Farmers Home Administration Use of Grant Funds for Water and Waste Disposal Systems

An analysis, performed in cooperation with the National Demonstration Water Project, sought to determine whether the Farmers Home Administration was making grants for rural water and waste disposal projects at the maximum amounts permitted by its regulations and authorized by Congress.

The Project analysis revealed that 429 projects (66 percent) of 650 projects included in the analysis, did not receive the maximum allowable grant. The amount of underobligation totaled $28,398,364. Seventy-eight projects, 12 percent of the total, received the maximum allowable grant and 143 projects, 22 percent, received more than the maximum allowable grant. Only five projects were considered overfunded in terms of authorizing legislation. Criteria applicable to the grant program are: (1) Agency grants cannot exceed 50 percent of total eligible project costs; (2) grants will generally be limited to an amount necessary to reduce the debt service burden to 1 percent of the median family income of the community; and (3) grants will be used to reduce user costs to a reasonable level, a rate comparable to that charged in similar communities. A check of the validity of the Project's calculations revealed that in only five of the cases studied did errors affect the amount of grant the project should have received. The Acting Administrator of the Agency stated that the Agency was opposed to retroactively adjusting grant amounts since it considered that the program had accomplished its basic goals.