# Presentation: 018122

## SPECIAL INITIATIVES

- PRESENTERS
**Nannie Hill-Midgett **
**David Lewis**
**Concepcion Malazo**

## INTRODUCTION

## OBJECTIVES

- TO REINFORCE BUILDING PARTNERSHIPS THAT WILL LEVERAGE PRIVATE AND COOPERATIVE RESOURCES.
- TO MAXIMIZE JOB CREATION AND ENHANCE RURAL ECONOMIC GROWTH THROUGH PARTNERSHIPS.

##   TOPICS FOR DISCUSSION

- Strategic Planning process.
- Memorandum Of Understanding (MOU).
- Debt Collection Improvement Act of 1996 (DCIA).
- Mediation/National Appeal Division (NAD)
- Business Programs Assessment Review(BPAR) Results

## I. STRATEGIC PLANNING PROCESS

- A. BACKGROUND
- Government Performance and Results Act  (GPRA).
- Farm Bill of 1996.
- Undersecretary Jill Long Thompson’s Unnumbered  Letter to Rural development State Directors dated Sept. 12, 1996.

## 1. GPRA requires the following:

- All Federal Agencies plan strategically for their future and to develop performance measures related to effectiveness of their programs and the efficiency with which their programs are delivered.
- The Act demands that Federal Agencies be managed efficiently, to perform a given tasks and to deal with it strongly or be held accountable for it.

## GPRA covers FY 1998 through 2002 and shall be reviewed annually and updated every 3 years.  The 5-year strategic plan mandated to  be submitted to OMB and Congress by September 1997.  

- GPRA covers FY 1998 through 2002 and shall be reviewed annually and updated every 3 years.  The 5-year strategic plan mandated to  be submitted to OMB and Congress by September 1997.
- The Act requires that performance measures be included in the Agency or Department Strategic Plans with future requests to Congress for funding starting in fiscal year 1999.

## USDA incorporated its overall Strategic Planning Process in the 1996 Farm Bill.

## 2. THE FARM BILL

- Requires for each States and each Federally recognized Indian Tribe to develop a 5-year strategic plan. This plan will adopt verbatim the vision and mission statements of the mission area Strategic Plan and will address the goals of the mission area plan. It should identify strategies for the delivery of our resources (funds, technical assistance, etc) over the next five years.

## The mission area programs are mandated not to compete with private credit, but rather supplement that credit.

- To seek leverage of our funds to the maximum extent possible with other lenders.
- To give priority in the delivery  of our programs to the smallest and poorest communities.

## To actively seek out and involve public and private institutions and individuals in the development of these plans.

## 3.  Under Secretary’s Letter issued on 9/12/96, to the Rural Development State Directors

## It states that with the reinvention of government and reduction in Federal resources, we can no longer be the primary source of financial assistance for many projects and we have to work hand-in-hand with our State, local, and public partners to leverage our resources and assure that the unique needs of each State are met. 

- It states that with the reinvention of government and reduction in Federal resources, we can no longer be the primary source of financial assistance for many projects and we have to work hand-in-hand with our State, local, and public partners to leverage our resources and assure that the unique needs of each State are met.

## To meet the requirements of the Farm Bill, the Under Secretary,  on her Unnumbered Letter dated 11/1/96, asked the Rural Development State Directors to develop a Statement of Modification amending their FY 1996 State Action Plan to reflect their planned activities for FY 1997 and incorporate the Administrator’s FY 1997 Priority Performance Goals for FY 1998 & 1999.

## State Office Strategic Planning Process

## Rural Development State Directors were required to prepare and address the delivery of the mission area’s resources. The major mission area initiatives to be addressed are leveraging, targeting partnerships and community development.

- The plan must contain specific planned activities with milestones and performance measures.

## It will be the only plans to be developed by the State Offices and to be updated annually in order to reflect activities and performance goals for the next fiscal year.

## The following were established as RBS Administrator’s Priority Goals for FY 1998:

- States will use 100 percent of their annual business loan and grant program funds allocated to the field.
- Provide at least the minimum program resources to regions, rural  communities, and customers of greatest need  (applicable in States with EZ/EC and Champion Communities or Presidential or Department Special Initiatives).

## Create or retain 1 job per $275 of budgeted appropriations for guaranteed investments in rural businesses.

- Reduce  overall delinquency rate on B&I loan program to 4 percent (excluding bankruptcy).
- Strengthen system for servicing, close monitoring, and more frequent and routinized review of IRP loan activity.

## Provide technical assistance and education services to at least 3 cooperatives or developing cooperative steering committee.

- Establish formal arrangements or partnerships to leverage financial and human resources dedicated to business and cooperative development.

## NATIONAL PARTNERSHIPS/MOUS

- To accomplish the mission set forth, RBS had partnered with Small Business Administration (SBA) and Federal Home Loan Bank System under its Community Investment Program (CIP) at the National Level.

## II. MOU BETWEEN THE SBA AND RBS

- This agreement defines and allocates the responsibilities of the parties. Each Agency will apply its expertise and experience according to its legislative mandate.
- Work together to improve conditions in which rural residents can start and grow successful businesses;
- Coordinate the delivery of rural development programs; and

## Develop a partnership with other Federal, State, County and local agencies, private organizations, commercial and financial institutions to accelerate the creation of strong businesses.

## III.  MOU BETWEEN FHLBank AND USDA/B&I

- This agreement involves financing economic development projects through advances under FHLBank CIP and the USDA B&I Guaranteed Loan Program in mission area targeted areas.
- Encourage partnerships between FHLBank members and USDA RBS in order to increase access to financing for economic development projects in distressed rural areas.

## Increase the number of member financial institutions providing long term fixed rate financing for economic development projects in distressed rural areas.

- Expand the capacity of the RBS and FHLBank number financial institutions to meet financial needs for economic development activity in distressed rural areas.
- Create a flexible product that invites the participation of state and local resources.

## Increase the level of economic development activity in rural EZs, EC’s, and CC’s other economically distressed rural areas, and areas impacted by natural disasters or federal actions that have resulted in a decline in economic conditions.

## USDA’s RBS will reserve $20 million in guarantee authority for the partnership initiatives each fiscal year until September lst and can be adjusted annually by mutual consent.

- The five FHL Banks will set aside up to $80 million in CIP advances.

## DEBT COLLECTION IMPROVEMENT ACT 1996

## Key provisions of the DCIA:

- Barring delinquent Federal debtors from obtaining Federal loans  or loan insurance or guarantees, (other than disaster loans)
- Cross Servicing
- Debt Referral
- Electronic Funds Transfer

## Barring Delinquent Debtor

- The Agency must deny credit to a delinquent debtor unless the request is waived by the head of the Agency or the Chief Financial Officer.
- Such debtor may obtain additional loans or loan guarantees only after such delinquency is resolved or fixed by the debtor by entering into a repayment plan , pays the debt in full or brings the debt current.

## Intent of the law is to ensure that the Federal Government does not continue to provide funds to known or repeat delinquent debtors.

- Most of the debt collection provisions of the DCIA apply to non-tax debt.

## DEBT REFERRAL

- DCIA requires Federal agencies to refer all delinquent debt that is 180 days old to Treasury for offset against Federal payments.
- Prior to referral, Agency must have completed all collection efforts.
- The Acts require agencies to use all tools available to collect delinquent debt before discharging any debt.

## Debts excluded from Offset

- Debts in foreclosure,  bankruptcy, Foreign Government debts, in forbearance or appeals.

## Debts excluded for Cross-Servicing

- Debts at private Collection Agency.
- Debts at the Department of Justice that are under litigation, eligible for internal offset, and scheduled for sale.
- Debts at 3rd party (medically related being process through an Insurance Company).

## CROSS SERVICING OF DEBT COLLECTION

- Provides for the transfer of delinquent debt to Treasury or other Debt Collection Centers.
- This provision allows Federal agencies with a proven track record to cross-service other agencies’ collection of delinquent debt.

## Three USDA agencies are examining cross-servicing.

- At least one USDA agency is exploring the use of Treasury’s Debt Collection Center.

## ELECTRONIC FUNDS TRANSFER (EFT) PROVISIONS

- Mandates EFT for new recipients as of 7/26/96.
- Mandates EFT for all payments made after 1/1/99.
- Includes all payments by Federal Agencies and Government Corporations.
- Requires Taxpayer Identification Number (TIN) for all payments.

## INTERNET ADDRESS FOR DEBT MANAGEMENT SERVICES: www.fms.treas.gov/debt/index.html

## IMPLEMENTING MEDIATION AND ALTERNATIVE DISPUTE RESOLUTION

## PRESENTER

- David Lewis-

## OBJECTIVE

- TO ACQUAINT THE ATTENDEES WITH MEDIATION AND OTHER ALTERNATIVES  WHEN AN ADVERSE ACTION ON A LOAN REQUEST HAS TAKEN PLACE

## INTRODUCTION

## DEFINITION

- MEDIATION - THE ACT OR AN INSTANCE OF MEETING;
- FRIENDLY INTERVENTION TO HELP FIND A SOLUTION TO A DISPUTE
- MEDIATOR HELPS TO WORK OUT SOLUTION.

## PROGRAMS AFFECTED 

- SECTION 11.1 OF THE NATIONAL APPEALS DIVISION PROCEDURES DEFINES “AGENCY” TO INCLUDE, IN PART,
- RURAL BUSINESS-COOPERATIVE SERVICE
- RURAL HOUSING SERVICE

## RURAL UTILITIES SERVICE, EXCEPT

- PROGRAMS AUTHORIZED BY THE RURAL 			ELECTRIFICATION ACT OF 1936
- RURAL TELEPHONE ACT, 7 U.S.C. 901 ET SEQ
- THERE ARE NO PROVISIONS IN THE REA ACT SECTION 	313 THAT REQUIRES THE AGENCY TO OFFER 	MEDIATION FOR GRANTS AND  ZERO -NTEREST 	LOANS
- MEDIATION IN TELEMEDICINE IS LIMITED TO 	   	SCORING ONLY

## IMPLEMENTATION POLICY

## STATE-CERTIFIED MEDIATION PROGRAMS

- THERE ARE APPROXIMATELY 21 STATES THAT HAVE STATE-CERTIFIED MEDIATION PROGRAMS
- THESE PROGRAMS ARE NOT CERTIFIED TO HANDLE RBS DISPUTES
- RBS & RHS WILL CONDUCT MEDIATION WHEN THE PROCESS IF FORMALIZED

## STATUS OF FORMAL IMPLEMENTATION POLICY

- INTERIM OPTIONS IN AN ADVERSE DECISION LETTER TO THE APPLICANT:
- OFFER THE APPLICANT AN OPPORTUNITY TO MEET WITH THE DECISION MAKER (INFORMAL HEARING) TO DISCUSS THE DECISION WITHIN 15 DAYS OF THE DATE OF DECISION.

## A STATEMENT GIVING MEDIATION AND APPEAL RIGHTS.  IN THE EVENT THE APPLICANT FILES A REQUEST FOR  MEDIATION/APPEAL HEARING SIMULTANEOUSLY, IN WRITING, MEDIATION WILL BE HELD FIRST. THE APPLICANT HAS 30 DAYS TO RESPOND WHETHER OR NOT THE APPLICANT WILL PARTICIPATE IN MEDIATION, ADR.

## THE APPLICANT SHOULD BE GIVEN APPEAL RIGHTS AND MUST RESPOND WITHIN 30 DAYS.

- THE METHOD FOR PAYING FOR MEDIATION/APPEAL IS UNDER  REVIEW BY UNDER SECRETARY. BUDGET LINE ITEM IS UNDER CONSIDERATION.

## PAYMENT OF SERVICES

- IN THE ABSENCE OF A LINE ITEM BUDGETARY AUTHORITY, THE COST OF MEDIATION WILL BE SHARED EQUALLY BETWEEN THE AGENCY AND THE APPLICANT, SUBJECT TO THE AVAILABILITY OF FUNDING
- PAYMENT FOR SUCH SERVICES CAN BE PAID FROM PROGRAM LOAN COSTS

## MEDIATION COST SHARING IS AVAILABLE TO INDIVIDUALS, CORPORATIONS, PARTNERSHIPS, COOPERATIVES AND PUBLIC BODIES. IN INDIVIDUAL CASES, THE AGENCY MAY PAY FOR THE ENTIRE COST OF MEDIATION.

## APPLICANTS FOR LOAN AND GRANTS WITH INCOME LEVELS AT OR BELOW THE POVERTY LINE SHALL BE EXEMPT FROM PAYMENT OF MEDIATION SERVICES, OR IF FEDERAL, STATE OR LOCAL AGENCIES ARE PROHIBITED FROM PAYING FOR SUCH SERVICES.

## THE ADMINISTRATOR SHALL WAIVE THE APPLICANT PAYMENT, ON A CASE-BY-CASE BASIS BASED ON INDIGENCE OR OTHERWISE ESTABLISHED CRITERIA FOR INDIVIDUAL CUSTOMERS.

- ALTERNATE DISPUTE RESOLUTION, EVERYBODY WINS.

## Any Questions

## BUSINESS PROGRAMS ASSESSMENT REVIEWS

## 	The BPAR Process

- State Selection
- Site Selection
- File Review

## BPARs are designed to supplement the National Internal Reviews

## Mandated by Government Performance and Results Act

- 		G P R A

## STRENGTHS 

- Lender’s are doing their jobs better (more in-depth financial analysis)
- RCFTS is well maintained
- Loan making is at an all time high
- Delinquency percentages are down in most states

## Most states staffs have an excellent relationship with their lenders

- Experience and knowledge of State staffs is spiraling upward
- Customer Service has been given high priority and it’s working!!

- Targeting is working in some states
- Project files are well organized in some states
- Some States have even initiated their own special initiatives

## Weaknesses Found in BPARs

- Servicing visits are not always made on time
- Minimum Tangible balance sheet equity not met - this is a critical weakness - Equity computation questions?  Call Fred Kieferle (202) 720-7818

## Some States are not obtaining pro forma balance sheets at startup.  This is also a very critical weakness.

- RCFTS is not up-to-date
- All programs are not being utilized; specifically, REDLG and IRP

- Some states have new and inexperienced staff - we’re trying to remedy that situation by offering training in financial analysis and national office program training
- Funds not utilized in targeted areas

## Ineligible RBEG projects

- Lack of documentation, such as environmental assessments, financial information, project summaries, business plans used in lieu of feasibility studies, etc..   Documentation is Key!!!

## +

- IRP Interest Rates were unusually high in some reviewed cases.  It is incumbent upon you as loan officers to encourage your intermediaries to keep the rates of interest in line with or below the market rates.

## MEMORANDUM OF            UNDERSTANDING

-    BETWEEN
- ALTERNATIVE AGRICULTURE RESEARCH AND COMMERCIALIZATION CORPORATION (AARCC)
-   AND
- RURAL BUSINESS-COOPERATIVE SERVICES

##        MOTTO OF USDA

- AGRICULTURE IS THE FOUNDATION OF MANUFACTURE AND COMMERCE
- FROM AGRICULTURE TO  PETROLEUM AS MAIN SOURCE OF INDUSTRIAL RAW MATERIALS

## ALTERNATIVE AGRICULTURE RESEARCH AND COMMERCIALIZATION CORPORATION (AARCC) ESTABLISHED UNDER 1990 FARM BILL

- FIRST FUNDING FOR AARCC IN 1992
- FIRST AARCC INVESTMENT IN 1993

## CURRENT PORTFOLIO

- $35 MILLION
- >60 PROJECTS
- 33 states
- PRIVATE SECTOR MATCH >3:1

## WHY AARCC?

- USE FALLOW LAND FOR PRODUCTION OF NON-FOOD/NON FEED CROPS
- (USES EXCESS PRODUCTION CAPACITY WITHOUT AFFECTING SUPPLY/DEMAND OF COMMODITIES)

##             A. AARCC

- PROVIDES FOR LOCAL/REGIONAL EMPLOYMENT
- (AARCC AS AN ENGINE OF RURAL DEVELOPMENT PROCESSING/ MANUFACTURING WITH BIOLOGICAL MATERIALS MUST TAKE PLACE CLOSE TO THE SOURCE)

##                A. AARC

- GLOBAL CONVERSION TO BIO-BASED ECONOMY
- U.S. IS “SAUDI ARABIA OF COM” ( WE BECOME MAJOR SUPPLIER OF WORLD’S RAW MATERIALS)
- MAJORITY OF END PRODUCTS WILL BE BIODEGRADABLE/COMPOSTABLE
- RAW MATERIALS ANNUALLY RENEWABLE
- INCREASED DEMAND FOR NEW PRODUCTS WILL SPARKS GREATER CROP DIVERSITY (REDUCING OVERALL AGROCHEMICAL USE)

##              HISTORY

- CHEMURGIC MOVEMENT (1930’s-40’s)
- HENRY FORD
- THOMAS EDISON
- WHEELER McMILLAN

## BIOBASED 1940’s FORD - MADE OF SOYBEAN PLASTIC

## 2002 CADILLAC CATERA