Farm Programs: Efforts to Achieve Equitable Treatment of Minority Farmers
(Testimony, 03/19/97, GAO/T-RCED-97-112).

The number of minority-owned farms is declining at a more rapid rate
than other farms, which has called into question the treatment of
minority farmers in receiving federal assistance. Moreover, for years,
minority farmers have reported that Agriculture Department (USDA)
officials do not treatment them in the same way as nonminority farmers
in the conduct of the agency's programs, particularly in decisions made
in USDA's country offices and district loan offices. This testimony,
which draws on a January 1997 report (GAO/RCED-97-41), (1) identifies
the Farm Service Agency's efforts to treat minority farmers in the same
way as nonminority farmers in delivering program services; (2) examines
the representation of minorities in county office staffing and on county
committees in the counties with the highest number of minority farmers;
and (3) examines data on the disposition of minority and nonminority
farmers' applications to participate in the Agricultural Conservation
Program and the direct loan program at the national level and in five
county and five district loan offices for fiscal years 1995 and 1996.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-RCED-97-112
     TITLE:  Farm Programs: Efforts to Achieve Equitable Treatment of 
             Minority Farmers
      DATE:  03/19/97
   SUBJECT:  Civil rights
             Agricultural assistance
             Eligibility criteria
             Federal employees
             Minorities
             Racial discrimination
             Soil conservation
             Direct loans
             Advisory committees
             Eligibility determinations
IDENTIFIER:  USDA Agricultural Conservation Program
             FSA Direct Farm Loan Program
             USDA Environmental Quality Incentive Program
             FSA Small Farmer Outreach Training and Technical Assistance 
             Program
             Russell County (AL)
             Dooly County (GA)
             Holmes County (MS)
             Glacier County (MT)
             Duval County (TX)
             Elmore (AL)
             Byron (GA)
             Jim Wells County (TX)
             
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Cover
================================================================ COVER


Before the Subcommittee on Department Operations, Nutrition, and
Foreign Agriculture,
House of Representatives

For Release
on Delivery
Expected at
1:00 p.m.  EST
Wednesday
March 19, 1997

FARM PROGRAMS - EFFORTS TO ACHIEVE
EQUITABLE TREATMENT OF MINORITY
FARMERS

Statement of Robert A.  Robinson, Director,
Food and Agriculture Issues
Resources, Community, and Economic
Development Division

GAO/T-RCED-97-112

GAO/RCED-97-112T


(150428)


Abbreviations
=============================================================== ABBREV

  USDA -
  FSA -
  GAO -
  ACP -
  NAD -
  EEO -

============================================================ Chapter 0

Mr.  Chairman and Members of the Subcommittee: 

We are pleased to be here today to testify on the work we have done
on the U.S.  Department of Agriculture's (USDA) efforts to achieve
equitable treatment of minority farmers.  Our testimony today is
based on our January 24, 1997, report.\1

Let me place our work in the context of concerns about this issue. 
As you know, the number of minority-owned farms is declining at a
more rapid rate than other farms, which has called into question the
treatment of minority farmers in receiving federal assistance. 
Furthermore, for a number of years, minority farmers have reported
that USDA officials do not treat them in the same way as nonminority
farmers in the conduct of USDA's programs, particularly in decisions
made in the Department's county offices and district loan offices. 

Because of these concerns, we were asked to review the efforts of
USDA's Farm Service Agency (FSA) to treat minority farmers fairly. 
As we were nearing completion of our work, the concerns of several
minority farmers were publicized, leading the Secretary of
Agriculture to take a number of actions, including holding national
and statewide forums on the treatment of minority farmers.  At these
meetings, minority farmers made a number of charges of discriminatory
practices in USDA.  For example, they charged that USDA officials
deny them courtesy and respect while giving large-scale farmers
service and loans.  They also charged that the loans of minority and
small farmers are not processed in a timely manner and that FSA is
foreclosing on minority-owned farmers at a higher rate than on
nonminority-owned farms.  Finally, they stated that FSA lacks
diversity in the state and county committee structure and county
office staffing.  While these efforts were underway, the Secretary
suspended all foreclosures on farm loans.  Our testimony today
focuses on the work we did to (1) identify FSA's efforts to treat
minority farmers in the same way as nonminority farmers in delivering
program services; (2) examine the representation of minorities in
county office staffing and on county committees in the counties with
the highest number of minority farmers; and (3) examine data on the
disposition of minority and nonminority farmers' applications for
participation in the Agricultural Conservation Program and the direct
loan program at the national level and in five county and five
district loan offices for fiscal years 1995 and 1996.  Because of the
small number of offices we visited, we cannot generalize our findings
to FSA's offices nationwide. 

In summary, we found that the Farm Service Agency's Civil Rights and
Small Business Development Staff (the Staff) oversees the agency's
efforts to achieve fair treatment for minority farmers.  In fiscal
years 1995 and 1996, the Staff closed 28 complaints of discrimination
against farmers on the basis of race or national origin and found
discriminatory practices in 2 of the 28 cases.  The Staff also
conducted 13 management reviews of field offices and found no
evidence of unfair treatment.  Finally, according to the Staff, their
training of all FSA personnel on civil rights matters will be
completed by the end of 1997.  We did not evaluate the quality and
thoroughness of the staff's activities. 

With respect to the representation of minority employees in the Farm
Service Agency's field offices, USDA's database showed that, as of
October 1996, 32 percent of the employees serving the 101 counties
with the highest number of minority farmers are members of a minority
group.  Moreover, for the same period, 89 percent of these minority
employees were either county executive directors or program
assistants.  Minority farmers make up about 17 percent of the farmer
population in these counties.  Furthermore, in 36 of the 101
counties, at least one minority farmer is a member of the county
committee. 

Finally, the applications of minority farmers for the Agricultural
Conservation Program and for the direct loan program were disapproved
at a higher rate nationwide than for nonminority farmers for October
1, 1994 through March 31, 1996.  We found that disapproval rates for
minority farmers were also higher at three of the five county offices
and three of the five district loan offices we visited.  However, our
review of the information in the application files at these offices
showed that decisions to approve or disapprove applications were
supported by information in the files and that decision-making
criteria appeared to be applied to minority and nonminority
applicants in a similar fashion. 


--------------------
\1 Farm Programs:  Efforts to Achieve Equitable Treatment of Minority
Farmers (GAO/RCED-97-41, Jan.  24, 1997). 


   BACKGROUND
---------------------------------------------------------- Chapter 0:1

Within USDA, FSA has the overall administrative responsibility for
implementing agricultural programs.  FSA is responsible for, among
other things, stabilizing farm income, helping farmers conserve
environmental resources, and providing credit to new or disadvantaged
farmers.  FSA's management structure is highly decentralized; the
primary decision-making authority for approving loans and
applications for a number of agricultural programs rests in its
county and district loan offices.  In county offices, for example,
committees, made up of local farmers, are responsible for deciding
which farmers receive funding for the Agricultural Conservation
Program (ACP).  Similarly, FSA officials in district loan offices
decide which farmers receive direct loans.  These FSA officials are
federal employees. 

Under the ACP, FSA generally paid farmers up to 75 percent of a
conservation project's cost, up to a maximum of $3,500 annually.  \2
FSA allocated funds annually to the states on the basis of federally
established priorities.  The states in turn distributed funds to the
county committees on the basis of the states' priorities.  Farmers
could propose projects at any time during the fiscal year, and the
county committees could approve the proposals at any time after the
funds became available.  Consequently, county committees often
obligated their full funding allocation before receiving all
proposals for the year. 

The district loan offices administer the direct loan program, which
provides farm ownership and operating loans to individuals who cannot
obtain credit elsewhere at reasonable rates and terms.  Each district
loan office is responsible for one or more counties.  The district
loan office's agricultural credit manager is responsible for
approving and servicing these loans.  FSA accepts a farmer's loan
application documents, reviews and verifies these documents,
determines the applicant's eligibility to participate in the loan
program, and evaluates the applicant's ability to repay the loan.  In
servicing these loans, FSA assists in developing farm financial
plans, collects loan payments, and restructures delinquent debt. 

For both the ACP and the direct loan program, as well as other
programs, farmers may appeal disapproval decisions to USDA's National
Appeals Division (NAD). 


--------------------
\2 Section 336 of the Federal Agricultural Improvement and Reform Act
of 1996 (P.L.  104-127, Apr.  4, 1996), known as the 1996 farm bill,
repealed the ACP and replaced it with the Environmental Quality
Incentives Program.  For fiscal year 1997, the new program will be
administered jointly by FSA and the Department's Natural Resources
and Conservation Service. 


   ONGOING EFFORTS TO ENHANCE
   MINORITY FARMERS' PARTICIPATION
   IN FARM PROGRAMS
---------------------------------------------------------- Chapter 0:2

FSA's efforts to achieve equitable treatment for minority farmers are
overseen by the agency's Civil Rights and Small Business Development
Staff through three separate activities.  First, the Staff
investigates farmers' complaints of discrimination in program
decisions through its Civil Rights and Small Business Development
Staff.  During fiscal years 1995 and 1996, the Staff closed 28 cases
in which discrimination was alleged on the basis of race or national
origin.  In 26 of these cases, the Staff found no discrimination.  In
the other two cases, the Staff found that FSA employees had
discriminated on the basis of race in one case and national origin in
the other.  At the time of review, USDA had not resolved how it would
deal with the employees and compensate the affected farmers.  As of
January 7, 1997, the Staff had 110 cases of discrimination alleged on
the basis of race or national origin under investigation.  Ninety-one
percent of these cases were filed since January 1, 1995. 

Second, the Staff conducts management evaluations of FSA's field
offices to ensure that procedures designed to protect civil rights
are being followed.  During fiscal years 1995 and 1996, the Staff
evaluated management activities within 13 states.  None of the
evaluations concluded that minority farmers were being treated
unfairly. 

And third, the Staff provides equal employment opportunity (EEO) and
civil rights training to its employees.  Beginning in 1993, the Staff
began to present revised EEO and civil rights training to all FSA
state and county employees.  About half of the FSA employees have
been trained, according to the Staff, and all are scheduled to
complete this training by the end of 1997.  The training covers such
areas as civil rights (program delivery) and EEO counseling,
mediation, and complaints. 

In addition to these activities, FSA has specific efforts to increase
minority farmers' participation in agricultural programs.  For
example, since September 1993, the Small Farmer Outreach Training and
Technical Assistance Program has assisted small and minority farmers
in applying for loans.  Over 2,500 FSA borrowers have been served by
these efforts.  FSA has also assisted Native American farmers by
establishing satellite offices on reservations.  More recently, in
July 1996, FSA created an outreach office to increase minority
farmers' knowledge of, and participation in, the Department's
agricultural programs. 


   EMPLOYMENT OF MINORITY STAFF IN
   COUNTY OFFICES AND
   REPRESENTATION OF MINORITY
   FARMERS ON COUNTY COMMITTEES
---------------------------------------------------------- Chapter 0:3

In the 101 counties with the highest numbers of minority farmers,
representing 34 percent of all minority farmers in the nation, FSA
employees and county committee members were often members of a
minority group. 


      MINORITY EMPLOYMENT IN
      COUNTY OFFICES
-------------------------------------------------------- Chapter 0:3.1

As of October 1996, 32 percent of FSA's employees serving the 101
counties were members of a minority group.  In the offices serving 77
of these counties, at least one staff member was from a minority
group.  Moreover, 89 percent of these minority employees were either
county executive directors or program assistants.  Minority farmers
make up about 17 percent of the farmer population in these 101
counties. 

In addition, 7 of the 10 county and district loan offices we visited
had at least one minority employee.  The executive directors of two
county offices, Holmes, Mississippi, and Duval, Texas, were members
of a minority group, as were the managers of two district loan
offices, Elmore, Alabama, and Jim Wells, Texas, and the deputy
managers of three district loan offices, Holmes, Jim Wells, and
Byron, Georgia. 

The number of minority employees could change as FSA continues its
current reorganization.  FSA plans to decrease its field structure
staff from 14,683 in fiscal year 1993 to 11,729 in fiscal year 1997ï¿½a
change of about 20 percent.  We do not know how this reduction will
affect the number of minority employees in county and district loan
offices. 


      MINORITY REPRESENTATION ON
      COUNTY COMMITTEES
-------------------------------------------------------- Chapter 0:3.2

We found that for the 101 counties with the highest numbers of
minority farmers, 36 had at least one minority farmer on the county
committee.  In the five county offices we visited, two committees had
minority members and the other three had minority advisers.  We have
previously reported on this issue.  In March 1995, in Minorities and
Women on Farm Committees (GAO/RCED-95-113R, Mar.  1, 1995), we
reported that minority farm owners and operators, nationwide,
accounted for about 5 percent of those eligible to vote for committee
members, and about 2 percent of the county committee members came
from a minority group. 


   REASONS PROVIDED FOR
   DISAPPROVALS OF ACP AND DIRECT
   LOAN APPLICATIONS
---------------------------------------------------------- Chapter 0:4

According to FSA's data, applications for the ACP for fiscal year
1995 and for the direct loan program from October 1994 through March
1996 were disapproved at higher rates nationwide for minority farmers
than for nonminority farmers.  To develop an understanding of the
reasons for disapprovals, we examined the files for applications
submitted under both programs during fiscal years 1995 and 1996 in
five county and five district loan offices.  We chose these offices
because they had higher disapproval rates for minority farmers or
because they were located in areas with large concentrations of
farmers from minority groups.  We chose the ACP and the direct loan
program because decisions on participation in these programs are made
at the local level.  In addition, nationally, these programs have
higher disapproval rates for minority farmers than for nonminority
farmers. 


      REASONS FOR DISAPPROVAL OF
      ACP APPLICATIONS
-------------------------------------------------------- Chapter 0:4.1

Nationally, during fiscal year 1995, the disapproval rates for
applications for ACP funds were 33 percent for minority farmers and
27 percent for nonminority farmers.  We found some differences in the
disapproval rates for different minority groups.  Specifically, 25
percent of the ACP applications from Native American and Asian
American farmers were disapproved, while 34 percent and 36 percent of
the applications from African American and Hispanic American farmers,
respectively, were disapproved. 

To develop an understanding of the reasons why disapprovals occurred,
we examined the ACP applications for fiscal years 1995 and 1996 at
five county offices.  (See attachment I for the number of ACP
applications during this period from minority and nonminority farmers
in each of the five counties, as well as the number and percent of
applications that were disapproved.)

When ACP applications were received in the county offices we visited,
they were reviewed first for compliance with technical requirements. 
These requirements included such considerations as whether the site
was suitable for the proposed project or practice, whether the
practice was still permitted, or whether the erosion rate at the
proposed site met the program's threshold requirements. 

Following this technical evaluation, if sufficient funds were
available, the county committees approved all projects that met the
technical evaluation criteria.  This occurred for all projects in
Dooly County and for a large majority of the projects in Glacier
County.  In Holmes County, the county committee ranked projects for
funding using a computed cost-per-ton of soil saved, usually
calculated by the Department's local office of the Natural Resources
Conservation Service.  The county committee then funded projects in
order of these savings until it had obligated all funds. 

In the remaining two counties, Russell and Duval, the county
committees, following the technical evaluations, did not use any
single criterion to decide which projects to fund.  For example,
according to the county executive director in Russell County, the
committee chose to fund several low-cost projects submitted by both
minority and nonminority farmers rather than one or two high-cost
projects.  It also considered, and gave higher priority to,
applicants who had been denied funds for eligible projects in
previous years.  In contrast, the Duval county committee decided to
support a variety of farm practices.  Therefore, it chose to allocate
about 20 percent of its funds to projects that it had ranked as
having a medium priority.  These projects were proposed by both
minority and nonminority farmers. 

In the aggregate, 98 of 271 applications from minority farmers were
disapproved in the five county offices we visited.  Thirty-three were
disapproved for technical reasons and 62 for lack of funds.  FSA
could not find the files for the remaining three minority applicants. 
We found that the applications of nonminority farmers were
disapproved for similar reasons.  Of the 305 applications for
nonminority farmers we reviewed, 106 were disapproved.  Fifty-three
were disapproved for technical reasons and 52 for lack of funds.  FSA
could not find the file for the remaining applicant.  Approval and
disapproval decisions were supported by material in the application
files, and the assessment criteria used in each location were applied
consistently to applications from minority and nonminority farmers. 


      REASONS FOR DISAPPROVAL OF
      DIRECT LOAN APPLICATIONS
-------------------------------------------------------- Chapter 0:4.2

Nationally, the vast majority of all applicants for direct loans have
their applications approved.  However, the disapproval rate for
minority farmers is higher than for nonminority farmers.  From
October 1994 through March 1996, the disapproval rate was 16 percent
for minority farmers and 10 percent for nonminority farmers.  We
found some differences in the disapproval rates for different
minority groups.  Specifically, 20 percent of the loan applications
from African American farmers, 16 percent from Hispanic American
farmers, 11 percent from Native American farmers, and 7 percent from
Asian American farmers, were disapproved. 

To assess the differences in disapproval rates, we examined the
direct loan applications for fiscal years 1995 and 1996 at five
district loan offices.  (See attachment II for more detailed
information on direct loan disapproval rates in five district
offices.)

Our review of the direct loan program files in these locations showed
that FSA's decisions to approve and disapprove applications appeared
to follow USDA's established criteria.  These criteria were applied
to the applications of minority and nonminority farmers in a similar
fashion and were supported by materials in the files.  The process
for deciding on loan applications is more uniform for the direct loan
program than for the ACP. 

The district loan office first reviews a direct loan application to
determine whether the applicant meets the eligibility criteria, such
as being a farmer in the district, having a good credit rating, and
demonstrating managerial ability.  Farmers who do not demonstrate
this ability may take a course, at their own expense, to meet this
standard.  If the applicant meets these criteria, the loan officer
determines whether the farmer meets the requirements for collateral
and has sufficient cash flow to repay the loan.  These decisions are
based on the Farm and Home Planï¿½the business operations plan for the
farmerï¿½prepared by the loan officer with information provided by the
farmer.  If the collateral requirements and the cash flow are
sufficient, the farmer generally receives the loan. 

In the five district loan offices we visited, 22 of the 115
applications from minority farmers were disapproved.  Twenty were
disapproved because the applicants had poor credit ratings or
inadequate cash flow.  One was disapproved because the applicant was
overqualified and was referred to a commercial lender.  In the last
case, the district loan office was unable to locate the loan file
because it was apparently misplaced in the departmental
reorganization.  However, correspondence dealing with this
applicant's appeal to NAD indicates that the application was
disapproved because the applicant did not meet the eligibility
criterion for recent farming experience.  NAD upheld the district
loan office's decision.  The Department allows all farmers to appeal
adverse program decisions made at the local level through NAD.  The
division conducts administrative hearings on program decisions made
by officers, employees, or committees of FSA and other USDA agencies. 

The applications of nonminority farmers that we reviewed were
disapproved for similar reasons.  Of the 144 applications from
nonminority farmers we reviewed, 15 were disapproved.  Nine were
disapproved because of poor credit ratings or inadequate cash flow;
five were disapproved because the applicants did not meet eligibility
criteria; and one was disapproved because of insufficient collateral. 

Additionally, in reviewing the 129 approved applications of
nonminority farmers, we did not find any that were approved with
evidence of poor credit ratings or insufficient cash flow. 

We also wanted to obtain information on whether FSA was more likely
to foreclose on loans to minority farmers while restructuring or
writing down loans to nonminority farmers.  Between October 1, 1994,
and March 31, 1996, we found only one foreclosed loan for
a--nonminority farmer--in the five district loan offices we reviewed. 
We also found 62 cases in which FSA restructured delinquent loans. 
Twenty-two of these were for minority farmers. 

Finally, the amount of time FSA takes to process applications from
minority and nonminority farmers is about the same.  Nationwide, from
October 1994 through March 1996, FSA took an average of 86 days to
process the applications of nonminority farmers and an average of 88
days to process those of minority farmers.  More specifically, for
African Americans, FSA took 82 days; for Hispanic Americans and
Native Americans, 94 days; and for Asian Americans, 97 days. 


-------------------------------------------------------- Chapter 0:4.3

This completes my prepared statement.  I will be happy to respond to
any questions you may have. 


AGRICULTURAL CONSERVATION PROGRAM
DISAPPROVAL RATES IN FIVE COUNTY
OFFICES
=========================================================== Appendix I

             Minority applications                Nonminority applications
      ------------------------------------  ------------------------------------
Coun
ty         Total                   Percent       Total                   Percent
offi  applicatio   Disapproved  disapprove  applicatio   Disapproved  disapprove
ce            ns  applications           d          ns  applications           d
----  ----------  ------------  ----------  ----------  ------------  ----------
Russ          18            11          61          96            47          49
 ell,
 Ala
 bam
 a
Dool           5             0           0          29             0           0
 y,
 Geo
 rgi
 a
Holm          28            16          57          88            38          43
 es,
 Mis
 sis
 sip
 pi
Glac          74             9          12          47             6          13
 ier,
 Mon
 tan
 a
Duva         146            62          42          45            15          33
 l,
 Tex
 as
--------------------------------------------------------------------------------

DIRECT LOAN DISAPPROVAL RATES IN
FIVE DISTRICT OFFICES
========================================================== Appendix II

         Minority applications reviewed      Nonminority applications reviewed
      ------------------------------------  ------------------------------------
Dist
rict       Total                   Percent       Total                   Percent
offi  applicatio   Disapproved  disapprove  applicatio   Disapproved  disapprove
ce            ns  applications           d          ns  applications           d
----  ----------  ------------  ----------  ----------  ------------  ----------
Elmo          30             7          23          22             3          14
 re,
 Ala
 bam
 a
Byro          20             9          45          45             9          20
 n,
 Geo
 rgi
 a
Holm          39             5          13          29             0           0
 es,
 Mis
 sis
 sip
 pi
Glac           4             0           0           7             1          14
 ier,
 Mon
 tan
 a
Jim           22             1           5          41             2           5
 Wel
 ls,
 Tex
 as
--------------------------------------------------------------------------------

*** End of document. ***