Farmers Home Administration

Farm Loan Programs Have Become a Continuous Source of Subsidized Credit Gao ID: RCED-89-3 November 22, 1988

Pursuant to a congressional request, GAO reviewed the Farmers Home Administration's (FmHA) farm loan graduation policies and procedures to determine: (1) whether FmHA followed legislative mandates to graduate successful borrowers; (2) the extent to which FmHA was a long-term source of credit; and (3) the amount of government interest-rate subsidy and financial advantage FmHA borrowers received.

GAO found that: (1) many FmHA borrowers did not graduate to other credit sources because they lacked financial capability and few lenders expressed interest in refinancing their debts; (2) some FmHA county offices did not comply with all aspects of the graduation review process; (3) FmHA lacked a clear operational definition of graduation, preventing consistent policy and practice application; (4) FmHA could not monitor or judge the success of its graduated borrowers, since it did not maintain reliable information on the results of its graduation efforts; (5) many FmHA borrowers have remained in the loan programs for extended periods due to the depressed agricultural market and the lack of definition of the FmHA role as a temporary credit source; and (6) FmHA borrowers received loans that no other lender would provide and significant interest-rate subsidies at government expense.

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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