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. 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 A-11, 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 A-11 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) 395-7864.
C. Treatment of Reestimates in
Budgeting and Accounting
The budgetary treatment of
subsidy reestimates is described in OMB Circular No. A-11, 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
97-01, “Form and Content of Agency Financial Statements.”