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HEARING TO IDENTIFY DUPLICATIVE 

FEDERAL RURAL DEVELOPMENT PROGRAMS

HEARING

BEFORE THE

SUBCOMMITTEE ON RURAL DEVELOPMENT, 

RESEARCH, BIOTECHNOLOGY, AND 

FOREIGN AGRICULTURE

OF THE

COMMITTEE ON AGRICULTURE 

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

SECOND SESSION

MARCH 21, 2012

Serial No. 112–31

(

Printed for the use of the Committee on Agriculture 

agriculture.house.gov 

COMMITTEE ON AGRICULTURE 

FRANK D. LUCAS, Oklahoma, Chairman 

BOB GOODLATTE, Virginia, 

Vice Chairman 

TIMOTHY V. JOHNSON, Illinois 

STEVE KING, Iowa 

RANDY NEUGEBAUER, Texas 

K. MICHAEL CONAWAY, Texas 

JEFF FORTENBERRY, Nebraska 

JEAN SCHMIDT, Ohio 

GLENN THOMPSON, Pennsylvania 

THOMAS J. ROONEY, Florida 

MARLIN A. STUTZMAN, Indiana 

BOB GIBBS, Ohio 

AUSTIN SCOTT, Georgia 

SCOTT R. TIPTON, Colorado 

STEVE SOUTHERLAND II, Florida 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

MARTHA ROBY, Alabama 

TIM HUELSKAMP, Kansas 

SCOTT DESJARLAIS, Tennessee 

RENEE L. ELLMERS, North Carolina 

CHRISTOPHER P. GIBSON, New York 

RANDY HULTGREN, Illinois 

VICKY HARTZLER, Missouri 

ROBERT T. SCHILLING, Illinois 

REID J. RIBBLE, Wisconsin 

KRISTI L. NOEM, South Dakota 

COLLIN C. PETERSON, Minnesota, Ranking 

Minority Member 

TIM HOLDEN, Pennsylvania 

MIKE MCINTYRE, North Carolina 

LEONARD L. BOSWELL, Iowa 

JOE BACA, California 

DENNIS A. CARDOZA, California 

DAVID SCOTT, Georgia 

HENRY CUELLAR, Texas 

JIM COSTA, California 

TIMOTHY J. WALZ, Minnesota 

KURT SCHRADER, Oregon 

LARRY KISSELL, North Carolina 

WILLIAM L. OWENS, New York 

CHELLIE PINGREE, Maine 

JOE COURTNEY, Connecticut 

PETER WELCH, Vermont 

MARCIA L. FUDGE, Ohio 

GREGORIO KILILI CAMACHO SABLAN, 

Northern Mariana Islands 

TERRI A. SEWELL, Alabama 

JAMES P. MCGOVERN, Massachusetts 

PROFESSIONAL STAFF

NICOLE SCOTT, Staff Director 

KEVIN J. KRAMP, Chief Counsel 

TAMARA HINTON, Communications Director 

ROBERT L. LAREW, Minority Staff Director 

SUBCOMMITTEE ON RURAL DEVELOPMENT, RESEARCH, BIOTECHNOLOGY, AND

FOREIGN AGRICULTURE

TIMOTHY V. JOHNSON, Illinois, Chairman 

GLENN THOMPSON, Pennsylvania 

MARLIN A. STUTZMAN, Indiana 

AUSTIN SCOTT, Georgia 

RANDY HULTGREN, Illinois 

VICKY HARTZLER, Missouri 

ROBERT T. SCHILLING, Illinois 

JIM COSTA, California, Ranking Minority 

Member 

HENRY CUELLAR, Texas 

PETER WELCH, Vermont 

TERRI A. SEWELL, Alabama 

LARRY KISSELL, North Carolina 

MIKE DUNLAP, Subcommittee Staff Director

(II) 

(III)

C O N T E N T S 

Page 

Costa, Hon. Jim, a Representative in Congress from California, opening statement ...................................................................................................................... 3

Johnson, Hon. Timothy V., a Representative in Congress from Illinois, opening statement ........................................................................................................ 1

Prepared statement .......................................................................................... 2

McIntyre, Hon. Mike, a Representative in Congress from North Carolina, 

prepared statement .............................................................................................. 5

WITNESSES

Tonsager, Hon. Dallas P., Under Secretary for Rural Development, U.S. Department of Agriculture, Washington, D.C. ....................................................... 6

Prepared statement .......................................................................................... 8

Submitted questions ......................................................................................... 35

Supplementary information ............................................................................. 33

Shear, William B., Director, Financial Markets and Community Investment, 

U.S. Government Accountability Office, Washington, D.C. .............................. 20

Prepared statement .......................................................................................... 21

(1)

HEARING TO IDENTIFY DUPLICATIVE 

FEDERAL RURAL DEVELOPMENT PROGRAMS 

WEDNESDAY, MARCH 21, 2012

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON RURAL DEVELOPMENT, RESEARCH, 

BIOTECHNOLOGY, AND FOREIGN AGRICULTURE, 

COMMITTEE ON AGRICULTURE, 

Washington, D.C. 

The Subcommittee met, pursuant to call, at 10:10 a.m., in Room 

1300 of the Longworth House Office Building, Hon. Timothy V. 

Johnson [Chairman of the Subcommittee] presiding. 

Members present: Representatives Johnson, Scott, Hultgren, 

Hartzler, Costa, and McIntyre. 

Staff present: Mike Dunlap, Tamara Hinton, DaNita Murray, 

Lauren Sturgeon, Wyatt Swinford, Heather Vaughan, Suzanne 

Watson, Andy Baker, Liz Friedlander, John Konya, Jamie Mitchell, 

and Caleb Crosswhite. 

OPENING STATEMENT OF HON. TIMOTHY V. JOHNSON, A 

REPRESENTATIVE IN CONGRESS FROM ILLINOIS 

The CHAIRMAN. The Subcommittee on Rural Development, Research, Biotechnology, and Foreign Agriculture hearing to identify 

duplicative Federal rural development programs, will come to 

order. Thank you all for being here today and welcome. 

Today, we are discussing government efficiency, which, because 

of our limited resources, is more important now than ever. We 

must find ways to deliver more effective programs using fewer resources. This is particularly important to our rural communities. 

Previously, this Subcommittee has called attention to the fragmentation of the government’s efforts to address economic development in rural areas. With at least 16 Federal agencies which operate over 88 programs designed to benefit small communities across 

the country, it is incumbent on Congress to ensure these efforts are 

implemented in a coordinated fashion. 

This Subcommittee has spent a great deal of time reviewing 

whether the purpose and goals of agriculture programs in our jurisdiction are being met. Those hearings served to inform the Committee about how scarce resources are being utilized and where opportunities exist to streamline and improve rural development programs. Previous efforts by the current Administration, such as the 

2010 Memorandum of Understanding Between USDA and SBA are 

in acknowledgement of the unorganized approach to rural development we face today. 

2

The recently convened White House Rural Council is another indicator that the Administration recognized that our agencies need 

to coordinate better among themselves. However, none of these efforts by themselves have been a catalyst for permanent change. 

The efforts put forth so far have been insufficient to address the 

concerns about duplicative efforts and the lack of coordination 

among agencies, which have the authority to provide assistance to 

rural America. Stakeholders across the country have shared burdens about the confusing array of agencies and programs, as well 

as an overly burdensome application process, which puts assistance 

out of reach for small communities which might need it the most. 

Following Congressional direction, the GAO, Government Accountability Office, has taken an extensive look at some of these 

issues and will present their initial findings here today. So I hope 

that their reports and continuing work will serve to advance this 

discussion and provide additional insight on how our agencies are 

or aren’t working. 

We also look forward to testimony by USDA to hear more about 

their efforts to administer their programs we are reviewing. In particular, I hope that additional insight will be provided into how the 

Administration is making tangible changes to the way scarce resources are made more accessible and how USDA is leveraging 

smaller budgets to benefit more communities in a tight fiscal environment. 

We appreciate the work our witnesses put in to preparing their 

testimony and look forward to an in-depth discussion. 

[The prepared statement of Mr. Johnson follows:]

PREPARED STATEMENT OF HON. TIMOTHY V. JOHNSON, A REPRESENTATIVE IN

CONGRESS FROM ILLINOIS

Thank you all for being here today, and welcome. 

Today we are discussing government efficiency, which—because of our limited resources—is more important now than ever. We must find ways to deliver more effective programs using fewer resources. 

This is particularly important to our rural communities. Previously, this Subcommittee has called attention to the fragmentation of the government’s efforts to 

address economic development in rural areas. With at least 16 Federal agencies 

which operate over 88 programs designed to benefit small communities across the 

U.S., it is incumbent upon Congress to ensure these efforts are implemented in a 

coordinated fashion. 

This Subcommittee has spent a great deal of time reviewing whether the purpose 

and goals of agricultural programs under our jurisdiction are being met. Those hearings served to inform the Committee about how scarce resources are being utilized 

and where opportunities exist to streamline and improve rural development programs. 

Previous efforts by the current Administration, such the 2010 Memorandum of 

Understanding between the USDA and the Small Business Administration, are an 

acknowledgement of the unorganized approach to rural development we face today. 

The recently convened White House Rural Council is another indicator that the Administration recognizes that our agencies need to coordinate better among themselves. However, none of these efforts in themselves have been a catalyst for lasting 

change. 

The efforts put forth so far have been insufficient to address the concerns about 

duplicative efforts and the lack of coordination among agencies which have the authority to provide assistance to rural America. Stakeholders across the country have 

shared concerns about the confusing array of agencies and programs, as well as an 

overly burdensome application process which puts assistance out of reach for small 

communities which might need it most. 

Following Congressional direction, the Government Accountability Office has 

taken an extensive look at some of these issues, and will present their initial findVerDate 0ct 09 2002 10:29 Oct 16, 2012 Jkt 041481 PO 00000 Frm 00006 Fmt 6633 Sfmt 6621 I:\DOCS\112-31\73660.TXT BRIAN
3

ings here today. It is our hope that their reports and continuing work will serve to 

advance this discussion and provide additional insight on how our agencies are—

and are not—working together. 

We also look forward to testimony by USDA to hear more about their efforts to 

administer the programs we are reviewing. In particular I hope that additional insight will be provided into how the Administration is making tangible changes to 

the way scarce resources are made more accessible, and how USDA is leveraging 

smaller budgets to benefit more communities in a tight fiscal environment. 

We appreciate the work our witnesses put into preparing their testimony for this 

morning and look forward to an in-depth discussion.

The CHAIRMAN. I would like to recognize my friend and Ranking 

Member, the gentleman from California, Mr. Costa. 

OPENING STATEMENT OF HON. JIM COSTA, A 

REPRESENTATIVE IN CONGRESS FROM CALIFORNIA 

Mr. COSTA. Thank you very much, Mr. Chairman, for holding 

this hearing. I think it is important for the Subcommittee to always exercise its role in appropriate oversight, and we are pleased 

that we have today here the Government Accountability Office, the 

GAO, to provide us with information on recommendations that we 

can go further with as well as with the United States Department 

of Agriculture’s Rural Development Programs. And their input, obviously, is always well taken. 

I look forward to hearing from the testimony. 

Rural America faces challenges. I am always a little bit hesitant 

to use the word unique because it is oftentimes an overused word. 

But they have challenges that we don’t have in urban America. 

And because of the population disparities in our country today, oftentimes our rural elements in our country get overlooked. And 

that is one of the important efforts that this Subcommittee needs 

to deal with. 

The USDA Rural Development has—the United States Department of Agriculture—over 500 offices. Whether those offices all are 

necessary today is a valid question, but they do, I know because 

of my own personal experience, provide help to rural communities 

for businesses, as well as entrepreneurs, to deal with economic developments, especially as things change. For example, in many 

areas we don’t have access to high-speed Internet, it is dial-up. And 

yet for these companies to compete effectively they have to have 

the same sort of access in a global economy to deal with their products that they are pursuing. 

So it is important for this Subcommittee to look at programs that 

may be duplicative. But we need to ensure that what may appear 

on paper as duplicative in practice is in fact not duplicative. And 

if it is, then we should address it. 

Take, for example, the United States Department of Agriculture’s 

Value-Added Producer Grant Program, identified as potentially duplicative in the GAO’s report. These grants I know from personal 

experiences help agricultural producers and cooperatives provide 

market value-added efforts to the products they produce on a host 

of efforts. In 2011, the Blue Diamond growers in California—you 

are probably familiar with the almonds that they produce, one of 

the largest cooperatives in California and maybe in the country—

provided a grant to help them launch its first retail products in 

France. We know that it is not always a level playing field when 

4

we are talking about trade throughout the world. It was very helpful to helping Blue Diamond market their products in Europe. 

In my Congressional District as well, the Rosa Brothers have a 

milk company in Hanford, California. They received a grant to help 

them offer delivery of locally produced dairy products. Congress 

created these programs in 2000 on a bipartisan basis. They looked 

at it again in 2002 and in the 2008 Farm Bills to address areas 

where other Federal agencies were not. I am not aware of other 

Federal economic development programs that focus in this area on 

agricultural efforts and products that we can compete with globally 

if we have a level playing field. 

So when we consider the rural development, economic development programs, I think we should also keep in mind and look at 

it closely as a Subcommittee. Mr. Chairman, the President’s proposal in January to combine Federal Government’s business and 

trade agencies. I think this has merit and we ought to look at it. 

This is a combination of agencies that is an area where we can get 

better bang for our buck. 

Among the departments and agencies targeted for consolidation 

are the Department of Commerce and the Small Business Administration. This proposal could go a long way towards address concerns of overlapping Federal economic development programs. That 

is not to say that there aren’t other areas that we can look at 

streamlining on rural development programs, as we are going to 

look at today and as we will hear from the witnesses. One of the 

ways this Subcommittee can help minimize the overlap of USDA’s 

economic development programs with those administered by other 

agencies is to ensure—and we have talked about this, Mr. Chairman—that the definitions of rural are flexible enough to meet the 

demands in rural America, because we know in many counties 

across the country—whether it is in Illinois or whether it is in 

Kansas or whether it is in California or any other state in the 

Union—that we may have an urban center within a very rural 

county and they fall off the definition of what is defined by rural. 

On February 15 in 2011 and September 13 in 2011, our Subcommittee held hearings in which the USDA witnesses were asked 

by Members on this Committee, in a bipartisan basis, about the 

status of the report on rural definitions that the USDA was required in the 2008 Farm Bill that was produced in June 2010. And 

obviously, we were frustrated that the report had not been submitted given that the report could be one of the most helpful tools 

in figuring out how we target our efforts for rural development. Although they have given us responses, I am not optimistic that the 

report will be provided before the time that we try to reauthorize 

the 2012 Farm Bill. I don’t still to this day understand why it is 

so difficult to provide this report. 

Since we are examining the USDA’s economic development programs, I want to take a minute just to talk about an effort in California that can and should serve as a model for the agencies across 

the country. We have heard from farmers and ranchers and businesses throughout rural communities that the challenges they face 

in accessing capital—probably more than any other single factor—

is what has hit hardest in these past few years—access to capital 

during tough economic times. 

5

In California, the United States Department of Agriculture’s 

Rural Development established the California Financial Opportunities Roundtable. The California Opportunities Roundtable participants include not only the Federal entities that include the Small 

Business Administration, the Federal Reserve Bank in San Francisco, and many other private businesses and state agencies. This 

innovative capital access project uses impact investing to drive 

growth in rural communities across California, while achieving financial returns for the investors at the same time. I want to say 

that we ought to look at reauthorizing in the farm bill the work 

that the USDA Rural Development has done in California, which 

serves, potentially, as a model for the rest of the country with limited Federal resources. 

Finally, I want to thank the Chairman again and our witnesses 

today for working with all of us on the Subcommittee to ensure 

that we get the most effective use of the Federal tax dollars in 

rural development programs to meet the needs of rural America. 

I yield back my time. 

The CHAIRMAN. Thank you, Mr. Costa. 

I would also like to note that Mr. McIntyre is not a Member of 

the Subcommittee. He has joined us and in consultation with Mr. 

Costa we have agreed and we are pleased to have you here joining 

us today. The chair would like to request that other Members submit their opening statements for the record so the witnesses may 

begin their testimony and to ensure that there is ample time for 

questions. 

[The prepared statement of Mr. McIntyre follows:]

PREPARED STATEMENT OF HON. MIKE MCINTYRE, A REPRESENTATIVE IN CONGRESS

FROM NORTH CAROLINA

Thank you Chairman Johnson and Ranking Member Costa for allowing me to join 

this hearing today to discuss rural development and the government’s modest role 

in promoting jobs and growth in rural America. Having grown up in Robeson County, a poor and rural county in southeastern North Carolina, I am keenly aware of 

the problems facing rural citizens and am particularly interested in the topics that 

we will discuss today. 

Citizens in rural places experience great difficulty in accessing the infrastructure 

and amenities that are available in our urban centers. The modern economy requires that businesses be able to access broadband services to connect to the global 

marketplace, three phase electric power to run industrial equipment, and clean 

water to support communities that supply the labor and skills needed for commerce. 

If we are to take seriously our obligation to serve all of the citizens of this great 

country, we must not solely cast our views at the problems facing the population 

centers in the cities and suburbs. Rural Americans deserve the attention of their 

government and need an agency that directly focuses on addressing rural problems. 

We are here today to discuss potential duplicative government programs in Rural 

Development. The Rural Development Mission Area at the United States Department of Agriculture is comprised of three agencies—the Rural Utilities Service, the 

Rural Housing Service, and the Rural Business-Cooperative Service. Each of these 

agencies is tasked with the challenge of addressing specific concerns in the rural 

economy. Those that work at USDA Rural Development live in the communities 

that they serve and are intimately aware of what rural means and what needs to 

be done to ensure that rural America remains a place that families choose to live 

and businesses are able to grow. While it is clear that these three agencies espouse 

similar goals as other government programs housed in different agencies throughout 

the government, the reality is that USDA is the only government agency with the 

reach to provide the service and expertise that is needed to serve rural America. 

To take any responsibility away from USDA in the areas of infrastructure investment, housing, or business development would be a great disservice to rural residents, not just in North Carolina but throughout the country. 

6

1Dow, E.F. ‘‘Federal Administration of Rural Electrification.’’ The American Political Science 

Review 31.6 (1937): 1107–112. Print. 2Malone, Laurence J. ‘‘The Origins of the New Deal Rural Electrification Initiative: Market 

Failure in Delivering Electricity to Rural Areas Before 1930.’’ Economic History Association.

March 18, 2012. http://eh.net/encyclopedia/article/malone.electrification.administration.rural. 3 Beall, Robert T. (1940). ‘‘Rural Electrification.’’ United States Yearbook of Agriculture. Washington, D.C.: United States Department of Agriculture. p. 790–809. Retrieved December 30, 

2008. http://naldc.nal.usda.gov/download/IND43893747/PDF. 4Schurr, Sam H., Calvin C. Burwell, Warren D. Devine, and Sidney Sonenblum. Electricity 

in the American Economy: Agent of Technological Progress. Westport, CT: CONTRIBUTIONS IN EC- ONOMICS AND ECONOMIC HISTORY, Number 117, Greenwood Press, 1990. 5Malone, Laurence J. ‘‘The Origins of the New Deal Rural Electrification Initiative: Market 

Failure in Delivering Electricity to Rural Areas Before 1930.’’ Economic History Association.

March 18, 2012. http://eh.net/encyclopedia/article/malone.electrification.administration.rural. 

The costs associated with bringing needed services to rural America can be high. 

Utility companies and telecommunications providers must incur higher capital costs 

to make the investments necessary to provide services to rural Americans on par 

with those that we take for granted in urban centers, but rural communities and 

businesses have continually shown us that they can and will responsibly take on 

these investments when financing for such endeavors is available. 

The United States Department of Agriculture has been at the center of the effort 

in addressing rural economic challenges. This effort began in the last century with 

rural electrification. After the passage of Norris-Rayburn Act in 1936, the Rural 

Electric Administration was funded to provide loans to private companies, public 

agencies, and cooperatives for the construction of electrical supply infrastructure in 

rural parts of the country.1–2 Prior to the REA, only three percent of the 6.3 million 

farms in the United States received electricity.3 Within 2 years of the establishment 

of the Rural Electric Administration, 350 cooperative projects in 45 states were delivering electricity to 1.5 million farms.4 Today, all rural residents are able to access 

power and nearly 98 percent are connected to telephone services.5 The successes of 

our rural electric and telephone systems did not happen without leadership, vision 

and partnership between the public, nonprofit, and private sectors. 

The challenges of investing in rural infrastructure are not a thing of the past. We 

face many of the same difficulties today. In my district in southeastern North Carolina, many communities in rural parts of Columbus, Bladen and Pender County are 

unable to access fast and reliable Internet and must instead rely upon expensive 

and inefficient satellite Internet connections to access the web. Telecommunication 

providers are not eager to invest in the rural market to provide broadband due to 

high network construction costs and the relatively few subscribers that the connection would provide. To help bridge this divide, the Rural Utilities Service offers 

grants, low interest loans and loan guarantees to companies that take the lead to 

make investments in rural broadband. This is exactly the type of high value, high 

return investment that the Federal Government should make to empower private 

sector growth and rural economic opportunity, and I will continue to work with 

USDA and stakeholders back home to do the work that needs to be done to ensure 

a vibrant and dynamic rural economy. 

I am looking forward to hearing testimony from the panel before this Subcommittee and thank the chair for holding today’s hearing.

The CHAIRMAN. So with those preliminary comments and my 

thanks to everybody for being here, the witnesses, let me introduce 

our first panel, who is actually one witness, Mr. Dallas Tonsager, 

Under Secretary for Rural Development, USDA, Washington, D.C. 

Just proceed when you are ready. 

STATEMENT OF HON. DALLAS P. TONSAGER, UNDER

SECRETARY FOR RURAL DEVELOPMENT, U.S. DEPARTMENT 

OF AGRICULTURE, WASHINGTON, D.C. 

Mr. TONSAGER. I am pleased to have this opportunity to discuss 

the important role USDA Rural Development plays in the economic 

development of our nation’s rural communities. 

Through the Consolidated Farm and Rural Development Act of 

1972, Congress charged USDA with leading the Federal Government’s effort to ensure a prosperous rural America and declared 

this task ‘‘so essential to the peace, prosperity, and welfare of all 

7

our citizens that the highest priority must be given to the revitalization and development of rural areas.’’

Secretary Vilsack and I care deeply about rural America. Over 

the last 3 years, thanks to resources made available by Congress, 

we have made historic investments designed to form the foundation 

of a rural economy that is built to last. And under the Secretary’s 

leadership through the White House Rural Council, USDA has 

worked closely with partners across the Federal family to leverage 

resources that maximize benefits for rural communities. 

As the only department with the primary responsibility of serving rural areas, the presence of USDA field offices in every state 

helps us serve that specific need of rural communities. Our direct 

personal contact with these communities creates efficiencies in our 

program delivery, and the employees who deliver our programs 

possess expert knowledge of the challenges and opportunities in 

these communities. 

Rural Development appreciates the ongoing efforts of the U.S. 

Government Accountability Office to identify potential overlap in 

Federal programs, and we take pride in our uniquely rural focus 

and our local program delivery model, which differentiates rural 

development from other Federal agencies. 

Rural Development’s utility programs enable communities to 

maintain and upgrade critical rural infrastructure that often carries a high price tag. Our electric and telecommunication programs 

are the only Federal programs that finance the construction of electric and telecom networks from the beginning to end. Our Water 

and Environmental Program is the only Federal program that 

lends directly to communities, particularly very small communities. 

In order to obtain financing from us, water and sewer authorities 

must demonstrate they have been unsuccessful in obtaining financing elsewhere. 

Rural Development has been responsive to GAO recommendations to increase coordination of Federal programs, water funding 

systems in the Colonias along the U.S.-Mexican border. In addition, 

Rural Development recently proposed a modification to our 

Colonias regulation that would allow us to better target resources 

to the areas with the highest level of need. 

Rural Development business and cooperative programs provide 

invaluable assistance to rural, small, and mid-sized businesses. 

Our Business and Industry Program is the only Federal guarantee 

program that offers a maximum guarantee of up to $40 million and 

specifically targets agricultural cooperative businesses. In response 

to the GAO recommendations, Rural Development has significantly 

enhanced its collaboration with the Small Business Administration 

that began by signing an MOU with SBA in 2010. 

Our housing programs ensure low and very low-income families 

throughout rural America have access to safe, decent, and affordable housing. Our Direct Home Loan Program is the only meanstested loan program to directly finance the purchase of homes in 

rural areas. In addition, communities interested in approving any 

central community facilities like schools, libraries, hospitals, and 

public safety buildings can walk into a local Rural Development office to work directly with our knowledgeable employees to apply for 

funding. 

8

In order to continue to serve rural America, we recognize a need 

to reposition our agency for the 21st century. To that end, we have 

proposed continual process improvements to ensure that our agency operates in a responsible stewardship of the taxpayers’ dollars. 

Since 2004, Rural Development’s portfolio has doubled and now 

stands at $165 billion. I am pleased to report that the principal dollars delinquent more than 1 year remains at approximately two 

percent. Such results are the product of consistent and proactive 

servicing of the loan portfolio and working with trusted borrowers 

to restructure their loans and avoid foreclosures. 

Improvements to our IT infrastructure remain a central part of 

our strategy to manage a growing portfolio with reduced resources. 

Employees need to be able to complete their mission anytime and 

anywhere to support our customers. Rural Development’s innovative work with multi-county regions is an important support mechanism for building an American economy that is built to last. 

USDA is collaborating with the departments across the Federal 

Government to support rural communities and are working in 

multi-county coalitions that foster economic development on a regional scale. 

I appreciate the opportunity to work with Members of the Subcommittee to build a foundation for American competitiveness. 

Thank you for your support of these programs, and at this time, 

I would be happy to take your questions. 

[The prepared statement of Mr. Tonsager follows:]

PREPARED STATEMENT OF HON. DALLAS P. TONSAGER, UNDER SECRETARY FOR RURAL

DEVELOPMENT, U.S. DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C. 

Chairman Johnson, Ranking Member Costa, and Members of the Subcommittee, 

I am pleased to have this opportunity to discuss the important role USDA Rural 

Development plays in the economic development of our nation’s rural communities. 

I am proud to represent agencies that are working tirelessly to realize the President’s vision for America: ‘‘a country that leads the world in educating its people; 

an America that attracts a new generation of high-tech manufacturing and highpaying jobs; a future where we’re in control of our own energy; and our security and 

prosperity aren’t tied to unstable parts of the world. An economy built to last, where 

hard work pays off and responsibility is rewarded.’’ Undoubtedly, USDA Rural Development (RD) has a key role to play in this effort, for the continued revitalization 

of our American economy will depend upon a prosperous rural America. 

Through the Consolidated Farm and Rural Development Act of 1972 (Con Act), 

Congress charged USDA with leading the Federal Government’s efforts to ensure 

a prosperous rural America and declared this task ‘‘so essential to the peace, prosperity, and welfare of all our citizens that the highest priority must be given to the 

revitalization and development of rural areas.’’ Today, Rural Development is responsible for implementing a suite of programs with the sole mission of improving the 

quality of life and economic condition of rural communities. 

Secretary Vilsack and I care deeply about rural communities. Over the last 3 

years, thanks to resources made available in the 2008 Farm Bill and the 2009 

American Recovery and Reinvestment Act, we’ve made historic investments in rural 

America designed to drive job growth and form the foundation of a rural economy 

that is built to last. We want to build a better future for the men and women who 

live, work and raise their families in rural communities—and to extend the promise 

of middle class jobs where hard work pays off and responsibility is rewarded. 

And as you know, rural America has unique challenges and assets. Rural communities are characterized by their isolation from population centers and product markets and benefit most from initiatives that integrate local institutions and businesses with state and Federal agencies that have intimate knowledge of their local 

needs. Delivering effective programs to rural America, which comprises over 75 percent of the total land mass of the United States, is a continual challenge. 

As the only Federal Department with the primary responsibility of serving rural 

areas, the presence of USDA field offices in every state helps us serve the specific 

9

needs of local rural communities. Our direct personal contact with these communities creates efficiencies in program delivery in that one phone call to USDA Rural 

Development allows local elected officials to identify resources for a wide range of 

community and economic development activities. Our partnerships with public and 

private institutions allow us to fund local and regional business development, expand infrastructure and provide access to affordable, long-term credit in rural areas. 

The employees who deliver Rural Development’s suite of programs work alongside 

farmers, ranchers, homeowners, schools, businesses, nonprofits, cooperatives, tribes 

and local governments to strengthen local economies. They are members of the communities they serve and possess expert knowledge of the economic challenges and 

opportunities that exist in their particular regions. In 2011 alone, Rural Development allocated almost $29 billion nationwide to upgrade community facilities like schools and hospitals, boost the reliability of the 

electric grid, fund renewable energy projects, provide affordable and reliable Internet access and create homeownership opportunities for more than 140,000 families. 

Since 2009, Rural Development has provided homeownership opportunities to more 

than 435,000 families. Sixty-three percent of 2011 funding supported loan guarantees that enabled private lenders to safely increase the pool of capital available in 

rural areas for credit-worthy businesses, communities, and homebuyers. About 34 

percent of our investments were secure, affordable direct loans that will be paid 

back with interest. 

Rural Development appreciates the ongoing efforts of the U.S. Government Accountability Office (GAO) to identify potential overlap in Federal programs, and we 

take pride in our uniquely rural focus and our local program delivery model which 

serves to differentiate Rural Development from other Federal agencies. Our direct 

personal contact between agency personnel, lenders, borrowers, communities, families and individuals is invaluable and provides in-person technical assistance that 

would otherwise be unavailable. 

Rural Development’s utility programs enable communities to maintain and upgrade critical rural infrastructure which often carries a very high price tag. Our 

Electric and Telecommunications programs are the only Federal programs that finance the construction of electric and telecom networks from beginning to end. Our 

Water and Environmental program is the only Federal program that directly lends 

and provides grants to communities, particularly very small communities. In order 

to obtain financing from us, water and sewer authorities must demonstrate they 

have been unsuccessful in obtaining financing elsewhere. 

In GAO–10–126, GAO examined numerous Federal programs, including USDA 

Rural Development, the Environmental Protection Agency (EPA), the Department 

of Housing and Urban Development (HUD), and the Economic Development Administration (EDA), that provide assistance to rural communities along the U.S.-Mexico 

border, or Colonias, for drinking water and wastewater projects. In that report, GAO 

suggested that ‘‘Congress consider requiring Federal agencies to develop a coordinated plan to improve the effectiveness of drinking water and wastewater programs 

in the border region and recommends that the agencies take steps to comply with 

statutory and regulatory requirements.’’

USDA Rural Development is committed to coordinating with other funding agencies at the Federal, state, and local level where possible to meet the needs of rural 

communities across the country, particularly the high-need Colonias areas along the 

U.S.-Mexico border. In addition, Rural Development disagreed with GAO’s assertion 

that we did not comply with the existing statute related to Colonias water and 

wastewater funding. We are pleased to report that on Friday, March 9, 2012, Rural 

Development released a proposed modification to our Colonias regulation which allows for additional priority points to Colonias areas that are un-served and that are 

facing significant health risks. Rural Development will continue our work to improve our program delivery to ensure that our country’s neediest areas receive funding. 

Rural Development’s business and cooperative programs provide valuable assistance to rural small and mid-size businesses and cooperatives. No other Federal program provides funding for similar purposes to cooperatives and majority-controlled 

producer-based business ventures in rural communities. Our Business and Industry 

program is the only Federal guaranteed loan program that specifically targets agricultural cooperative businesses and is available to nonprofits as well as for-profit 

entities. 

In GAO–11–318SP, GAO examined overlap and fragmentation among Federal economic development programs, including USDA Rural Development’s business programs, the Small Business Administration’s 8(a) program, and HUD’s Hispanic 

Serving Institutions Assisting Communities program. In its assessment, GAO recommended that the Federal agencies need to pursue enhanced collaboration across 

10

the programs. Additionally, GAO requested that the agencies ‘‘collect accurate and 

complete data on program outcomes and use the information to assess each program’s effectiveness.’’

To enhance inter-agency collaboration on economic development, USDA Rural Development signed a Memorandum of Understanding (MOU) with the Small Business 

Administration (SBA) in April 2010 to improve service delivery to small businesses 

in under-served rural areas. Under the MOU, the agencies agreed to advise potential borrowers of the other agency’s programs, to make each agency’s programs more 

complementary, and to develop joint training seminars on each agency’s programs. 

More recently, SBA and USDA are holding a series of joint roundtables across the 

country focused on increasing investment in rural communities. The meetings have 

presented opportunities to hear from stakeholders of both agencies about the challenges and benefits of investing in rural America. With regard to data collection, 

Rural Development’s Rural Business Service has commenced a series of trainings 

to improve the collection and maintenance of data related to program performance 

measures and to improve data integrity. The agency evaluates program performance 

based on jobs created/saved; businesses assisted; and kilowatt hours of electricity 

generated/saved. Additionally, the agency uses Customer Service Scores to evaluate 

program effectiveness and satisfaction. 

Housing drives rural economies and supports healthy rural communities. Rural 

Development housing programs ensure low and very-low income families throughout 

rural America have access to safe, decent and affordable housing. Our direct home 

loan program is the only means tested mortgage loan program to directly finance 

the purchase of homes in rural areas. Rural communities interested in building or 

upgrading essential community facilities, like schools, libraries, hospitals and public 

safety buildings, can walk into a local RD office to work directly with our knowledgeable employees to apply for funding. 

We at Rural Development take our mission of serving rural America very seriously, and we have long recognized the responsibility we share with the rest of the 

Federal Government to reduce the burden on future generations created by recurring budget deficits. In order to continue to serve rural America, we recognize a 

need to reposition our agency for the 21st century. To that end, we have pursued 

continual process improvements to ensure that our agency operates as a responsible 

steward of taxpayer dollars. Since 2004, Rural Development’s portfolio has doubled, 

and now stands at $165 billion. Today, I am pleased to report that the principal 

dollars delinquent more than 1 year remains at approximately two percent of the 

principal. 

Such results are the product of consistent and proactive servicing of the loan portfolio and working with trusted borrowers to restructure their loans and avoid foreclosure. Rural Development also has a longstanding record of streamlining its programs, which has consistently provided the mission area with the ability to successfully implement new programs and to meet increased demand for financing in multiple industry sectors with an unprecedented level of funding, even as staff levels 

steadily decreased. 

Efficiencies 

Looking to the future, Rural Development is in step with the Department of Agriculture’s broader efforts to improve the reliability and efficiency of the services we 

provide. In January, Secretary Vilsack unveiled USDA’s ‘‘Blueprint for Stronger 

Service’’. Under this initiative, the Department identified 379 recommendations for 

improving USDA’s office support and operations, which includes ways to streamline 

the provision of administrative services, such as civil rights, information technology, 

finance, human resources, homeland security, procurement, and property management. To realize further efficiencies, USDA has proposed closure of 259 domestic offices, facilities and labs across the country, as well as seven foreign offices, while 

ensuring that the vital services they provide are not diminished. Rural Development 

alone plans to close 43 offices. In some cases, offices are no longer staffed and many 

are within 20 miles of other USDA offices. In other cases, technology improvements, 

advanced service centers, and broadband service have reduced some need for brick 

and mortar facilities. 

Rural Development is currently focused on managing these reductions, streamlining our programs wherever possible, and servicing our existing portfolio to maintain its low delinquency rate. 

Collaborative Efforts 

Rural Development’s innovative work with multi-county regions is an important 

support mechanism for President Obama’s ‘‘Blueprint for America’’ and building a 

prosperous American economy that is ‘‘Built to Last.’’ Through a number of efforts, 

11

USDA is collaborating with Departments across the Federal Government to support 

rural communities that are building durable, multi-county coalitions that foster economic development on a regional scale. In addition to providing direct economic benefits, regional collaboration allows rural communities to capitalize on economies of 

scale in infrastructure and public services, to encourage the development of specialization in industrial sectors that would make them more competitive, and to locate 

facilities and services where they provide the greatest benefit at the lowest cost. We 

will continue to partner with other Departments to leverage Federal resources to 

more effectively support regional economic development efforts. 

Conclusion 

Rural Development is resolutely pursuing President Obama’s vision of an America 

that leads the way in the development of renewable sources of energy, reinvigorates 

a sustainable manufacturing industry, and promotes the economic well-being of all 

Americans. Through our network of local economic development experts across rural 

America, we support innovators and entrepreneurs, individual families and entire 

communities. Our presence in the rural communities that we serve, combined with 

our local knowledge and uniquely rural focus, sets us apart from other Federal programs and helps us maintain our low delinquency rate. 

We know these investments will pay dividends for years to come. 

I appreciate the opportunity to work with Members of the Subcommittee to build 

a foundation for American competitiveness. Thank you for your support of Rural Development programs. At this time, I am happy to answer your questions.

The CHAIRMAN. Thank you, Mr. Tonsager. 

Let me just start with what I think is probably a self-apparent 

question, but obviously one of the charges of this Committee will 

be developing an assessment for how we know how programs succeed or fail or in between and how those evaluations that you make 

form future decisions. So my question is, right now, how do you 

evaluate the success of various programs? And how is that evaluation the basis for specifically how those evaluations form future decisions on regulatory changes, applications, and so forth? I think 

you get the gist of my question. 

Mr. TONSAGER. I think the first thing in these kinds of evaluations to remember is this is primarily about individual people and 

groups of people who have identified within their community something that is needed. In the case of single-family housing borrowers, of course, success is by somebody who has repaid their 

housing loan and successfully done their housing. For a community 

that needs a water and sewer system, it is having a successful 

project that has been well planned, thought out, and meets the 

needs of that community and they have been able to repay their 

loans successfully. 

So, we begin with that to remember that these are about these 

communities, thousands of leadership people who have come together to come up with a plan who need resources and want to accomplish a specific task, maybe a hospital. So if we build a hospital 

or finance a hospital in a community, the hospital is successfully 

serving that community. 

Another, of course, important major is job creation, and we have 

a couple of processes associated with the measurements of job creation. In some cases, we have a calculation for a formula that has 

been provided for us where they estimate, for example, the construction of a new home and how many jobs that might be creating. 

In our business programs, we have been using a process to estimate the number of jobs created, including local judgment by our 

staff, and then there are a couple of formulas that we look at the 

size of the loan. But we are transitioning in that process to getting 

12

actual results, and by 2013, we will have actual results on loanmaking and the jobs created as the projects are implemented. 

The CHAIRMAN. Within your department, I am assuming in any 

department of the government there is always duplicative programs, which, as you look and see where you can make improvements, what programs do you think stand out as administered in 

a way and implemented in such a way that they do qualify as duplicative in areas that you would like to see addressed? 

Mr. TONSAGER. Sure. We have approximately 42 tools right now 

that we use to work with rural communities and we like to have 

it as a one-stop center, of course. But we believe there are a couple 

areas that we would like to work closely with you. One we have 

four programs that provide revolving loan funds for businesses and 

local communities, and we think there would be a lot of sense in 

being flexible with the programs so we can still serve that broad 

audience, but we probably don’t need four different programs for 

that purpose, as well as some of our grant programs we believe 

that could potentially be combined. 

So this year, we propose a budget, for example, not to fund the 

Rural Business Opportunity Grant Program but to put those funds 

into the Rural Business Enterprise Grant Program. We think that 

makes a lot of sense. We don’t want to diminish anybody’s access, 

but we would like to work with you regarding flexibility in the programs. There may be a reduction in the number of programs that 

are available for that. 

The CHAIRMAN. Last, we will hear in a few minutes GAO’s assessments and they have raised a number of issues—do you feel 

that you have addressed those issues completely or do you think 

you have some work to do in terms of addressing some of the issues 

they raise? 

Mr. TONSAGER. Oh, we know we have some work to do. I know 

they have scored us as partially addressing issues. We know we 

have some progress to make on some of the statements. In some 

cases, we will disagree with them regarding what is said, but yes, 

we recognize we need to make some progress. 

The CHAIRMAN. With that, then, I would recognize the Ranking 

Member, Mr. Costa, for questions. 

Mr. COSTA. Thank you very much, Mr. Chairman. 

I raised the issue in my opening statement and I don’t know if 

you can report to us, but again I find it baffling at this point. In 

2008, we required as a part of the reauthorization of the farm bill 

to work on this rural definition issue, which has been problematic 

to some of us who represent very rural districts. And I mean for 

folks this information—I know my Subcommittee Members know 

this—but I represent the number one agricultural county in the nation, Fresno County, over $6 billion. Kern County I share with another colleague is number three with over $4 billion in farm gate 

receipts. Yet Fresno is not defined as being rural because it has a 

large urban city in the center of the county. Why can’t we get this 

report? It is 2012. It is 4 years later. 

Mr. TONSAGER. We have provided, as you mentioned, a number 

of elements to the report that included the information requested 

regarding the various definitions. And so previous testimonies have 

provided that. It is true that we have not provided our distinct 

13

what we would recommend for a definition. We are still working 

internally through that process. I would like to offer some 

thoughts, though, regarding that. 

We have the current authority, of course, applies very hard line 

numbers that if you cross the number it is no longer eligible. We 

have an immediate Census coming up October 1. We will be implementing new Census data regarding rural definitions from year 

2010, and that means some communities that have grown will no 

longer be eligible for programs. Some communities may have 

shrunk and may become newly eligible. 

Mr. COSTA. Well, just on that point there are a couple of other 

questions. For example, the Administration has a Strong Cities, 

Strong Communities Program that includes six cities across the 

country—and again, one of them happens to be the City of Fresno, 

which is the sixth largest city in the state now, but yet USDA is 

involved in this effort, this model program. You are supposed to be 

effectively coordinating with Federal agencies, but yet it doesn’t follow under the definition of rural. 

Mr. TONSAGER. We try to work with each of the efforts that are 

regionally based to have employees involved, and I believe——

Mr. COSTA. So the definition in this case isn’t a hard line? 

Mr. TONSAGER. For the technical discussion that is in fact—we 

don’t approve all programs. 

Mr. COSTA. Let me move on again because of time. 

Mr. TONSAGER. Sure. 

Mr. COSTA. USDA’s Rural Utilities Service Programs aren’t the 

focus of our hearing today, but I did mention that in my statement. 

Since you raised it in your statement, we are focusing on duplicative Federal programs, but I want to know USDA’s perspective on 

claims that rural broadband is duplicating efforts of the Commerce 

Department’s National Telecommunications efforts. 

Mr. TONSAGER. The Department of Commerce had Recovery Act 

funds for that purpose but they no longer are engaged in those programs if I understand correctly. 

Mr. COSTA. So then it wouldn’t be overlapping——

Mr. TONSAGER. Right. That is correct. 

Mr. COSTA.—with government-backed programs by private investment companies to expand broadband in our rural areas? 

Mr. TONSAGER. We work with private companies in financing 

broadband projects. 

Mr. COSTA. Finally, I learned from data that the USDA’s Economic Research Service, ERS, that shows that Federal investment 

in rural areas is lagging behind investments in urban areas. It 

seems to suggest that the claims of geographical overlap in the 

Federal programs in this instance might be unfounded or at least 

overstated. Have you seen the data and are you prepared to provide an assessment that resonates with your experience? 

Mr. TONSAGER. I recently saw the data, have not had time to 

study it. It is my belief that that is the case. We are most anxious 

to use our resources to try and draw other Federal program resources more to rural areas than it has been. 

Mr. COSTA. It is your belief, then, that there is not an overlap? 

Mr. TONSAGER. It is my belief that rural areas do not get as 

much Federal resources as urban areas do. 

14

Mr. COSTA. On a percentage, per capita basis? 

Mr. TONSAGER. Yes, sir. 

Mr. COSTA. Okay. 

Well, Mr. Chairman, my time has expired but we will obviously 

follow up and I will submit some additional questions for the record 

that I would hope we would have a response for. 

Mr. TONSAGER. Thank you, Congressman. 

The CHAIRMAN. Thank you, Mr. Costa. 

The chair would then recognize the gentleman, Mr. Stutzman, 

from—well, I guess he is not here. 

I recognize the gentleman from Georgia, Mr. Scott. 

Mr. SCOTT. Thank you, Mr. Chairman. 

Mr. Tonsager, one of the things you mentioned was flexibility in 

moving from four programs to one and reducing those administrative costs, and I quite honestly—if we can go from four to one and 

reduce those administrative costs and give you more flexibility, I 

think that is a great thing and helps the taxpayers. I guess my 

concern goes back to what my colleague from the other side of the 

aisle is bringing up, which is the accountability issue. If you want 

the flexibility and we want to give it to you, you have to understand that the accountability measures have to be there and when 

the departments ignore the timely filing of reports so that we can 

make sure the taxpayer funds are being spent wisely, then that 

certainly gives pause to us giving more flexibility. So I would like 

for you to speak to that issue. 

And then I would like for you to speak to two other issues; one 

is the coordination between the USDA and the SBA and how that 

has worked; and then two is the number of businesses who have 

received funding from the USDA that are still in business after 3 

years, so those three things, sir. 

Mr. TONSAGER. Sure. Yes, we need to be held accountable. We 

understand that. And we do work our best to file reports in a timely manner. I am not sure which specific reports you have concern 

about. We do believe in transparency and we know that if we provide you the information regarding our performance, it helps selfcorrect because you will bring discipline to that argument. 

If you would provide me with the particular reports that are 

lacking, I can give you more information about that. 

Mr. SCOTT. We will get that to you. 

Mr. TONSAGER. Okay. Let us see. I am sorry. Please forgive me. 

Mr. SCOTT. The relationship between SBA and USDA and how 

that has worked with the——

Mr. TONSAGER. Sure. 

Mr. SCOTT.—consolidation if you will of the——

Mr. TONSAGER. We did establish the Memorandum. We are doing 

joint trainings between our people that are involved in business 

funding and trying to learn from each other regarding their abilities in business lending. Our program, of course, goes to very large 

loans where SBA is somewhat restricted in size. We advocate with 

clients regarding use of the SBA loans so we have our staff trained 

in how the SBA loans work. And if it is better suited for them in 

some cases, then we would advocate that they would pursue an 

SBA loan. And we also work more closely with lenders so we would 

have a group of business and industry loan lenders, some 1,800 

15

banks that like to use our program. We try and coordinate—especially when both SBA and the B&I Program is in the same financial institution. 

Mr. SCOTT. Do you have the information on the number or the 

percentage of businesses that you are involved in the initial or the 

startup funding that are in business after 3 years? 

Mr. TONSAGER. I am sorry. I don’t have that with me today but 

we will certainly provide it to you. 

[The information referred to is located on p. 33.] 

Mr. SCOTT. All right. Thank you. 

Mr. Chairman, I don’t have any further questions. I yield back 

my time. 

The CHAIRMAN. Thank you, Mr. Scott. 

The Chair would recognize the gentleman from North Carolina, 

Mr. McIntyre. 

Mr. MCINTYRE. Thank you, Mr. Chairman. Thank you for this 

opportunity. As former Chairman of this Subcommittee, I have a 

couple of questions for the Under Secretary, and it good to see you 

again, Mr. Under Secretary. 

I know USDA Rural Development has taken the lead in addressing one of the most pressing challenges facing rural America; that 

is the digital divide separating rural and urban areas. And I know 

you are familiar with that with the major success story that we 

had in North Carolina down in Columbus County, a very rural area 

that now has—with the help of ATMC, a local provider there—98 

percent completed its mission to connect nearly 1,000 rural residents who otherwise had no access to high-speed Internet. And I 

still remember the lady last August who ran out of her house when 

she saw me out there with the crews say thank you, thank you. My 

son can now do his homework at home instead of having to go all 

the way back into town to try to go to a library or to the school. 

He could come home and the young boy can be at home to do his 

homework. 

How is USDA uniquely situated, do you believe, to take the lead 

for the Federal Government in investing in our rural telecommunications infrastructure as compared to other departments or agencies? 

Mr. TONSAGER. Well, we of course have a 70 year old tradition 

in rural America. We financed the National Rural Electric System 

through decades that saw the very first light bulb and then went 

to virtually every corner of the United States. We have done the 

same with the National Rural Water System and we have not gotten everywhere with rural water. But we have been building that 

over a very long period of time. 

Mr. MCINTYRE. Yes. 

Mr. TONSAGER. So we have unique skill sets in making very large 

credit available to very large organizations and have done so in a 

very positive manner. So our presence in rural America and our 

long-term history of making financial commitments that work quite 

well, is a major component of what we do. 

Mr. MCINTYRE. Can you speak about the effort to build on and 

build out with respect to broadband investments that are being 

made by the USDA? 

16

Mr. TONSAGER. Sure. Along with our responsibility for building 

that system, we also have tools for building businesses. And so we 

have been conducting webinars, bringing in companies that do direct marketing and I think that is one of the great hopes that was 

brought by Congress to not only build this system but make sure 

economic opportunity happened for those people that live in those 

communities. So as we build out the system we are conducting 

these webinars with local organizations, businesses, and companies 

and bringing together those efforts so that people might begin to 

use this wonderful tool of broadband to build their economic lives. 

Mr. MCINTYRE. I know that a lot of folks are always concerned 

about duplicative services, but I would like for you, given your 

unique position and the experience you have had in doing these 

types of things, to explain to us how USDA Rural Development 

that gives significant assistance to much-needed infrastructure investments—water, wastewater, broadband, telephone, and electric 

infrastructure—we know that EDA, HUD, Department of Transportation, and EPA also do certain aspects of that but how do you 

believe that USDA with its extensive field staff makes a difference 

when it comes to rural America; so we can get a handle on what 

is the difference here and why is USDA Rural Development so critical in meeting these needs to keep rural America from being left 

behind? 

Mr. TONSAGER. Sure. In my testimony I talked about the charge 

in the 1972 Con Act regarding taking the lead in rural areas. So 

we see ourselves as an aggressive organization in trying to bring 

resources. We know that our mission is rural. We know that other 

Federal agencies might not have as aggressive an approach. I mean 

generally they are a passive provider of resources. We see our job 

as taking our resources, trying to bring more to the table with private sector, with other Federal agencies and trying to make sure 

that rural citizens have access to as much Federal Government resources as we can possibly get. So we think our position, having a 

field structure, and our mandate to be assertive in our view in providing these resources makes us unique. 

Mr. MCINTYRE. Thank you. And I speak for all of us who have 

constituents and ourselves that live in rural areas that with this 

time of year and April 15 fast approaching that rural America are 

just as much taxpaying citizens as those in urban and suburban 

America and should not be left behind. And I want to thank you 

for the efforts you make on behalf of rural America and our citizens, the American taxpayers who do see a return on their investments that we are reminded of every year at April 15. The difference it makes in their lives when they see rural broadband, 

water, and wastewater projects and the infrastructure come to 

make their quality of lives inline with their fellow American citizens. God bless you and thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Mr. McIntyre. 

Now, I would recognize the gentleman from Illinois, Mr. 

Hultgren. 

Mr. HULTGREN. Thank you, Mr. Chairman. 

Thank you for being here today. A couple questions. I understand 

that Rural Housing Service has been trying to get some access to 

17

* Editor’s note: The information request has been answered in three parts, labeled Insert 2–

5. 

the same employment data that HUD uses to verify tenants’ incomes. What benefit would this earned income verification data 

provide to RHS and I wonder what is preventing you from using 

it? 

Mr. TONSAGER. I will have to ask my folks what the status of 

that proposal. I thought we were getting close if not had gotten to 

that point yet. It would help with the evaluation of loan applications and its time limits of getting the loan applications done. Having information available would help us make sure the portfolio 

performs well and that we are making loans to eligible applicants 

as well as making sure that they get repaid. And I am sorry. I 

don’t know if any of my staff knows for sure. We will have to report 

back on the status of that. 

[The information referred to is located on p. 33.] * 

Mr. HULTGREN. If you can get us the information, that would be 

great on that. That would be terrific. 

GAO and others have proposed consolidation of the Rural Housing Programs with HUD. I wonder, do you think the rural areas 

would see the same attention under HUD’s management as they 

currently receive? 

Mr. TONSAGER. I believe that we provide real opportunities to remote rural citizens. Forgive me for using the term unique for rural 

America, but the people in rural America don’t make as much 

money. And our particular program, I think the guarantee program 

especially is well suited to rural communities in that we don’t have 

a particular down payment requirement. We have been very successful in repayment to the point where for the program cost, it 

doesn’t cost the taxpayers any money. There is cost, of course, with 

our system of delivery but not with the fee that we are assessing. 

We don’t have a cost and the performance of the program has been 

very good. 

So, the uniqueness of the programs for housing addresses the 

needs of rural people and how to get that delivery in the far corners of rural America becomes the challenge for perhaps HUD and 

others if it were to be combined. 

Mr. HULTGREN. If it were combined, I mean is there any expectation or what is the expectation of the amount of savings as you 

combine the programs as far as salaries being saved, expenses for 

the agency? And then I wondered if there is a savings, how USDA 

would seek to reallocate those resources if there was a consolidation or savings of administrative costs? 

Mr. TONSAGER. I have not seen any particular identification of 

what those savings might be. I would say for the guarantee program particularly the amount of resources is pretty modest. We are 

working with private institutions. The financers are doing the 

great bulk of the work. Much of our work is monitoring of those 

loans in that case. The direct program costs more because it is 

more of a hands-on approach with individual people and helping 

them to get good credit. So I am sorry; I just don’t have the information. 

18

Mr. HULTGREN. Okay. There again, if you have that information, 

if you can get that to us or if your staff has that information, that 

would be helpful. 

Mr. TONSAGER. Sure. 

Mr. HULTGREN. Switching gears a little bit. Under the current 

requirements, a community must be outside of a metropolitan statistical area to qualify for Rural Housing Programs. MSAs are no 

longer the compact area they once were and communities located 

far from the urban core can still be considered part of the MSA. 

I wondered why do you have this blanket exemption and do you 

feel some communities are disadvantaged by this exemption? 

Mr. TONSAGER. Of course, it is required by law. I mean we have 

a specific requirement regarding the geographic area that we can 

serve, so we have to follow that to the letter in doing that. 

We are anxious to look at flexibility and I know Congressman 

Costa’s concern about the rural definition issue. When we find ourselves with multiple definitions running into is that we can’t address the needs of a whole community. We are doing a bit here, a 

bit there, and we are struggling with that definitional issue and 

trying to come to grips with what would be the most useful discussion to have. But the Secretary is focused a good bit on flexibility 

in the existing programs and we are studying that closely. 

Mr. HULTGREN. What are your recommendations for addressing 

those definitional issues? Are there proposals that are in place? Is 

there legislation that is introduced that would address that concern? 

Mr. TONSAGER. Not at this time. We have not made proposals at 

this time. 

Mr. HULTGREN. Do you expect that to be coming or what is your 

thought there? 

Mr. TONSAGER. We expect after a review process to put forward 

some material on the subject. 

Mr. HULTGREN. Okay. But it would take legislative change you 

believe——

Mr. TONSAGER. Yes. 

Mr. HULTGREN.—to bring that definition? 

Mr. TONSAGER. Yes, there are very concise definitions in the statute regarding each program area. And it would take definitely statutory change. 

Mr. HULTGREN. Okay. My time has expired. I yield back. Thank 

you, Mr. Chairman. 

The CHAIRMAN. Thank you, Mr. Hultgren. The gentlelady from 

Missouri, Mrs. Hartzler. 

Mrs. HARTZLER. Thank you, Mr. Chairman. 

In your testimony, you discuss the coordination between USDA 

and the Small Business Administration in 2010 in an effort to improve service delivery to small businesses in rural areas. So what 

was the result of this coordination? 

Mr. TONSAGER. There has been significant activity. We do training together with the SBA. We provide clients coming in the door 

information regarding potential use of SBA applications or SBA 

programs if they are better suited to their needs in that area. So 

we have ongoing efforts with SBA all the time. And I mentioned 

earlier that we see our field structure as an opportunity to draw 

19

more resources from other Federal agencies into rural areas. So we 

see our tools as an opportunity to leverage those agencies to bring 

their resources. And so we attempt to do that with as many of the 

other Federal agencies as we can, including the SBA. 

Mrs. HARTZLER. That is very good. Does your interagency coordination include a conscious effort to determine which agency should 

be funding which type of investment even when both agencies 

might have clear authority to do so? 

Mr. TONSAGER. We tend to look at the individual applicants and 

try to advocate with them regarding that. We haven’t, I don’t 

think, done a strategy where we looked at which agency would be 

best suited in an individual area, so I may not be quite understanding your question well enough and I will ask my colleagues 

if they have any thoughts. 

And my deputy points out that the lender is the applicant to us 

in the loan guarantee case. And so we work with them. 

Mrs. HARTZLER. Yes. All right, that makes sense. Now, I missed 

the first part of the hearing due to being at another hearing at the 

same time—sorry—but we were talking about consolidating programs here. I came in where you were saying that you believe that 

four revolving loan funds could be consolidated, also some grant 

programs. Is that the only duplication or consolidation that you 

think could be done in the Department? 

Mr. TONSAGER. Well, we should consider perhaps some of the 

guarantee programs. You know, we have a guarantee program for 

large energy projects, we have our Business and Industry Loan 

Guarantee Program, and we have a guarantee program and our 

REAP Program, which is also energy-related. 

We don’t have a clearer saying do this, this, and this, but, if we 

can look at still having the same audiences that we are all trying 

to serve and limit or reduce the number of programs that are applicable that might be of value, less NOFAs we have to put out, less 

procedures we have to go through. So we don’t have a defined kind 

of agenda on that. We are just suggesting if we combine some of 

the tool sets and broaden them out, get more flexibility as the Secretary has talked about, it would make some sense. 

Mrs. HARTZLER. Sounds like some good ideas. Have you put that 

into a format that could be transferred over to a legislative initiative? 

Mr. TONSAGER. We have not but we would be more than happy 

to work with some Members on any proposals you might want to 

consider. 

Mrs. HARTZLER. I would be interested in seeing in writing some 

of your suggestions of specific programs you think could be consolidated to increase efficiencies that we can move forward with because I think that makes sense for the taxpayer and for the people 

that we are trying to serve. 

So thank you for what you are doing for rural America. It is very 

important, I appreciate it. 

Mr. TONSAGER. Yes, thank you, ma’am. 

Mrs. HARTZLER. I yield back my time. 

The CHAIRMAN. Thank you. With that, I believe there are no 

more questions. We thank you for your testimony and appreciate 

your being here and look forward to hearing from you again. 

20

Mr. TONSAGER. Thank you, sir. 

The CHAIRMAN. We will now assemble the next panel, which is 

essentially one witness. Our witness now for the second panel is 

Mr. William Shear, Director, Financial Markets and Community 

Investment, Government Accountability Office. 

Please begin when you are ready, Mr. Shear. 

STATEMENT OF WILLIAM B. SHEAR, DIRECTOR, FINANCIAL 

MARKETS AND COMMUNITY INVESTMENT, U.S.

GOVERNMENT ACCOUNTABILITY OFFICE, WASHINGTON, D.C. 

Mr. SHEAR. Thank you. Chairman Johnson, Ranking Member 

Costa, and Members of the Subcommittee, I am pleased to be here 

this morning to discuss our work on overlap, fragmentation, and 

potential duplication in economic development programs. 

As part of our series of reports on these programs, most recently 

in February 2012, we reported on the existence of overlap and fragmentation among those Federal economic development programs 

that support entrepreneurs. Specifically, we focused our analysis on 

53 of the 80 economic development programs at Agriculture, Commerce, HUD, and SBA that fund entrepreneurial assistance because these programs appear to overlap the most among the 80 

economic development programs. 

My testimony today is largely based on information on these 53 

programs that is discussed in our recent February 2012 report. 

Specifically, this testimony discusses our work to date on, first, the 

extent of overlap and fragmentation among these programs; and 

second, the availability of meaningful performance information on 

these 53 programs. I will also provide an overview of the nature 

of our ongoing work. 

In summary, based on our work to date we have found that programs that support entrepreneurs overlap based not only on their 

shared purpose of serving entrepreneurs but also on the type of assistance they offer. The programs generally can be grouped according to at least one of three types of assistance—first, technical assistance; second, financial assistance; and third, government contracts. Much of the overlap and fragmentation among these 53 programs is concentrated among programs that support economically 

distressed and disadvantaged areas and programs that are disadvantaged in small businesses. In addition, many of these economic development programs also operate in both urban and rural 

areas. 

While most of the 53 economic development programs that support entrepreneurs have reasonable performance measures, intend 

to meet their annual performance goals, few evaluation studies 

have been completed and little evaluative information exists that 

assesses the programs’ effectiveness at what they are intended to 

serve. 

In addition to the work discussed in our recent report, I will 

mention two other sources of information—first, progress made by 

the agencies in implementing collaborative practices we had recommended; and second, our continuing work to be discussed in a 

report on economic development programs we plan to issue this 

summer. 

21

1GAO, Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue, GAO–11–318SP (http://www.gao.gov/products/GAO-11-318SP) 

(Washington D.C.: Mar. 1, 2011) and Efficiency and Effectiveness of Fragmented Economic Development Programs Are Unclear, GAO–11–477R (http://www.gao.gov/products/GAO-11-477R) 

(Washington, D.C.: May 19, 2011). 2GAO, 2012 Annual Report: Opportunities to Reduce Duplication, Overlap and Fragmentation, 

Achieve Savings, and Enhance Revenue, GAO–12–342SP (http://www.gao.gov/products/GAO12-342SP) (Washington D.C.: Feb. 28, 2012). 3The number of programs administered by Commerce, HUD, SBA, and USDA that were identified in GAO–11–477R (http://www.gao.gov/products/GAO-11-477R) as supporting entrepreneurial efforts decreased from 54 to 53 because Commerce merged its Minority Business Opportunity Center program and Minority Business Enterprise Center program into one program that 

is now called Minority Business Center. In addition, two of the original Commerce programs 

identified in our March and May 2011 reports—Community Trade Adjustment Assistance and 

Research and Evaluation—have been replaced with two other Commerce programs—Trade Adjustment Assistance for Firms and the Economic Development—Support for Planning Organizations—because one of the original programs had temporary funding and the other original program was misclassified as an economic development program. The two new Commerce programs 

Continued

With respect to collaborative practices, in April 2010, USDA and 

SBA signed a Memorandum of Understanding. The MOU defined 

and articulated a common outcome focused on improving service 

delivery to small businesses in under-served rural areas. USDA’s 

April 2011 survey of state directors indicates progress under the 

MOU in several areas, including field offices advising borrowers of 

SBA’s programs, referring borrowers to SBA and its resource partners, and explaining ways to make USDA and SBA programs more 

complementary. However, we have not received comparable information from SBA indicating progress in this area. In addition, 

HUD, USDA, and SBA have provided limited evidence that they 

have taken steps to develop compatible policies and procedures 

with either Federal agencies and this also goes to the issue of defining roles and responsibilities. 

With respect to our remaining audit work, a large part of it will 

focus on the extent to which the programs are duplicative, overlapping, or fragmented and we are especially focusing on the provision 

of economic development assistance by the various agencies and 

programs in rural America. 

Chairman Johnson and Ranking Member Costa, this concludes 

my prepared statement. I would be happy to answer any questions 

at this time. 

[The prepared statement of Mr. Shear follows:]

PREPARED STATEMENT OF WILLIAM B. SHEAR, DIRECTOR, FINANCIAL MARKETS AND

COMMUNITY INVESTMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE,

WASHINGTON, D.C. 

Economic Development 

Efficiency and Effectiveness of Fragmented Programs Are Unclear 

Chairman Johnson, Ranking Member Costa, and Members of the Subcommittee:

I am pleased to be here today to discuss our work on overlap, fragmentation, and 

potential duplication in economic development programs. Over the past year, we 

have issued a series of reports on potential duplication among Federal economic development programs, including a number of rural development programs.1 Most recently in February 2012 we reported new information on the existence of overlap 

and fragmentation among those Federal economic development programs that support entrepreneurs.2 Specifically, we focused our analysis on 53 of the 80 economic 

development programs at the Departments of Commerce (Commerce), Housing and 

Urban Development (HUD), Agriculture (USDA), and the Small Business Administration (SBA) that fund entrepreneurial assistance because these programs appear 

to overlap the most.3 According to agency officials, these programs, which typically 

22

that have been added should have been included in the March and May 2011 reports, according 

to Commerce officials. 4We excluded the portion of the Community Development Block Grant funding that HUD reported is not used to support economic development. The total enacted appropriations for these 

53 programs was about $5.6 billion for Fiscal Year 2010. 5While the definition of rural can vary among programs, USDA’s typically defines it as covering areas with population limits ranging from less than 2,500 to 50,000.

fund a variety of activities in addition to supporting entrepreneurs, spent an estimated $2.6 billion in enacted appropriations on economic development efforts in Fiscal Year 2010.4

Economic development programs, if effective, can develop and expand, and thus 

contribute to the nation’s economic growth. However, the ways that these programs 

are administered could lead to inefficient delivery of services to entrepreneurs, such 

as requiring recipients to fill out applications to multiple agencies with varying program requirements, and could compromise the government’s ability to effectively 

provide the needed service and meet the shared goals of the programs. 

My testimony today is based on information on these 53 programs that is discussed in our recent February 2012 report. Specifically, this testimony discusses our 

work to date on (1) the extent of overlap and fragmentation among these programs 

and (2) the availability of meaningful performance information on these 53 programs. Because we have ongoing work that will be issued later this year, we also 

provide an overview of the nature of our ongoing work. 

In summary, based on our work to date, we have found that:

• Programs that support entrepreneurs overlap based not only on their shared 

purpose of serving entrepreneurs but also on the type of assistance they offer. 

Much of the overlap and fragmentation among these 53 programs is concentrated among programs that support economically distressed and disadvantaged areas and programs that assist disadvantaged and small businesses. In 

addition, many of these economic development programs also operate in both 

urban and rural areas.5

• While most (45) of the 53 economic development programs that support entrepreneurs have reasonable performance measures and tend to meet their annual 

performance goals, few evaluation studies have been completed and little evaluative information exists that assesses the programs’ effectiveness.

As we continue our ongoing work, we are conducting additional analyses of these 

53 programs to determine, among other things, (1) what support do Federal economic development programs provide to entrepreneurs and to what extent the programs are duplicative, overlapping, or fragmented; (2) the effects on entrepreneurs 

and the steps agencies have taken to address any duplication, overlap, or fragmentation; and (3) the extent to which these programs have established and met 

performance goals and been evaluated for effectiveness. 

For our February 2012 report, which this testimony is based on, we focused our 

analysis on the 53 economic development programs at Commerce, HUD, USDA, and 

SBA that fund entrepreneurial assistance because these programs appeared to overlap the most. We examined the extent to which the Federal Government’s efforts 

to support entrepreneurs overlap among these numerous, fragmented programs by 

examining their missions, goals, services provided, and targeted beneficiaries and 

areas. We also collected information on performance measures that the agencies collect to track the performance of each of the 53 programs, and any evaluation studies 

conducted or commissioned by the agencies evaluating the effectiveness of these programs. This process included meeting with agency officials to corroborate the publicly available information. We also determined the reasonableness of the performance measures by assessing each measure against agency strategic goals and specific program missions to determine the extent to which they are aligned. The work 

on which this statement is based was performed from June 2011 through February 

2012 in accordance with generally accepted government auditing standards. Those 

standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based 

on our audit objectives. We believe that the evidence obtained provides a reasonable 

basis for our findings and conclusions based on our audit objectives. 

Programs that Support Entrepreneurs Overlap and Are Fragmented 

Based on a review of the missions and other related program information for 

these 53 programs, we determined that these programs overlap based not only on 

their shared purpose of serving entrepreneurs but also on the type of assistance 

they offer. The programs generally can be grouped according to at least one of three 

23

6SBA administers the two programs that solely provide entrepreneurs with assistance in obtaining government contracts: the HUBZone program, which supports small businesses located 

in economically distressed areas, and the Procurement Assistance to Small Businesses program, 

which serves small businesses located in any area.

types of assistance that address different entrepreneurial needs: help obtaining (1) 

technical assistance, (2) financial assistance, and (3) government contracts. Many of 

the programs can provide more than one type of assistance, and most focus on technical and/or financial assistance: 6

• Technical assistance: Thirty-six programs distributed across the four agencies 

provide technical assistance, including business training and counseling and research and development support.

• Financial assistance: Thirty-three programs distributed across the four agencies 

support entrepreneurs through financial assistance in the form of grants and 

loans.

• Government contracting assistance: Seven programs distributed between two of 

the four agencies support entrepreneurs by helping them qualify for Federal 

procurement opportunities.

Table 1 illustrates overlap among programs that provide entrepreneurial assistance in terms of the type of assistance they provide. For example, USDA administers nine of the 36 programs distributed across the four agencies that provide technical assistance, including business training and counseling and research and development support. The agency also administers nine of the 33 programs distributed 

across the four agencies that support entrepreneurs through financial assistance in 

the form of grants and loans. Appendix I lists the programs GAO identified that 

may have similar or overlapping objectives, provide similar services or be fragmented across government missions. Overlap and fragmentation may not necessarily lead to actual duplication, and some degree of overlap and duplication may 

be justified.

Table 1: 53 Programs That Support Entrepreneurs, by Type of Assistance, 

as of September 30, 2011 a

HUD SBA USDA Commerce Total b

Technical assistance only 2 6 5 4 17

Financial assistance only 3 5 5 13

Technical and financial assistance only 7 3 4 2 16

Government contracting assistance only 2 2

Technical and government contracting only 1 1

Financial and government contracting only 2 2

Technical, financial, and government contracting assistance 2 2

Total 12 19 14 8 53

Source: GAO analysis of information provided by Commerce, HUD, USDA, and SBA.

Notes:

aSome of the programs may not have received funding in Fiscal Year 2011. 

bThe 36 technical assistance programs include those in the following categories: technical assistance only; technical and financial assistance only; technical, financial, and government contracting assistance; and technical and government contracting assistance only. The 33 financial 

assistance programs include those in the following categories: financial assistance only; technical 

and financial assistance only; technical, financial, and government contracting assistance; and financial and government contracting assistance only. The seven government contracting assistance programs include those in the following categories: government contracting assistance only, 

technical and government contracting assistance only, financial and government contracting assistance only, and technical, financial, and government contracting assistance. 

Furthermore, we found that much of the overlap and fragmentation among these 

53 programs is concentrated among those that support economically distressed and 

disadvantaged areas and programs that assist disadvantaged and small businesses, 

including those in rural areas (see Fig. 1 below). For example, 23 programs provide 

technical assistance to businesses operating in areas that are disadvantaged; USDA 

administers nine of these programs. In addition, USDA administers 5 of the 26 programs that provide technical assistance to disadvantaged businesses. 

24

Figure 1: Programs That Provide Technical and Financial Assistance, by 

Type of Business and Community Served, as of September 30, 2011.

Source: GAO analysis.

Note: Some of the programs may not have received funding in Fiscal Year 

2011.

The number of programs that support entrepreneurs—53—and the overlap among 

these programs raise questions about whether a fragmented system is the most effective way to support entrepreneurs. By exploring alternatives, agencies may be 

able to determine whether there are more efficient ways to continue to serve the 

unique needs of entrepreneurs, including consolidating various programs. In ongoing 

work, we plan to examine the extent of potential duplication among these programs 

as well as determine the effects of this fragmented system on the delivery of technical assistance to entrepreneurs. 

To address issues arising from potential overlap and fragmentation in economic 

development programs, we previously identified collaborative practices agencies 

should consider implementing in order to maximize performance and results of Federal programs that share common outcomes. Our work to date shows that Commerce, USDA, and SBA have taken initial steps to implement at least one of the 

collaborative practices—defining and articulating common outcomes for some of 

their related programs. For example, in April 2010 USDA and SBA signed a Memorandum of Understanding (MOU) in response to GAO’s 2008 recommendation that 

the agencies should establish a formal approach to encourage further collaboration. 

The MOU defined and articulated a common outcome focused on improving service 

delivery to small businesses in under-served rural areas. Under the MOU, USDA 

and SBA agreed that their field offices would advise potential borrowers of the other 

agency’s programs that may meet their small business financing needs and coordinate the referral of small business applicants to one another where appropriate, 

work to make each agency’s programs more complementary by minimizing differences in program fees and processing and closing procedures, and develop joint 

training seminars on each agency’s programs. In addition, USDA and SBA agreed 

to measure progress under the MOU. USDA’s April 2011 survey of state directors 

indicates progress under the MOU in several areas, including field offices advising 

borrowers of SBA’s programs, referring borrowers to SBA and its resource partners, 

and exploring ways to make USDA and SBA programs more complementary. However, we have not received comparable information from SBA indicating progress in 

this area. In addition, HUD, USDA, and SBA have provided limited evidence that 

they have taken steps to develop compatible policies or procedures with other Federal agencies, or to search for opportunities to leverage physical and administrative 

resources with their Federal partners. 

Agencies Lack Meaningful Information on the Effectiveness of Programs that Support 

Entrepreneurs 

Based on our work to date, we found that 45 of the 53 economic development programs we identified that support entrepreneurs have reasonable performance measures and tend to meet their annual performance goals; however, the four agencies 

have either never conducted a performance evaluation or have conducted only one 

in the past decade for 39 of the 53 programs. In order to effectively evaluate and 


11231001.eps
25

7Pub. L. No. 111–352 (2011). 

oversee the services being provided, Congress and the agencies need meaningful 

performance information such as performance measures and evaluation studies. 

This information is needed to help decision makers identify ways to make more informed decisions about allocating increasingly scarce resources among overlapping 

programs. Specifically, performance measures can provide information on an agency’s progress toward meeting certain program and agency-wide strategic goals, expressed as measurable performance standards. In contrast, program evaluations are 

systematic ways to assess a broader range of information on program performance. 

As a result, evaluation studies can help identify which programs are effective or not, 

explain why goals were not met and identify strategies for meeting unmet goals, 

and estimate what would have occurred in the absence of the program. 

Without results from program evaluations and performance measurement data, 

agencies lack the ability to measure the overall impact of these programs, and decision makers lack information that could help them to identify programs that could 

be better structured and improve the efficiency with which the government provides 

these services. Moreover, the Federal Government has recently required the Office 

of Management and Budget (OMB) to coordinate with agencies to ensure that they 

better track the results of their programs. Specifically, the GPRA Modernization Act 

of 2010 (GPRAMA) requires OMB to work with agencies to, among other things, develop outcome-oriented goals for certain crosscutting policy areas and report annually on how these goals will be achieved.7

Other GPRAMA requirements could lead to improved coordination and collaboration among agencies. For instance, GPRAMA requires each agency to identify the 

various organizations and program activities—both within and external to the agency—that contribute to each agency’s goal. In ongoing work, we plan to determine 

reasons why the agencies (1) do not conduct more routine evaluations of these programs and (2) have not established and do not track performance measures for 8 

of the 53 programs. 

Framework for Ongoing Analysis 

As mentioned earlier, our ongoing work focuses on, among other things, (1) what 

support do Federal economic development programs provide to entrepreneurs and 

to what extent the programs are duplicative, overlapping, or fragmented; (2) the effects on entrepreneurs and the steps agencies have taken to address any duplication, overlap, or fragmentation; and (3) the extent to which these programs have established and met performance goals and been evaluated for effectiveness. To examine the support Federal economic development programs provide to entrepreneurs 

and to what extent the programs are duplicative, overlapping, or fragmented, we 

will review information on the activities and services that the agencies conduct to 

administer each of the 53 programs, as well as associated budget information for 

each program. We will also evaluate the agencies’ methods for tracking the activities 

conducted, services provided, and associated costs against criteria that we have established related to internal control standards. To identify the effects on entrepreneurs and the steps agencies have taken to address any duplication, overlap, or 

fragmentation, we will, among other things, conduct interviews with select Federal 

agency and regional commission officials, entrepreneurs, and state and local partners in select areas across the U.S., including rural areas. During these interviews 

we will determine how the Federal agencies collaborate to support entrepreneurs, 

identify any reported lessons learned from these collaborative efforts, as well as 

challenges they face to collaboratively support entrepreneurs. We will also obtain 

their views on the negative effects that the overlapping, fragmented, or duplicative 

programs have on the efficient delivery of services to entrepreneurs. Finally, we will 

interview program officials to determine the reasons why the agencies do not conduct more evaluation studies. 

Chairman Johnson and Ranking Member Costa, this concludes my prepared statement. I would be happy to answer any questions at this time. 

Contacts and Staff Acknowledgements 

For further information on this testimony, please contact me at [Redacted] or 

[Redacted]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Key contributors to this testimony include Marshall Hamlett and Triana McNeil, Assistant Directors; Cindy Gilbert; John McGrail; Jennifer Schwartz; and Karen Villafana.

26

Appendix I: List of Programs That Support Entrepreneurs and Related 

Budgetary Information 

Program FY 2010 obligations 

Department of Commerce

Grants for Public Works and Economic Development Facilities $158,930,000

Economic Development/Support for Planning Organizations $31,391,000

Economic Development/Technical Assistance $9,800,000

Economic Adjustment Assistance $45,270,000

Trade Adjustment Assistance $18,987,000

Global Climate Change Mitigation Incentive Fund $25,000,000

Minority Business Centers (merged the former Minority Business Enterprise Centers 

and Minority Business Opportunity Center programs) $10,113,693

Native American Business Enterprise Centers $1,351,500

U.S. Department of Agriculture

Empowerment Zones $500,000

Woody Biomass Utilization Grant Program $5,000,000

1890 Land-Grant Institutions Rural Entrepreneurial Outreach Program/Rural Business Entrepreneur Development Initiative/BISNET $0

Small Business Innovation Research $22,000,000

Biomass Research and Development Initiative Competitive Grants Program $0

Value-Added Producer Grants $19,400,000

Agriculture Innovation Center $0

Small Socially-Disadvantaged Producer Grants $3,500,000

Intermediary Re-lending $8,500,000

Business and Industry Loans $52,900,000

Rural Business Enterprise Grants $38,700,000

Rural Cooperative Development Grants $8,300,000

Rural Business Opportunity Grants $2,500,000

Rural Microentrepreneur Assistance Program $9,000,000

Department of Housing and Urban Development

Community Development Block Grant (CDBG)/Entitlement Grants $2,760,223,970

CDBG/Special Purpose/Insular Areas $6,930,000

CDBG/States $1,176,594,747

CDBG/Non-entitlement CDBG Grants in Hawaii $5,791,797

CDBG/Brownfields Economic Development Initiative $17,500,000

CDBG/Section 108 Loan Guarantees $6,000,000

Section 4 Capacity Building for Affordable Housing and Community Development $50,000,000

Rural Innovation Fund $25,000,000

CDBG Disaster Recovery Grants $100,000,000

Indian CDBG $65,000,000

Hispanic Serving Institutions Assisting Communities $6,250,000

Alaska Native/Native Hawaiian Institutions Assisting Communities $3,265,000

Small Business Administration

8(a) Business Development Program $56,817,000

7(j) Technical Assistance $3,275,000

Procurement Assistance to Small Businesses $3,164,000

Small Business Investment Companies $24,262,000

7(a) Loan Program $518,869,000

Surety Bond Guarantee Program $0

SCORE $7,000,000

Small Business Development Centers $112,624,000

504 Loan Program $70,645,000

Women’s Business Centers $13,997,000

Veterans’ Business Outreach Centers $2,500,000

Microloan Program $42,901,000

PRIME $8,000,000

New Markets Venture Capital Program $0

7(a) Export Loan Guarantees $0

HUBZone $2,189,000

Small Business Technology Transfer Program $0

Small Business Innovation Research Program $0

Federal and State Technology Partnership Program $2,000,000

Total $5,561,941,707

Source: Commerce, HUD, SBA, and USDA. 

27

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The CHAIRMAN. Thank you for your testimony. 

I have one question. Your testimony indicated most of the fragmentation found among these programs is concentrated in programs which have carve-outs for economic or other eligibility criteria. In your judgment, do those set-asides and carve-outs lead to 

a fragmentation of program delivery? 

Mr. SHEAR. You have asked a very good question. And to a large 

degree, for the carve-outs, the set-asides can create certain challenges in delivering programs; yet it involves a view by the Congress and others toward what types of targeting is appropriate in 

programs. So it is one of the challenges in terms of how programs 

are structured. So, for example, for counseling and training programs, some of the programs across the agencies are more focused 

on lower-income populations than some of the others. If you were 

going to try to combine the programs, it would be a challenge to 

have programs under common administration that would be able to 

28

provide those carve-outs. So yes, the carve-outs can create a challenge in terms of avoiding fragmentation; but nonetheless, we 

think there are opportunities to try to address the fragmentation 

issues. 

The CHAIRMAN. Thank you. That is all the questions I have. 

I recognize the gentleman from California, the Ranking Member, 

Mr. Costa. 

Mr. COSTA. Thank you again, Mr. Chairman. 

Mr. Shear, it is my understanding that the GAO, when doing 

your evaluation on the potentially duplicative nature of the Federal 

economic development programs on the four agencies that you 

looked at statutory and regulatory population requirements. Is that 

correct? 

Mr. SHEAR. Yes. In our initial work which we reported on a little 

over a year ago, our first attempt there was to look at the design 

of these 80 programs and there we were focusing very much on 

what the programs could fund. So it was our first high-level look 

at these programs. 

Mr. COSTA. Is that a useful tool, do you think, in preventing 

overlap? 

Mr. SHEAR. Being here today, I can say that, yes, I think it was 

a very effective tool in a sense that we were able to capture information on how programs were designed to identify what should be 

part of the landscape to drill down on. So where the question was 

a year ago, how much could be made of what we found? We viewed 

it as more of a step to lead to what the agencies could focus on and 

what we could focus on going forward, and that is why we are drilling down in this area. So if I could take it one step further——

Mr. COSTA. I was going to say, so what is your follow-up going 

to be? 

Mr. SHEAR. Our follow-up here is that in one thing I am reporting on today, you notice we use the words overlap and fragmentation because in terms of the drill-down we have done among these 

programs and the information we have collected and continue to 

collect and examine is that we have a story that is largely of overlap rather than duplication. We certainly have a story of fragmentation where you have various parties and various agencies undertaking activity that should be coordinated in a better fashion. 

Mr. COSTA. So in your final report—again because my time is 

limited here——

Mr. SHEAR. Yes. 

Mr. COSTA.—are you going to then make recommendations to the 

Subcommittee and the full Committee on how we can avoid the 

overlapping and duplication in these four agencies? 

Mr. SHEAR. Yes. The biggest part and the drill-down on rural 

America and in reaching out to stakeholders in the economic development process in rural America is to try to get an idea as far as 

to what degree there might be duplication in some of the, for example, loan guarantee programs, some of the technical assistance programs that Rural Development has versus SBA and EDA. And 

so——

Mr. COSTA. So you are also looking at——

Mr. SHEAR.—we are also doing more of a drill-down. We are looking——

29

Mr. COSTA. Go ahead. 

Mr. SHEAR. I am sorry. We are doing more of a drill-down to see 

to what degree——

Mr. COSTA. In what timeline are you going to report to——

Mr. SHEAR. We expect to report at the end of July on that. 

Mr. COSTA. Of this year? 

Mr. SHEAR. Of this year. What we expect to recommend in terms 

of what our expectation of recommendations I will just list one of 

them. Under the GPRA Modernization Act, the agencies are actively involved in crosscutting issues, including serving small businesses. And so what we are looking for is informing decisions on 

strategically how overlap and fragmentation and how service delivery can be improved by looking for opportunities for those to—so 

we are going to be recommending actions that will better able the 

Congress and the agencies to better serve the economic development needs of its communities. 

Mr. COSTA. A couple quick questions on your report to us. Are 

you going to look at significant differences in the cost of delivery? 

Mr. SHEAR. Yes. We have collected extensive information from all 

four agencies on the cost of delivery. The data quality varies among 

the agencies. We continue to ask them for more refined cost data, 

so we are really trying to push as far as we can based on what data 

the agencies have. 

Mr. COSTA. You will be able, you think, to make recommendations on which models work best? 

Mr. SHEAR. We think we will be able to inform decisions. We are 

not in the business of picking which programs should be the winners or losers of what agencies but to provide information that will 

inform decisions about how government programs and economic development programs can be structured to be more effective. 

Among the things we might find is that the data itself that agencies collect and more importantly how the agencies use that data 

to evaluate the effectiveness of their programs, their mechanisms, 

and other ways they go about doing their business, we might make 

recommendations in the area about how better data collection and 

evaluation could lead to better decisions in program delivery. 

Mr. COSTA. Well, we will look forward to that report in July. 

And Mr. Chairman, I have no further questions. Thank you very 

much. 

The CHAIRMAN. Thank you, Mr. Costa. 

Mr. Scott? 

Mr. SCOTT. Thank you, Mr. Chairman. 

And I would like to follow along that same thought process if you 

would, Mr. Chairman. Basically what you are telling us is that the 

agencies are not collecting enough data to determine whether or 

not the programs that are being funded or the loans are inefficient 

or appropriate use of tax dollars, is that correct? 

Mr. SHEAR. Yes, let me answer in two steps. And we make a distinction between program metrics that are collected under an annual basis in what we call evaluations of effectiveness. So I will use 

an analogy to counseling and training programs by SBA where 

SBA has three major counseling and training programs. They do 

have certain metrics on businesses served and certain metrics 

about just how many people and how many businesses are being 

30

trained and receive counseling. And that can be useful within 

itself. But then what they do is that they conduct periodic evaluations where they reach out to those who received counseling and 

training and they receive information from those businesses as far 

as how they valued that counseling and training, how it has helped 

them grow their businesses. And then it collects data on how well 

the businesses do because after all, one of the measures of success 

of how well the programs do is how well the businesses do after 

receiving the counseling and training. So we are looking for more 

of an evaluative approach by the agencies as part of managing 

their programs. 

Mr. SCOTT. Wouldn’t it make sense—I mean every employer out 

there that receives and SBA loan or SBA assistance, certainly the 

tax ID number of that employer is on the application with the SBA. 

Why couldn’t you simply look at the number of jobs created and 

based on the payroll tax number that is already being provided? 

Mr. SHEAR. With jobs created, you have brought up a very important point. Jobs created is one of the metrics that tends to be used 

for GPRA purposes. We haven’t examined that avenue to collect 

data on jobs created. We certainly have looked at a number of Inspector General reports over time on how agencies do collect data 

on jobs created. Part of our issue with jobs created is it is hard to 

create a benchmark of what jobs would have been available by both 

that particular employer and other employers in the absence of the 

SBA assistance. So we are looking for an approach that looks a little bit more how well do the businesses do that get the loans? 

So, for example, in 2007 we recommended SBA for its 7(a) Program. It was already collecting a lot of data on its businesses that 

get what are called 7(a) loan guarantees, that they should use that 

information to try to provide some evaluative information as far as 

that, the businesses that loans are being made to by lenders in the 

program of whether those businesses are actually succeeding. So 

you bring up a very important point we haven’t quite looked at, but 

we do look at job metrics as being important to collect, but we are 

also looking for something that is more general in terms of what 

is the purpose of the program. 

Mr. SCOTT. And Mr. Shear, I appreciate your comments. I think 

maybe that is where the breakdown if you will in an entrepreneur 

and small business owner who has only been in Congress for 12 to 

13 months like myself is and where maybe people who have been 

in the Beltway a lot longer are in that the number one issue is 

jobs. Americans want to get back to work. And if the SBA is going 

to be there—and I do believe that the SBA has been a successful 

government program if you want to refer to it as that—but if the 

loan does not create additional payroll and additional jobs, then the 

funds probably should have gone somewhere else where they did 

create additional payroll and jobs. 

And so I don’t understand why it is so hard to get that metric 

of the payroll associated with the tax ID number that got the loan 

with the SBA backing, because the payroll is going to be reported 

according to the tax ID number and the loan is going to be reported 

according to the tax ID number. I don’t understand why it is so difficult to look at this tax ID number there was a million dollars 

worth of payroll generated before the loan; 3 years after the loan, 

31

total annual payroll now is $2 million. That seems to me like it 

would be pretty simple and help us as the Members evaluate what 

the most efficient programs are with putting Americans back to 

work because that is our goal is to put them back to work. 

Mr. SHEAR. I think you raise a very important point and even 

though we haven’t looked at that specific question, I will certainly 

bring it up with SBA, have they ever explored this? but I know 

from another SBA program that is not included in this work, we 

have done a lot of work on their Disaster Loan Program, and we 

know that we have been involved a lot in recommending ways that 

SBA and IRS can work together in terms of verifying income and 

other information by sharing information for those who apply for 

disaster loans. So perhaps that might provide some type of a model 

for what you are suggesting. 

Mr. SCOTT. Well, and you are not requiring the entrepreneur or 

the business owner to provide any additional documentation? You 

are not breaking it down to individual taxpayers, so you are still 

protecting their personal identity? You are taking a tax ID number 

that the SBA has and looking at the total growth in wages once 

the loan was delivered. 

Mr. Chairman, I know I have gone over my time. Thank you, sir. 

And thank you, sir, for your testimony. 

And I yield back. 

Mr. SHEAR. Thank you. 

The CHAIRMAN. I have no further questions. I don’t believe Mr. 

Scott does and nobody else is here so we just want to thank you 

for your testimony. 

Mr. SHEAR. Thank you very much. 

The CHAIRMAN. I have no closing statement to make. Mr. Costa 

has already had to go to another committee, and so again I thank 

the Members of the Committee and the witnesses for your testimony. I thank our excellent Republican and Democratic staffs for 

their good work that they always do and appreciate your putting 

this together. 

Under the rules of the Committee, the record of today’s hearing 

will remain open for 10 days to receive additional material and 

supplementary written responses from the witnesses to any question posed by a Member. 

This hearing of the Subcommittee on Rural Development, Research, Biotechnology, and Foreign Agriculture is adjourned. 

[Whereupon, at 11:15 a.m., the Subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

32

33

SUPPLEMENTARY MATERIAL SUBMITTED BY HON. DALLAS P. TONSAGER, UNDER

SECRETARY FOR RURAL DEVELOPMENT, U.S. DEPARTMENT OF AGRICULTURE

During the March 21, 2012 hearing entitled, Hearing To Identify Duplicative Federal Rural Development Programs, requests for information were made to Hon. Dallas P. Tonsager. The following are their information submissions for the record. 

Insert 1

Mr. TONSAGER. We did establish the Memorandum. We are doing joint 

trainings between our people that are involved in business funding and trying 

to learn from each other regarding their abilities in business lending. Our program, of course, goes to very large loans where SBA is somewhat restricted in 

size. We advocate with clients regarding use of the SBA loans so we have our 

staff trained in how the SBA loans work. And if it is better suited for them in 

some cases, then we would advocate that they would pursue an SBA loan. And 

we also work more closely with lenders so we would have a group of business 

and industry loan lenders, some 1,800 banks that like to use our program. We 

try and coordinate—especially when both SBA and the B&I Program is in the 

same financial institution. 

Mr. SCOTT. Do you have the information on the number or the percentage of 

businesses that you are involved in the initial or the startup funding that are 

in business after 3 years? 

Mr. TONSAGER. I am sorry. I don’t have that with me today but we will certainly provide it to you.

Between 2002 and 2008, based on readily available data, RBS identified a total 

of 3,731 loan guarantees to businesses. Of these 3,731 loan guarantees, almost 99 

percent of the businesses receiving the guaranteed loans were still in operation 3 

years after the date of loan obligation. 

RBS identified 203 startup businesses receiving a loan guarantee under either the 

B&I Guaranteed loan program or REAP. Of these 203 start-up businesses, 

97percent were still in operation 3 years after the date of loan obligation. (Note: Not 

all of the guaranteed loan data identified the date a business was established. Thus, 

the result on startups represents a subset of all loan guarantees made to startups.) 

RBS does not track date of establishment for its grant programs. 

Insert 2

Mr. HULTGREN. Thank you, Mr. Chairman. 

Thank you for being here today. A couple questions. I understand that Rural 

Housing Service has been trying to get some access to the same employment 

data that HUD uses to verify tenants’ incomes. What benefit would this earned 

income verification data provide to RHS and I wonder what is preventing you 

from using it? 

Mr. TONSAGER. I will have to ask my folks what the status of that proposal. 

I thought we were getting close if not had gotten to that point yet. It would 

help with the evaluation of loan applications and its time limits of getting the 

loan applications done. Having information available would help us make sure 

the portfolio performs well and that we are making loans to eligible applicants 

as well as making sure that they get repaid. And I am sorry. I don’t know if 

any of my staff knows for sure. We will have to report back on the status of 

that.

RHS is requesting in the 2013 Budget the authority to be added to the list of 

agencies permitted to utilize the Department of Health and Human Services’ National Directory of New Hires Database. In order to have access to this data, specific 

authority in law must be granted. HUD has had this authority for over 10 years. 

It is the primary income verification system used by HUD, its public housing authorities, and multi-family property owners and management agents. Utilization of 

this system has substantially reduced instances of improper subsidy payment errors. 

This access would provide RHS with the ability to obtain accurate income and employment information, helping it to better manage RHS housing programs by ensuring the agency is providing the appropriate amount of housing subsidy based on the 

applicant’s income. RHS would use the income matching information to determine 

multi-family tenants’ eligibility for rental assistance as well as the eligibility of single family direct loan borrowers’ for payment assistance. 

In 2010, the White House’s Domestic Policy Council created the interagency Rental Policy Working Group with the Departments of Treasury, Agriculture, and Housing and Urban Development. As part of its coordinating efforts, the Rental Policy 

Working Group has engaged state, local, individual and private stakeholders to 

identify administrative changes that could increase overall programmatic efficiency 

34

and further enhance the ability of communities to create and preserve affordable 

housing. 

Insert 3

Mr. HULTGREN. . . . GAO and others have proposed consolidation of the Rural Housing Programs 

with HUD. I wonder, do you think the rural areas would see the same attention 

under HUD’s management as they currently receive? 

Mr. TONSAGER. I believe that we provide real opportunities to remote rural 

citizens. Forgive me for using the term unique for rural America, but the people 

in rural America don’t make as much money. And our particular program, I 

think the guarantee program especially is well suited to rural communities in 

that we don’t have a particular down payment requirement. We have been very 

successful in repayment to the point where for the program cost, it doesn’t cost 

the taxpayers any money. There is cost, of course, with our system of delivery 

but not with the fee that we are assessing. We don’t have a cost and the performance of the program has been very good. 

So, the uniqueness of the programs for housing addresses the needs of rural 

people and how to get that delivery in the far corners of rural America becomes 

the challenge for perhaps HUD and others if it were to be combined.

The President’s budget does not support consolidation of RHS programs with 

HUD. The Rural Housing Service is the only Federal program mandated to serve 

exclusively the housing needs of Americans in rural areas. Since the 1950s, RHS 

has recognized the unique economics—and poverty—of rural America and the need 

for programs to fill the housing gap. Over the past 62 years, RHS programs have 

assisted nearly 3.5 million families with direct loans, guarantees of bank loans, and 

grants for home purchase and repair. Yet the need still exists to improve housing 

quality and affordability in rural areas. 

It is noted that the delivery methods of HUD and RHS programs are vastly different. RHS programs are provided to recipients (either individuals or approved 

lenders) through a network of more than 400 offices where RD staff with local 

knowledge and expertise work one-on-one with the borrower to learn and meet their 

individual housing needs, whether it be purchase, repair or rental. 

HUD programs are generally provided through third parties—nonprofits or contractors. These third party providers may not have the same investment or expertise 

in these rural communities, are generally not as attuned to local needs, and could 

prove more expensive in delivering our housing programs to low income families 

who still need our assistance. 

Insert 4

Mr. HULTGREN. If it were combined, I mean is there any expectation or what 

is the expectation of the amount of savings as you combine the programs as far 

as salaries being saved, expenses for the agency? . . .

We have not completed any in-depth study comparing the HUD and USDA housing programs or the advantages and disadvantages, financial and otherwise, of any 

plan to consolidate these programs. It is unlikely that there would be big savings, 

given that USDA has a large field office presence to offer the direct loans, which 

HUD doesn’t have and would presumably need to add. In addition, the Rural Development mission area has three services: RHS, RBS and RUS. Taking away some 

programs from one of the services does not remove the need for the infrastructure 

expenses for the remainder of RD that stays within USDA. 

Insert 5

Mr. HULTGREN. . . . And then I wondered if there is a savings, how USDA 

would seek to reallocate those resources if there was a consolidation or savings 

of administrative costs? 

Mr. TONSAGER. I have not seen any particular identification of what those 

savings might be. I would say for the guarantee program particularly the 

amount of resources is pretty modest. We are working with private institutions. 

The financers are doing the great bulk of the work. Much of our work is monitoring of those loans in that case. The direct program costs more because it is 

more of a hands-on approach with individual people and helping them to get 

good credit. So I am sorry; I just don’t have the information.

We have not completed any in-depth study comparing the HUD and USDA housing programs nor the advantages and disadvantages, financial and otherwise, of any 

plan to consolidate these programs. But our initial thoughts on the issue are that 

the savings would be minimal at best. 

35

SUBMITTED QUESTIONS

Response from Hon. Dallas P. Tonsager, Under Secretary for Rural Development, U.S. Department of Agriculture 

Questions Submitted By Hon. Henry Cuellar, a Representative in Congress from 

Texas 

Question 1. What effect have recent budget cuts had on Rural Development agency operations nationwide? 

Answer. The recent budget reductions pose challenges, both in terms of delivering 

programs and managing our portfolio. Staff reductions, to a certain extent, challenge 

RD’s ability to deliver some programs in a timely manner and the agency will have 

higher training costs as remaining staff take on new and different responsibilities. 

Rural Development’s administrative resources are contracting, while its program 

portfolio is expanding, putting tremendous strain on the resources available to manage the portfolio. RD’s administrative budget has decreased by $61 million since Fiscal Year (FY) 2010. Staff levels have fallen by 1,000 since 2007, with 500 of that 

total occurring this FY 2012. RD’s portfolio exceeds $165 billion and continues to 

grow, and the appropriated program level for FY 2012 is $38.9 billion. Meanwhile, 

we make portfolio and risk management top priorities as we strive to ensure the 

integrity of RD programs. 

To address these challenges, RD agencies are making adjustments and developing 

systematic approaches in their business management. For example, the Rural Business Service (RBS) is reorganizing its staff to best meet the demands of each program. At the state level, RBS is providing training across programs to the field support staff, including continued training of 17 new or acting Business Program Directors. RBS continues to work with our network of 47 State Offices and their Business 

Program Directors and field staff to ensure successful delivery of all our programs. 

RBS just recently completed training on the energy programs across the country. 

In addition, RD continues to work with all of our partners, including our network 

of over 1,700 community banks participating in the Business and Industry guaranteed loan program and the cooperative organizations associated with our cooperative 

programs, leveraging our available resources to deliver RD business programs successfully. 

The Rural Housing Service (RHS) is exploring a number of ways to achieve savings and still meet the housing needs in rural America. RHS has developed a new 

business model for delivery of the Section 502 Single Family Housing Guaranteed 

Loan Program (SFHGLP). The centralized structure model allows states to successfully and consistently deliver the program with a core group of specialists, technicians, and assistants. States are able to focus their time and knowledge specifically 

on the SFHGLP and offer more efficient and timely loan review and approval, consistent loan decisions, and increased customer satisfaction. 

Similarly, the Single Family Housing (SFH) Direct Loan Program is promulgating 

a rule to create a formal process for designating qualified loan application packagers 

as agency-certified. The proposed rule will streamline application processing of SFH 

direct loan applications, reduce the burden placed on the smaller RHS staff and ensure that the program is successfully delivered to eligible participants through certified packagers. 

The Rural Utilities Service (RUS) has also expanded coordination of the 

broadband buildout under the Recovery Act to our State Offices in order to assist 

with program delivery. Rural Utilities Service is also working more closely with 

other Federal agencies to better coordinate delivery of similar programs and, where 

possible, use a regional approach to leverage economies of scale in infrastructure 

funding. 

RD is also engaged in a number of strategies to ensure that taxpayer dollars are 

used in the most strategic way to make the biggest difference. For example, several 

RD programs are supporting regional and community economic strategies that leverage resources and broaden the scope of project activity. These efforts are often 

inclusive of communities hardest hit by economic downturns or persistent poverty 

conditions. RD has also been active in supporting the Stronger Economies Together 

(SET) initiative which supports the development of regional economic solutions. 

These initiatives encourage and engage direct community involvement as well as 

multi-county and multi-state collaboration. Promoting a more regional or collaborative deployment of resources allows RD to target or concentrate resources in a 

particular area, which can in turn bring economic relief to all communities within 

the project area.

Question 1a. What about specifically in Texas? 

36

Answer. While the reduction in staff throughout Texas has resulted in some temporary delays in program delivery, RD has been working there to implement many 

of the initiatives described above as part of its national strategy for tackling the 

challenges associated with the recent budget cuts. 

Allocations of RD program funds to states are based on formulas using decennial 

Census data (see answer to Question 2. below); therefore, the reduction impact in 

program levels on Texas is same, in terms of percentage of change, as the national 

changes noted above. 

The following table shows the program dollar investments in Texas between FY 

2009 and FY 2011:

Program 2009 2010 2011

Single Family Housing Direct $34,100,489 $75,123,994 $59,942,101

Single Family Housing Guaranteed $731,761,082 $892,012,446 $826,636,595

Rural Rental Housing $749,799 $0 $287,128

Rental Assistance $38,670,524 $40,038,544 $47,267,993

Community Facilities Direct $8,529,137 $40,311,837 $58,928,708

Community Facilities Guaranteed $10,802,500 $17,400,000 $5,605,000

Community Facilities Grants $6,117,682 $6,493,968 $1,047,990

Water and Waste Disposal Direct $56,068,030 $103,326,500 $44,382,000

Water and Waste Disposal Grants $35,563,168 $23,389,623 $28,372,415

Business and Industry Guaranteed $50,599,965 $134,259,920 $43,000,281

Rural Business Enterprise Grants $3,042,310 $1,739,000 $1,402,000

Intermediary Relending Program $1,500,000 $750,000 $998,000

Multi-family Housing Guaranteed $8,636,900 $4,960,000 $1,500,000

Home Repair Loans and Grants $3,364,569 $3,857,483 $3,554,827

Farm Labor Housing Program $5,222,085 $3,000,000 $10,781,390

Electric $262,066,000 $545,395,000 $376,602,000

Telecom $11,185,641 $241,517,260 $26,285,759

Value-Added Program Grants $0 $662,500 $0

Renewable Energy Loans and Grants $413,243 $1,767,149 $19,460,104

Self Help Program $293,000 $607,945 $619,445

Totals $1,268,686,124 $2,136,613,168 $1,556,673,737

We anticipate that the FY 2012 budget and requested amounts for FY 2013 will 

be sufficient to fund qualified applications consistent with other states. Electric and 

Telecommunications funds are not allocated by state, so we cannot currently determine the impact program spending might have on Texas projects.

Question 1b. Has a shortage of operational or administrative costs limited the effectiveness and availability of programs to those wishing to apply? 

Answer. For most RD programs, the shortage of operational and administrative 

costs has challenged delivery, but RD has worked to ensure the effectiveness and 

availability of our programs to applicants. There are three programs, however, that 

have been affected:

• The Rural Microentreprenuer Assistance Program (RMAP). Section 726 of the 

Consolidated and Further Continuing Appropriations Act of 2012 limited RD 

salaries and expenses from utilizing salary and expense appropriations to carry 

out the RMAP program. This has resulted in RBS being unable to accept any 

applications in FY 2012 for this program.

• Rural Energy for America Program (REAP). Section 726 of The Consolidated 

and Further Continuing Appropriations Act of 2012 limited RD salaries and expenses for delivering REAP such that RBS can only fund projects totaling $22 

million out of the mandatory $70 million provided in the 2008 Farm Bill for the 

program. This reduction in available administrative funds will limit the number 

of projects funded.

• Bioenergy Program for Advanced Biofuels (9005). Section 726 of the Consolidated and Further Continuing Appropriations Act of 2012 limited RD salaries 

and expenses for delivering the 9005 program such that RBS can only can only 

make payments totaling $65 million out of the mandatory $105 million funding 

provided in the 2008 Farm Bill. This reduction will limit the support to advanced biofuel producers.

Question 2. How are state allocations of rural development determined? 

Answer. Rural Business Service

State allocations are made on an annual basis and calculated as program level 

amounts, not by budget authority. State allocations are made for the following programs:

• Business and Industry Guaranteed Loans

37

• Rural Energy for America

• Rural Business Enterprise Grants

• Intermediary Relending Program

The same basic formula criteria, data source, and weight are used for each of 

these four programs in determining state allocations. For FY 2012, the 2000 Census 

data was used. 

The basic formula takes a number of criteria that reflect the funding needs for 

a particular program and through a normalization and weighting process for each 

of the criteria calculates the basic state factor (SF). The criteria used in the basic 

formula are:

• State’s percentage of national rural population

• State’s percentage of national rural population with incomes below the poverty 

level

• State’s percentage of national nonmetropolitan unemployment

Each of the three criteria is assigned a specific weight according to its relevance 

in determining need. The percentage representing each criterion is multiplied by the 

weight factor and summed to arrive at a state factor (SF). The SF cannot exceed 

0.05.

SF = (State’s percentage of national rural population × 0.5) + (State’s percentage 

of national rural population with incomes below the poverty level × 0.25) + 

(State’s percentage of national nonmetropolitan unemployment × 0.25)

• State’s percentage of national nonmetropolitan unemployment

The amount allocated to a state for a program is calculated by multiplying the 

state’s State Factor by the amount available for allocation for that program less the 

sum of the amount held in reserve by the National Office plus the total base and 

administrative allocation for that program:

SF × (Amount available for allocation ¥ (National Office Reserve + total base and 

administrative allocations))

Each program identifies a ‘‘base allocation.’’ The ‘‘base allocation’’ is the minimum 

amount that will be allocated to the state. If the allocation formula results in an 

amount less than a program’s base allocation, RBS will allocate that state the base 

allocation. For example, in FY 2012, the base allocation for the Business and Industry Guaranteed Loan program is $5 million. If the formula calculated an allocation 

of $3.5 million for State A, the Agency would allocate $5 million to State A. For FY 

2012, the base allocations for the four programs are:

• Business and Industry Guaranteed Loans—$5 million

• Rural Energy for America—$50,000 for loan and grant allocations; $20,000 for 

grant allocations of in the amount of $20,000 or less

• Rural Business Enterprise Grants—$72,000

• Intermediary Relending Program—$150,000

Rural Housing Service

The allocations are need based per state. For instance, the criteria for the Section 

502 Direct loan program include: State’s percentage of the national number of rural 

occupied substandard units (25% weight); state’s percentage of national rural population (10%); State’s percentage of the national rural population in places of less 

than 2,500 population (15%); State’s percentage of the national rural households between 50 and 80 percent of median income (30%); and, State’s percentage of the national number of rural households below 50 percent of area median income (20%). 

We use the decennial Census for our allocation formulas. The allocation formulas 

for Fiscal Year 2012 were based on the 2000 Census data. While the allocation formulas for the other SFH programs vary, all are based on the size and need and the 

decennial Census. 

Multi-Family Housing loan and grant funds are not usually allocated by state. 

Multi-Family Housing publishes annual notices soliciting applications from the national office, for loans in its Section 515 direct and Section 538 guaranteed loan programs, and grants and loans in its Section 514/516 Farm Labor Housing and Preservation and Revitalization programs. Funding awards are made on a case-by-case 

basis, based on the applications’ scores and feasibility of the transactions involving 

the loans or grants (as determined by Rural Housing’s underwriting of the loan). 

Housing Preservation Grants are allocated to states based on a formula factor published by RHS. 

38

Community Facilities (CF) Direct and Guaranteed loan funds are allocated to 

states based on a formula that contains the following three criteria and weights: (1) 

State’s percentage of national rural population (50%), (2) State’s percentage of national rural population with incomes below the poverty level (25%), and (3) State’s 

percentage of national nonmetropolitan unemployment (25%). CF Grant funds are 

allocated to states based on a formula that contains the following two criteria and 

weights: (1) State’s percentage of national rural population (50%), and (2) State’s 

percentage of national rural population with incomes below the poverty level (50%). 

The National Office generally retains a reserve of 10 percent of the appropriated 

amounts for CF to fund high priority projects when a state has insufficient funds.

Rural Utilities Service

In RUS Water and Waste Programs, funds are allocated to states based on a formula derived by guidance in the statute and codified in our regulations. The formula is based upon the latest decennial Census data for rural population, rural poverty and rural unemployment. The weighting of the criteria is established in RUS 

1780 regulation, which is 50 percent for rural population and 25 percent each for 

rural poverty and rural unemployment. 

Electric and Telecommunications funds are not allocated by state.

Question 2a. Do these allocations take into account operational costs? 

Answer. RD does not take into account operational costs when making state allocations.

Question 2b. Or are allocations need based, or based on population or land area? 

Answer. Allocations are generally based on the basic parameters: rural population, 

poverty and unemployment. Thus, rural population is directly accounted for in the 

allocation process. To the extent ‘‘need’’ is reflected by a state’s poverty and unemployment rates, then the allocation takes into account ‘‘need.’’

Land area is not included in the allocation process.

Question 3. Are agencies, such as yours, communicating with other agencies doing 

similar work in similar areas? 

Answer. USDA works closely with other agencies such as SBA and HUD to better 

coordinate overall policy and leverage opportunities for our customers. In particular, 

the White House Rural Council builds on other interagency relationships to increase 

coordination and leveraging. Through collaboration, USDA Rural Development is 

able to utilize its unique field office structure, which allows the Federal Government 

to maintain a local presence in the rural communities we serve. Other Federal partners do not have a local presence in these communities that can assist in the development and growth of the community, and thus USDA can facilitate those agencies’ 

ability to reach local communities directly.

Question 3a. If not, is there a reason for a lack of information sharing? 

Answer. Not applicable.

Question 3b. If so, can you provide examples of these partnerships? 

Answer. Examples are provided below.

• USDA and the Small Business Administration (SBA) are working together to 

bring private equity and venture capital investors together with start-up rural 

businesses, especially at the state and local level where they frequently collaborate to conduct outreach and training events. Through the White House Rural 

Council, SBA and RBS partnered to host a series of six roundtable discussions 

on increasing private investment capital for rural small businesses in FYs 

2011–2012. This effort includes partners from the financial industry, Farm 

Credit Administration, and state agencies. The two agencies also established a 

working group to create consistent and streamlined application processes.

USDA and SBA also meet regularly to discuss new partnership opportunities, 

including joint lending for projects. Each agency’s unique lending parameters 

create leverage opportunities and the impact of this leveraging increases access 

to capital for rural businesses. For example, a rural business can use a Business 

and Industry (B&I) loan guarantee for the purchase of real estate and also use 

an SBA guarantee for working capital or equipment. The impact of this 

leveraging for rural businesses is increased access to capital.

• A formal Memorandum of Understanding (MOU) with the Housing and Urban 

Development (HUD) describes the cooperation between RHS and HUD on crosschecking disaster assistance recipients.

• The Federal Interagency Partnership for Colonias, farm workers and rural communities connects Federal, state, and local government agencies and community 

organizations, such as legal aid groups, to discuss and solve legal problems that 

impact Colonias and migrant farmworker communities. On June 12, 2012, 

39

USDA, the U.S. Department of Housing and Urban Development (HUD), and 

the U.S. Department of the Treasury’s Community Development Financial Institutions Fund (CDFI Fund) announced a joint ‘‘Border Community Capital Initiative’’ (Border Initiative), a collaboration designed to increase access to capital 

in the U.S./Mexico border region which includes some of the poorest communities in the country. The three agencies signed a Memorandum of Understanding that will offer up to $200,000 to nonprofit and/or tribal financial institutions serving colonias for direct investment and technical assistance focusing 

on affordable housing, small businesses, and community facilities.

• Single Family Housing Guaranteed Loan Program (SFHGLP) partners with the 

Department of Housing and Urban Development (HUD) in evaluating applications via an automated underwriting system. Automated underwriting systems 

are an efficient, consistent, objective and accurate method of mortgage underwriting compared with traditional manual methods. RHS’s automated underwriting system is known as the Guaranteed Underwriting System (GUS) and 

uses a modified version of HUD’s scorecard to measure an applicant’s ability to 

repay the mortgage debt as agreed. Collaboration between Rural Development 

and HUD has led to recent changes in the mortgage scoring utilized by the 

Agency.

• RD collaboration with the Department of Homeland Security/Federal Emergency Management Agency and the Federal Communications Commission to improve access to emergency communication systems and disseminate critical information to rural communities. The Community Facilities Direct and Guaranteed Loan and Grant programs can support public safety licensees by funding 

necessary equipment and upgrades. These improvements will help these licensees in meeting the Federal Communications Commission’s mandatory narrow 

banding deadline of January 1, 2013.

• MOU between USDA and Environmental Protection Agency (EPA) on improving sustainability of rural water and waste systems. Since the MOU has been 

in effect, both agencies have worked together and with rural stakeholders to: 

encourage partnering of funding across the agencies; develop sustainability assessment tools, promote the hiring of Veterans by rural water and waste systems (in partnership with the Veterans Association), conduct webinars to promote system partnerships in rural areas (two so far—Ohio and Kentucky), and 

conduct rural water and waste sustainability workshops. (March 13 in Michigan; May 9 in California, one other by the end of the FY 2012).

• USDA is a key member of the Interagency Infrastructure Task Force (ITF), 

chaired by EPA and including USDA, HUD, Indian Health Service and Department of Interior, that is working to improve access and sustainability in Native 

American and Alaskan Native Communities. The current focus of the task force 

is on sustainable tribal utilities. Recent activities include hosting a series of 

calls featuring presentation from Tribal Utilities on successful efforts and the 

unique challenges of providing and sustaining water and waste utilities in tribal 

communities.

• RD executed a MOU with the Department of Health and Human Services 

(HHS) to improve collaboration and to strengthen healthcare infrastructure in 

rural America. To help meet the health care needs of rural America, USDA RD 

and HHS’s Office of the National Coordinator for Health Information Technology and Health Resources and Services Administration are partnering to leverage resources to increase the availability of capital for healthcare facilities 

and health information technology, with the goal of improving the accessibility 

and quality of medical services in rural communities.

• RD coordinates with the Department of Energy on a variety of smart grid, energy efficiency and renewable energy initiatives, and with the EPA on emissions 

regulations. RD has also been active in interagency policy development related 

to broadband deployment, public safety communications and critical infrastructure with the Commerce Department’s National Telecommunications Information Administration.

• USDA is coordinating with other Federal and state agencies to improve the 

water and waste disposal infrastructure application process across funding 

agencies. To that end, USDA is chairing a working group that is seeking to 

standardize a key component of the application process (the Preliminary Engineering Report) with the goal of adoption by Federal and state funders. USDA 

is also leading a similar effort through the ITF that would be implemented by 

all Federal funders of tribal water and waste infrastructure.

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Interaction continuously occurs at our 47 State Offices with groups such as state 

housing finance agencies, state regulators and support groups. Our most effective 

interaction with outside groups occurs at the local office level. Staff in each of 400+ 

offices is embedded in rural communities and are aware of the assistance available 

locally. They work closely with local governments, community action agencies, 

church and business groups, lenders and others to achieve the mission of our programs.

Question 4. Have you reviewed the GAO report how agencies working in rural 

water areas on the border are doing duplicative work (Rural Water Infrastructure—

Improved Coordination and Funding Processes Could Enhance Federal Efforts to 

Meet Needs in the U.S.-Mexico Border Region) and are you implementing any of the 

recommendations the report recommends, or would need congressional authorization 

to move forward? 

Answer. RD is proud of the assistance we have provided to the Colonias regions 

for development of water and waste disposal infrastructure projects. Since 2007, 

more than $130.4 million has been invested by Rural Development in water and 

waste infrastructure projects to serve Colonias areas, benefiting approximately 

143,000 individuals. 

On March 9, 2012, we proposed modifications to RUS regulations that would improve targeting of funds provided by Congress for the Colonias to those areas with 

the least access to water and waste infrastructure. The comment period closed on 

May 8, 2012, and a final regulation will follow later this summer. 

We coordinate at the state and Federal levels with other funding agencies on 

Colonias projects and continue to strengthen our relationships to ensure that we are 

working together to better serve the Colonias. As part of our plan for improving delivery to the Colonias, we had planned to initiate and lead a comprehensive outreach effort which would include USDA’s Federal, state and local partners and 

stakeholders. 

Questions Submitted By Hon. Peter Welch, a Representative in Congress from 

Vermont 

Question 1. The Value-Added Producer Grant Program, or VAPG, provides competitive grants to our nation’s agricultural producers to establish value-added, and 

producer-owned, enterprises. Grant funds can be used for one of two purposes. First, 

grants are awarded for developing business plans and feasibility studies. In other 

words, the program works to ensure that the businesses our producers are creating 

will be viable and sustainable in the long-term, which is smart. Second, grants are 

awarded for working capital to operate these value-added businesses. In these cases, 

applicants must show they’ve done their homework and that they have the business 

plan and feasibility study in place. 

Answer. Correct. That is how the Value-Added Grant Program is delivered.

Question 2. VAPG is a popular and unique program, because it helps farmers increase their share of the food dollar and improve farm incomes, and because it helps 

create jobs in farming communities. What’s more, there’s nothing else like it. It’s 

the only competitive grants program for agricultural producers to add value to their 

products and thus to add value to our economy. Many of my colleagues on the committee have constituents that received grants earlier this year. 

Answer. Yes. That is how the program works

Question 3. Can you speak to the uniqueness and success of VAPG in contributing 

to rural economic development and job creation? 

Answer. The Value-Added Producer Grant (VAPG) program is unique in that it 

provides the funding that allows independent agricultural commodity producers, agricultural producer groups, farmer and rancher cooperatives, and majority controlled 

producer-based business ventures to participate in the economic returns found in 

the value-added markets. Grants assist awardees in conducting feasibility studies 

to develop business plans and strategies for creating marketing opportunities and 

to provide capital to establish alliances or business ventures that enable producers 

to better compete in domestic and international markets. In addition to promoting 

creative, innovative and resourceful businesses, VAPG funds facilitate greater participation in emerging and new markets for value-added products and allow producers to capture a larger share of the marketing margin—essentially converting 

them from commodity producers to value-added business entrepreneurs. 

The VAPG program has had positive impacts for both rural economic development 

and agricultural producers in that it has provided for the resources needed to expand market share and encourage producers to invest in ideas that would lead to 

value-added enterprises. This investment has resulted in more of the marketing 

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margin accruing to producers in both existing and new value-added businesses. Examples of projects to illustrate the success of VAPG are:

• MOO-ville Creamery. In 2005, MOO-Ville creamery in Nashville, MI, was in 

the process of installing a dairy processing plant, but needed help with funding 

the operations. It received a VAPG that provided critical working capital to 

allow it to purchase inventory, pay personnel expenses, provide training to employees and buy a lighted sign. The VAPG award allowed the operation to continue, and they now operate a retail store on property where they sell milk, ice 

cream and cheese made from milk from their dairy operation. It also sells to 

restaurants, coffee shops and retail stores.

• San Miguel Produce. Located in Oxnard, California, San Miguel Produce is 

an independent producer of organic and conventional cooking greens. In 2009, 

it received a $299,874 VAPG working capital grant for socially disadvantaged 

farmers and ranchers. With this grant, San Miguel Produce has been able to 

expand markets for their ‘‘Cut ’n Clean Green’’ products and increase revenues 

over 500 percent.

• The Country Pumpkin. The owner of the Country Pumpkin in Sutton, Nebraska, started raising pumpkins at the age of 13 as part of his SAE (Supervised Agricultural Experience) project for FFA. The pumpkins were sold off a 

trailer that was parked at the end of their driveway. Today the Country Pumpkin has grown to offer more than 50 varieties of pumpkins, squash, gourds, and 

ornamental corn including many heirloom varieties. A few years ago, the owner 

recognized the need to extend the September and October pumpkin market to 

something that could be sold year round. In 2009, the owner applied for an 

$86,150 VAPG planning grant to look into products that could be made from 

pumpkins. The feasibility study was completed by the Food Processing Center 

at the University of Nebraska and showed that there was a market for the 

pumpkin puree and identified several businesses that were interested in buying 

the fresh, locally grown pumpkin puree.

• Champlain Orchards. In 2009, Champlain Orchards in Shoreham, Vermont 

received a $146,959 VAPG working capital grant to expand value-added processing and marketing of apples, peaches, small fruit and vegetables grown on 

the farm. The young owners, who now operate the 100 year old family-owned 

farm, strive to preserve the best traditions of Vermont apple farming, while tapping the best of new farming advances. Expanding their processing and marketing will help increase sales of value-added products by $1 million over a 

three year period. In the early months after receiving the award, there was an 

increase in gross income of 19 percent and an increase in cider sales of 8 percent as a result of this VAPG.

Question 3a. Can you also speak the demand for this program to help inform 

strengthened funding for the program in the new farm bill? 

Answer. Since the program was established in 2001, we have been able to make 

awards to about 33 percent of the producers applying to the program and to fund 

about 30 percent of the funds being sought. Specifically, since 2001, RD has received 

5,256 applications seeking approximately $809 million and has been able to make 

1,730 awards for over $241 million. Since 2009, Rural Development has received 

1,063 applications requesting approximately $136.5 million. For this 3 year time period, RD has funded 495 projects totaling $62.7 million. 

Since 2001, the VAPG program has assisted over 1,700 individual producers, cooperatives, and other rural entrepreneurs establish value-added agriculture businesses and increase their economic well being across rural America. While the demand for funding has historically exceeded supply, awards from this nationally competitive program have reached each of the 50 states and Puerto Rico during this 

same time period.

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