GUARANTY AGENCY RESERVES.

SEC. 4042. GUARANTY AGENCY RESERVES. Section 422 of the Act (20 U.S.C. 1072) is amended by adding at the end the following new subsection: “(g) Preservation and Recovery of Guaranty Agency Reserves.— “(1) Authority to recover funds.— Notwithstanding any other provision of law, the reserve funds of the guaranty agencies, and any assets purchased with such reserve funds, regardless of who holds or controls the reserves or assets, shall be considered to be the property of the United States to be used in the operation of the program authorized by this part or the program authorized by part D of this title. However, the Secretary may not require the return of all reserve funds of a guaranty agency to the Secretary unless the Secretary determines that such return is in the best interest of the operation of the program authorized by this part or the program authorized by part D of this title, or to ensure the proper maintenance of such agency’s funds or assets or the orderly termination of the guaranty agency’s operations and the liquidation of its assets. The reserves shall be maintained by each guaranty agency to pay program expenses and contingent liabilities, as authorized Dy the Secretary, except that— “(A) the Secretary may direct a guaranty agency to return to the Secretary a portion of its reserve fund which the Secretary determines is unnecessary to pay the program expenses and contingent liabilities of the guaranty agency; “(B) the Secretary may direct the guaranty agency to require the return, to the guaranty agency or to the Secretary, of any reserve funds or assets held by, or under the control of, any other entity, which the Secretary determines are necessary to pay the program expenses and contingent liabilities of the guaranty agency, or which are required for the orderly termination of the guaranty agency’s operations and the liquidation of its assets; “(C) the Secretary may direct a guaranty agency, or such agency’s officers or directors, to cease any activities involving expenditure, use or transfer of the guaranty agency’s reserve funds or assets which the Secretary determines is a misapplication, misuse, or improper expenditure of such funds or assets; and “(D) any such determination under subparagraph (A) or (B) shall be based on standards prescribed by regulations that are developed through negotiated rulemaking and that include procedures for administrative due process. “(2) Termination provisions in contracts.— (A) To ensure that the funds and assets of the guaranty agency are preserved, any contract with respect to the administration of a guaranty agency’s reserve funds, or the administration of any assets purchased or acquired with the reserve funds of the guaranty agency, that is entered into or extended by the guaranty agency, or any other party on behalf of or with the concurrence of the guaranty agency, after the date of enactment of this subsection shall provide that the contract is terminable by the Secretary upon 30 days notice to the contracting parties if the Secretary determines that such contract includes an impermissible transfer of the reserve funds or assets, or is 107 STAT. 358otherwise inconsistent with the terms or purposes of this section. “(B) The Secretary may direct a guaranty agency to suspend or cease activities under any contract entered into by or on behalf of such agency after January 1, 1993, if the Secretary determines that the misuse or improper expenditure of such guaranty agency’s funds or assets or such contract provides unnecessary or improper benefits to such agency’s officers or directors. “(3) Penalties.— Violation of any direction issued by the Secretary under this subsection may be subject to the penalties described in section 490 of this Act. “(4) Availability of funds.— Any funds that are returned or otherwise recovered by the Secretary pursuant to this subsection shall be available for expenditure for expenses pursuant to section 458 of this Act.”.