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Testimony:



Subcommittee on Department Operations, Oversight, Nutrition, and 

Forestry, Committee on Agriculture, House of Representatives:



United States General Accounting Office:



GAO:



For Release on Delivery Expected at 10 a.m. Wednesday, September 25, 

2002:



DEPARTMENT OF AGRICULTURE:



Hispanic and Other Minority Farmers Would Benefit from Improvements in 

the Operations of the Civil Rights Program:



USDA Civil Rights:



Statement of Lawrence J. Dyckman, 

Director, Natural Resources and Environment:



GAO-02-1124T:



Mr. Chairman and Members of the Subcommittee:



I appreciate this opportunity to come before you today to discuss our 

work related to civil rights issues at the Department of Agriculture 

(USDA). As you know, for a number of years, some minority and women 

farmers have asserted that the USDA’s Farm Service Agency (FSA) 

discriminates against them, treating them differently from other 

farmers during the loan approval or foreclosure process. Furthermore, 

USDA has faced charges that its Office of Civil Rights (OCR) has not 

conducted proper and timely investigations of complaints of 

discrimination.



In my testimony today, I will address (1) differences in the processing 

times and approval rates for direct loans for Hispanic farmers and non-

Hispanic farmers, (2) USDA’s policies for staying foreclosures and how 

these policies have been implemented, and (3) OCR’s progress in 

addressing previously identified problems associated with untimely 

processing of discrimination complaints and human capital issues. Our 

statement is based on the report that we issued September 20, 2002, to 

Representatives Baca and Reyes.[Footnote 1]



In summary:



* 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. We also found that 

the FSA’s direct loan approval rate was somewhat lower for Hispanic 

farmers than 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 the 

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 OCR, FSA’s policy 

is to automatically issue a stay of adverse action, such as 

foreclosure, until the complaint has been resolved. Although FSA 

followed this policy in most of the cases we reviewed, it did not 

always do so because of miscommunication with OCR in reconciling their 

respective lists of complainants. In contrast, USDA does not have a 

similar policy for staying foreclosures for members of discrimination 

class actions. Instead, USDA makes these stay of 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 actions-

-although the stay has expired for one of these groups--but has not 

issued stays for two other class actions, including the Hispanic 

farmers’ suit, because the agency believes that the circumstances did 

not warrant a stay.



* OCR has made modest progress in the length of time it takes to 

process discrimination complaints. USDA requires OCR to complete the 

investigative phase of processing a complaint within 180 days of 

accepting it. In fiscal year 2000, OCR took an average of 365 days to 

complete just the investigative phase. Although OCR slightly improved 

this average 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, the department lacks a meaningful way to 

measure its overall performance. When all stages of complaint 

resolution are accounted for, average processing time decreased from 

772 days in fiscal year 2000 to 676 days in fiscal year 2001. Although 

OCR has implemented many recommendations made in the past by USDA’s 

Inspector General and agency task forces, these actions have not 

resolved fundamental, underlying problems adversely affecting the 

office’s ability to process complaints in a timely manner. Of most 

significance, OCR continues to experience problems in obtaining and 

retaining staff with the requisite skills needed to process complaints. 

Severe morale problems and poor working relationships among staff have 

exacerbated these problems and hindered OCR’s ability to significantly 

improve its complaint processing times.



To help reduce problems and confusion surrounding stays of foreclosure 

in cases where discrimination has been alleged, we recommended in our 

report that FSA and OCR improve communication about the status of 

complaints; develop a policy statement that explains how USDA makes 

stay of foreclosure decisions when class action lawsuits have been 

filed; and retain historical information on foreclosures. To help 

improve the timeliness of processing discrimination complaints filed by 

farmers, we recommended that the Secretary of Agriculture establish 

time requirements for all stages of the complaint process and develop 

an action plan to address ongoing staffing problems. In responding to a 

draft of our report, USDA generally agreed with these recommendations.



Background:



Among other things, FSA is responsible for implementing USDA’s direct 

and guaranteed loan programs. FSA’s district office staff administer 

the direct loan program and have 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., he or she must operate 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 

borrowers 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 may 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 a USDA employee or the 

discriminatory effect of a departmental 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. As you 

know, to elevate the attention of civil rights matters at USDA, the 

Congress created the position of Assistant Secretary of Agriculture for 

Civil Rights in the 2002 Farm Bill. In addition, in September of this 

year, the Secretary of Agriculture announced the creation of a new 

office within FSA to work with minority and socially disadvantaged 

farmers who have questions and concerns about loan applications filed 

with local offices.



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:



During fiscal year 2000 and 2001, the national average processing time 

for direct loans for 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 varied. 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 of non-Hispanic and Hispanic 

farmers’ applications nationwide and for the four states.



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; [Empty]; 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; [Empty]; 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; [Empty]; 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; [Empty]; 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; [Empty]; 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. 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. Despite national 

differences, 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; [Empty]; 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; [Empty]; 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; [Empty]; 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; [Empty]; 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; [Empty]; Hispanic farmers: 

Number of applications: 76; Hispanic farmers: Loan approval rate: 61.



Note: The numbers of applications are different from 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 nonminority loan processing 

times and approval rates at both the national and state levels. In 

addition, FSA sends teams 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 they find. Through fiscal year 2001, 

each state office was reviewed once every 3 years; beginning in fiscal 

year 2002, the offices will be reviewed every other year.



While FSA monitors variations in loan processing times and approval 

rates for minorities and nonminorities, 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 office follow-

up efforts. FSA is currently considering requiring state offices to 

provide information on how they have 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 when 

discrimination has been alleged in individual complaints filed with 

OCR, but not in response to individual or class action lawsuits with 

similar allegations. When an individual files an administrative 

discrimination complaint with OCR, FSA’s policy is to automatically 

issue a stay of adverse action--including foreclosure-until the 

complaint has been resolved. During fiscal years 2000 and 2001, this 

policy was followed in 24 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 FSA learned that complaints had 

been filed with OCR, it stayed its foreclosure actions, and, as of 

August 2002, no further collection actions had been 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 foreclosure 

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 

department believed that the 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 August 29, 2002, about 21,800 claims have been 

accepted for processing. 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 some class members had 

previously filed discrimination complaints with USDA and that the 

department had failed to thoroughly investigate the complaints. In 

December 1999, USDA issued a notice to FSA offices directing them not 

to accelerate or foreclose on any direct loans held by Native American 

borrowers 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. According to the memo, 

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 were evaluating 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 had been alleged to support the 

claims of discrimination made 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 September 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 stays of foreclosure for potential class 

members in Garcia, relatively few Hispanic farmers have been affected 

by this decision. According to our survey of state offices, FSA 

accelerated the direct loans of almost 1,500 borrowers during fiscal 

years 2000 and 2001; only 41 of these borrowers were Hispanic. FSA also 

foreclosed on the loans of 6 of these 41 farmers 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 the loans of approximately 600 

borrowers[Footnote 4], 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 readily retrieved 

or analyzed. 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:



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 OCR’s 

organization and staffing, database management, and complaint 

processing. As of July 2002, the office had fully implemented 42, or 

nearly 80 percent, of these recommendations and plans to complete 

implementation of most of the others by October 2002. In addition, OCR 

has made some organizational modifications, such as creating separate 

employment and program directorates and adding three new divisions to 

the latter--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 directs OCR to complete its investigative reports 

within 180 days after accepting a discrimination complaint. However, 

during fiscal years 2000 and 2001, OCR took on average 365 days and 315 

days, respectively, to complete its investigative reports. Furthermore, 

as shown in figure 1, the 180-day requirement covers only a portion of 

the three major stages of the entire processing cycle.[Footnote 5] 

Accordingly, even if the 180-day requirement were met, OCR still take 2 

years or more to complete the processing of a complaint. In fact, when 

all phases of the complaint resolution are accounted for, OCR took an 

average of 772 and 676 days in 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, OCR has 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 

were 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 tasks as responding to requests for information from the courts.



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 of employee-filed administrative complaints in the department. 

This atmosphere has led to frequent reassignments or resignations of 

OCR managers and staff. According to senior OCR officials, 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.



In conclusion, Mr. Chairman, USDA has continuously faced allegations of 

discrimination in its making direct loans to farmers over the past 

decade. 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, 

USDA 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 

department faces the continued problem of having its decisions viewed 

as unfair. Furthermore, if FSA and OCR do not improve their process for 

reconciling their respective lists of complainants, FSA 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, OCR 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. Our report contains a series of 

recommendations to the Secretary of Agriculture to resolve these 

issues:



Mr. Chairman, this completes my prepared statement. I would be happy 

to respond to any questions you or other Members of the Subcommittee 

may have.



Contacts and Acknowledgments

For future contacts regarding this testimony, please contact Lawrence 

J. Dyckman at 202-512-3841. Individuals making key contributions to 

this testimony included Gregory A. Kosarin, Natalie H. Herzog, 

Jacqueline A. Cook, Lynn M. Musser, Robert G. Crystal, and George H. 

Quinn Jr.



FOOTNOTES



[1] Department of Agriculture: Improvements in the Operations of the 

Civil Rights Program Would Benefit Hispanic and Other Minority Farmers, 

GAO-02-942 (Washington, D.C.: Sept. 20, 2002).



[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 it could be determined for each case whether there was evidence 

of discrimination in program lending.



[4] In responding to our 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 OCR 

restructuring takes place. In addition, OCR has yet to establish time 

requirements that address all stages of complaint processing.