Financial Audit:

Farmers Home Administration's Financial Statements for 1989 and 1988

AFMD-91-36: Published: May 6, 1991. Publicly Released: May 6, 1991.

Additional Materials:


Jeffrey C. Steinhoff
(202) 512-9454


Office of Public Affairs
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GAO examined the Farmers Home Administration's (FmHA): (1) consolidated financial statements as of September 30, 1989 and 1988; (2) internal accounting control structure; (3) compliance with laws and regulations; and (4) operating results for the fiscal year (FY) then ended.

GAO found that: (1) FmHA used inaccurate accounting records to support its reported amount of acquired property and did not properly reconcile reports produced by the Acquired Property Tracking System with its field offices' detailed acquired property files; (2) FmHA complied with laws and regulations for FY 1989; and (3) the new FmHA farm loan system lacked sufficient internal controls and was unable to project loan losses. In addition, GAO found that FmHA financial operations for FY 1987 through FY 1989 showed that: (1) FmHA consistently operated at a loss, since it paid higher interest than it received from borrowers and many borrowers did not repay loans; (2) FmHA total loan portfolio book value decreased from $60.9 billion in FY 1987 to $54.5 billion in FY 1989; (3) emergency farm loans represented a high delinquency and default risk; (4) nonfarm loans totalled $32 billion as of September 30, 1989 and continued to represent 59 percent of total outstanding FmHA loans; and (5) FmHA loan guarantees increased to $4.5 billion. GAO also noted that it: (1) and the Office of Management and Budget identified FmHA as a high-risk area within the federal government; and (2) was conducting detailed reviews to determine the nature and extent of problems associated with FmHA systems and programs.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: With the implementation of systems modifications in February 1991, adjustments were made to bring the general ledger into agreement with supporting detail records. Reconciliation of the Acquired Property Tracking System with the detailed property files maintained in county offices was completed and certified on October 22, 1991.

    Recommendation: The Secretary of Agriculture should direct the Administrator, FmHA, to require accurate and timely reconciliation of the acquired property general ledger accounts with detailed acquired property files each fiscal year.

    Agency Affected: Department of Agriculture

  2. Status: Closed - Implemented

    Comments: All FmHA field offices have now implemented the automated farm and home plan (ORACLE), which gathers the data needed to classify the borrower from the borrower's computerized financial statements, thus eliminating prior keypunch and other data entry errors.

    Recommendation: The Secretary of Agriculture should direct the Administrator, FmHA, to implement internal controls to detect and correct data entry errors in the farm loan classification system.

    Agency Affected: Department of Agriculture

  3. Status: Closed - Implemented

    Comments: Reports are sent to FmHA field offices twice a year to verify classification information for farm programs and annually for single family housing programs. Accuracy of these reports was evaluated during assessment reviews in late 1991.

    Recommendation: The Secretary of Agriculture should direct the Administrator, FmHA, to reconcile estimated loss information from the loan classification system to the hard-copy files at the field offices to ensure that all previous data entry errors are corrected.

    Agency Affected: Department of Agriculture


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