1. Federal Investments Seminar INVESTMENT/BORROWING/ FEDERAL CREDIT REFORM SUBCOMMITTEE Presented By: BILL FLEMING MAY 17, 2005

2. BACKGROUND Subcommittee set up to address intragovernmental differences for the following Reciprocal Categories (RCPs): Investments FMS developed this plan “to sufficiently identify and track intragovernmental material differences reported to FMS by the Federal Program Agencies (FPAs)”. Reciprocal Category Number Reciprocal Category Name Treasury SGL Accounts Partner SGL Accounts RCP 1 Securities Issued by Federal Agencies Under General & Special Authority 25**16** RCP 2 Federal Interest Receivable/Federal Interest Payable 21401340 1349 RCP 3 Exchange Interest Revenue & Expenses, Gains & losses on Federal Investments 6320 7211 7280 5311 5318 7111 7180

3. Background (continued) Borrowing Reciprocal Category Number Reciprocal Category Name Treasury SGL Accounts Partner SGL Accounts RCP 2 Federal Interest Receivable/Federal Interest Payable 21401340 1349 RCP 5 Revenue and Expense on Federal Borrowings 5310 5312 5317 5319 6310 6330 RCP 6 Gains and Losses on Federal Borrowings 7112 7212 7190 7290 RCP 17 Federal Loans Receivable/Federal Loans Payable 1350 1359 2510 2520 2590

4. Background (continued) Current members include: –Ella Hughes-Bailey - Treasury FMS –Richard Bennett - EPA –Stephanie Brown - Treasury - BPD –Susan.Chapman - Treasury - BPD –Scott Chayette - DOE –Trina Cook - Treasury - BPD –Dan Decena – Treasury/ office of the fiscal assistant secretary –William Fleming - Education –Veronica Freeman - DOL –Jeanne Johnson-Education OCFO –Gail Matthews - Education OCFO –Eileen Parlow - FASAB –Sheldonna Proctor - EPA –Keith Rake - Treasury - BPD –Wendy Stover-HUD –Hayward Trapps -Treasury FMS –Kristina Kaminski - SSA –Letha, Holliday - SSA

5. Future Actions Recruit additional members from agencies affected by investment/borrowing issues Review Intragovernmental Fiduciary Confirmation System (IFCS) reports for agencies with differences below current studies threshold to determine source of differences. Classify into groups already defined Discuss specific agency situations with BPD/FFB and agency personnel Produce narrative explaining differences by agencies

6. Future Actions (continued) Detail current and future corrective actions –Government-wide –Individual agency

7. Current Conclusions Bring Accounting Methodologies into Agreement –Accounting for Premiums and Discounts (Effective Interest, Level Yield, Straight Line, Etc.) –Zero Coupon Bonds Amortization Methodology (Effective Interest vs. Mark-to-Market) BPD staff reviewed the problem and issued a recommendation Treasury is currently reviewing the paper OMB Mediation Process for Unresolved Differences

8. Current Conclusions – (continued) Timing Differences –Quarterly Borrowing Differences - Encourage agencies to accrue interest expense/payables at least quarterly (possibly using BPD accruals as the basis of the entry) – Need to examine year-end cutoffs

9. Current Conclusions – (continued) Deposit Funds –Researching Accounting Guidance –Recommend changes to allow such investments to be coded as non-federal –Recommend that additional Deposit Fund guidance be added to the Fiduciary Business Rules

10. Current Conclusions – (continued) Alleviating Accounting/Coding Errors –Largest class of differences –Probably the easiest to materially reduce For most agencies, federal balances for the subject SGL accounts are almost exclusively Treasury (TP 20). Adequate information exists through IFCS and FedInvest.com and other BPD reports available to trading partners FACTS I file is simple and can be edited manually if necessary IFCS/FACTS I/Quarterly “F” file assistance is readily available from Treasury –Need to address quality control issues at individual agencies

11. Current Conclusions – (continued) Alleviating Accounting/Coding Errors (continued) –Send special report to FACTS I/ ”F”/GFRS preparer before transmission showing expected balances by SGL, Fund, and trading partner. IRAS provides feedback on IRAS/IFCS differences after the fact Close BPD/FFB IFCS window before quarterly “F” file windows to allow for additional oversight before reporting (IFCS window does close before the FACTS I window at year end.