Limited-Resource Farmer Loans

More Can Be Done To Achieve Program Goals and Reduce Costs Gao ID: CED-81-144 August 31, 1981

GAO reviewed the Farmers Home Administration (FmHA) program for providing low-interest rate loans to limited-resource farmers to determine whether more supervision and technical assistance were needed to achieve program goals and whether improvements were needed to control costs and safeguard against misuse of program funds.

GAO found that the management assistance provided to limited-resource borrowers has been inadequate and limited. As a result, borrowers will have a hard time meeting the program goals of increasing production, incomes, and living standards. Additionally, GAO found that FmHA did not always identify borrower weaknesses which needed attention or farm or financial management improvements or practices which needed development. Significant information was sometimes omitted from annual farm plans, and long-range planning was limited or nonexistent. The importance of a record-keeping system was not always discussed. Farm visits were not always made, and yearend analyses of farm records were not always made to determine progress, problems, and needed corrective actions. FmHA staffing has not been adequate to provide the level of assistance needed, and other Department of Agriculture agencies are not being used effectively to obtain additional assistance. FmHA has made limited-resource loans to borrowers who were ineligible, and loan files were not always fully documented to support the loans. Because the subsidies can be substantial, internal controls must be adequate to assure that only eligible borrowers receive them. A good internal control system which separates the duties and procedures governing the authorization, preparation, review, and flow of transactions through the system is lacking. It may be possible to recapture interest subsidies on the loans from the appreciation in farm values when the farm is sold, transferred, or no longer farmed by the borrower.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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