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AFMD-82-40 1 (1982-01-11)

handle is hein.gao/gaobabmmd0001 and id is 1 raw text is: U - TED' -'TS .- .CC UNTING CFICE * ; -/NASH!N~ Z-, D.C. 20548 ACCOU-WTIbG AND rINANCIAL. 6MAPwAGEM D4T DIVISION B-202690 The Honorable Everett Rank Executive Vice President Commodity Credit Corporation 117287 Department of Agriculture. Dear Mr. Rank: Subject: -Collection and Accounting for Accrued Interest on Commodity Credit Corporation Producer LoansI-JAFMD-82-40) As you are aware, we concluded our review of the CorLmodity Credit Corporation's (CCC) financial statements for fiscal year 1980 and issued our report (CED-91-137, August 13, 1981). As a result of information gathered during the course of our review, we believe CCC's practice of applying repayments of tobacco as- sociations' loans first to principal and then to accrued interest is inconsistent both with CCC's procedures for repaying its Treasury borrowings and with normal banking practices.' Under the CCC accounting system, accrued interest on tobacco loans is computed and maintained in memorandum records. Cash received from loan repayments is applied first to loan Frinci~al, then, after the principal is liquidated, to interest receivable. The memorandum record of accrued interest is reduced by the same amount. Cash received beyond liquidation of accrued interest is returned to the tobacco associations. However, if cash collections are insufficient, the memorandum account is closed and the receiv- able waived. CCC Docket HP 40a, as approved by the Secretary of Agriculture on January 28,.1966, provided that sales proceeds from 1966 and prior years' loans outstanding be applied first to loan principal and then to accrued interest. This change from the prior rule, which applied up to 2-1/2 cents of every dollar to interest and 97-1/2 cents to principal, was recommended as a means of elimi- nating unproductive computations and reducing recordkeeping. The ch-ange also resulted in recording interest income on tobacco

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