1951-Rsupporting_statement03-26-08

March 2008

SUPPORTING STATEMENT

7 CFR Part 1951-R

Rural Development Loan Servicing

0570-0015

TERMS OF CLEARANCE: This collection is approved for three years. The agency should better facilitate electronic submission of Form RD 1951-4 by providing it in a different format (word document, etc.) so that respondents may return the form electronically. After doing this, the agency should report the percentage of respondents who select this option in the next submission package.

RESPONSE: Form RD 1951-4 is accessible at http://forms.sc.egov.usda.gov/eforms/mainservlet and can be filled out online and printed hardcopy and submitted to the agency. The Department has not given the clearance to accept digital records at this time due to security and legal issues that are currently being worked out.

A. Justification

1. Explain the circumstances that make the collection of information necessary.

Rural Development is requesting Office of Management and Budget (OMB) clearance of the reporting requirements contained in 7 CFR Part 1951, Subpart R. The Rural Development Loan Servicing was legislated in 1985 under Section 1323 of the Food and Security Act of 1985. This action is needed to implement the provisions of Section 407 of the Health and Human Services Act of 1986, which amended Section 1323 of the Food Security Act of 1985.

Subpart R of part 1951 contains regulations for servicing and liquidating existing loans previously approved and administered by the U.S. Department of Health and Human Services (HHS) under 45 CFR Part 1076 and transferred from HHS to the U.S. Department of Agriculture. This subpart contains regulations for servicing and liquidating loans made by Rural Development under the Intermediary Relending Program (IRP) to eligible intermediaries and applies to ultimate recipients and other involved parties.

The portion of subpart R pertaining to loanmaking applies to Rural Development Loan Fund (RDLF) intermediaries which have received Federal funds and have not fully utilized relending of those funds to ultimate recipients.

2. Indicate how, by whom, and for what purpose the information is to be used. Except for a new collection, indicate the actual use the Agency has made of the information received from the current collection.

The information requested is a statement of financial condition from the Intermediary, i.e. assets and liabilities, income statement and a summary of the Intermediary’s total lending program. This information is vital to Rural Development for the Agency to make credit and financial analysis decisions based on financial information provided by the Intermediary.

Rural Development has determined that the financial reporting requirements are necessary to provide the Agency with current information in order to monitor the program, to make various reporting requirements to the U. S. Congress, and for program innovation and expansion under the Government’s Performance Review.

IRP and the RDLF servicing of that program are administered by the Rural Business-Cooperative Service (RBS), Business Programs in Washington, DC, which will be the primary user of the information collected. Under the Freedom of Information Act (FOIA), the general public can request the majority of the data by the Agency from the intermediaries, except for information that is classified as confidential. Currently, an estimated 20 intermediaries have received loans under the RDLF and approximately 250 intermediaries have received loans under the IRP program. Approximately 270 respondents will answer the financial data collected. Based on the current budget fund allocation, approximately 60 entities will apply for IRP loans and approximately 50 entities will be approved. Total respondents anticipated for the next three years including current respondents will approximate 420.

Specifically, the burden to be cleared with the regulation is as follows:

REPORTING REQUIREMENTS - NO FORMS

Weighted average

Rural Development is required to charge all loans made by the RDLFs after December 31, 1982, a 1 percent interest rate provided the loans made by the intermediary to the ultimate recipient does not exceed the sum of 7 percent. In order for Rural Development to determine the weighted average of the loan portfolio, the RDLF intermediary will be required to complete a weighted loan average rate on its outstanding portfolio.

Insurance

The collateral should be secured by key man life insurance to assure loan repayment. In addition, hazard insurance is a standard lending requirement which names the Rural Development as beneficiary at the lesser of the depreciated replacement value of the property being insured or the amount of the loan. The hazard insurance is required in order to protect the collateral.

Intermediary visitations

This requirement is a servicing procedure to assure that the intermediary is operating as planned and for Rural Development to physically review the collateral, employment, and general operations for the ultimate recipient. This is essential to protect the Government’s interest.

Audited Financial Statement

An annual audit of the intermediary’s financial operations is needed and required in order to accurately assess the intermediary’s compliance with the appropriate regulatory agencies having jurisdiction over the intermediary as well as a tool for Rural Development to monitor the use of Agency loan funds. It is a method of assessing the strength of the intermediary and diagnosing problems and weaknesses regarding the intermediary and taking appropriate steps to protect the interest of the Federal Government, when necessary.

Employment/Income narrative

This requirement is necessary to ensure that the loan funds are used by ultimate recipients to increase employment, income and ownership to low-income persons, farmers and their families, displaced farm families, etc.

Proposed budget

This requirement is necessary to ensure that the intermediary has adequate financial resources to implement its program in the coming year.

Intermediary’s report of loans 90 days in arrears

The intermediary is required to notify the Agency whenever an ultimate recipient is more than 90 days in arrears in payment of principal and interest.

Assumption Agreement

Rural Development must review the assumption agreement for legal sufficiency and conformity to the regulations governing the program prior to the transfer and assumption.

Transferee financial statements

This requirement is necessary to ensure that the transferee is financially capable to successfully operate the program.

REPORTING REQUIREMENTS - FORM

Form RD 1951-4, “Report of IRP/RDLF Lending Activity”

This form is necessary to evaluate the financial and lending activity and performance of the intermediary. New and existing IRP intermediaries will be required to file the report quarterly while the existing RDLF borrowers will file the report semi-annually. The form gathers information about jobs created or saved for the IRP/RDLF programs. This form is available at http://forms.sc.egov.usda.gov/eforms/mainservlet.

3. Describe whether and to what extent, the collection of information involves the use of automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g. permitting electronic submission of responses, and the basis for the decision for adopting this means of collection.

Form RD 1951-4 is used to collect more detailed information concerning the ultimate recipient. The Agency is required to access the benefits of the program because the primary purpose of the financial assistance is to create employment. Form RD 1951-4 will greatly assist the Agency in the gathering of the information required and populating the information in our Guaranteed Loan Accounting System and to obtain information about the impact of the IRP/RDLF programs, i.e., number of jobs created or saved as well as program impact concerning ultimate recipients. Rural Development is required to verify the information to comply with the legislative requirements (i.e. helping low income persons).

The form will allow the Intermediary to provide the information necessary for the Agency to meet the General Performance Results Act requirements in measuring program impact. The majority of the information requested in the application is generally available to the Intermediary, but simply placed in the format requested and submitted to the Agency. The form Rural Development uses consolidates credit information in a meaningful manner, which enables the Agency to more expeditiously review and analyze the material to make decisions. The complexity, variety, and uniqueness of loan types make it difficult to review a case properly if it is not adequately documented. Rural Development’s role is primarily one of monitoring Intermediaries actions, which requires considerable analysis and verification to assure compliance with Agency requirements. The Intermediary is required to certify the information provided to the Agency. In addition, the Office of Management and Budget (OMB) and the General Accounting Office (GAO) have both requested information from the Agency on its revolving loan programs for Rural Development.

At this time, no information is submitted electronically. The Agency currently has an effort underway to automate and simplify the new budget document (Form RD 1951-4) in the Guaranteed Loan System. However, due to the mandate of the “Privacy Initiative” it is anticipated that this project will be resumed by the end of August 2008. It is estimated that electronic signatures will be accepted by the Agency within 2 years. The Department has not given the clearance to accept digital records at this time due to security and legal issues that are currently being worked out.

4. Describe efforts to identify duplication. Show specifically why any similar information already available cannot be used or modified for use for the purposes described in Item 2 above.

The legislative authority for this program limits the types of assistance for loan funds to a limited number of specialized recipients. The program is not actively duplicated elsewhere in the Government at this time.

5. If the collection of information impacts small businesses or other small entities (item 5 of OMB Form 83-I), describe any methods used to minimize burden.

As a lender, the Intermediary should be collecting this information from its ultimate recipients and it should be readily available from either its own internal records or their borrowers. The collection of financial data is from nonprofit entities and public organizations; therefore, there will be little probability that small businesses will provide information as the result of this program.

6. Describe the consequences to Federal program or policy activities if the collection is not conducted or conducted less frequently, as well as any technical or legal obstacles to reducing burden.

The consequences of not collecting this information would result in the Intermediary receiving Federal funds and there would be no oversight or monitoring to determine compliance with the regulations governing the program. The information collected under this program is considered the minimal necessary to conform to the requirements of existing program regulations and OMB circulars, such as A-102, A-110, A-129, A-133, and other requirements.

7. Explain any special circumstances that would cause an information collection to be conducted in a manner:

a. Requiring respondents to report information more than quarterly.

The Intermediary may be required to submit Form RD 1951-4 if the borrower’s Loan Agreement calls for completion more often that semi-annual, or if the borrower is in default or in liquidation.

b. Requiring written responses in less than 30 days.

The Intermediary may be required to submit written information in less than 30 days; however, this would be extremely rare. For example, the Agency may be required to respond to an Office of Inspector General Audit (OIG) or Congressional inquiry in which up-to-date information may be necessary to fulfill external requirements.

c. Requiring more than an original and two copies.

None.

d. Requiring respondents to retain records for more than 3 years.

There is no such requirement.

e. Not utilizing statistical sampling.

None.

f. Requiring use of statistical sampling which has not been reviewed and approved by OMB.

None.

g. Requiring a pledge of confidentiality.

All records are available through the FOIA, except information that may be classified as confidential that could not be released under FOIA.

h. Requiring submission of proprietary trade secrets.

None.

8. Describe efforts to consult with persons outside the Agency to obtain their views on the availability of data, frequently of collection, the clarity of instructions and record keeping, disclosure, reporting format (if any), and on data elements to be recorded, disclosed, or reported.

A Notice was published in the Federal Register on October 31, 2007, [72 FR 61607]. No comments were received.

A sampling of Intermediaries who are knowledgeable in financial services similar to the B&I Loan Program upon which the regulations for the IRP are based were contacted and requested to provide their analysis of the public burden associated with completing the requested information required by the Agency. These intermediaries, we believe, provide a fair sampling of size and expertise necessary to make a judgment on Rural Development program requirements.

The following RDLF/IRP intermediaries were contacted:

(a) Georgia Mountains Regional Economic Development Corporation Gainesville, Georgia 30503 - - Telephone Number (770) 536-7839 - - Contact person – Sheila S. Greene.

(b) Community Transportation Association of America, Washington, DC - - Telephone Number (202) 661-0206 - - Contact person – Donald Browner.

(c) Housing Assistance Council, Inc., Washington, DC - - Telephone Number (202) 842-8600 - - Contact person – Jennifer Kenney.

(d) Coastal Area District Development Authority, Brunswick, Georgia - - Telephone Number (912) 261-2500 extension 22 - - Contact person – Robin Blackwell.

9. Explain any decision to provide any payment or gift to respondents other than reenumeration of contractors or grantees.

There is no payment or gift to respondents.

10. Describe any assurance of confidentiality provided to respondents and the basis for the assurance in statute, regulation, or Agency policy.

The information collected under the provisions of the program is not considered to be of a confidential nature. The data collected from organizations is ordinarily required to make their activities open and available to public scrutiny, such as nonprofit entities.

11. Provide additional justification for any question of a sensitive nature, such as sexual behavior or attitudes, religious beliefs, and other matters that are commonly considered private.

The information collected does not contain any sensitive information such as sexual behavior and attitudes, religious beliefs or other matters commonly considered private.

12. Provide estimates of the hour burden of the collection of information.

The $90/hour cost estimate is based on discussions with Intermediaries to determine an estimated rate. It was advised that calculating the wages for the clerical staff, loan technician, involvement of accountants and other staff, plus the Executive Director, the outside cost per hour to prepare the form and review would calculate out to $90/hour.

13. Provide an estimate of the total annual cost burden to respondents or record keepers resulting from the collection of information.

There are no start-up costs involved. See attached spreadsheet.

14. Provide estimates of annualized cost to the Federal Government.

RBS estimates the total cost to the Federal Government to administer the activities of this program to be $1,280,609 per year, which includes the time to collect the information provided by the respondents, analyzing the data and etc. There are approximately 47 government employees working on the IRP program, one full-time person in the National Office and 46 State Offices. These individuals work approximately one-half day on the IRP/RDLF program. The average employee is a GS-11 and we used this information (from the 2008 Base General Pay Schedule) to calculate the annual cost to the government.

[A GS-11, step 1 earns $54,494/year divided by 2 (spends half the day on this program) times 47 government employees nationwide equals $1,280,609.]

15. Explain the reasons for any program changes or adjustments reported in items 13, or 14 of the OMB Form 83-I.

There are no program changes associated with this request.  There is an adjustment concerning wage class, which was increased to account for the general rise in cost of living.

16. For collection of information whose results will be published, outline plans for tabulation and publication.

Rural Development has no plans to publish this collection of information.

17. If seeking approval to not display the expiration date for OMB approval of the information collection, explain the reasons that display would be inappropriate.

It is not cost effective for the Agency to display the expiration date on the forms due to the large volume of forms used by the various field offices.

18. Explain each exception to the certification statement identified in item 19 on OMB 83-I.

There are no exceptions requested.

19. How is this information collection related to the Service Center Initiative (SCI)? Will the information collection be part of the one stop shopping concept?

The Service Center Initiative (SCI) has no impact on this information collection package.

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