Department of Agriculture
Improvements in the Operations of the Civil Rights Program Would Benefit Hispanic and Other Minority Farmers Gao ID: GAO-02-942 September 20, 2002The Farm Service Agency (FSA) runs a direct loan program that provides loans to farmers who are unable to obtain private commercial credit to buy and operate farms. FSA is required to administer this program in a fair, unbiased manner. GAO found that during fiscal years 2000 and 2001, FSA averaged 4 days longer to process loan applications from Hispanic farmers than it did for non-Hispanic farmers: 20 days versus 16 days. However, the processing times in three of the four states with the highest number of Hispanic borrowers was faster that it was for non-Hispanic borrowers in those states. FSA's direct loan approval rate was somewhat lower for Hispanic farmers than for non-Hispanic farmers nationwide--83 and 90 percent, respectively. The Department of Agriculture's (USDA) policies for staying foreclosures when discrimination has been alleged depend on the method used to lodge complaints. When an individual has a discrimination complaint accepted by USDA's Office of Civil Rights (OCR), FSA's policy is to automatically issue a stay of foreclosure until the complaint has been resolved. A GAO survey revealed that during fiscal years 2000 and 2001, FSA foreclosed on the loans of 600 borrowers nationwide. Although Hispanic farmers make up 4 percent of the agency's direct loan portfolio, 3 percent of these foreclosures involved Hispanic farmers. OCR has made modest progress in the length of time it takes to process discrimination complaints. USDA requirements direct OCR to complete its processing up through the investigative phase of complaints within 180 days of acceptance. It does not, however, have a time requirement for all of the phases of complaint processing.
RecommendationsOur 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.
Director: Team: Phone:GAO-02-942, Department of Agriculture: Improvements in the Operations of the Civil Rights Program Would Benefit Hispanic and Other Minority Farmers
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Report to Congressional Requesters:
United States General Accounting Office:
GAO:
September 2002:
Department of Agriculture:
Improvements in the Operations of the Civil Rights Program Would
Benefit Hispanic and Other Minority Farmers:
GAO-02-942:
Contents:
Letter:
Results in Brief:
Background:
Direct Farm Loan Application National Processing Times Were Longer for
Hispanic Farmers than for Non-Hispanic Farmers but Were Shorter in Most
States with Large Numbers of Hispanic Borrowers:
USDA Only Has a Policy for Staying Foreclosures When Discrimination
Complaints Are Filed with OCR:
Office of Civil Rights‘ Problems with Processing Discrimination
Complaints Persist:
Conclusions:
Recommendations:
Agency Comments:
Scope and Methodology:
Appendix I: Scope and Methodology:
Appendix II: Survey of USDA Farm Service Agency State Offices:
Appendix III: Comments from the Office of Civil Rights:
GAO Comments:
Appendix IV: GAO Contacts and Staff Acknowledgments:
Tables:
Table 1: Average Processing Times for Non-Hispanic and Hispanic Farmers
for Fiscal Years 2000 and 2001 Combined:
Table 2: Percentage of Direct Loan Applications Approved by FSA for
Fiscal Years 2000 and 2001 Combined:
Figure:
Figure 1: OCR Complaint Processing Cycle:
Abbreviations:
USDA: U.S. Department of Agriculture
FSA: Farm Service Agency
OCR: Office of Civil Rights:
United States General Accounting Office:
Washington, DC 20548:
September 20, 2002:
The Honorable Joe Baca
The Honorable Silvestre Reyes
House of Representatives:
The U.S. Department of Agriculture‘s (USDA) Farm Service Agency (FSA)
administers a direct loan program[Footnote 1] that, among other things,
provides loans to farmers who are unable to obtain private commercial
credit to buy and operate farms. FSA is required to administer this
program in a fair, unbiased manner. In each of fiscal years 2000 and
2001, FSA processed about 20,000 loan applications and approved over
16,000 direct loans to farmers. In each year, about 2,000 of these
applications came from minority farmers and about 1,400 loans were made
to this group. For a number of years, some minority and women farmers
have asserted that USDA officials discriminate against them, treating
them differently from other farmers during the loan approval process.
Furthermore, USDA has faced charges that its Office of Civil Rights
(OCR) has not conducted proper and timely investigations of complaints
of discrimination. Since 1997, various groups of farmers--including
African-Americans, women, and Native Americans--have filed class action
lawsuits against USDA alleging, among other things, a 20-year history
of improperly denied or delayed farm loans and delayed complaint
investigations. On October 13, 2000, a group of Hispanic farmers filed
one such class action. Some members of this group have since raised
concerns that, contrary to past class actions where USDA stayed
(or suspended) foreclosure actions, USDA is foreclosing against
Hispanic
farmers while this lawsuit is still pending.
In light of these concerns, you asked us to (1) compare the processing
times and approval rates for direct loans for Hispanic farmers with
those for non-Hispanic farmers, (2) describe USDA‘s policies for
staying foreclosures and how these policies have been implemented, and
(3) assess USDA‘s progress in addressing previously identified problems
associated with untimely processing of discrimination complaints and
human capital issues within USDA‘s Office of Civil Rights.
Our review focused on USDA‘s actions during fiscal years 2000 and 2001,
the most recent years for which data are available. To address the
first objective, we analyzed FSA‘s direct loan data for Hispanic and
non-Hispanic farmers. To address the second objective, we surveyed FSA
farm loan officials in all 50 states and three territories to collect
national information about the total number of loans made to all
farmers and to Hispanic farmers--as well as the number of foreclosures-
-during our time frame. We also visited the four states that received
the largest number of direct loan applications from Hispanic farmers
during fiscal year 2001--California, New Mexico, Texas, and Washington-
-to gather information about instances in which Hispanic borrowers‘
direct loans were foreclosed during fiscal years 2000 and 2001. To
address the third objective, we analyzed OCR‘s program discrimination
complaint data for fiscal years 2000 and 2001 and interviewed OCR
officials about complaint processing times and human capital issues. We
also interviewed FSA and the OCR officials and reviewed regulations,
policies, and procedures for processing direct loans and discrimination
complaints. We performed our work between October 2001 and August 2002
in accordance with generally accepted government auditing standards.
Appendix I provides additional details on our scope and methodology.
Results in Brief:
During fiscal years 2000 and 2001, FSA took, on average, 4 days longer
to process loan applications from Hispanic farmers than it did for non-
Hispanic farmers: 20 days versus 16 days. However, the processing times
in three of the four states with the highest number of Hispanic
borrowers was faster than it was for non-Hispanic borrowers in those
states. We also found that the Farm Service Agency‘s direct loan
approval rate was somewhat lower for Hispanic farmers than that for
non-Hispanic farmers nationwide, 83 and 90 percent respectively.
Although FSA monitors variations in loan processing times and approval
rates between minorities and non-minorities, it does not have
established criteria for determining when variations are significant
enough to warrant further inquiry. In addition, while FSA conducts
periodic field reviews of state offices‘ performance in civil rights
matters and suggests improvements, it does not require the state
offices to implement the recommendations and does not monitor offices‘
follow-up efforts.
USDA‘s policies for staying foreclosures when discrimination has been
alleged depend on the method used to lodge complaints. When an
individual has a discrimination complaint accepted by the Office of
Civil Rights, USDA‘s Farm Service Agency‘s policy is to automatically
issue a stay of foreclosure until the complaint has been resolved.
During fiscal years 2000 and 2001, we tracked 26 Hispanic farmers from
California, New Mexico, Texas, and Washington who filed discrimination
complaints with USDA‘s Office of Civil Rights regarding their direct
loans. In 24 of the cases, the Farm Service Agency took no foreclosure
actions, but--contrary to USDA policy--did in the other 2 cases. These
two loans were not handled in accordance with USDA‘s policy because of
miscommunication between the Office of Civil Rights and the Farm
Service Agency in reconciling their respective lists of complainants.
When the Farm Service Agency learned that complaints had been filed
with the Office of Civil Rights, it stayed its foreclosure actions,
and, as of August 2002, no further collection actions were taken
against the two farmers.
For discrimination claims made in a class action, USDA officials told
us that the department does not have a similar policy for staying
foreclosures for the individuals who are potential class members. The
officials told us that they make these foreclosure decisions on a
case-by-case basis, considering the merits of each class action. Since
1997, USDA has issued stays of foreclosure for two class action groups
that alleged the Farm Service Agency discriminated against them.
However, the stay of foreclosure has expired for one of these groups
and USDA has not issued stays for farmers associated with the two other
ongoing class action lawsuits, including the Hispanic farmers‘ suit,
because the agency believes that the circumstances did not warrant a
stay.
Because the Farm Service Agency does not maintain centralized,
historical information on foreclosures, we surveyed all Farm Service
Agency state offices to determine whether Hispanic farmers were
disproportionately represented among foreclosure actions. Our survey
revealed that during fiscal years 2000 and 2001, the Farm Service
Agency foreclosed on the loans of approximately 600 borrowers
nationwide. While Hispanic farmers make up about 4 percent of the
agency‘s direct loan portfolio, 3 percent of these foreclosures
involved Hispanic farmers. In light of the frequent charges of
discrimination it faces, the Farm Service Agency officials acknowledge
that it would be extremely useful for the agency to maintain
centralized information on foreclosure actions over time.
USDA‘s Office of Civil Rights has made modest progress in the length of
time it takes to process discrimination complaints. USDA requirements
direct OCR to complete its processing up through the investigative
phase of complaints within 180 days of acceptance. It does not,
however, have a time requirement for all of the phases of complaint
processing. In fiscal year 2000, OCR took an average of 365 days to
complete just the investigation phase. Although OCR slightly improved
this to 315 days in fiscal year 2001, this continues to far exceed the
department‘s internal 180-day requirement. More importantly, because
USDA does not have a processing time requirement for all phases of
complaint resolution, it lacks a meaningful way to measure its overall
performance. When all stages of complaint resolution are accounted for,
average processing time was 772 days for fiscal year 2000 and 676 days
for fiscal year 2001.
The Office of Civil Rights has implemented many recommendations made in
the past by USDA‘s Inspector General and agency task forces. Further,
OCR significantly reduced its inventory of complaints from the
beginning of fiscal year 2000 to the end of fiscal year 2001. These
actions, however, have not resolved fundamental, underlying problems
adversely affecting the office‘s ability to process complaints in a
timely manner. Of most significance, the office continues to experience
problems in obtaining and retaining staff with the requisite skills
needed to process complaints. High staff turnover is evidenced by the
fact that of the complaint processing staff on board in September 2000,
only two-thirds were still processing complaints in July 2002.
According to Office of Civil Rights officials, severe morale problems
and poor working relationships among staff has exacerbated these
turnover problems and hinders the Office of Civil Rights‘ ability to
significantly improve its timely processing of complaints.
To help reduce problems and confusion surrounding stays of foreclosure
in cases where discrimination has been alleged, we are recommending
ways to improve communication between the Farm Service Agency and the
Office of Civil Rights; the development of a policy statement that
explains how USDA makes stay of foreclosure decisions when class action
lawsuits have been filed; and the retention of historical information
on foreclosures. To help improve the timeliness of processing
discrimination complaints filed by farmers, we are recommending that
the Office of Civil Rights establish time-frame requirements for all
stages of the complaint process and develop an action plan to address
ongoing staffing and morale problems.
We provided USDA with a draft of this report for review and comment.
FSA and USDA‘s Office of General Counsel provided a few technical
comments that we incorporated into the report as appropriate. OCR
generally agreed with our recommendations but believed that the report
should present more information on recent improvements made by the
office. These comments and our response are presented in appendix III.
Background:
Among other things, FSA is responsible for implementing USDA‘s direct
and guaranteed loan programs. FSA‘s county office staff administers the
direct loan program and has primary decision-making authority for
approving loans. As of September 30, 2001, there were about 95,000
borrowers with direct loans outstanding, with an unpaid principal
balance of about $8.5 billion. FSA farm loan managers are responsible
for approving and servicing these loans. The factors FSA staff consider
in approving or denying a loan include the applicant‘s eligibility,
(i.e., operates a family-size farm in the area), credit rating, cash
flow, collateral, and farming experience. Once a farm loan application
is complete, FSA officials have 60 days to approve or deny the
application and notify the applicant in writing of the decision.
Once FSA approves a direct loan, it helps borrowers develop financial
plans; collects loan payments; and, when necessary, restructures
delinquent debt. Direct loans are considered delinquent when a payment
is 30 days past due. When a borrower‘s account is 90 days past due, FSA
county staff formally notify him or her of the delinquency and provide
an application for restructuring the loan. To be considered for loan
restructuring, borrowers must complete and return an application within
60 days. FSA staff process the completed application and notify the
borrowers as to whether they are eligible for loan restructuring. If a
borrower does not apply or is not eligible for loan restructuring, and
the loan continues to be delinquent, FSA notifies the borrower that it
will take legal action to collect all the money owed on the loan
(called loan acceleration). If the borrower does not take action to
settle their account within a certain period of time, FSA can start
foreclosure proceedings.
When farmers believe that FSA has discriminated against them, they may
file a discrimination complaint with USDA‘s OCR. For the complaint to
be accepted, it must:
* be filed in writing and signed by the complainant;
* be filed within 180 days of the discriminatory event; and:
* describe the discriminatory conduct of an employee of a USDA agency
or discriminatory effect of a policy, procedure, or regulation.
Farmers may also seek compensation for violations of their civil rights
by filing individual or class action lawsuits. In 1997, African
American farmers filed a class action against USDA (Pigford v.
Glickman). In 1999, this suit resulted in a multimillion-dollar
settlement agreement for the farmers. Since then, women and other
minority farmers have also filed class actions against USDA.
To elevate the attention of civil rights matters at USDA, in the 2002
Farm Bill the Congress created the position of Assistant Secretary of
Agriculture for Civil Rights.
Direct Farm Loan Application National Processing Times Were Longer for
Hispanic Farmers than for Non-Hispanic Farmers but Were Shorter in Most
States with Large Numbers of Hispanic Borrowers:
Although the average direct loan application processing time was longer
for Hispanic farmers than for non-Hispanic farmers during fiscal years
2000 and 2001, over 90 percent of loan applications from Hispanic
farmers (and 94 percent from non-Hispanic farmers) were processed
within the agency‘s 60-day requirement. We also found that the direct
loan approval rate for Hispanic farmers was slightly lower than for
non-Hispanic farmers, 83 and 90 percent, respectively. FSA officials
maintain that approval rate differences were not significant and
attribute them to differences in the applicants‘ ability to repay the
loans they requested.
During fiscal year 2000 and 2001, the national average processing time
for direct loans from Hispanic farmers was 20 days--4 days longer than
for non-Hispanic farmers--but well within FSA‘s 60-day requirement. At
the state level, loan processing time differences were more distinct.
For example, in the four states that account for over half of all
Hispanic applications, processing times for Hispanic farmers were
faster than for non-Hispanic farmers in three states and slower in the
fourth state. However, all times fell well within FSA‘s 60-day
requirement. Table 1 shows the average processing times for non-
Hispanic and Hispanic applications nationwide and for the four states,
both fiscal years combined.
Table 1: Average Processing Times for Non-Hispanic and Hispanic Farmers
for Fiscal Years 2000 and 2001 Combined:
National; Non-Hispanic farmers: Number of applications: 39,725; Non-
Hispanic farmers: Average processing time: 16; Hispanic farmers: Number
of applications: 793; Hispanic farmers: Average processing time: 20.
California; Non-Hispanic farmers: Number of applications: 635; Non-
Hispanic farmers: Average processing time: 21; Hispanic farmers: Number
of applications: 99; Hispanic farmers: Average processing time: 15.
New Mexico; Non-Hispanic farmers: Number of applications: 172; Non-
Hispanic farmers: Average processing time: 24; Hispanic farmers: Number
of applications: 49; Hispanic farmers: Average processing time: 15.
Texas; Non-Hispanic farmers: Number of applications: 3,395; Non-
Hispanic farmers: Average processing time: 24; Hispanic farmers: Number
of applications: 194; Hispanic farmers: Average processing time: 22.
Washington; Non-Hispanic farmers: Number of applications: 514; Non-
Hispanic farmers: Average processing time: 27; Hispanic farmers: Number
of applications: 69; Hispanic farmers: Average processing time: 37.
Source: FSA direct loan data.
[End of table]
The vast majority--91 percent--of all direct loan applications from
Hispanic farmers were processed within FSA‘s 60-day requirement.
However, the loan approval rate for Hispanic farmers was lower than for
non-Hispanic farmers during this 2-year period--83 and 90 percent,
respectively. Nonetheless, as shown in table 2, in three of the four
states that received the largest number of Hispanic applications in
fiscal year 2001, direct loan approval rates were similar.
Table 2: Percentage of Direct Loan Applications Approved by FSA for
Fiscal Years 2000 and 2001 Combined:
National; Non-Hispanic farmers: Number of applications: 35,685; Non-
Hispanic farmers: Loan approval rate: 90; Hispanic farmers: Number
of applications: 678; Hispanic farmers: Loan approval rate: 83.
California; Non-Hispanic farmers: Number of applications: 530; Non-
Hispanic farmers: Loan approval rate: 89; Hispanic farmers: Number
of applications: 82; Hispanic farmers: Loan approval rate: 88.
New Mexico; Non-Hispanic farmers: Number of applications: 156; Non-
Hispanic farmers: Loan approval rate: 93; Hispanic farmers: Number
of applications: 48; Hispanic farmers: Loan approval rate: 92.
Texas; Non-Hispanic farmers: Number of applications: 2,099; Non-
Hispanic farmers: Loan approval rate: 87; Hispanic farmers: Number
of applications: 142; Hispanic farmers: Loan approval rate: 85.
Washington; Non-Hispanic farmers: Number of applications: 491; Non-
Hispanic farmers: Loan approval rate: 80; Hispanic farmers: Number
of applications: 76; Hispanic farmers: Loan approval rate: 61.
Note: The number of applications in table 2 is different than those
shown in table 1 because some of the applications were not approved or
denied in the year in which they were received.
Source: FSA direct loan data.
[End of table]
As part of FSA‘s assessment of its civil rights performance, the agency
monitors differences between minority and non-minority loan processing
times and approval rates at both the national and state levels. In
addition, FSA sends teams out to state offices to conduct civil rights
reviews. The teams review loan files to verify compliance with FSA
policies and procedures and, if warranted, provide written
recommendations to remedy problems identified. Up through fiscal year
2001, each state was reviewed once every 3 years; beginning in fiscal
year 2002, state offices will be reviewed every other year.
As shown in tables 1 and 2, Washington was the only state in our review
that had both slower processing times and lower approval rates for
Hispanic farmers. This disparity also surfaced during a 2001 FSA field
review. Specifically, the final report noted that the time period from
the completion of loan applications to the applications‘ approval was
significantly longer for minorities in three of the four FSA service
centers it reviewed. Although the review found that the state properly
documented its reasons for rejecting loan applications from minority
farmers, FSA recommended that the office director emphasize to staff
the importance of treating prospective borrowers equally and of the
need to properly document reasons for denying loan requests when there
may be the appearance of disparate treatment.
While FSA monitors variations in loan processing times and approval
rates between minorities and non-minorities, it does not have
established criteria for determining when observed variations are
significant enough to warrant further inquiry. In addition, while FSA
conducts periodic field reviews of state offices‘ performance in civil
rights matters and suggests improvements, it does not require the
offices to implement the recommendations and does not monitor state
follow-up efforts. FSA is currently considering requiring state offices
to provide information on how they addressed weaknesses noted during
reviews.
USDA Only Has a Policy for Staying Foreclosures When Discrimination
Complaints Are Filed with OCR:
USDA has a policy for issuing stays of foreclosure in cases where
discrimination has been alleged in individual complaints filed with
OCR, but not in response to individual or class action lawsuits with
similar allegations. In cases where individuals file an administrative
discrimination complaint with USDA‘s OCR, agency policy is to
automatically issue a stay of adverse action--including foreclosures--
until the complaint has been resolved. During fiscal years 2000 and
2001, this policy was followed in 24 out of the 26 applicable cases
involving Hispanic borrowers. The policy was not followed in the
remaining two cases because of miscommunication between OCR and FSA in
reconciling their respective lists of complainants. When the Farm
Service Agency learned that complaints had been filed with the Office
of Civil Rights, it stayed its foreclosure actions, and, as of August
2002, no further collection actions were taken against the two farmers.
Although future data system improvements should alleviate this problem,
OCR and FSA officials acknowledge that improvements could be made in
the interim.
USDA does not have a similar policy for issuing stays related to
discrimination claims raised in an individual or class action lawsuit.
Instead, FSA makes decisions on whether to issue stays on a case-by-
case basis based on the advice of USDA‘s General Counsel and the
Department of Justice. Since 1997, USDA has issued stays of
foreclosures related to African-American and Native American farmers‘
class action discrimination lawsuits involving FSA loan programs. In
contrast, USDA did not issue stays of foreclosure for other class
action discrimination lawsuits involving FSA loan programs because the
agency believes that they circumstances did not warrant a stay. These
class action lawsuits and how USDA handled stays of foreclosure are
discussed in greater detail below.
* In October 1997, African-American farmers filed a class action
lawsuit against the Secretary of Agriculture (Pigford v. Glickman)
alleging racial discrimination by USDA in its administration of federal
farm programs. On October 9, 1998, the court certified the class--
issued the criteria for class eligibility. [Footnote 2] On January 5,
1999, USDA entered into a 5-year consent decree with the claimants of
the suit to settle it. The federal district court approved the consent
decree and a framework for the settlement of individual claims in April
of the same year. As of
July 31, 2002, almost 23,000 claims had been filed under the consent
decree. Of those, 21,539 were accepted for processing, and 1,146 claims
were rejected based on a determination that the claimant was not a
member of the class. As part of the consent decree, USDA agreed to
refrain from foreclosing on real property owned by a claimant or
accelerating their loan account.[Footnote 3]
* In November 1999, Native American farmers filed a class action
lawsuit against the Secretary of Agriculture (Keepseagle v. Glickman)
alleging that USDA willfully discriminated against Native American
farmers and ranchers when processing applications for farm credit and
farm programs. Further, claimants alleged that class members previously
filed discrimination complaints with USDA and that the department
failed to thoroughly investigate the complaints. In December 1999, USDA
issued a notice to FSA offices informing them that they were not to
accelerate or foreclose on any direct loans held by Native American
borrowers before the end of 2000, unless the national office, with the
concurrence of the Office of General Counsel, specifically authorized
such action against an individual. As scheduled, this directive expired
at the end of 2000.
* In October 2000, Hispanic farmers (Garcia v. Glickman) and women
farmers (Love v. Glickman) each filed class action lawsuits against
USDA alleging similar claims that USDA willfully discriminated against
them in processing applications for farm credit and farm programs.
Specifically, they alleged that loans were denied, provided late, or
provided with less money than needed to adequately farm. In addition,
the plaintiffs alleged that when they filed discrimination complaints
about the handling of their loan applications, USDA failed to
investigate them. The department has not issued stays of foreclosure in
either of these lawsuits.
In June 2001, USDA‘s Acting General Counsel wrote a memo that explained
the department‘s reasoning for issuing stays of foreclosure in response
to some class action lawsuits, but not others. The memo stated that the
stay of foreclosure agreement included in the Pigford consent decree
was reached only in the context of litigation and only to settle a
lawsuit in which a class action had already been certified by the
district court. The memo went on to say that the stay of foreclosure
policy issued in response to the Keepseagle lawsuit was implemented
during the infancy of the lawsuit while USDA and the Department of
Justice evaluated how to proceed in defending it. In addition, the memo
stated that USDA did not intend to continue a stay of foreclosure
beyond the evaluation. Further, the Acting General Counsel wrote that
in all three of the pending lawsuits--Keepseagle, Garcia, and Love--no
adequate factual bases have been alleged to support the claim of
discrimination made even by most of the named plaintiffs. As a result,
the department saw no reason to implement a policy to halt foreclosures
and other similar actions affecting borrowers potentially involved in
these lawsuits. As of August 2002, a class has been certified for the
Keepseagle lawsuit, but not for the Garcia suit. USDA has not issued
any further stays of adverse action for participants in any of these
lawsuits.
Although USDA has not issued a stay of foreclosure for potential class
members in Garcia, relatively few Hispanic farmers have been affected
by this decision. According to our survey results, FSA accelerated the
direct loans for almost 1,500 borrowers during fiscal years 2000 and
2001; only 41 of these borrowers were Hispanic. Six of these 41 farmers
also had their loans foreclosed on by FSA during this period. In
addition to these
41 borrowers, 10 other Hispanic borrowers who had their loans
accelerated in prior years were foreclosed on during fiscal years 2000
and 2001. To put these figures into context, during this period, FSA
foreclosed on approximately 600[Footnote 4] borrowers, 16 (or 3
percent) of whom were Hispanic. During this period, Hispanic farmers
made up about 4 percent of the agency‘s direct loan portfolio.
FSA does not maintain historic information on accelerations or
foreclosures in a manner for this information to be retrieved or
analyzed readily. FSA officials acknowledged that such information is
needed in light of the frequent charges of discrimination it faces.
Office of Civil Rights‘ Problems with Processing Discrimination
Complaints Persist:
Despite implementing many improvements recommended by
USDA‘s Inspector General and task forces, OCR has only made modest
progress in its timely processing of complaints. Additional progress
has been hindered because OCR has yet to address underlying, severe
human capital problems. In addition, USDA‘s criterion for timely
processing only covers a portion of the three major stages of complaint
processing. OCR officials acknowledge that without time requirements
that address all phases of processing, it lacks a meaningful way to
measure timeliness or to identify and address problem areas and
staffing needs.[Footnote 5]
OCR has adopted many recommendations made in the past by
USDA‘s Inspector General and agency task forces. For example, in 2000,
a USDA task force identified 54 tasks to help address problems with the
OCR‘s organization and staffing, database management, and complaint
processing. As of July 2002, the office has fully implemented 42, or
nearly 80 percent, of these recommendations and plans to complete
actions on most of the others by October 2002. In addition, OCR has
made some organizational modifications--such as creating separate
employment and program directorates, which report under separate lines
of supervision, and adding three new divisions to the current
structure--Program Adjudication, Program Compliance, and Resource
Management Staff. Further, from the beginning of fiscal year 2000 to
the end of fiscal year 2001, OCR has made significant progress in
reducing its inventory of complaints from 1,525 to 594.
Despite these actions, however, OCR continues to fail to meet USDA‘s
requirement that program complaints be processed in a timely manner.
Specifically, USDA‘s internal requirements direct OCR to complete its
investigative reports within 180 days after accepting a discrimination
complaint. However, during fiscal years 2000 and 2001 it took OCR on
average 365 days and 315 days, respectively, to complete its
investigative reports. Furthermore, as shown in figure 1, the 180-day
requirement only covers a portion of the three major stages of the
entire processing cycle. Accordingly, even if the 180-day requirement
was met, it could still take OCR 2 years or more to complete the
processing of a complaint. In fact, when all phases of the complaint
resolution are accounted for, it took OCR an average of 772 and 676
days for fiscal years 2000 and 2001, respectively, to completely
process complaints through the entire complaint cycle and issue the
final agency decision.
Figure 1: OCR Complaint Processing Cycle:
[See PDF for image]
Source: USDA Office of Civil Rights.
[End of figure]
OCR has made only modest progress in improving its timely processing of
complaints because it has yet to address severe, underlying human
capital problems. According to USDA officials, the office has had long-
standing problems in obtaining and retaining staff with the right mix
of skills. The retention problem is evidenced by the fact that only
about two-thirds of the staff engaged in complaint processing in fiscal
year 2000 was still on board 2 years later. OCR officials also pointed
out that this staffing problem has been exacerbated because management
and staff have been intermittently diverted from their day-to-day
activities by such things as responding to requests for information
from the courts. OCR officials stated that this pattern of disruption
has been continuous since 1997.
Furthermore, severe morale problems have exacerbated staff retention
problems and have adversely affected the productivity of the remaining
staff. Management officials told us that they spend an inordinate
amount of time and resources addressing internal staff complaints. In
fact, during fiscal years 2000 and 2001, OCR had one of the highest
rates within USDA of administrative complaints filed by employees. This
atmosphere has led to frequent reassignments or resignations of OCR
managers and staff. According to OCR‘s Deputy Director of Programs, the
problem has reached the point where some staff have even threatened
fellow employees or sabotaged their work. Although OCR‘s Director
believes that the situation has improved over the past few years, he
acknowledges that some of the more serious morale problems have not
been resolved.
Conclusions:
The purpose of USDA‘s direct loan program is to provide loans to
farmers who are unable to obtain private commercial credit. Over the
past decade, USDA has continuously been faced with allegations of
discrimination in its making direct loans to farmers. To help guard
against such charges, FSA needs to improve its monitoring and
accountability mechanisms and make its systems and decision processes
more consistent and transparent. Although FSA monitors variations in
loan processing times and approval rates, it lacks criteria for
determining when discrepancies warrant further inquiry. Similarly,
while FSA conducts periodic reviews of its state offices‘ civil rights
conduct and makes suggestions for improvement, it cannot ensure that
these suggestions have been effective--or even adopted--without a
requirement that state offices implement its recommendations or if not,
explain their reasons for not doing so. In addition, USDA has also been
criticized for its handling of the allegations themselves--whether they
were handled through litigation or the agency‘s complaint processes. In
the case of class action lawsuits, the agency has been charged with
treating different minority groups inequitably because it grants stays
of foreclosures to some groups but not to others. Without a standard,
transparent policy that lays out the factors USDA considers in deciding
whether or not to issue stays, the agency faces the continued problem
of having its decisions viewed as unfair. Furthermore, if USDA does not
improve its process of reconciling its lists of complainants, it runs
the risk of violating its policy of not taking foreclosure actions
against farmers with pending discrimination complaints. In addition,
without maintaining historical information on foreclosures, USDA lacks
an important tool to help it understand its equal opportunity
performance.
In the case of USDA‘s processing of complaints, its Office of Civil
Rights continues to be untimely. Also, without a time requirement that
covers all stages of complaint processing, USDA lacks a meaningful way
to measure performance or to identify and remedy problem areas and
staffing needs. Furthermore, until USDA addresses long-standing human
capital problems within OCR, it is unlikely that the timeliness of
complaint processing will significantly improve.
Recommendations:
To help resolve issues surrounding charges of discrimination in FSA‘s
direct loan program, we recommend that the Secretary of Agriculture:
* establish criteria for determining when discrepancies between
minority and non-minority loan processing times and approval rates
warrant further inquiry; and:
* require state offices to implement recommendations made as a result
of FSA field reviews or explain in writing their rationale for not
doing so.
To help address problems related to FSA foreclosures, we recommend that
the Secretary of Agriculture:
* develop and promulgate a policy statement that lays out the factors
USDA considers in issuing stays of foreclosure in class action
lawsuits;
* maintain historic information, by race, on foreclosures completed by
FSA; and:
* direct FSA and OCR to improve communications to ensure that
foreclosure actions are not taken against borrowers with pending
complaints.
To help address long-standing problems related to OCR‘s untimely
processing of complaints, we recommend that the Secretary of
Agriculture:
* establish time requirements for all stages of the complaint process
and monitor OCR‘s progress in meeting these requirements; and:
* develop an action plan to address ongoing problems with obtaining and
retaining staff with needed skills, establish performance measures to
ensure accountability, and monitor OCR‘s progress in implementing the
plan.
Agency Comments:
We provided a copy of a draft of this report to USDA‘s Farm Service
Agency, Office of General Counsel, and Office of Civil Rights for their
review and comment. FSA and OGC generally agreed with the information
in the report and provided technical and clarifying comments. We have
incorporated these comments, as appropriate. OCR commented that they
were in general agreement with our recommendations but wanted us to
give more prominence to the progress it has made in notifying FSA about
filed complaints, improving complaint processing, and addressing morale
problems. We have revised the report to more clearly reflect OCR
progress in certain areas. These comments and our response are
presented in appendix II.
Scope and Methodology:
To compare the processing times for direct loans for Hispanic farmers
with those for non-Hispanic farmers, we analyzed FSA data and obtained
FSA officials‘ explanations for differences we observed. To analyze
USDA‘s policies for staying foreclosures and how they have been
implemented, we obtained relevant USDA policies and memoranda, and,
through file reviews (in California, Texas, New Mexico, and
Washington), determined the extent to which these policies were
followed. To assess USDA‘s progress in addressing previously identified
problems associated with slow processing of discrimination complaints
and resolution of human capital issues within USDA‘s Office of Civil
Rights, we reviewed USDA status reports and obtained senior managers‘
views on why previously identified problems persist. (App. I contains a
more detailed discussion of our scope and methodology.):
We performed our review from October 2001 through August 2002 in
accordance with generally accepted government auditing standards.
As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
from the date of this letter. At that time, we will send copies of this
report to congressional committees with jurisdiction over farm
programs, the Secretary of Agriculture, the Director of the Office of
Management and Budget, and other interested parties. We will also make
copies available to others upon request. In addition, the report will
be available at no charge on the GAO Web site at http://www.gao.gov.
If you have any questions about this report, please contact me at
(202)-512-3841. Key contributors to this report are listed in appendix
IV.
Lawrence J. Dyckman
Director, Natural Resources and Environment:
Signed by Lawrence J. Dyckman
[End of section]
Appendix I: Scope and Methodology:
To compare the processing times for direct loans for Hispanic farmers
with those for non-Hispanic farmers, we interviewed FSA officials at
the national, state, and county level about the types of direct loans
that FSA provides as well as the steps that are followed in the loan-
making process. We also reviewed FSA regulations and procedures related
to direct loan processing. Because of completeness and reliability
issues with FSA‘s direct loan data, we were not able to perform
detailed analyses of loan processing times for Hispanic and non-
Hispanic farmers using a download of FSA loan data. Instead, we
analyzed direct loan processing times using FSA reports based on
historical data for fiscal years 2000 and 2001. We calculated loan
processing times from the date the farm loan application was complete
to the date of the agency decision to approve or reject the loan
application. We compared the average processing times for all complete
applications from Hispanic farmers to those from non-Hispanic farmers.
We also calculated loan approval rates using FSA historical loan data.
We were unable to provide information about the loan amount requested
and received by borrowers for comparison purposes because this data has
not been tested by FSA for completeness and reliability.
To identify USDA‘s policies for staying foreclosures and to determine
how they have been implemented, we interviewed officials from USDA‘s
Office of Civil Rights, Office of General Counsel, FSA‘s Civil Rights
staff, and FSA state offices. We reviewed policies and procedures for
implementing stays of foreclosure, where available. In those instances
where written guidance was not available, we relied on interviews with
officials from USDA‘s Office of General Counsel and written
correspondence regarding the department‘s actions. In reviewing FSA‘s
implementation of its stay of foreclosure policy in response to
administrative complaints, we limited our work to the four states that
received the largest number of Hispanic loan applications during fiscal
year 2001--California, New Mexico, Texas, and Washington. To identify
Hispanic farmers who had had filed discrimination complaints against
FSA and whose complaints were processed during fiscal years 2000 and
2001, we obtained a list of Hispanic farmers from the OCR and reviewed
available FSA state office direct loan and complaint files to determine
whether the FSA farm loan chiefs had been notified when a farmer had
filed a complaint and whether or not FSA had implemented a stay of
adverse action. In addition, we followed up with FSAís Office of Civil
Rights, with regard to those complainants who did not have a state loan
file or a stay of adverse action notice in the state complaint file, to
determine whether the office had sent out notices to stay adverse
actions.To obtain previously unavailable national data for fiscal years
2000 and 2001 about the number of FSA accelerations and foreclosures of
direct loans made to Hispanic and non-Hispanic farmers, we surveyed FSA
Farm Loan Chiefs in all 50 states, as well as Guam, the Virgin Islands,
and Puerto Rico. The response rate to our survey was 100 percent.
To assess USDA progress in addressing previously identified problems
with its civil rights office‘s organizational structure, staff
turnover, and complaint processing times, we reviewed reports from
USDA‘s Office of Inspector General, internal agency task forces, the
U.S. Commission on Civil Rights, and the Congress. We discussed
problems and recommended remedies with officials from OCR and FSA. We
also examined budget justification documents, USDA departmental
regulations, and OCR procedures. Due to problems with OCR‘s program
complaint database, we relied on, but were unable to verify, processing
information published in USDA‘s annual program performance reports for
fiscal years 2000 and 2001. As noted in the 2001 report, USDA modified
the method it used for calculating processing times that year. If its
prior method had been used, processing times would have increased by 14
percent.
We conducted our review from October 2001 through August 2002 in
accordance with generally accepted auditing standards.
[End of section]
Appendix II: Survey of USDA Farm Service Agency State Offices:
[See PDF for image]
[End of section]
Appendix III: Comments from the Office of Civil Rights:
TO: Larry Dyckman:
Director, Natural Resources and Environment, U.S. General Accounting
Office:
FROM: David Winningham, Director:
Office of Civil Rights:
SUBJECT: U.S. General Accounting Office Draft Report, GAO-02-942,
’Improvements in the Operations of the Civil Rights Programs Would
Benefit Hispanic and Other Minority Farmers“:
Please find attached the response to the subject report GAO submitted
the Secretary of Agriculture on August 26, 2002.
If you have any questions or require any assistance in this matter,
please feel free to contact Farook Sait, Special Assistant, at 720-
5212.
U. S. General Accounting Office Draft Report, GAO-02-942, ’Improvements
in the Operations of the Civil Rights Programs Would Benefit Hispanic
and Other Minority Farmers“:
The Office of Civil Rights (OCR) is in general agreement with the
recommendations made by GAO regarding the need to formalize time frames
for all phases of the complaint process and the need to increase
capital and human resources to the complaint function. However, there
is key information not mentioned regarding OCR‘s accomplishments and
plans for complaint processing. Additionally, there is some information
which is in error and some information which is inappropriately
characterized. Therefore, GAO needs to make appropriate changes in its
report reflecting the information in this document.
The report states that according to the Farm Service Agency‘s (FSA)
policy, foreclosures are stayed when an individual files a complaint of
discrimination and it is accepted by the OCR, until the final agency
decision is issued. During Fiscal Years (FY) 2000 and 2001, there were
26 Hispanic farmers from California, New Mexico, Texas, and Washington,
who had filed complaints with the OCR. The foreclosure action was
stayed in 24 cases. Foreclosure proceedings were initiated in 2
complaints because FSA was not aware that discrimination complaints had
been accepted by the OCR. These actions were stopped when FSA was
informed that the OCR had accepted the complaints.
The GAO has concluded that the initiation of foreclosure proceedings by
FSA against the 2 Hispanic borrowers was a result of poor communication
between the OCR and FSA. However, OCR in response to an Office of
Inspector General (OIG) audit recommendation, in early 2000,
established a procedure to avoid such a situation, by holding monthly
meetings with agency officials to reconcile the complaint information
between OCR and the agency. These meetings are held every month with
FSA staff and the complaint information is reconciled between the two
agencies.
The report also states that OCR has made ’modest“ progress in the
processing time for complaints.
Average time to complete the investigation:
FY 2000: 365 days
FY 2001: 315 days (14% improvement):
Average time to issue final action on complaint:
FY 2000: 772 days
FY 2001: 676 days (14% improvement):
The fact is, at the beginning of FY 2000 OCR had an inventory of 1525
complaints. At the end of FY 2001 OCR had reduced the complaint
inventory to 594. OCR believes that a reduction of approximately 60
percent of the complaint inventory and 14 percent improvement in
processing time deserves better than to be described as ’modest.“:
The report states that the internal regulations of OCR require an
investigation to be completed within 180 days from the date of
acceptance. However, OCR does not have a time requirement for other
phases of complaint processing. As such, GAO makes the following
recommendations:
* improve communication between CR and FSA;
* CR should establish time requirements for all stages of the complaint
process; and develop an action plan to address ongoing staffing and
morale problems:
OCR held a staff and management retreat in FY 2000 to address work
processing, budget requirements, staffing requirements, teamwork and
morale problems. From this retreat was formed a working group composed
of managers, specialists and support staff, who developed the Long Term
Improvement Plan (LTIP), a copy of which is attached. The LTIP
identified the deficiencies noted by the OIG audits and the instant GAO
report, and delineated steps and methods to correct them.
Specifically, LTIP identified the problem of low employee morale and
determined that a major factor to address it would be to address the
following essential needs:
* redirect improperly placed staff;
* necessary and continuing training;
* proper alignment of the organization;
* increased funding for systems;
* increased funding for additional staff;
* improved file maintenance system;
* and improve systems and tracking mechanisms.
OCR recognized the need to reconfigure the organization, and to
establish a unit dedicated to complaint intake. The Programs
Directorate was assigned 9 additional positions to help improve its
performance.
The GAO report on page 13 states as follows:
’OCR has made only modest progress in improving its timely processing
of complaints because it has yet to address severe, underlying human
capital problems. According to USDA officials, the Office has had long-
standing problems in obtaining and retaining staff with the right mix
of skills. The retention problem is evidenced by the fact that only
about two-thirds of the staff engaged in complaint processing in fiscal
year 2000 was still on board 2 years later. OCR officials also pointed
out that this staffing problem has been exacerbated because management
and staff have been intermittently diverted from their day-to-day
activities by such things as responding to requests for information
from the courts or the Equal Employment Opportunity Commission. OCR
officials stated that this pattern of disruption has been continuous
since 1997.“:
The highlighted portion of the above statement is incorrect, as the
staff working on program discrimination complaints have not been
transferred or diverted from their responsibilities to work on any
requests for information from the courts or the Equal Employment
Opportunity Commission. The work of processing Equal Employment
Opportunity (EEO) complaints is done by a dedicated staff in a
different division.
The following chart shows the processing of EEO complaints:
Number of complaints closed; FY 2000, 697; FY 2001, 625.
Average number of days; FY 2000, 750; FY 2001, 627.
Number of investigations completed; FY 2000, 305; FY 2001, 681.
[End of table]
As can be seen, the average processing time for EEO complaints was
reduced by 123 days (16.4%), and the number of investigations increased
by 123 percent!! This does not address the many other areas of
improvement in OCR activities. Therefore, to describe the improvements
by OCR as ’slight“ or ’modest“ and focus on unsubstantiated statements
by individuals is unfair to the agency.
The report continues on page 13 as follows:
’Furthermore, severe morale problems have exacerbated staff retention
problems and have lowered the productivity of the remaining staff.
Management officials told us that they spend an inordinate amount of
time and resources addressing internal staff complaints. In fact, OCR
has a higher rate of administrative complaints filed by employees than
any other agency within USDA. This atmosphere has led to frequent
reassignments or resignations of OCR managers and staff. According to
OCR‘s Deputy Director for Programs, the problem has reached the point
where some staff have even threatened fellow employees or sabotaged
their work.“:
Again, this portion of the report is incorrect. The report shows an
improvement in the - time frames for completion of investigations and
final resolutions, which contradicts the statement that the problem of
employee morale has ’lowered the productivity of the remaining staff.“
Also, since GAO‘s focus was on the processing of program discrimination
complaints, a reference to the number of EEO complaints by OCR
employees and other employee issues which occurred prior to the LTIP is
misleading.
It is OCR‘s position that there is already an established system for
monthly meetings between OCR and FSA to ensure reconciliation of
complaint information. OCR already has a plan for resource allocation,
staff training, staff realignment, performance improvement, and all
other aspects of agency enhancement addressed in the LTIP. OCR will
formalize time frames for all aspects of complaint processing.
Attached is a copy of the LTIP and the Strategic Work Plan. We request
that GAO take this information and make the necessary changes in its
report to reflect more accurately the efforts of OCR.
GAO Comments:
The following are GAO‘s comments on the Office of Civil Rights‘ letter
dated September 11, 2002.
Since early 2000, OCR has coordinated on a monthly basis with FSA to
reconcile their respective lists of complainants. However, OCR‘s Long
Term Improvement Plan (LTIP)--issued in October 2000--noted that
current procedures had not ensured that FSA was notified about newly
filed complaints in time to prevent foreclosures or other adverse
actions against complainants. In addition, one of the cases we noted in
our report occurred in 2001--well after the implementation of the
monthly meetings. When asked about this and another case, FSA officials
told us that the current procedures still needed improvement. (As we
noted in the report, foreclosure actions were halted once FSA was
informed that OCR had accepted the complaints.) Given the importance of
halting foreclosure actions once a complaint has been filed, we believe
that OCR and FSA need to improve communications about borrowers with
pending complaints.
We have added information about OCR‘s reduction of its inventory of
complaints. However, unless OCR reduces the time it takes to process
complaints, the inventory will expand once again. While we acknowledged
that OCR has made modest progress in reducing its processing time, it
still exceeds its own interim goals for timeliness by 75 percent in
fiscal year 2001.
The seven essential needs cited by OCR, for the most part, involve
improving the office‘s work processes. Although these improvements
should indirectly help improve morale, they do not directly address the
severe problems cited by the Deputy Director, such as staff threatening
fellow employees or sabotaging their work. We revised the report to
reflect the director‘s belief that the situation has improved over the
past several years and his acknowledgment that some of the more serious
morale problems have yet to be resolved.
During the course of our review, several senior OCR managers referred
to the increased workloads created by the courts‘ requests for files
and other information needed to resolve pending lawsuits. In addition,
OCR‘s October 2000 LTIP noted that investigative staff had been
assigned to a variety of non-investigative projects, which delayed the
processing of complaints. We have removed the reference regarding the
Equal Employment Opportunity Commission.
Our report focused on the timeliness of processing program complaints
and not on EEO complaints filed by USDA employees.
GAO did not mean to imply that OCR‘s productivity is declining. Rather,
we are making the point that serious morale problems adversely affect
productivity and have revised the report accordingly. While the number
of EEO complaints filed by OCR employees has declined between fiscal
years 2000 and 2001, OCR continues to have one of the highest complaint
rates within USDA.
[End of section]
Appendix IV: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Lawrence J. Dyckman (202) 512-3841
Gregory A. Kosarin (202) 512-6526:
Acknowledgments:
In addition to those named above, Natalie H. Herzog, Jacqueline A.
Cook, Lynn M. Musser, Robert G. Crystal, and George H. Quinn Jr. made
key contributions to this report.
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FOOTNOTES
[1] Under a number of statutes, FSA provides both direct and guaranteed
loans. For direct loans, farmers apply and receive loans directly from
FSA. For guaranteed loans, farmers apply and receive loans from
commercial lenders, with FSA acting as a guarantor for up to 95 percent
of any loss.
[2] The class is defined as African-Americans who: (1) farmed, or
attempted to farm, between January 1, 1981, and December 31, 1996; (2)
applied to USDA during that time for participation in a federal farm
credit or benefit program and who believed they were discriminated
against on the basis of race in USDA‘s response to that application;
and (3) filed a discrimination complaint on or before July 1, 1997,
regarding USDA‘s treatment of their credit or benefit application.
[3] During the Pigford case, a general stay of foreclosure was in
effect. On December 18, 1996--before the Pigford lawsuit was filed
--the Secretary of Agriculture, in response to concerns about
inconsistencies and discrimination in USDA programs, ordered FSA to
stay foreclosures until a determination could be made in each case
as to whether there was evidence of discrimination in program lending.
[4] In responding to the GAO survey about direct loan foreclosures,
some states provided estimates of the total number of borrowers
affected, instead of exact numbers.
[5] According to OCR‘s Deputy Director of Programs, additional time
requirements for complaint processing were developed in July 2002.
However, the requirements will not go into effect until proposed office
restructuring takes place. In addition, OCR has yet to establish time
requirements that address all stages of complaint processing.
