Rural Utilities Service: Opportunities to Better Target Assistance to Rural Areas and Avoid Unnecessary Financial Risk
Highlights
The Agriculture Department's Rural Utilities Service (RUS) makes loans and provides loan guarantees to improve electric service to rural areas. Beyond guaranteeing loans, under a yet-to-be-implemented provision of the 2002 Farm Bill, RUS is also to guarantee the bonds and notes that lenders use to raise funds for making loans for electric and telecommunications services. Fees on these latter guarantees are to be used for funding rural economic development loans and grants. GAO was asked to examine (1) the extent to which RUS' borrowers provide electricity service to nonrural areas and (2) the potential financial risk to taxpayers and amount of loans and grants that the guarantee fees will fund. GAO also identified an alternative for funding rural economic development.
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| To better target RUS' lending to borrowers serving rural areas, Congress may wish to consider specifying that the program criterion for rural areas applies to both an initial loan and any subsequent loans that borrowers seek. | Congress passed a 2008 farm bill but did not implement this recommendation. | |
| To provide additional funds for rural economic development loans and grants without risk to taxpayers, Congress may wish to consider amending the RE Act to authorize a small loan-origination fee on RUS' electricity and telecommunication loans. | Congress passed the 2008 farm bill but did not implement this recommendation. | |
| To provide additional funds for rural economic development loans and grants without risk to taxpayers, Congress may wish to consider amending the RE Act to direct that fees collected on such loans be used for rural economic development loans and grants, and simultaneously repeal the new lender debt guarantee requirement. | On July 20, 2005, OMB approved an apportionment of $1 billion for implementing a new lender debt guarantee program through USDA. USDA is proceeding with the program. |