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RCED-84-33 1 (1983-12-12)

handle is hein.gao/gaobabnfe0001 and id is 1 raw text is: * & UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 20548 RESOURCES. COMMUNITY. AND ECONOMIC DEVELOPMENT December 12, 1983 DIVISION B-205935 The Honorable Thomas E. Petri House of Representatives Dear Mr. Petri: Subject: Cost Information on USDA's Tobacco Program (GAO/RCED-84-33) In your April 13, 1983, letter and subsequent discussions with your office, you asked that we obtain cost information on the Department of Agriculture's (USDA's) tobacco price-support pro- gram, which is financed by the Commodity Credit Corporation (CCC). Specifically, you wanted to know (1) the costs of the tobacco pro- gram prior to passage of the No Net Cost Tobacco Program Act of 1982 (Public Law 97-218, July 20, 1982), (2) the costs incurred for the 1982 flue-cured and burley crops, and (3) the adequacy of the 1982 tobacco assessment required by the 1982 act to cover anticipated program costs, other than for administrative costs. In addition to responding to your specific questions, this report supplements our August 4, 1983, letter to you and provides general background information on the no net cost tobacco program. In summary: --CCC has made tobacco loans since 1938 totaling about $5 billion. Under the program, the tobacco serves as collat- eral for the price-support loan. A loss occurs when the sales proceeds from a crop of loan tobacco is insufficient to fully repay the loan. For those crops under loan sold through September 30, 1982, principal totaling over $58 million has not been recovered, resulting in losses to CCC. --CCC has incurred substantial unreported interest cost expenses because of the method it allows tobacco producers to use to repay their loans. CCC borrows funds from the Department of the Treasury to meet its daily cash require- ments, which includes financing for the tobacco price- support program. The Treasury charges CCC interest on the daily outstanding balance owed, which includes unpaid interest on borrowings from prior periods. In contrast, (>~~ / * (022874) (022874)

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