Cash Flows From Capital and Related Financing Activities

According to GASB 9, there are certain types of loans, known as program loans, that warrant special treatment. Even though loan activities are generally shown as investing activities, certain loan programs are undertaken to fulfill a governmental responsibility. These loans are known as program loans.

For cash flow purposes, activities related to these types of loan programs must be classified as operating activities. GASB 9 gives low-income housing loans and student loans as examples of program loans. All loans made and collected (including related interest) are shown in the operating section. Bond transactions made to fund the program are shown in the noncapital financing activities section and any extra cash invested is shown in the investing section.

GASB did not intend for all loan programs to be considered program loans. Therefore, they have taken a narrow interpretation of the program loan exclusion in GASB 9. Only loans that provide a direct benefit to individual participants are shown as program loans. Therefore, loans to other entities, such as local governments or businesses, would not fit the criteria for program loans. Similarly, the agency that made loans for projects that benefited the state government do not qualify as a program loan. Although individuals may indirectly benefit from these projects, the direct beneficiary is the government.

But my agency's business is making these loans . . . "

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