your
files in order to calculate subsequent reestimates.
2. Interest rate reestimate  An interest rate reestimate is
made, at a minimum, once after the cohort (or risk category) is 90%
disbursed. This type of reestimate
accounts for the difference between: (a) the interest rate assumption used to
calculate the subsidy rate for budget execution (when funds were obligated) and
(b) the actual average interest rate(s) prevailing during the year(s) of
disbursement.
3. Technical reestimate  This type of reestimate is made
every year as long as loans in that cohort remain outstanding, unless a
different plan has been approved by OMB.
A technical reestimate accounts for changes in technical estimates that
underlie the cashflow estimates.
Reestimated factors include: disbursements, defaults, delinquencies,
repayment patterns, borrower interest rates, recoveries, fees, and other cash
flow elements. To the extent that
future cash flows are influenced by economic assumptions (in programs with
variable interest rates, for example), then the reestimate may be updated for
the current budget economic assumptions, if it is deemed that this will make a
material change in the estimates.
4. Cumulative (total) reestimate  The difference between the
original subsidy rate estimate and the reestimated subsidy rate estimate. {Special note: If there has been a
modification as defined in OMB Circular A11 Section 85.3(n), and a subsidy for
this modification has been calculated and disbursed to the cohort or risk
category being estimated, then the cumulative reestimate will include the
dollar amount of the modification outlays.
However, the dollar amount that has been outlayed from the program to
the financing account for the modification will be subtracted from the
cumulative reestimate before the current year reestimate is calculated.}
5. Current year reestimate  The current year reestimate is
calculated by starting with the cumulative reestimate and subtracting: (a) all previously apportioned amounts for
reestimates, plus (b) any previously apportioned modification outlays (as
described above). The residual is the
amount of reestimate that will appear in the current year column of the Budget
and be apportioned in the current year.
6. Interest on reestimates  Interest on reestimates must be
calculated from the time of disbursement to the point in time when the
reestimate is actually paid from the program account to the financing
account. This is because reestimates are
calculated and paid in a year following loan disbursement, but are discounted
to the time of loan disbursement.
Hence, it is necessary to pay interest on the reestimates to keep the
financing account “whole.” This is the
interest which would have accrued for the amount of time that the reestimate
would have been in the financing account, if it had actually been paid at the
time of loan disbursement.
B. Instructions and Summary Spreadsheet
The following pages describe the steps to be taken to make both
types of reestimates and interest on reestimates above. OMB program examiners have been provided a
summary spreadsheet to accompany these instructions (filename:
“reest02.wk4”). This reestimate spreadsheet
can be enhanced for individual agency use.
If your agency has enhanced the file and would like to share your ideas
with other agencies, please contact Courtney Timberlake at (202) 3957864.
C. Treatment of Reestimates in Budgeting and Accounting
The budgetary treatment of
subsidy reestimates is described in OMB Circular No. A11, Sections 85.3(t) and
85.5(f). Reestimates are also presented
in agency financial statements (and are included in preparing the financial
statements for individual accounts published in the Budget). The use of these instructions for financial
statements is explained in Statement of Federal Financial Accounting Standards
(SFFAS) Number 2, “Accounting for Direct Loans and Loan Guarantees,” as amended
by SFFAS Number 18. Further information
on reporting reestimates in financial statements is available in OMB Bulletin
9701, “Form and Content of Agency Financial Statements.”
D. Reestimates
Step
1. INFORMATION NEEDED FOR ALL
REESTIMATES Assemble
the following information for each cohort and, if applicable, for each risk
category which has disbursed loans: a. the original subsidy rates (and cash flows) used for budget execution (calculated at the time of obligation or commitment), b. the most recent interest rate reestimate subsidy rate and technical reestimate subsidy rate, for cohorts for which reestimates have already been performed, c. the dollar amount of actual disbursements and subsidy outlays for each year, d. the actual annual average interest rate(s) for the year(s), if calculating an interest rate reestimate (see Attachment A),[2] e. any actual data on cash flows and other data that supports changes in expectations about the estimated future cash flows (NOTE: PLEASE DO NOT CHANGE THE CASH FLOWS UNTIL STEP 4), and f. number of months between the (1) end of FY00 and (2) expected date for transferring the reestimate amount (used for calculating interest on reestimates). 
Step
2. STARTING POINT FOR ALL REESTIMATES The
weightedaverage “original” subsidy rate for a cohort or risk category is the
rate used in budget execution to calculate subsidy outlays to the financing
account, using the estimated discount rate(s) and forecast technical
assumptions. SPREADSHEET ENTRY: Enter the subsidy rate (in decimal form)
in column B of summary spreadsheet for each cohort or risk category. SPREADSHEET ENTRIES: Enter the dollar amount of loan
disbursements made in FYs 9200 for this cohort or risk category in columns E
– M of the summary spreadsheet. 
Step
3. STARTING POINT FOR INTEREST RATE
REESTIMATE Interest
rate reestimates on a cohort must be calculated, at a minimum, once when the cohort
is 90% disbursed. If
you are not calculating an interest rate reestimate at this time: If an interest rate reestimate has been calculated for the cohort:
SPREADSHEET ENTRY: Enter in
column C of the summary spreadsheet the most recent interest rate reestimate
subsidy rate. If no interest rate reestimate has been calculated for the cohort: SPREADSHEET ENTRY: Enter in
column C of the summary spreadsheet your original weighted average subsidy
rate calculated in Step 2, and skip to Step 6. If
you are calculating an interest rate reestimate: For
FYs 9200 use the actual annual average interest rate as the discount rate
for the risk category in an appropriate version of the OMB Credit Subsidy
Calculator (for calculating reestimates for the FY02 Budget this is 8/1/94
r.9 or 11/26/99 rev.1). DO NOT ADJUST ANY CASHFLOWS AT THIS TIME. Do not update forecasted discount rates
(discount rates beyond FY00). ACTION: Calculate a new
subsidy rate using the OMB Credit Subsidy Calculator. SPREADSHEET ENTRY: Enter
the result of this calculation in column C of the summary spreadsheet. 
Step
4. INTEREST RATE REESTIMATE Calculate
the difference in percentage points between the “original” subsidy rate
estimate (in Step 2) and the “new” subsidy rate estimate (as calculated in
Step 3). AUTOMATIC CALCULATION: The summary spreadsheet calculates this
difference automatically and places the result in column D. 
Step
5. INTEREST RATE REESTIMATE Calculate
the interest rate reestimate in dollars  Multiply the difference calculated
in Step 4 (the change in percentage points) by the TOTAL AMOUNT DISBURSED
IN FYs 92  00 (total shown in Step 2). AUTOMATIC CALCULATION: The summary spreadsheet calculates this amount
in column N. 
Step
6. STARTING POINT FOR TECHNICAL
REESTIMATE Calculate
the new subsidy rate estimate for the technical reestimate. Recalculate the subsidy rate estimate
using the same interest rate(s) as in step 3 (if you have performed an interest
rate reestimate), or the original interest rate assumptions (if you have not
performed an interest rate reestimate), as well as any actual cash flows and
revised technical assumptions for future cash flows. Include: … o Actual
data ‑‑ all actual data which is known (for example, fee
receipts, interest received, principal repaid, and disbursement amounts). o Revised technical assumptions
‑‑ any new assumptions about borrower interest rates, defaults,
recoveries, payments of claims, etc., for the risk category. o Revised
economic assumptions  to the extent that future cash flows are
influenced by economic assumptions (in programs with variable interest rates,
for example), then the reestimate may be updated for the current budget
economic assumptions, if it is deemed that this will make a material change
in the estimates. These new assumptions should be
used to modify the cash flows. The
revised cash flows should be used to recalculate the subsidy rate for new
technical assumptions. ACTION: Calculate a new subsidy rate using the OMB
Credit Subsidy Calculator. SPREADSHEET ENTRY: Enter results in summary spreadsheet
column O. 
Step
7. TECHNICAL REESTIMATE Calculate
the difference in percentage points between the revised subsidy rate estimate
for interest rates (from Step 4) and the revised subsidy rate estimate for
technical assumptions (from Step 6). AUTOMATIC CALCULATION: The summary spreadsheet automatically
calculates this difference in column P.
If you did not calculate an interest rate reestimate, then column O
will equal column R. 
Step
8. TECHNICAL REESTIMATE Calculate
the technical reestimate in dollars.
Multiply the difference in subsidy rate calculated in Step 7 (the
percentage points) by the TOTAL AMOUNT DISBURSED IN FYs 92  00 (total
shown in Step 2). {Note: For programs that disburse all loans in
the same year as obligation/commitment, the amounts disbursed will be shown
in that one year. Hence, for these
programs there would be no loans disbursed in FYs 93 – 00 from the FY 92
cohort, for example.} AUTOMATIC CALCULATION: The summary spreadsheet calculates this
difference in column Q. 
E. Budget presentation
Step
9. TOTAL OF ALL INTEREST RATE
REESTIMATES AND ALL TECHNICAL reestIMATES FOR THE CURRENT YEAR Calculate
total reestimate amounts to display for Budget P&F. From
the total reestimate for each cohort or risk category, subtract the (a)
cumulative reestimates (EXCLUDING INTEREST ON REESTIMATES) that have been
shown in previous budgets, and were apportioned for in prior years; and (b)
outlays which have been apportioned for credit modifications as defined by
OMB Circular A11, Section 85.3(n). P&F
entries: For positive (upward)
reestimates[3], the total results of all
interest rate and technical/default calculations for all cohorts or risk
categories within an account are displayed in the current year on the
following P&F schedule lines in the credit program account: 00.05 Reestimates of direct loan subsidy (total of all direct loan
reestimates) 00.07 Reestimates of loan guarantee subsidy (total of all loan
guarantee reestimates) Downward
reestimates are shown as a payment from the financing account to a receipt
account, and appear as an obligation line:
“Payment of downward reestimate” in the financing account in the
current year. Downward reestimates
are displayed on the following P&F schedule lines in the financing
account: 08.02 Payment of downward reestimate to receipt account 08.04 Payment of interest on downward reestimates to receipt account SPREADSHEET
ENTRIES:
Enter in column T the amount of reestimates (EXCLUDING INTEREST ON
REESTIMATES) that have been shown in previous budgets, and were apportioned
in FYs 9300. Enter in column U the
amount of outlays that have been apportioned for credit modifications
apportioned through FY 00. AUTOMATIC
CALCULATION: The summary spreadsheet calculates the
total reestimate amount automatically and places the result of interim
calculations in columns R, S, and the final result in column W. 
Step 10.
INTEREST ON REESTIMATES To calculate interest on reestimates, find the
interest rate in Attachment A for the maturity and fiscal year of the cohort
or risk category being reestimated. P&F entries: For positive (upward) reestimates, the
total results of the interest on reestimates calculations for all cohorts or
risk categories within an account are displayed in the current year on the
following P&F lines in the credit program account: 00.06 Interest on reestimates of direct loan
subsidy 00.08 Interest on reestimates of loan guarantee
subsidy Downward
reestimates are shown as a payment from the financing account to a receipt
account, and interest on these downward reestimates appears as an obligation
line: “Payment of interest on
downward reestimate” in the financing account in the current year. Downward reestimates are displayed on the
following P&F schedule lines in the financing account: 08.02 Payment of downward reestimate to receipt account 08.04 Payment of interest on downward reestimates to receipt account SPREADSHEET
ENTRIES: Enter this interest rate
in column X of the summary spreadsheet.
Enter in cell K4 the number of months between the end of FY 00 and the
time the reestimate is expected to be apportioned. AUTOMATIC
CALCULATION: The summary
spreadsheet then calculates the interest on reestimates. The result is placed in columns Y and Z of
the spreadsheet. AUTOMATIC
CALCULATION: The summary
spreadsheet also calculates all P&F entries and places the result in
column AB. 
Attachment A
Actual Annual Average Interest Rates
The following are the actual annual interest rates.
Fiscal Year 
Maturity Category 


1 year or less 
More than 1 year,
less than 5 years 
5 years or more,
less than 10 years 
10 years or more,
less than 20 years 
20 years or more 
1992 
4.06 
5.52 
6.93 
7.59 
7.59 
1993 
3.25 
4.58 
5.90 
6.65 
6.65 
1994 
4.06 
5.36 
6.21 
6.77 
6.77 
1995 
5.99 
6.78 
7.11 
7.26 
7.39 
1996 
5.45 
5.96 
6.33 
6.64 
6.77 
1997 
5.50 
6.19 
6.51 
6.77 
6.89 
1998 
5.34 
5.57 
5.68 
5.85 
5.98 
1999 
4.76 
5.11 
5.36 
5.67 
5.81 
2000 
TBD 
TBD 
TBD 
TBD 
TBD 
Notes:
1. All rates are effective annual yield rates. They are used in credit subsidy cost calculations, to reestimate credit subsidy cost, and to calculate the interest income and expense of the financing accounts.
2. For 1992‑1994, the 10‑20 year and 20+ year categories were combined into one category with a single interest rate. Starting in 1995, interest rates for these categories are computed separately.
[1] The November 26, 1999, rev.1 version of the Credit Subsidy Calculator has been revised to allow for calculation of reestimates using the same methods that are used by r.9.
[2] The FY 2000 actual average interest rate will not be available until the end of FY 2000, around late September or early October of 2000.
[3]Note: If the results provide negative (downward) reestimates, the reestimate will be shown in the credit financing account and a receipt account. Specific instructions on the budgetary treatment of subsidy reestimates are provided in OMB Circular No. A11, Sections 85.3(t) and 85.5(f).