Number of Employees and Committee Members With FSA Farm Loans

Our analysis of FSA’s loan portfolio database showed that 414 employees and 1,209 county committee members had FSA farm loans as of September 30, 1996. FSA’s federal employees and county committee members had slightly more loans per borrower than other FSA borrowers, while FSA’s nonfederal employees had slightly fewer loans per borrower than other borrowers. Differences in the Size and Repayment History of Loans to FSA Employees, County Committee Members, and Other Borrowers

While the outstanding principal of the direct and guaranteed loans of FSA employees and county committee members was about $265 million of the $16.9 billion in FSA’s outstanding loan principal as of September 30, 1996, we found some differences in the average amount of loans, loan delinquencies, and debt relief received by FSA employees and county committee members in comparison with other FSA borrowers. With respect to delinquencies, FSA’s federal employees were delinquent on their direct farm loans slightly less often than other borrowers. However, the average amounts of the delinquencies for FSA’s federal employees and county committee members were somewhat larger than the delinquencies of other borrowers, as shown in table 3. Number of Cases Requiring Action to Avoid Conflicts of Interest

Starting in 1995, FSA’s state offices began to survey FSA employees and committee members to identify those with loans and relationships with borrowers so that the offices could take action to avoid conflicts of interest in FSA’s farm loan program. As of March 1997, according to the data we obtained from the 50 FSA state offices, 1,767 employees and county committee members (about 7 percent) had loans or loan-related relationships that required action to avoid conflicts of interest. FSA identified these cases through its state offices’ (1) surveys of employees and committee members and (2) reviews of individual cases to identify those whose loans and relationships with borrowers required action to avoid conflicts of interest. However, FSA headquarters has not reviewed the actions of its state offices on county employee groups. However, FSA has not provided state offices with clear and consistent guidance on identifying situations that constitute conflicts of interest and carrying out their responsibilities, nor has it periodically reviewed how well the state offices are fulfilling their roles. As a result, FSA has little assurance that state offices have consistently identified and acted upon all conflict-of-interest cases. Recommendations

We recommend that the Secretary of Agriculture direct the Administrator of FSA to (1) clarify FSA’s policy and guidance that define situations constituting potential conflicts of interest and the actions that are needed for addressing such cases, (2) require all state offices to address conflict-of-interest cases using the revised policy and guidance, and (3) monitor and review state and county offices’ actions to ensure that the efforts to address conflicts of interest are adequate and thorough. South Dakota FSA officials did not obtain information on the total number of county committee members.
Why GAO Did This Study

GAO reviewed conflicts of interest in the Farm Service Agency's (FSA) farm loan program, focusing on the: (1) number of FSA's federal and nonfederal employees and county committee members who have FSA farm loans; (2) comparative size and repayment history of farm loans to FSA's federal employees, FSA's nonfederal employees, county committee members, and other FSA borrowers; (3) number of cases FSA has identified requiring action to avoid conflicts of interest; and (4) actions FSA has taken to address these cases.

What GAO Found

GAO noted that: (1) as of September 30, 1996, FSA's loan portfolio indicated that 414 of about 16,300 FSA federal and nonfederal employees and 1,209 of about 8,150 members of county committees had 4,089 FSA farm loans; (2) while the outstanding principal of the loans of FSA's federal and nonfederal employees and county committee members was about $265 million of FSA's outstanding loan principal of $16.9 billion, these employees' loans differed in size when compared with the loans of other FSA borrowers; (3) as of September 30, 1996, the loans of FSA's federal employees averaged about $197,700 per borrower, the loans of nonfederal employees averaged about $127,000, the loans of FSA's county committee members averaged about $183,500, and the loans of all other borrowers averaged about $145,200 per borrower; (4) with respect to repayment history, FSA's federal and nonfederal employees and county committee members were delinquent and needed debt relief on their farm loans less often than other borrowers; (5) however, when these employees received debt relief, it was greater than the relief granted other borrowers, 53 percent, on average, for FSA's federal employees, and 7 percent and 2 percent, respectively, for nonfederal employees and county committee members; (6) as of March 1997, FSA had identified 1,767 cases in which its federal and nonfederal employees or county committee members had loans or relationships with other borrowers that required action to avoid conflicts of interest; (7) these cases were identified through FSA's review of 3,622 cases in which FSA's federal and nonfederal employees and county committee members reported that they or their relatives or business associates had FSA farm loans; (8) the total number of cases is likely to increase as FSA proceeds with its efforts to identify cases requiring action to avoid conflicts of interest; (9) although FSA has made progress in dealing with conflicts of interest, it has not provided its state offices with clear and consistent guidance on how to identify and address conflict-of-interest cases; (10) furthermore, FSA headquarters has not reviewed the state offices' efforts to address conflicts of interest; and (11) as a result, FSA's state offices vary in the extent to which they have identified and taken action on cases to avoid conflicts of interest.