Long-Term Cost Implications of Farmers Home Administration Subsidized and Guaranteed Loan Program

PAD-79-15: Published: Apr 24, 1979. Publicly Released: Apr 24, 1979.

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Cost implications of subsidized and guaranteed loans made by the Farmers Home Administration (FmHA) were reviewed and a methodology for long-term cost projections was developed by selecting the major lending programs in the agency and identifying the cost components for each.

In fiscal year 1979 the authorization request exceeded $7 billion, but FmHA did not identify the future financial obligations for each loan program or for all programs. Some programs have a higher default loss rate, and some use proportionally more FmHA-provided financial advice than others. Loan program costs were estimated by identifying the incremental costs that would be incurred with the addition of a reasonable increase in funding.

Recommendations for Executive Action

  1. Status: Closed

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

    Recommendation: The subcommittee concerned should specify that the FmHA program authorization and appropriation request include long-term cost projections, and indicate a program funding level below which projections would not be required.

    Agency Affected:

  2. Status: Closed

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

    Recommendation: The Secretary of Agriculture should ensure that: (1) long-term cost projections are developed for major FmHA programs and are incorporated in the request for authorization and appropriation; (2) each cost projection includes analyses of costs for the requested authorization level and costs for an increase; (3) information requirements of a cost projection system are identified and provisions are made for collecting and analyzing the required data; and (4) program managers in the business and industrial development loan program review the rural lending experience of the Economic Development Administration to improve their estimates of loan viability and default losses.

    Agency Affected:

 

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