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089404 1 (1972-03-31)

handle is hein.gao/gaobacvjr0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 20548 CIVIL DIVISION MAR 1 1 1972 Dear Mr. Hamil: We have reviewed the policies and practices of the Rural Electrification Administration (REA) for advancing funds to borrowers to finance the construction, improvement, and operation of electric and telephone facilities which serve rural residents. Our review was made pursuant to the Budget and Accounting Act, 1921 (31 U.S.C. 53), and the Accounting and Auditing Act of 1950 (31 U.S.C. 67). Our review--made at REA headquarters and the offices of 21 selected borrowers in nine States--included an examination of records relating to advances of about $155 million to the 21 borrowers during the period February 1, 1968, to June 30, 1971. Funds advanced by REA to all bor- rowers during this period totaled about $1.7 billion. Our review showed that contrary to the Government policy that.-cash advances be timed to be in accord with a borrower's actual cash require- ments, REA's practice has been to advance funds to borrowers without sufficient consideration of the borrowers' cash requirements. Also REA's instructions are contrary to the Government policy that cash advances be made monthly or more frequently to meet borrowers' current disbursement needs, and do not provide for the use of letters of credit for borrowers who receive advances totaling $250,000 or more annually. As a result, Government funds have been disbursed in advance of the time the funds were actually needed by the borrowers thus accelerating Government borrowings and increasing related interest costs. On the basis of our review of the records for the 21 selected borrowers, we estimated that the Government could have realized inter- est savings of about $467,000 if REA had advanced the funds to the 21 borrowers only as needed. We are recommending that REA --revise its instructions to require that advances be made monthly or more frequently to meet borrowers' current disbursement needs, --establish a program for systematically monitoring the advance of funds to borrowers to provide assurance that advances are made in accordance with the borrowers' actual needs, and f/

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