A controversial new federal farm-loan application form, which already has cost the Farmers Home Administration (FmHA) more than $1 million, must be studied more before it can be adopted nationwide, the Office of Management and Budget has ruled.

The 22-page Coordinated Financial Statement (CFS), intended by FmHA to replace a standard four-page loan form that the agency used for years, has drawn a storm of criticism from farm groups and members of Congress.

A recent report by a House subcommittee charged that FmHA officials violated at least three federal laws in adopting the CFS and that they failed to adequately justify their decision to award a costly noncompetitive contract for the program to an Illinois firm.

The House Government Operations subcommittee on government information, justice and agriculture, chaired by Rep. Glenn English (D-Okla.), also noted that the FmHA had gone beyond OMB's instructions to use the CFS only on a limited trial basis.

But, the report said, OMB has to share in the blame. "In approving use of CFS all across the nation retroactively, OMB violated an implicit requirement of the Paperwork Reduction Act," it said.

English's report said the panel found no evidence of misconduct. But it was critical of FmHA chief Charles Shuman and University of Illinois professor Thomas Frey, designer of the CFS. Frey hired Shuman's daughter as a student-assistant shortly before the FmHA purchased the new accounting system.

Shuman maintained that he did not know Frey when they were students at the University of Illinois at the same time in the 1950s, or that his daughter had been hired a month before Frey's private consulting firm was given an FmHA contract to train agency workers to use the CFS.

"It seems disingenuous to believe that despite public criticism of himself and of the government in this matter, Mr. Shuman had not taken time to check his college yearbook -- or even to ask his daughter to check for him, since she was working for Dr. Frey at the time of the press reports," the report said.

The subcommittee also criticized Shuman for assigning the job of changing the FmHA forms to Molly Baldrige, "a relatively inexperienced staff member" who is the daughter of Commerce Secretary Malcolm Baldrige. She, in turn, could provide no record of having considered other types of financial reporting forms, the report said.

The latest move by OMB means that the FmHA's plans to issue final rules that would have put the CFS in use nationwide have been put on hold while more information is gathered from a trial program in North Carolina. OMB also has limited FmHA's use of the loan form elsewhere to 10 borrowers per county.

"Although we approved the limited use of these forms," an OMB letter to the Department of Agriculture said, "the practical utility of the collection of information involved with the CFS remains unclear." An FmHA spokesman said the department has until the end of this year to give OMB more data on the system.

The English subcommittee recommended that Shuman reconsider his decision for nationwide use of the CFS and that he look at other financial reporting systems that might help farmer-borrowers while not overloading them with paperwork.

Rep. Thomas N. Kindness (R-Ohio), the subcommittee's ranking Republican, said he would have used stronger language in criticizing the FmHA's performance. "I'm sure a lot of the nation's farmers would like to get their hands on the kind of fertilizer you use to make a four-page loan application grow to 22 pages," he said.