0501 Overview

This chapter establishes the Department of Veterans Affairs’ (VA) financial policies for measuring, recognizing, reestimating, and reporting of liabilities related to loan guarantees.

Key points covered in this chapter:

• VA will apply different accounting standards to pre-1992 and post-1991 guaranteed loan liabilities in accordance with the Federal Accounting Standards Advisory Board (FASAB) Statement of Federal Financial Accounting Standards (SFFAS) 2, 18, and 19;
• VA will recognize a subsidy expense for post-1991 guaranteed loans at the time of disbursement equal to the present value of estimated cash outflows minus inflows over the life of the loans;
• VA will reestimate the subsidy cost allowance annually, any increase or decrease in the estimate will be recorded in the year in which the estimate is completed;
• VA will account for loan modifications and asset sales in accordance with SFFAS  2 as amended by SFFAS 18 and 19, the Office of Management and Budget (OMB), Treasury, and VA guidance;
• VA will report guaranteed loan liabilities in the consolidated balance sheet and disclose all required information in the notes, in compliance with OMB Circular A-136; and
• VA will maintain model governance and assumption documentation in compliance with OMB Circular A-11.

0502 Revisions

Section	Revision	Office	Reason for Change	Effective Date
Various	Completed full review	OFP	Ensure compliance with current regulations	May  2026
0503	Expanded and clarified definitions	OFP	Enhancing consistency	May  2026
0505	New section 050502 added. Consolidate credit reform foundational concepts, fund structures, applicability, and cohort accounting in one place.	OFP	Structural rules needed to understand liabilities, subsidy estimates, and reestimates that follow	May  2026
0505	Develop and compare cohort level models to alternative foreclosure models and determine which model is best for VA. Include an assessment of each model’s ability to adequately assess foreclosure risk and sensitivity to loan characteristics.	OFP	Auditor Finding 2025-VA FIN-07 Objective performance comparison and validation	May  2026
0505	Explicit reference to OMB Circular A‑129 to ensure VA’s loan guarantee policy aligns with Federal credit program standards for risk management, lender oversight, servicing, collections, and reporting	OFP	Align policy with mandatory OMB standards and strengthen VA’s legal compliance framework	May  2026
0505	Added explicit references to OMB Circular A‑123 and GAO’s Green Book to establish internal control requirements for loan guarantee modeling, estimation, and reporting.	OFP	Strengthen internal control framework and align with government‑wide standards	April  2026
0506	Authorities and References updated to include OMB Circular A-123 and GAO Green Book	OFP	Ensure that VA’s loan guarantee policy is grounded in the Federal Government’s required internal control framework	April 2026

For a complete list of previous policy revisions, see Appendix A: Previous Policy Revisions.

0503 Definitions

Administrative Expenses ­­– Costs that are directly related to credit program operations including payments to contractors.

Cohort – All direct loans obligated, or loan guarantees committed in the same fiscal year (cohort year) regardless of when disbursements occur.

Credit Program – A Federal program that provides loan guarantees and direct loans to non-Federal entities, (e.g., to segments of the population not adequately served by private lenders).

Default – The failure to meet any obligation or term of a credit agreement, grant, or contract.

Discount Rate – Treasury interest rates that are used to calculate the present value of the cash flows that are estimated over a period of years.

Federal Credit Reform Act (FCRA) – Law that requires federal credit programs (specifically direct loans and loan guarantees) to have their full lifetime costs (known as ‘subsidy costs’) estimated at origination and funded upfront via designated credit accounts, ensuring their costs are recorded on an accrual, rather than cash, basis. FCRA separates pre‑1992 from post‑1991 loans, mandating a cash/liquidation approach for older credit and an accrual-cohort method for newer ones, with loans crossing that threshold (via modification) being reclassified accordingly.

Financing Account – A non-budget account associated with each Credit Program account. The financing account holds fund balances, receives the subsidy cost payment from the Credit Program account, and includes all other cash flows to and from the Government resulting from post-1991 direct loans or loan guarantees, including Treasury borrowings.

Foreclosure – A legal proceeding instituted by a loan holder, where the failure of a borrower to repay the entirety of a secured debt results in the termination of the borrower’s rights in the property (and title to the property is transferred to the holder’s successor or assignee).

Guaranteed Loan Sales Liabilities – Represent the portion of VA’s recorded loan guarantee obligation that remains or is adjusted when guaranteed loans are sold or transferred.

Liabilities for Loan Guarantee – A probable future net outflow or other sacrifice of resources as a result of VA’s Home Loan Guaranty program.

Liquidating Account – A budgetary account that records all cash flows to and from the U.S. Government resulting from pre-1992 direct loan obligations or loan guarantee commitments (unless they have been modified and transferred to a financing account).

Loan Guarantee – Any guarantee, insurance, or other pledge with respect to the payment of all or part of the principal or interest on any debt obligation of a non-Federal borrower to a non-Federal lender, but not including the insurance of deposits, shares, or other withdrawable accounts in financial institutions.

Loan Guarantee Commitment – A binding agreement by a Federal agency to guarantee a loan when specified conditions are fulfilled by the borrower, the lender, or any other party to the guarantee agreement.

Marketable Treasury Securities – Securities, including Treasury bills, notes, bonds, and Treasury Inflation-Protected Securities (TIPS), that Treasury initially issues for sale to the marketplace and that can be bought and sold on securities exchange markets.

Master Servicer – The servicing entity responsible for performing all of the loan servicing functions under the Pooling and Servicing Agreements created for each Vendee Mortgage Trust (VMT) sale.

Maturity or Maturity Date – Refers to the final payment date of a loan or other financial instrument, at which point the principal (and all remaining interest) is due to be paid.

Measurable – A value can be reasonably estimated.

Modification – A Government action that (1) differs from actions assumed in the baseline estimate of cash flows and (2) changes the estimated cost of an outstanding direct loan (or direct loan obligation) or an outstanding loan guarantee (or loan guarantee commitment). There are two different types of modifications:

• Direct Modifications – Changes in the subsidy cost caused by altering the terms of existing contracts or by selling loan assets; and
• Indirect Modifications – Changes in the subsidy cost caused by legislation that alters the way in which an outstanding portfolio of direct loans or loan guarantees is administered.

Negative Subsidy – A subsidy cost that is less than zero. A negative subsidy will occur if the present value of cash inflows to the Government exceeds the present value of cash outflows.

Obligation – A legally binding agreement that will result in outlays, immediately or in the future. An obligation is a legal liability of the Government against an available appropriation.

OMB Credit Subsidy Calculator (CSC) – Discounting tool issued by OMB for agencies to calculate credit subsidy costs and financing account interest for post-1991 loan guarantees.

Positive Subsidy – Positive subsidy value exists when the present value of expected cash outflows from the Government exceeds the present value of expected cash inflows.

Present Value – The current value of future cash flows.

Program Account – The Program Account records the loan subsidy costs of the Government that are associated with direct loans obligated and loan guarantees committed since 1992 and their related administrative expenses of the VA housing loan programs. The subsidy costs are calculated on a net present value basis. All administrative expenses are estimated on a cash basis.

Reestimate – Estimates of the subsidy costs performed subsequent to their initial estimates made at the time of a loan’s disbursement. Per SFFAS 2, there are two different types of reestimates:

• Interest Rate Reestimates for differences between discount rate assumptions at the time of formulation (the same assumption is used at the time of obligation or commitment) and the actual interest rate for the year of disbursement; and
• Technical/Default Reestimates for changes in projected cash flows of outstanding loan guarantees after reevaluating the underlying assumptions and other factors that affect cash flow projections as of the financial statement date, except for any effect of the interest rate reestimates.

Recognize – To formally record or incorporate an item into the Agency’s financial statements as an asset, liability, revenue, expense, etc.

Real Estate Owned (REO) Property – Real estate acquired by the VA through foreclosure or deed-in-lieu of foreclosure on VA-guaranteed or VA-held home loans, recorded as a financial asset under VA accounting standards, and managed for preservation, marketing, and sale in accordance with VA regulations (38 C.F.R. Part 36).

Subsidy Cost – Estimated present value of the cash flows from the Government (excluding administrative expenses) less the estimated present value of the cash flows to the Government discounted to the time when the loan is disbursed. Present value is derived by a computation from the Credit Subsidy Calculator (CSC), mandated by OMB Circular A-11. Subsidy values can be either positive or negative.

Systematic Methodology – An explicit and precise approach that aims to minimize bias and enhance the reliability of conclusions.

Vendee Loan – Direct loan issued to a third-party borrower for the market value of the Real Estate Owned (REO) property. VA acquires REO property from a private sector mortgage lender upon default of a loan subject to the VA Loan Guaranty Program.

Vendee Mortgage Trust (VMT) Securitization Program – VA’s program authorized under 38 U.S.C. § 3720(h) that “guarantees the timely payment of principal and interest on certificates or other securities evidencing an interest in a pool of mortgage loans made in connection with the sale of properties acquired” under chapter 37, title 38 U.S.C. The VMT program helps to reduce VA’s cost associated with servicing loans. Upon the sale of loans to a third-party investor (Trust), VMT certificates are issued pursuant to a Pooling and Servicing Agreement (PSA) which is an agreement between VA, the Master Servicer, the Program Administrator, and the Trustee. VA guarantees the full and timely payment of principal and interest on VMT certificates. VA’s guaranty is backed by the full faith and credit of the United States Government.

0504 Roles and Responsibilities

Actuarial Liability Governance Board (ALGB) is responsible for:

• Overseeing the management and evaluation of the effectiveness of various actuarial models;
• Assessing the assumptions that significantly impact VA’s actuarial liabilities recorded on VA’s financial statements and overseeing related changes;
• Ensuring oversight and adherence to industry standards in managing actuarial models;
• Establishing the overall principles and direction for the governing and administrative bodies of the Board; and
• Overseeing the effectiveness and efficiency of the governance model, including amending the composition of the Board and reviewing/adjusting governance policies as necessary. Refer to Appendix B for full Charter.

Office of Actuarial Services (OAS) is responsible for developing, updating, and documenting systematic models; including information about assumptions and methods, summary of model output, and output for use in the cash flow model (managed by VBA). OAS is also responsible for coordinating with Office of Finance (OF) on audit corrective action plans.

Veterans Benefits Administration (VBA), Accounting Policy and Reporting Service (APRS) is responsible for reviewing the Credit Subsidy Calculator (CSC) output received from VBA Credit Reform Budget and CSC models and posting journal vouchers to VA’s accounting system by fund and cohort level. APRS also provides the cash flows and debt balances as well as the return of borrowing data to CRS and Office of Budget (OB) to ensure accuracy and matching to Treasury reporting. As needed, APRS assists Office of Financial Reporting (OFR) in the reporting of loan liabilities.

VBA, Administrative and Loan Accounting Center (ALAC) is responsible for providing financial management support to VA’s housing programs by performing accounting, financial reporting assistance, voucher examining, payments, and collections.

VBA, Loan Guaranty Service (LGY) is responsible for operating and managing housing loan programs as a benefit for eligible borrowers to obtain, retain, and adapt homes.

VBA Credit Reform Staff (CRS) is responsible for calculating subsidy rates and costs for VA direct loans and loan guarantees for the President’s budget submission and recording and reporting inputs by APRS and ALAC.

0505 Policies

050501 General Policies

1. VA will maintain internal controls over credit program operations, modeling, subsidy estimation, financial reporting, and related processes consistent with OMB Circular A‑123 and Government Accountability Office’s (GAO’s) Standards for Internal Control in the Federal Government (Green Book).
2. In accordance with OMB Circular A‑129, VA will establish and maintain policies and procedures to ensure sound credit program management. These will include standards for program design, risk assessment, lender oversight, servicing, collections, and reporting. VA will periodically review credit program performance for compliance with OMB Circular A‑129 requirements and implement corrective actions as needed.

050502 Credit Reform Accounting Framework

1. In accordance with OMB Circular A-11 and SFFAS 2, VA will use three fund types required under Credit Reform:
   • Liquidating accounts for pre-1992 loan activity accounted for on a cash basis with liabilities measured on a net‑expected‑value basis.
   • Program accounts for current year subsidy budget authority, and all current year administrative costs; and
   • Financing accounts for all post-1991 proprietary accounting, claims, and related cash flows with activity maintained separately by fiscal year (cohort) beginning with Fiscal Year (FY) 1992.
2. VA will apply Federal Credit Reform accounting to all loan guarantees obligated on or after October 1, 1991 and to pre-1992 guarantees that were substantially modified on or after that date. VA will estimate subsidy costs at disbursement and reestimate annually to reflect actual loan performance and updated expectations of future performance.
3. In accordance with OMB Circular A-11, VA will use cohort accounting for all post-1991 guarantees and for modified pre-1992 guarantees. Post–1991 guarantees remain in their original cohort for the life of the loans, even if they are modified. Modified pre–1992 guarantees are assigned to the cohort corresponding to the year of modification. Cohorts may be aggregated for budget presentation; however, accounting records must be maintained separately for each cohort.

050504 Loan Sale Guarantee Liability

1. VA may bundle vendee and/or acquired loans and sell them to a third-party investor (Trust) pursuant to a sale agreement. VA guarantees the investor full and timely payment of principal and interest on the certificates backed by the full faith and credit of the Federal Government. For example, VA will:
   1. Make a payment to the third-party investor when a borrower fails to make a scheduled principal and interest payment;
   2. Pay the remaining scheduled principal balance of a loan held by a third-party if such loan is foreclosed upon and the ensuing property sale results in a liquidation loss.
2. VA will adhere to the requirements of the Federal Credit Reform Act (FCRA) for post-1991 loan sale guarantees and record the guarantee for loans sold through the Vendee Mortgage Trust (VMT) securitization program at the present value of expected net cash outflows resulting from the guarantee.
3. After vendee loan closing (i.e., transfer of legal ownership of the Real Estate Owned (REO) property to the third-party borrower), VA will hold the loan in a national loan portfolio until its sale through the VMT securitization program.
4. In accordance with OMB Circular A-11, VA will include planned loan asset sales in its budget submission and in the President’s budget, including expected proceeds and timing.
5. With OMB approval, VA may sell loans when market conditions are favorable and the sale is economically justified. VA will establish parameters for these sales, such as minimum unpaid principal balances and limits on the percentage of loans sold from any cohort.

050505 Subsidy Estimates and Reestimates

1. VA will prepare a subsidy estimate when a post-1991 guaranteed loan is disbursed, or when an existing guaranteed loan is modified. For pre‑1992 guaranteed loans, a subsidy estimate is required only for a direct modification that transfers the guarantee to the financing account.
2. VA will recognize subsidy expense for post-1991 guaranteed loans at disbursement, calculated as the present value of estimated future cash outflows minus the present value of estimated future cash inflows using Treasury rates for comparable maturities. 
   1. VA’s subsidy expense includes interest costs, default costs, fees and collections, and other costs related to current-year disbursements. Each component will be presented separately in VA’s financial statements.
   2. VA’s total subsidy expense includes current-year disbursements (1 above), modifications, and reestimates for interest rate and technical/default changes.
3. When a positive subsidy rate exists, VA will receive budget authority, for the year the loans are obligated, to cover the expected lifetime costs of the loans. VA will earn interest on these subsidies along with other forms of collections to pay for future claims.
4. When a negative subsidy rate exists, VA will obligate an amount equal to the negative subsidy in the financing account. When the loan is disbursed, the financing account will pay the negative subsidy to the negative subsidy receipt account. These remittances will be recorded as offsetting receipts in the budget and reduce VA’s budget authority and outlays.
5. VA will estimate default costs by program, cohort, and risk category, incorporating differences between projected and actual performance and updated assumptions.
6. VA may consider the following risk factors in estimating default costs:
   • Historical loan performance;
   • Current and forecasted international, national, or regional economic conditions that may affect the performance of the portfolio:
   • Financial and other relevant characteristics of borrowers;
   • The value of collateral to loan balance;
   • Changes in recoverable value of collateral;
   • Newly developed events that would affect the loans’ performance; and
   • New laws, VA program changes, or foreclosure moratoriums.
7. VA will reestimate the subsidy costs each year to reflect actual loan performance and updated assumptions. Reestimates will include both interest rate and technical/default components and consider all factors affecting projected cash flows.
8. Default cost estimates for each credit program and risk category will be developed using a systematic methodology. High risk or individually significant accounts will be analyzed separately.
9. VA will exclude administrative costs associated with credit activities such as salaries, legal fees, office expenses, and costs related to credit policy evaluation, loan origination and closing, servicing, monitoring, and system maintenance from subsidy cost estimates. These costs will be recognized separately as administrative expenses in accordance with FCRA and OMB Circular A-11.
10. When estimating loan funding fee collections under 38 U.S.C. § 3729, VA will include an estimate of statutory exemptions for Veterans and other eligible borrowers who qualify for a waiver of the fee.
11. VA will maintain a comprehensive historical performance database capturing detailed loan activity, including actual payments, prepayments, delinquencies, defaults, recoveries, and amounts written off to support default cost estimation.
12. VBA will conduct reestimates in November and August:
    1. The budget reestimate in November is for the purpose of preparing budget formulation. The VBA Credit Reform staff will prepare the budget reestimate. The Office of Budget may review the budget reestimates. VA will submit the budget reestimate to OMB for approval.
    2. The finance reestimate in August is for the purpose of preparing the financial statements. This reestimate is prepared by the Loan Guaranty program office and must be concurred with by the VBA OFM Deputy Chief Financial Officer.
13. VA will reestimate interest rate costs to reflect differences between assumed rates and actual Treasury rates at the time of loan disbursement.
14. The VBA Accounting Policy Reporting Service (APRS) will prepare journal vouchers for the reestimates and VBA Finance Center will enter them in VA’s accounting system. The re-estimate for financial statements will be recorded in September, while the re-estimate for budget formulation will be recorded after VA’s receipt of a reapportionment of the re-estimates from the Office of Budget.
15. VA will maintain documentation supporting all underlying assumptions used in subsidy cost calculations consistent with Federal Financial Accounting and Auditing Technical Release 3 (Revised), Appendix A.

050506 Modeling Governance and Oversight

1. VA will establish and maintain a documented process for modeling assumptions used in estimating the present value of loan guarantee liabilities. This process will include internal controls such as review and approval by appropriate levels of authority, periodic validation of assumptions, and independent review to ensure reliability and compliance with applicable Federal standards.  
2. Actuarial Liability Governance Board (ALGB) and Senior Management governance and oversight of modeling will include:
   • Review of modeling governance policies to ensure adequacy for the model’s intended use and control environment;
   • Validation that procedures used for modeling comply with established policies; and
   • Evaluation of security and change control procedures as well as risk assessment prior to contemplative changes to model.
3. VA’s modeling documentation will provide a detailed explanation of the model’s purpose, design, and theory, enabling a qualified user to operate the model and replicate results independently. Documentation will include:
   • A description of the model’s purpose, design and intended use, including limitations;
   • Model theory and logic including sensitivity to key drivers and assumptions;
   • Detailed operating procedures and workflow;
   • Data requirements, embedded calculations and linkage among modeling steps, tabs, and spreadsheets;
   • Security, version control, and change management procedures, including a change log;
   • Validation plans and findings of validations performed;
   • Controls over data, algorithms, and reporting frameworks;
   • Historical supporting documents for underlying assumptions;
   • Results of annual lookback analysis, including assumptions review; and
   • Roles and responsibilities for model maintenance and governance.
4. VA will maintain detailed procedures to support effective modeling oversight, including:
   • A governance framework and internal controls for overseeing and validating the model’s purpose, design, activities, and tasks;
   • Defined purpose, goals, and approach commensurate with overall reliance on models;
   • Standards over model validation based on model criticality and complexity; to include a lookback analysis to determine the effectiveness of the model;
   • Controls over data input and reporting requirements;
   • Annual verification of control procedures;
   • Evaluation of actuarial model effectiveness (i.e., verifying accuracy, comparison of model outputs to real-world outcomes, and assessing the model’s ability to capture financial risks);
   • Benchmarking of the cohort models against alternative models to evaluate each model’s ability to adequately assess foreclosure risk;
   • Defined roles and responsibilities for management, staff, internal audit, and others involved in model development, use, controls, and validation;
   • Security requirements and change control procedures for processes, estimates, and models; and
   • Review and approval requirements for estimates.

050507 Modification of Loan Guarantees

1. OMB Circular A-11, Section 185, specifies that modifications to loan guarantees will result from any Government action that (1) differs from the assumptions in the baseline cash flow estimate and (2) affects the subsidy cost such as changes to contract terms or legislation that provides new collection tools.
2. VA will calculate modification cost as the excess of the post-modification liability  over the pre-modification liability and recognize this amount as modification expense when the guarantee is modified.
3. For post-1991 guaranteed loans, VA will adjust the liability to the present value of revised net cash outflows from the modification date to maturity, discounted at the original discount rate.
4. For pre-1992 guaranteed loans, VA will apply the following treatment:
   1. Direct modifications transfer the guarantee to the financing account and adjust the book value equal to the post-modification liability. Subsequent modifications will be treated as a post-1991 loan guarantee.
   2. Indirect modifications remain in the liquidating account. The liability of those loan guarantees is reassessed and adjusted to reflect changes resulting from the modification.
5. Differences in book value adjustments of pre-1992 and post-1991 guarantees arising from different discount rates or measurement methods will be recognized as gains or losses in accordance with SFFAS 2 and OMB Circular A-11.

050508 Accounting and Reporting for Loan Guarantee Liabilities

1. VA will recognize and measure loan guarantee liabilities in accordance with Statement of Federal Financial Accounting Standards (SFFAS) 2, and applicable federal credit reform requirements.
2. In accordance with SFFAS 2, VA will report post-1991 loan guarantee liabilities at their present value for financial reporting.
3. In accordance with SFFAS 2, VA will report pre-1992 loan guarantee liabilities in the liquidating account using the net expected value of future cash flows. VA may elect to restate these liabilities at present value, as permitted under SFFAS 2.
4. VA will report loan guarantee liabilities and related note disclosures in accordance with OMB Circular A-136.
   1. VA will provide a description of program characteristics and disclose:
      • Amount of guaranteed loans disbursed in each program during the reporting year;
      • Estimated total subsidy rates and subsidy components for current year’s cohorts;
      • Significant events, changes in economic conditions, legislation, credit policies, or estimation methodologies that materially affect subsidy rates, subsidy expense, or subsidy reestimates; and
      • Significant events or conditions that are more likely than not to impact subsidy costs but are not measurable at the reporting date.
   2. VA will provide in the notes to the financial statements a reconciliation of beginning to ending loan guarantee liabilities showing:
      • Subsidy expense for current year disbursements;
      • Subsidy reestimates;
      • Fees collected;
      • Loans write-offs;
      • Claim payments to lenders; and
      • Other adjustments.

0506 Authorities and References

• United States Code (U.S.C.)
  • 2 U.S.C. §661, Subchapter III, Credit Reform
  • 38 U.S.C Part II, Chapter 20, Benefits for Homeless Veterans
  • 38 U.S.C Part III, Chapter 3701, Housing and Small Business Loans                  
  • 38 U.S.C. §3720(h)(2), Veterans Education and Benefits Expansion Act of 2001
  • 38 U.S.C §3729, Loan Fee
• Federal Accounting Standards Advisory Board (FASAB) Handbook by Chapter
  • Statement of Federal Financial Accounting Standards (SFFAS) 2, Accounting for Direct loans and Loan Guarantees
  • SFFAS 18, Amendments to Accounting Standards
  • for Direct Loans and Loan Guarantees in SFFAS 2
  • SFFAS 19, Technical Amendments to Accounting Standards
  • for Direct Loans and Loan Guarantees in SFFAS 2
  • Federal Financial Accounting Technical Release 6: Preparing Estimates for Direct Loan and Loan Guarantee Subsidies under the Federal Credit Reform Act – Amendments to Technical Release No. 3 Preparing and Auditing Direct Loan and Loan Guarantee Subsidies under the Federal Credit Reform Act
• Federal Credit Reform Act of 1990
• Office of Management and Budget (OMB) Circulars
  • Circular A-11, Part V, Section 185, Federal Credit
  • Circular A-123, Management’s Responsibility for Enterprise Risk Management and Internal Control
  • Circular A-129, Policies for Federal Credit Programs and Non-Tax Receivables
  • Circular A-136 Revised, Financial Reporting Requirements
• GAO’s Standards for Internal Control in the Federal Government (Green Book)
• Treasury Financial Manual (TFM), Volume 1, Part 2, Chapter 4700, Appendix 1, 2 and 3

0507 Rescissions

Volume VI, Chapter 5 – Liabilities for Loan Guarantees, May 2025

Appendix A: Previous Policy Revisions

Section	Revision	Office	Reason for Change	Effective Date
0604	Updated roles to include Actuarial Liability Governance Board (ALGB)	OFP	VA implementation of formal governance body in FY22 with oversight responsibility for VBA and VHA actuarial benefit models	May  2025
0604	Updated roles to include reorganized Office of Actuarial Services (OAS)	OFP	Actuarial responsibilities reorganized under OAS in Office of Management (OM)	May  2025
0605	Controls over Housing Models and Governance	OFP	Audit Finding-NFR 23-11, recommendations that VA refine modeling documentation and oversight policies and procedures	May  2025
0605	Controls over Housing Models and Governance	OFP	Audit Finding-NFR 24-10, recommendation that VA refine monitoring controls over model validation and verification	May  2025
Appendix B	Added new Appendix B: ALGB Charter	OFP	Updated and Reviewed Final ALGB Charter	May  2025
Various	Reformatted to new policy format and completed comprehensive five-year review and update	OFP	Ensure policy is up to date with current laws and regulations and accurate	December 2021
0603 Definitions	Updated for clarity of understanding	OFP	Improve effectiveness and clarity of the policy	December 2021
0604 Roles and Responsibilities	Clarify responsibilities for measuring, recognizing, re-estimating, and reporting of the liability	OFP	Defines specific responsibilities for various positions and organizations responsible for guaranteed loan liabilities	December 2021
0605 Policies	Updated policy statements to include Modeling Governance and Oversight standards	OFP	Properly reflect VA’s loan guarantee liability accounting and reporting requirements	December 2021
0606 Authorities and References	Added Auditing Technical Release 3 (Revised)	OFP	Enhanced support necessary for Home Loan Guaranty modeling	December 2021

Appendix B: Actuarial Liability Governance Board (ALGB) Charter

U.S. Department of Veterans Affairs
Office of Management

Actuarial Liability Governance Board (ALGB) Charter

January 30, 2025

Table of Contents

REVISION HISTORY               3
I. ESTABLISHMENT                4
II. AUTHORITY                          4
III. PURPOSE                             4
IV. GOALS                                  4
V. ALGB RESPONSIBILITIES 4
VI. BOARD MEMBERSHIP 5
  A. Voting Members   5
  B. Non-Voting Members        6
VI. BOARD FUNCTIONS        6
  A. Meetings                                 6
  B. Quorum                                   6
  C. Approvals                               6
  D. Reporting                               7
  E. Charter Amendment         7
V I. CHARTER APPROVAL     7
  IX. SIGNATURE                        7
  X. APPENDIX – ORGANIZATION CHART  8

REVISION HISTORY

Version	Date	Changes	Author
1	7/19/2022		Signed Charter
2	4/12/2024	Sections I-VIII	OFA
3	1/30/2025	Name Change, Sections 1-IX	OAS

1. ESTABLISHMENT
   This Charter establishes and clarifies the purpose, responsibilities, structure, and procedural guidelines of the Department of Veterans Affairs (VA) Actuarial Liability Governance Board (ALGB).
2. AUTHORITY
   In accordance with VA Directive 0214, Enterprise Governance Structure and Process, the ALGB is a standing cross-department governance body.
3. PURPOSE
   The charter outlines the framework for oversight of VA’s actuarial models by the ALGB. The charter defines the decisions necessitating deliberation and approval for Veterans Benefits Administration (VBA) and Veterans Health Administration (VHA) program actuarial liabilities, and other actuarial model considerations requiring attention by voting members. The charter addresses decision-making procedures, criteria for evaluating decisions, and processes for documenting final decisions. The charter does not encompass the entire spectrum of responsibilities for ALGB voting members.
   
   The accompanying ALGB Governance Manual expands upon the ALGB Charter by specifying additional procedural details and providing a comprehensive framework for organizational governance. It serves as a guide that supplies in-depth information to enhance understanding and adherence to the governing principles.
   
4. GOALS
   The primary objective of the ALGB’s voting members is to institute standardized actuarial model decision-making processes. It also aims to ensure that decisions undergo thorough evaluation by leaders and subject matter experts (SME) with relevant expertise and knowledge aligned with the specific decision context.
5. ALGB RESPONSIBILITIES
   The Board has the responsibility of overseeing the management of various actuarial models. The ALGB is responsible for assessing the assumptions that significantly impact VA’s actuarial liabilities and overseeing related changes. A key aspect of their responsibilities is decision-making, where voting members must be prepared to understand and vote on critical items that impact VA’s liabilities.
6. BOARD MEMBERSHIP
   The ALGB Executive Leadership is comprised of voting and non-voting members.

A. Voting Members
The Chair will convene and preside over the ALGB meetings; the Vice Chair will assume the Chair’s role when the Chair is absent, even when the Chair sends a proxy. If both the Chair and Vice-Chair are absent, then the proxy for the Chair will preside the meeting. However, for an ALGB meeting to proceed, the presence of either the Chair or Vice Chair (or their proxy) is required.

Chair:

• Provides executive leadership and direction for the ALGB;
• Specifies procedures and protocol for ALGB meetings;
• Delegates duties to ALGB membership and other parties as required;
• Directs the review and analysis of recommendations and provides final disposition on decisions presented to the ALGB; and
• Approves changes to the Charter; and
• In the Chair’s absence, the Vice Chair can be assigned to ‘act,’ with equal authority. The Vice Chair will also oversee meetings of the ALGB Voting Members, including cadence, agenda, and outcomes.

Vice-Chair:

• Assumes duties of Chair in the Chair’s absence;
• Provides executive leadership and direction for the ALGB;
• Specifies procedures and protocol for ALGB meetings;
• Delegates duties to ALGB membership and other parties as required;
• Directs the review and analysis of recommendations and provides final disposition on items presented to the ALGB; and
• Facilitates board deliberations by ensuring the agenda is set in advance, all issues are addressed, and all attendees can express their thoughts and opinions.

Other Voting Members:

• Recommends disposition to ALGB Chair; and
• Votes in accordance with agency priorities on matters presented to the ALGB.

Proxies for Voting Members:

• A proxy is a sufficiently senior member of their organization; and
• A proxy is sufficiently knowledgeable about VA’s actuarial liabilities and basic principles of model risks and is authorized to make decisions on behalf of their organization.

B. Non-Voting Members

Non-voting members may participate in ALGB meetings and discussions to provide input relevant to their expertise. Non-voting members include but not limited to:

Office of Actuarial Services (OAS), SMEs and other Technical Advisors

• Conduct advanced planning and analysis before content is presented to the ALGB;
• Present findings and/or recommendations;
• Respond to requests from ALGB members to address concerns within areas requiring additional information;
• Provide guidance and advice when requested;
• Set appropriate timing and prioritization of experience studies;
• Ensure compliance with the ALGB manual; and
• Periodically review and reassess the Board’s governance guidelines including the charter and make recommendations regarding any changes to the Board.

Secretariat:

• Advises ALGB members on meeting agenda topics and decisions needed, based on recommended goals and priorities each year;
• Coordinates and schedules ALGB meetings; and
• Captures decisions, action items and key takeaways through ALGB meeting minutes.

7. BOARD FUNCTIONS
   1. Meetings
      The ALGB generally meets monthly. The Secretariat collaborates with voting members to identify and establish additional topics for consideration. Monthly meetings will be cancelled if there are no agenda topics requiring discussion.
   2. Quorum
      The ALGB requires a quorum for all ALGB meetings and decisions, which consists of at least three voting members. The quorum must include either the Chair or Vice Chair or their proxy.
   3. Approvals
      The Board will make a reasonable effort to reach all decisions by consensus.
      • If a motion calls for a vote, it requires a simple majority of the voting members to pass.
      • If a majority cannot be reached (a tie vote), then the Chair or Vice-Chair will make the decision. If both the Chair and Vice-Chair are represented by proxies, then the decision must be deferred until the Chair is available to make the decision.
   4. Reporting
      All ALGB approvals and actions must be recorded and published for VA stakeholder awareness. The ALGB Secretariat will ensure timely publication of ALGB decisions.
   5. Charter Amendment
      The ALGB may amend the Charter as deemed necessary by the Chair.
8. CHARTER APPROVAL
   This Charter remains effective until modified. Proposed changes require review and approval by the Chair or his designee.
9. SIGNATURE
   /s/
   Digitally signed 01/31/2025
   Edward J. Murray
   Acting Assistant Secretary for Management and Chief Financial Officer
10. APPENDIX – ORGANIZATION CHART

Role	Position	Organization
Chair	PDAS DCFO	OM
Vice-Chair	VBA CFO	VBA
Secretariat	Executive Director	OAS
Other Voting Member	VHA Assistant CFO	VHA
Other Voting Member	VBA Deputy CFO	VBA
Other Voting Member	ADAS for Financial Audit	OF