The Farmers Home Administration made about $1.8 billion in questionable loans during the 1980 fiscal year, some to agency officials and their close relatives, according to an audit by the Agriculture Department's inspector general.
The loans to agency officials and their relatives posed "potentially embarrassing situations," the report said, and may have violated conflict-of-interest laws. An IG audit official said yesterday that some of the loans have been referred to the office's investigations unit to determine if criminal prosecution is warranted. The report did not name the officials involved, and the audit official refused to reveal their names.
The audit, based on a survey of 235,190 borrowers, including farmers and rural residents in 10 states, reported other evidence of widespread abuse and mismanagement at the agency, which is the lender of last resort for U.S. farmers. According to the audit, about one fourth of all the loans surveyed, worth $832 million, probably could have been financed by commercial banks.
In making its rural housing loans, the FmHA limits eligibility to farmers with annual incomes below $15,600, the report said. Yet the audit found one state where loans were made to farmers earning $17,000 to $28,000.
Some other FmHA loan programs are restricted to the production of food or fiber. Yet the audit found that agency loans from these programs were being used for greenhouses, horse farms, and in one case, for the expansion of a retail grocery store to include alcoholic beverages and frozen foods.
FmHA Administrator Charles W. Shuman said yesterday that many of the problems cited in the report were recognized years ago and "we've put in place several regulations to stop them . . . . We've taken immediate action."
However, Shuman said he has also objected to some of the IG's criticisms. "I would object strongly to saying that a greenhouse could not be part of a farming operation," he said.