Session 69

1. Session 69 Blazing the Guaranty Agency Financial Report(ED Form 2000) Sandra Simmons Katrina Turner

2. Agenda • When to Submit the Guaranty Agency Financial Report (GAFR) • Uses of the GAFR Data • Changes to GAFR Reporting as a Result of the Higher Education Reconciliation Act (HERA) • Clarification on Rehabilitated Loan Reporting • Verification and Analysis of the Annual GAFR Data Submitted • Reconciliation of Annual GAFR Data to Guaranty Agency’s Financial Statements

3. 1. When to Submit the Guaranty Agency Financial Report (GAFR) • Monthly • Claims submitted within 30 days • Collections within 45 Days • Monthly/Quarterly required monthly • Annual • Data is reported as of September 30 on an accrual basis and due by December 1.

4. 2. Uses of GAFR Data • Receive and make payments to guarantors; • Monitor guarantor’s financial activities; • Collection recovery rate; • Federal receivable balance; • ED’s financial statements; • Reasonability to NSLDS data; • Minimum Reserve Ratio; and • Trigger Rate.

5. 2. Uses of GAFR Data (Con’t.) Minimum Reserve Ratio* If a guarantor drops below the minimum reserve ratio of .25% for two consecutive years, they are required to submit and implement a Management Plan acceptable to the Department. * Higher Education Act of 1965 (HEA, as amended), Section 428(c)(9)(C)

6. 2. Uses of GAFR Data (Con’t.) Minimum Reserve Ratio Calculation • Historical* method of calculating the minimum reserve ratio is: Federal Fund Balance (AR-26) divided by Original Principal Outstanding (OPO) * The historical calculation is used for evaluating a guaranty agency’s financial condition.

7. 2. Uses of GAFR Data (Con’t.) • Currently, the ratio published on the FP Portal is: Federal Fund Balance (AR-26) + Loan Loss Liability (AR- 56) + FY06 and FY07 Reserve Recalls Not Returned divided by Original Principal Outstanding (OPO)

8. 2. Uses of GAFR Data (Con’t.) • Original Principal Outstanding (OPO) = AR-1 (-) AR-2 (+) AR-3 (-) AR-4 (-) AR-5 (+) AR-6 (-) AR-7 (-) AR-8 (-) AR-9 (-) AR-10 (-) AR-11 (-) AR-12

9. 2. Uses of GAFR Data (Con’t.) • Trigger Rate • If the guarantor’s reinsurance claims paid by the Department reaches 5% or 9% (trigger rate) of the loans in repayment at the end of the preceding year, then the reimbursement rate on claims are reduced. • The method for calculating the Trigger Rate is: • Trigger Basis Amount divided by Loans In Repayment

10. 2. Uses of GAFR Data (Con’t.) • Trigger Basis Amount = • Dollars Paid CFY (-) Rehab Loan Refunds (-) Refunds • Loans in Repayment @ 9/30 of the prior year = • AR-1 (-) AR-2 (+) AR-3 (-) AR-4 (-) AR-5 (+) • AR-6 (-) AR-7 (-) AR-8 (-) AR-9 (-) AR-10 (-) • AR-11 (-) AR-12 (-) AR-13 (-) AR-14

11. 2. Uses of GAFR Data (Con’t.) Category Calculations Loans in Repayment (see calculation above) 5% Trigger (In Repayment) 5% of Calculated Value Above 9% Trigger (In Repayment) 9% of Calculated Value Above Amount Requested Fiscal Year to Date FYTD Total MR-1 “Other Amount” Dollars Paid Fiscal Year to Date FYTD Total MR-1 “Principal Amount” Rehabilitated Loans Applied If a GA has an Rehabilitation Agreement – Cumulative total of MR-10 Rehabilitated Loan Principal Amount. If a GA has no Rehabilitation Agreement this Field would be zero. Refunds Applied All GA’s receive credit for Partial Refunds (MR-7-A). GA’s with Repurchase Agreement – Receive credit for Repurchases – CFY, MR-5-A, Defaults. W/agreement total for MR-5-A plus MR-7-A. W/out agreement total for MR-7-A only. Trigger Basis Amount Represents the fiscal year to date amount of Dollars Paid FY to Date reduced by the amounts calculated for Rehabilitated Loans Applied and Refunds Applied. Percent of Request Paid Dollars Paid FY to Date divided by Amount Requested FY to Date. Trigger Rate Trigger Basis Amount divided by Loans in Repayment.

12. 3. Changes to GAFR Reporting as a result of the HERA • Insurance/Reinsurance Rates • Lender Insurance (Loan 1st Disbursed On/After 7/1/06)  Lender 97%; GA 95% • Lender Insurance for Exempt Claims (Loan 1st Disbursed On/After 7/1/06) Lender 100%; GA 100% •  Exceptional Performer (Claim Submitted On/After 7/1/06) Lender 99%; GA 95%

13. 3. Changes to GAFR Reporting as a result of the HERA (Con’t.) • 30-Day Claim Filing • New Supplemental GA Report • GA Claims • VFA Weekly • Supplemental Detail Reports

14. 3. Changes to GAFR Reporting as a result of the HERA (Con’t.) • Secretary’s Fee on Consolidation Loans • FFEL to FFEL • FFEL to DL • Monthly GAFR Reporting

15. 3. Changes to GAFR Reporting as a result of the HERA (Con’t.) • Account Maintenance Fee • FY 06 • Spending cap $220 million • Payment methodology • Authority to transfer funds rescinded 7/1/06 • FY 07 • No spending cap

16. 3. Changes to GAFR Reporting as a result of the HERA (Con’t.) • Federal Default Fee • Effective on all loans guaranteed on or after 7/1/2006, a fee of 1% on all loans guaranteed must be deposited into the Federal Fund • This amount is reported in line AR-19 on the Annual GAFR.

17. 4. Example of Rehabilitated Loan Reporting

18. 5. Verification of Annual GAFR Reporting • Loans in Repayment (CFY>PFY) • Fed Fund Bal AR-26 PFY = AR-15 CFY • Reinsurance AR-17 < AR-21 Claims pd. • DAF transfers AR-23 = AR-30 • Operating Fund Bal AR-40 PFY = AR-29 CFY • Verify amounts reported for LPIF and AMF • Validate AR-56

19. 5. Verification of Annual GAFRReporting (Con’t.) • Compare Monthly Data Elements to Annual • Reinsurance from ED (AR-17) • MR-16 = AR-51 – AR-54 • Collections (AR-20 and AR-25) • Secretary’s Share

20. 6. Reconciliation of Annual GAFR Data to Guaranty Agency’s Financial Statements • Data submitted must reconcile to the guaranty agency’s financial statements. • Guarantor must maintain supporting documentation for all line items. • Periodically, the Department conducts Forms 2000 program reviews.

21. Technical Slide We appreciate your feedback and comments. Sandra Simmons Katrina Turner 202.377.3332 202.377.3311 Sandra.Simmons@ed.gov Katrina.Turner@ed.gov or FSA_GAR@ed.gov 202.275.3481 202.275.0913