Rural Development U.S. Department of Agriculture

RURAL DEVELOPMENT 

FY 2002 and FY 2003 ANNUAL PERFORMANCE PLANS

The Rural Development mission area, was established on October 13, 1994, by the Federal Crop Insurance Reform

and Department of Agriculture Reorganization Act. Rural Development is one of seven mission areas within the 

Department. It consists of three agencies, the Rural Business-Cooperative Service (RBS), the Rural Housing

Service (RHS), and the Rural Utilities Service (RUS). The mission area also administers the rural portion of the 

Administration's Empowerment Zones and Enterprise Communities (EZ/EC) Initiative and the National Rural 

Development Partnership, a nationwide network of rural development leaders and officials committed to the vitality

of rural areas. The mission areas’ programs are authorized by a variety of statutes which are identified with the 

discussion of each goal. 

The mission of Rural Development is to: Enhance the ability of rural communities to develop, to grow, and to

improve their quality of life by targeting financial and technical resources in areas of greatest need through activities 

of greatest potential. 

Rural Development achieves its mission by helping rural individuals, communities and businesses obtain the 

financial and technical assistance needed to address their diverse and unique needs. This financial and technical 

assistance may come directly from Rural Development or, with Rural Development's assistance, from one of the 

numerous public and private organizations involved in the development of rural communities. Rural Development 

agencies deliver over 40 different loan, loan guarantee, and grant programs in the areas of business development, 

cooperative development, housing, community facilities, water supply, waste disposal, electric power, and 

telecommunications, including distance learning and telemedicine. Rural Development staff also provide technical 

assistance to rural families and community leaders to ensure success of the projects it finances. Rural Development 

staff are also responsible for the servicing and collection of a loan portfolio that exceeds $70 billion. Additional 

information regarding Rural Development can be found in its strategic plan. 

This Plan is a combined Plan for all of the agencies in the mission area. This plan is based on Rural Development’s

Long-Range Plan for FY’s 2000-2005, which was published in September 2000 to replace the Strategic Plan 1997-

2002. 

Performance indicators have been added to address the Rural Business Opportunity Grant (RBOG) program as these 

have not been addressed in the past. 

This plan was developed solely by Federal employees. No non-Federal entities were involved in its preparation.

Efforts to Improve Data: With a history of being a provider of loans and grants, Rural Developments’ automated

systems are primarily accounting systems and are generally not designed to capture the type of data desired for 

reporting under the Government Performance and Results Act (GPRA). The major non-accounting system used by

the agencies is the Rural Community Facilities Tracking System (RCFTS). This system, which has been in place for 

many years, is dependent upon field staff inputting and maintaining the data and there are few quality controls in

place to ensure accuracy of the data. With few other sources of data available, the agencies have had no choice but 

to rely on this data for GPRA purposes. Efforts are underway to replace RCFTS with the Rural Development 

Application Processing and Tracking System (RDAPTS). 

Efforts to Improve Information Security: Security of all agency information resources is being accomplished in

concert with policies and standards being published by the Department’s Office of the Chief Information Officer. 

Rural Development has established a web farm in St. Louis as a part of the Service Center Modernization Initiative 

(SCMI) and in conjunction with the Farm Service Agency and the Natural Resources Conservation Service. Efforts

FY 2002 & 2003 Annual Performance Plan January 2002 
Rural Development U.S. Department of Agriculture 

to secure the three web sites operating under the auspices of SCMI are underway and are being expedited as a result 

of the imposed timeframes contained within the Government Paperwork Elimination Act and the Freedom to E-File 

Act. The Department’s efforts to define the level of security required to host an internet web site where information

can be disseminated and collected from the public are continuing and the needed technologies evaluated. Rural 

Development is taking steps to comply with the Department’s policies and standards as they are published.

Baseline Indications of Need: Indications of the extensive nature of rural America's needs are provided by selected 

baseline data below. Rural Development programs will contribute to the amelioration of these conditions but, 

without huge increases in funding, cannot markedly impact the macro indicators of disparity.

From the American Housing Survey (1997 data):

4.4 percent of all rental units exhibit crowding (more than one person per room). 

1,817,000 households reported moderate to severe physical housing problems.

The median household income for nonmetro renters was $17,840, as compared to $22,749 for urban

renters.

65 percent of households with incomes below the poverty level pay more than 30 percent of their income

towards housing costs.

25 percent of nonmetro renters pay over 40 percent of income to housing costs.

In 1,475,000 occupied nonmetro housing units, the primary source of drinking water was "not safe to

drink." 

From the Rural Utilities Service: 

Revenue per mile for urban utility systems is 8 times higher than for rural systems. 

Only 7.3% of rural households have access to broadband services. 

From the Economic Research Service: 

Poverty is 2.7 percentage points higher in rural areas than in urban areas (15.9 percent rural; 13.2 percent

urban).

Poverty in the rural south is 18.7 percent. 

The unemployment rate is 9 percent higher in rural areas than in urban areas (1998). 

46 percent of rural Black children live in poverty (1996). 

3.2 million rural children live in poverty (1996). 

6.3 million rural households have household incomes under $15,000. 

More than 20 percent of rural people in poverty were either full time workers or were in a family with at 

least one full time worker. 

64 percent of rural people in poverty worked at least part time or had a family member who worked at least 

part time. 

Rural household income averaged 25 percent less than urban household income (1996). 

Key External Factors: The ability of the mission area to achieve the goals of its strategic plan can be impacted by

a variety of factors beyond its control. Primary external factors affecting all programs are: 

Macroeconomic influences - Changes in the economy can have a major impact on our financial programs and the 

ability of our customers to meet their obligations. A rise in unemployment generally impacts low-income families 

first. Inflation can impact the disposable income of low-income families and may also adversely impact the ability

of small communities and businesses to meet their obligations if their operating expenses are increasing faster than

their income. Changes in the cost of money have the greatest impact on the mission area. As interest rates rise or 

fall, there is a clear impact on the cost of the financing provided by the mission area and the ability of new

customers to afford the assistance they need. For instance, high interest rates reduce the ability of our existing direct 

loan borrowers to graduate to private sector credit. Changing interest rates will impact the subsidy rates of each

FY 2002 & 2003 Annual Performance Plan 2 January 2002 
Rural Development U.S. Department of Agriculture 

program. Lower interest rates reduce the subsidy cost of direct loans, and increase the subsidy cost of some of the 

guaranteed programs. Rural Development can partially ameliorate the impact of adverse economic conditions by

increasing its loan servicing activities to minimize delinquencies. 

Reductions in funding - Reductions in the level of funding provided to the Rural Development agencies will reduce 

their ability to help rural America and to achieve their goals. Likewise, reductions in funding for Salaries and

Expenses will limit the ability of the mission area to provide the staff and other resources needed to deliver the 

programs or achieve the anticipated level of performance. Reductions in program funding can be partially offset by

efforts to increase the leveraging of agency funds with other sources of funds. Reductions in Salaries and Expenses

can only be offset by the elimination of lower priority work efforts which may, in the long run, be to the detriment 

of the government and its customers.

Coordination of Cross Cutting Program Activities: The partnerships and coordination with other organizations 

required for program delivery varies among agencies and by programs within the agencies. Most of the direct 

financial programs do not require a partner for program delivery. We are, however, seeking to ensure that

placement of our funds is coordinated with, and supports the delivery of, the funds of other entities. We are also

seeking to leverage our funds to the maximum extent possible with other lenders. Guaranteed programs are 

generally made through local financial institutions with coordination at the local level. The mission area strategic

plan is the basis for the development of State/Tribal strategic plans required by the 1996 Federal Agriculture 

Improvement and Reform Act. Rural Development State Directors have developed these plans with their various

public and private partners to support the coordinated delivery of all resources, both financial and technical. 

Other USDA agencies with which the mission area works closely are the Economic Research Service; Farm Service 

Agency; Natural Resources Conservation Service; Forest Service; Foreign Agricultural Service; Agricultural 

Marketing Service; Cooperative State Research, Education and Extension Service; and National Agricultural

Statistics Service. Outside of the Department, coordination is often done with the Department of Housing and

Urban Development, Economic Development Administration, Environmental Protection Agency, Small Business 

Administration, Department of Labor, Department of Energy, Federal Energy Regulatory Commission, and Federal

Communications Commission.

Strategic Goals: The Rural Development strategic plan consists of five goals. Goals 1-4 support Goal 4 of the 

Departmental strategic plan Enhance the capacity of rural residents, communities, and businesses to prosper. 

Goal 5 of the mission area plan supports Goal 5 of the Departmental plan - Operate an efficient, effective and 

discrimination-free organization.

Goal 1: Good Jobs and Diverse Markets.  Rural Development will improve the quality of life in rural America 

by encouraging the establishment and growth of rural businesses and cooperatives.

Goal #1 of the mission area plan is specific to the programs administered by the Rural Business-Cooperative Service 

(RBS). The Agency is responsible for delivering business development programs authorized by the Consolidated 

Farm and Rural Development Act, Food Security Act of 1985, Rural Electrification Administration Act of 1936, and 

cooperative development programs authorized by the Cooperative Marketing Act of 1926 and the Agricultural

Marketing Act of 1946. 

Objectives of Goal 1:

1.1 Increase the availability and quality of jobs in rural areas. 

1.2 Encourage and promote the use of marketing networks and cooperative partnerships to increase and expand

business outlets.

1.3 Direct Rural Development program resources to those rural communities and customers with the greatest need. 

1.4 Manage the loan portfolio in a manner that is efficient and effective. 

FY 2002 & 2003 Annual Performance Plan 3 January 2002 
Rural Development U.S. Department of Agriculture 

Program Activities supporting Goal 1: Business Programs and Cooperative Development Programs. 

FY 2000 

ACTUAL 

FY 2001* 

ACTUAL 

FY 2002* 

ESTIMATE 

FY 2003* 

ESTIMATE 

Funding (Appropriated)

Program $1.172b* $2.903b* $1.26b* $0.85b**

S&E $27.949M   **  

FTEs (Appropriated) 304 ** ** ** 

*Includes supplemental for FY 2001. Also includes $15 million in FY 2001, $15 million in FY 2002 and $14 

million in FY 2003, for Rural Empowerment Zone and Rural Enterprise Community Grants. These funds are 

administered by the Office of Community Development rather than RBS. 

** Starting with the FY 2001 budget, S&E for all Rural Development agencies are combined and neither the S&E 

nor FTE figures can be provided separately. 

BUSINESS PROGRAMS

Business and Industry (B&I) Guaranteed Loans. This program finances business and industrial acquisition,

construction, conversion, enlargement, repair or modernization in rural unincorporated areas and incorporated areas

with a population of 50,000 or less and the immediately adjacent urbanized and urbanizing areas. Loan funds are 

used to finance the purchase and development of land, easements, rights-of-way, buildings, equipment, facilities, 

machinery, supplies and materials plus funds can be used to pay start-up costs and to supply working capital. 

Eligible applicants include individuals as well as public, private, or cooperative organizations organized for profit or 

nonprofit, Indian tribes, and corporate entities. Loans may be guaranteed by RBS with a maximum percentage for 

guarantee of 80 percent for loans of $5 million or less, 70 percent for loans between $5 million and $10 million, and 

60 percent for loans exceeding $10 million up to $25 million.

Business and Industry Direct Loans. The criteria and loan purposes are basically the same as for the guaranteed 

loans except for, recreation and tourism, hotels and motels, qualified agricultural production, and cooperative stock

purchase loans, all of which are eligible loan purposes under the B&I Guaranteed Loan Program, are not eligible 

purposes under the B&I Direct Loan Program. These loans are available to applicants who are unable to obtain the 

needed assistance from a private lender with a guarantee. The maximum loan amount to any one borrower is $10 

million.

Intermediary Relending Program (IRP) Loans. These direct loans are made to intermediary borrowers (i.e. private 

nonprofit corporations, state or local government agencies, Indian tribes, and cooperatives) who, in turn, relend the 

funds to rural businesses, private nonprofit organizations and others meeting the criteria for ultimate recipients. IRP

loans are limited to rural unincorporated areas, and cities or towns of 25,000 or less population. Financial assistance 

from the intermediary to the ultimate recipient must be for economic development projects, the establishment of new

businesses and/or the expansion of existing businesses, creation of employment opportunities and/or saving existing

jobs in rural areas. 

Rural Economic Development Loans (REDL). Zero interest loans are provided to any RUS electric or telephone 

entity (that is not delinquent on any Federal debt or in bankruptcy proceedings) to relend to ultimate recipient 

projects at zero interest. Proceeds are used to provide rural economic development and/or job creation projects

FY 2002 & 2003 Annual Performance Plan 4 January 2002 
Rural Development U.S. Department of Agriculture 

including, but not limited to, project feasibility studies, start-up costs, incubator projects, and other reasonable 

expenses. 

Rural Economic Development Grants (REDG). Grants are provided to borrowers that re-loan the funds, at zero 

interest rates, to businesses in unincorporated areas or small towns of 2,500 or less population. The revolving loan

funds provide needed capital to non-profit entities and municipal organizations to finance community facilities in

rural areas which promote job creation, promote education and training to enhance marketable job skills, or extend

or improve medical care. Grant funds are used to establish revolving loan fund programs to promote economic

development in rural areas. 

Rural Business Enterprise Grants. Grants are available to public bodies, private nonprofit corporations, and 

Federally-recognized Indian Tribal groups to encourage the development of small and emerging private business

enterprises; the creation, expansion, and operation of rural distance learning networks; and to provide adult 

education or job training related to potential employment or job advancement for adult students. These grants are 

limited to unincorporated areas and incorporated areas of 50,000 population or less and the immediately adjacent 

urbanized and urbanizing areas. Grant funds may be used for the acquisition and development of land, construction

of buildings, purchase of equipment, obtaining of needed technical assistance, start up capital in the form of a loan

from the establishment of revolving loan funds, refinancing, services and fees. Grants are also available to qualified 

nonprofit organizations for the provision of technical assistance and training to rural communities for the purpose of

improving passenger transportation services or facilities. 

Rural Business Opportunity Grants. Grants are made to public bodies, nonprofit corporations, Indian tribes, and 

cooperatives for training, planning, and technical assistance for rural economic development in unincorporated areas

and rural towns of 10,000 or less population. Funds may be used to pay costs of providing technical assistance for 

rural business, economic planning for rural communities, or training for rural entrepreneurs or economic 

development officials.

Program Activity: Business Programs FY 2000 

ACTUAL 

FY 2001 

ACTUAL 

FY 2002 

ESTIMATE 

FY 2003 

ESTIMATE

Program Level $1.139b *$2.852b $1.289b $0.84b 

FY 2002 & 2003 Annual Performance Plan 5 January 2002 

PERFORMANCE GOALS AND 

INDICATORS

FY 2000 

ACTUAL 

FY 2001 

ACTUAL 

FY 2002 

TARGET 

FY 2003 

TARGET 

 Create or save jobs in rural area. 

Number of jobs created or saved: 

B&I Guaranteed Loans *

B&I Direct Loans **

IRP Loans 

Rural Business Enterprise Grants 

Rural Economic Development Loans 

Rural Economic Development Grants 

29,118 

1,080 

29,266 

9,550 

2,967 

1,521 

29,927 

1,816 

29,866 

39,292 

3,697 

624 

31,049 

0 

29,206 

32,721 

2,444 

844 

20,400 

0 

30,600 

35,100 

2,400 

800 

Community economic benefits 

B&I Guaranteed Loans

B&I Direct Loans

$2,568m

$75.5m

$2,689m

$126.3m

$2,789m

0 

$1.831m

0 
Rural Development U.S. Department of Agriculture 

IRP Loans

Rural Business Enterprise Grants 

$95.6m

$86.0m

$97.6m

$123.1m

$95.43m

$102.5m

95.43m

110m

IRP dollars lent by intermediaries/IRP

dollars obligated to intermediaries 

(cumulative since Program inception). 

78.5% 80.6% 75% 75%

Non-IRP funds leveraged for each dollar 

of IRP funds. $3.12 $3.12 $3.76 $3.12 

Number of businesses benefiting from

RBEG program. 1,483 3,792 1,741 3,400 

Non-RBE funds leveraged for each

dollar of RBEG funds. $1.12 $1.29 $2.40 $1.12 

Non-REDLG funds leveraged per dollar

of program funds. 

Loans 

Grants 

$4.56 

$7.16 

$6.44 

$5.29 

$3.00 

$3.00 

$3.00 

0 

Non-RBOG funds leveraged for each

dollar of RBOG funds. N/A N/A $1.00 $1.00 

Number of businesses benefiting from

RBOG Program. 509 0 

Number of economic development plans

developed with RBOG. 10 6 

Number of people trained through 

RBOG program. 96 56 

Assist marketing networks and cooperative 

partnerships in the establishment and expansion

of business outlets. 

Percentage of B&I Guaranteed funds

obligated to cooperatives. 11% 3.9% 20% 20%

Direct Rural Development program resources to 

those rural communities and customers with the 

greatest need. 

Percent of funds obligated in

Empowerment Zones/Enterprise

Communities/REAPs: 

B&I Guaranteed 

IRP

RBEG 

2.0%

4.7%

20.3%

.8% 

10.8%

12.7%

2.3%

19%

22%

2.3%

16%

17%

Percentage of funds obligated for 

FY 2002 & 2003 Annual Performance Plan 6 January 2002 
Rural Development U.S. Department of Agriculture 

Mississippi Delta and Native American

Initiatives: 

B&I Guaranteed 

IRP

RBEG

0 

0 

0 

MD NA

0% 5% 

21% 10% 

2% 6% 

MD NA

0% 5% 

21% 10%

2% 6% 

MD NA

0% 5% 

11% 10%

2% 6% 

Manage the B&I portfolio effectively to

minimize the delinquency rate. 

Delinquency rate (excluding bankruptcy

cases). 4.2% 4% 3% 4%

* Includes $1.162 billion of B&I Guaranteed Loan Program for Disaster and Emergency Assistance. 

** B&I Direct Loan Program is not funded in FY 2002 or FY 2003. 

Discussion of Performance Goals: Building competitive businesses in rural areas helps achieve the Departments’

goal to Expand economic and trade opportunities for agricultural producers and other rural residents.

The development of performance measures for this program is complicated by the wide variety of businesses which

can be assisted. The key factor, however, for all of the Business and Industry programs is the creation or saving of

jobs. Performance indicators related to job creation/saved are established for all programs. While the amount of

funding available for these programs will have minimum impact on National employment data, there will be a 

significant impact on the unemployment rates and the economy in some rural areas. We are unable to measure the 

quantitative impact at this time. 

Reaching those communities and individuals with the greatest need for job creation is a major concern of the 

Agency. Several measures relate to funding provided to EZ/EC communities or to regional Initiatives established by

the President to address unique economic problems.

One of the Objectives in the mission area’s strategic plan is the intent to direct business program resources to those 

communities and customers with the greatest need. This includes areas that have been consistently poor, have high

unemployment rates, have out-migration, have experienced natural disasters, or experienced economic stress due to 

Federal action, such as the closure of military bases. Several performance measures relate to this Objective. RBS 

has established two strategies to ensure funds are targeted to these communities and customers. In addition, priority

selection criteria that supports those targeted areas and customers have been established, are published in the 

program regulations, and are used in funding decisions.

A second Objective is to manage the business loan portfolio in a manner that is efficient and effective. This 

Objective is addressed in the performance measures in terms of delinquency rates. Performance of the loan portfolio

is continually monitored within RBS. States are delegated approval authority based on National Office assessment 

of State employee qualifications and training in delivery of programs. In addition, a Business Programs Assessment 

Review process was initiated in Fiscal Year 1998 for the purpose of reviewing State Office administration of

Business Programs within the states, and states are reviewed as a part of this process. Quarterly review of

delinquent loan portfolios and state servicing of the cases is performed by the National Office and assistance is

provided to the states, as needed, to ensure effective and timely servicing decisions are made. Specific training

needs have been identified and are being addressed. 

FY 2002 & 2003 Annual Performance Plan 7 January 2002 
Rural Development U.S. Department of Agriculture 

Means and Strategies: Achievement of the FY 2002 and FY 2003 Performance Goals and Indicators is contingent

upon receiving the program and general support resources indicated in this plan. The program levels and projected 

performance targets are based on Congressional appropriations, however, subsidy rates are not subject to change. 

As required by the Balanced Budget Act of 1997, the program-specific subsidy rates utilized in the development of

the Presidents Budget will be used when establishing obligations of funds. Funds expended in any particular 

program could be impacted, however, by the movement of funds from one program to another as authorized by the 

Rural Community Advancement Program.

RBS is concerned about the quality of jobs created. While it is unable to measure job quality, it is giving funding

priority to projects that support jobs with average wage rates that exceed Federal minimum wage rates.

RBS, as part of the FY 2002 Administrative Budget funding request, proposes to procure and distribute off-the-shelf

software that provides credit and financial analysis, including the ability to develop spreadsheets of business 

transactions. Acquisition of this software will improve the quality of the portfolio through more informed and

consistent credit analyses by field staff for loan origination and loan servicing activities. 

Coordination with other Federal programs is not required but strongly encouraged for the delivery of the Business 

Programs. Funded businesses must meet the standards of OSHA or, if construction is involved, the Environmental 

Protection Agency in the same sense that they must meet the zoning and construction requirements of the state, 

county, or local government. These are issues of concern handled by the applicants engineer or staff. Other Federal

agencies, such as the Economic Development Agency, or state agencies may be potential partners for joint funding

if a specific project meets their requirements. 

Verification and Validation: Data to measure the performance measures will come from the following automated

accounting systems:

 Program Loan Accounting System (PLAS) 

 Guaranteed Loan System (GLS) 

 Rural Community Facilities Tracking System (RCFTS ) 

These systems are used by agency managers in their management of the programs. PLAS and GLS are accounting

systems designed to manage the agencys portfolio of direct and guaranteed loans. These systems contains a variety

of data edits to minimize the risk of inaccurate data being placed in the systems. These two systems provide reports

used by OIG in their annual audit of the mission areas financial statement. 

The Guaranteed Loan System (GLS) is a web-based accounting and loan management system currently in

development by Rural Development. (The name of this system will likely be changed as data for direct loans and

grants is incorporated.) 

 The financial data in the predecessor accounting system, the Guaranteed Loan Accounting System (GLAS), 

was moved into GLS in April 2001, and GLAS was shut down.

FY 2002 & 2003 Annual Performance Plan 8 January 2002 

 The existing non-accounting management system, the Rural Communities Facilities Tracking System

(RCFTS), contains a variety of data related to Business Programs, including grants and guaranteed and

direct loans. It contains data such as the number of jobs created and saved and the Congressional District 

in which the business applicant is located. The field offices maintain the data. This system is being

redeveloped in GLS. All the data currently captured in RCFTS, as well as the accounting data previously

contained in GLAS, plus all the information captured on the application for a loan, will be captured and

maintained in GLS. Lenders will be able to submit applications on-line, and Rural Development field

offices will use this system to process loans on-line. Because the new system will be a tool the field offices 

use to actually process and service loans, not simply a tracking system for reporting purposes, we feel the 
Rural Development U.S. Department of Agriculture 

quality of Agency data will improve significantly. This redevelopment is expected to be available by year 

end. 

 Rural Development is also developing a Data Warehouse into which the data from all the Agency systems 

will be continuously loaded. A feature of the Data Warehouse is the capability to run reports using all the 

internal Agency data as well as data from external sources, such as the Census. The Data Warehouse will 

enable the Agency to compile accurate reports using verifiable data. 

 The new systems will reduce the number of manual reports, requested from State Directors, which contain

unverifiable data. 

Jobs created or saved is an important indicator for the Business Programs and an estimate of the jobs being created 

or saved is determined for each loan during processing. The exception to this is the IRP. On average, each

$100,000 of IRP money loaned by the intermediary results in one ultimate recipient (business) loan. This loan

provides jobs for approximately 20-25 people. The average loan to an ultimate recipient is 8.82 years. Based on an

average term of 8.82 years per loan to ultimate recipients, the total loan funds available to the intermediary revolves 

3.4 times over the 30-year life of the loan to the intermediary. Therefore, approximately 76.5 jobs are established 

per $100,000 over the 30-year life of the loans to the intermediaries (22.5 * 3.4 =76.5). 

The economic impact of the Business programs is also an important indicator. The Department of Labor estimates

an economic multiplier effect of $2.50 for every dollar of Business loans or grants provided. 

COOPERATIVE DEVELOPMENT PROGRAMS

Rural Cooperative Development Grants. Grants are made to fund the establishment and operation of centers for 

rural cooperative development with their primary purpose being the improvement of economic conditions in rural 

areas. Grants may be made to nonprofit institutions or institutions of higher education. Grants may be used to pay

up to 75 percent of the cost of the project and associated administrative costs. The applicant must contribute at least 

25 percent from non-federal sources. Grants are competitive and are awarded based on specific selection criteria. 

The Appropriate Technology Transfer for Rural Areas (AFTRA) Program. The program encourages agricultural 

producers to adopt sustainable agricultural practices that allow farmers to maintain or improve profits, produce high

quality food and reduce adverse impacts to the environment. AFTRA is located on the University of Arkansas

campus at Fayetteville, Arkansas, and functions as an information and technical assistance center staffed with

sustainable agriculture specialists accessible nationally by toll-free telephone. 

National Sheep Industry Improvement Center. The Center promotes strategic development activities to strengthen

and enhance the production and marketing of sheep and goat products in the United States. It does this by

encouraging infrastructure development, business development, market and environmental research, and designing

unique responses which address the needs of the industries and ensures their long term, sustainable development. 

The Center has a Board of Directors that oversees its activities and operates a no-year revolving fund for loans, 

grants, and cooperative agreements. The Center is to be privatized upon receiving total appropriations of $50 

million, or by April 4, 2006, whichever comes first. 

Achievement of the FY 2002 and FY 2003 Performance Goals and Indicators is contingent upon receiving the 

program resources outlined below. 

Program Activity: Cooperative Development 

Programs

FY 2000 

ACTUAL 

FY 2001 

ACTUAL 

FY 2002 

ESTIMATE 

FY 2003 

ESTIMATE

FY 2002 & 2003 Annual Performance Plan 9 January 2002 
Rural Development U.S. Department of Agriculture 

Program Levels $16m $36.5m $7.75m $9.0m

PERFORMANCE GOALS AND 

INDICATORS

FY 2000 

ACTUAL 

FY 2001 

ACTUAL 

FY 2002 

TARGET 

FY 2003 

TARGET 

Assist marketing networks and cooperative 

partnerships in the establishment and

expansion of business outlets. 

Number of Technical assistance and 

educational services provided. 205 244 200 200 

Customer rated quality of technical 

assistance (0-5 rating scale). 3.5 N/A 3 3 

Leverage of research expenditure 

(dollar value of RBS sponsored 

research per dollar of RBS research

expenditures). 

1.25 1.44 1.25 1.25 

Research and educational materials

provided to customers. 51,137 53,594 25,000 25,000 

Number of responses to inquires for 

information. 16,000 16,000 15,000 15,000 

Discussion of Performance Goals: Strong cooperatives in rural areas help achieve the Departmental goal to

Expand economic and trade opportunities for agricultural producers and other rural residents.

A priority of the Administration is providing assistance to small and beginning farmers. The need for this assistance 

is reflected in the following indicators: 

 In 1980 farmers received 37 cents of every consumer dollar spent for food. By 1996 the farmers’ share had 

dropped to 23 cents. 

 Farms with gross annual sales under $250,000 represent 94 percent of all farms, but they receive only 41 

percent of all farm receipts.

Cooperative purchasing and selling is an important tool for helping small and beginning farmers be economically

viable. These goals reflect the success of the RBS in enhancing the quality of life of rural Americans by providing

leadership in building competitive businesses and sustainable cooperatives. These goals include the number of

businesses, cooperatives, and communities that receive financial resources and technical assistance, and the impacts

on rural economies that stem from this assistance. These goals also reflect success in implementing the themes from

the mission area strategic plan, including partnering, leveraging, capacity building, etc. Many goals relate directly to

the levels of program funding and Agency staffing levels. Reductions in the proposed levels of funding and staffing

will cause corresponding reductions in the planned levels of performance. 

Means and Strategies: Strategies to achieve the objectives include: 

 Coordinate efforts with the Foreign Agricultural Service to utilize cooperatives to promote in rural areas

product development of products which have a foreign market. 

FY 2002 & 2003 Annual Performance Plan 10 January 2002 
Rural Development U.S. Department of Agriculture 

 Involve 1890 and 1862 land-grant universities in providing technical assistance, credit acquisition

assistance, and business plan development to minority-owned businesses and entrepreneurs in training.

 Partner with public, non-profit, and educational institutions to heighten awareness and understanding of

cooperatives and marketing opportunities in under-served rural areas. 

 Provide field-level training and technical assistance to cooperatives and developing cooperative groups. 

 Establish an Outreach Program and Outreach Liaison Position.

 Improve accessibility of Rural Development programs for Native Americans. 

Achievement of the FY 2002 and FY 2003 Performance Goals and Indicators is contingent upon receiving the 

program and general support resources indicated in this plan. 

Verification and Validation: The data comes from the Agencys’ program records which are not automated nor 

audited. They are, however, considered to be reasonably accurate for use by management. The amount of technical 

assistance and services provided includes services provided under technical assistance requests, workshops, 

international briefings, specialized analysis, training, staff presentations, etc. 

The customer rated quality of technical assistance is based upon a composite of a survey of cooperatives or groups

that have received substantial technical assistance from RBS during the year. The customers rate the performance 

on a scale of 1 to 5, with 5 being the best. The survey process is managed through the National Office. 

The leveraging of research expenditures includes research funded through direct appropriation to the salaries and

expenses account and allocations from appropriate program accounts. 

Goal 2: Quality Housing and Modern Community Facilities. Rural Development will improve the quality of

life of rural residents by providing access to technical assistance, capital, and credit for quality housing and modern, 

essential community facilities. 

Goal 2 of the mission area plan is specific to the programs administered by RHS. The agency is responsible for 

delivering housing programs authorized by the Housing Act of 1949, as amended, and community facilities

programs authorized by the Consolidated Farm and Rural Development Act, as amended. 

Objectives of Goal 2: 

2.1 Improve the quality of life for the residents of rural communities by providing access to decent, safe, sanitary

and affordable housing.

2.2 Improve the quality of life in rural America by providing essential community facilities. 

2.3 Maximize the leveraging of loan funds to increase the number of rural residents assisted by Rural Development 

programs. 

2.4 Manage the loan portfolio in a manner that is efficient and effective. 

Program Activities supporting Goal 2: , Homeownership, Rental Housing, and Community Facilities programs. 

FY 2000 

ACTUAL 

FY 2001 

ACTUAL 

FY 2002 

ESTIMATE 

FY 2003 

ESTIMATE 

Funding (Appropriated)

Program $4.600b $4.90b $6.11b $5.24b

S&E $437.858m * * *

FTEs (Appropriated) 6,081 * * * 

* Starting with FY 2001 budget, the S&E budget for all Rural Development agencies are combined. Therefore, 

S&E and FTE figures, at the agency level, cannot be provided separately. 

FY 2002 & 2003 Annual Performance Plan 11 January 2002 
Rural Development U.S. Department of Agriculture 

HOMEOWNERSHIP PROGRAMS

Section 502 Rural Housing Direct Loan Program. This program provides mortgage financing to very low- and lowincome families who cannot obtain credit from other sources. Borrowers are offered fixed-interest-rate loans with

maturities ranging from 30 to 38 years. The loans are subsidized at a graduated interest rate level from 1 percent to

a percent over Treasurys cost of money, depending on family income. Approximately 40 percent of the people 

served earn less than 50 percent of the median income in the rural area in which they live; the remainder earn

between 50 and 80 percent. The 502 program also provides "supervised credit" to its borrowers to help them

maintain their homes in times of financial crises through workout agreements and moratoriums.

Section 502 Guaranteed Loan Program. The Section 502 Loan Guarantee program provides homeownership 

opportunities to low- and moderate-income rural residents, typically those whose incomes are between 80 percent 

and 115 percent of the median income in the county. The program offers a 90 percent guarantee as encouragement

to private lenders to provide 30-year, fixed-rate guaranteed mortgages for customers who would be unable to obtain

credit without the guarantee. The loans can be for up to 100 percent of market value or for acquisition cost, 

whichever is less, thereby removing the down payment barrier that prevents many people from becoming

homeowners.

Mutual and Self-Help Housing Program. The Mutual Self-Help Technical Assistance Grant program truly

empowers very-low-income and low-income rural Americans by enabling them to use sweat equity to help reduce 

the cost of homeownership. Nonprofit organizations and local governments may obtain grant funds to enable them

to provide technical assistance to groups of families who work cooperatively to build their own homes. Typically, 

the future homeowners obtain section 502 direct loans to finance their homes, however, other mortgage products

have also been used. By providing their "sweat equity", the future owners help themselves as well as others in the 

group to own a home with a smaller mortgage than if the borrower paid full market price. It is estimated that a 

homeowner under the self-help method realizes, on average, a 10-15 percent reduction in construction costs while 

learning basic construction and maintenance skills. The Self-Help Program also builds a strong sense of community

commitment and involvement among the participants. 

Section 504 Rural Housing Loan and Grant Program. This program provides financial assistance to very-lowincome rural homeowners to remove health and safety hazards from their homes. Grants are limited to $7,500 and 

are only available to elderly homeowners (those age 62 or over) whose incomes are 50 percent or less of the median

in the rural area in which they live. At the Secretary’s discretion, the grant limit can be increased to $15,000. 

Section 533 Housing Preservation Grant Program. This program provides financial assistance through nonprofit

groups and government agencies to very-low- and low-income homeowners to repair their homes, and to rental 

property owners for the rehabilitation of units which will be rented to low- and very-low-income families. Housing

rehabilitated through this program must be brought up to local building codes.

Section 523 Rural Housing Site Loan Program. This program provides funds to nonprofit organizations to develop

building sites for participants in the RHS Self-Help housing program. The nonprofit organizations resell these 

improved sites to program participants at cost, thus passing on their savings in land and development costs. The 

interest rate on the loans is 3 percent, and the nonprofit organizations repay the loans when they sell the properties. 

Self-Help participants who are able to purchase one of these improved sites generally have lower overall costs and

thus require smaller RHS housing loans than those Self-Help participants who acquire their improved building site 

through the contract method.

Section 524 Rural Housing Site Loan Program. This program is similar to the Section 523 Rural Housing Site Loan

program in that it provides loans to nonprofit organizations to purchase and develop rural building sites. However, 

FY 2002 & 2003 Annual Performance Plan 12 January 2002 
Rural Development U.S. Department of Agriculture 

once developed the sites may be provided to any low- or moderate-income person, not just an RHS Self-Help 

participant. Loans are made at the Treasury’s rate of interest. 

Program Activity: Homeownership Programs FY 2000 

ACTUAL

FY 2001 

ACTUAL

FY 2002 

ESTIMATE

FY 2003 

ESTIMATE

Program Level (direct and guaranteed) $3.389b $3.51b $4.38b $3.83b

PERFORMANCE GOALS AND 

INDICATORS

FY 2000 

ACTUAL

FY 2001 

ACTUAL 

FY 2002

TARGET

FY 2003 

TARGET 

Improve the quality of life of residents of rural 

communities by providing access to credit for decent, 

safe, and sanitary housing.

Rural households receiving financial assistance 

to purchase a home of their own. 45,420 44,073* 53,000* 46,000*

Total Units Sec. 502 Direct and Guaranteed 502 

and Sec. 504 Loan and Grant. 58,018 57,234** 69,000** 59,000**

Number of houses financed through the Section 

502 Direct Loan Program. 17,026 14,638* 15,000* 13,000*

Number of houses financed through the Section 

502 Direct Loan (Natural Disaster) Program. 519 137* N/A N/A

Number of houses financed through the Section 

502 Guaranteed Loan Program. 29,123 29,326* 39,000* 33,000*

Number of existing houses improved (Section

504 Loans and Grants). 10,360 11,762* 11,700* 12,000*

Number of existing houses improved (Section

504 Loans and Grants Natural Disaster). 990 507** N/A N/A

Number of jobs created (Direct 502). 17,520 16,171 16,500 14,000

Number of jobs created (Guaranteed 502). 14,323 14,438 24,000 20,000

Maximize the leveraging of loan funds to increase the 

number of rural residents assisted by Rural Development

programs. 

Number of borrowers assisted through 

leveraging (Direct 502). 6,448 7,753 10,000 10,000

Number of Guaranteed lenders participating in

low-income housing finance. 2,400 2,400 2,400 N/A

Number of Rural Home Loan Partnerships. 177 239 180 300

Provide effective supervision to minimize delinquencies

and future loss. 

First-year delinquency rate. 3.2% 3.2% 3.8% 3.3%

* These figures are initial loans only, since subsequent loans do not create additional houses. 

* * This figure is total units obligated, including subsequent loans. 

Discussion of Performance Goals: Affordable housing helps meet the Departmental goal to Enhance the capacity

of all rural residents, communities, and businesses to prosper.

The primary purpose of the Homeownership program is to increase the number of decent, safe and sanitary housing

units available to low- and very-low-income families in rural areas. The agency is tracking the number of homes 

financed to quantify this effort. 

FY 2002 & 2003 Annual Performance Plan 13 January 2002 
Rural Development U.S. Department of Agriculture 

A key component of the Rural Development strategic plan is that all programs will develop partnerships with other 

organizations involved in rural development. The purposes of these partnerships are to encourage strategic delivery

of the programs of both organizations and to coordinate the delivery of technical assistance and financing to rural

communities. Several performance measures relate to the leveraging of the programs’ funds which is the most 

likely outcome of the partnerships. Leveraging of funds extends the impact of Rural Development’s limited funds 

and brings additional dollars into the development of rural communities. 

The final indicator relates to effective management of the portfolio. Ensuring that loans are repaid on time is a 

factor in any lending program. Since over 80 percent of RHS borrowers are first-time homeowners, it is important

they immediately establish a habit of making their mortgage payments on time. The agency pays close attention to 

the first-year delinquency rate to ensure that those borrowers who miss a payment are contacted immediately before 

they become hopelessly delinquent and no longer able to keep their home. 

Means and Strategies: Achievement of the FY 2002 and FY 2003 Performance Goals and Indicators is contingent

upon receiving the program and general support resources indicated in this plan. Program levels and projected 

performance targets are based on Congressional appropriations, however, subsidy rates are not subject to change. 

As required by the Balanced Budget Act of 1997, the program-specific subsidy rates utilized in the development of

the President’s Budget will be used when establishing obligations of funds. 

RHS programs have helped raise the number of homeowners in the United States to an all-time high. RHS has 

developed financial and technical partnerships to extend the impact of Rural Development’s limited funds and bring

additional dollars into the development of rural communities. 

While other Federal agencies have single family housing programs, RHS programs are the only ones that focus on

making affordable credit available to lower income, rural residents. Long term, fixed rate mortgage credit is less 

available, and more costly, in rural areas than metro areas. RHS programs help to level the playing field for lower 

income families. Through its leveraging and loan guarantee programs, RHS is also helping the private sector, as

well as State Housing Authorities and nonprofits, reach into rural areas that they otherwise have had difficulty

serving.

Verification and Validation: Data from the following systems can be used to verify and validate most

performance measures: 

Program Loan Accounting System (PLAS) 

Guaranteed Loan System (GLS) 

Dedicated Loan Origination and Servicing System (DLOS) 

These systems track financial data, but generally not management data. These systems contain a variety of data edits

to minimize the risk of inaccurate data being placed in the system. Reports from these systems are used by OIG in

development of the mission area’s audited financial statement. 

RENTAL HOUSING PROGRAMS

Section 515 Rural Rental Housing (RRH) Direct Loans. The Section 515 program employs a public-private

partnership by providing subsidized loans at an interest rate of 1 percent to limited-profit and nonprofit developers to

construct or renovate affordable rental complexes in rural areas. This 1 percent loan keeps the debt service on the 

property sufficiently low to support below-market rents affordable to low-income tenants. Many of these projects

also utilize low-income housing tax credit proceeds. This program is typically used in conjunction with RHS 

Section 521 Rental Assistance which provides project-based rental assistance payments to property owners to

subsidize the tenants’ rent at an affordable level. With rental assistance, tenants pay a maximum of 30 percent of

FY 2002 & 2003 Annual Performance Plan 14 January 2002 
Rural Development U.S. Department of Agriculture 

their income towards their rent and utilities. Some 515 projects also utilize HUD's Section 8 project-based 

assistance which enables additional very-low-income families to be served. 

Section 538 Rural Rental Guaranteed Loan Program. This program provides affordable rental housing to low- to

moderate-income rural residents by providing 90 percent guarantees to certified lenders. For the for-profit sector, 

the guarantees cover 90 percent loan-to-value ratios. For the nonprofit sector they cover 97 percent loan-to-value 

ratios. 

Farm Labor Housing Direct Loans. Section 514 direct loans are available for farm owners, public bodies, and 

nonprofit associations to provide living quarters, furnishings, and related facilities for domestic farmworkers. The 

Section 514 loans have a 1 percent interest rate and a maximum term of 33 years. The Section 516 grants are used 

in conjunction with the loans to finance off-farm rental housing which will be affordable for low-wage farmworkers. 

Grants are only available to a governmental or nonprofit organization and may not exceed 90 percent of the total 

project cost. Section 521 rental assistance can also be used in conjunction with this program. Farmworkers who 

lease Section 514/516 Farm Labor Housing units must be either US citizens or permanent residents. A majority of

their income must come from farm work. 

Section 521 Rental Assistance. In 1999, one third of all rural renters paid more than 30 percent of their income for 

housing costs. The Section 521 Rental Assistance Program helps to mitigate that rent overburden and also enable 

very-low- and low-income rural residents to live in decent, safe, and sanitary housing. Rental Assistance is projectbased assistance used in conjunction with the Section 515 and Section 514/516 programs. The program provides

rental assistance payments directly to the owners of some RHS-financed rental projects under contracts specifying

that Rental Assistance beneficiaries will pay no more than 30 percent of their income for rent. This subsidy goes to

the unit, not to an individual tenant. 

Program Activity: Rural Rental Housing 

(RRH)

FY 2000 

ACTUAL 

FY 2001 

ACTUAL 

FY 2002 

ESTIMATE 

FY 2003 

ESTIMATE 

Program Level $910m $859m $1b $937m

FY 2002 & 2003 Annual Performance Plan 15 January 2002 

PERFORMANCE GOALS AND 

INDICATORS

FY 2000 

ACTUAL 

FY 2001 

ACTUAL 

FY 2002 

TARGET 

FY 2003 

TARGET 

Improve the quality of life for the residents of

rural communities by providing access to

decent, safe, sanitary and affordable rental 

housing.

Total Number of units funded for new

construction (FY). 5,357 2,457 5,500 3,800

Sec. 515 1,626 1,578 1,700 0*** 

Sec. 514/516 680 855 1,000 1,000 

Sec. 514/516 Natural Disaster 156 24 0 0

Sec. 538 2,895 0 2,800 2,800

Total Number of units funded for 

rehabilitation (FY). 

7,100 8,243 8,400 9,000 

Sec. 515 4,990 5,511 5,500 5,800

Sec. 514/516 696 1,003 1,200 1,200

Sec. 533 1,414 1,729 1,700 2,000

Direct resources to those rural communities 

and customers with the greatest need. 
Rural Development U.S. Department of Agriculture 

Average tenant income. $7,775 $7,980 $8,135 $8,135

Average income of tenants who do 

not receive Rental Assistance. N/A* N/A* N/A* N/A

Average income of tenants who 

receive Rental Assistance. N/A* N/A* N/A* N/A

Number of tenants who are rent

overburdened. N/A* 74,377 N/A N/A

Number of rental assistance units

renewed (tenants do not lose subsidy). 38,489 39,159 42,330 42,330

Percent of rental assistance units

renewed. 100% 100% 100% 100%

Number of tenant households living in

affordable, decent , safe, and sanitary

housing. 429,288** 453,275 435,246 435,246

Effectively manage the portfolio to minimize 

delinquencies and future losses.

Number of projects with accounts

more than 180 days past due. 153*** 146 130 130

Develop systems and processes which 

strengthen the management of MFH 

projects and help preserve the 

portfolio. 

Developed 

automated

system

(MultiFamily

Information

System) to

monitor 

projects and 

tenants.

Publish new

regulations 

for comment. 

Publish final 

regulations.

 * Available by end of FY 2002 reporting period. 

** Estimated, actual data not available. 

*** Includes 18 properties in inventory.

Discussion of Performance Goals: Affordable rental housing in rural communities helps achieve the Departmental 

goal to Enhance the capacity of all rural residents, communities, and businesses to prosper.

Most communities in rural America have a scarcity of decent rental housing affordable to very low-income families. 

In addition, migrant workers and farm laborers, whose incomes are extremely limited, face some of the worst 

housing conditions in the Nation. Despite improvements in housing quality, especially in the number of rural units 

with complete plumbing facilities, the 1990 census data indicated rural renters were more than twice as likely to live 

in substandard housing as people who owned their own homes. Many rural renters, with lower median incomes and 

higher poverty rates than homeowners, are simply unable to find decent housing that is also affordable. RHS rental 

housing programs are among the few resources that enable low- and very low-income, elderly and disabled renters

in rural America to access decent, safe, sanitary, and affordable housing.

Funding for this program has been reduced substantially during the past few years while the rental units in the 

portfolio continue to age and require resources for rehabilitation. A major focus of the performance measures is on

the agencys efforts to maintain or increase the number of rental units available to house low- and very low-income

FY 2002 & 2003 Annual Performance Plan 16 January 2002 
Rural Development U.S. Department of Agriculture 

families, at a rental rate affordable to the family. With over 86,000 of RHS current tenants rent overburdened,

meaning that they pay more than 30 percent of their monthly income for rent, maintaining the number of occupiable, 

affordable units is a significant challenge for the agency. The agency is tracking the number of units being built or

rehabilitated as well as the impact of rental assistance on the families. 

This program has also been the focus of several audits by the Inspector General related to fraud, waste, and abuse 

and the program is on USDAs list of Major Management Challenges and Program Risks. The performance 

indicator to develop systems and processes which strengthen the management of MFH projects and help preserve

the portfolio and encourage sound life cycle management, was added in FY 2001 to address this concern.

Means and Strategies: Achievement of the FY 2002 and FY 2003 Performance Goals and Indicators is contingent

upon receiving the program and general support resources indicated in this plan. The program levels and projected 

performance targets are based on Congressional appropriations and are not subject to changes that could impact a 

programs’ subsidy rate, such as fluctuations in the Treasury discount rate. As required by the Balanced Budget Act 

of 1997, the program-specific subsidy rates utilized in the development of the Presidents’ Budget are used when

establishing obligations of funds. 

The agency is employing several key strategies to implement its program:

Build leveraging partnerships to expand resources going into rural areas.

Reinvent the Multi-Family Housing Program, including completion of automation projects to improve program

management.

In order to stretch its resources, RHS is actively developing leveraging partnerships. Leveraging of funds extends 

the impact of Rural Development’s limited funds and brings additional dollars into the development of rural 

communities. 

The Rural Rental Housing program has a history of fraud, abuse, and indifference to the health and safety of tenants. 

In reviewing the $12 billion Rural Rental Housing Program, GAO and OIG previously identified a continuing

history of fraud and abuse by owners and management companies, along with instances of indifference towards the 

health and safety of low-income and elderly tenants. The agency has made substantial progress and, in the 1999 

listing of high-risk areas, the MFH program was not included. However, the agency continues to work on this area 

of concern.

Coordination with other Federal programs can substantially enhance the delivery of the Multi Family Housing

programs under the appropriate circumstances. Low-income housing tax credits, authorized through the Department

of Treasury, can help make housing more affordable for very low-income tenants. Section 8 assistance from HUD 

also helps with affordability. RHS program dollars also help State government programs and nonprofit 

organizations leverage their resources. These programs complement, rather than compete with, each other as our 

programs can help make these projects affordable for the community while helping to meet the public policy goals 

of other Federal and State agencies. 

RHS loan guarantee programs enable private sector lenders to become more involved in rural financing. Our 

guarantee programs bring otherwise unavailable long-term, fixed-rate private sector credit to rural areas. 

Verification and Validation: Data from the following systems can be used to verify and validate most

performance measures: 

Automated Multi-Family Housing Accounting System (AMAS) 

Program Loan Accounting System (PLAS) 

Guaranteed Loan System (GLS) 

FY 2002 & 2003 Annual Performance Plan 17 January 2002 
Rural Development U.S. Department of Agriculture 

Multi-Family Housing Information System (MFIS) 

Multi-Family Housing Tenant Information System (MFTS) 

These systems track financial data, but generally not management data. These systems contain a variety of data 

edits to minimize the risk of inaccurate data being placed in the system. Reports from these systems are used by OIG 

in development of the mission areas audited financial statement. 

COMMUNITY FACILITIES PROGRAMS

Community Facility Direct Loans. The direct loan program is for the purposes of constructing, enlarging,

extending, or improving essential community facilities. Eligible applicants must demonstrate that they are unable to

obtain capital from commercial sources. Applications for health and public safety projects receive the highest

priority. The interest rate on these loans is determined by the median family income of the area to be served and

ranges from 4.5 percent to 5.25 percent.

Community Facility Loan Guarantees. The criteria for the loan guarantees are the same as the direct loans. In the 

case of the guarantee program, the loans are offered by a private lender and the interest rate on the loan is negotiated 

between the lender and the borrower. 

Community Facility Grants. This program was authorized under the Federal Agriculture Improvement and Reform

Act of 1996. In most cases, the grant program is used in conjunction with the community facilities direct loan

program to make essential community facilities affordable for the most needy communities, which often cannot 

afford even direct loans without additional subsidies. 

Program Activity: Community Facilities

FY 2000 

ACTUAL

FY 2001 

ACTUAL

FY 2002 

ESTIMATE

FY 2003 

ESTIMATE

Program level $302m $535m $478m $478m

PERFORMANCE GOALS AND INDICATORS FY 2000 

ACTUAL 

FY 2001 

ACTUAL 

FY 2002 

TARGET 

FY 2003 

TARGET 

Improve the quality of life for rural residents by

providing new or improved essential community

facilities. 

Number of rural residents with improved 

standards of living through new or improved

essential community facilities (in millions). 8.1 12 13 13

Number of jobs created or retained. 4,493 5,814 7,200 7,200

Community Health

Number of new or improved health care 

facilities. 116 156 180 180

Number of new or improved elder care 

facilities. 32 47 50 50

Number of beds available at new or 

improved elder care facilities. 2,558 935 4,000 4,000

Emergency Services

Number of new or improved fire and rescue

facilities. 104 161 170 170

Number of new or improved fire and rescue

FY 2002 & 2003 Annual Performance Plan 18 January 2002 
Rural Development U.S. Department of Agriculture 

vehicles. 128 212 200 200

Education and Child Care

Number of new or improved child care 

centers. 55 63 50 50

Number of children served by new or 

improved child care centers. 4,049 2,167 3,500 3,600

Number of new or improved schools. 44 67 70 70

Maximize the leveraging of loan funds to increase the 

number of rural residents assisted by Rural 

Development programs. 

Number of CF funding partnerships. 866 452 1,400 1,400

Number of CF borrowers assisted through 

leveraging. 492 414 790 790 

Discussion of Performance Goals/Indicators: The availability of needed community facilities in rural 

communities helps achieve the Departmental goal to Enhance the capacity of all rural residents, communities, and

businesses to prosper.

Since the programs began in 1965, over 80 different types of projects have been financed with Community Facility

funds. Examples of these projects are child care centers, nursing homes, assisted living facilities, hospitals, health

clinics, fire stations, libraries, telecommunications, school facilities, community buildings, and industrial parks. The 

development of performance measures for these programs is complicated by the wide variety of projects which can

be funded. While applications are prioritized upon receipt, with health and safety receiving top priority, projects are 

generally funded in the order of receipt at the State-level to ensure equity in the distribution of funds. As a result, it 

is impossible to know ahead of time what the mix of funded projects will be during the fiscal year. 

Community Facilities projects are grouped into three categories (Community Health, Emergency Services, and

Education and Child Care) in order to simplify the presentation of performance measures. Each category has one or 

more measures of the number of new or improved facilities to be provided in rural areas during the fiscal year. This 

output measure is supported, where possible, with an assessment of the impact of the project, such as the number of

hospital beds added to the stock in rural communities or the number of children served in a day care facility. 

A key component of the Rural Development strategic plan is that all programs would develop partnerships with the 

other organizations involved in rural development. The purposes of these partnerships are to encourage strategic 

delivery of the programs of both organizations and to coordinate the delivery of technical assistance and financing to

rural communities. Two of the performance measures relate to the leveraging of the programs funds which is the 

most likely outcome of the partnerships. Leveraging of funds extends the impact of Rural Developments limited

funds and brings additional dollars into the development of rural communities. 

Means and Strategies: Achievement of the FY 2002 and FY 2003 Performance Goals and Indicators is contingent

upon receiving the program and general support resources indicated in this plan. The program levels and projected 

performance targets are based on Congressional appropriations and are not subject to changes that could impact a 

programs subsidy rate, such as fluctuations in the Treasury discount rate. As required by the Balanced Budget Act 

of 1997, the program-specific subsidy rates utilized in the development of the Presidents Budget will be used when

establishing obligations of funds. Funds expended in any particular program could be impacted, however, by the

movement of funds from one program to another as authorized by the Rural Community Advancement Program.

Specific strategies to achieve the performance goal include: 

FY 2002 & 2003 Annual Performance Plan 19 January 2002 

Build leveraging partnerships to expand resources going into rural areas.
Rural Development U.S. Department of Agriculture 

Support Welfare Reform by promoting development of day-care facilities.

In order to stretch its resources, RHS is actively developing leveraging partnerships. The purposes of these

partnerships are to encourage lender participation in providing financing to rural communities. The effort to move

families off of welfare and into work requires the availability of affordable quality day care, which is often more 

limited in rural America. This can present a real barrier to a family who is trying to move out of poverty. RHS'

Community Facilities Programs can be used to finance both child and adult day care. 

Coordination with other Federal programs enhances the delivery of the Community Facilities Programs under the 

appropriate circumstances. Proposed projects must meet the standards of the Environmental Protection Agency and 

health facilities must meet the standards of the Department of Health and Human Services, in the same sense that 

they must meet the zoning and construction requirement of the State, county, or local government. These are issues

of concern handled by the applicants engineer. Other Federal agencies, such as the Economic Development Agency

or Indian Health Service, or State agencies may be potential partners for joint funding if a specific project meets

their requirements. RHS program dollars also help State government programs and nonprofit organizations leverage

their resources. 

RHS loan guaranteed programs enable private sector lenders to get more involved in rural financing. The 

guaranteed programs bring otherwise unavailable long term, fixed rate private sector credit to rural areas. 

Verification and Validation: Several performance indicators address the overall impact of the Community

Facilities Program while others support the various categories of projects normally funded by the program. One 

overall measure is an assessment of the number of rural residents whose quality of life will be improved by the 

Community Facilities projects financed during the fiscal year. This is, and will always be, a soft estimate but it is an

attempt by the agency to quantify the impact of the Community Facilities Program on the rural population it serves. 

It cannot, in fact, be specifically measured, even at the end of the fiscal year, as there is a wide variation in the 

impact of projects and most have an impact far beyond the city limits of the town in which it is located. For 

example, the expansion of a hospital will provide improved medical care, and an improved quality of life, for people 

living miles from the town in which the hospital is located. 

A second way the impact of the total program is quantified is through the estimation of the number of jobs created or

retained as a result of the expenditure of Federal funds in the rural communities. This measure is also used by the 

other Rural Development agencies. Community Facilities funds are often construction related and the impact is 

established through the use of economic multipliers developed by the Department of Commerce.

Data to measure the performance measures will come from the following automated accounting systems: 

Program Loan Accounting System (PLAS) 

Guaranteed Loan System (GLS) 

Rural Community Facilities Tracking System (RCFTS) 

These systems are used by agency managers in their management of the programs. PLAS and GLS are accounting

systems designed to manage the agencys portfolio of direct and guaranteed loans. These systems contains a variety

of data edits to minimize the risk of inaccurate data being placed in the systems. Reports from these two systems are 

used by OIG in development of the mission areas audited financial statement. 

RCFTS is a non-accounting management system which contains a variety of data related to Community Facilities 

projects, e.g., community populations and number of people served by each project. Data in RCFTS is input by the 

field staff and does not contain edits to verify the accuracy of the data. Manual reports from State Directors will be

used to obtain data regarding several of the performance measures. This information will be less reliable since it is 

FY 2002 & 2003 Annual Performance Plan 20 January 2002 
Rural Development U.S. Department of Agriculture 

obtained manually and its accuracy cannot be verified. However, confidence in this data is high enough to be

acceptable for the purposes for which it is being used. 

Goal 3: Modern Affordable Utilities. “Rural Development will improve the quality of life of rural residents by

promoting and providing access to capital and credit for the development and delivery of modern affordable utility

services.” 

Goal 3 of the mission area plan is specific to the programs administered by the Rural Utilities Service (RUS). The 

agency is responsible for delivering electric and telecommunications programs as authorized by the Rural 

Electrification Act of 1936, as amended; distance learning and telemedicine grant programs as authorized by the 

Rural Economic Development Act of 1990, as amended; and water and waste programs authorized by the 

Consolidated Farm and Rural Development Act, as amended. 

Objectives of Goal 3:

3.1 Provide financing for modern, affordable, water and waste disposal services in rural communities. 

3.2 Provide financing for modern, affordable telecommunications, including Distance

Learning/Telemedicine services, in rural communities. 

3.3 Provide financing for modern, affordable electric service to rural communities. 

3.4 Direct Rural Development resources to those rural communities and customers with the greatest 

 need. 

3.5 Maximize the leveraging of loan funds to increase the number of rural residents assisted by Rural 

 Development programs. 

Program Activities supporting Goal 3: Water and Waste, Telecommunications, and Electric 

FY 2000

ACTUAL 

FY 2001* 

ACTUAL 

FY 2002* 

ESTIMATE 

FY 2003* 

ESTIMATE

Funding (Appropriated)

Program $4.148b $5.199b $6.999b $4.782b

S&E $68.153m $0 $0 $0

FTE’s (Appropriated) 715 $0 $0 $0

* Starting with the FY 2001 budget, the S&E budget for all Rural Development agencies is combined. Therefore, 

the S&E and FTE cannot be provided separately at the agency level.

WATER AND WASTE PROGRAM

Water and Waste Disposal Direct Loans. Loans are made to public bodies, organizations operated on a not-forprofit basis, Indian tribes on Federal and State Reservations, and other Federally recognized Indian tribes, for the 

development of storage, treatment, purification, or distribution of water or for the collection, treatment, and disposal

of waste in rural areas. A rural area may include an area in any city or town which has a population of not more 

than 10,000 inhabitants. Applicants must be unable to obtain sufficient credit elsewhere to finance actual needs at

reasonable rates and terms. Loans are repayable in not more than 40 years or the useful life of the facility, 

whichever is less. These loans bear interest not in excess of the current market yield for comparable term municipal 

obligations. Loans made in areas where: (1) the median household income of the service area falls below the higher 

of 80 percent of the Statewide non-metropolitan median household income or the poverty level; and (2) the project 

is needed to meet applicable health or sanitary standards, bear interest not in excess of 5 percent. 

Water and Waste Disposal Guaranteed Loans. Eligible borrowers and loan purposes are similar to those under the 

direct water and waste disposal loan program, except that loans involving tax-exempt obligations and loans 

FY 2002 & 2003 Annual Performance Plan 21 January 2002 
Rural Development U.S. Department of Agriculture 

involving a water and waste disposal grant may not be guaranteed. Normally, the guarantee will not exceed 80

percent, however, in extraordinary circumstances it may be increased to a maximum of 90 percent. The interest rate 

is negotiated between the borrower and lender and may be at a fixed or variable rate. 

Water and Waste Disposal Grants. Grants are made to public, quasi-public, and nonprofit associations, and to

certain Indian tribes for the development, storage, treatment, purification, and distribution of water or the collection,

treatment, or disposal of waste in rural areas. Grants are used for water and waste disposal projects serving the most

financially needy communities to reduce user cost to a reasonable level. Grants may be made to communities that 

have a median household income that falls below the higher of the poverty line or 100 percent of the State's nonmetropolitan median household income. P.L. 104-127, the Federal Agriculture Improvement and Reform Act of

1996, provided that not less than one percent, nor more than 3 percent, of the water and waste disposal grant funds

appropriated each year be made available for technical assistance and training of eligible grantee associations for 

such purposes as assisting in identifying and evaluating alternative solutions to problems relating to water and waste 

disposal, preparing applications, and improving operation and maintenance practices at existing facilities. 

Solid Waste Management Grants. Grants are made to nonprofit organizations to provide technical assistance in rural 

areas and towns up to 10,000 inhabitants, and to provide technical assistance to local and regional governments and 

related agencies for the purpose of reducing or eliminating pollution of water resources and improve planning and 

management of solid waste disposal facilities. 

Program Activity: Water and Waste FY 2000 

ACTUAL 

FY 2001 

ACTUAL 

FY 2002 

ESTIMATE 

FY 2003 

ESTIMATE 

Program level $1.337b $1.410b $1.540b $1.479b 

PERFORMANCE GOALS AND 

INDICATORS

FY 2000 

ACTUAL 

FY 2001 

ACTUAL 

FY 2002 

TARGET 

FY 2003 

TARGET 

Provide rural residents with modern, affordable 

water and waste services. 

Loans to develop or expand Rural

water systems to provide quality

drinking water in compliance with the 

Safe Drinking Water Act. 590 613 600 540 

Loans to develop or expand Rural

waste disposal systems to provide

quality waste disposal service in

compliance with State and Federal 

environmental standards. 325 309 300 275 

Total jobs generated as a result of

facilities constructed with W&W

funds.

39,771 40,600 40,150 38,460 

Direct program resources to those rural communities with the greatest need. 

Persistent poverty counties. 219 236 230 210 

Total W&W project cost. $341m $308m $305m $292m

RUS amount. $249m $240m $236m $225m

Special initiative - number of projects and amount of W&W funding (in millions) 

EZ/EC 33 ($46) 59 ($49) 49 ($43) 49 ($43) 

Colonias 36 ($19) 32 ($20) 33 ($20) 32 ($20) 

Pacific Northwest 0 0 0 0 

FY 2002 & 2003 Annual Performance Plan 22 January 2002 
Rural Development U.S. Department of Agriculture 

Alaskan Villages 24 ($20) 18 ($20) 28 ($24) 28($24) 

Guaranteed Loans 9($11) 6 ($5) 6 ($5) 6 ($5) 

Discussion of the Performance Goals: The availability of adequate, safe drinking water and waste disposal 

facilities helps achieve the Departmental goal to “Enhance the capacity of all rural residents, communities, and

businesses to prosper.” 

One of the Objectives in the mission area’s strategic plan is the intent to direct resources to those communities and

customers with the greatest need. This includes areas that have been consistently poor, have high unemployment

rates, have out-migration, have experienced natural disasters, or experienced economic stress due to Federal action,

such as changes in Federal policy related to timber production. Several performance indicators relate to achieving

this Objective. 

Means and Strategies: Achievement of the FY 2002 and FY 2003 Performance Goals and Indicators is contingent

upon receiving the program and general support resources indicated in this plan. The program levels and projected 

performance targets are based on Congressional appropriations, however, subsidy rates are not subject to change. 

As required by the Balanced Budget Act of 1997, the program-specific subsidy rates utilized in the development of

the President’s Budget will be used when establishing obligations of funds. Funds expended in any particular 

program could be impacted, however, by the movement of funds from one program to another as authorized by the 

Rural Community Advancement Program.

Specific strategies to achieve the performance goals include: 

 Build leveraging partnerships to expand resources going to rural areas.

 Where applicable, direct resources to the neediest projects and communities. 

 Work with local communities and other borrowers to ensure funds are invested wisely. 

RUS has established and monitors annual priority performance goals for State delivery of programs which include

targeting of program resources to target communities and customers. In addition, priority selection criteria that 

support those targeted areas and customers have been established, are published in the program regulations, and are 

used in funding decisions.

Verification and Validation: Most of the data used in the Performance Indicators are taken from internal RUS and 

Rural Development Mission Area records. Data to measure the performance measures will come from the following

automated systems: 

 Program Loan Accounting System (PLAS) 

 Guaranteed Loan System (GLS) 

 Rural Community Facilities Tracking System (RCFTS) 

These systems are used by agency managers in their management of the programs. PLAS and GLS are accounting

systems designed to manage the agency’s portfolio of direct and guaranteed loans. These systems contains a variety

of data edits to minimize the risk of inaccurate data being placed in the systems. The three systems are audited 

annually by OIG as a part of their development of an audited financial statement.

The number of loans and grants made and loan and grant amounts are available from Rural Development accounting

records.

FY 2002 & 2003 Annual Performance Plan 23 January 2002 

The numbers of people served and the number of new and expanded water systems financed are available from the 

Rural Community Facilities Tracking System. RCFTS is a non-accounting management system which contains a 

variety of data related to water and waste projects, e.g., community populations and number of people served by
Rural Development U.S. Department of Agriculture 

each project. Data in RCFTS is input by the field staff; RCFTS does not contain edits to verify the accuracy of the 

data. Information from the USDA Economic Reporting Service will be used to identify persistent poverty counties 

and persistent out-migration counties. 

RUS has had a lot of experience with these data and is highly confident of their accuracy. Non-RUS data are 

identified by source and are also considered very reliable. Confidence in this data is high enough to be acceptable 

for the purposes for which it is being used. 

TELECOMMUNICATIONS PROGRAM

The Rural Utilities Service’s Telecommunications Program contains three major components: 1) loans for 

infrastructure improvement and expansion; 2) loans specifically targeted for the deployment of broadband service in

small towns and communities; and 3) loans and grants for distance learning and telemedicine initiatives in rural 

areas. Utilizing advanced telecommunications services, combined, these programs provide the Administration with

a powerful tool in building strong rural economies and increasing educational and health care services in rural 

communities across the US. 

Telecommunications Loans. Loans are made to furnish and improve telecommunications service, including a wide 

array of telecommunications related services, in rural areas: 

RUS hardship loans bear interest at a fixed rate of five percent per year. These loans are intended only for 

borrowers with extremely high investment costs in terms of per subscriber service. These borrowers also have a 

very low number of subscribers for each mile of telecommunications line constructed. This low subscriber 

“density” inherently increases the cost to serve the most sparsely populated rural areas. Because of the high

cost of the investment needed, these borrowers cannot typically afford higher interest rate loans. 

The RUS Direct loans (or Treasury rate loans) bear interest at the government’s cost of money (or the current

Treasury rate). Thus, the interest charged varies with the Treasury rate. As Treasury rates increase, so does the 

cost to the borrower for these loans. Since the interest rate is tied to the cost of borrowing from Treasury, there 

is very little cost to the taxpayer for these loans in terms of subsidy and budget authority. 

Rural Telephone Bank (RTB) loans are made under the same terms and conditions as Treasury rate loans. In

1993, Congress mandated that all Treasury rate loans and RTB loans be made concurrently. The RTB acts as a 

supplemental source of financing to RUS borrowers in order to meet the growing capital demands for 

improvements to rural telecommunications infrastructure. Interest rates on RTB loans are calculated by formula 

based on the RTB’s cost of borrowing funds from Treasury. This results in a rate that nearly mirrors the 

government’s cost of money. One significant difference, however, is that borrowers from this program must

make an equity contribution in the form of a stock purchase from the government in an amount equal to five

percent of their construction needs. It should be noted that the RTB is mandated by law (the RE Act) to become

a private entity. Privatization of the RTB began in FY 1996. 

In addition, RUS can provide loan guarantees to borrowers a non-government lender or from the Federal 

Financing Bank (Treasury). The interest rate charged on FFB loans is the Treasury rate plus one-eighth of one

percent. The terms of these loans may vary significantly and allow borrowers more flexibility in meeting their 

financing needs. The FBB loan guarantee program has a zero cost to taxpayers in terms of subsidy.

In terms of risk, there has never been a default or loss on a telecommunications loan. All loans are based on

extensive feasibility studies that determine a borrower’s ability to repay the loan and loans are monitored and

secured through covenants in loan contracts and the borrower’s mortgage with RUS, which gives the government a

first lien on all of the assets of the borrower. 

FY 2002 & 2003 Annual Performance Plan 24 January 2002 

Broadband Loans. Broadband networks in small, rural towns will facilitate economic growth and provide the 

backbone for the delivery of increased educational opportunities over state-of-the-art telecommunications networks. 
Rural Development U.S. Department of Agriculture 

Loans are made for the deployment and expansion of broadband service in rural areas and towns with populations

up to 20,000 inhabitants. In the capital intensive telecommunications marketplace today, larger carriers are reluctant 

to make investment for broadband service in places other than predominantly urban and suburban markets. Small 

rural towns and communities will be left behind and lose the ability to attract new businesses and expand existing

ones. Loans are made at the Treasury rate of interest (and therefore at a zero subsidy cost to taxpayers) to provide 

broadband service to rural consumers where such service does not currently exist. 

Distance Learning and Telemedicine (DLT) Loans and Grants. This program is having a profound impact in rural

America by assisting rural schools and learning centers in gaining access to improved educational resources over 

advanced broadband networks and by assisting rural hospitals and health care centers in gaining access to improved 

medical care by linking to urban medical centers for clinical interactive video consultation, distance training of rural 

health care providers, and access to medical expertise and library resources. Building on advanced 

telecommunications infrastructure, telemedicine projects are providing new and improved health care services and 

benefits to rural residents, many in medically under-served areas. Distance learning projects provide funding for 

computers and Internet hookups in schools and libraries and promote confidence in, and understanding of, the 

world-wide-web and its benefits to students and young entrepreneurs. Loans, made at the Treasury rate of interest

and bearing no subsidy cost, and grants are made to encourage, improve, and make affordable the use of advanced 

telecommunications that will provide educational and health care benefits to people living in rural areas. Program

results have demonstrated the dramatic benefits that can be achieved by investments made educational interactive 

video, Internet, and other information networks. 

Program Activity: Telecommunications Loans

FY 2000 

ACTUAL 

FY 2001 

ACTUAL 

FY 2002 

ESTIMATE 

FY 2003 

ESTIMATE 

Program Level $670m $669m $669m $495m

PERFORMANCE GOALS AND 

INDICATORS 

FY 2000 

ACTUAL 

FY 2001 

ACTUAL 

FY 2002 

TARGET 

FY 2003 

TARGET 

Provide modern, affordable telecommunications

services to rural communities. 

Number of new subscribers receiving

service 154,899 188,908 180,000 133,000 

Jobs Generated as a result of facilities 

constructed with telecommunications

funds. 15,410 15,387 16,000 11,385 

Number of subscribers with improved 

service 275,196 315,308 670,000 495,000 

Maximize the leveraging of loan funds to increase 

the number of rural residents assisted.

Leveraging of telecommunications 

financial assistance (private investment

to RUS and RTB funding). $6.51:$1 $5.7:$1 $5:$1 $5:$1 

Program Activity: Broadband Loans

FY 2000 

ACTUAL 

FY 2001 

ACTUAL 

FY 2002 

ESTIMATE 

FY 2003 

ESTIMATE 

Program Level $na $100m $80m $80m

PERFORMANCE GOALS AND 

INDICATORS 

FY 2000 

ACTUAL 

FY 2001 

ACTUAL 

FY 2002 

TARGET 

FY 2003 

TARGET 

FY 2002 & 2003 Annual Performance Plan 25 January 2002 
Rural Development U.S. Department of Agriculture 

Provide modern, affordable telecommunications

services to rural communities. 

Number of new subscribers receiving

service na 78,524 106,500 106,500 

Program Activity: Distance Learning and

Telemedicine Programs

FY 2000 

ACTUAL 

FY 2001 

ACTUAL 

FY 2002 

ESTIMATE 

FY 2003 

ESTIMATE 

Program Level $25m $328m $328m $75m

PERFORMANCE GOALS AND 

INDICATORS 

FY 2000 

ACTUAL 

FY 2001 

ACTUAL 

FY 2002 

TARGET 

FY 2003 

TARGET 

Provide distance learning and telemedicine

services, utilizing telecommunications

technologies, to rural communities. 

Number of schools receiving distance 

learning facilities. 277 590 840 140 

Number of healthcare providers

receiving telemedicine facilities. 138 236 570 55 

Maximize the leveraging of grant funds to

increase the number of rural residents assisted. 

Leveraging of telemedicine and distance

learning financial assistance (private

investment to RUS funding). $1.21:$1 $.94:$1 $2:$1 $1:$1 

Discussion of the Performance Goals: While significant progress is being made in the deployment of advanced 

telecommunications technologies in rural areas, RUS will continue to focus on the challenges remaining in

providing rural access to the digital economy and its benefits: 

serving the unserved and underserved;

keeping pace with new industry changes in a competitive market; and

addressing special needs of economically distressed regions and those areas with limited resources. 

Households in rural America remain less likely to be connected to the Internet than households in urban areas. 

While it is estimated that nearly 39% of rural households have some type of access, the “quality” of that access is, in

many cases, far less than that in urban areas. “Regular” phone lines, for instance, will allow for access, but at 

substantially lower transmission rates, such as 9.6 kilobits per second. Urban users usually connect at a minimum of

28 kilobits per second. So the “ability” to connect to the Internet must also be measured in terms of the quality, or

speed, of the connection. Unfortunately, much of the older plant in service today was designed before the Internet

and was optimized for voice traffic in a way that makes them unsuitable for the high data rates enjoyed by the 

typical urban user. Adding to this inequity is the fact that the pace at which rural families and business get 

connected is also lower than the pace at which their urban counterparts come on line. 

The divide between rural and urban is larger for broadband services, where only 7.3% of rural household have

access. This divide is caused by a lack of infrastructure due to the high costs of serving areas of low population

density and/or technical limitations. Couple this with the fact that much of the existing infrastructure serving rural 

areas is not capable, technologically, of supporting broadband service and must first be replaced. While some

alternatives to “traditional” telecommunications services exist, there are limitations with their deployment in rural 

FY 2002 & 2003 Annual Performance Plan 26 January 2002 
Rural Development U.S. Department of Agriculture 

America. For instance, Cable TV systems can be modified to provide broadband access; however Cable TV doesn’t

reach every household and typically does not extend outside of towns in rural areas. For the estimated 14 to 19% of

American households with no access to Cable TV service, there is no possibility of cable modem service. And

while satellite service appears promising because it can reach remote areas as easily as urban areas, current satellites 

are limited by spectrum availability and transmission delays caused by the great distance from earth to the geostationary satellite. 

As noted before, progress is being made and there are successes being achieved everyday. In areas served by rural

telecommunications carriers, there is more access and higher rate access than the areas served by non-rural carriers. 

This is due in large part to the RUS program and the universal service support mechanisms. 

Means and Strategies: Achievement of the FY 2002 and FY 2003 Performance Goals and Indicators is contingent

upon receiving the program and general support resources indicated in this plan. The program levels and projected 

performance targets are based on Congressional appropriations and are not subject to changes that could impact a 

program’s subsidy rate, such as fluctuations in the Treasury discount rate. As required by the Balanced Budget Act 

of 1997, the program-specific subsidy rates utilized in the development of the President’s Budget will be used when

establishing obligations of funds. 

Specific strategies to achieve the performance goals include: 

 Build leveraging partnerships to expand resources going to rural areas.

 Where applicable, direct resources to the neediest projects and communities. 

 Implement the National Information Infrastructure Initiative, thereby increasing educational and health care 

levels in rural areas. 

Verification and Validation: The data used in the Performance Indicators are taken from internal RUS records

rather than from automated accounting systems.

The number of subscribers receiving new service is collected from the loan application and Loan Feasibility

Study, RUS Form 496. Estimates are based on loan studies for the number of new subscribers to be served 

using loan funds. The figure is adjusted as follows: a distinction is made between the number of new

residential subscribers versus the number of new business subscribers. A multiplier of 2.6 (which reflects the 

average number of persons per household) is applied to the residential subscribers. The business subscribers are 

then added back in to derive the total. The same sources and methodology is used for determining the number 

of subscribers with improved service. Improved service is based on a borrowers entire service area. RUS 

considers an investment in any or all exchanges in a borrower’s system as providing improved service to all 

subscribers in the system.

The Telecommunications leverage ratio is available from RUS Form 479, Part F, Funds Invested in Plant

During the Year. The ratio is derived using total non-RUS loan funds expended for telecommunications plant

versus RUS loan funds expended for the same period.

Information on the number of subscribers receiving new broadband services is based on estimates for the 

borrowers loan application.

All information on the number of schools and health care providers is derived from approved DLT loan and 

grant applications. 

ELECTRIC PROGRAM

FY 2002 & 2003 Annual Performance Plan 27 January 2002 

Electric Distribution Loans. These loans are made to finance electric distribution facilities. In many cases the 
Rural Development U.S. Department of Agriculture 

interest rates are tied to the economic conditions of the areas served and the costs of providing service to that area. 

Municipal rate loans are made at variable interest rates tied to the industry rate on municipal bonds, capped at 

7 percent in areas where consumer income is low and the cost of providing service is high. Hardship loans, with an

interest rate fixed at 5 percent, are made to RUS-financed systems where the cost of providing service is very high

and local economic conditions are severe. Factors taken into account include consumer density, extreme high

residential rates or large rate disparity, and per capita income levels. Treasury rate loans, a budget appropriation

program, are made at variable interest rates tied to the Treasury’s cost of money. RUS electric borrowers provide 

service in the vast majority of the poorest non-metropolitan counties and the non-metropolitan counties experiencing

the greatest out-migration. 

RUS provides only part of the financing needs for most distribution systems. The borrower obtains the balance from

the private sector. Generally, borrowers supply approximately 50 percent of their capital needs with internally

generated funds. Of their remaining capital needs, RUS provides 70 to 100 percent with the private sector providing

the balance. RUS has recently streamlined procedures for sharing the government’s lien to better accommodate the 

private sector. Most loans are made for 35 years and are secured by the borrower’s electric system assets. In order 

to ensure the availability of capital to maintain their electric infrastructure, many borrowers apply for RUS loans 

every few years.

Guaranteed Loans. RUS guarantees loans made by the Federal Financing Bank (FFB), CoBank - National Bank for

Cooperatives and National Rural Utilities Cooperative Finance Corporation (CFC) to finance electric generation,

transmission and distribution facilities. The interest rate on FFB loans is based on the Treasury’s cost of money plus

1/8 percent. 

Program Activity: Electric Program FY 2000 

ACTUAL

FY 2001 

ACTUAL

FY 2002 

ESTIMATE

FY 2003 

ESTIMATE

Program level $2.116b $2.616b $4.071b $2.621b 

 

PERFORMANCE GOALS AND 

INDICATORS

FY 2000 

ACTUAL

FY 2001 

ACTUAL

FY 2002 

TARGET

FY 2003 

TARGET

Provide modern, affordable electric service to rural 

residents and communities. 

Jobs created as a result of facilities 

constructed with Electric funds. 48,700 45,000 60,200 59,800 

Number of rural electric systems

upgraded. 137 220 187 220 

Number of consumers benefiting from

system improvements (millions). 2.3 3.5 2.8 3.4 

Direct program resources to those rural 

communities with the greatest need. 

FY 2002 & 2003 Annual Performance Plan 28 January 2002 
Rural Development U.S. Department of Agriculture 

Electric loans (number and amount) to 

clients serving persistent poverty

counties. (RUS-financed electric 

systems provide service in 523 of the 

540 identified persistent poverty

counties) (Dollars in millions). 

72 

$615 

98 

$829 

89

$1,160 

87 

$740 

Electric loans (number and amount) to 

clients serving persistent out-migration

counties (RUS financed electric systems

provide service to 655 of the 700 

counties identified as having net outmigration) (Dollars in millions). 

73 

$321 

97 

$530 

90

$740 

86 

$470 

Maximize the leveraging of loan funds to increase 

the number of rural residents assisted.

Leveraging of rural electric financial

assistance (private investment to RUS 

funding). $2.88:1 $.70:1 $1:1 $1:1 

Effectively manage the portfolio to minimize 

delinquencies and future losses.

Develop internal processes which

strengthen management of the portfolio

of electric loans.

N/A Review Staff

Instruction

1717-Y and 

revise as

needed to 

identify and

monitor 

financially

stressed

borrowers. 

 Review

7CFR 1717 

subpart Y -

Settlement

of Debt

regulations 

and revise

if

appropriate. 

Review

7CFR 1717 

subpart Y –

Settlement

of Debt

regulations 

and revise if

appropriate. 

Discussion of Performance Goals: The availability of an adequate supply of electricity is critical to achieving the 

Departmental goal to “Expand economic and trade opportunities for agricultural producers and other rural 

residents.” In previous years this number has been between $2.00 -$3.00 of private investment to Government

funding. However, in FY 2001, 50% of the Government advances ($978 million of $1.957 billion) (65.4% of the 

$1.495 billion Federal Financing Bank advances) went to the G&T’s to finance Generation and Transmission

projects. G&T financing makes use of FFB loan guarantees. FFB financing does not require a private financing 

component to finance energy projects as does RUS insured and direct loans to distribution borrowers. 

The increase in loan guarantees and the advance of loan funds was in direct response to the uncertainty of the 

wholesale power market and the need for borrowers serving rural areas to manage their electricity supply portfolio

to ensure reliable electric service at a competitive cost. RUS responded quickly to the demands placed on the 

FY 2002 & 2003 Annual Performance Plan 29 January 2002 
Rural Development U.S. Department of Agriculture 

nation’s energy supply and delivery system. 

The electric industry is rapidly moving toward a new era of deregulation and intense competition. As more States 

move toward deregulation, opening up the electric infrastructure to retailing and driving the forces of competition,

the rural consumer and the rural provider face particular challenges. For example, RUS electric borrowers average 

only 6.5 consumers per mile compared to 33 consumers per mile for investor-owned electric utility systems. As the 

competitive nature of the industry heightens, it will be extremely important to rural electric consumers that rural 

electric providers have access to reasonably priced capital. The electric program fulfills the continuing purpose of

ensuring that rural residents continue to be served with reliable and affordable electricity. 

The performance goals for the RUS programs fall into three major categories. One set of goals reflects the impact of

RUS on rural residents by measuring the number of rural individuals, families, businesses, and communities whose 

quality of life has been enhanced with improved electric and telecommunications services, distance learning and

telemedicine programs, and improved access to clean water and waste water disposal. Since most of the loans are 

for construction purposes, a second set measures the impact of the projects on the community through the creation of

jobs. The third category of goals reflect the agency’s success in implementing two key themes of the Rural 

Development mission area strategic plan, directing resources to the neediest communities and leveraging of financial 

resources. 

This program has also been the focus of several audits by the Inspector General and the General Accounting Office 

related to large writeoffs which have occurred in the past and is on USDA’s list of Major Management Challenges 

and Program Risks. The performance indicator, develop internal processes which strengthen management of the 

portfolio of electric loans, has been added in FY 2001 to address this concern. 

Means and Strategies: Achievement of the FY 2002 and FY 2003 Performance Goals and Indicators is contingent

upon receiving the program and general support resources indicated in this plan. The program levels and projected 

performance targets are based on Congressional appropriations and are not subject to changes that could impact a 

program’s subsidy rate, such as fluctuations in the Treasury discount rate. As required by the Balanced Budget Act 

of 1997, the program-specific subsidy rates utilized in the development of the President’s Budget will be used when

establishing obligations of funds. 

Specific strategies to achieve the objectives include: 

 Build leveraging partnerships to expand resources going to rural areas.

 Where applicable, direct resources to the neediest projects and communities. 

 Continue the advocacy for Rural America as in policies resulting from deregulation of electric utilities. 

Coordination with other Federal programs is not required for the delivery of the electric program. Proposed projects

must meet the standards of the Environmental Protection Agency (EPA) in the same sense that they must meet the 

zoning and construction requirement of the State, county, or local government. These are issues of concern handled 

by the applicant’s engineer. Other Federal agencies, or State agencies, may be potential partners for joint funding if

a specific project meets their requirements. 

Verification and Validation: Most of the data used in the Performance Indicators are taken from internal RUS and 

Rural Development mission area records. Data to measure the number of loans, loan amounts, number of

borrowers, and funds advanced are performance measures will come from the RUS Loan Servicing System

(RULSS). This automated accounting system is designed to manage the agency’s portfolio of direct and guaranteed 

loans. The system contains a variety of data edits to minimize the risk of inaccurate data being placed in the system. 

RULSS is audited annually by OIG as a part of their development of an audited financial statement.

Consumers served, counties served, and investment in infrastructure is available from RUS borrower reported

FY 2002 & 2003 Annual Performance Plan 30 January 2002 
Rural Development U.S. Department of Agriculture 

statistics. While this information is not audited, it is considered to be sufficiently accurate for management’s

purposes. 

The identification of persistent poverty counties and persistent out-migration counties is available from the USDA

Economic Research Service. 

Goal 4: Community Capacity Building : Rural Development will provide information, technical assistance, and,

when appropriate, leadership to rural areas, rural communities and cooperatives to give their leaders the capacity to 

design and carry out their own rural development initiatives.

The preceding three goals recognize that rural development involves providing financial assistance. Goal 4 adds the 

understanding that a successful comprehensive community development process also involves technical assistance 

to build leadership capacity and community development skills. Mission area staff provide technical assistance to

rural communities and cooperatives, often in partnership with public and private organizations. 

Funding and FTE's: All funds are appropriated and are included under the program goals.

Program Activity: Community Development FY 2000 

ACTUAL 

FY 2001 

ACTUAL 

FY 2002 

ESTIMATE 

FY 2003 

ESTIMATE

Program level * $15m $14.967m $14.967m $14.211m

 * Funds are appropriated through the Rural Business/Cooperative Service budget. 

PERFORMANCE GOALS AND 

INDICATORS

FY 2000 

ACTUAL 

FY 2001 

ACTUAL 

FY 2002 

TARGET

FY 2003 

TARGET

Jobs created or saved in EZ/EC

and REAP communities. 3,354 11,997 1,000 1,000

Maximize Resources Available 

in EZ/ECs. 

Ratio of non-EZ/EC grants to EZ/EC 

grants.

10.7:1 17.77:1 7:1 or 

greater 

7:1 or 

greater 

Discussion of Performance Goals: The community development performance goals indicate Rural Development's

success in helping rural communities plan and implement effective community development programs. The 

Empowerment Zones/Enterprise Communities (EZ/EC), National Centers of Excellence, and the various initiatives 

mentioned in the goals are designed to address unique needs of the region or population and reflect the mission

area's desire to target its resources to the neediest communities. Since jobs are vital to any prospering community, 

the measurement of jobs created or saved through the community development initiatives is quite significant and

meaningful. The final measure ties our community development efforts to the mission area's desire to maximize 

partnerships and the leveraging of funds.

FY 2002 & 2003 Annual Performance Plan 31 January 2002 
 

 Rural Development U.S. Department of Agriculture 

Means and Strategies: Use local and State coordinating bodies, such as planning districts, Resource Conservation

and Development Councils (RC&D) and the State Rural Development Councils, to identify alternative sources of

funding for rural projects. Specific strategies for accomplishing the goal include: 

. Use local and State coordinating bodies, such as planning districts, Resource Conservation and 

Development Councils (RC&D) and the State Rural Development Councils, to identify alternative 

sources of funding for rural projects.

 Provide assistance and training to rural leaders on strategic planning and other sources of technical

assistance, which are available to help them assess community strengths, plan for the future, and 

prepare applications for assistance. 

 Implement collaborative rural economic and community development training for rural 

organizations, involving other Federal, State, and local agencies, and organizations. 

 Expand the base of knowledge and understanding of the Rural Development mission area 

employees in economic and community development, evaluation methods and operations, and 

analyzing the social/economic dynamics of rural areas and communities. 

Verification and Validation: A manual process to measure the community development indicators has been

established utilizing data provided by the State Directors. While its accuracy cannot be verified, confidence in this 

data is high enough to be acceptable for the purposes for which it is being used.

Goal 5: Effective, Efficient Service to the Public Rural Development will develop the staff, systems, and

infrastructure needed to ensure high quality delivery of its programs to all rural residents.

Goal 5 supports the mission areas management of the human, physical, and financial resources it is given for the 

effective and efficient delivery of its programs, and addresses agency-specific management reform issues. 

Management Initiatives 3 and 4 in the September 1997 Strategic Plan are incorporated in this Goal. 

Objectives of Goal 5:

5.1: Create and sustain a work environment that develops and fosters partnerships, cooperation, full and open

communications, teamwork, mutual respect, and maximum individual development.

5.2: Develop information systems which support cost-effective delivery of programs and maximize the availability

of information to all employees. 

5.3: Improve financial management to ensure fiscal accountability. 

5.4 Improve procurement process and effectiveness.

Funding and FTE's: All funds are appropriated and are included under the program goals.

FY 2002 & 2003 Annual Performance Plan 32 January 2002 

PERFORMANCE GOALS

AND INDICATORS

FY 2000 

 ACTUAL 

FY 2001 

ACTUAL

FY 2002 

TARGET

FY 2003 

TARGET

Develop policies and practices

which are employee and family

friendly. 

Develop common policies 

with FSA and NRCS in

support of the Service

Partnership Council

approval obtained 

Telecommuting

policy

Publish

common

N/A
 

 Rural Development U.S. Department of Agriculture 

FY 2002 & 2003 Annual Performance Plan 33 January 2002 

support of the Service 

Center initiative. 

regarding common 

policies on hours of

duty, 

telecommuting and

leave. Common

regulation on hours 

of duties published. 

Training conducted

via teleconference. 

document is in

the clearance 

process. Leave 

and other 

common

policies are on

hold pending 

NFAC decision

and guidance 

on future 

direction.

policies 

regarding 

leave, 

telecommuting

and 

grievances.

Provide fair and equitable 

treatment to all customers and 

employees. 

Provide civil rights 

training to employees. 

68% of employees

received training.

93% of

employees not 

trained in FY 

2000 received 

training.

Train 100% of

new

employees

Train 50% of

new

employees. 

Reduce backlog of

complaints. 

Reductions in

complaints of 38%

program and 34%

EEO complaints. 

36% of

complaints 

filed were 

closed. 

40% of

complaints 

filed will be

closed. 

25% of

complaints 

filed will be

closed. 

Provide efficient, timely personnel 

support.

Implement CAMS. Basic modules 

implemented in 37 

States. 

Basic modules 

implemented 

Nationwide 

Move from

client-server

to web-based 

architecture. 

Move from

client-server

to web-based 

architecture. 

Implement an automated 

staffing system.

Research

performed. 

Participate in

USDA

evaluation team

to assess 

alternative 

systems. 

Participation on

going.

Complete 

evaluation

(with USDA). 

Help draft 

USDA-wide 

guidance.

Select a 

system. Based

on USDA

guidance.

Enhance and build information

systems which support the mission

areas programs. 

Implement the Rural 45% of N/A 100% of 100% of
 

 Rural Development U.S. Department of Agriculture 

Utilities Loan (RULSS). requirements 

operational. 

requirements

operational. 

requirements

operational. 

Implement the new

Guaranteed Loan System

(GLS). 

Phases II, III, & IV 

completed. Phase 

V, Funds 

Reservation system,

completed. 

GLAS System

retired. 

Electronic Data 

Interchange

implemented. 

93% of GLS

web processes

operational, 

the remainder 

to be

completed in

2003. 

93% of GLS

web processes

operational, 

the remainder 

to be

completed in

2003. 

Develop the Program

Funding Control System

(PFCS). 

Evaluation of

commercial-off-theshelf systems 

completed.

Request for

Proposal completed. 

Deferred FY

2001 targets to

FY 2002. 

Select and 

install 

commercial 

software and

begin 

developing

unique

capabilities. 

Complete 

systems 

development.

Implement the provisions

of the E-File legislation.

Completed required

GPEA and Freedom

to 

E-File plans to

achieve compliance. 

Implemented 

web farm.

Converted

existing forms 

to web-enabled 

format.

Complete 

automation

support

activities for 

GPEA and

Freedom to 

E-File 

requirements. 

Manage the mission areas 

financial resources efficiently and 

effectively.

Percent of disbursements 

made electronically. 53% 58% 75% 75%

Receive an unqualified 

opinion on RDs financial

statement. 

Qualified opinion

received. 

Subject to OIG 

Approval

Clean opinion

received. 

Clean opinion

received. 

Credit Reform - % of

programs with a clean

opinion from OIG. 16% Subject to OIG 

Approval

100% 100%

Percent of material 

FMFIA deficiencies

corrected timely. 75% 50% 50% 50%

FY 2002 & 2003 Annual Performance Plan 34 January 2002 
 

 Rural Development U.S. Department of Agriculture 

Reach management

decision on OIG financial

management audit

recommendations within

6 months of audit report

issuance. 90% 77% 90% 90%

Improve procurement process and 

effectiveness.

Increase use of performance-based 

contracts.

Expand on-line procurement.

N/A

N/A

14% of new

contracts were 

performance 

based. 

78% were 

posted to

FedBizOpps. 

12% of

contract 

dollars 

awarded on

basis of

performance 

standards.

All full and

open

competition

solicitations

available on

the internet. 

20% of new

award dollars

will contain

performance 

standards.

Implementatio

n Plan

prepared for 

IAS. (Webbased 

procurement

software.

Discussion of Performance Goals: Rural Development is dependent upon the ability and skills of its staff for the 

effective delivery of its programs. The staff must be adequately trained and have the resources needed if it is to

accomplish its job. The mission areas administrative resources have been reduced as a result of the 

Administrations and Congress joint efforts to balance the Federal budget, while program resources have increased. 

This has resulted in reductions in staff and field offices needed to deliver the programs plus an even greater 

reduction in administrative staff. A reduction in human resources increases the need for automated systems which

can help staff work more efficiently, while still maintaining their effectiveness. 

Reductions in resources also requires that Rural Development be innovative in identifying new ways of doing

business while being ever mindful of the need to provide high quality service to our customers. Rural Development 

will utilize a management approach and encourage a workplace environment which values employees and involves 

them, as partners, in the management of the mission area. The environment of the workplace will ensure that all 

customers and employees are treated fairly, equitably, with dignity and respect. 

FY 2002 & 2003 Annual Performance Plan 35 January 2002 
 

 Rural Development U.S. Department of Agriculture 

The performance goal, Improve procurement process and effectiveness, and the related indicators, support the 

Administrations priorities. Achievement of this goal should result in greater competition for mission area contracts 

and improved performance by contractors.

The mission areas inability to reasonably estimate the cost of its credit programs has been an ongoing concern for 

several years and is included on USDAs list of Major Management Concerns and Program Risks. The indicator, 

Credit Reform - percent of programs with a clean opinion from OIG, represents the mission areas progress is 

addressing this concern. The indicator related to obtaining an unqualified opinion also relates to this effort. 

Means and Strategies: Specific strategies for achieving the objectives include: 

Develop a workforce capable of delivering a full range of financial and non-financial services in

support of rural development activities.

 Foster, and continually strengthen, an internal culture that focuses on and is driven by customer 

needs, both internally and externally. 

 Increase the use of Alternative Dispute Resolution (ADR) as a tool for resolving workplace and 

external customer disputes. 

 Enhance the work environment by developing policies and adopting processes which are friendly

to the employees and their families. 

 Instill the value of cultural diversity in all Rural Development personnel and develop a workforce 

which is representative of the diversity of the areas in which they work. 

 Provide Civil Rights training to all employees. 

 Sup36ort USDA service centers by developing common administrative policies and processes

with other USDA agencies. 

 Maximize the use of automated systems to ensure consistency in work processes and as a 

replacement for staff lost in downsizing efforts.

 Include in the recognition and rewards system a linkage to the accomplishment. 

 Support the establishment of USDA Service Centers and develop processes and automated 

systems which maximize their effectiveness.

 Focus information and technical infrastructure development on enhancements which improve 

service delivery and maximizes the availability of data for all employees. 

 Make data more accessible by utilizing WEB technology. 

 Develop a data warehouse to ensure current data is available to all employees and to support the 

ability of the mission area to better manage and analyze its delivery of programs. 

 Enhance Rural Developments ability to track and monitor administrative funds appropriations and

provide accurate reports to all internal customers.

 Implement the electronic funds transfer (EFT) requirements of the Debt Collection Improvement 

Act. 

 Work with the Departmental OIG and OCFO to resolve issues related to credit reform and obtain a 

clean opinion on Rural Developments audited financial statement. 

Verification and Validation: Quarterly reports from State Civil Rights Managers will be used to report on progress 

towards civil rights and EEO performance measures. Verification of surveying activity will be determined by the 

surveying activities conducted during the year. Monthly reports of EEO performance are reviewed to determine 

progress. 

FY 2002 & 2003 Annual Performance Plan 36 January 2002 
 

 Rural Development U.S. Department of Agriculture 

SUMMARY OF RESOURCES FOR FY 2002 **

(Dollars in Billions) (Available Resources) 

Goal 1 Goal 2 Goal 3 Goal 4 Goal 5 Total

Rural BusinessCooperative Service

$1.3 $.015 $1.315 

Rural Housing

Service

$6.11 $6.11 

Rural Utilities 

Service 

$6.999 $6.999 

Total $1.3 $6.11 $6.999 $.015 $14.424 

7020 FTEs

SUMMARY OF RESOURCES FOR FY 2003**

(Dollars in Billions) (President’s Budget) 

Goal 1 Goal 2 Goal 3 Goal 4 Goal 5 Total

Rural BusinessCooperative Service

$0.85 $.014 $0.864 

Rural Housing

Service

$5.24 $5.24 

Rural Utilities 

Service 

$4.782 $4.782 

Total $0.85 $5.24 $4.782 $.014 $10.886 

7024 FTEs

** After FY 200 the budget proposals provide for a combined S&E budget for all Rural Development agencies. 

The FTE cannot be shown separately. 

FY 2002 & 2003 Annual Performance Plan 37 January 2002