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Disclosed in the investing section of the cash flow statement with a related disclosure in the reconciliation section.
Cash flows from loan programs should be classified as investing activities with the exception of program loans. Program loans are treated differently from other loan programs under paragraph 19 of Statement 9. Program loans are distinguished from other types of loans because they are undertaken to provide a direct benefit to individual constituents. Loans recipients in this program are local governments, not individuals. Although the citizens of the government may reap the benefits of the loan program, the local government is the direct benefit of the program. Therefore, the loans do not qualify as program loans and should be shown as investing activities in the statement of cash flows.
Since the agency will show the loan programs as operating activities on the operating statement, the effects of any transactions will be present in the calculation of operating income. However, the agency cannot show the transactions arising from the loan program in the operating activities section of the cash flow statement. Therefore, an adjustment is needed in the reconciliation section to tie to cash flows from operating activities.