Welcome back. In my last post, I started a conversation about the re-release of OMB Circular A-129 Policies For Federal Credit Programs And Non-Tax Receivables. As I mentioned then, this update was 12 years in the making and contains substantial revisions and additions. To give you an idea of the impact of the revisions, I will talk about each section individually. Below, I start with Section I.
Here is an excerpt from the Table of Contents from the new January 2013 version followed by my comments (in bold):
I. RESPONSIBILITIES OF DEPARTMENTS AND AGENCIES
- Office of Management and Budget (no material changes to this section)
- Department of the Treasury (no material changes to this section)
- Federal Credit Policy Council (other than changing the name from Federal Credit Policy Working Group, I don’t see many changes here)
- Department and Agencies (this section was definitely re-written in a way that is hard to reconcile word-for-word. Below is a summary of the new text)
Summary of new “Responsibilities: Departments and Agencies”
- It starts off with the standard stuff…Agencies must follow OMB circulars, FCRA, legislation must follow OMB circulars, etc. That kind of thing.
- We also see a regurgitation of concepts that have been slightly rewritten, but I can’t find material changes. This includes concepts around lender oversight, establishing of credit-related management Boards, and the submission of credit-related testimony.
- What changed?
- Overall, this section feels less oriented to “debt collection” and more oriented to “credit management” than it used to be.
- While the role of the agency CFO is still mentioned by name, it is now focused on asset management and debt collection, rather than the previous focus on the CFO’s role on a “Board” to oversee similar responsibilities. It might be a small change, but seems to suggest that the CFO will serve as an executive to oversee these duties, not as a member of a general Board or a Credit Review Board.
- There is a much stronger emphasis on the need for robust management and oversight structure, with clear and accountable lines of authority and responsibility. Also, the need for independent risk management functions and monitoring in terms of programmatic goals and performance within acceptable risk thresholds has a new emphasis that was not there before.
- This is a big one: the revision calls for a “strategic program review” once every two years. Under the old version, programs could operate indefinitely and claim to, more or less, passively remain in compliance with the circular. This requirement, by contrast, requires programs to actively prove their effectiveness and compliance every two years in a review that OMB will dictate. This change dramatically increases OMB’s oversight power and authority as it can use the report as a way to comment on any number of deficient areas of programmatic and credit management. In short, this new requirement forces every agency to stand up and be re-evaluated, not just hide out under the assumption of presumed compliance.
That’s all for now. Let’s pick up the next section in my next post.
CredTip: Ever want to run your reestimate before the new discount rates are released in September? Perhaps to get an early start? When performing reestimates prior to the release of new CSC2, use “Use All” instead of “Use 90” as “Reestimate Discount Rate.” “Use All” will force CSC2 to use all available actual interest rates to estimate SER when the most recent completed fiscal year's discount rates are not yet available.
Factoid: True or false: The final cohort Single Effective Rate is taken from the CSC2 output when the Interest Rate Reestimate is performed, not the Technical Reestimate. The first reader to post the right answer will get some Kudos in a future post. Good luck.