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Highlights

Congress created the Farm Labor Housing (FLH) Loan and Grant Program in the early 1960s to support the development of affordable housing for farm workers. In 2010, Congress appropriated $19.7 million for this program, which is administered by the Rural Housing Service (RHS) in the U.S. Department of Agriculture (USDA). GAO was asked to examine (1) demand for the FLH program; (2) RHS's processes for ensuring that the program is providing decent housing for eligible farmworkers; and (3) the financial status and financial management of FLH properties. To do this work, GAO analyzed agency data, regulations, and FLH program documentation; convened a group of experts with assistance of The National Academies; selected and inspected 20 properties in five states; and interviewed RHS staff and various stakeholders.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Agriculture To better determine and track compliance across the portfolio, the Secretary of Agriculture should direct the Administrator of RHS to implement mechanisms to improve the specificity and timely reporting of its compliance review information--such as findings data and performance grade data in Multi-Family Housing Information System (MFIS).
Closed - Implemented
This recommendation has been implemented. In May 2011, the Rural Housing Service (RHS) developed and began to utilize a monthly report that identifies problems (open findings) in Farm Labor Housing projects listed in the Multifamily Information System (MFIS) that remain unresolved at the month's end. Open findings in the following categories are reviewed by the national office: civil rights compliance, financial, management, ownership and physical condition. In 2012, RHS also began evaluating the Missing Data Elements report, which is designed to detect data that should be in MFIS, as part of its oversight each State Director's Multifamily Housing servicing goals. According to the Rural Development Multifamily Handbook (HB)-2-3560, state and servicing offices are required to input the current status of all servicing actions into MFIS. The state office must monitor the MFIS activities of servicing offices to ensure that data are accurate, consistent, timely, and complete. According to the RHS national office, the Missing Data Elements report is used to ensure that such actions by the state and servicing offices are completed.
Department of Agriculture To help resolve identified borrower noncompliance in a timely manner, the Secretary of Agriculture should direct the Administrator of RHS to implement enforcement mechanisms that can be tailored to the severity of the borrower noncompliance, such as the civil money penalty enforcement provision in its program regulations.
Closed - Implemented
This recommendation has been implemented. In response to our recommendation, USDA published a proposed rule on Civil Monetary Penalties in January 2013 and the final rule in August 2016. The final rule established the implementation of its civil monetary penalty provision with the goal of enabling RHS to target the non-monetary default issues and elicit compliance by the borrower without such drastic steps as foreclosure. In February 2019, RHS updated its handbook with guidance on implementing the final rule. By taking steps to implement a range of enforcement mechanisms, RHS loan servicers can begin to tailor borrower noncompliance issues by severity.
Department of Agriculture To better ensure that requirements for tenant eligibility are met across the FLH portfolio, the Secretary of Agriculture should direct the Administrator of RHS to require its loan servicers to use the Systematic Alien Verification and Entitlements (SAVE) program administered by the Department of Homeland Security to verify tenant's residency status during supervisory reviews.
Open
As of May 2020, according to officials, USDA has proposed revisions to its regulations that will incorporate the usage of Systematic Alien Verification and Entitlements (SAVE) program. The proposed rule is under interagency review with the Office of Management and Budget. Publication of the final rule is planned to occur in fiscal year 2022 according to USDA officials. We will continue to monitor USDA's progress in implementing our recommendation.
Department of Agriculture To better ensure that requirements for tenant eligibility are met across the FLH portfolio, the Secretary of Agriculture should direct the Administrator of RHS to seek legislative authority to gain access to the Department of Health and Human Services' National Directory of New Hires and make this information available to RHS so that they can assess the accuracy of tenant income documentation during supervisory reviews and other oversight activities.
Closed - Implemented
Although legislation has not yet passed, this recommendation to seek legislation has been implemented. The Secretary of the Department of Agriculture (USDA) proposed legislation in May 2012, which would allow the agency access to the National Directory of New Hires (NDNH) administered by the Department of Health and Human Services. The Office of Management and Budget did not move this proposal forward in the President's Budget for fiscal year 2012. USDA subsequently submitted legislative proposals with the Budget for USDA in fiscal years 2013-2015, seeking Congressional authority for access to NDNH.
Department of Agriculture To help ensure that reliable program costs are estimated in future years, the Secretary of Agriculture should direct the Administrator of RHS, on an annual basis, to work with budget staff to investigate key assumptions, including comparing these assumptions to actual program performance, in order to explain unusual fluctuations impacting the credit subsidy rate used in budget formulation.
Closed - Implemented
This recommendation has been implemented. In its standard operating procedures for Rural Development (RD) Budget Office staff, the Department of Agriculture has included steps to investigate key assumptions in its annual credit subsidy model, including review of unusual changes or fluctuations; comparison of assumptions to actual program performance; and obtaining the review and approval of Farm Labor Housing program officials. RD Budget Office staff have developed a process to annually review each assumption in its credit subsidy model to determine the extent to which the assumption has changed from the previous year. RD Budget Office staff also conduct trend analysis to investigate assumptions in the credit subsidy model for programs that have year-over-year changes of more than 5 percent in the budget formulation subsidy rate.
Department of Agriculture To better ensure that FLH funds obligated but unliquidated are efficiently used to provide farm labor housing, the Secretary of Agriculture should direct the Administrator of RHS to issue guidance on obligation expiration dates and make all RHS staff in the state and local offices aware of the guidance and how to implement it.
Closed - Implemented
This recommendation has been implemented. On December 7, 2011, the Rural Housing Service (RHS) provided guidance to Rural Development State Directors for reviewing, obligating, and deobligating Farm Labor Housing (FLH) program obligations in the form of an unnumbered letter. The unnumbered letter provides timelines for insuring obligation of FLH program funds in a timely manner:on-farm loans must be fully liquidated not more than two years from the date the loan was obligated; and off-farm FLH loans and grants must be fully liquidated not more than three years from the date the loan was obligated. On July 20, 2014, RHS issued an unnumbered letter providing further guidance to Rural Development State Directors in response to this recommendation, which instructs every state office to evaluate every unliquidated obligation semi-annually and certify, to the national office, the continuing need of unliquidated obligations. Both unnumbered letters extend these policies to Section 515, Section 514, and Section 516 unliquidated loan and grant obligations.
Department of Agriculture The Secretary of Agriculture should direct the Administrator of RHS to better utilize available data on demand for the FLH program--such as systematically reviewing local market analyses, further analyzing occupancy data on a statewide, regional, or national level, and retaining and analyzing application information--to help target available funding to areas of greatest need.
Open
As of May 2020, according to officials, USDA has conducted an analysis of occupancy data and information retained in program applications, to determine how funding can be allocated to better meet market demand, and support community revitalization and affordable housing needs. Officials planned to use the results of this analysis to revise USDA's Farm Labor Housing Notice for Solicitation of Applications. The notice is currently undergoing an internal clearance process, which USDA anticipates completing by fiscal year 2022. We will continue to track the agency's progress on this recommendation.

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