Farmers Home Administration:

Federally Acquired Farm Property Presents a Management Challenge

RCED-86-88: Published: Jun 13, 1986. Publicly Released: Jun 13, 1986.

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In response to a congressional request, GAO examined the increase in the number of farms that the Farmers Home Administration (FmHA) acquired as a result of loan foreclosures and other actions, specifically: (1) why the increase occurred; (2) the financial impact on the government; and (3) how well FmHA is managing the properties.

GAO found that: (1) the increase in the number of farms that failed is due to poor farming and financial practices or personal problems, but future failures may be related to economic factors; (2) FmHA lost revenues from acquiring the inventory properties due to undersecured loans and bad loan-servicing policies; and (3) FmHA allotted only a minimal amount of funds to manage the inventory properties in 1985, but will increase its management expenditures to maintain property values and result in higher sales income in the future.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: FmHA regulations were revised to require that maximum publicity be given to the sale of inventory property. Specific guidance on when, where, and how to advertise was also provided.

    Recommendation: The Secretary of Agriculture should direct the Administrator, FmHA, to intensify the selling efforts for inventory property through more extensive use of advertising.

    Agency Affected: Department of Agriculture

  2. Status: Closed - Not Implemented

    Comments: Due to concerns expressed by members of the Senate Agriculture Committee over the historic mission of FmHA to hold inventory property for potential family farm buyers for 3 years, FmHA withdrawed the proposed revision to its regulations.

    Recommendation: The Secretary of Agriculture should direct the Administrator, FmHA, to issue a policy directive to FmHA state personnel stating that, when suitable property is not sold within a specified time, perhaps 1 year, because of a lack of eligible buyers or economic conditions, it should be reclassified as surplus property.

    Agency Affected: Department of Agriculture

  3. Status: Closed - Implemented

    Comments: FmHA regulations were revised to provide the Administrator with authority to restrict leasing of property which could be used to produce agricultural products in surplus supply.

    Recommendation: The Secretary of Agriculture should direct the Administrator, FmHA, to issue a policy directive to FmHA state personnel stating that farm real estate in inventory should neither be leased nor operated for the production of surplus agricultural commodities.

    Agency Affected: Department of Agriculture

 

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