Credit Reform:

Improving Rural Development's Credit Program Cost Estimates

AIMD-00-286R: Published: Aug 22, 2000. Publicly Released: Aug 22, 2000.

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Pursuant to a legislative requirement, GAO provided information on the Department of Agriculture's (USDA) Rural Development (RD) mission area's progress in improving its credit program cost estimates.

GAO noted that: (1) the task force has made some progress in addressing the deficiencies related to reasonably estimating the cost of RD's credit programs; (2) progress made since GAO's last briefing to the Steering Committee for credit Reform Implementation on December 16, 1999, includes updating sensitivity analyses and completing new cash flow models for the non-housing direct and guaranteed loan programs; (3) however, several milestone dates from the plan were missed because of a shortage in both the staff and funding resources USDA devoted to resolving long-standing credit reform weaknesses; (4) inadequate resources hampered progress in critical areas, such as assessing the quality of the data used to estimate future loan performance and developing a new cash flow model based on available data to estimate the cost of the housing direct loan programs; (5) as a result, RD continues to have limited assurance that credit program costs estimates are reasonable; and (6) while oversight for credit reform implementation efforts falls under the guidance of the USDA Executive Steering Committee for Credit Reform Implementation, the Steering Committee as a whole has had little direct involvement in overseeing progress to improve RD's credit program cost estimates.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: USDA's Rural Development (RD) mission area have taken several steps to ensure that the necessary staffing and funding resources are available to promptly implement the procedures in the detailed implementation plan. Specifically, RD created and authorized a new Budget Division Credit Reform Staff, which includes four permanent full time positions, which are currently filled. RD's Office of the Chief Financial Officer (OCFO) has also committed staff in order to complete several of the procedures from the implementation plan. The OCFO anticipated the need for two additional staff resources to assist with the preparation of reestimates. However, since these positions were not authorized or funded, procedures were implemented to minimize workloads of existing staff. These procedures include the automation of data collection for reestimates and procedures to analyze the need for reestimates. Furthermore, resources were made available to hire outside contractors to implement more complicated procedures from the implementation plan, including the development of a new cash flow model to estimate the costs of the direct housing loan programs. The actions above demonstrate that RD has made considerable efforts to commit staff and resources needed to implement procedures from the detailed implementation plan.

    Recommendation: In order to improve Rural Development's estimates of credit program costs in a timely manner, the Secretary of Agriculture or his designee should commit the necessary staff and funding resources to promptly implement procedures in the detailed implementation plan.

    Agency Affected: Department of Agriculture

  2. Status: Closed - Implemented

    Comments: USDA formed a CFO-led working group to resolve the agency's credit reform implementation issues. The working group, which includes members from the Rural Development mission area, established milestone due dates for the procedures remaining to be completed from the detailed implementation plan.

    Recommendation: In order to improve Rural Development's estimates of credit program costs in a timely manner, the Secretary of Agriculture or his designee should set milestone dates for all the procedures included in the detailed implementation plan.

    Agency Affected: Department of Agriculture

  3. Status: Closed - Implemented

    Comments: With the new administration taking over at USDA, a new process was implemented to notify agency executives, including the Secretary and all Under-Secretaries, of the status of corrective actions to resolves all of USDA's outstanding weaknesses, including credit reform implementation issues. On a regular basis, executives receive updates related to the status of the consolidated action plan. For credit reform implementation issues, these updates indicate due dates and estimated completion dates for procedures remaining to be completed. The estimated completion date is provided to ensure that scheduled due dates are not changed. In order to ensure that corrective actions are taken a list of outstanding tasks is prepared that highlight scheduled completion date and the responsible mission area. This list has been highly effective in bringing past due items to managements attention and resulting in prompt corrective actions.

    Recommendation: In order to improve Rural Development's estimates of credit program costs in a timely manner, the Secretary of Agriculture or his designee should establish a process whereby the Executive Steering Committee for Credit Reform Implementation routinely monitors the progress of credit reform implementation efforts. With respect to the detailed implementation plan, establish a process for the Steering Committee: to (1) be notified when scheduled due dates will not be met so that corrective actions can be taken; and (2) approve changes to scheduled due dates.

    Agency Affected: Department of Agriculture

 

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