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Farmers Home Administration: Farm Loan Programs Have Become a Continuous Source of Subsidized Credit

RCED-89-3 Published: Nov 22, 1988. Publicly Released: Nov 22, 1988.
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Highlights

Pursuant to a congressional request, GAO reviewed the Farmers Home Administration's (FmHA) farm loan graduation policies and procedures to determine: (1) whether FmHA followed legislative mandates to graduate successful borrowers; (2) the extent to which FmHA was a long-term source of credit; and (3) the amount of government interest-rate subsidy and financial advantage FmHA borrowers received.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Agriculture To help ensure that FmHA borrowers with potential for graduation to non-FmHA financing are identified and graduated when their economic conditions permit, the Secretary of Agriculture should direct the Administrator, FmHA, to develop and convey to all FmHA units a precise operational definition of graduation and emphasize the importance of uniform application of that definition.
Closed – Implemented
FmHA has begun coordination to redefine graduation in FmHA Instruction 1951-F, section 1951.252(b). This definition will improve the graduation process and subsequent reporting accuracy. Also, priority has been placed on graduation by setting goals for field offices. GAO considers this recommendation to be a high-risk issue and addressed it in a report released in early 1992.
Department of Agriculture To help ensure that FmHA borrowers with potential for graduation to non-FmHA financing are identified and graduated when their economic conditions permit, the Secretary of Agriculture should direct the Administrator, FmHA, to monitor county office compliance with graduation requirements.
Closed – Implemented
The monitoring system is now in place and reports are generated on a monthly basis. Also, agency internal reviews are being used to ensure compliance.
Department of Agriculture To help ensure that FmHA borrowers with potential for graduation to non-FmHA financing are identified and graduated when their economic conditions permit, the Secretary of Agriculture should direct the Administrator, FmHA, to collect and summarize accurate data on results of the borrower graduation process and distribute such results to all appropriate management levels so that FmHA is kept informed of the progress made in graduating borrowers to non-FmHA sources of credit.
Closed – Implemented
The problem has been due to different interpretations of graduation by county offices. A more precise definition of the term should help resolve this problem. Also, data on graduation activity are being collected and made available to agency management on a monthly basis. GAO considers this recommendation to be a high-risk issue and addressed it in a report issued in early 1992.

Full Report

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Topics

Agricultural programsFarm creditFarm income stabilization programsFarm subsidiesGovernment guaranteed loansInterest ratesLoan repaymentsManagement information systemsNoncomplianceProgram management