Direct Loan System Requirements: Checklist for Reviewing ... · SYSTEM REQUIREMENTS Checklist for...

GAOUnited States General Accounting Office

Financial Management Series

April 2000 DIRECT LOAN SYSTEM REQUIREMENTS

Checklist for Reviewing Systems Under the Federal Financial Management Improvement Act

GAO/AIMD-21.2.6

GAO/AIMD-21.2.6 - Direct Loan System Checklist (4/00)

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CONTENTS

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Preface 3

Overview 5Authoritative Guidance 6How to Use This Checklist 7

Direct Loan System Requirements 9

Loan Extension 11Account Servicing 23Treasury Cross-Servicing 31Portfolio Management 35Delinquent Debt Collection/Troubled Debt Servicing 50Other Reporting Requirements 67

Figure

Figure 1: Agency Systems Architecture 5

Abbreviations

ACH automated clearinghouseCAIVRS Credit Alert Interactive Voice Response SystemCCLR Claims Collection Litigation ReportCFO Act Chief Financial Officers ActDCIA Debt Collection Improvement ActDOJ Department of JusticeEDA Electronic Debt AccountFCRA Federal Credit Reform ActFFMIA Federal Financial Management Improvement ActFMFIA Federal Managers’ Financial Integrity ActGMRA Government Management Reform ActIRS Internal Revenue ServiceJFMIP Joint Financial Management Improvement ProgramOGC Office of General counselOMB Office of Management and BudgetOPM Office of Personnel ManagementPCMI President’s Council on Management ImprovementSF standard formSFFAS Statement of Federal Financial Accounting StandardsTIN taxpayer identification numberTOP Treasury Offset Program

Page 2 GAO/AIMD-21.2.6 - Direct Loan System Checklist (4/00)

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PREFACE

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B-284928

The Federal Financial Management Improvement Act (FFMIA) of 1996 requires, amongother things, that agencies implement and maintain financial management systems thatsubstantially comply with federal financial management systems requirements. Theserequirements are detailed in the Financial Management Systems Requirements seriesissued by the Joint Financial Management Improvement Program (JFMIP) and in Officeof Management and Budget (OMB) Circular A-127, Financial Management Systems, andOMB’s Implementation Guidance for the Federal Financial Management ImprovementAct (FFMIA) of 1996, issued September 9, 1997. JFMIP intends for the requirements topromote understanding of key financial management systems concepts and requirements,to provide a framework for establishing integrated financial management systems tosupport program and financial managers, and to describe specific requirements ofindividual types of financial management systems.

We are issuing this checklist that reflects JFMIP’s revised Direct Loan SystemRequirements (June 1999) to assist (1) agencies in implementing and monitoring theirdirect loan systems and (2) managers and auditors in reviewing their direct loan systemsto determine if they substantially comply with FFMIA. This checklist is not required to beused in assessing the direct loan system. It is provided as a tool for use by experiencedstaff. This checklist, the JFMIP source document, and the two previously mentionedOMB documents should be used concurrently. Experienced judgment must be applied inthe interpretation and application of this tool to enable a user to consider the impact ofthe completed checklist on an entire direct loan system and whether the system, as awhole, substantially complies with requirements.

Additional copies of the checklist can be obtained from Room 1100, 700 4th Street. NW,U.S. General Accounting Office, Washington, D.C. 20548, or by calling (202) 512-6000, orTDD (202) 512-2537. This checklist replaces GAO’s previously issued exposure draft ofthe Direct Loan System Checklist (October 1999) and is available on the Internet onGAO’s Home Page (www.gao.gov) under “Other Publications.”

Jeffrey C. SteinhoffActing Assistant Comptroller GeneralAccounting and Information Management Division


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OVERVIEW

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The Federal Financial Management Improvement Act (FFMIA) of 1996 requires, amongother things, that agencies implement and maintain financial management systems thatsubstantially comply with federal financial management systems requirements. Thesesystem requirements are detailed in the Financial Management Systems Requirementsseries issued by the Joint Financial Management Improvement Program (JFMIP)1 andOffice of Management and Budget (OMB) Circular A-127, Financial Management Systems.JFMIP requirements documents identify (1) a framework for financial managementsystems, (2) core financial systems requirements, and (3) 16 other financial and mixedsystems supporting agency operations, not all of which are applicable to all agencies.Figure 1 is the JFMIP model that illustrates how these systems interrelate in an agency'soverall systems architecture.

Figure 1: Agency Systems Architecture

Source: JFMIP Direct Loan System Requirements (June 1999).

1JFMIP is a joint cooperative undertaking of the Office of Management and Budget, theGeneral Accounting Office, the Department of Treasury, and the Office of PersonnelManagement, working in cooperation with each other and with operating agencies toimprove financial management practices throughout the government. The program wasinitiated in 1948 by the Secretary of the Treasury, the Director of the Bureau of theBudget (now OMB), and the Comptroller General and was given statutory authorizationin the Budget and Accounting Procedures Act of 1950. The Civil Service Commission,now the Office of Personnel Management (OPM), joined JFMIP in 1966.


To date, JFMIP has issued the framework and systems requirements for the core financialsystem and 7 of the 16 systems identified in the architecture. (See figure 1.) 2

We are issuing this checklist that reflects JFMIP’s revised Direct Loan SystemRequirements (June 1999) to assist (1) agencies in implementing and monitoring theirdirect loan systems and (2) managers and auditors in reviewing agency direct loansystems to determine if they substantially comply with FFMIA. This checklist is notrequired to be used in assessing the direct loan system. It is provided as a tool for use byexperienced staff. This checklist, the JFMIP source document, OMB Circular A-127, andOMB’s Implementation Guidance for the Federal Financial Management ImprovementAct (FFMIA) of 1996, issued September 9, 1997, should be used concurrently.Experienced judgment must be applied in the interpretation and application of this tool toenable a user to consider the impact of the completed checklist on the entire direct loansystem and whether the system, as a whole, substantially complies with requirements.

Authoritative Guidance

OMB Circular A-127 and OMB’s implementation guidance provide the basis for assessingwhether agencies implement and maintain their financial management systems insubstantial compliance with FFMIA. The implementation guidance identifies variouscriteria that an agency must meet to substantially comply with these requirements. Oneof the criteria listed in the OMB guidance is the JFMIP systems requirements series.

The source of all the questions in this checklist is the JFMIP Direct Loan SystemRequirements (JFMIP-SR-99-8, June 1999). This JFMIP document is an update of theDecember 1993 JFMIP Direct Loan System Requirements document. This updateaddresses the goal of the President’s Council on Management Improvement (PCMI) andJFMIP to improve the efficiency and quality of financial management in the federalgovernment. Impetus was provided by the Chief Financial Officers (CFO) Act of 1990 andthe Federal Credit Reform Act of 1990 (FCRA), Government Management Reform Act of1994 (GMRA), and Federal Financial Management Improvement Act of 1996, whichstrongly reaffirmed the need for the federal government to provide financial systems thatfacilitate the effective management of government programs and services and the properstewardship of public resources.

The JFMIP source document states that functional requirements of the federalgovernment’s financial systems can be segregated into two general categories, mandatoryand value added. Definitions of the two terms are found on p. 6 of the source document.The source document states that all direct loan systems requirements are mandatory.This includes all statements described as “should” or “must;” therefore, all direct loansystems requirements listed in this checklist are mandatory.

2Thus far, the series includes the (1) Framework for Federal Financial ManagementSystems, (2) Core Financial System Requirements, (3) Inventory System Requirements,(4) Seized/Forfeited Asset System Requirements, (5) Direct Loan System Requirements,(6) Guaranteed Loan System Requirements, (7) Travel System Requirements, (8) HumanResources & Payroll Systems Requirements, and (9) System Requirements for ManagerialCost Accounting. In early 1998, JFMIP decided to initiate projects to update systemrequirements documents that were not current with regulations and legislation. JFMIPalso planned to initiate projects to complete the remaining systems requirements wherenone currently exist. As these projects are completed, we plan to issue related checklists.


How to Use This Checklist

OMB’s 1997 implementation guidance provides chief financial officers and inspectorsgeneral with a means for determining whether their agencies’ financial managementsystems substantially comply with federal financial management systems requirements.The annual assurance statement required pursuant to section 4 of the Federal Managers’Financial Integrity Act (FMFIA) is one of the means to assist agencies in thedetermination of substantial compliance. Agencies can also use this checklist as a tool tohelp determine annual compliance with section 4 of this act.3

Filling out this checklist will allow agencies to systematically determine whether specificsystem requirements are being met. In determining substantial compliance, agenciesshould assess the results of the completed checklist on the direct loan systemrequirements taken as a whole. “No” answers should not be viewed individually or takenout of context. Rather, “no” answers should be assessed as to the impact on the overallhuman resources and payroll systems and the extent to which the “no” answers inhibitthe entire human resources and payroll systems from meeting substantial compliance.

The checklist contains three columns with the first citing the question to be answered.Use the second column to answer each question “yes,” “no,” or “na.” Use the thirdcolumn to explain your answer. A “yes” answer should indicate that the agency’s directloan system provides for the capability described in the question. For each “yes” answer,the third column should contain a brief description of how the direct loan systemcontains the capability and should also refer to a source that explains or shows thecapability.

A “no” answer indicates that the capability does not exist. For a “no” answer, the thirdcolumn should provide an explanation and, where applicable, a reference to any relatedsupporting documentation. Such explanations could include the following examples:(1) the agency is working on modifying or implementing its direct loan system to have thecapability available in subsequent years or (2) management believes the capability is notcost-effective and will not enhance the direct loan system’s ability to manage operations.Cost-benefit studies, or other reasoning, that support a “no” answer should be identifiedin the explanation column. If there are no cost-benefit studies or other support, a fullexplanation should be provided.

Not every checklist may apply to each agency. Further, while a checklist may beapplicable to an agency, certain questions within the checklist may not be applicable.Answer such nonapplicable question(s) with “na” and provide an appropriate explanationin the second column.

3In addition, the CFO Council has charged the Financial Systems Committee withdeveloping implementation guidance for performing FFMIA compliance reviews. TheCFO Council and JFMIP plan to jointly issue the guidance.


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DIRECT LOAN SYSTEM REQUIREMENTS

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The direct loan system requirements document provides agencies with requirements thatencompass the full scope of requirements for an automated direct loan system. Eachagency must evaluate whether it is practical to fully automate all of these functions orwhether manual systems and processes are justified. Agencies are to use the functionalrequirements in planning their financial system improvement projects. As with the othersystems requirements documents, agencies will have to include their uniquerequirements, both technical and functional, with the requirements in the JFMIPdocument. Furthermore, each agency must develop its own integration strategy detailinghow the direct loan system will either interface or integrate with the core financialsystem and other applicable systems.

The six functions of the direct loan system are discussed below.

1. Loan Extension – Supports analysis of the applicant’s eligibility in accordancewith statutory and regulatory requirements. The function also supports thedevelopment of information to satisfy credit reform accounting and budgetingrequirements. (The checklist questions for this area are drawn from pp. 19-26 ofthe source document.)

2. Account Servicing – Supports routine invoicing and collection of debts. (Thechecklist questions for this area are drawn from pp. 27-32 of the sourcedocument.)

3. Treasury Cross-Servicing -- Occurs when Treasury’s Financial ManagementService (FMS) or a Treasury-designated debt collection center provides debtcollection services for other federal agencies. (The checklist questions for thisarea are drawn from pp. 33-36 of the source document.)

4. Portfolio Management – Supports the management and performance evaluation ofthe direct loan program and its portfolio. It also supports program financing andmanagement of portfolio sales. (The checklist questions for this area are drawnfrom pp. 37-47 of the source document.)

5. Delinquent Debt Collection/Troubled Debt Servicing – Includes the recovery ofdelinquent debt through the use of dunning letters, offset programs, collectionagencies, garnishment of nonfederal wages, litigation, and the termination ofcollection action on uncollectible debt. (The checklist questions for this area aredrawn from pp. 48-61 of the source document.)

6. Other Reporting Requirements -- Provides requirements for two types ofreporting—transaction history and external reporting requirements. (Thechecklist questions for this area are drawn from p. 62 of the source document.)

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Direct Loan System Requirements

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The checklist questions follow the JFMIP source document. It should be noted that notall questions will apply in all situations and, as with the use of any checklist, professionaljudgment should be exercised. Using the JFMIP source document and its “Appendix D:Glossary,” that defines terms used, along with the two previously mentioned OMBdocuments, will help ensure that the user is cognizant of the background informationnecessary to fully understand the questions.

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Loan extension

Yes/no

na Explanation

General requirements –

application screening process –

process loan application

1. Does the automated systemprovide for an electronicapplication process usingvarious media, such as a secureinternet application (Web site)?

2. Does the automated systemrecord critical credit applicationdata needed to supportapplication screening?

3. Does the automated systemprovide access to applicationinformation to all agency staffparticipating in the screeningand credit-granting decisions?

4. Does the automated systemprocess and record collectionsof fees remitted with theapplication in both the directloan system and the corefinancial system?



evaluate applicant program

eligibility

5. Does the automated systemcompare loan applicationinformation to agency programeligibility criteria?

6. Does the automated systemcheck the appropriate systemdata files to determine whetherthe applicant has submitted aduplicate application or has hada recent loan application

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Loan extension

Yes/no

na Explanation

rejected? These situations mayindicate attempts by applicantsto subvert agency creditpolicies.

7. Does the automated systemdocument that borrowers havecertified that they have beenunable to obtain credit fromprivate financial sources, wheresuch certification is a programrequirement?



conduct credit analysis

8. Does the automated systemprovide an automated interfacewith credit bureaus that allowsagencies to obtain applicantcredit history information(credit bureau report)?

9. Does the automated systemrecord credit historyinformation entered by agencystaff for credit bureaus that donot have the capability for anautomated interface?

10. Does the automated systemdocument that applicantfinancial data, repaymentability, and repayment historyhave been verified through theuse of supplementary datasources such as employmentand income data, financialstatements, tax returns, andcollateral appraisals, where thisis a program requirement?

11. Does the automated systemcompare the applicant’screditworthiness information to

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Loan extension

Yes/no

na Explanation

system-stored programcreditworthiness criteria and,where a program requirement,calculate a credit risk rating forthe applicant?

12. Does the automated systemdocument whether the CreditAlert Interactive VoiceResponse System (CAIVRS)identified the applicant as aborrower who isdelinquent/defaulted on aprevious federal debt? Thesystem should allow override ifthe agency determines that theaccount was referred to CAIVRSin error.



conduct funds control

13. Does the automated systemprovide the information neededto compute the credit subsidyamount associated with a loanusing projected cash flows andthe applicable Treasury interestrate in accordance with OMBCircular A-11, Preparation andSubmission of BudgetEstimates; A-34, Instructions onBudget Execution; andStatements of Federal FinancialAccounting Standards No. 2,Accounting for Direct Loans andLoan Guarantees?

14. Does the automated systemprovide an automated interfacewith the core financial systemto determine if sufficient fundsare available in the programaccount to cover the subsidycost and if available lendinglimits in the Financing Account

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Loan extension

Yes/no

na Explanation

are sufficient to cover the facevalue of the proposed loan?

15. Does the automated systemprovide an automated interfacewith the core financial systemto commit funds for the loan iffunds control is not done withinthe Direct Loan System?



approve/reject credit request

16. Does the automated systemupdate the applicationinformation store to reflect thestatus of the loan?

17. Does the automated systemaccept, identify, track, andreport supervisor overrides ofsystem-generatedacceptance/rejectionrecommendations?

18. Does the automated systemcreate and maintain a systemrecord of accepted and rejectedloan applications?

19. Does the automated systemgenerate a letter notifying theapplicant of rejection oracceptance of the loanapplication?


loan origination process –

book loan

20. Does the automated systemrecord loan terms and calculatedisbursement schedules andrepayment amounts andschedules as needed?

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Loan extension

Yes/no

na Explanation

21. Does the automated systemrecord the cohort and riskcategory, as defined in OMBCircular A-34, Instructions onBudget Execution, associatedwith the loan?

22. Does the automated systemassign a unique account numberto the loan that remainsunchanged throughout the lifeof the loan?

23. Does the automated systemsupport the generation of loandocuments for the borrower andthe agency?

24. Does the automated systemrecord information concerningthe loan booking process,including date of booking?

25. Does the automated systemrecord the applicable Treasuryinterest rate for the loan at thetime of obligation in accordancewith OMB Circular A-34,Instructions on BudgetExecution, and agency-specificguidelines? This rate is used insubsidy calculations.

26. Does the automated systemprovide an automated interfacewith the core financial systemto record the direct loanobligation, including theobligation for the subsidy, andliquidate commitmentspreviously recorded?

27. Does the automated systeminclude in credit bureaureporting all commercialaccounts in excess of a

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Loan extension

Yes/no

na Explanation

predetermined amount?


loan origination process –

disburse and account for funds

28. Does the automated systemcalculate and deduct the loanapplication and origination feefrom disbursements if notpreviously remitted by theapplicant?

29. Does the automated systemprovide the capability to cancel,thus deobligating, undisbursedloans?

30. Does the automated systemupdate debtor accounts toreflect management override ofoffsets?

31. Does the automated systemrecord information needed foreach loan disbursement,including amounts andapplicable Treasury interestrates, to support both thecomputation of accrued interestexpense on borrowings fromTreasury and subsidyreestimates?

32. Does the automated systemsupport the calculation of theborrowings? The actualorganization of the systemprocesses between the directloan system and core financialsystem is at the discretion of theagency.

33. Does the automated systemprovide an automated interfacewith the core financial system

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Loan extension

Yes/no

na Explanation

to initiate and record thedisbursement by cohort,establish the receivable, andrecord the movement of thesubsidy funds from the ProgramAccount to the FinancingAccount?

34. Is the automated system able toannotate on the borrowerrecord that a disbursement wasoffset by Treasury on behalf ofanother government agency?

35. If the direct loan system itselfhandles the paymentprocessing, does the systemmeet the requirements in theCore Financial SystemRequirements related to thisactivity and send summary datato the core financial system?

Collateral requirements

36. Is the automated system able tocapture the estimated usefuleconomic life of the pledgedcollateral and compare it to theproposed term of the loan?

37. Does the automated systemdocument that transactions overa predetermined amount have acollateral appraisal by alicensed or certified appraiser?

38. Does the automated systemcompute the loan-to-value ratioand flag those loans with a ratioexceeding 100% (or morestringent standards set by theagency)?

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Loan extension

Yes/no

na Explanation

Internal management

information

39. Are the internal managementinformation requirementsavailable to agency creditprogram managers anddesignated internal reviewofficials on a periodic or an asrequested basis?

40. Has the agency determined thespecific managementinformation needs necessary tomanage its credit programsbased on the agency missionand applicable statutoryrequirements?

41. In order to support these needs,does the system provide a user-friendly query tool (preferablygraphics-based) that facilitatesreporting rapidly on anyrequired data elements?

42. Does the agency maintainfinancial accountinginformation at appropriatelevels of summary forcomputational and reportingpurposes? The main levels are

• transaction,• loan history,• risk category,• cohort, and• account.

43. Has the agency determinedwhether the information shouldbe provided on hard copyreports or through systemqueries?

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Loan extension

Yes/no

na Explanation

Internal management

information –

approval and rejection

monitoring

44. Does the system provide at leastapproval and rejectionmonitoring managementinformation? The approval andrejection monitoring summaryprovides information about allcredit applications that wereapproved or rejected for a giventime period. The data arebroken down into separatestatistics on credit approvalsand rejections. The approvalsection indicates the number ofapproved applications and thepercentage of total applicationsthat they represent. The totalrequested amount and the totalapproved amount are shown foreach loan origination office.The rejected application sectioncontains the number of rejectedapplicants and the percentage oftotal applications that theyrepresent. The total of all loansrequested is also shown. Thisdata summary also lists theaverage time spent to process acredit application, from the timeof application until the finaldecision is made.

Internal management

information –

override exceptions

45. Does the system provide at leastoverride exceptionsmanagement information? Theoverride exceptions summaryidentifies all credit applicationdecisions that override actionsof the automated system

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Loan extension

Yes/no

na Explanation

processes. Overrides can occurin two situations: an applicationis approved even though theapplicant’s program eligibility orcreditworthiness assessment isnot acceptable under agencyprogram management lendingcriteria, or an application isrejected even though theapplicant’s program eligibilityand creditworthiness areacceptable under agencyprogram management lendingcriteria.

Internal management

information –

potential application fraud

46. Does the system provide at leastpotential application fraudmanagement information? Thepotential application fraudsummary identifies all creditapplications that matched oneor more pending or recentlyrejected applications.Comparison is based on fourcriteria: applicant name,applicant address, applicantphone number, and applicantTaxpayer Identification Number(TIN). If a pending applicationmatches any of these criteria,the data fields that matched andthe original application andpending applicationidentification numbers appearon this data summary withprimary applicationidentification information.

Internal management

information –

detailed transaction history

47. Does the system provide at least

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Loan extension

Yes/no

na Explanation

a detailed transaction history?The detailed transaction historysummary contains detailed loanorigination and account data.The data summary is used forcontrol and tracking, as an audittrail, and provides some of thedata necessary for the creditsubsidy calculation. Detailedtransaction history datasummaries include, at aminimum, loan origination anddisbursement data.

Internal management

information –

exceptions

48. Does the system provide at leastexceptions managementinformation? The exceptionssummary highlights exceptionsin loan origination processing.The summary should begenerated periodically or ondemand as needed. Examplesof exception data include loan-to-value ratios exceeding theallowable amount for a givenprogram and approved loansthat have not been disbursedwithin a specified period oftime.

Internal management

information –

disbursement management

summary

49. Does the system provide at leastdisbursement managementsummary information? Thedisbursement managementsummary periodically displaysall loan origination. Thesummary is used to monitor theperformance of each loan

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Loan extension

Yes/no

na Explanation

origination center and to trackthe volume and amount of loandisbursements by program.

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Account servicing

Yes/no

na Explanation


billing and collection process –

invoice debtor

1. Does the automated systemcalculate outstanding balancesfor each loan account invoiced,including principal, interest, latecharges, and other amountsdue?

2. Does the automated systemidentify loan accounts to beinvoiced based on agencyprogram invoicing criteria andloan account information, suchas amount outstanding, mostrecent payment, paymentamount due, and date due?

3. Does the automated systemprovide the capability to analyzeescrow balances to adjustrequired deposit amounts toprevent deficiencies in tax andinsurance deposits andpayments for housing and otherlong-term real estate loans?

4. Does the automated systemgenerate and transmit a bill,payment coupon, invoice, orother document that shows theborrower ID, amount due, datedue, the date after which thepayment will be considered late,and the current balance?

5. Does the automated systemprovide a means for debtors toinquire into their account statussuch as electronic inquiry usinga secure internet site, Web site,or automated telephoneprogram such as a voice

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Account servicing

Yes/no

na Explanation

response unit?



reporting

6. Is the system able to prepareand mail to borrowers byJanuary 31 of each year InternalRevenue Service (IRS) Form1098, Mortgage InterestStatements; IRS Form 1099-A,Acquisition or Abandonments ofSecured Property; IRS Form1099-C, Cancellation of Debt;IRS Form 1099-G, CertainGovernment Payments; andother IRS forms as required?

7. Is the system able to transmitinformation on interest paid andother reportable data to theIRS? The Debt CollectionImprovement Act (DCIA) nowauthorizes agencies to reportnondelinquent consumer andcommercial debt to creditbureaus, providing that theagency has processed thenecessary Privacy Act noticesfor consumer debt.



apply collections

8. Does the automated systemapply collections according toagency program receiptapplication rules to theappropriate liquidating orfinancing account? Collectionsources could include cash,preauthorized debit, check, orcredit card.

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Account servicing

Yes/no

na Explanation

9. Does the automated systemrecord a prepayment (the earlypayoff of the entire loan balanceor paying more than thescheduled monthly payment), apartial payment, a full payment,or indicate a late payment?

10. Does the automated systemidentify payments that cannotbe applied and document whythe payments cannot beapplied?

11. Does the automated systemapply components of payment(principal, interest, and latefees) in accordance withestablished business rules?

12. Is the automated systemcapable of automaticallycapitalizing interest inaccordance with establishedpolicy?

13. Does the automated systemprovide an electronic means toreceive payments such asAutomated Clearinghouse(ACH) and Electronic DebitAccount (EDA)?

14. Does the automated systemprovide the capability tocompare borrower’spreauthorized debits receivedfrom financial institutions andother external sources toexpected collections?

15. Does the automated systemprovide an automated interfacewith the core financial systemto record the collection?

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Account servicing

Yes/no

na Explanation

16. If the direct loan system itselfhandles the collectionprocessing, does the systemmeet the requirements in theCore Financial SystemRequirements related to thisactivity and send summary datato the core financial system?


account status maintenance

process –

direct loan modifications

17. Does the automated systemsupport the evaluation ofaccounts proposed formodification by the agency orborrower by comparing loandata to agency program loanmodification criteria?

18. Does the automated systemcalculate rescheduled loanterms, including repaymentamounts and schedules, whereappropriate?

19. Does the automated systemcalculate any change in thesubsidy amount as a result ofthe loan modifications?

20. Does the automated systemperform a funds control checkto verify the availability of asubsidy through an automatedinterface with the core financialsystem?

21. Does the automated systemproduce selected loan accountinformation listings for reviewby internal modification groups?

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Account servicing

Yes/no

na Explanation

22. Does the automated systemestablish a new loan accountand collateral record for eachnew debt instrument and assigna unique loan account numberto the new account record?

23. Does the automated systemmaintain a link between the newloan account established for thenew debt instrument and the oldloan account records?

24. Does the automated systemupdate the loan informationstore to reflect the modifiedstatus of the loan, includingchanges in the value or status ofany collateral?

25. Does the automated systemprovide an automated interfacewith the core financial systemto record pre-1992 and post-1991 direct loan modifications?

26. Does the automated systemgenerate a new loan documentthat displays informationconcerning the original andmodified direct loan?


27. Does the system documentsignificant changes to thecondition and value of anycollateral?

Internal management

information requirements

28. Is the internal managementinformation available to agencycredit program managers anddesignated internal review

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Account servicing

Yes/no

na Explanation

officials on a periodic or on anas requested basis?

29. Does the agency determine thespecific managementinformation needs necessary tomanage its credit programsbased on the agency missionand applicable statutoryrequirements?

30. Does the agency maintainfinancial accountinginformation at appropriatelevels of summary forcomputational and reportingpurposes? The main levels are:



Internal management

information requirements –


32. Does the system provide at leasta detailed transaction history?The detailed transaction historysummary provides detailed loanaccount data and paymenttransaction activity on a loan-by-loan basis to provide asufficient amount of the detailedtransaction history and shouldbe accessible online to permitroutine account servicing.Additional detailed transaction

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Account servicing

Yes/no

na Explanation

history should be maintained onmedia, such as microfiche orCD-ROM, which can be readilyaccessible by the user.

Internal management


standard management control/

activity

33. Does the system provide at leaststandard managementcontrol/activity information?The standard managementcontrol/activity summary tracksthe status of all loan accountsby summarizing loan activity atvarious critical points of theloan cycle such as status, i.e.,current, delinquent, incollection, etc. The collectionprocess summarizes paymentactivity to allow agencymanagement to monitor theeffectiveness of each activity inthe collection process.Delinquency information issummarized to highlightdelinquent debt (collateralizedand noncollateralized) andmodified debt. This datasummary is producedperiodically and providesinformation for preparing theStandard Form (SF) 220-9.

Internal management


exceptions

34. Does the system provide at leastexceptions managementinformation? The exceptionssummary identifies deficienciesthat have occurred in theroutine processing andmonitoring of account status.

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Account servicing

Yes/no

na Explanation

Examples of exceptions includeunapplied payments anddelinquent accounts not eligiblefor debt collection. Thissummary is generally producedperiodically.

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Treasury cross-servicing

Yes/no

na Explanation


identify accounts selected

1. Does the automated systemcompare delinquent loanaccount information tostatutory criteria to selectdelinquent loan accounts forpossible referral?

2. Does the automated systemgenerate notification to thedebtor of the agency’s intent torefer the debt to a debtcollection center?

3. Does the automated systemupdate the loan informationstore?

4. Does the automated systemidentify accounts that can nolonger be serviced by agencypersonnel?


monitor accounts referred to

the debt collection center

5. Does the system identifyaccounts with monetaryadjustments that must bereported to the debt collectioncenter?

6. Does the system provide ad hocreporting capability needed tomonitor the accounts referredto a debt collection center andthe amounts recovered?

7. Does the system interface withthe core financial system torecord receipts remitted to theagency?

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Yes/no

na Explanation

8. Does the system applycollections received from thedebt collection center accordingto agency application rules?

9. Does the system recordcollection fees in accordancewith agency programrequirements?

10. Does the system process agencyor debt collection centerrefunds, notify the debtcollection center as appropriate,and update the loan informationstore?

11. Does the system notify the debtcollection center ofadjustments, recalls of debt, orcollections received by theagency on the referred debt?

12. Does the system remove fromthe accounting and financialrecords accounts that the debtcollection center recommendsshould be written off?


use an agency authorized to

cross-service

13. Does the automated systemidentify the volume and type ofdebts serviced?

14. Does the automated systemidentify the tools used by theagency to collect its own debt?

15. Does the automated systemprovide 1 or more years ofinformation on the average ageof debt over 180 days?

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Yes/no

na Explanation

16. Does the automated systemcalculate the amount of debtcollected using variouscollection tools?

17. Does the automated systemaccrue late charges, as requiredby the referring agency?

18. Does the automated systemprovide information to thereferring agency sufficient forthe referring agency tosatisfactorily complete theReport on Receivables DueFrom the Public?

19. Does the automated systemtrack, by portfolio, age of debtreferred, dollar and number ofreferrals, and collections onreferred debts and report toTreasury monthly?

20. Does the automated systemprovide information to referringagency as needed, i.e.,collections received?

21. Does the automated systemprovide an ad hoc reportingcapability needed to satisfyreferring agencies’ uniqueinformation requests, such aslength of work out agreements,percent of debt that can becompromised, etc.?

Internal management


22. Is the internal managementinformation available to agencycredit program managers anddesignated internal reviewofficials on a periodic or on an

______________________________________________________________________________


______________________________________________________________________________



Yes/no

na Explanation

as requested basis?

23. Does the agency determine thespecific managementinformation needs necessary tomanage its credit programsbased on the agency missionand applicable statutoryrequirements?



25. Does the agency determinewhether the information isprovided on hard copy reportsor through system queries?

______________________________________________________________________________


______________________________________________________________________________


Portfolio management

Yes/no

na Explanation


portfolio performance process –

identify loans for evaluation

1. Does the automated systemcompare loan data to agencyprogram portfolio evaluationcriteria in order to identify loansthat require review orevaluation?

2. Does the automated systemcompare loan data to agencyprogram portfolio evaluationcriteria to identify loans withpotential for graduation toprivate sector financing?


portfolio performance process –

compute portfolio performance

measures

(Note: The information necessary tocompute some of the followingmeasures may not be readilyavailable for all loan programs ormay be available only at substantialexpense. Therefore, the value of agiven performance measure shouldbe examined within the context ofthe total cost to an agency of usingthat measure.)

3. Does the automated systemcompute and maintain programperformance information?Some examples of the types ofperformance measures anagency may want its automatedsystem to compute are:

• Number and dollar value ofloans made

• Average loan size

______________________________________________________________________________


______________________________________________________________________________



Yes/no

na Explanation

• Loans made by geographicalregion

• Number and amount ofdelinquent loans by keyindicators such as loan-to-value ratios

• Number and amount ofdefaulted loans by keyindicators such as loan-to-value ratios

• Number and amount ofrescheduled loans

• Amount of loan write-offs

4. Does the automated systemcompute and maintain financialmeasures to help assess thecredit soundness of a loanprogram? Some examples ofthe types of performancemeasures an agency may wantits automated system tocompute are:

• Average loan-to-value ratio(for collateralizedprograms)

• Current loans as apercentage of total loans

• Delinquent loans as apercentage of total currentloans

• Write-offs as a percentage ofseriously delinquent loans

• Overall portfolio risk rate• Loan loss rates• Recovery rates on defaulted

loans

5. Does the automated systemcompute and maintainefficiency measures to helpdetermine the effectiveness ofthe use of agency resources?Some examples of the types ofperformance measures an

______________________________________________________________________________


______________________________________________________________________________



Yes/no

na Explanation

agency may want its automatedsystem to compute are:

• Administrative cost per loanapproved

• Time required to process aloan application

• Administrative cost per loanserviced

• Administrative cost perdelinquent dollar collected

• Net proceeds on realproperty sold compared toappraised value


program financing process –

support Treasury borrowing

calculations

(Note: The organization of systemprocesses between the direct loansystem and the core financialsystem is at the discretion of theagency.)

6. Do the direct loan system andcore financial system processes,in combination:

• Execute SF-1151s andrecord amounts borrowedfrom Treasury to financeloans?

• Make adjustments toborrowings during the yearto reflect changes in originalestimates?

• Execute and recordTreasury borrowings tofinance interest payments toTreasury if insufficientfunds are available to makethe payment?

• Track the amount ofuninvested funds in the

______________________________________________________________________________


______________________________________________________________________________



Yes/no

na Explanation

Financing Account asneeded to support interestearnings calculations?

• Compute interest expenseon borrowings and interestearnings on uninvestedfunds?

• Execute and recordrepayment of principal usingSF-1151s and interest toTreasury using SF-1081s?

• Execute and record receiptof interest earnings fromTreasury on uninvestedfunds using SF-1081s?

• Provide an automatedinterface with the corefinancial system to recordall calculations?


support subsidy estimate –

loan characteristics

7. Does the system maintain datathat is predictive of loanperformance and subsidy costs?Loan characteristics maintainedin a loan system will varygreatly from program toprogram. For example, thevalue of collateral pledged maybe highly predictive of recoveryrates for some programs. Thefollowing is a list of some of theloan characteristics thatagencies should collect. Thisinformation should be obtainedfrom either the loan system, thecore financial system, or otherdata repositories within oroutside the agency.

• Loan number – Cash flowsshould be maintained at theindividual loan level, even

______________________________________________________________________________


______________________________________________________________________________



Yes/no

na Explanation

though analysis might oftenbe done at the cohort level.Cash flows, such as receiptsfrom property disposition,must be tracked back to theoriginal loan via the loannumber or other dataelement used to identify theoriginal loan.

• Date of obligation – Thisinformation is necessary forreviewing historical cohortdata, since cohorts aredefined by year ofobligation, and for relatingloan behavior to other datedvariables.



loan terms and conditions

8. Does the system maintain theactual loan terms, includingmaturity, interest rate, and up-front and/or annual fees? Thesedata are critical for comparingactual payments to scheduledpayments and for measuring therelationship between defaultrisk and loan terms andconditions. The system shouldbe able to calculate and report,as necessary, the aggregaterepayment schedule for acohort.



changes in loan terms and

conditions

9. Does the system record anychanges in terms and conditionsin addition to the original termsand conditions, not in place of

______________________________________________________________________________


______________________________________________________________________________



Yes/no

na Explanation

them? These data are neededboth to reestimate the subsidycost and to establish a basis forestimating new subsidies.



borrower location

10. Has the agency chosen tocollect several locationelements such as zip code,congressional district code,approving office code, andservicing office code forregional analysis?



borrower creditworthiness

11. Does the system includemeasures of the financialcondition of the business orindividual receiving the loan andpast credit experience ifapplicable sincecreditworthiness may be astrong predictor of defaults?



loan use

12. Does the system track theintended loan use for certainloan programs to reveal anysignificant variance in costdepending on the use of the loanproceeds?



program-specific data

13. Does the system recognize that

______________________________________________________________________________


______________________________________________________________________________



Yes/no

na Explanation

other loan characteristics mayalso be important in predictingdefault? The loan-to-value ratiois a critical data element forpredicting housing loandefaults; for student loans, thetype of educational institutionmay be important; the value ofcollateral is important in anumber of programs.



economic data

14. Does the system recognize thatnearly all loan programs areaffected by trends andfluctuations in the economy?The system should maintain theprimary economic factors thatinfluence loan performance.The critical indicators will varyacross programs. For housingloans, among other factors,property values and houseappreciation rates should bemonitored. For programs thatdetermine a borrower’s interestrates based on the borrower’sincome, all economic data onincomes should be maintainedin either the direct loan system,the core financial system, oranother data repository withinor outside the agency.



historical cash flows

15. Does the system maintain allcash transactions related toeach loan for several years toallow for trend analysis? Sincetransactions may be identifiedby a wide variety of

______________________________________________________________________________


______________________________________________________________________________



Yes/no

na Explanation

transactional codes, agenciesshould consider groupingtransactions by the type of cashflows that are projected in loanprogram subsidy estimates.These groupings will vary fromprogram to program dependingon the way cash flows areprojected for subsidy estimates.This information should beobtained from either the directloan system, the core financialsystem, or another datarepository (such as microficheor CD-ROM that permits easyretrieval of data) within oroutside the agency.

Listed below are suggestedgroupings that may be modifiedto fit actual loan programs.

• Approval amount.• Disbursement amount and

disbursement rate for eachyear.

• Up-front fee.• Annual fees.• Interest subsidies.• Prepayments including both

the timing and amount.• Defaulted loan amounts

including both the timingand amount.

• Delinquencies.• Recoveries (including both

the timing and amount) ondefaulted loans by recoverymethods such as the sale ofcollateral or offsetprograms.

• Scheduled principal andinterest payments.

• Actual principal and interestpayments.

______________________________________________________________________________


______________________________________________________________________________



Yes/no

na Explanation



support subsidy reestimates

(Note: System activities may belocated in either the direct loansystem or the core financial system,as appropriate.)

16. Does the automated systemsupport the reestimate of thesubsidy cost for each cohortand risk category of loans at thebeginning of each fiscal year inaccordance with OMB CircularA-34, Instructions on BudgetExecution and Statement ofFederal Financial AccountingStandards (SFFAS) No. 2,Accounting for Direct Loans andLoan Guarantees?

17. Does the automated systemmaintain cash flow data thatpermit comparison of actualcash flows each year (and newestimates of future cash flows),as well as historical data fromprior years to the cash flowsused in computing the latestloan subsidy estimate?

18. Does the automated systemcompare the current yearreestimated subsidy cost toprior years’ reestimated loansubsidy costs to determinewhether subsidy costs for a riskcategory increased ordecreased?

19. Does the automated systemtransfer loan subsidy from thoserisk categories with an excessof loan subsidy to those riskcategories in the same cohortthat are deficient in loan

______________________________________________________________________________


______________________________________________________________________________



Yes/no

na Explanation

subsidy to provide adequatefunding for each risk category?

20. Does the automated systemgroup those cohorts that needindefinite appropriation loansubsidy funds separately fromthose cohorts that have excessfunds?

21. Does the automated systemrequest an apportionment andobligate funds to cover thesubsidy increase for thosecohorts of loans that haveinsufficient subsidy?

22. Does the automated systemtransfer excess subsidy ofcohorts of loans to the SpecialFund Receipt Account?

23. Does the system support thereestimate calculation andprovide the necessary data torecord the re-estimate in thecore financial system?



analyze working capital needs

(Note: System activities may belocated in either the direct loansystem or the core financial system,as appropriate.)

24. Does the automated systemaccount for working capitalcash balances in accordancewith OMB guidance?

25. Does the automated systemrecord costs incurred that arefunded by working capital?

______________________________________________________________________________


______________________________________________________________________________



Yes/no

na Explanation

26. Does the automated systemcompute the amount ofTreasury interest earned byworking capital funds andprovide this amount to the corefinancial system?


portfolio sales process –

prepare portfolio for sale

27. Does the automated systemcompare loan information toagency program criteria toselect loans for inclusion in apotential sales pool?

28. Does the automated systemprovide the ad hoc querycapability needed to provideinformation on selected loans?

29. Does the automated systemrecord OMB/ Treasury approvalor disapproval of the sale/prepayment?



conduct prepayment program

30. Does the automated systemgenerate a prepayment offer tobe sent to eligible borrowers forparticipation in the prepaymentprogram?

31. Does the automated systemrecord receipt of commitmentletters from borrowers?

32. Does the automated systemprovide an automated interfacewith the core financial systemto record the receipt of aprepayment and the changes in

______________________________________________________________________________


______________________________________________________________________________



Yes/no

na Explanation

subsidy costs?



execute portfolio sale

33. Does the automated systemidentify loans with incompletedocumentation in the loaninformation store and generatea request for information toensure that loan files arecomplete?

34. Does the automated systemupdate the loan informationstore with any providedinformation?

35. Does the automated systemgenerate documents and otherinformation necessary tofinalize the sales agreementwith the purchaser?

36. Does the automated systemupdate the loan informationstore to identify loans sold usinginformation received from theunderwriter?

37. Does the automated systemprovide an automated interfacewith the core financial systemto record the sale of thereceivables, the proceeds,changes in subsidy costs, andcalculate the related gain or lossin accordance with SFFAS No.2, Accounting for Direct Loansand Loan Guarantees?


(Note: There are no collateralrequirements applicable to the

______________________________________________________________________________


______________________________________________________________________________



Yes/no

na Explanation

portfolio management function.)

Internal management


38. Has the agency determined thespecific managementinformation needs necessary tomanage its credit programsbased on the agency missionand applicable statutoryrequirements?

39. Does the agency maintainfinancial accountinginformation at appropriatesummary levels forcomputational and reportingpurposes? The main levels are



Internal management



41. Does the system provide at leasta detailed transaction history?The detailed transaction historysummary identifies, for eachprogram by cohort andcompiled on a loan by loanbasis, the number and amountof loans in each phase of thedirect loan life cycle. Theinformation provided includes

______________________________________________________________________________


______________________________________________________________________________



Yes/no

na Explanation

the number of loans, currentand delinquent, and the totalnumber and value of loans inthe portfolio.

Internal management


standard management

control/activity

42. Does the system provide at leaststandard managementcontrol/activity information?The standard managementcontrol/activity summaryprovides portfolio activity, withcomparisons to one or moreprior year loan activity, foragency management use inevaluating portfolio and creditmanagement performance.

Internal management


portfolio sale historical

payments

43. Does the system provide at leastportfolio sale historical paymentinformation? The portfolio salehistorical summary provides adetailed payment history foreach loan included in theportfolio selected for sale.Historical payment data arecritical in order to assess theinvestment value of theportfolio to be offered for sale,determining the structure andterms of the sale, andcalculating the gain or loss onthe sale.

Internal management


portfolio sale performance

______________________________________________________________________________


______________________________________________________________________________



Yes/no

na Explanation

44. Does the system provide at leastportfolio sale performanceinformation? The portfolio saleperformance summary providesthe rating agencies and financialadvisors with statistics to moreeffectively evaluate portfoliocharacteristics performance.Statistics include loan-to-valueratios, effective yields, and lossestimates.

Internal management


program credit reform status

45. Does the system provide at leastprogram credit reform statusinformation? The programcredit reform status summaryprovides the status of the fiscalyear’s credit reformappropriations and subsidylevels.

______________________________________________________________________________


______________________________________________________________________________


Delinquent debt collection/

troubled debt servicing

Yes/no

na Explanation


collection actions process –

report delinquent debt

1. Does the automated systemidentify delinquent commercialand consumer accounts forreporting to credit bureaus(preferably by electronicinterface) and CAIVRS bycomparing reporting criteria todelinquent loan data?

2. Does the automated systemcalculate outstanding balances,including interest, penalties, andadministrative charges, andinclude this information incredit bureau reports?

3. Does the automated systemgenerate (or include in demandletters) a notice to informconsumer borrowers of thereferral of a delinquent debt to acredit bureau and CAIVRS inaccordance with regulations?

4. Does the automated systemmaintain a record of eachaccount reported to creditbureaus to allow tracking ofreferred accounts?

5. Does the automated systemprepare monthly data onappropriate medium ofdelinquent debtors to beincluded in the CAIVRSdatabase?



contact with the debtor

______________________________________________________________________________


______________________________________________________________________________




Yes/no

na Explanation

6. Does the automated systemgenerate and transmit dunningletters to debtors with past dueloan accounts?

7. Does the automated systemidentify debtors who do notrespond to dunning letterswithin a specified time?

8. Does the automated systemtrack demand letters andborrower responses todocument borrower dueprocess notification (andborrower willingness and abilityto repay debt)?

9. Does the automated systemtrack and document debtorappeals received in response todemands for payment?

10. Does the automated systemprovide automated support tothe collection process? Supportcould be provided for activitiessuch as contacting a delinquentborrower by phone;documenting contacts with adebtor and the results;documenting installmentpayments, reschedulingagreements, and debtcompromise; generatingmanagement reports; andtracking the performance ofindividual agency collectors.



refer for Treasury offset

11. Does the automated systemidentify accounts eligible forreferral to the Treasury Offset

______________________________________________________________________________


______________________________________________________________________________




Yes/no

na Explanation

Program (TOP)?

12. Does the automated systemgenerate written notification tothe borrower that includes thefollowing?

• The nature and the amountof the debt.

• The intention of the agencyto collect the debt throughadministrative offset.

• An explanation of the rightsof the debtor.

• An offer to provide thedebtor an opportunity toinspect and copy therecords of the agency withrespect to the debt.

• An offer to enter into awritten repaymentagreement with the agency.

13. Does the automated systemidentify, at the end of thenotification period, the debtorswho remain delinquent and areeligible for referral?

14. Does the automated systemoffset delinquent debtsinternally before referral toTOP, where applicable?

15. Does the automated systemtransmit to TOP eligible newdebts and increase, decrease, ordelete previously reporteddebts?

16. Does the automated systemapply collections receivedthrough the TOP process todebtor accounts in accordancewith applicable paymentapplication rules?

______________________________________________________________________________


______________________________________________________________________________




Yes/no

na Explanation

17. Does the automated systemrecord offset fees in accordancewith agency programrequirements?

18. Does the automated systemupdate the loan informationstore to reflect TOP status?

19. Does the automated systemupdate the core financial systemto record collections from TOP?

20. Does the automated systemprocess agency refunds given toborrowers erroneously andoffset and transmit thisinformation to Treasurypromptly?

21. Does the automated systemrecord refunds given byTreasury and adjust the loaninformation store accordingly?



garnishment of non-federal

wages

22. Does the automated systemgenerate a written noticeinforming the borrower of theagency’s intention to initiateproceedings to collect the debtthrough deductions from pay,the nature and amount of thedebt to be collected, and thedebtor’s rights?

23. Does the automated systemdocument that the wagegarnishment order was sent tothe employer?

______________________________________________________________________________


______________________________________________________________________________




Yes/no

na Explanation

24. Does the automated systemprovide the ad hoc reportingcapability needed to monitor theamounts recovered throughnonfederal wage garnishment?

25. Does the automated systemdocument that the agencyprovided debtors a hearing,when requested?

26. Does the automated systeminterface with the core financialsystem to record receiptsremitted to the agency?

27. Does the automated systemapply collections receivedthrough wage garnishmentaccording to agency applicationrules?



refer to collection agencies

28. Does the automated systemcompare delinquent accountdata to agency programcollection agency referralcriteria to select delinquent loanaccounts for referral tocollection agencies?

29. Does the automated system sortand group delinquent loanaccounts based on type of debt(consumer or commercial), ageof debt, and location of debtor?

30. Does the automated systemcalculate outstanding interest,penalties, and administrativecharges for each delinquent loanaccount to be referred?

______________________________________________________________________________


______________________________________________________________________________




Yes/no

na Explanation

31. Does the automated systemassign selected delinquent loanaccount groupings toappropriate collection agenciesbased on collection agencyselection criteria for agencyprograms?

32. Does the automated systemdocument that the delinquentaccount has been referred to acollection agency?

33. Does the automated systemgenerate and receive electronictransmissions of accountbalance data and status updatesto and from collection agencies?

34. Does the automated systemrecord receipts remitted to thecollection agency andforwarded to the agency?

35. Does the automated systemupdate the loan informationstore to reflect receipts,adjustments, and other statuschanges, including rescheduling,compromise, and otherresolution decisions?

36. Does the automated systemaccept and match collectionagency invoices with agencyrecords?

37. Does the automated systemgenerate payment to thecollection agency for servicesrendered through the corefinancial system?

38. Does the automated systemrequest, reconcile, and recordreturned accounts from

______________________________________________________________________________


______________________________________________________________________________




Yes/no

na Explanation

collection agencies?

39. Does the automated systeminterface with the core financialsystem to record collectionsprocessed through collectionagencies?



refer for litigation activities

40. Does the automated systemcompare delinquent loanaccount information against theagency’s litigation referralcriteria to identify delinquentloan accounts eligible forreferral?

41. Does the automated systemsupport identification ofaccounts to be referred tocounsel for filing of proof ofclaim based on documentationthat a debtor has declaredbankruptcy?

42. Does the automated systemprovide an electronic interfacewith credit bureaus to obtaincredit bureau reports that willenable assessment of thedebtor’s ability to repay before aclaim is referred to legalcounsel?

43. Does the automated systemcalculate the outstandingbalance, including principal,interest penalties, andadministrative charges, for eachdelinquent loan account to bereferred to legal counsel?

______________________________________________________________________________


______________________________________________________________________________




Yes/no

na Explanation

44. Does the automated systemgenerate the Claims CollectionLitigation Report (CCLR)?CCLR is used to capturecollection actions and currentdebtor information and transmitthis information to theDepartment of Justice (DOJ).

45. Does the automated systemreceive electronic transmissionsof account data and statusupdates to and from DOJ’sCentral Intake Facility or theagency’s Office of GeneralCounsel’s (OGC) automatedsystem for referrals?

46. Does the automated systemupdate the loan status to (1)reflect referral for litigation sothat the loan can be excludedfrom other collection actionsand (2) alert the agency toobtain approval from counselbefore accepting voluntarydebtor payment?

47. Does the automated systemtrack filing of pleadings andother motions, including proofsof claims in bankruptcy, toensure swift legal action and tomonitor litigation activity?

48. Does the automated systemmatch agency litigation referralswith DOJ list of agencylitigation referrals?

49. Does the automated systemrecord and track recovery ofjudgment decisions?

50. Does the automated systemupdate the loan information

______________________________________________________________________________


______________________________________________________________________________




Yes/no

na Explanation

store to reflect receipts andadjustments?

51. Does the automated systeminterface with the core financialsystem to record any collectionsresulting from litigation?


write-offs and close-outs

process –

identify and document accounts

selected for write-off

52. Does the automated systemcompare delinquent loanaccount information to agencyprogram write-off criteria toselect delinquent loan accountsfor possible write-off?

53. Does the automated systemclassify debtors based onfinancial profile and ability torepay?

54. Does the automated systemhave indicators of the financialwell-being of a debtor, includingdebtor financial statements,credit bureau reports, andpayment receipt history?

55. Does the automated systemproduce a CCLR for each loanaccount to be referred to agencycounsel or DOJ for approval oftermination of collectionaction?

56. Does the automated systemupdate the loan status to reflectthe referral?

57. Does the automated systemupdate the loan information

______________________________________________________________________________


______________________________________________________________________________




Yes/no

na Explanation

store to reflect approval ordisapproval by agency counselor DOJ for termination ofcollection action?

58. Does the automated systemupdate the loan informationstore and provide an automatedinterface with the core financialsystem to record the write-off ofthe receivable?


write-off and close-out process –

monitor written-off accounts

59. Does the automated systemmaintain a suspense file ofinactive (written-off) loanaccounts?

60. Does the automated systemreactivate written-off loanaccounts at a system user’srequest if the debtor’s financialstatus or the account statuschanges?


write-off and close-out process –

document close-out of

uncollectible accounts

61. Does the automated systemcompare loan account data toagency close-out criteria toidentify debtor accounts eligiblefor close-out and 1099-Creporting?

62. Does the automated systemprepare and send a Form 1099-Cto IRS if the debtor has notresponded within the requiredtime?

______________________________________________________________________________


______________________________________________________________________________




Yes/no

na Explanation

63. Does the automated systemupdate the loan informationstore to reflect receipts,adjustments, and other statuschanges, including rescheduling,compromise, and otherresolution decisions?

64. Does the automated systemretain electronic summaryrecords of close-out accountactivity for a period of 5 yearsfor use in agency screening ofnew loan applications?

Collateral requirements –

foreclose on collateral process –

identify foreclosure candidates

65. Does the automated systemcompare delinquent accountdata to collateral foreclosureselection criteria?

66. Does the automated system sortand group selected delinquentaccounts by type of collateral(single family or multifamily,commercial, farm, etc.),location, loan-to-value ratios,and amount of debt?

67. Does the automated systemcalculate outstanding principal,interest, penalties, andadministrative charges for eachloan account selected forforeclosure review?


foreclose on collateral process –

foreclose

68. Does the automated systemtransmit a foreclosure notice tothe borrower?

______________________________________________________________________________


______________________________________________________________________________




Yes/no

na Explanation

69. Does the automated systemtransmit information necessaryfor the foreclosure to DOJand/or agency OGC, asapplicable?

70. Does the automated systemrecord the results of theforeclosure proceedings andtitle conveyance to the agency?

71. Does the automated systemprovide an automated interfaceof data on acquired collateral tothe property managementsystem for management andliquidation of the property?

72. Does the automated systemprovide an automated interfaceto the core financial system torecord the value of the propertyacquired and to reduce thereceivable amount?

73. Does the automated systemgenerate or provide theinformation needed to manuallyprepare IRS Form 1099-A,Acquisition or Abandonment ofSecured Property?


manage/dispose of collateral

process –

manage collateral

74. Does the automated systemgenerate payments to propertymanagement contractors forservices rendered?

75. Does the automated systemtrack, record, and classifyoperations and maintenanceexpenses related to the acquired

______________________________________________________________________________


______________________________________________________________________________




Yes/no

na Explanation

collateral?

76. Does the automated systemdocument rental income andother collections related to theacquired collateral?

77. Does the automated system postthe expenses and income to thecore financial system throughan automated interface?


manage/dispose of collateral

process –

dispose of collateral

78. Does the automated systemupdate the loan informationstore to record receiptsresulting from the liquidation ofacquired collateral and thedisposition of the collateral?

79. Does the automated systemidentify any deficiency balancesremaining for the loan aftercollateral liquidation for furthercollection activities?

80. Does the automated systemprovide an automated interfaceto the core financial system andthe property managementsystem to record disposal of theproperty and associatedreceipts?

Internal management


81. Has the agency determined thespecific managementinformation needs necessary tomanage its credit programsbased on the agency mission

______________________________________________________________________________


______________________________________________________________________________




Yes/no

na Explanation

and applicable statutoryrequirements?




Internal management



84. Does the system provide at leasta detailed transaction history?The detailed transaction historysummary provides detailedaccount information by cohortfor internal control and trackingand, in the absence of anelectronic interface to externalentities, may be used to transferdata from the agency to theexternal entity to facilitatedelinquent debt collectionactions. Separate datasummaries are produced foroffset referrals, collectionagency referrals, litigationreferrals, and write-offs andclose-outs.

______________________________________________________________________________


______________________________________________________________________________




Yes/no

na Explanation

Internal management


standard management control/

activity

85. Does the system provide at leaststandard managementcontrol/activity information?The standard managementcontrol/activity summary tracksthe status of all referral activityincluding initial referrals, statusupdates, and account balanceupdates. Separate and summarylists are produced for individualand total reporting and referralactivity.

Internal management


exceptions

86. Does the system provide at leastexceptions information? Theexceptions summary highlightsdeficiencies that have occurredin the referral process.Examples of subjects forperiodic exception informationinclude

• delinquent accounts eligiblefor reporting that have notbeen reported,

• defaulted rescheduled loans,• account referrals that

cannot be processed,• collection agency resolution

percentage,• accounts without

foreclosure or collateralmanagement activity for aspecified period of time,

• accounts referred forlitigation for which nolitigation decision has been

______________________________________________________________________________


______________________________________________________________________________




Yes/no

na Explanation

recorded, and• delinquent accounts without

activity for long periods oftime that have not beenwritten-off.

Internal management


offsetting agency description

87. Does the system provide at leastoffsetting agency descriptioninformation? The offsettingagency description summarycontains offsetting agencyrequirements to facilitate theoffset referral process. Thesummary includes content andtransmission specifications,reimbursement fee data,account selection criteria, andany other agency-specificdetails.

Internal management


trend analysis/performance

88. Does the system provide at leasttrend analysis/performanceinformation? The trendanalysis/performance summaryhighlights the effectiveness ofdifferent delinquent debtcollection techniques over time.The summary indicates theeffectiveness of using differenttypes of collection actions fordifferent credit programs.

Internal management


collection contractor

compensation

______________________________________________________________________________


______________________________________________________________________________




Yes/no

na Explanation

89. Does the system provide at leastcollection contractorinformation? The collectioncontractor compensationsummary provides monthlyaccount analyses to calculate,track, and verify compensationfor each contractor providingcollection services to an agency.This information aids in theverification of invoices receivedfrom the contractor andhighlights the differences in feeschedules among contractors.

Internal management


collateral management activity

and expense

90. Does the system provide at leastcollateral management activityand expense information? Thecollateral management activityand expense summary providesdetailed and summary data ofcollateral management activityand expense data for monitoringcollateral management activitiesthat affect the value of agency-owned property prior todisposition. All income earnedand expenses incurred while thecollateral is in the agency’spossession must be recordedand tracked to support theagency’s ability to recover theexpenses.

______________________________________________________________________________


______________________________________________________________________________


Other reporting requirements

Yes/no

na Explanation

Transaction history

1. Is the system capable ofproducing a completetransaction history of eachloan?

External reporting

requirements

2. Is the system capable ofsupporting the externalreporting requirements of OMBand Treasury, including thoseassociated with FCRA of 1990and the CFO Act of 1990? Theseexternal reports rely onsupplemental financial dataresident in the direct loansystem, although they aregenerated from the generalledger. The reports are

• SF-132, Apportionment andReapportionment Schedule

• SF-133, Report on BudgetExecution

• SF-220-9, Report onAccounts and LoansReceivable Due from thePublic

(Note: Other system outputs aredescribed in the FunctionalRequirements chapters of theJFMIP source document. Theseinclude items such as letters andinvoices to borrowers, SF-1151s andSF-1081s used in Treasuryborrowing, and delinquent debtinformation sent to credit bureaus,collection agencies, and DOJ.)

(922285)

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