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092708 1 (1969-04-25)

handle is hein.gao/gaobacwou0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE u WASHINGTON, D C 20548 CIVIL DIVISION APR 25 1969 Dear Mr. Frick: The General Accounting Office has made a review of the overall effective interest rate earned by the Commodity Credit Corporation (CCC), Department of Agriculture, on repayments of grain price-support loans by producers. Our review was made pursuant to the Government Corporation Control Act (31 U.SQC 841). The review, made at the Kansas City Data Processing Center (DPC), Agricultural Stabilization and Conservation Service (ASCS), was di- rected toward evaluating CCC's policy of computing interest on price- support loans. The review pertained to 1967-crop grain loans and was made because, during an earlier review, we had noted that the effec- tive interest rate earned by CCC on scme loans was very low. We had noted, for example, that on a loan of $970,000 repaid to CCC in three installments, the effective interest rate was only 2.1 percent, due mainly to the fact that $503,000 of the loan was interest free. Our review showed that there is a need for CCC to revise its interest computation procedure and that there are potential benefits to be derived from verification of interest computations. Our comments on these matters follow, NEED TO REVISE INTEREST COMPUTATION PROCEDURE Our review of selected 1967-crop loan repayments showed that the amount of interest collected under the current method was an estimated $300,000 less than the amount that would have been collected under the previous method. Th2s difference is attributable mainly to CCC's policy of disregarding the month of repayment for interest computations, Under the grain price-support program prior to crop year 1964, a borrower was charged interest at a rate of 3.5 percent a year on the amount repaid for the actual number of days that a loan was outstand- ing. In 1964, the CCC Board of Directors adopted a policy which pro- vided for a simplified method of computing interest on price-support loans on grains and certain other commodities as specified by the

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