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Congress asked us to examine the Department of Agriculture's (the Department) use of liquidating and financing accounts for farm credit programs (direct loans and loan guarantees) to cover the cost of administrative settlements of alleged discriminatory treatment of African-American farmers. We understand that the concern involves the source of funds used to pay the administratively settled claims and not the merits of the underlying claims. In response to an inquiry made in June 1998, the Department advised us that it used the farm credit program liquidating and financing accounts to administratively pay compensatory damages for alleged violations of the civil rights of six African-American farmers.

We conclude that the financing and liquidating accounts are not available to pay compensatory damages to the six African-American farmers. We believe that the Department should charge the costs of these payments to the appropriation provided for administrative expenses of the farm credit programs.


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