RURAL DEVELOPMENT

FY 2000 and FY 2001 ANNUAL PERFORMANCE PLANS

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

Insurance Reform and Department of Agriculture Reorganization Act. Rural Development is one

of seven mission areas within the Department. It consists of three agencies, the Rural BusinessCooperative Service, the Rural Housing Service, and the Rural Utilities Service. The mission area

also administers the rural portion of the Administration's Empowerment Zones and Enterprise

Communities (EZ/EC) Initiative and the National Rural Development Partnership, a nationwide

network of rural development leaders and officials committed to the vitality of rural areas. The

mission area’s programs are authorized by a variety of statutes which are identified with the

discussion of each goal.

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

to grow, and to improve their quality of life by targeting financial and technical resources in areas

of greatest need through activities of greatest potential.

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

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

This financial and technical assistance may come directly from Rural Development or, with Rural

Development's assistance, from one of the numerous public and private organizations involved in

the development of rural communities. Rural Development agencies deliver over 40 different

loan, loan guarantee, and grant programs in the areas of business development, cooperative

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

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

provide technical assistance to rural families and community leaders to ensure success of the

projects it finances. Rural Development staff are also responsible for the servicing and collection

of a loan portfolio that exceeds $80 billion. Additional information regarding Rural Development

can be found in its strategic plan.

This Plan is a combined Plan for all of the agencies in the mission area. In the past separate

plans were published for each agency. Several performance indicators utilized in the FY 1999

and FY 2000 Annual Performance Plans have been discontinued. These measures can be found

on Appendix A of the FY 1999 Annual Performance Report. Also, several performance indicators

have been added to this Plan. These include: 1) an indicator related to first-year delinquencies for

the single family housing program; 2) a delinquency indicator for the multi-family housing program;

3) an indicator for the establishment of partnerships related to community development technical

assistance; and 4) an indicator related to the development of new work schedules and leave

policies. 

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

provided by selected baseline data below. Rural Development programs will contribute to the

amelioration of these conditions but, without huge increases in funding, cannot markedly impact

the macro indicators of disparity.

From the American Housing Survey (1995 data):

• 3% of all rental units exhibit crowding (more than one person per room).

• 2.7 million families live in substandard housing.

• 60 percent of poor rural households, who pay more than 30 percent of their income towards

housing and utilities, pay less than $500 each month for housing costs.

• 538,000 households reported moderate to severe physical housing problems.

• The median household income for rural renters was $17,254, as compared to $22,051 for

urban renters.

• 23% of rural renters pay over 40% of income to housing costs.
2

• In 570,000 occupied rural housing units the primary source of drinking water was "not safe to

drink."

From the Rural Utilities Service:

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

• Only 17 % of rural libraries are connected to the Internet, as compared to 80% of libraries in

cities with populations exceeding 250,000.

From the Economic Research Service:

• Poverty is 2 percentage points higher in rural areas than in urban areas (15.6% rural; 13.4%

urban).

• Poverty in the rural south is 19.2%.

• The unemployment rate is 16% higher in rural areas than in urban areas (1st quarter 1997).

• 48% of rural Black children live in poverty (1995).

• 3.2 million rural children live in poverty (1995).

• 23% of the rural poor were either full time workers or were in families with one or more full

time workers.

• The unemployment rate is 16 percent higher in rural areas than urban areas.

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

• 23 percent of rural people in poverty were either full time workers or were in a family with at

least one full time worker.

• More than 60 percent of rural people in poverty worked at least part time or had a family

member who worked at least part time.

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

can be impacted by a variety of factors beyond its control. Primary external factors affecting all

programs are:

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

programs and the ability of our customers to meet their obligations. A rise in unemployment

generally impacts low-income families first. Inflation can impact the disposable income of lowincome families and may also adversely impact the ability of small communities and businesses to

meet their obligations if their operating expenses are increasing faster than their income. 

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

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

the ability of new customers to afford the assistance they need. For instance, high interest rates

reduce the ability of our existing direct loan borrowers to graduate to private sector credit. 

Changing interest rates will impact the subsidy rates of each program. Lower interest rates reduce

the subsidy cost of direct loans, and increase the subsidy cost of guaranteed programs. Rural

Development can partially ameliorate the impact of adverse economic conditions by increasing its

loan servicing activities to minimize delinquencies.

Reductions in funding - Reductions in level of funding provided to the Rural Development

agencies will reduce their ability to help rural America and to achieve their goals. Likewise,

reductions in funding for Salaries and Expenses will limit the ability of the mission area to provide

the staff and other resources needed to deliver the programs or achieve the anticipated level of

performance. Reductions in program funding can be partially offset by efforts to increase the

leveraging of agency funds with other sources of funds. Reductions in Salaries and Expenses

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

the detriment of the Government or its customers.

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

other organizations required for program delivery varies among agencies and by programs within

the agencies. Most of the direct financial programs do not require a partner for program delivery. 
3

We are, however, seeking to ensure that placement of our funds is coordinated with, and supports

the delivery of, the funds of other entities. We are also seeking to leverage our funds to the

maximum extent possible with other lenders. Guaranteed programs are made through local

financial institutions with coordination at the local level. The mission area strategic plan is the

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

Improvement and Reform Act of 1996. Rural Development State Directors have developed these

plans with their various public and private partners to support the coordinated delivery of all

resources, both financial and technical.

Other Federal agencies with which the mission area works closely are Economic Research

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

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

Extension Service; and National Agricultural Statistics Service. Outside of the Department,

coordination is required with the Department of Housing and Urban Development, Economic

Development Administration, Environmental Protection Agency, Small Business Administration,

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

Federal Communications Commission.

Strategic Goals: The Rural Development strategic plan consists of three goals and four

management initiatives. The goals support Goal 1 of the Departmental strategic plan --- "Expand

economic and trade opportunities for agricultural producers and other rural residents." The

management initiatives in the Rural Development plan support the four management initiatives in

the Departmental plan.

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

rural America by encouraging the establishment and growth of rural businesses and

cooperatives.”

Goal #1 of the mission area plan is specific to the programs administered by the Rural BusinessCooperative Service (RBS). The Agency is responsible for delivering business development

programs authorized by the Consolidated Farm and Rural Development Act, Food Security Act of

1985, Rural Electrification Administration Act of 1936, and cooperative development programs

authorized by the Cooperative Marketing Act of 1926 and the Agricultural Marketing Act of 1946.

Objectives of Goal 1:

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

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

increase and expand business outlets.

1.3 Direct Rural Development program resources to those rural communities and customers with

the greatest need.

1.4 Manage the loan portfolio in a manner that is efficient and effective.
4

Program Activities supporting Goal 1: Business Programs and Cooperative Development

Programs.

FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

ESTIMATE

FY 2001*

ESTIMATE

Funding (Appropriated)

Program $1.308b $1.368b $1.068b* $1.463b*

S&E $29,162m $28.462m $27.949m **

FTEs (Appropriated) 328 304 304 **

*Includes $30 million in FY 2000, and $15million in FY 2001, for Rural Empowerment Zone and Rural Enterprise

Community Grants. These funds are administered by the Office of Community Development rather than RBS.

** The FY 2001 budget proposal provides for a combined S&E budget for all Rural Development agencies. The S&E and

FTE figures will no longer be provided separately. 

BUSINESS PROGRAMS

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

acquisition, construction, conversion, enlargement, repair or modernization in rural unincorporated

areas and communities with a population of 50,000 or less, unless the community is part of an

urbanized area that has a total population of 50,000 or more. Loan funds are used to finance the

purchase and development of land, easements, rights-of-way, buildings, equipment, facilities,

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

working capital. Eligible applicants include individuals as well as public, private, or cooperative

organizations organized for profit or nonprofit, Indian tribes, and corporate entities. Loans may be

guaranteed by RBS with a maximum percentage for guarantee of 80 percent for loans of $5

million or less, 70 percent for loans between $5 million and $10 million, and 60 percent for loans

exceeding $10 million up to $25 million. 

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

the guaranteed loans. These loans are available to applicants who are unable to obtain the

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

borrower is $10 million.

Rural Intermediary Relending Program (IRP) Loans. These direct loans are made to intermediary

borrowers (i.e. private nonprofit corporations, state or local government agencies, Indian tribes,

and cooperatives) who, in turn, relend the funds to rural businesses, private nonprofit

organizations and others meeting the criteria for ultimate recipients. IRP loans are limited to rural

unincorporated areas, and cities or towns of 25,000 or less population. Financial assistance from

the intermediary to the ultimate recipient must be for economic development projects, the

establishment of new businesses and/or the expansion of existing businesses, creation of

employment opportunities and/or saving existing jobs in rural areas.

Rural Economic Development Loans (REDL). Zero-interest loans are provided to borrowers that

re-loan the funds, at zero interest rates, to businesses in unincorporated areas or small towns of

2,500 or less population. The revolving loan funds provide needed capital to non-profit entities

and municipal organizations to finance community facilities in rural areas which promote job

creation, promote education and training to enhance marketable job skills, or extend or improve

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

economic development in rural areas.

Rural Business Enterprise Grants. Grants are available to public bodies, nonprofit corporations,
5

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

emerging rural business enterprises; the creation, expansion, and operation of rural distance

learning networks; and to provide educational instruction or job training related to potential

employment or job advancement for adult students. Grant funds may be used for the acquisition

and development of land, construction of buildings, purchase of equipment, obtaining of needed

technical assistance, start up capital in the form of a loan, establishment of revolving loan funds,

refinancing, services and fees. Grants are also available to qualified nonprofit organizations for

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

improving passenger transportation services or facilities.

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

Indian tribes, and cooperatives for training, planning, and technical assistance for rural economic

development in unincorporated areas and rural towns of 10,000 or less population. Funds may be

used to pay costs of providing technical assistance for rural business, economic planning for rural

communities, or training for rural entrepreneurs or economic development officials.

Program Activity: Business Programs FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

ESTIMATE

FY 2001

ESTIMATE

Program Level $1.305b $1.365b $1.022b $1.431b

PERFORMANCE GOALS AND

INDICATORS

FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

TARGET

FY 2001

TARGET

Create or save jobs in rural area.

Number of jobs created or saved:

B&I Guaranteed Loans

B&I Direct Loans

IRP Loans 

Rural Business Enterprise Grants

Rural Economic Development Loan 

Rural Economic Development Grant

44,933

861

26,780

14,939

NA

NA

36,507

1,163

25,245

11,464

3,783

1,677

25,800

2,200

29,300

10,800

3,700

600

36,800

2,200

49,300

12,700

3,700

600

Community economic benefits 

B&I Guaranteed Loans

B&I Direct Loans

IRP Loans

Rural Business Enterprise Grants

$2,928m

$52m

$87.5m

$93m

$3,109m

$65.3m

$82.5m

$91m

$2,125m

$125m

$95.6m

$86.5m

$3,125m

$125m

$161m

$101.7m

IRP dollars lent by intermediaries/IRP

dollars obligated to intermediaries

(cumulative since Program inception) 71% 89.41% 75% 75%

Non-IRP funds leveraged for each

dollar of IRP funds $3.76 $3.76 $3.76 $3.76

Number of businesses benefitting

from RBEG program 1,710 2,331 2,219 2,606

Non-RBE funds leveraged for each

dollar of RBEG funds $2.40 $2.40 $2.40 $2.40
6

Non-REDLG funds leveraged per

dollar of program funds 

Loans

Grants 

$5.80

$3.30

$3.00

$3.00

$3.00

$3.00

$3.00

$3.00

Assist marketing networks and

cooperative partnerships in the

establishment and expansion of business

outlets.

Percentage of B&I Guaranteed funds

Obligated to cooperatives 3% 4.4% 20% 20%

Direct Rural Development program

resources to those rural communities and

customers with the greatest need.

Percentage of funds obligated in

Empowerment Zones/Enterprise

Communities 

B&I Guaranteed

IRP

RBEG

1.4%

17%

22%

1.3%

12.1%

21.5%

1.7%

19%

20%

1.4%

19%

22%

Percentage of funds obligated for

other Presidential or Departmental

Initiatives 

B&I Guaranteed

IRP

RBEG

REDLG

24.9%

39%

35%

2%

37.6%

48%

48.8%

47.3%

10%

20%

20%

2%

10%

20%

20%

2%

Manage the B&I portfolio effectively to

minimize the delinquency rate.

Delinquency rate (excluding

bankruptcy cases) 4% 4.8% 3% 3%

Discussion of Performance Goals: Building competitive businesses in rural areas helps

achieve the Department’s goal to “Expand economic and trade opportunities for agricultural

producers and other rural residents.”

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

businesses which can be assisted. The key factor, however, for all of the Business and Industry

programs is the creation or saving of jobs. Performance indicators related to job creation/saved

are established for all programs. RBS estimates that approximately 395,000 jobs will be

created/saved as a result of financial assistance provided by the Business and Industry program

over a 5-year span of time (Fiscal Years 1997 -2001). The following chart provides this projection

by fiscal year:
7

Fiscal Year Jobs

Created/Saved

1997 53,015

1998 84,533

1999 79,839

2000 72,400

2001 105,300

Total 395,087

While job creation at this level will have minimum impact on National employment data, there will

be a significant impact on the unemployment rates and the economy in some rural areas. We are

unable to measure the quantitative impact at this time.

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

concern of the Agency. Several measures relate to funding provided to EZ/EC. communities or to

regional Initiatives established by the President to address unique economic problems.

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

resources to those communities and customers with the greatest need. This includes areas that

have been consistently poor, have high unemployment rates, have out-migration, have

experienced natural disasters, or experienced economic stress due to Federal action, such as the

closure of military bases. Several performances measures relate to this Objective. RBS has

established two strategies to ensure funds are targeted to these communities and customer. The

Administrator has established and monitors annual priority performance goals for State delivery of

programs which include targeting of program resources to target communities and customers. In

addition, priority selection criteria that supports those targeted areas and customers have been

established, are published in the program regulations, and are used in funding decisions.

A second Objective is to manage the business loan portfolio in as manner that is efficient and

effective. This Objective is addressed in the performance measures in terms of delinquency rates. 

Performance of the loan portfolio is continually monitored within RBS. States are delegated

approval authority based on National Office assessment of State employee qualifications and

training in delivery of programs. In addition, a Business Programs Assessment Review was

initiated in Fiscal Year 1998 for the purpose of reviewing State Office administration of Business

Programs within the states. Quarterly review of delinquent loan portfolios and state servicing of

the cases is reviewed by the National Office and assistance is provided to the states, as needed,

to ensure effective and timely servicing decisions are made.

Means and Strategies: Achievement of the FY 2001 Performance Goals and Indicators is

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

FY 2000 program levels and projected performance targets are based on Congressional

appropriations and are not subject to changes that could impact a program’s subsidy rate, such as

a fluctuations in the Treasury discount rate. As required by the Balanced Budget Act of 1997, the

program-specific subsidy rates utilized in the development of the President’s FY 2000 Budget will

be used when establishing obligations of FY 2000 funds. Funds expended in any particular

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

authorized by the Rural Community Advancement Program.
8

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

giving funding priority to projects that support jobs with average wage rates that exceed Federal

minimum wage rates.

RBS, as part of the FY 2001 Administrative Budget funding request, proposes to procure and

distribute off-the-shelf software that provides credit and financial analysis, including the ability to

develop spreadsheets of business transactions. Acquisition of this software will improve the

quality of the portfolio through more informed and consistent credit analyses by field staff for loan

origination and loan servicing activities.

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

of the Business Programs. Funded businesses must meet the standards of OSHA or, if

construction is involved, the Environmental Protection Agency in the same sense that they must

meet the zoning and construction requirement of the state, county, or local government. These

are issues of concern handled by the applicant’s engineer or staff. Other Federal agencies, such

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

funding if a specific project meets their requirements.

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

following automated accounting systems:

C Program Loan Accounting System (PLAS)

C Guaranteed Loan Accounting System (GLAS)

C Rural Community Facilities Tracking System (RCFTS )

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

GLAS are accounting systems designed to manage the agency’s portfolio of direct and

guaranteed loans. These systems contains a variety of data edits to minimize the risk of

inaccurate data being placed in the systems. These two systems are audited annually by OIG as

a part of their development of an audited financial statement.

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

Business Programs, such as the number of jobs created or saved. Data in RCFTS is input by the

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

Director will be used to obtain data regarding several of the performance measures. This

information will be less reliable since it is obtained manually and its accuracy cannot be verified. 

However, confidence in this data is high enough to be acceptable for the purposes for which it is

being used.

Jobs created or saved is an important indicator for the Business programs and the an estimate of

the jobs being created or saved is determined for each loan during processing. The exception to

this is the IRP program. On the average, each $100,000 of IRP money loaned by the intermediary

results in one ultimate recipient (business) loan. This loan provides jobs for approximately 20-25

people. The average loan to an ultimate recipient is 8.82 years. Based on an average term of

8.82 years per loan to ultimate recipients, the total loan funds available to the intermediary

revolves 3.4 times over the 30-year life of the loan to the intermediary. Therefore, approximately

76.5 jobs are established per $100,000 over the 30-year life of the loans to the intermediaries

(22.5 * 3.4 =76.5).

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

of Labor estimates an economic multiplier effect of $2.50 for every dollar of Business loans or

grants provided. 
9

COOPERATIVE DEVELOPMENT PROGRAMS

Rural Cooperative Development Grants. Grants are made to fund the establishment and

operation of centers for rural cooperative development with their primary purpose being the

improvement of economic conditions in rural areas. Grants may be made to nonprofit institutions

or institutions of higher education. Grants may be used to pay up to 75 percent of the cost of the

project and associated administrative costs. The applicant must contribute at least 25 percent

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

criteria.

The Appropriate Technology Transfer for Rural Areas (ATTRA) Program. The program

encourages agricultural producers to adopt sustainable agricultural practices that allow farmers to

maintain or improve profits, produce high quality food and reduce adverse impacts to the

environment. ATTRA is located on the University of Arkansas campus at Fayetteville, Arkansas,

and functions as an information and technical assistance center staffed with sustainable

agriculture specialists accessible nationally by toll-free telephone.

National Sheep Industry Improvement Center. The Center promotes strategic development

activities to strengthen and enhance the production and marketing of sheep and goat products in

the United States. It does this by encouraging infrastructure development, business

development, market and environmental research, and designing unique responses which

address the needs of the industries and ensures their long term, sustainable development. The

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

for loans, grants, and cooperative agreements. The Center is to be privatized upon receiving total

appropriations of $50 million, or by April 4, 2006, whichever comes first.

Achievement of the FY 2001 Performance Goals and Indicators is contingent upon receiving the

program resources outlined below. 

Program Activity: Cooperative

Development Programs

FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

ESTIMATE

FY 2001

ESTIMATE

Program Levels $3m $3m $16m $17m

PERFORMANCE GOALS AND

INDICATORS

FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

TARGET

FY 2001

TARGET

Assist marketing networks and

cooperative partnerships in the

establishment and expansion of 

business outlets.

Number of Technical assistance

and educational services provided 326 215 200 200

Customer rated quality of technical

assistance (0-5 rating scale) 4.4/5 3/5 3/5 3/5

Leverage of research expenditure

(dollar value of RBS sponsored

research per dollar of RBS research

expenditures) 1.25 1.25 1.2 1.2
10

Research and educational materials

provided to customers 105,096 99,600 100,000 100,000

Number of responses to inquires for

information 15,000 16,500 15,000 15,000

Direct resources to those rural

communities and customers with the

greatest need.

Service to poverty areas (number of

impoverished or economically

depressed counties in which service

was provided) NA NA 75 75

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

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

other rural residents.” 

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

for this assistance is reflected in the following indicators: 

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

farmer’s share had dropped to 23 cents.

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

receive only 41 percent of all farm receipts.

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

be economially viable. These goals reflect the success of the RBS in enhancing the quality of life

of rural Americans by providing leadership in building competitive businesses and sustainable

cooperatives. These goals include the number of businesses, cooperatives, and communities

that receive financial resources and technical assistance, and the impacts on rural economies that

stem from this assistance. These goals also reflect success in implementing the themes from the

mission area strategic plan, including partnering, leveraging, capacity building, etc. Many goals

relate directly to the levels of program funding and Agency staffing levels. Reductions in the

proposed levels of funding and staffing will cause corresponding reductions in the planned levels

of performance.

Means and Strategies: Strategies to achieve the objectives include:

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

rural areas product development of products which have a foreign market.

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

acquisition assistance, and business plan development to minority-owned businesses and

entrepreneurs in training.

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

understanding of cooperatives and marketing opportunities in under-served rural areas.

C Provide field-level training and technical assistance to cooperatives and developing

cooperative groups.

C Establish an Outreach Program and Outreach Liaison Position.

C Improve accessability of Rural Development programs for Native Americans.

Achievement of the FY 2001 Performance Goals and Indicators is contingent upon receiving the

program and general support resources indicated in this plan. 

Verification and Validation: The data comes from the Agency’s program records which are not
automated nor audited. They are, however, considered to reasonable accurate for use by

management. The number of technical assistance and services provided includes services

provided under technical assistance requests, workshops, international briefings, specialized 

analysis, training, staff presentations, etc. 

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

cooperatives or groups that have received substantial technical assistance from RBS during the

year. The customers rate the performance on a scale of 1 to 5, with 5 being the best. The survey

process is managed through the National Office. 

The leveraging of research expenditures includes research funded through direct appropriation to

the salaries and expenses account and allocations from appropriate program accounts. 

Goal 2: Quality Housing and Modern Community Facilities. “Rural Development will

improve the quality of life of rural residents by providing access to technical assistance, capital,

and credit for quality housing and modern, essential community facilities.”

Goal 2 of the mission area plan is specific to the programs administered by the Rural Housing

Service (RHS). The Agency is responsible for delivering housing programs authorized by the

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

Consolidated Farm and Rural Development Act, as amended. 

Objectives of Goal 2: 

2.1 Improve the quality of life for the residents of rural communities by providing access to

decent, safe, sanitary and affordable housing.

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

2.3 Direct Rural Development program resources to those rural communities and customers with

the greatest need.

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

Rural Development programs.

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

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

Facilities programs. 

FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

ESTIMATE 

FY 2001

ESTIMATE

Funding (Appropriated)

Program $4.998b $5.128b $5.811b $6.679b

S&E $412.241m $420.881m $437.858m *

FTEs (Appropriated) 6,189 6,109 6,081 *

* The FY 2001 budget proposal provides for a combined S&E budget for all Rural Development agencies. S&E and FTE

figures, at the agency level, will no longer be provided separately.

HOMEOWNERSHIP PROGRAMS

Section 502 Rural Housing Direct Loan Program. This program provides mortgage financing to

very low- and low-income families who cannot obtain credit from other sources. Borrowers are

offered fixed-interest-rate loans with maturities ranging from 30 to 38 years. The loans are

subsidized at a graduated interest rate level from 1% to a percent over Treasury’s cost of money,

depending on family income. Approximately 40 percent of the people served earn less than 50

percent of the median income in the rural area in which they live; the remainder earn between 50
12

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

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

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

homeownership opportunities to low and moderate-income rural residents, typically those whose

incomes are between 80% and 115% of the median income in the county. The program offers a

90 percent guarantee as encouragement to private lenders to provide 30-year, fixed-rate

guaranteed mortgages for customers who would be unable to obtain credit without the guarantee. 

The loans can be for up to 100% of market value or for acquisition cost, whichever is less, thereby

removing the down payment barrier that prevents many people from becoming homeowners.

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

truly empowers very low-income and low-income rural Americans by enabling them to use “sweat

equity” to help reduce the cost of homeownership. Nonprofit organizations and local governments

may obtain grant funds to enable them to provide technical assistance to groups of families work

cooperatively to build their own homes. Typically, the future homeowners obtain section 502

direct loans to finance their home, however, other mortgage products have also been used. By

providing their "sweat equity", the future owners help themselves as well as others in the group to

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

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

construction costs while learning basic construction and maintenance skills. The Self-Help

Program also builds a strong sense of community commitment and involvement among the

participants.

Section 504 Rural Housing Loan and Grant Program. This program provides financial assistance

to very low-income rural homeowners to remove health and safety hazards from their homes. 

Grants are limited to $7,500 and are only available to elderly homeowners (those age 62 or over)

whose incomes are 50 percent or less of the median in the rural area in which they live. At the

Secretary’s discretion, the grant limit can be increased to $15,000.

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

through non-profit groups and government agencies to very low- and low-income homeowners to

repair their homes, and to rental property owners for the rehabilitation of units which will be rented

to low- and very low-income families. Housing rehabilitated through this program must be brought

up to local building codes.

Section 523 Rural Housing Site Loan Program. This program provides funds to non-profit

organizations to develop building sites for participants in the RHS Self-Help housing program. 

The nonprofit organizations resell these improved sites to program participants at cost, thus

passing on their savings in land and development costs. The interest rate on the loans is 3

percent, and the non-profit organizations repay the loans when they sell the properties. Self-Help

participants who are able to purchase one of these improved sites generally have lower overall

costs and thus require smaller RHS housing loans than those Self-Help participants who acquire

their improved building site through the contract method.

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

Housing Site Loan program in that it provides loans to non-profit organizations to purchase and

develop rural building sites. However, once developed the sites may be provided to any low- or

moderate-income person, not just an RHS Self-Help participant. Loans are made at the

Treasury’s rate of interest.
13

Program Activity: Homeownership

Programs

FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

ESTIMATE

FY 2001

ESTIMATE

Program Level (direct and guaranteed) $3.87b $4.04b $4.50b $5.14b

PERFORMANCE GOALS AND

INDICATORS

FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

TARGET

FY 2001

TARGET

Improve the quality of life of residents of rural 

communities by providing access to credit for

decent, safe, and sanitary housing. 

Total Units Sec. 502 Direct and

Guaranteed 502 and Sec. 504 Loan and

Grant 67,691 65,721* 77,653 81,519

Number of houses financed through the

Section 502 Direct Loan Program

(including credit sales) 17,214 16,145 17,782 20,661

Number of houses financed through the

Section 502 Direct Loan (Natural

Disaster) Program NA 44 1,117 0

Number of houses financed through the

Section 502 Guaranteed Loan Program 39,403 39,752 41,859 47,418

Number of existing houses improved

(Section 504 Loans and Grants) 11,091 9,075 11,405 13,440

Number of existing houses improved

(Section 504 Loans and Grants Natural

Disaster) NA 321 5,490 0

Number of jobs created (Direct 502) 15,687 14,257 15,900 18,400

Number of jobs created (Guaranteed 502) 23,248 21,409 22,500 25,500

Maximize the leveraging of loan funds to

increase the number of rural residents

assisted by Rural Development programs.

Number of borrowers assisted through

leveraging (Direct 502) 4,459 5,371 5,500 10,488

Number of Guaranteed lenders

participating in low-income housing

finance NA 1,147 1,721 2,581

Number of Rural Home Loan Partnerships

40 78 150 180

Provide effective supervision to minimize

delinquencies and future loss.

First-year delinquency rate NA 5.3% 4.8% 4.3%

* Includes 384 Individual Water and Waste Disposal Grants.

Discussion of Performance Goals: Affordable housing help meet the Departmental goal to

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

The primary purpose of the Homeownership program is to increase the inventory of decent, safe

and sanitary housing units available to low- and very low-income families in rural areas. The

agency is tracking the number of homes being built and the number of existing homes being

improved to quantify this effort.
14

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

partnerships with the other organizations involved in rural development. The purposes of these

partnerships are to encourage strategic delivery of the programs of both organizations and to

coordinate the delivery of technical assistance and financing to rural communities. Several

performance measures relate to the leveraging of the program’s funds which is the most likely

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

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

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

time is a factor in any lending program. Since over 80 percent of RHS borrowers are first-time

home owners, it is important they immediately establish a habit of paying their mortgage payment

on time. The Agency pays close attention to the first-year delinquency rate to ensure that those

borrowers who miss a payment are contacted immediately before they become hopelessly

delinquent and no longer able to keep their home. 

Means and Strategies: Achievement of the FY 2001 Performance Goals and Indicators is

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

FY 2000 program levels and projected performance targets are based on Congressional

appropriations and are not subject to changes that could impact a program’s subsidy rate, such as 

fluctuations in the Treasury discount rate. As required by the Balanced Budget Act of 1997, the

program-specific subsidy rates utilized in the development of the President’s FY 2000 Budget will

be used when establishing obligations of FY 2000 funds.

The President’s Homeownership Initiative has helped raise the number of homeowners in the

United States to an all time high. Through this initiative, RHS has developed financial and

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

additional dollars into the development of rural communities.

While other Federal agencies have single family housing programs, RHS’ programs are the only

ones that focus on making affordable credit available to lower income, rural residents. Long term,

fixed rate mortgage credit is less available, and more costly, in rural areas than metro areas. 

RHS’ programs help to level the playing field for lower income families. Through its leveraging

and loan guarantee programs, RHS is also helping the private sector, as well as State Housing

Authorities and non-profits, reach into rural areas that they otherwise have had difficulty serving.

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

most performance measures:

C Program Loan Accounting System (PLAS)

C Guaranteed Loan Accounting System (GLAS)

C Dedicated Loan Origination and Servicing System (DLOS)

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

variety of data edits to minimize the risk of inaccurate data being placed in the system. The

systems are audited annually by OIG as a part of their development of an audited financial

statement.

RENTAL HOUSING PROGRAMS

Section 515 Rural Rental Housing Direct Loans. The Section 515 program employs a publicprivate partnership by providing subsidized loans at an interest rate of 1% to limited-profit and

non-profit developers to construct or renovate affordable rental complexes in rural areas. This 1

percent loan keeps the debt service on the property sufficiently low to support below-market rents

affordable to low-income tenants. Many of these projects also utilize low-income housing tax

credit proceeds. This program is typically used in conjunction with RHS Section 521 Rental
15

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

subsidize the tenant’s rent at an affordable level. With rental assistance, tenants pay a maximum

of 30 percent of their income towards their rent and utilities. Some 515 projects also utilize HUD's

Section 8 project-based assistance which enables additional very low-income families to be

served.

Section 538 Rural Rental Guaranteed Loan Program. This program provides affordable rental

housing to low- to moderate-income people by providing 90 percent guarantees to certified

lenders. For the for-profit sector, the guarantees cover 90 percent loan-to-value ratios. For the

non-profit sector they cover 97 percent loan-to-value ratios.

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

bodies, and non-profit associations to provide living quarters, furnishings, and related facilities for

domestic farm workers. The Section 514 loans have a 1 percent interest rate and a maximum

term of 33 years. The Section 516 grants are used in conjunction with the loans to finance offfarm rental housing which will be affordable for low-wage farm workers. Grants are only available

to a governmental or non-profit organization and may not exceed 90% of the total project cost. 

Section 521 rental assistance can also be used in conjunction with this program. Farm workers

who lease Section 514/516 Farm Labor Housing units must be either US citizens or permanent

residents. A majority of their income must come from farm work.

Section 521 Rental Assistance. In 1989, one in five rural households paid more than 30 percent

of its income for housing costs. The Section 521 Rental Assistance Program helps to mitigate

that rent overburden and also enable very low- and low-income rural residents to live in decent,

safe, and sanitary housing. Rental Assistance is project-based assistance used in conjunction

with the Section 515 and Section 514/516 programs. The program provides rental assistance

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

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

This subsidy goes to the unit, not to an individual tenant.

Program Activity: Rural Rental

Housing 

FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

ESTIMATE

FY 2001

ESTIMATE

Program Level $761m $810m $902m $1.055b

PERFORMANCE GOALS AND

INDICATORS

FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

TARGET

FY 2001

TARGET

Improve the quality of life for the

residents of rural communities by

providing access to decent, safe,

sanitary and affordable rental housing.

Total Number of new units built (FY)

3,942 5,351 5,668 8,654

Sec. 515 2,413 2,189 1,487 1,401

Sec. 514/516 419 622 719 801

Sec. 514/516 Natural Disaster NA 0 169 0

Sec. 538 1,110 2,540 3,293 6,452

Total Number of units rehabilitated

(FY) 8,657 4,736 5,428 6,501

Sec. 515 5,472 2,340 3,694 4,115

Sec. 514/516 210 626 400 490
16

Sec. 533 2,975 1,770 1,334 1,896

Direct resources to those rural

communities and customers with the

greatest need.

Average tenant income Not yet

 available

Not yet 

available

Not yet 

available

Not yet 

available

Income of tenants who do not

receive Rental Assistance

Not yet 

available

Not yet 

available

Not yet 

available

Not yet 

available

Income of tenants who receive

Rental Assistance

Not yet

available

Not yet 

available

Not yet 

available

Not yet 

available

Number of tenants who are rent

overburdened

Not yet 

available

Not yet 

available

Not yet 

available

Not yet 

available

Number of households not

displaced by loss of rental

assistance (number of renewals) 34,385 38,311 41,800 42,800

Percent of tenants not displaced by

loss of rental assistance 100% 100% 100% 100%

Additional tenants living in

affordable, decent, safe, and

sanitary housing 4,659 4,046 718 972

Percentage of projects that reflect

racial/ethnic demographics of local

area

Not yet 

available

Not yet 

available

Not yet 

available

Not yet 

available

Effectively manage the portfolio to

minimize delinquencies and future

losses. 

Number of projects with accounts

less than 180 days past due

Not

available 164 130 100

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

achieve the Departmental goal to “Expand economic and trade opportunities for agricultural

producers and other rural residents.”

Most communities in rural America have a scarcity of decent rental housing affordable to very lowincome families. In addition, migrant workers and farm laborers, whose incomes are extremely

limited, face some of the worst housing conditions in the nation. Despite improvements in

housing quality, especially in the number of rural units with complete plumbing facilities, the 1990

census data indicated rural renters were more than twice as likely to live in substandard housing

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

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

affordable. RHS’ rental housing programs are among the few resources that enable low- and very

low-income, elderly and disabled renters in rural America to access decent, safe, sanitary, and

affordable housing.

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

units in the portfolio continue to age and require resources for rehabilitation. A major focus of the

performance measures is on the agency’s efforts to maintain or increase the number of rental

units available to house low- and very low-income families, at a rental rate affordable to the family. 

With over 86,000 of RHS’ current tenants rent overburdened, meaning that they pay more than 30

percent of their monthly income for rent, maintaining the number of occupiable, affordable units is
17

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

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

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

waste, and abuse. A performance indicator related to effective management of the program to

minimize delinquencies has been added for FY 2001. 

Means and Strategies: Achievement of the FY 2001 Performance Goals and Indicators is

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

FY 2000 program levels and projected performance targets are based on Congressional

appropriations and are not subject to changes that could impact a program’s subsidy rate, such as

fluctuations in the Treasury discount rate. As required by the Balanced Budget Act of 1997, the

program-specific subsidy rates utilized in the development of the President’s FY 2000 Budget will

be used when establishing obligations of FY 2000 funds.

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

C Build leveraging partnerships to expand resources going into rural areas.

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

improve program management.

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

of funds extends the impact of Rural Development’s limited funds and brings additional dollars

into the development of rural communities. The Rural Rental Housing program has a history of

fraud, abuse, and indifference to the health and safety of tenants: In reviewing the $12 billion

Rural Rental Housing Program, GAO and OIG previously identified a continuing history of fraud

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

the health and safety of low-income and elderly tenants. The Agency has made substantial

progress and, in the 1999 listing of high-risk areas, the MFH program was not included. However,

the Agency continues to work on this area of concern.

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

Family Housing programs under the appropriate circumstances. Low income housing tax credits,

authorized through the Department of Treasury, can help make housing more affordable for very

low-income tenants. Section 8 assistance from HUD also helps with affordability. RHS program

dollars also help State government programs and non-profit organizations leverage their

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

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

goals of other Federal and State agencies.

RHS loan guarantee programs enable private sector lenders to get more involved in rural

financing. Our guarantee programs bring otherwise unavailable long term, fixed rate private

sector credit to rural areas. 

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

most performance measures:

C Program Loan Accounting System (PLAS)

C Guaranteed Loan Accounting System (GLAS)

C Multi-Family Housing Information System (MFIS)

C Multi-Family Housing Tenant Information System (MFTS)

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

a variety of data edits to minimize the risk of inaccurate data being placed in the system. The

systems are audited annually by OIG as a part of their development of an audited financial

statement.
18

COMMUNITY FACILITIES PROGRAMS

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

enlarging, extending, or improving essential community facilities. Eligible applicants must

demonstrate that they are unable to obtain capital from commercial sources. Applications for

health and public safety projects receive the highest priority. The interest rate on these loans is

determined by the median family income of the area to be served and ranges from 4.5 percent to

5.375 percent.

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

direct loans. In the case of the guarantee program, the loans are offered by a private lender and

the interest rate on the loan is negotiated between the lender and the borrower.

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

Improvement and Reform Act of 1996. In most cases, the grant program is used in conjunction

with the community facilities direct loan program to make essential community facilities affordable

for the most needy communities, which often cannot afford even direct loans without additional

subsidies.

Program Activity: Community Facilities FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

ESTIMATE

FY 2001

ESTIMATE

Program level $286m $278m $409m $484m

PERFORMANCE GOALS AND

INDICATORS

FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

TARGET

FY 2001

TARGET

Improve the quality of life for rural

residents by providing new or improved

essential community facilities

Number of rural residents with

improved standards of living through

new or improved essential community

facilities (in millions) 8.793 8 11 13

Number of jobs created or retained 9,911 9,600 13,500 15,700

Community Health

Number of new or improved health

care facilities 101 123 173 202

Number of new or improved elder

care facilities 40 42 59 69

Number of beds available at new or

improved elder care facilities 1,608 4,932 6,950 8.092

Number of new or improved health

care in medically underserved areas 25 36 51 59

Emergency Services

Number of new or improved fire and

rescue facilities 75 72 101 118

Number of new or improved fire and

rescue vehicles 171 140 195 228

Education and Child Care

Number of new or improved child care

centers 45 69 97 113
19

Number of children served by new or

improved child care centers 4,548 5,628 7,900 9,200

Number of new or improved schools 38 32 44 51

Maximize the leveraging of loan funds to

increase the number of rural residents

assisted by Rural Development programs. 

Number of funding partnerships 310 565 796 927

Number of borrowers assisted

through leveraging 241 429 605 704

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

rural communities helps achieve the Departmental goal to “Expand economic and trade

opportunities for agricultural producers and other rural residents.”

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

Community Facility funds. Examples of these projects are child care centers, nursing homes,

assisted living facilities, hospitals, health clinics, fire stations, libraries, telecommunications,

school facilities, community buildings, and industrial parks. The development of performance

measures for these programs is complicated by the wide variety of projects which can be funded.

While applications are prioritized upon receipt, with health and safety receiving top priority,

projects are generally funded in the order of receipt at the state-level to ensure equity in the

distribution of funds. As a result, it is impossible to know ahead of time what the mix of funded

projects will be during the fiscal year.

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

Services, and Education and Child Care) in order to simplify the presentation of performance

measures. For each category there is one or more measures of the number of new or improved

facilities to be provided in rural areas during the fiscal year. This output measure is supported,

where possible, with an assessment of the impact of the project, such as the number of hospital

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

facility.

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

partnerships with the other organizations involved in rural development. The purposes of these

partnerships are to encourage strategic delivery of the programs of both organizations and to

coordinate the delivery of technical assistance and financing to rural communities. Two of the

performance measures relate to the leveraging of the program’s funds which is the most likely

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

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

Means and Strategies: Achievement of the FY 2001 Performance Goals and Indicators is

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

FY 2000 program levels and projected performance targets are based on Congressional

appropriations and are not subject to changes that could impact a program’s subsidy rate, such as 

fluctuations in the Treasury discount rate. As required by the Balanced Budget Act of 1997, the

program-specific subsidy rates utilized in the development of the President’s FY 2000 Budget will

be used when establishing obligations of FY 2000 funds. Funds expended in any particular

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

authorized by the Rural Community Advancement Program.

Specific strategies to achieve the performance goal include:

C Build leveraging partnerships to expand resources going into rural areas.

C Support Welfare Reform by promoting development of day-care facilities.
20

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

purposes of these partnerships are to encourage lender participation in providing financing to rural

communities. The effort to move families off of welfare and into work requires the availability of

affordable quality day care, which is often more limited in rural America. This can present a real

barrier to a family who is trying to move out of poverty. RHS' community facilities programs can

be used to finance both child and adult day care.

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

programs under the appropriate circumstances. Proposed projects must meet the standards of

the Environmental Protection Agency and health facilities must meet the standards of Health and

Human Services, in the same sense that they must meet the zoning and construction requirement

of the state, county, or local government. These are issues of concern handled by the applicant’s

engineer. Other Federal agencies, such as the Economic Development Agency or Indian Health

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

their requirements. RHS program dollars also help State government programs and non-profit

organizations leverage their resources.

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

financing. The guaranteed programs bring otherwise unavailable long term, fixed rate private

sector credit to rural areas. 

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

Community Facilities program while others support the various categories of projects normally

funded by the program. One overall measure is an assessment of the number of rural residents

whose quality of life will be improved by the Community Facilities projects financed during the

fiscal year. This is, and will always be, a soft estimate but it is an attempt by the Agency to

quantify the impact of the Community Facilities program on the rural population it serves. It

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

variation in the impact of projects and most have an impact far beyond the city limits of the town in

which it is located. For example, the expansion of a hospital will provide improved medical care,

and an improved quality of life, for people living miles from the town in which the hospital is

located.

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

of jobs created or retained as a result of the expenditure of Federal funds in the rural

communities. This measure is also used by the other Rural Development agencies. Community

Facilities funds are often construction related and the impact is established through the use of

economic multipliers developed by the Department of Commerce.

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

systems:

C Program Loan Accounting System (PLAS)

C Guaranteed Loan Accounting System (GLAS)

C Rural Community Facilities Tracking System (RCFTS)

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

GLAS are accounting systems designed to manage the agency’s portfolio of direct and

guaranteed loans. These systems contains a variety of data edits to minimize the risk of

inaccurate data being placed in the systems. These two systems are audited annually by OIG as

a part of their development of an audited financial statement.

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

Community Facilities projects, e.g., community populations and number of people served by each
21

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

of the data. Manual reports from State Director will be used to obtain data regarding several of

the performance measures. This information will be less reliable since it is obtained manually and

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

for the purposes for which it is being used.

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

residents by promoting and providing access to capital and credit for the development and

delivery of modern affordable utility services.”

Goal 3 of the mission area plan is specific to the programs administered by the Rural Utilities

Service (RUS). The Agency is responsible for delivering electric and telecommunications

programs as authorized by the Rural Electrification Act of 1936, as amended; distance learning

and telemedicine grant programs as authorized by the Rural Economic Development Act of 1990,

as amended; and water and waste programs authorized by the Consolidated Farm and Rural

Development Act, as amended.

Objectives of Goal 3:

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

communities.

3.2 Provide financing for modern, affordable telecommunications, including Distance

Learning/Telemedicine services, in rural communities.

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

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

greatest need.

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

by Rural Development programs.

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

FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

ESTIMATE

FY 2001*

ESTIMATE 

Funding (Appropriated)

Program $2.837b $3.396b $4.292b $4.261b

S&E $65.982m $65.674m $68.153m *

FTE’s (Appropriated) 764 715 715 0

* The FY 2001 budget proposal provides for a combined S&E budget for all Rural Development agencies. The S&E and

FTE will no longer be provided separately.

WATER AND WASTE PROGRAM

Water and Waste Disposal Direct Loans. Loans are made to public bodies, organizations

operated on a not-for-profit basis, Indian tribes on Federal and State Reservations, and other

Federally recognized Indian tribes, for the development of storage, treatment, purification, or

distribution of water or for the collection, treatment, and disposal of waste in rural areas. A rural

area may include an area in any city or town which has a population of not more than 10,000

inhabitants. Applicants must be unable to obtain sufficient credit elsewhere to finance actual

needs at reasonable rates and terms. Loans are repayable in not more than 40 years or the

useful life of the facility, whichever is less. These loans bear interest not in excess of the current

market yield for comparable term municipal obligations. Loans made in areas where: (1) the
22

median household income of the service area falls below the higher of 80 percent of the statewide

non-metropolitan median household income or the poverty level; and (2) the project is needed to

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

Water and Waste Disposal Guaranteed Loans. Eligible borrowers and loan purposes are similar

to those under the direct water and waste disposal loan program, except that loans involving taxexempt obligations and loans involving a water and waste disposal grant may not be guaranteed. 

Normally, the guarantee will not exceed 80 percent, however, in extraordinary circumstances it

may be increased to a maximum of 90 percent. The interest rate is negotiated between the

borrower and lender and may be at a fixed or variable rate.

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

associations, and to certain Indian tribes for the development, storage, treatment, purification, and

distribution of water or the collection, treatment, or disposal of waste in rural areas. Grants are

used for water and waste disposal projects serving the most financially needy communities to

reduce user cost to a reasonable level. Grants may be made to communities that have a median

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

Reform Act of 1996, provided that not less than one percent, nor more than 3 percent, of the

water and waste disposal grant funds appropriated each year be made available for technical

assistance and training of eligible grantee associations for such purposes as assisting in

identifying and evaluating alternative solutions to problems relating to water and waste disposal,

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

Solid Waste Management Grants. Grants are made to nonprofit organizations to provide

technical assistance in rural areas and towns up to 10,000, and to provide technical assistance to

local and regional governments and related agencies for the purpose of reducing or eliminating

pollution of water resources and improve planning and management of solid waste disposal

facilities.

Program Activity: Water and Waste FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

ESTIMATE

FY 2001

ESTIMATE

Program level $1.32b $1.301b $1.287b $1.614b

PERFORMANCE GOALS AND

INDICATORS

FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

TARGET

FY 2001

TARGET

Provide rural residents with modern,

affordable water and waste services. 

Rural people receiving safe,

affordable drinking water from water

systems financed by W&W loans and

grants 1,302,269 1,314,012 1,340,000 1,673,000

Rural people served who did not

previously have public water service

(includes Water 2000 projects)

637,188 748,776 763,000 953,000
23

Rural people receiving safe,

affordable waste disposal service

through waste disposal systems

financed by W&W loans and grants. 608,429 583,559 595,000 743,000

Rural water systems developed or

expanded which provide quality

drinking water in compliance with the

Safe Drinking Water Act 617 579 590 737

Rural waste disposal systems

developed or expanded which provide

quality waste disposal service in

compliance with State and Federal

environmental standards 346 328 334 418

Total jobs generated as a result of

facilities constructed with W&W funds 35,720 33,017 34,839 42,000

Direct program resources to those rural

communities with the greatest need.

Number of RUS W&W assistance

projects in the 540 persistent poverty

counties 211 247 252 314

 Total W&W project cost $264m $298m $315m $382m

RUS amount $223m $257m $246m $298m

Special initiative - number of projects

and amount of W&W funding (in

millions)

EZ/EC 29 ($29.5) 28 ($21) 73 ($35) 74 ($35)

Colonias 38 ($19.6) 38 ($22) 33 ($20) 40 ($22)

Pacific Northwest 27 ($34.3) 34 ($32) 0 0

Alaskan Villages 9 ($6.3) 14 ($29) 24 ($20) 23 ($20)

Guaranteed Loans 14 ($15.4) 7 ( 5.8) 49 ($75) 49 ($75)

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

waste disposal facilities helps achieve the Departmental goal to “Expand economic and trade

opportunities for agricultural producers and other rural residents.”

A Presidential initiative to address the need for clean water was launched by the Clinton

Administration in August 1994. The Water 2000 Initiative targets resources to the rural people

who have some of the nation’s most serious drinking water availability, dependability, and quality

problems. This number includes the approximately 700,000 rural Americans without access to

drinking water in their homes.
24

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

communities and customers with the greatest need. This includes areas that have been

consistently poor, have high unemployment rates, have out-migration, have experienced natural

disasters, or experienced economic stress due to Federal action, such as changes in Federal

policy related to timber production. Several performances indicators relate to achieving this

Objective.

Means and Strategies: Achievement of the FY 2001 Performance Goals and Indicators is

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

FY 2000 program levels and projected performance targets are based on Congressional

appropriations and are not subject to changes that could impact a program’s subsidy rate, such as 

fluctuations in the Treasury discount rate. As required by the Balanced Budget Act of 1997, the

program-specific subsidy rates utilized in the development of the President’s FY 2000 Budget will

be used when establishing obligations of FY 2000 funds. Funds expended in any particular

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

authorized by the Rural Community Advancement Program.

Specific strategies to achieve the performance goals include:

C Build leveraging partnerships to expand resources going to rural areas.

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

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

C Achieve the goals of Water 2000 by bringing safe, clean drinking water to every rural

household.

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

programs which include targeting of program resources to target communities and customers. In

addition, priority selection criteria that supports those targeted areas and customers have been

established, are published in the program regulations, and are used in funding decisions.

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

internal RUS and Rural Development Mission Area records. Data to measure the performance

measures will come from the following automated systems:

C Program Loan Accounting System (PLAS)

C Guaranteed Loan Accounting System (GLAS)

C Rural Community Facilities Tracking System (RCFTS)

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

GLAS are accounting systems designed to manage the agency’s portfolio of direct and

guaranteed loans. These systems contains a variety of data edits to minimize the risk of

inaccurate data being placed in the systems. The three systems are audited annually by OIG as a

part of their development of an audited financial statement.

The number of systems financed and loan and grant amounts are available from Rural

Development accounting records.

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

available from the Rural Community Facilities Tracking System. RCFTS is a non-accounting

management system which contains a variety of data related to water and waste projects, e.g.,

community populations and number of people served by each project. Data in RCFTS is input by

the field staff and does not contain edits to verify the accuracy of the data. Information from the

USDA Economic Reporting Service will be used to identify persistent poverty counties and

persistent out-migration counties.
25

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

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

enough to be acceptable for the purposes for which it is being used. 

TELECOMMUNICATIONS PROGRAM

Telecommunications Loans. Loans are made to furnish and improve telephone service, including

a variety of related telecommunications purposes, in rural areas. Direct loans are made to rural

telecommunications systems and guarantees are provided for loans made by other lenders, such

as the Federal Financing Bank. These loans help to ensure that there is an “on ramp” to the

Information Superhighway in rural America. The interest rate charged to borrowers depends on

the financial condition of an individual borrower system and the costs associated with serving rural

subscribers. The interest rate on most loans is a variable rate tied to the Government’s cost of

money. Cost of money loans are supplemented by loans from the Rural Telephone Bank (RTB). 

A portion of a borrowers’ needs are met by RUS loans, and a portion by RTB loans. The ratio of

RUS funding to RTB funding is determined by the ratio of RUS and RTB levels authorized by

Congress. The most rural systems are eligible for loans at a hardship rate of 5 percent. 

Borrowers may also apply for RUS guaranteed Federal Financing Bank loans.

Rural Telephone Bank Loans. The Rural Telephone Bank is a public-private partnership that

supplements the RUS telecommunications program by providing another source of capital for

furnishing and improving rural telecommunications systems. Loans made by the RTB bear

interest at a rate equal to its cost of capital, which currently approximates the Treasury’s cost of

funds. The RTB is managed by a 13-member board of directors that includes 2 members from

the private sector, 5 general officers of USDA, and 6 members elected by RTB shareholders. 

RTB’s day-to-day operations are conducted by employees of USDA and the telecommunications

program, with no additional cost to the taxpayer. The Fiscal Year 2000 Budget proposed that the

RTB operate as a Performance-Based Organization (PBO). As a PBO, the RTB would pay its own

salaries and expenses as well as provide loan subsidies from internal funds in its liquidating

account. The RTB would become a private entity within 10 years.

Distance Learning and Telemedicine Loans. This program provides financial assistance to rural

community facilities, such as schools, libraries, hospitals, and medical centers. In addition,

funding is available for other entities providing distance learning and telemedicine services in rural

areas. In the Telecommunications Act of 1996, Congress and the President recognized the

special challenge of rural education and health care and the role telecommunications plays in

delivering high quality service. This program helps address the end-user equipment needs of

these systems. Loans and grants are made to encourage, improve, and make affordable the use

of advanced telecommunications that will provide educational and health care benefits to people

living in rural areas. Program results have demonstrated that substantial cost savings and

dramatic benefits can be achieved by investments made in educational and medical interactive

video, Internet, and other information networks for rural Americans.

Program Activity:

Telecommunications Program

FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

ESTIMATE

FY 2001

ESTIMATE

Program level $565m $461m $670m $670m

PERFORMANCE GOALS AND

INDICATORS *

FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

TARGET

FY 2001

TARGET
26

Provide modern, affordable

telecommunications services to rural

communities.

Number of new residents and

businesses receiving service 226,002 170,000 247,000 284,000

Jobs generated as a result of

facilities constructed with

Telecommunication funds 13,002 10,603 15,400 17,700

Schools receiving transmission

facilities for distance learning

applications 16 15 22 25

Maximize the leveraging of loan funds to

increase the number of rural residents

assisted.

Leveraging of telecommunications

financial assistance (private

investment to RUS and RTB

funding)

$4.70:1 $5.22:1 $5.00:1 $5.00:1

* Indicators based on program funding of $670m plus $100m for broadband and dial-up internet services included in DLT

funding.

Program Activity: Distance Learning

and Telemedicine Program

FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

ESTIMATE

FY 2001

ESTIMATE

Program level $16m $68m $220m $427m *

* Includes $100m for broadband and dial-up internet service. The performance indicators for this $100m are included in

the Telecommunications Program.

PERFORMANCE GOALS AND

INDICATORS

FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

TARGET

FY 2001

TARGET

Provide distance learning and

telemedicine services, utilizing

telecommunications technologies, to

rural communities.

Number of schools receiving

distance learning facilities 253 287 1,800 2,680

Number of rural residents and

businesses receiving education or

training over distance learning 

facilities (in millions) 0.4 0.2 2.8 4.0

Number of health care providers

receiving telemedicine facilities 127 131 3,130 4,670

Maximize the leveraging of loan funds to

increase the number of rural residents

assisted.
27

Leveraging of telemedicine and

distance learning financial

assistance (private investment to

RUS funding)

$2.0:1 $1.45:1 $2.0:1 $2.0:1

Discussion of the Performance Goals: The availability of modern telecommunications helps

achieve the Departmental goal to “Expand economic and trade opportunities for agricultural

producers and other rural residents.”

The Telecommunications Act of 1996 represents the most comprehensive rewrite of the

Communications Act of 1934 and the most sweeping telecommunications reform ever. The

passage of this legislation is bringing about a whole new world of telecommunications services

and technologies. It will also create a new industry structure setting new ground rules. New

competitors are entering the telecommunications industry. One of the most dramatic occurrences

is the opening of the local loop and the development of competition in a previously regulated

industry. The rural provisions in the Act set forth revisions for “Universal Service” and the

structure for allowing competition, infrastructure sharing, and resale in rural areas. The specific

rules and requirements are being forged by new Federal Communications Commission rulings,

state public utilities commission proceedings in each state, and in many cases, state proceedings

with each separate RUS borrower. RUS has the responsibility to represent rural Americans in this

process and in this new environment.

Rural economic development is critical as communities across the country struggle to keep pace

with today’s fast moving information-based economy. Barriers to local rural development result

from the lack of access to adequate financing and the vastness of space and distance which

isolate rural communities from the mainstream of today’s economy. The development and

implementation of the Information Superhighway as part of the National Information Infrastructure

Initiative (NII) is a solution which can help to overcome these barriers.

Means and Strategies: Achievement of the FY 2001 Performance Goals and Indicators is

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

FY 2000 program levels and projected performance targets are based on Congressional

appropriations and are not subject to changes that could impact a program’s subsidy rate, such as 

fluctuations in the Treasury discount rate. As required by the Balanced Budget Act of 1997, the

program-specific subsidy rates utilized in the development of the President’s FY 2000 Budget will

be used when establishing obligations of FY 2000 funds. 

Specific strategies to achieve the performance goals include:

C Build leveraging partnerships to expand resources going to rural areas.

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

C Implement the President’s National Information Infrastructure Initiative, thereby increasing

educational and health care levels in rural areas.

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

RUS records rather than from automated accounting systems. The number of residents and

businesses receiving service for the first time are available from information collected from Loan

Application and Loan Feasibility Study, RUS Form 496. Estimates are based on loan studies for

the number of new subscribers to be served using loan funds and adjusted to reflect the number

of people receiving service through a single subscribership. A multiplier of 3 is used to reflect the

number of persons per household and business.

The number of residents and businesses with improved service is also available from Loan

Application and Loan Feasibility Study, RUS Form 496, utilizing an estimation process similar to

the one described above. For instance, a new digital switch would certainly improve all service in
28

the exchange where the switch was located and would also improve all service to other

exchanges calling into that exchange. Generally, RUS considers the total subscribers of a

borrower receiving a loan as subscribers receiving improved service.

Telecommunications leverage ratio is available from RUS form 479, Part F, Funds Invested in

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

telecommunications plants versus RUS loan funds expended for the same period. Information on

the number Schools receiving transmission facilities for DL applications comes from RUS Form

493c, Loan Funds data. (Information collected from the loan design, submitted with the

application, and compiled in RUS Form 493c for each borrower).

While this information is provided by the applicant and is not subject to audit, it is considered to be

sufficiently accurate for management’s purposes and for the purposes for which it is being used. 

ELECTRIC PROGRAM

Electric Distribution Direct Loans. These loans are made to finance electric distribution facilities. 

The interest rates are tied to the economic conditions of the areas served and the costs of

providing service to that area. Most loans are made at an interest rate tied to a published index of

municipal interest rates. Most RUS-financed systems eligible for the municipal rate loans are also

eligible to have their interest rate capped at 7 percent. RUS-financed systems that serve in more

distressed areas can qualify for loans at a hardship rate of 5 percent. Factors taken into account

include consumer density, extremely high residential rates or large rate disparity, and per capita

income levels. RUS electric borrowers provide service in the vast majority of the poorest nonmetropolitan counties and the non-metropolitan counties experiencing the greatest out-migration.

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

obtains the balance from the private sector. Generally, borrowers supply approximately 50

percent of their capital needs with internally generated funds. Of their remaining capital needs,

RUS provides approximately 70 percent and the private sector provides 30 percent. RUS has

recently streamlined procedures for sharing the Government’s lien to better accommodate these

systems.

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

National Bank for Cooperatives and National Rural Utilities Cooperative Finance Corporation

(CFC) to finance electric generation, transmission and distribution facilities. The interest rate on

FFB loans is based on the Treasury’s cost of money plus 1/8 percent. Most loans are made for

35 years and are secured by the borrower’s electric system assets. In order to ensure the

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

every few years.

Program Activity: Electric Program FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

ESTIMATE

FY 2001

ESTIMATE

Program level $925m $1.566b $2.115b $1.550b

PERFORMANCE GOALS AND

INDICATORS

FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

TARGET

FY 2001

TARGET

Provide modern, affordable electric

service to rural residents and

communities.
29

Jobs created as a result of facilities

constructed with Electric funds 21,275 36,018 48,600 35,600

Number of rural electric systems

upgraded 160 179 200 180

Number of consumers benefitting

from system improvements (millions) 2.7 2.8 3.1 2.8

Direct program resources to those rural

communities with the greatest need.

Electric loans (number and amount)

to clients serving persistent poverty

counties (RUS-financed electric

systems provide service in 523 of

the 540 identified persistent poverty

counties) (Dollars in millions)

74

$539

72

$538

84

$889

83

$715

Electric loans (number and amount)

to clients serving persistent outmigration counties (RUS financed

electric systems provide service to

655 of the 700 counties identified as

having net out-migration) (Dollars in

millions)

72

$286

83

$379

84

$889

88

$758

Maximize the leveraging of loan funds to

increase the number of rural residents

assisted. 

Leveraging of rural electric financial

assistance (private investment to

RUS funding) $2.60:1 $2.70:1 $2.73:1 $2.87:1

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

to achieving the Departmental goal to “Expand economic and trade opportunities for agricultural

producers and other rural residents.”

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

As more states move toward deregulation, opening up the electric infrastructure to retailing and

driving the forces of competition, the rural consumer and the rural provider faces particular

challenges. For example, RUS electric borrowers average only 6 consumers per mile compared

to 35 consumers per mile for investor-owned electric utility systems. As the competitive nature of

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

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

purpose of ensuring that rural residents continue to be served with reliable and affordable

electricity.

The performance goals for the electric program fall into three major categories. One set of goals

reflects the impact of RUS on rural residents by measuring the number of rural individuals,

families, businesses, and communities whose quality of life has been enhanced with improved

electric and telecommunications services, distance learning and telemedicine programs, and

improved access to clean water and waste water disposal. Since most of the loans are for

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

through the creation of jobs. The third category of goals reflect the agency’s success in
30

implementing two key themes of the Rural Development mission area strategic plan, directing

resources to the neediest communities and leveraging of financial resources. 

Means and Strategies: Achievement of the FY 2001 Performance Goals and Indicators is

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

FY 2000 program levels and projected performance targets are based on Congressional

appropriations and are not subject to changes that could impact a program’s subsidy rate, such as 

fluctuations in the Treasury discount rate. As required by the Balanced Budget Act of 1997, the

program-specific subsidy rates utilized in the development of the President’s FY 2000 Budget will

be used when establishing obligations of FY 2000 funds. 

Specific strategies to achieve the objectives include:

C Build leveraging partnerships to expand resources going to rural areas.

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

C Continue the advocacy for Rural America as in policies resulting from deregulation of electric

utilities.

Coordination with other Federal programs is not required for the delivery of the electric program.

Proposed projects must meet the standards of the Environmental Protection Agency (EPA) in the

same sense that they must meet the zoning and construction requirement of the state, county, or

local government. These are issues of concern handled by the applicant’s engineer. Other

Federal agencies, or state agencies, may be potential partners for joint funding if a specific project

meets their requirements.

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

internal RUS and Rural Development Mission Area records. Data to measure the number of

loans, loan amounts, number of borrowers, and funds advanced are performance measures will

come from the RUS Loan Servicing System (RUSLS). This automated accounting system is

designed to manage the agency’s portfolio of direct and guaranteed loans. The system contains a

variety of data edits to minimize the risk of inaccurate data being placed in the system. RUSLS is

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

Consumers served, counties served, and investment in infrastructure is available from RUS

borrower reported statistics. While this information is not audited, it is considered to be sufficiently

accurate for management’s purposes. 

The identification of persistent poverty counties and persistent out-migration counties is available

from the USDA Economic Research Service.
31

MANAGEMENT INITIATIVES

The following activities support the management initiatives. Funding of the resources necessary

for the initiatives’ implementation is included in the Salary and Expenses funding for the individual

agencies, but is not quantified at the initiative level.

MANAGEMENT INITIATIVE 1: Community Capacity Building.

Rural Development will provide information, technical assistance, and, when appropriate,

leadership to rural areas, rural communities and cooperatives to give their leaders the capacity to

design and carry out their own rural development initiatives.

Program Activities: All

Funding and FTE's: All funds are appropriated and are included under the program goals.

PERFORMANCE GOALS AND

INDICATORS 

FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

TARGET

FY 2001

TARGET

Increase the Capacity of Rural 

Communities and Their

Leaders

Rural communities that apply

for non-USDA Rural

Development assistance to

implement their community

plans.

NA 612

communities

400

communities

400 

communities

Partnerships Built that

Implement a Technical

Assistance Network for

Communities within each

State.

235

partnerships

235

partnerships

Create or save jobs in EZ/EC

and REAP communities.

NA 2288 jobs 1000 jobs 1000 jobs

Maximize Resources Available

in EZ/ECs. 

Ratio of non-EZ/EC grants to

EZ/EC grants

NA 8.4:1 7:1 or

greater

7:1 or

greater

Discussion of Performance Goals: This management initiative supports USDA Goal I ---

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

The community development performance goals indicate Rural Development's success in helping

rural communities plan and implement effective community development programs. The EZ/EC,

Centers of Excellence, Tribal colleges, and the various initiatives mentioned in the goals are

Presidential, Secretarial, and other special initiatives designed to address unique needs of the

region or population and reflect the mission area's desire to target its resources to the neediest

communities. Since jobs are vital to any prospering community, the measurement of jobs created

or saved through the community development initiatives is quite significant and meaningful. The

final measure ties our community development efforts to the mission area's desire to maximize

partnerships and the leveraging of funds.
32

Means and Strategies: Rural Development has designated staff at the National and state levels

to work closely with the EZ/EC communities and communities in the other initiatives in order to

ensure this work is completed. Their task is to provide guidance to rural leaders on sources of

technical assistance in the assessment of their community's strengths, develop plans for the

future, and prepare applications for assistance to implement those plans. This staff works closely,

at the local level, with local and state coordinating bodies, such as planning districts and the State

Rural Development Councils, to identify alternative sources of funding and technical assistance

for rural projects.

Verification and Validation: A manual process to measure the community development

indicators has been established utilizing data provided by the State Directors. While its accuracy

cannot be verified, confidence in this data is high enough to be acceptable for the purposes for

which it is being used.

MANAGEMENT INITIATIVE 2: Innovation, Learning and Continuous Improvement.

Rural Development will design and implement new and innovative internal initiatives which

strengthen its ability to help rural residents and communities.

Program Activities: All

Funding and FTE's: All funds are appropriated and are included under the program goals.

PERFORMANCE GOALS AND

INDICATORS 

FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

TARGET

FY 2001

TARGET

Enhance and Build Information

Systems Which Support the

Mission Area’s Programs

Implement an operational

New Guaranteed Loan

System (GLS)

NA Phase 1

Completed

Phase II, III,

& IV

completed. 

Phase V,

Funds

Reservation

system,

completed.

Continue

Phased

Implementat

ion

Operationalize the

Community Utilities and

Business System

NA 40%

operational

60%

operational

80%

operational

Develop Programs Funding

Control System

NA Reviewed

NFC and

other USDA

and

completed

cost

analysis 

Request for

Proposal

under

Developmen

t

Award

Commercial

Off-The -

Shelf

software

contract

Manage the Mission Area’s

Financial Resources Efficiently

and Effectively
33

Implementation of EFT in

compliance with DCIA

requirements

NA 32% 50% 60%

Credit Reform - % of

programs with clean opinion

from OIG

30% 0% 100% 100%

Implement Foundation

Financial Information System

(FFIS)

NA 0% Follow

USDA

OCFO

guidelines

and

schedules

for

implementation

Follow

USDA

OCFO

guidelines

and

schedules

for

implementation

Reach management decision

on OIG financial management

audit recommendations within

6 months of audit report

issuance

NA 90% 90% 90%

Percent of material FMFIA

deficiencies corrected timely

NA NA 50% 50%

Obtain clean and timely audit

opinion on audited financial

statements

Create task

force

Receive

qualified

opinion

Obtain clean

opinion

Obtain clean

opinion

Discussion of Performance Goals: This management initiative supports USDA Management

Initiative 4 - "Improve financial management and reporting."

Rural Development is constantly pursuing improvements in its financial management and financial

systems. The performance goals reflect the mission area's efforts in two categories. One

category reflects our success in implementing statutory requirements, such as the Debt Collection

Improvement Act (DCIA), and Departmental or mission area priority initiatives, such as the

integrated financial management system and the program funding control system. The second

category reflects our continuing concerns regarding internal controls and the concerns of our

auditors, with emphasis given to progress related to achieving an unqualified opinion on the

financial statement.

Means and Strategies: Meeting the performance goals is contingent upon receiving the level of

staff and S&E resources requested in the President’s budget as most of these indicators are

dependent upon a significant level of systems development if they are to be achieved. 

Achievement of an unqualified opinion on the mission area's financial statement is currently

dependent upon resolving concerns raised by OIG related to subsidy estimates for each loan

program as required by credit reform. Through cooperation with the USDA Chief Financial

Officer, OMB, OIG and GAO, the Under Secretary has established a special task force to pursue

and resolve these concerns. Their efforts will involve the development of new subsidy models. 

The completion date for this task force effort is unknown.

A task force composed of staff from the programs, information systems, accounting, and financial

management have reviewed the requirements of DCIA and developed a plan documenting
34

internal actions required to implement each requirement. This plan is updated and reviewed

monthly.

Rural Development will implement the Foundation Financial Information System (FFIS) for its

Salaries and Expense Appropriation activity. A task force composed of staff from the Budget

Division and Deputy Chief Financial Officer will develop the business requirements for Rural

Development's interface to the FFIS. The task force will follow the guidelines and schedule for

implementation issued by the USDA Chief Financial Officer.

Verification and Validation: Rural Development will verify and validate accomplishment of these

goals against data residing in existing internal management reports, such as the IRM planning

documents, DCIA monthly reports, credit reform task force progress reports, and the audit

tracking system. This information, while not audited, is considered to be sufficiently accurate by

management to use for management purposes. 

MANAGEMENT INITIATIVE 3: Employee Excellence.

Rural Development will create and sustain a work environment that develops and fosters

partnerships, cooperation, full and open communications, teamwork, mutual respect, and

maximum individual development.

Program Activities: All

Funding and FTE's: All funds are appropriated and are included under the program goals.

PERFORMANCE GOALS

AND INDICATORS

FY 1998

ACTUAL

FY 1999

ACTUAL

FY 2000

TARGET

FY 2001

TARGET

Enhance Human Resource

Systems to Ensure They Are

Fair and Equitable to All

Employees

Implementation of new

policies and practices

related to work schedules

and leave

NA NA Obtain

Partnership

Council

approval and

provide

training as

needed

Implemented

Implement annual civil

rights training for all

employees

NA Implemented Ongoing Ongoing

Discussion of Performance Goals: This initiative supports USDA Management Initiative I ---

"Ensure that all customers and employees are treated fairly and equitably, with dignity and

respect."

Fairness and equity, both in program delivery and human resource management, have been

critical issues to the Secretary and the Under Secretary. This goal ensures the mission area is

actively responding to these concerns. 

Means and Strategies: The availability of adequate resources (staff, training funds, and travel

funds) is the key criteria to Achievement of this performance goal. 
35

Verification and Validation: The records of the Human Resources staff and the Civil Rights staff

will be sufficient to verify the achievement of the indicators. While this information is not subject to

audit, it is considered adequate for management’s purposes. 

MANAGEMENT INITIATIVE 4: Quality Customer Service.

Rural Development will foster and continually strengthen an internal culture that focuses on and is

driven by customer needs, both internally and externally, that systematically acts to make internal

processes and individual actions responsive to the needs of customers, and that assures that all

customers and employees are treated fairly, equitably, and with dignity and respect.

Program Activities: All

Funding and FTE's: All funds are appropriated and are included under the program goals.

PERFORMANCE GOALS

AND INDICATORS

FY 1998

ACTUAL 

FY 1999 

ACTUAL

FY 2000

TARGET

FY 2001

TARGET

Reduce backlog of Program

and EEO Complaints

NA 36%

program

75% EEO

25% 25%

Obtain Feedback from

Program Customers

Business and Industrial

Loans

Focus Group

and Survey

NA Reconcile

survey

findings to

program

operations

Implement

findings in

program

operations

Cooperative Services Survey Completed

Survey

Survey Survey

Single Family Housing NA Completed

Survey

Reconcile

survey

findings to

program

operations

Participate in

the SCIT

Customer

Service

Activities

Water and Waste NA Did Not

Survey

NA NA

Electric Program NA Did Not

Survey

Survey Reconcile

survey

findings to

program

operations

Telecommunications NA Did Not

Survey

NA Survey

Discussion of Performance Goals: This management initiative supports USDA Management

Initiative 1, "Ensure that all customers and employees are treated fairly and equitably, with dignity

and respect." and USDA Management Initiative 2 --- "Improve customer service by streamlining

and restructuring county offices." Equity in program delivery and employment is a priority. The

performance measure related to effective management of complaints reflects the mission area's
36

commitment to this priority.

It is critical that the agencies deliver the programs in a way that meets the needs of the customers

and ensures that all program recipients are treated equally. The performance measures reflect

the mission area's efforts to obtain feedback from customers on how they are treated and how the

various processes they encounter impact them. This is the first step in ensuring our programs are

delivered in a customer-focused manner. Each program has a variety of potential target

audiences (new applicants, existing customers, and recipients of specific servicing actions) which

could be surveyed over a period of years. Information received in this process will be helpful in

identifying changes needed in our lending and servicing processes. Once identified, there is a

limited need to obtain additional feedback from a target audience until needed changes have been

made in regulations and processes.

Means and Strategies: The strategy for reducing complaints of program and employment

discrimination is two-fold. First, priority will be given to processing existing complaints. Second,

training related to diversity sensitivity, customer service, and conflict resolution is being provided

in order to avoid future complaints.

The mission area is utilizing the services and expertise of the Service Center Implementation

Team's (SCIT) Quality Customer Service Team which has obtained a three year generic

clearance from OMB for a variety of customer service information collections. Rural Development

customers will be included in the annual surveys conducted by the Team with the results made

available for agency use. In addition the Team is in the process of implementing a

comment/complaint card system which will be available at USDA service centers in order to give

all service center customers a means for providing feedback about the quality of service received. 

Our ability to conduct meaningful surveys requires the availability of financial and staff resources.

Verification and Validation: Quarterly reports from State Civil Rights Managers will be used to

report on progress towards civil rights and EEO performance measures. Verification of surveying

activity will be determined by the surveying activities conducted during the year.
37

SUMMARY OF RESOURCES FOR FY 2000

(Dollars in Billions)

GOAL I GOAL 2 GOAL 3 TOTAL

Rural Business

/Cooperative Service

$1.068

304 FTEs

$1.068

304 FTEs

Rural Housing Service $5.811

6,081 FTEs

$5.811

6,081 FTEs

Rural Utilities Service $4.292

715 FTEs

$4.292

715 FTEs

Total $1.068

304 FTEs

$5.811

6,081 FTEs

$4.292

715 FTEs

$11.171

7,100 FTEs

SUMMARY OF RESOURCES FOR FY 2001

(Dollars in Billions)

Goal 1 Goal 2 Goal 3 Total

Rural Business

/Cooperative Service

$1.463

**

Rural Housing Service $6.679

**

Rural Utilities Service $4.261

**

Total $1.463

**

$6.679

**

$4.261

**

$12.403

7020 FTEs

** The FY 2001 budget proposal provides for a combined S&E budget for all Rural Development

agencies. The FTE will no longer be shown separately. 

(Note: Funding for management initiatives has been included under the program goals for both

Fiscal Years.)