Farm Credit Administration:

Oversight of Special Mission to Serve Young, Beginning, and Small Farmers Needs to Be Improved

GAO-02-304: Published: Mar 8, 2002. Publicly Released: Mar 8, 2002.

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GAO reviewed the Farm Credit Administration's (FCA) regulation of the Farm Credit System (System) to ensure compliance with its statutory mission to serve young, beginning, and small farmers (YBS). FCA has issued YBS-related policies and guidance, designed and implemented a YBS examination protocol, and examined institutions for compliance with YBS requirements. However, FCA has not promulgated regulations to define standards and clarify what constitutes an acceptable YBS program. GAO also found that FCA failed to follow examination procedures and document examination conclusions in the YBS program. Slightly more than half of the institutions in the System had a YBS program or service in place. Nearly one third had set numerical goals for YBS service, although most were not conducting demographic studies. Half had YBS marketing and outreach efforts in place, and most were coordinating their YBS offerings with federal, state, or other governmental or private credit sources.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To strengthen FCA in its oversight role of the System, promote compliance, and highlight the System's efforts to provide service to YBS, the FCA Board should promulgate a regulation that outlines specific activities and standards that constitute an acceptable program to implement the YBS statutory requirement.

    Agency Affected: Farm Credit Administration

    Status: Closed - Implemented

    Comments: In 2002, GAO recommended that the Board of the Farm Credit Administration (FCA), as the regulator of the Farm Credit System (System), promulgate a regulation that outlines specific activities and standards that constitute an acceptable program for the System's associations to comply with the statutory requirement that they prepare programs for making credit available to Young, Beginning, and Small farmers. FCA has issued a final regulation that delineates the minimum components that each System association must include when developing programs for Young, Beginning, and Small farmers and ranchers. Setting such standards in regulation will enhance the FCA's oversight of the System's efforts in achieving its mission to serve Young, Beginning, and Small.

    Recommendation: To strengthen FCA in its oversight role of the System, promote compliance, and highlight the System's efforts to provide service to YBS, the FCA Board should ensure that examiners follow the guidance and complete the appropriate examination procedures related to YBS, and adequately document the work performed and conclusions drawn during examinations.

    Agency Affected: Farm Credit Administration

    Status: Closed - Implemented

    Comments: The Farm Credit Administration (FCA) has taken the following steps to ensure that examiners follow the guidance and complete the appropriate examination procedures related to young, beginning, and small farmers (YBS), and adequately document the work performed and conclusions drawn during examination. (1) Senior FCA examiners review and initial the YBS examination leadsheet, signifying that the YBS procedures have been completed and documented. (2) Quality assurance examiners certify in writing for each examination that (a) a comprehensive examination of YBS activities was performed, (b) all examination procedures were followed in their entirety, (c) the Report of Examination addresses all pertinent examination findings, and (d) the workpapers are complete and support the conclusions contained in the Report of Examination. (3) Staff from the Office of the Chief Examiner are reviewing a sample of completed YBS related examinations to ensure that YBS procedures have been completed and documented. (4) The Office of Examination Focus Area for YBS has been moved to item number 1 in the Informational Memorandum distributed to all Farm Credit System (System) institutions to elevate to the System the importance that FCA believes YBS marketing and lending should take on in the FCS.

    Recommendation: To strengthen FCA in its oversight role of the System, promote compliance, and highlight the System's efforts to provide service to YBS, the FCA Board should publicly disclose the results of the examinations for YBS compliance for individual System institutions.

    Agency Affected: Farm Credit Administration

    Status: Closed - Not Implemented

    Comments: In September 2002 the Farm Credit Administration (FCA) issued an Advance Notice of Proposed Rulemaking (ANPR), which was intended to solicit public input to the idea of the FCA Board publicly disclosing the results of examinations for Young, Beginning, and Small (YBS) compliance for individual System institutions. FCA also held a public meeting on the ANPR in Kansas City two months after its issuance. FCA received 65 comment letters on the ANPR, with some in favor of public disclosure of exam results and others opposed to public disclosure of exam results. FCA put a final rule in place in March 2004. The final rule contained language about additional disclosures related to YBS that are now required of associations in their annual shareholders reports, but it did not contain language about public disclosure of exam results. (FCA does not issue public information about exam results for individual Farm Credit System institutions. FCA does issue aggregate information each year about exam results.)

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