Limited-Resource Farmer Loans:

More Can Be Done To Achieve Program Goals and Reduce Costs

CED-81-144: Published: Aug 31, 1981. Publicly Released: Aug 31, 1981.

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GAO reviewed the Farmers Home Administration (FmHA) program for providing low-interest rate loans to limited-resource farmers to determine whether more supervision and technical assistance were needed to achieve program goals and whether improvements were needed to control costs and safeguard against misuse of program funds.

GAO found that the management assistance provided to limited-resource borrowers has been inadequate and limited. As a result, borrowers will have a hard time meeting the program goals of increasing production, incomes, and living standards. Additionally, GAO found that FmHA did not always identify borrower weaknesses which needed attention or farm or financial management improvements or practices which needed development. Significant information was sometimes omitted from annual farm plans, and long-range planning was limited or nonexistent. The importance of a record-keeping system was not always discussed. Farm visits were not always made, and yearend analyses of farm records were not always made to determine progress, problems, and needed corrective actions. FmHA staffing has not been adequate to provide the level of assistance needed, and other Department of Agriculture agencies are not being used effectively to obtain additional assistance. FmHA has made limited-resource loans to borrowers who were ineligible, and loan files were not always fully documented to support the loans. Because the subsidies can be substantial, internal controls must be adequate to assure that only eligible borrowers receive them. A good internal control system which separates the duties and procedures governing the authorization, preparation, review, and flow of transactions through the system is lacking. It may be possible to recapture interest subsidies on the loans from the appreciation in farm values when the farm is sold, transferred, or no longer farmed by the borrower.

Recommendations for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Agriculture should direct the FmHA Administrator to improve to the extent possible the FmHA internal control system in the limited-resource program by using the review functions to assure compliance with FmHA documentation requirements.

    Agency Affected: Department of Agriculture

  2. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Agriculture should direct the FmHA Administrator to improve, to the extent possible, the FmHA internal control system in the limited-resource program by subjecting the county supervisor's decision to increase or continue present interest rates to review and concurrence by another individual or group.

    Agency Affected: Department of Agriculture

  3. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Agriculture should direct the FmHA Administrator to improve, to the extent possible, the FmHA internal control system in the limited-resource program by assuring that loan approval decisions are not made by those individuals responsible for processing the loan and documenting all the facts in support of loan approval.

    Agency Affected: Department of Agriculture

  4. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Agriculture should direct the FmHA Administrator to emphasize to FmHA county officials the importance of recording in the Farm and Home Plan the actual results of the annual farm operations.

    Agency Affected: Department of Agriculture

  5. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Agriculture should direct the FmHA Administrator to develop more appropriate technical aids or forms to encourage more effective long-range planning of a borrower's farm operation and in planning and carrying out farm visits.

    Agency Affected: Department of Agriculture

  6. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Agriculture should direct the FmHA Administrator to revise FmHA instruction 1924-B to specify the priority to be given in supervising limited-resource borrowers.

    Agency Affected: Department of Agriculture

  7. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Agriculture should direct the FmHA Administrator to make more effective use of the resources available from other Department of Agriculture agencies by establishing formal working agreements and referral systems, by performing joint farm planning for existing and future limited-resource borrowers, and by reporting back to the Secretary on the progress and problems being encountered in obtaining such cooperation.

    Agency Affected: Department of Agriculture

  8. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Agriculture, in an effort to reduce subsidy costs, should direct the FmHA Administrator to seek legislation to permit the recapture of Federal subsidies on limited-resource farm ownership loans when the property is no longer farmed by the borrower, sold, or transferred.

    Agency Affected: Department of Agriculture

 

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