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093293 1 (1972-08-30)

handle is hein.gao/gaobacxdh0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D C 20548 GENERAL GOVERNMENT DIVISION ADG 3 0 1972 Dear Mr. Eachon. The General Accounting Office has examined into the Small Business Administration's (SBA) lease guarantee program which was established to assist small businesses to secure leases for prime industrial, business or commercial space Under the enabling leg- islation, SBA is required to establish a uniform fee for its share of any guarantee based upon sound actuarial practices. -Our survey was conducted at the Washington, D C , headquarters office of SBA and was directed toward determining the adequacy of SBA's present fee structure in recovering expected losses and admin- istrative expenses of the program With the assistance of our actuarial science staff, default rates were developed based upon rental payments made by SBA on leases in default Our actuarial science staff compared actual default rates we developed with those rates supporting SBA's present fee structure Our actuaries concluded that the limited experience of the program is not sufficient to determine whether the current fee schedule is adequate Because further experience in the program is needed to determine the adequacy of the lease guarantee fee structure, we plan no further review work at this time. The following matter noted during our survey is presented for your consideration. INADEQUATE INFORMATION FOR MONITORING THE PROGRAM The Underwriting Division (UD) is responsible for developing policies and procedures for the lease guarantee program except for administration (servicing) of the lease guarantees which is per- formed by the Office of Loan Administration (OLA). The only information on defaulted leases available to UD and OLA personnel was contained in payment history files which pri- marily contain requests for payment and payment vouchers. Detailed examination of these records is required to develop default rates

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