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FGMSD-78-34 1 (1978-05-15)

handle is hein.gao/gaobaaxgp0001 and id is 1 raw text is: DOCIIT RESUE 05958 - [13663681 Need To Improve Servicizg of Direct Loans under the Business Development Assistance I. ogras. FGHSD-78-34; B-189572. May 15, 1978. 3 pp. + 2 appendices (11 pp,). Report to Robert T. Hall, Department of Commerce: Assistant Secretary for Economi4: Development; by D. L. Scantlebury, Director, financial and General Management Studies Div. Issue Area: AccouDting and Financial Reporting: Collection of Amounts Owed (2803); Accounting and Financial Reporting: Internal Controls ower Receipts and Disbursements (2810). Contact: Financial and General management Studies Div. Budget Function: Miscellaneous: Financial manageent and Information Systems (100;). OrganizatioL Concerned: Economic Development administration. The Rconomic Development Administration (EDA) attempts to create permanent jobs in high unemployment areas by assisting businesses to expand or locate new facilities in affected areas. The assistance includes direct loans and guarantees of loans vith private lending institutions and is administered primarily through six regional offices. Loan servicing is undertaken by regional offices to assure loan repayment and detect weaknesses in the bozrowert' repayment ability. Findings/Ccnclusions: As of June 30. 1977, EDA had about $306 million receivable on 439 loans and a coutingent liability of $148 million on 46 loan guarantees. At that date, 299 of the loans outstaiding were in arrears or renegotiated. This percentage could be reduced if loan servicing were improved to correcr- tAe follcuing shortcomings: a large proportion of borrowers were not promptly contacted when repayments rjre late; field visits to borrowers were infrequent in spite of procedures which emphasize this activity; borrowers' financial statements *--re not regularly obtained and analyzed; and management and technical assistance was seldom offered to borrowers in difficulty. EDA officials stated that inadequate loan servicing resulted from greater emphasis on new loan application approval than on loan servicing. Recommen4ations: Regional offices should be required to: make better use of the information which identifies delinquent borrowers and plan appropriate fcllowup action, place greater emphasis on making regular visits to borrowers, provide management and technical assistance to borrowers as needed, and obtain borrowers' quarterly and annual financial statements and assure that the statements; are analyzed promptly. (Author/HT)

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