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COMMITTEE ON AGRICULTURE

THOMAS S. FOLEY, Washington, Chairman

W. R. POAGE, Texas, Vice Chairman
E DE LA GARZA, Texas

JOSEPH P. VIGORITO, Pennsylvania
WALTER B. JONES, North Carolina
ED JONES, Tennessee
JOHN MELCHER, Montana
DAWSON MATHIS, Georgia
BOB BERGLAND, Minnesota
GEORGE E. BROWN, JR., California
DAVID R. BOWEN, Mississippi
CHARLES ROSE, North Carolina
JERRY LITTON, Missouri

JOHN BRECKINRIDGE, Kentucky
FREDERICK W. RICHMOND, New York
RICHARD NOLAN, Minnesota

JAMES WEAVER, Oregon

ALVIN BALDUS, Wisconsin

JOHN KREBS, California

TOM HARKIN, Iowa

JACK HIGHTOWER, Texas

BERKLEY BEDELL, Iowa

MATTHEW F. McHUGH, New York
GLENN ENGLISH, Oklahoma

FLOYD J. FITHIAN, Indiana

JOHN W. JENRETTE, JR., South Carolina NORMAN E. D'AMOURS, New Hampshire RAY THORNTON, Arkansas

WILLIAM C. WAMPLER, Virginia

Ranking Minority Member KEITH G. SEBELIUS, Kansas PAUL FINDLEY, Illinois CHARLES THONE, Nebraska STEVEN D. SYMMS, Idaho JAMES P. JOHNSON, Colorado EDWARD R. MADIGAN, Illinois PETER A. PEYSER, New York MARGARET M. HECKLER, Massachusetts JAMES M. JEFFORDS, Vermont RICHARD KELLY, Florida CHARLES E. GRASSLEY, Iowa TOM HAGEDORN, Minnesota W. HENSON MOORE, Louisiana

PROFESSIONAL STAFF
FOWLER C. WEST, Staff Director
ROBERT M. BOR, Counsel
HYDE H. MURRAY, Counsel
JOHN R. KRAMER, Special Counsel
L. T. EASLEY, Press Assistant

SUBCOMMITTEE ON CONSERVATION AND CREDIT
BOB BERGLAND, Minnesota, Chairman

W. R. POAGE, Texas

E DE LA GARZA, Texas

ALVIN BALDUS, Wisconsin
GLENN ENGLISH, Oklahoma

FREDERICK W. RICHMOND, New York
JACK HIGHTOWER, Texas

BERKLEY BEDELL, Iowa

EDWARD R. MADIGAN, Illinois JAMES M. JEFFORDS, Vermont RICHARY KELLY, Florida

COMMITTEE ON AGRICULTURE AND FORESTRY HERMAN E. TALMADGE, Georgia, Chairman

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CONTENTS

Alvord, David, Office of the Governor of Idaho, Boise, Idaho__.

Aspin, Hon. Les, Representative in Congress from the First District
of Wisconsin__

195

Baldus, Hon. Alvin J., Representative in Congress from the Third
District of Wisconsin----

145

Boyt, James O., executive secretary, Midwest Water Resources Coun-
cil, Des Moines, Iowa----

197

Elliott, Frank B., Administrator, Farmers Home Administration, U.S.
Department of Agriculture_.

207, 255, 320, 361

165

Hansen, Oliver A., chairman, Agricultural Division, American Bankers
Association, Durant, Iowa, accompanied by Leslie W. Peterson, vice
chairman, Trimont, Minn__

Harbison, Robert, chairman, Cullman County, Ala., County Commis-
sioners, and chairman, National Association of Counties Subcommit-
tee on Rural Development, accompanied by Elliott Alman, NACO
legislative representative..

Hart, John, president, National Association of Home Builders, ac-
companied by Carl A. S. Coan, Jr., staff vice president and legisla-
tive counsel; Denis O'Toole, associate legislative counsel, and
Thomas D. Wall, assistant director for Federal programs--.

Hartmann, William, Jr., vice president, Land Improvement Contractors

of America, Brookfield, Ill., accompanied by Michael E. Strother,

Washington representative, Land Improvement Contractors of

America

Hausler, Richard, assistant State regional representative, Appalachian
Regional Commission__‒‒‒

Holmes, Hon. William, mayor, Marlin, Tex., representing National

League of Cities__

Independent Bankers Association of America, with covering letter
from Kenneth J. Benda, president, and Don F. Kirchner, chairman_

Johnson, Reuben, director, Legislative Services, National Farmers

Union

Jorgenson, Ben. VO-AG instructor in central Minnesota_.

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Statement of—Continued

Kirby, Harry C., president, Rural Home Builders Association of Pare
Florida, Inc., Tallahassee, Fla.

Leahy, Hon. Patrick J., a U.S. Senator from Vermont..

Litton Ray, mayor, Roundrock, Tex., representing American Associa-
tion of Small Cities_-_-

Lowry, Daryl, master, Vermont Grange_

McIntyre, Hon. Thomas J., a U.S. Senator from New Hampshire_
McNichols, Robert, county administrator, Pulaski County, Va__
Millstein, Herb, joint financial management improvement program,
General Accounting Office_‒‒‒‒

Murray, William E., Legislative Specialist for Rural Area Develop-
ment, National Rural Electric Cooperative Association_-_-
Naylor, Frank, Associate Administrator, Farmers Home Administra-
tion, U.S. Department of Agriculture_-_.

78

319

163

190

101

228

Nestle, Mark H., Director, program evaluation staff, Farmers Home
Administration, U.S. Department of Agriculture__

230

Nolan, Hon. Richard, a Representative in Congress from the State of
Minnesota

Oberstar, Hon. James L., a Representative in Congress from the State
of Minnesota_

411

412

Onweiler, Hon. William, Idaho State Representative, Boise, Idaho__--
Powell, W. Kindred, Jr., president, Enterprise Financial Consulting.
Inc., Atlanta, Ga----

60

123

Scott, John W., master, National Grange_

Shelton, Thomas, vice president and general manager, Broiler Production Division, Perdue Farms, Inc., Salisbury, Md..

157

192

Solem, James J., director, Office of Local and Urban Affairs, Minnesota
State Planning Agency, St. Paul, Minn----.

117

Sump, Alfred, member, Board of Supervisors, Page County, Iowa___.
Texas LP-Gas Association, Austin, Tex., with covering letter from
Lowry M. Carpenter, to Senator Dick Clark..

100

191

Walker, William, Assistant Secretary for Rural Development, U.S.
Department of Agriculture_---

204

Miscellaneous documents

Iowa's First Area-Farm Water System, reprint of an article from
Land & Water Development magazine---.

29

Waiting List-Water and Waste Disposal Grant Program of the Farmers Home Administration____

96

Excerpts from interviews with farmers Eldon A. Johnson, Princeton,
Minn., and Roger J. Gall, Royalton, Minn..........

156

Questions submitted to Farmers Home Administration by Hon. Bob
Bergland

295

Question submitted to Environmental Protection Agency by Hon. Bob
Bergland

316

Question submitted to Department of Housing and Urban Development by Hon. Bob Bergland

316

Questions submitted to Farmers Home Administration by Hon. Dick
Clark

395

FmHA MANAGEMENT CAPABILITY

TUESDAY, JANUARY 27, 1976

U.S. SENATE,

SUBCOMMITTEE ON RURAL DEVELOPMENT OF THE
COMMITTEE ON AGRICULTURE AND FORESTRY, AND
U.S. HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON CONSERVATION AND CREDIT OF THE
COMMITTEE ON AGRICULTURE,

Washington, D.C.

The joint subcommittee met, pursuant to notice, in room 324, Russell Senate Office Building, Hon. Dick Clark, chairman, Subcommittee on Rural Development of the Committee on Agriculture and Forestry, and Hon. Bob Bergland, chairman, Subcommittee on Conservation and Credit of the Committee on Agriculture, presiding.

Present: Senators Clark, Leahy, Curtis, and Dole, and Representatives Bergland, Poage, Baldus, English, Hightower, Bedell, Jeffords, and Kelly.

STATEMENT OF HON. DICK CLARK, A U.S. SENATOR FROM IOWA

Senator CLARK. The subcommittees will come to order.

This is the first of 5 days of hearings on the Farmers Home Administration which the Subcommittee on Rural Development is going to be holding this week and next in cooperation with the House Subcommittee on Conservation and Credit.

The first 3 days of hearings will be held here in the Senate and will be devoted to testimony from public witnesses.

Next week, on Wednesday and Thursday, we will convene at the House Agriculture Committee to talk to representatives of the Farmers Home Administration, and to the GAO personnel who have helped us in our study of the Agency's operations.

These are especially trying times for the Farmers Home Administration. Last week, as a result of an audit report from the Department, Senator Dole and I announced that Farmers Home Administration had overpaid an estimated $43 million to ineligible home buyers during the last 2 years. Earlier, the General Accounting Office reported that as a result of an archaic manner of handling housing accounts in local banks, both the Agency and the borrowers had paid unnecessary interest and subsidies of $18 million in fiscal 1974 alone.

This kind of mismanagement is not pleasant to think about, especially at a time when we must also consider the fiscal 1977 budget for the Agency, but it obviously must be considered thoroughly.

The President's budget slashes programs past the bone-particularly in the Department of Agriculture. And while I do not agree with that agricultural budget, Federal resources are limited and we must constantly strive for better management and efficiency in Government. The purpose of these hearings is not to dig old skeletons out of closets to dangle before the public. But the reason that our subcommittee began to study the Farmers Home Administration 2 years ago was a direct result of our feeling that the Agency was growing so fast with no corresponding personnel increases, that the potential for serious problems was increasing.

The overpayments that Senator Dole and I announced last week represent just such a problem.

I'm hopeful that we will find evidence during these next 2 weeks that the present Farmers Home Administration managers have set in motion a system of management and operation which will avert future misspending of funds and will cope with Agency growth in an efficient responsible manner.

And that growth has been phenomenal.

In 1968, Farmers Home had $4 billion in outstanding loans.

In 1975, it had over $14 billion outstanding.

And it is anticipated that by 1977 the figure will reach $25 to $30 billion.

We are talking about programs that provide 80 percent of the housing loans in the State of Maine, and a sizable portion of the total borrowing on the national money market.

The purpose of these hearings is to accomplish four things:

To improve the financial and administrative management of the Agency, and its coordination with other agencies;

To improve services to users of agency programs-the Nation's farm and rural community;

To encourage planning and goal-setting for rural development by the Agency;

And to determine whether any of the authorizing legislation or administrative regulations stand in the way of efficient administration or services to users.

We will also want to take a look at the proposed budget for the Agency for the next fiscal year.

Our subcommittee, with the help of GAO and others, has done 2 years of work in preparation for these hearings. During most of that period Farmers Home itself has been undergoing major management changes initiated by its Administrator. It is obvious to me that if the Agency is to put its new system of program management into operation, Congress is going to have to lend its help. These hearings represent a step in that direction.

One final point, the Farmers Home Administration has about 4,000 people working in the field. Federal productivity reports indicate that these are among the hardest working personnel associated with the Federal Government.

I am concerned about their morale as they read about oversight hearings and management mistakes.

So it has to be a major intent here at the hearings to channel their hard work into the most efficient and productive avenues possible. I know that is also General Elliott's intention.

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