A REVIEW OF THE CLASSIFICATION OF FARM LOAN MANAGER POSITIONS WITHIN THE FARM LOAN PROGRAMS OF USDA/FSA

INTRODUCTION

I have been asked by the law firm of McCallister & Quinn to review the positions of non-supervisory Farm Loan Manager, GS-12, in the Farm Services Agency of USDA, and render an opinion as to the appropriate classification series and grade for these positions. McCallister & Quinn is acting on behalf of its client, the National Association of Credit Specialists.

These positions had been classified using the Agricultural Management Series, GS-0475, a series that required a positive educational requirement for a degree in the biological sciences. On December 21, 1999, the Office of Personnel Management advised USDA that the GS-0475 series would be abolished, advising that a degree in the biological sciences was unnecessary for satisfactory performance in agricultural loan specialist positions and that the Loan Specialist Series, GS-1165 should be used instead. OPM noted that the GS-1165 series included an agricultural specialization. NOTE: Throughout this paper I will use the organizational title Farm Loan Manager for the GS-12 non-supervisory positions and the organizational title Farm Loan Officer for the GS-11 and below positions rather than the official titles of Loan Assistant (GS-5 and GS-7) and Loan Specialist (Agricultural).

Action to implement OPM’s decision and apply the GS-1165 standard to the farm loan positions included a comprehensive study in 2002 and 2003 by the Farm Service Agency’s personnel office followed an independent review by a qualified third party contractor. The study and review concluded that only those Farm Loan Manager positions that supervised three or more persons at a base level of work of GS-11 could properly be classified at the GS-12 level. Other GS-12 specialists who did not meet the requirements for classification under the GS Supervisory Grade Evaluation Guide were considered to be appropriately classified at the GS-11 level. However, FSA management determined that the existing non-supervisory GS-12’s would not be downgraded but rather “grandfathered.” Instead of being downgraded, the positions they held would be filled at GS-11 when vacated.

The National Association of Credit Specialists continues to believe that the non-supervisory Farm Loan Managers are appropriately classified at the GS-12 level. The Association contends that, even if the determinations made in 2002 and 2003 were correct at the time, changes in the level and complexity since that time warrant reestablishment of the GS-12 level as the appropriate classification for Farm Loan Managers.

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POSITION CLASSIFICATION STANDARDS

“Title 5, United States Code, governs the classification of positions in the Federal Service. This law states that positions shall be classified based on the duties and responsibilities and the qualifications required to do the work. Section 5104 of title 5 provides definitions for the grade levels of the General Schedule. These grade level definitions are the foundation upon which the position classification standards are built.

“The classification of positions recognizes the level and responsibility in terms of the grade levels established by law . . . The law requires the Office of Personnel Management to define Federal occupations, establish official position titles, and describe the grades of various levels of work . . . OPM approves and issues position classification standards that must be used by agencies to determine the title, series, and grade of positions covered by title 5.

“Most occupations change over time, but the fundamental duties, responsibilities required generally remain the same . . . (but) Any duties or responsibilities not specifically covered in a standard can still be evaluated by comparison with classification criteria for similar or related kinds or work.”1

OPM’s Introduction to the Position Classification Standards also provides a Primary Standard which serves as a “standard-for-standards for the Factor Evaluation System (FES). This issuance notes that standards are based on extensive organization studies, to develop criteria which clearly describe the occupation and depict the various levels of difficulty and responsibility so that they can be understood and consistently applied. Although some older standards are written in narrative form, standards developed in recent years use the Factor Evaluation System (FES). The GS-1165 Loan Specialist classification standard is an example of older standards written in narrative form.

THE GS-1165 LOAN SPECIALIST CLASSIFICATION STANDARD

Changes in occupations over time tend to make classification standards dated as occupations mature, new technology emerges, and the economy develops. For this reason, OPM constantly conducts occupation studies and issues new standards. However, the Position Classification Standard for Loan Specialist Series, GS-1165, was issued in December 1961 and last modified in June 1966. The series definition contained in the standard continues to apply to the farm loan specialist positions, but the specific examples require extrapolation in order to apply the standard to current agricultural loan work.

The 1165 Loan Specialist Standard directs that “The most significant factors to be considered in the classification of positions in this series are: 1. Nature of Loans and 2. Nature of Supervision Received.” More current position classification standards using the Factor Evaluation System, classifies positions using an analysis of nine factors: 1.

1 Quoted from The Classifier’s Handbook issued by the Office of Personnel Management

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Knowledge Required by the Position, 2. Supervisory Controls, 3. Guidelines, 4. Complexity, 5. Scope and Effect, 6. Personal Contacts, 7. Purpose of Contacts, 8. Physical Demands, and 9. Work Environment.

Applying any standard requires the classifier to have or get extensive background information about the relevant Federal programs and detailed information about the position(s) being classified. Even when standards are not directly applicable, the classifier may extrapolate the information in the standard to apply it to the position, compare the positions to positions in different occupational series, and as necessary utilize the Primary Standard contained in the Introduction to Position Classification Standards.

The guides and standards are no substitute for good judgment.2 In the final analysis the judgment of an experienced classifier is required to assure that a classification decision applies the correct standard, achieves proper organizational alignment, and provides an appropriate basis for determining the qualifications for the position. Otherwise, the classification decision will not meet the intent of the Classification Act: to ensure that positions with similar levels of complexity of duties and responsibility and qualifications required to do the work should be classified at the same grade levels.

THE POSITION CLASSIFICTION STANDARDS: DIFFERENTIATING BETWEEN GS-11 AND GS-12 NON-SUPERVISORY LOAN SPECIALIST POSITIONS

As noted above the position classification standards for the GS-1165 Loan Specialist Series provide that the “most significant factors to be considered in the classification of positions in this series are:

1. Nature of Loans (and)

2. Nature of Supervision Received”

The standard describes four other factors considered important for all positions in this series but notes that these factors are reflected in the two principal factors, above, and are not described at the various grade levels of the standard. These four factors include (1) Nature of available guidelines for performance of the work, (2) Nature and scope of recommendations, decisions, commitments, and conclusions, (3) Purpose and nature of person-to-person work relationships, and (4) Qualifications required. Although the GS-1165 standard is a narrative standard written in an older format, these four supplemental factors could be said to anticipate the development of standards issued in the Factor Evaluation System format.

The GS-1165 Loan Specialist standard provides general descriptions for non-supervisory positions at the GS-5, GS-7, GS-9, GS-11 and GS-12 positions in four sub-specializations: agricultural, commercial, realty and general. Grade-level descriptions are 2 Adapted from Preface to The Classifiers Handbook, August 1991

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generalized to cover all government loan programs and do not specifically cover each specialization. Positions at the GS-5 and GS-7 levels are training and developmental levels and are titled as Loan Assistants. GS-9, GS-11, and GS-12 positions are at full performance levels but differ in complexity and nature of the work and degree of supervision received. The official title for these positions is Loan Specialist (appropriate specialization). Agencies must use these titles in official personnel documents but also may use organizational (or working) titles. In USDA’s Farm Loan Programs, the commonly used organizational titles are Farm Loan Officer at the GS-9 and GS-11 levels. At the GS-12 level these positions are known within the organization as Farm Loan Managers.

This paper concerns itself only with determining the correct classification of the GS-1165-12 Farm Loan Manager positions that previous studies have determined are properly classified at the GS-11 level.

Grade-level definitions within the GS-1165 standard for the GS-11 and GS-12 levels provide examples of work typically performed at these levels. However, none of these examples is specific to the work of Loan Specialists (Agricultural). In fairness, many of the cited work processes are typical of those performed by loan specialists across specializations, e.g., “the determination of financial capacity of the borrower (as) complicated by the fact that the income is based on the operations of business firms, sometimes with varied activities . . . rather than on relatively stable salaries, wages, etc.”

Discussing GS-11 level Loan Specialist work, the standard states that “GS-11 assignments in the realty field are of the complexity represented by analysis of the financial capacity of mortgagors, builders or sponsors who apply for loans or for guarantee or insurance of their commitments in connection with large-scale housing transactions (large multi-family rental projects, operative-builders projects, nursing homes, and the like). In the commercial field, GS-11 employees are assigned loan actions covering varied kinds of business operations representing all types of ownership (single owner, partnerships, and corporations.” At this level, “GS-11 Loan Specialists are expected to accomplish the normal day-to-day actions pertaining to loan examining and servicing without supervisory direction. Any actions not covered by regulations or precedents are discussed with the supervisor prior to formulation of recommendations as to approval or disapproval. Completed work is reviewed for compliance with agency policies, regulations, and procedures and to determine whether the recommendation is the best solution to the problems, or whether other approaches may be utilized to resolve the problem in a more efficient and economical manner.”

The introductory description for work at the GS-12 level Loan Specialist work, in contrast, states the “The GS-12 level is characterized by the requirement for broad experience and seasoned judgment in providing financial management guidance to borrowers, in ascertaining and analyzing the many and often obscure facts regarding the borrower’s financial capacity, and in evaluating the general economic and financial conditions that affect the Government’s risk in granting, guaranteeing, or insuring the loan. The GS-12 loan specialist is expected to determine the areas and sources of

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information he will explore, and the approach he will take in obtaining needed facts about proposed loan actions, and furnishing guidance to borrowers. Although under agency delegations of authority he normally cannot approve or disapprove loan actions, his judgment concerning the technical assigned cases is accepted as authoritative.” Note: the exclusive use of the male gender appears due to the age of the standard.

Typical work processes at the GS-11 level involve:

1. Conducting interviews with loan applicants to ascertain eligibility and provide financial counseling for a variety of businesses and arrive at a conclusion as to the ability of the applicant to repay the loan and any conditions necessary for approval.

2. Performing difficult and complex credit analyses and evaluating the financial capacity to complete a project. Recommendations by the GS-11 loan specialist are reviewed by the supervisor for technical adequacy and compliance with policies, regulations, and procedures.

3. Servicing loans of all types and amounts to small businesses in an assigned geographical area and making recommendations to resolve delinquent loans, including liquidation. Plans for liquidation are normally discussed with, and approved, by the supervisor or higher authority, prior to execution.

4. Servicing a variety of loans, reviewing loan accounts to determine status, analyzing trends within the service area, such as patterns of default, and the effect of forced sales on the value of other Government made, guaranteed, or insured loans in the area.

Work at the GS-12 level typically involves assignments such as:

1. Investigating circumstances prior to recommending approval of, and servicing, loans when conditions such as the following are present:

a. Applicant is a corporation with a number of subsidiaries, enterprises, and interlocking financial relationships, making it difficult to determine assets, liabilities, working capital and profits as well as to control use of the assets and collateral.

b. Weakness of borrower’s financial condition and management requires extended guidance to the borrower.

c. Borrower is located in an area of substantial or persistent unemployment, and his operation is a major factor in the economic status of the community.

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2. Authorizing and administering loans to a concern whose performance calls for extensive contract financing or loans” to provide working capital. Authorization is based on analysis in breadth and depth of the borrower’s financial soundness, in terms of net worth in relation to total debt, size and condition of accounts receivable, inventory, taxes, sales volume, and profit percentage trends, specifying restrictive conditions in order to protect the Government’s interest, including developing and recommending various courses such as refinancing or mergers in order to keep the firm in production.

3. Counseling borrowers to determine preventive or liquidation action required in case of possible or actual default. Action taken in such cases usually has significant effect on the realty market in the area, and on the agency’s ability to operate at a sound financial level.

Note these differences in the standard between GS-11 and GS-12 Loan Specialists:

1. The GS-12 level is characterized by the requirement for broad experience and seasoned judgment. The GS-12 loan specialist’s judgment concerning the technical aspects of assigned cases is accepted as authoritative. At the GS-11 level normal day-to-day actions are performed without supervisory action, whereas any actions not covered by regulations or precedents are discussed with the supervisor prior to formulation of recommendations for approval or disapproval. Completed reports and recommendations are reviewed by the supervisor for technical adequacy.

2. Assignments at the GS-12 level often require investigation of circumstances prior to recommending approval when conditions include borrowers who have a number of subsidiaries, enterprises, and interlocking financial relationships, making it difficult to determine assets, liabilities, working capital and profits as well as to control the use of assets and collateral; often the weakness of borrower’s financial condition and management requires extended guidance(underscoring supplied) to correct deficiencies and to assure that the borrower realizes maximum benefit from Government financing. At the GS-11, on the other hand the Loan Specialist reviews and makes recommendations on requests from the borrower or participating bank for a variety of actions within the terms and conditions of the loan and may recommend liquidation ofdelinquent loans when all preventive steps have been exhausted. At the GS-11 level plans for liquidation are normally discussed with, and approved, by the supervisor.

Essentially, then, the differences between the GS-11 and GS-12 positions as described in the position classification standards are:

1. The complexity of the circumstances including the complexity of the borrowing entity/entities.

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2. The degree and extent of specialized guidance required to be given the borrower.

3. The degree of independence of actions and authoritativeness of the decisions or recommendations of the loan specialist.

4. The breadth of experience and quality of judgment required.

CURRENT REVIEW OF THE GS-12 LOAN SPECIALIST POSITIONS (FARM LOAN MANAGERS) WITHIN FSA

To collect basic information about the occupation and affected non-supervisory LoanSpecialist positions within FSA, I reviewed studies done previously by the agency and a third party in 2002 and 2003. I held numerous in-person and telephone conversations with the attorney representing the National Association Credit Specialists, officers of the Association, and former agency employees. I also conducted extensive in-person interviews with several existing GS-12 Loan Specialists (Farm Loan Managers). I asked some of these Farm Loan Managers to expand on my conversations with them in writing. The information they provided can be found in Attachments 1 -5 to this document, modified only slightly to remove identifying information. I also reviewed the information about Farm Loan Programs to be found on, or linked to, the agency’s web site.

“FSA makes direct and guaranteed famer ownership (FO) and operating loans (OL) to family-size farmers and ranchers who cannot obtain commercial credit from a bank, Farm Credit System institution, or other lender. FSA loans can be used to purchase land, livestock, equipment, feed, see, and supplies. Our loans can also be used to construct buildings or make farm improvements.

“FSA loans are often provided to beginning farmers who cannot qualify for conventional loans because they have insufficient financial resources. FSA also helps established farmers who have suffered financial setbacks from natural disasters, or whose resources are too limited to maintain profitable farming operations.”3

None of the studies performed by the agency or the third-party reviewer challenged the determination that the correct occupational series for these positions is the GS-1165 Loan Specialist Series (agricultural). Individuals lamented the loss of the GS-0475 Agricultural Management Series which had required a degree in the biological sciences in order to be eligible for positions classified in that series. However, that issue is moot as the series was abolished by the Office of Personnel Management at the request of USDA.

The third-party reviewer “found no significant type of work or a requirement for a specialized knowledge that would dictate consideration of any other series as more 3 www.fsa.usda.gov/FSA

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appropriate for these positions. I agree with the third-party reviewer. However, I was told repeatedly that successful progression in this series within FSA’s farm loan programs depends on a basic knowledge of farming activities and nomenclature. Based on the examples I was given, I would encourage inclusion of this requirement in vacancy announcements.

A basic OPM premise is that while most occupations change over time, “the fundamental duties, responsibilities, and qualifications required generally remain the same. Thus, careful application of appropriate established classification standards and guidance should result in correct classification decisions.” I agree generally. However, the age of this standard and the dramatic changes in farming since the last modification of this standard in 1966 provide a stern test to OPM’s premise. These dramatic changes include the pace of expansion of industrial farming, the decline in the number of small farmers, the concomitant complexity of financial arrangements of many of the remaining small farmers, the increasing cost of mechanized equipment, the increasing number of part-time farmers, and the relatively recent development and expansion of organic, niche, and related specialized farming to meet needs exposed by the limitations of industrial farming. As farming has changed, relatively low commodity prices relative to increased costs has required many farming entities to rely on non-farm income to pay for daily living expenses, insurance, and utilities. In addition, changes in loan programs and other aspects of farm loans brought about by successive Farm Bills, as well as recurrent economic crises have impacted agricultural enterprises generally. Many, if not all, of these developments appear to this analyst to have the potential for increasing the complexity of the work of the loan specialist.

The third-party reviewer reports that his “review leads us to the same conclusion as that of the FSA classifier. We too find that the complexity of the loan programs and the role played by the FSA Loan Specialists, along with the supervision provided the supervisory Farm Loan Manager is as envisioned in the standard as being typical of a GS-11 level Loan Specialist. Yes, the nature of the loan programs is complex, and the Farm Loan Managers are accorded much responsibility for investigating loan applicants, for exercising judgment in approving and closing loans, and for servicing. But this complexity, this variety, this exercise of judgment, and this amount of authority are all envisioned in the standard as being representative of the GS-11 level. We do not find that the higher-order responsibilities referred to in the official position description, and elaborated upon by the FSA headquarters classifier, meet the GS-12 level intended in the position qualification standard. That is, the case file does not support the notion that the FSA non-supervisory Farm Loan Managers on a regular and recurring basis are involved in situations where the applicants are multi-level entities with subsidiaries and complex financial relationships, where the nature of the borrower raises unusual circumstances because of his/her role in the community, or where the assessment of the loan application is complicated by intricate financing considerations. We recognize that such situations undoubtedly exist and arise in FSA. But the case file provides no evidence that the farm

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loan program environment can support approximately 450 individuals performing such work on a regular and recurring basis.”4

The findings of the third-party reviewer raise the following questions, as a minimum:

1. Was the case file upon which the third-party reviewer based his findings accurate and complete at the time?

2. Did the reviewer independently conduct fact-finding or rely solely on the case file?

3. Are the third-party reviewer’s judgments to be accepted as authoritative, given the answers to 1 and 2?

4. Have there been changes in farming and the agricultural economy that have added complexity sufficient to warrant over-turning the conclusions of the previous reviews?

5. Have there been changes in the nature of available guidelines, the nature and scope of recommendations, the nature of person-to-person contacts, or the level of experience and judgment required that merit consideration?

There is no way for this reviewer to know the answers to 1 and 2, above, and this reviewer finds no need to challenge the judgments made in 2002 and 2003. Rather, this is a contemporary review based in large part on correspondence, discussions, and in-person interviews with loan specialists themselves. My findings are not based on a case file but are based instead on primary sources equivalent to desk audits, the basic tools of the classifier, and organizational knowledge of the U.S. Department of Agriculture and its agencies gained overmore than three decades, half of that time as a senior executive.

As I noted above, the introductory description of the GS-12 Loan Specialist states:

The GS-12 level is characterized by the requirement of broad experience and seasoned judgment. The GS-12 specialist’s judgment concerning the technical aspects of assigned cases is accepted as authoritative.

On the other hand, at the GS-11 level:

“GS-11 Loan Specialists are expected to accomplish the normal day-to-day actions pertaining to loan examining and servicing without supervisory direction. (However) . . . actions not covered by regulations or precedents are discussed with the supervisor prior to formulation of recommendations as to approval or

4 Classification Report, Farm Service Agency (FSA), GS-1165 Loan Specialist Positions in FSA Field Offices, by Human Technology Inc. (HTI), 2003.

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disapproval. Completed work is reviewed for compliance with agency policies, regulations, and procedures and to determine whether the recommendation is the best solution to the problems, or whether other approaches may be utilized to resolve the problem in a more efficient and economical manner.”

Note the differences here. They are critical. The GS-12 routinely calls upon a breadth of experience and depth of judgment not required at the GS-11 level. The GS-12’s actions, because of the breadth of experience and depth of judgment, are accepted as authoritative whereas the GS-11’s work more often is subjected to higher review.

First-time borrowers make initial contact with the agency to gain information and begin the process of obtaining a loan. Approaches to the agency may be triggered by information gained as a result of the agency’s outreach programs, referrals by other lenders, or suggestions from a peer or friend in the community. During an initial approach the borrower may deal initially with any Farm Loan Officer or Farm Loan Manager. Typically, however, the most complex or difficult situations as they evolve are assigned to the Farm Loan Manager or involve the Farm Loan Manager at some point in the loan or servicing process.

Entities seeking farm loans, even small farms, are increasingly complex. Here are some reasons cited by Farm Loan Managers for the increasing complexity of circumstances confronting the Farm Loan Manager:

● Agency rules have changed, rendering a trust a potentially eligible entity. Trust agreements themselves are becoming more complex.

● Relaxed agency eligibility rules have resulted in an expansion of the customer base. Specialized enterprises, very large and very small operations that were previously considered ineligible, are now considered potentially eligible operations.

● An increased number of applicants and borrowers are entities rather than individuals.

● More of the applicants and borrowers depend on revenue received from non-farm business ventures which often operate as an entity (including LLC, corporation, partnership, trust or other entity). Often, the success or failure of the farm operation depends on the success or failure of the non-farm business venture. Repayment capacity is difficult to determine.

Although all of these circumstances may confront any farm loan specialist, the increasing complexity of the circumstances provides more opportunities, and the necessity, for the non-supervisory Farm Loan Manager to exercise technical supervision. Bear in mind, too, that the non-supervisory Farm Loan Managers are considered non-supervisory only insofar as they do not supervise at least three

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persons, the prerequisite imposed by the Supervisory Grade Evaluation Guide to be classified under that Guide and be assigned a supervisory title. The decisions of the Farm Loan Manager are considered authoritative, as is the “technical advice and guidance” the Farm Loan Manager gives to the Farm Loan Officers at grade GS-11.

The fact that the Farm Loan Manager provides administrative and technical supervision to one or more Farm Loan Officers operating at a base level of GS-11 does not by itself mean that the Farm Loan Manager should be classified at a higher grade level unless a substantial amount of the Farm Loan Manager’ time is spent on supervision. By definition, a substantial amount of time spent in supervision requires three or more subordinates. Two different positions with somewhat different levels of difficulty may still be classified at the same grade level as each grade level encompasses a range of difficulty and complexity. Accordingly, the position of a Farm Loan Manager who supervises fewer than three persons is classified based on a comparison of her or his duties, responsibilities, and degree of supervision received with the appropriate non-supervisory standard.

According to the Farm Loan Managers I interviewed, the nature of Farm Loan Manager’s responsibilities includes significant changes in portfolio management responsibilities. These include:

1. Conversion of detailed regulations into streamlined handbooks setting out general program objectives, thus requiring more frequent use of independent judgment by the Farm Loan Manager.

2. Introduction of new Farm Loan Program risk Assessment tools, requiring Farm Loan Mangers to develop strategic plans for addressing high risk items in an ever changing environment while also striving to improve on low risk activities.

3. Providing advice and assistance to farmers, ranchers, lenders, and supplies or others who need assistance but may never apply for a loan. This need has arisen as the number of experienced private-sector agricultural lenders has declined and agricultural operations have become more complex. Often, the Farm Loan Manager is called upon as a substitute for the expertise and advice no longer available from experienced private-sector agricultural lenders.

4. As county office committees are no longer involved in making loan eligibility determinations, reviewing loans requests, or reviewing debt settlement offers, Farm Loan Managers are operating with even greater independence and effectively are the final decision maker in the majority of the loan making and loan servicing actions taken, even

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if some actions such as debt settlements may require higher level signoffs.

5. More farmers require advisory assistance as they struggle to maintain profitability and narrowing profit margins require them to be better managers. The Farm Loan Manager is often the best source of such advice, given the Farm Loan Manager’s depth and breadth of experience. One Farm Loan Manager described it to me this way: “We’re often the Financial Doctor for the farmers in trouble. We prescribe solutions to keep them in business and avoid default.”

The Farm Loan Manager is the subject-matter expert in an assigned area. With more types of expertise required in today’s changing agricultural economy and the necessity to maintain a broader range of contacts, he or she must train and develop the Farm Loan Officers. He or she must handle those cases beyond the capacity of the Farm Loan Officer who typically, but not always, has less experience.

Many loans handled by the Farm Loan Manager may require putting together a package involving several conventional lenders in order to make the FSA component workable. In these complicated transactions the Farm Loan Manager often has to do the work for the conventional lender, who no longer has the expertise, in order to secure the lender’s involvement.

The Farm Loan Manager typically is the FSA official who, dealing with problem loans, advises whether to liquidate, prepares the documents for transmittal to the state office and the US attorney, testifies in court, and who represents the office in bankruptcy cases. Generally speaking, it is only the Farm Loan Manager who handles bankruptcies and liquidations, including forced sales and repossessions of property. He or she is the prime resource for the US Attorney handling a particular matter.

On many occasions a conventional lender or an Ag instructor will bring a difficult matter to the Farm Loan Manager and effectively “plop down the mess” and say to the Farm Loan Manager, “What can you do to help?” Again, this is evidence of the respect for the Farm Loan Manager’s breadth and depth of experience in farming and farm financing and her or his ability to provide constructive advice.

In states in which mediation is mandatory prior to liquidation, it is the Farm Loan Manager who attends and, within limits, has authority to act on behalf of the agency. He or she may negotiate and recommend settlements, although the final decision on debt settlements is reserved to the state office or above. Nonetheless, the Farm Loan Manager’s recommendation is generally authoritative. Even in states in which mediation is not mandatory, the Farm Loan Manager may participate in voluntary mediation. On occasion, a debtor may use mediation to leverage restructuring or as a delaying tactic. The Farm Loan Manager will convene all of the concerned parties who are asked to come to the table with talking points and proposals for resolution. Only the Farm Loan

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Manager has the comprehensive understanding required to provide leadership and act in mediation cases.

Examples provided by Farm Loan Managers describing the nature of their work, describing how the position has changed in recent years, and supporting the requirement for a depth and breadth of experience and judgment can be found in Attachments 1 through 5 to this document.

ANALYSIS

The Farm Loan Manager, whether he or she meets the minimum requirements for classification under the Supervisory Grade Evaluation Guide, supervises one or more Farm Loan Officers, sometimes including trainees. As such, the Farm Loan Manager is the person who provides administrative and technical supervision for farm loan programs within an assigned geographical area that, depending on the state, may comprise one or several counties. The Farm Loan Manager is the product of several years of experience, most always more than five, which have given her or him a depth and breadth of experience unique in the assigned area. Consequently, the Farm Loan Manager’s technical advice and decisions are considered authoritative within FSA and respected within the assigned area by conventional lenders and borrowers alike. He or she manages the loan program, decides on strategies, directs priorities, develops staff to recognize, analyze, and utilize the information needed to make good decisions, and orchestrates the servicing of loans to prevent or manage defaults or potential defaults. The Farm Loan Manager is the point person for the agency in mediations and in bankruptcies and liquidations is the principal resource for the U.S. Attorney’s office and, in some cases, may manage the bankruptcy process.

In recent years, developments in the economy, trends in agricultural production, and the increasing complexity of borrowing entities have combined to require a higher level of sophistication in assessing the borrower’s financial capacity and ability to repay a loan. Also, new crops, new markets, and new practices have added complexity to the process of assessing a borrower’s financial situation and potential ability to pay. As conventional lenders have lost capability to understand the agricultural sector, the Farm Loan Manager often has become the substitute for the bank’s lost capability. Increasingly, too, the Farm Loan Manager is called upon to create complex packages combining financing from one or several conventional lenders with that from FSA in order to make a deal and, in effect, limit the risk to the government. In such cases, FSA loans by themselves would be risky,and often, infeasible.

These two paragraphs, above, show the close relationship of the Farm Loan Manager’s work to the introductory paragraphs in the GS-1165 position classification standard for the GS-12 level:

“The GS-12 level is characterized by the requirement of broad experience and seasoned judgment in providing financial management guidance to borrowers, in ascertaining and

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analyzing the many and often obscure facts regarding the borrower’s financial capacity, and in evaluating the general economic and financial conditions that affect the Government’s risk in granting, guaranteeing, or insuring the loan.

“The GS-12 loan specialist is expected to determine the areas and sources of information he will explore, and the approach he will take in obtaining needed facts he will explore, and the approach he will take in obtaining needed facts about proposed loan actions, and furnishing guidance to borrowers. Although under agency delegations of authority he normally cannot approve or disapprove loan actions, his judgment concerning the technical aspects of assigned cases is accepted as authoritative.”

I find that the Farm Loan Manager’s work closely corresponds to, or exceeds, these initial paragraphs of the standard’s grade level definition for GS-1165-12. He or she has wide latitude for the exercise of independent judgment, oversees the farm loan program within her or his assigned area, provides direction and guidance to the Farm Loan Officers, and makes decisions and judgments which are considered authoritative within the agency, even for actions beyond her or his scope of delegated authority. The Farm Loan Manager furnishes consequential advice not only to borrowers and prospective borrowers but also to conventional lenders who may participate with the agency in financing an entity’s operations. He or she has the depth and breadth of experience that permits solid analyses of the finances of prospective or existing borrowers and is the person expected to propose resolution to problem situations, including altering business practices, forcing liquidations, and bankruptcies, and carrying out related duties.

The position classification standard for GS-1165-12 Loan Specialists also describes three examples of kinds of assignments which can be typical of the GS-12 level.

In the first example the GS-12 Loan Specialist “investigate(s) circumstances prior to recommending approval of, and servicing, loans when conditions such as the following are present:

a. Applicant is a corporation with a number of subsidiaries, enterprises, and interlocking financial relationships. This situation makes it difficult to determine assets, liabilities, working capital and profits as well as to control the use of the assets and collateral;

b. Weakness of borrower’s financial condition and management requires extended guidance to the borrower to correct deficiencies and to assure that he realizes maximum benefit from Government financing; arrangement of standby agreements with the borrower’s creditors may also be required to permit him to get back on his feet;

c. Borrower is located in an area of substantial or persistent unemployment, and his operation is a major factor in the economic status of the community, requiring consideration of other than usual conditions or terms relating to credit, collateral, repayment schedules, and the like.”

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The Farm Loan Managers have described to me the increasing number and diversity of financial arrangements among farm partners and families, all of which require extensive analysis to determine the nature of the individual entities, the financial capacity and obligations of each, and whether the operation proposal is feasible and likely to succeed considering all of the circumstances.

By definition, loans are made to borrowers who cannot obtain commercial credit or at least not without FSA participation as a direct lender or guarantor. Often, too, the Farm Loan Manager must act like an attorney in commercial transactions, using her or his knowledge and experience to provide substantive advice and guidance both initially and continuing, as a condition of the loan arrangement and to maintain the viability of the enterprise. Typically, the Farm Loan Manager assesses the totality of the borrower’s financial situation and often constructs loan packages involving the participation of one or several conventional lenders and either a direct loan or a guarantee or both.

These activities of the Farm Loan Manager are similar in scope and level of difficulty and responsibility to that described in Parts 1a and 1b of Example 1. Farm Loan Managers may or may not be located in areas of substantial or persistent unemployment and the borrowers are not likely individually to be a major factor in the economic status of the community. However, given the nature of FSA farm loans the failure of a substantialportion of a Farm Loan Manager’s loan portfolio could severely impact the area, especially given the narrow margins on which most farms, particularly small farms, operate. Changing commodity prices, weather, markets and other variables require the application of a high order of knowledge and judgment on the part of the Farm Loan Manager, certainly equivalent to that expressed in 1c of Example 1.

In the second example provided by the GS-1165 standards of assignments typical of GS-12 loan specialists, the GS-12 loan specialist authorizes and administers “loans to an industrial concern whose performance of Government contracts calls for extensive contract financing or ‘loans’ to provide working capital. Authorization is based upon analysis in breadth and depth of the borrower’s financial soundness, in terms of net worth in relation to total debt, size and condition of accounts receivable, inventory, taxes, sales volume, and profit percentage trends. It is usually necessary to specify restrictive conditions . . . to protect the Government’s interest. In the case of default, the GS-12 loan specialists may develop and recommend various courses such as refinancing or mergers in order to keep the firm in production.”

Farm Loan Managers do not authorize or administer the type of loans described in Example 2. Nonetheless, they do perform many of the same work processes, including analysis in breadth and depth of borrowers, each of which presents a unique combination of financial circumstances and many of which required continued supervision, including extensive management advice and guidance. Taken as a whole the work of the Farm Loan Manager in such cases is at least equivalent in level of difficulty, complexity and responsibility as that described in Example 2.

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The third example describes the work of loan specialists who counsel operative-builders or sponsors, whose commitments in construction of very large cooperative or rental apartment projects the Government has insured concerning financing arrangements, sales or rental plans and methods, and other matters affecting financial soundness of the project . . . (and) determine(s) preventive or liquidation action required in case of possible or actual default, taking into consideration a variety of factors . . . (as) the impact of such action may have significant effect on the realty market in the area and on the agency’s ability to operate at a sound financial level.

The third example addresses a specialized area of lending not performed by FSA. Nonetheless, the focus of this example is on providing “counsel” to the borrowers or their sponsors. Counseling prospective borrowers or during the servicing of loans, particularly in difficult cases in which default appears possible or likely, is a typical higher level duty of Farm Loan Managers. Because the Farm Loan Manager manages a large portfolio of loans, the consequences of effective advice and counseling can keep problem borrowers in business, minimize liquidations, thus contributing to the stability of the local farm economy and preserving the Government’s interests.

Clearly, the work of the Farm Loan Manager fits nicely within the range of difficulty and complexity exhibited by these samples and well beyond the range of difficulty exhibited by the examples provided in the standards for the GS-11 loan specialist, whose work is typically reviewed by a higher level authority. Moreover, the GS-11 routinely takes matters which fall outside well established precedents to the supervisor for guidance.

In my opinion, the work of Farm Loan Managers, taken in totality and performed for a substantial portion of their time, is equivalent in level of difficulty, responsibility, and qualifications required to that of the examples provided in the standard for GS-12 Loan Specialists. Moreover, it appears the Farm Loan Manager operates with less supervisory guidance and with more effective authority than that described at the GS-12 level of the standard. It is my judgment that the agency’s Farm Loan Managers warrant classification as Loan Specialist (agricultural), GS-1165-12.

CONCLUSIONS

1. There is a distinctive difference between the work of the Farm Loan Officers and the Farm Loan Managers. Farm Loan Managers typically perform the more difficult work, rely on a greater depth and knowledge of experience, and their advice and decisions generally are considered authoritative. They direct the work of the Farm Loan Officers, interpret agency guidelines, and establish priorities and strategies for achieving program goals. That there is a qualitative difference between the work of the Farm Loan Managers and Farm Loan Officers does not by itself determine that there should be a difference in grade between the two kinds of positions, as there is a range of difficulty within each grade level, but it suggests strongly that such is the case in this instance.

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2. In an increasingly complex farming environment, the Farm Loan Manager typically handles the more complex cases, is called upon to provide advice and assistance in complex or especially difficult circumstances, represents the program at mediations, in liquidations and bankruptcies, and is considered an authority by program management, conventional lenders and the farming community and Federal and state cooperators within an assigned area. The Farm Loan Manager often assembles complex packages of loans involving one or several conventional lenders, combined with FSA financing, to make a government loan workable. The confidence placed in the Farm Loan Manager by both conventional lenders and the agency makes this possible.

3. Changes in agency practices require the Farm Loan Manager, as the area program expert, to exercise a greater degree of judgment as detailed agency regulations are replaced by more general guidelines. Trends in the agricultural economy have increased the number of complex matters handled by the Farm Loan Manager and are a substantial part of the work.

4. In this reviewer’s opinion, a substantial portion of the work of the Farm Loan Manager falls squarely within the parameters for GS-1165-12 work described in the position classification standard.

5. As a cross-check, this reviewer compared the work of the Farm Loan Manager as discussed in this paper with the Primary Standard. Comparison with the Primary Standard confirms, in this reviewer’s opinion, his conclusion that the Farm Loan Manager position is properly classified at the GS-12 level.

6. Maintaining the Farm Loan Manager position as a GS-12 preserves an appropriate career ladder, appropriately assists recruitment and retention, and properly guides the establishment of qualification requirements for the position.

Submitted by:

/s/

Larry B. SlagleHuman Resources ConsultantApril 13, 2010

AttachmentsAttachment 1

What Changed?What New Duties, Responsibilities and Challenges Are

Farm Loan Managers Facing?

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NATURE OF LOANS:

1) Increased Diversity and Complexity of Operations Served:

Agency rules changed rendering trusts a potentially eligible entity. Trust agreements are becoming more complex.

Relaxed agency eligibility rules resulted in an expansion of the customer base. Specialized enterprises, very large and very small operations that were previously considered ineligible are now considered as potentially eligible operations.

Increased percentage of applicants and borrowers are entities rather than individuals.

More applicants and borrowers depend on revenue received from non-farm business ventures which often operate as an entity (LLC, corporation, partnership, trust or other entity). The success or failure of the farm operation often depends on the success or failure of the non-farm business venture. FSA loan officials must review and evaluate every aspect of the non-farm business entity as well as the farm operation. Repayment capacity is not easily determined.

Off hand, I can think of customers in the portfolio served by my office that are dependent on income from self owned insurance business ventures; construction business ventures; value added food manufacturing, packaging, distribution and marketing ventures; value added production, distribution, and sale of arts, crafts, and clothing items; agricultural tourism business ventures; custom haying, harvesting and planting operations; seed and feed sale business ventures; consulting business ventures; trucking business operations; and a variety of work from home commission sales operations. Each of these non-farm business ventures affects the financial condition, revenue and overall risk of the customer’s operation and potential for success. FSA loan officials evaluate the potential risks and returns attributed to the far and the non-farm business. Loan officials provide counsel as to how to structure and insure non-farm business ventures in order to protect family and farm financial interests.

Increased diversity of agricultural production practices. Embryo transplants, artificial insemination and other specialized methods of producing genetically “superior” livestock creates specialized markets and alters production cycles, costs and practices.

Genetic engineering of seed and rapidly changing economic conditions are creating increased diversity of production practices with each having different rates of return, risks and costs. Crops such as rice, cotton and peanuts, which

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were traditionally grown in warm Southern states are now being produced in states as far north as Kansas. Roundup ready seed varieties are also allowing for increased diversity in cropping rotation methods and increased use of double cropping practices. Drought or disease resistant seed varieties are creating more diversity in production practices. Many of the new practices require a larger financial investment, better management and often create greater risks to the customer and the lender.

Multiple new kinds of irrigation methods have been developed for use in the area. GPS enabled specialized farming practices are more common as are any number of other specialized practices that were facilitated by enhanced machinery, crop, livestock and production technology.

A significant number of new conservation and commodity program optionsare being offered for crop, forage and livestock producers. The new programs are significantly more complex and offer more options for producers and creditors o evaluate.

New and more complex crop insurance program alternatives are now available. Loan officials must be familiar with the alternatives, costs and risks associated with each insurance product offered.

More complex marketing options / tools being utilized. Forward contracting has become more prevalent. Various forms of production contracts are now being utilized. Livestock are being sold via on-line video sales. Fruits, vegetables, livestock and livestock products are being packaged and sold directly to consumers. Value added methods of marketing goods are becoming more common. The expanded use of internet and communications tools has caused a rapid increase in sales methods.

More complex buying tools being utilized. With rapidly changing costs of production we are working with more complex cost control / risk management measures such as contracting for goods and services such as fuel, fertilizer, seed feed and chemicals for future delivery. Livestock, machinery and other assets are being purchase via on-line live auctions or other internet services.

In many instances FSA loan personnel are serving a larger area due to office consolidations or staffing reductions. As service areas get larger, the FSA loan portfolio becomes more diverse due to increased diversity of whether and growing conditions; increased marketing opportunities/challenges; increased diversity of cropping and livestock enterprises; and increased diversity of commercial lending practices.

Direct loan limits were increased by 50% ($400,000 to $600,000). Guaranteed loan limits increased nearly 59% ($700,000 to $1,112,000).

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Increased loan limits allows FSA to work with larger more diverse and often more complex operations.

2) Increased market volatility on both sides of the balance sheet. Surviving and thriving in these volatile times requires greater customer and loan official knowledge, skills and ability. Note the following:

Prices received for products changes much more rapidly adding risk to

customer and lending decisions. For example in 2008, we had a $12 swing from high to low in the price of wheat, a commodity that typically sells for $3.00 to $5.00 a bushel. Federal Board of Trade regulations governing limit up and limit down rules on many agricultural commodities were changed to allow commodity prices to move up or down much more rapidly on any given day. In a half page article published in the local newspaper on February 21, 2010 an area farmer and agricultural economist addressed the volatility issue with an assertion that “the price movements that 10 years ago would occur over a period of a year on the Kansas City Board of Trade seem now to happen in a matter of hours or a day.” Increased volatility of market prices have resulted in increased diversity of risk management strategies that loan officials must be knowledgeable of.

Prices paid for inputs changes much more rapidly. For example, the cost of fuel, fertilizer and chemicals used to produce cash grain crops doubled within a span of about three months in 2008. The result of rapidly changing production costs has been an increased diversity of buying strategies. Customers are contracting for goods and services months in advance of delivery. Customers are forming “buying groups” in order to take advantage of quantity discounts. Customers are altering traditional payment methods to attain discounts. Customers are traveling greater distances and working with non-traditional suppliers in an effort to secure cost savings. Customers are conducting long distance transactions via the internet. Each of these practices creates a degree of risk and uncertainty that loan officials must address with customers.

Enhanced technology is resulting in specialized production practices and discriminating market pricing practices. With enhanced technology, buyers are able to measure, track and adjust payment for quality. Grain protein levels, moisture content and cleanliness are readily measured. Livestock are commonly bought based on yield and grade. A few years ago, customers and loan officials were able to concentrate efforts on increasing production with little consideration given to quality issues that buyers did not have the capacity to measure. Today, quality factors must be addressed as we strive to assist customers succeed.

There are more factors to consider in identifying strength, weakness and solutions to management, production, marketing, or financial challenges faced by each customer. The causes of positive or negative trends are more

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difficult to identify and it is more challenging to identify solutions for overcoming deficiencies. A few years ago, a customer could address profitability shortfalls by securing a non-farm job. Today, non-farm jobs are difficult to attain and many of the operations that we serve have become so labor intensive that it would not be practical to pursue non-farm employment.

NATURE OF LOAN MANAGER RESPONSIBILITIES:

1) Considerably Greater Portfolio Management Responsibilities:

a) Streamlining:

Thousands of pages of regulations dictating policy in great detail were eliminated in favor of handbook procedures setting forth general program objectives. Loan officials are responsible for making judgment decisions rather than to rely on detailed procedural guidelines.

Approximately 33% of the forms previously utilized by FSA were eliminated. Farmers, ranchers, lenders and others are now responsible for creating their own forms. FSA loan officials must review non-agency forms for conformance with agency and customer objectives. The amount of “fine print” and red tape provisions in many of the documents being reviewed requires loan officials to have extensive knowledge and the skill to negotiate with attorneys, abstractors, lenders, suppliers and others.

b) Farm Loan Program Risk Assessment (FLPRA):

Enhanced automation systems resulted in increased portfolio management tools and responsibilities. The “Farm Loan Program Risk Assessment” (FLPRA) program is an extensive portfolio management tool. FLPRA begins with an annual report generated from the evaluation of a mass amount of statistical data assessing the relative condition of the portfolio and program administration activities for each individual office and each state. The report is given to managers at each level throughout the agency with Farm Loan Managers being expected to develop strategic plans for addressing high risk items in an ever changing environment while also striving to improve on low risk activities to stay ahead of the competition. There are 56 risk assessment factors that each loan manager is striving to address in the 2010 report. Each manager is expected to review the FLPRA report, identify items that are affecting the 56 risk factors, and develop a portfolio management plan to assure that program objectives are being attained and risk managed to the fullest extent possible. Each manager is expected to identify and adjust to ever changing conditions (weather, market, resource availability, etc.) in order to manage a multi-million dollar loan portfolio, manage risk associated with the loan programs, and help assure customer success. Most loan managers are responsible for a larger agricultural portfolio in terms of dollar volume and in

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terms of the number of customers served than most local lending institutions maintain.

c) Detailed performance goals with automation tools to monitor and manage the goals whereas, prior goals were general, largely beyond local control and not directly linked to performance.

2) Mandatory Borrower Assessment / Supervised Credit:

a) A detailed borrower assessment with regular updates is now required for every direct loan customer. The assessment must describe the operation, identify deficiencies / risk factors, establish performance goals for overcomingdeficiencies, and establish long term goals for the business. More volatile economic conditions and more diverse operations with a larger variety of production, marketing, accounting and management practices render it considerably more challenging for loan officials to identify deficiencies and establish a plan for overcoming the deficiencies. Declining non-farm employment opportunities renders it even more challenging to overcome profitability challenges.

b) Agriculture is an extremely capital intense business and has become significantly more so in recent years. The effective allocation of capital is a critical factor in determining the viability of each operation. Direct loan borrowers are required to consult with FSA loan personnel prior to making operational changes of any significance. Loan officials must be skilled in evaluating risks and returns for the entire business and for each individual component of the business. Real estate rental terms; real estate sales or purchases; machinery lease, purchase or sales; machinery repair or replacement; facility or real estate improvements; livestock purchases or sales; changes in crop or livestock production methods or enterprises; proposed new non-farm ventures; marketing strategies; and supply purchase contract strategies are a few of the common issues that loan officials must assist customers with. Loan Managers are, as a rule, engaged in providing counsel in the most complex and difficult determinations.

3) A significant percentage of FSA loan applicants and borrowers are “beginning farmers/ranchers” with limited experience. Beginning farmers/ranchers generally require more detailed counsel / guidance and with a less complete track record to evaluate it is more challenging for loan officials to identify strengths or weaknesses and predict the future prospects for success.

4) Farm Business Plan. The automated farm business plan is a fantastic tool that allows loan personnel to capture, review and evaluate significant amounts of historical production and financial data. With enhanced capabilities for capturing data, FSA assumed enhanced responsibilities for evaluating the information and counseling applicants/borrowers.

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5) FSA services are not limited to those who apply for direct or guaranteed loans. FSA loan officials are often called upon to evaluate and provide professional assistance to farmers, ranchers, lenders, suppliers or others who need assistance with a difficult situation, but may never apply for a loan. As the number of experienced agricultural lenders declines and agricultural operations become more complex there has been an increased demand for FSA consultative assistance. Experienced, fully trained agricultural lenders are becoming sparse.

6) Environmental review and oversight responsibilities have become much more detailed and demanding.

NATURE OF SUPERVISORY CONTROL:

1) Streamlining resulted in the elimination of thousands of pages of regulations dictating policy in great detail in favor of handbook procedures setting forth broad policy objectives requiring loan managers to apply considerable judgment. For example, rules governing the release of hazard insurance proceeds prior to streamlining prohibited loan officials from releasing funds of greater than $2,000 until the property (our collateral) had been repaired or replaced. Post streamlining rules contain no dollar limit governing the release of hazard insurance proceeds. The streamlined rules provide only general guidance as to what factors should be considered.

2) In general, all FSA personnel are spread thinner and striving to deliver more programs and services with fewer resources. Farm Loan Managers are operating more independently with less support and less oversight from District Directors (DDs) and State Office Personnel. FSA is placing an increased demand on fewer DDs with less support/resources to oversee more programs, more complex programs and perform more administrative duties. FSA travel funds and training funds have been declining thus allowing for less state office oversight, less training and increased demand on local managers to monitor quality and provide training as necessary.

Enhanced communication skills and a workforce that is striving to do more with less is causing a shift in responsibilities. Loan managers are assuming more responsibilities for working directly with legal counsel in the United States Attorney’s office in handling bankruptcy, foreclosure, conversion, fraud and other litigation actions.

3) The County Office Committee is no longer involved in making loan eligibility determinations, reviewing loan requests or reviewing debt settlement offers. Farm Loan Managers are operating more independently and are the final decision maker in a majority of the loan making and loan servicing actions taken.

FARM LOAN MANAGER VS. FARM LOAN OFFICER DUTIES - The primary difference in the FLM and FLO position is responsibility / accountability:

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1. The FLM is responsible for portfolio, personnel and program management including:

Meeting goals and objectives established by the National, State and District Office.

Efficiently and effectively administering the loan programs to meet program objectives with available resources such as supplies, personnel, travel funds, time, etc.

Quality control over the entire portfolio.

Overseeing office operations.

Responding to national office, state office, district office and COR review findings.

Establishing priorities for the office. Procedures and notices indicate what should be done. Loan managers must determine what tasks are most critical at any given time and determine what can be done with the resources available.

Providing guidance and training to loan personnel and county office personnel who are assisting with loan program activities.

Establishing policy in regard to loan making, loan servicing, administrative and operational activities.

2. The Farm Loan Officer (FLO) is responsible for activities assigned to them. The FLO is NOT responsible for the overall performance of an office, is NOT responsible for the performance of other personnel, is NOT responsible for establishing program policy, and is NOT responsible for portfolio management.

EXAMPLES OF DIFFICULT CASES:

1) Bankruptcy, foreclosure, fraud and collateral conversion cases are some of the more complex that we deal with. A recent bankruptcy that we handled involved fraud and conversion. I prepared a list of information and witnesses that the Assistance US Attorney requested by subpoena. I carried a box of records 12 inches high, 18 inches wide and three feet long to a meeting with the Assistant US Attorney. I spent an entire day with the Assistant US Attorney and staff marking exhibits and preparing a list of questions for witnesses. The evidence confirmed that the borrower had sold our collateral in the name of three of his children and his father-in-law. The evidence also confirmed my suspicions that the borrower and his attorney had distorted income information in order to meet Chapter 12 bankruptcy eligibility rules. The Assistant US Attorney and I met with the Bankruptcy Trustee to discuss bankruptcy fraud proceedings. We (the Assistant US Attorney and I) then called the borrower’s

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attorney to discuss evidence and the course of action that we intend to pursue. The borrower’s attorney proposed that we settle the case. I helped prepare terms of the settlement agreement which were extremely favorable to FSA. Given the amount of evidence that we had compiled the borrower and his attorney agreed to our terms without further dispute. The US Attorney is in possession of a properly executed deed that will be used to transfer ownership of our collateral to FSA if the borrower fails to perform all monetary and non-monetary provisions of the agreement.

2) Mediation and appeals are often difficult. The FSA loan official is generally called upon to defend adverse decision against a room full of “experts” including attorneys for the applicant/borrower, attorneys for other creditors, financial consultants hired to dispute FSA findings, suppliers, lenders, and others with interests that are not consistent with those of FSA.

3) Rather than to provide an endless list of difficult cases that I have worked on, I will provide an overview of the cases that I worked on last week:

a) I worked on a loan application from an individual wanting to purchase a turkey breeding operation for $500,000. The applicant has no prior farm or business experience, thus the applicant has no historical production, income or expense data for the turkey breeding operation that can be utilized to assess the profitability of the proposed business venture. The operation is so specialized that I am not sure that there is a similar operation in the state. I am only aware of one other turkey breeding operation in the state and it is owned by the integrator rather than by an individual. Part of the challenge in working with this applicant has been the existence of multiple conflict-of-interest relationships that are affecting decisions made by the other lender and applicant. The applicant currently works for the integrator and oversees the operation that he wants to purchase. The applicant reports that he and the seller are close friends. The co-applicant works for the bank who is offering to make a loan secured by first lien on all of the assets. We requested a copy of three years of income and expense records from the current business owners. It is our belief that an individual that is considering the purchase of a main street business would review the historic sales, income and expense records for the business before tendering an offer. The current owner (seller) called to inform me that the records are not available because they run multiple business ventures and do not maintain separate records on the turkey farm. During the same conversation, the owner (seller) informed me that he had agreed to clean out the turkey barns and dispose of the litter several times per year at no charge because it would be too expensive for the buyer to purchase the equipment to load and haul litter plus the buyer has no place to dispose of the litter. When questioned about the source of funds for the required 5% down payment the applicant informed me that the seller was going to give them the money with “no strings attached”.

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The applicants signed a contract agreeing to pay $500,000 for 9 acres of real estate with no mention of the machinery, equipment or tools that must remain with the property in order for it to remain a viable turkey producing facility. The contract is silent in regard to waste disposal agreements. The applicant is yet to secure a proposed contract with his employer who is the integrator. We do know that the applicant must quit his job if he buys the operation.

The co-applicant works for the bank that agreed to provide 50% of the funds with first lien on all assets. “Off the record”, the banker tells FSA of their concerns about the proposed project. The banker is not willing to discuss their concerns with the applicant or support FSA’s attempt to secure additional records as they do not wish to ruffle the feathers of their employee.

b) A borrower with a recently confirmed bankruptcy plan called FSA. He has been unable to secure operating credit because of lien position issues. Reviewed the FSA records and the bankruptcy records. Advised the borrower what our lien position is, what the terms of the bankruptcy plan are and what he needs to do in order to resolve the bank’s concerns and secure operating capital.

c) A borrower called to report that one of their land lords decided to sell a half section of ground that they have been operating for more than twenty years. The land owner gave them an opportunity to purchase the ground at a specified price. Years of eligibility rules prevent the borrower from obtaining a loan from FSA to purchase the property, but they wanted assistance in determining if they should attempt to buy it or let it go. Talked them through the process of calculating rate of return, break even factors and looking at risks. Discussed their financial, family and business goals that we had agreed upon and placed in their FSA borrower assessment. Made recommendations for them to think about and agreed to visit again in a few days.

d) Reviewed an application from an individual requesting assistance in re-establishing his farm operation. Two years ago, he sold his cow herd to pay legal fees and pay most of the amount due on a divorce court ordered settlement agreement. All leased ground and farm business interests that he had established during his marriage had been terminated during the divorce. With FSA assistance, the applicant is now proposing to lease cropland and purchase beef cows. He has machinery debt, real estate debt, and personal debt that is structured with payment terms that he can’t meet. He has no recent track record for us to review in determining what his production costs or income potential will be. The applicant applied for a loan to refinance machinery debt obligations, pay his ex-wife the remaining funds due on the divorce settlement agreement and purchase cows.

FSA has been encouraging the applicant to make operational changes to enhance his profitability. The applicant implemented a portion of the recommended changes, but for each positive step taken he suffered a setback at the hands of land

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owners increasing previously proposed rental rates or delaying his possession date. I called the applicant to inform him that FSA must render an adverse decision as we can’t continue delaying action while waiting for him to secure additional revenue sources. Discussed alternatives and established a plan for how he may overcome our concerns and enhance his chances of success within the next few months. Prepared and sent the adverse decision letter.

e) Reviewed an application from an individual who lost approximately $400,000 on grain and livestock marketing contracts during the past 3 years. The applicant, a chemical engineer who quit his job to return to the farm four years ago, borrowed funds from a bank and liquidated his retirement accounts to pay the losses that he suffered. The bank is now demanding payment and he has a large obligation to IRS that he is asking FSA to refinance. The bank required him to go through farm mediation services and seek the services of a financial consultant prior to referring him to FSA. The bank does not believe that FSA can make a loan, but they were not satisfied with the services received from mediation or financial consultants. The bank referred the customer to FSA as they wanted us to review the situation and provide professional financial guidance, suggest alternatives, and help them get the operation back on track. I met with the applicant to discuss the situation and begin the evaluation process. Advised him of alternatives that he should begin considering as it would seem that he must secure more revenue that the current farm/ranch will produce.

f) Reviewed and prepared a written analysis of financial and production information that an area banker provided in seeking our advice. The information is for a financially distressed customer of the bank that is not an FSA customer or applicant. The banker and farmer have been working with two different farm financial consultants for the past two years and are not making satisfactory progress. The banker is the bank president and has more than 30 years of lending experience.

FSA reviewed information and met with the banker, farmer and financial consultant in December of 2009. At that time, we expressed concern about negative financial and production trends. The farmer and consultant thought the negative trends had been reversed in 2009 and decided to wait until after January 2010 to provide 2009 numbers for our review. FSA reviewed the 2009 numbers and updated a previously prepared written summary of our findings for the banker, farmer and consultant to review.

Three years ago the family had direct loans with FSA which were paid in full soon after they inherited a significant amount of real estate. Since paying their FSA loans in full, their total liabilities had increased from $238,000 to over $500,000. It was my determination that the operation can not service their current obligations and their liabilities would continue to increase unless they make some significant operational / financial changes. I had also concluded that family living expenses had been more than twice the modest amount that the financial

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consultant had reported for 2009 and shown in the 2010 projection. I called the banker to discuss my findings and agreed to meet with the farmer and banker to discuss the trends, chances for success, and alternatives. FSA asked that the farmer and his spouse be in attendance as the records indicate that the two may not be working toward the same objectives.

I met with the banker, farmer and his spouse to discuss their situation, discuss our desire to help preserve the equity that they have left, and evaluate alternatives. The farmer’s spouse was angry with the bank for loaning money and at her husband for borrowing an excessive amount of money. She was so angry that her hands and voice were shaking as she stated that she would not sign another bank note and would go directly to the attorney’s office to start divorce proceedings if her husband did not agree to change his ways. FSA presented alternatives including probable, income, expense and debt service obligations associated with each alternative. FSA discussed potential tax obligations and encouraged them to seek the services of their accountant before deciding on a plan of action. Tentative agreements were reached. The family plans to sell most of their machinery in the spring; sell 160 acres of land with possession transferred after wheat harvest; sell the cattle as cow / calf pairs in the spring; retain a semi-truck and grain trailer and accept a job driving for an area business that has been trying to hire him; retain a skid steer loader and truck in order to continue his tree cutting business; cash rent lease their remaining 600 acres of land to generate more than enough income to service the $50,000 to $100,000 of debt that is not paid as a result of the partial liquidation.

After the customers left our meeting, the banker expressed appreciation for FSA assistance. The banker was surprised that we were able to get the family to agree to any changes. They had been trying to get something done for two years. The banker indicated that they would not need a direct or guaranteed loan, but certainly appreciated our assistance. He indicated that they have two additional customers that are struggling and they may seek assistance with. The banker stated that he only works with farmers part time, but FSA works with farmers full time and he considers FSA to be the farm financial experts that he relies on when all else fails.

g) Took a call from an applicant who has an approved Farm Ownership loan that has not been funded. The purchase contract requires him to close, but his bank recently underwent an FDIC examination and they are now telling him that they will not provide a “bridge loan”. The farmstead that he has been occupying for over 20 years was sold 3 months ago and he must move all of his machinery, livestock and his household goods somewhere. He was planning to move to the farmstead that was to be financed with a “bridge loan” and does not know what to do now. If the proposed purchase falls through he is not certain where to go. Discussed finding another lender to assist him. He listed a few banks that had been recommended to him by neighbors. Gave him the name of four agricultural loan officials that he may wish to visit with. The applicant called me back within

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a few hours and had talked with one of the bankers. I agreed to copy his records so he could come by the office to pick them up and deliver them to the banker for review. Received a call from the new banker. The banker wanted to discuss the applicant’s situation, historic trends, collateral, risks, etc. The banker agreed to review the request and make a decision before the day was over. Received a call from the banker indicating that he will provide a bridge loan if the applicant moves all of his business to their bank. Received a call from the applicant informing me that the new banker was planning to close within 7 to 10 days and wanting to know if we had received the water, sewer and termite inspection reports. Received and reviewed the inspection reports the following day. Called the applicant to inform him that the lagoon did not pass inspection thus repairsmust be completed and a new inspection report provided.

h) Met with prospective future applicants to review and discuss FSA real estate loan eligibility rules. Discussed some alternatives that may allow them to enhance their prospects for qualifying for a loan at some future time. Discussed tax and estate planning issues that the family may wish to consider as they begin planning to transfer assets to the next generation.

i) Received a telephone call from three different customers who had questions about the year-end financial, income, expense, and production reports. Also received a call from two different customers to discuss concerns about the amount of income taxes they owe and how they should come up with the funds to pay taxes. One of the two carried grain over and wanted to know if they should sell at current prices or hold the grain and borrow funds to pay the taxes.

The above listed activities are not the most difficult situations that we deal with, but do provide a sample of the loan activities that mangers are addressing each day. Repayment capacity of most farm / ranch operations assisted by FSA is not easily determined. The service provided by FSA is not limited to those who apply for or receive direct and guaranteed loans. We have lenders, former customers, prospective future customers, suppliers and others who rely on the expertise of FSA loan officials to help them succeed with or without FSA loan assistance.

Prepared 3/1/2010

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Attachment 2 – Examples of Complex Work Performed by a Farm Loan Manager in Acute Loan DelinquenciesNote: Names have been altered to preclude identification of specific individuals in these actual case examples.

E H CaseThis particular case involved years of dealing with delinquent loans and no payments to FSA. After 18 years of nonpayment and 3 bankruptcies filed by the borrowers, (each time to stop our foreclosure actions), we were finally able to liquidate the security. The initial confiscation of chattel security was completed through a contract with an equipment dealer. In confiscating the security, Mr. H and his son were very difficult to deal with. They would not voluntarily turn over the equipment. I requested the assistance of the US Marshal’s service and contracted with a local equipment dealer to pick up the equipment from several different farms. While picking up and loading the equipment, the US Marshal called me to come to the farm because the H’s were being difficult and would not turn over the equipment. I actually had to go with the US Marshal to every farm and stay with the equipment dealer and US Marshal to gather all the pieces of farm equipment. One instance, the US Marshal has to request the borrower

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to “get off the combine”. He would not tell me where the combine was but through talking with a neighbor, I found out the location. When we arrived at this farm, Mr. H was on the combine using it. After the chattels were moved to a secure location, the borrowers filed another motion for bankruptcy and I was forced to pay a contractor to take the equipment back to Mr. H. The whole community heard of his bragging that “he had sent the government lady packing”. Asst. US Attorney, Mike Spalding, requested I prepare to testify in US Federal Court as an expert witness on the case. I researched the files and FSA and ASCS records to compile the case of Mr. H’s poor farming practices and years of below average production. His argument in court of trying to confirm another bankruptcy plan was that his lack of production and farm income was due to disasters, both economic and natural. After researching the files and his history through FSA and old ASCS records, I proved that he was a below average farmer and had never produced the yields that he stated in his case and in court. I not only researched his production history but analyzed his records through tax returns and case file documents to show that his expense to income percentages were always above average for the county and area. After relaying this in court as a witness for the Government, the Judge would not confirm the H’s bankruptcy plan. She stated it was clear they could not do what they stated they were going to do and threw out the bankruptcy, which in turn finally allowed FSA to liquidate the security.I requested that I (through FSA) be allowed to sell the chattel security and real estate through auction and not at the courthouse door by the US Marshal. Most sales at the courthouse door result in lower returns due to the negative stigma of a forced sale. I contracted with real estate auctioneer and we worked together to have the farm cleaned up and surveyed into several different tracts, still offering it as a whole as well. I contracted with a locksmith to change the locks on the doors of the dwelling after giving the proper notice and time to vacate. The sale of the farm brought top dollar and FSA was able to recoup most of the loan balances. This was a very complex and time consuming case. It was a difficult case in dealing with uncooperative borrowers/customers and it took a heavy toll on everyone involved. There was countless hours spent in servicing, liquidating and finalizing this case.

T & C & T PARTNERSHIPSThis family applied with a guaranteed lender, South Central Bank, in 2005 for Farm Ownership Loans, Term Operating loans and for Lines of Credit for their annual operating expenses. This involved 7 different combinations of entities and individual borrowers. There were 3 brothers, a son and their wives. One loan request package was from the 3 brothers and their wives (Slinker Farms), another application was T and C Farms with their wives, another application was Te and wife, C and his wife and Ti and his wife. Each application package has real estate loans, chattel loans and operating lines of credit. The complexity of differentiating each entity’s security, each entity’s debts, working through financial statements for the entities and each individual’s financial statement was very difficult. I was required to complete projected cash-flows for the partnerships and also for each individual. Budgets and balance sheets were complex with each owning their own share of livestock and equipment and then the different combinations owning separate livestock and equipment. The real estate was owned by

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combinations of the brothers and then each brother and his wife owned real estate in their individual capacities. In analyzing their past history, I was required to make determinations of what enterprises where profitable and those that were not profitable. The time required analyzing aproject for each case was enormous and took several months to complete. Several different chattel appraisals were required and real estate appraisals as well. Partnerships, LLC’s and the individuals that make up these entities can be very complex and challenging. The loans were approved and now I work with the servicing end of each. They are all current, but each year I must analyze the past year’s actual cash-flows, tax returns and the planned year for each. This must be completed prior to concurring with the next years advancements on their operating lines of credit.

Alvin

This case is similar to the E.H. case in that the delinquent borrower did not make a payment for several years. We were forced to liquidate after many years of trying to work with the borrower to collect and/or convince him to sell voluntarily. After working with the US Attorney’s office for several years, we were given permission to sell the farm. I again requested to be able to sell at auction, hoping to get top dollar and recover as much as possible on the FSA debt. The interest on this loan was as much as the principal balance! I requested authority to sell the farm myself, as Farm Loan Manager, at auction on site. I contracted with an individual to bush-hog the farm which was heavily overgrown. We sold everything as is and held the auction on the farm selling the farm as a whole with no divisions into smaller tracts. We advertised for three weeks prior and posted the sale information in several prominent sites in the county.Eligible bidders were advised they would need a letter of credit and 10% down (in the form of a cashier’s check) day of sale. On the day of the sale, I gave out bidder’s numbers and had interested bidders sign in with name, address and proof of credit. After reading the terms of the sale and asking if there were any questions, I began to take bids. We had a very successful sale and recovered most of the debt from the auction. The farm brought well more than the appraised value and more than it would have at the courthouse door as a Master Commissioner sale or by the US Marshal.After years of delinquent servicing, I was very satisfied with the final outcome. These are always difficult cases whenever you are forced to liquidate someone’s home and farm. But when there is not cooperation from the customers/borrowers, we have no other alternative but to recover the most we can for the government and taxpayers.

Prepared March 22, 2010

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Attachment 3 – Example of Complex Entity in Small Farming Operations Requiring Significant Advisory Assistance from the Farm Loan Manager and Coordination with Other Lenders.

Farmer Steve visited our office at the suggestion of his local banker. He inquired for assistance because he was having cash flow problems resulting in account payable increases. His banker did not have a proposal nor did Steve. This bank was not a regular participant with FSA programs.

Farmer Steve had recently assumed full operating control of the operation after a split with his brother but was continuing to own it with his brother in a partnership in which his brother was the "silent" partner. This meant the silent partner had no say in the operation but still needed to apply and sign all loan and financial documents. The real estate for the operation was owned by another entity also consisting of himself and his brother. The split with his brother had resulted in additional real estate and operating debt and a contentious relationship with his brother.

I reviewed the balance sheet and outlined a possible debt structure based on the security available that included an FSA direct operating loan, an FSA guaranteed operating loan, an FSA guaranteed operating loan with interest assistance and an FSA guaranteed farm ownership loan along with a Bank non guaranteed real estate loan in first position which would need to be re-amortized. This would consolidate his accounts, machinery contracts, and bank debts. Farmer Steve applied for FSA assistance and I worked up the cash flow and provided the financial info and this proposal to the Bank on behalf of the applicant and with his consent. The Bank had concerns and issues on the proposal, as did the applicant. I arranged a meeting of the bank loan officer and their senior credit analyst, the applicant and his two adult children in the operation, the adult Ag instructor and myself for FSA. I outlined and explained the plan, the process for the guarantees, the requirements for these, and the risk mitigation issues for both the bank and the applicant.I addressed the concerns of the bank over past losses, security concerns and loan terms. We negotiated some revisions in the bank loan terms and a feasible plan was found that met the applicant's concerns, FSA requirements, and the Bank's requirements. We were able to provide the applicant with FSA assistance to enable him to continue the farming operation.

Attachment 4 – Examples of Other Complex/Difficult Loans to (1) Operations Involving Multiple Entities and (2) Beginning Farmers

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Complex Loan Involving Multiple Entities

The borrower in this dairy example is an active direct and guaranteed loan borrower. As I stated during my interview a Farm Loan Manager acts as a financial doctor. We focus on determining the cause of the financial problems, develop a prescription to remedy the symptoms currently being experienced and develop a strategy for achieving intermediate and long term financial goals.

This unit consisted of multiple entities owned by two brothers. These entities included two separate dairies that were located in two different locations, an Ag consulting business, a cropping entity which sold crops to the dairies as feed and commercial products to elevators, and an entity which owned all real estate rented by the dairies and crop entity. Included with the application was the financial information for all the entities as well as the individual financial information for the two brothers and theirspouses.

The brothers submitted an application for FSA direct loan assistance for the cropping operation entity which had requested a loan to refinance annual operating losses. Included in these losses were credit card debts and feed bills. This operation had been referred to FSA by their current primary lender because of financial difficulties in servicing all of their debt with the bank. The bank and individuals thought their problem was related to low milk prices.

Historically, the brothers had operated a 600 cow dairy operation that was successful. They were well known for their success and had developed a consulting business for managing dairy operations as a separate enterprise. The crop enterprises as well as the land ownership enterprise were already established as part of operating this dairy.

They were contacted by a neighbor who was having financial problems and was being pressured to liquidate by their lender. This involved another 600 cow dairy. This happened to be the same lender that the brothers did business with. With the help of that lender they purchased the neighboring dairy operation and formed the second dairy operation. They formed a new entity for the new dairy operation and added it to their existing entity mix. They operated the farm this way until they were referred to FSA.

I had to review the financials data from the various enterprises owned by the brothers. This involved reviewing tax returns and financial records over the previous three years for all of the enterprises and individuals. It involved reviewing production records for the crop and individual dairy operations. FSA also verified all debts by the various entities.

It was determined that while the operations on paper were operated as separate enterprises, the reality was that the two brothers operated the entities as one unit. They were writing checks from one entities account to pay expenses for another entity. The unit had become too big and complicated for the two brothers to manage.

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This made it very difficult to complete an enterprise analysis. The bank had never completed an enterprise analysis nor had they reviewed the financial records in adequate detail to determine if records were being maintained properly. It wasn’t until the account could not service all of its debt with the bank was there any indication of a financial problem. The bank was only interested in their debt service requirements. The records showed that the combined unit had been losing money for years. It manifested itself in the form of credit card debt and open accounts.

After considerable effort and multiple meetings with the existing lenders, creditors, owners, and FSA, the Farm Loan Manager determined that the consulting business and one of the Dairy enterprises were losing the most money. In addition, the Farm Loan Manager determined that there was friction between the two brothers regarding the operation of the consultant business. It was felt by one of the brothers that the other was away from the farm too much and was putting too much pressure on the remaining brother to operate the farming operation.

After determining the problems, negotiations began between the primary lenders of the various entities, the owners of the entities, and the Farm Loan Manager to determine what if anything FSA could do to assist these individuals. We determined that FSA could proceed with assistance in the form of a combination of direct and guaranteed loans provided the individuals restructured their operations. Changes included:

1) Ceasing operations of the consulting business to focus on their own farming operations.

2) Forming a new entity to consolidate the dairy operations into one operation. This involved a consolidation of debt through refinancing and assumptions.

3) The sale of real estate to free up owner equity to reduce debt. The sale of real estate involved a like kind exchange involving one parcel of real estate and the outright sale of another parcel, as well as expanding and remodeling dairy facilities.

4) The hiring of a consultant firm to deal with the tax issues generated by the restructuring, the emotional issues of selling the real estate, and personal issues between the two brothers. This was extremely difficult to accomplish because the brothers thought they were better consultants than anyone else. They took it as a personal insult to their management ability.

Essentially, the Farm Loan Manager issued a “prescription” to cure the financial ills for the operation. It involved training the lenders on the limitations and restrictions of FSA loan programs. It involved convincing the two brothers of their limitations.

In addition to providing financing to assist these individuals to work through their financial difficulties, the Farm Loan Manager acted as a mediator between the lenders and the brothers to work through the problems and accept the changes that were needed to make the operation financially viable.

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Currently the Farm Loan Manager is responsible for tracking and monitoring the progress of this account. This requires that an annual farm visit be completed to review whether:

1) Records are being maintained properly for the various enterprises.2) Annual income and expenses are in line with projections.3) Security for the loans is being maintained.4) The brothers and family members are working together as a unit.

The Farm Loan Manager is also responsible for monitoring whether the bank is in compliance with the terms and conditions of the FSA guarantee. Annual onsite reviews are completed of the lender’s records for compliance with FSA regulations and specific guarantee requirements.

Example of a Difficult Beginning Farmer Loan

Note: This example illustrates the consequences of a Farm Loan Manager’s decisions and the authoritative nature of his actions rather the complexity of the loan situation.

Currently, I have a Beginning Farmer borrower who obtained a loan to purchase 120 acres including a house in 2005. At the time of loan approval, the applicant had off farm income to assist in covering the costs of his farming operation. He also had access to his parent’s farm equipment which he used for exchange for labor, helping his parents operate their farm.

Since the loan was made, the borrower’s parents have retired. The debtor purchased some of the equipment and rents his parents’ farm in addition to the land he owns. The additional borrowing put stress on the cash flow but was workable.

In 2009, the applicant was permanently laid off from work. The debtor is current on his FSA payments but because of the loss of the nonfarm income he is unable to develop a feasible plan for 2010 which will allow FSA to loan funds for operating inputs. The debtor wants me to consider deferring the installments until he can find nonfarm work.

I have considered debt restructuring but a feasible projection cannot be projected for 2010. Nor can we determine when nonfarm employment will be available in light of the current economic conditions in Michigan. Other credit is not available due to current economic conditions unless the applicant is able to obtain nonfarm income. The only options available appear to be bankruptcy or liquidation.

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Attachment 5 – An Example of a Farm Loan Manager Position Requiring Breadth of Experience and Wide Knowledge of Programs, including State Cooperator and non-USDA or non-FSA Programs.

Dairy OperationI have a current dairy producer who owns and operates a 250 cow dairy along with crops. He farms as an entity with him and his wife as members. They have 10 loans with FSA, 4 different types. All the loans have received 2 disaster set-asides and been restructured many times before. Collateral consists of crops, livestock, machinery and equipment, and real estate. The producer obtains financing from 3 other commercial lenders and has a guaranteed FO with one of them. When milk prices started to decline, he could no longer pay his monthly obligations. FSA suspended his milk assignment payments indefinitely and worked with his other lenders who suspended principal payments. The low milk prices continued longer than expected and at the same time, his 2009 crops were affected by weather related disaster. This left him with insufficient cash to pay his fertilizer and feed bill. His cow numbers also declined during this period because of lack of income to

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feed them or to purchase replacement heifers. At this point, he was in severe financial distress. Milk prices were still low, feed and fertilizer suppliers wanted payment before they would advance him supplies and credit for 2010, his FSA payments were behind, and his other lenders wanted to start collecting principal payments again. I visited with the producer to discuss alternatives to keep him in business and get him back on track. He needed financing to pay his past due fertilizer and feed bills and to purchase bred heifers to build up his herd size. FSA was not in a position to provide him with 100% of his financing needs due to loan limits and with milk prices still low, he needed some creative financing. Although he was an existing FSA producer, he had not provided FSA actual income, expenses, and production records for quite some time. For this reason, additional work was needed to put together his last 3 years historical numbers. He is not on DHIA (Dairy Herd Improvement Association) where they keep records of milk and calving production for him, which made it more difficult to compute. After developing his historical crop yields, rolling herd average, calving history, and milk production, we developed a current balance sheet and projected cash flows for both 2010 and 2011 with the additional cows to be purchased. The FSA loans would have to be rescheduled but his other creditors still needed to do the same and he needed additional financing. We contacted his other creditors with this information and proposal to how his loans with them should be scheduled to make his cash flow work. We also worked with one of his creditors to make him a new loan for the amount FSA could not. The other lender providing the new financing wanted FSA to subordinate its first lien on the cows to give them a first and guarantee the new and existing debt that was also secured by cows. Because of our regulations, FSA cannot subordinate AND also guarantee the loan. For this reason, they chose the subordination but had to lower the new loan amount. Since loan funds were not sufficient to cover all his needs, his cash flow had to be reworked to handle the shortfall. After working with all his creditors, obtaining all financing available, we determined best to only require interest only payments to FSA the first year while prices were still low and then equal payments starting the following year. In order to process the subordination, we needed to know the current market value of all collateral. We requested a real estate appraisal on 12 tracts of land. I did the chattel appraisal on all machinery and livestock. Once all the appraisals were completed and we knew how much collateral was available, considering prior liens, we approved the subordination. We obtained a title search and then attended the closing with the title company to go over the new and restructured notes. The guaranteed lender provided the required documentation to me to approve their restructure and to update our records.

Marketing/OutreachWe have a 26 county area that involves working with 8 different FSA county offices. I am responsible for outreach and marketing of the FLP program in my area. You would be surprised at how many producers do not know FSA makes loans. Since we have such a large area, we do not know every farmer or farm. We have made it a policy to meet the farmer at his farm or local FSA office instead of driving to the headquarters office. We do this for all new producers who wish to apply and existing borrowers. This helps us to see the type of operation the producer has and how it is ran. It makes them feel comfortable to be able to open up and tell us what we need to know.

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I require an FLP presence in each FSA office at least once every 2 weeks. 5 of the 8 are weekly. By doing this, not only are we available to the producers in that area, but the Farm Program folks also learn about our program from hearing us talk to producers and asking questions. They see firsthand what we do and then they feel more comfortable about recommending a person for FLP. I also require attendance at annual dinners/breakfasts that FSA offices or other institutions, such as Farm Credit, Crop Insurance, Southern States, put on where we give a brief summary of our programs. We attend workshops that NRCS has for farmers. Not only do we learn what NRCS is offering to help with our own customers, but we also make it known to those present who we are and if we can loan for that practice. I work and visit with the Virginia Department of Agriculture regularly to keep them up to date on our programs. I am working with them now to set up a central website to identify all programs available to producers. Also to set up workshops for vegetable producers who want to expand. I keep our guarantee lenders up to date on all our loans as they too recommend their clients to FSA and vise versa. This has created a lot of joint financing projects. We have several different newspapers and radio stations in the area that are sent news articles periodically to publish. We also prepare articles for the FSA CED’s to publish in their newsletters. We attend and work the booth at the annual Ag Expo and Virginia State Annual Outreach meetings.

Different Types of Farming OperationsAs mentioned, we cover a 26 county area with several different types of enterprises in each county. A typical area would consist of all grain, or all dairy and a few non-typical. In our area, it’s all different. This requires a lot more research. No matter how much education or experience a person has growing up on a farm, no one knows every enterprise. And more and more farmers are getting into the processing and marketing of their product which makes it even more difficult. I will normally handle the more complex cases or if I have to assign it to a loan officer, I will make sure they have the resources available to process the loan to be comfortable with their decision or recommendation. Some of the types of operations I work with:

Holstein/Jersey Dairies – for milk, cheese, ice cream – Organic and regular Cow/calf Feed Lots Feeder livestock Goat dairy – For milk, cheese, lotions, soaps Meat Goats Sheep Sheep Dairy – For Cheese, meat, wool Hogs Turkeys – Tom’s, hens,... Chickens – broilers, layers, and eggs Crops – Corn, Soybeans, wheat, barley, sorghum, milo, cotton,... Hay/straw Vegetables – Regular and Organic – CSA’s Pumpkins - Fall Festivals

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Farmers Markets for raised fruits and vegetables Slaughter houses for raised livestock Nurseries Cut Flowers Tobacco Vineyards/wineries Mung Bean and soybean Sprouts Christmas Trees Sod Aquaculture – oysters, eels, frogs,..

Programs FLM has to be knowledgeable ofWhen a producer comes in to an FSA office, the FLM has to be knowledgeable of all types of programs available, not just FLP loans. This enables us to better supervise and advise them. We may not be able to help them, but another agency may. Some of the programs we need to know about are:

NRCS – They have conservation programs, the BMP loan program, pilot program for high tunnel green houses, nutrient management and cover crop programs, etc.

Other FSA programs - MILC, SURE, DCP, ACRE, FSFL, LDP, commodity loans, CRP, etc.

Rural Development – RD has grants for value added and energy savings. State Programs – Where to send them within Virginia Department of Agriculture

(VDACS) for organic certification. VDACS also has a clearing house list to buy or sell hay. They have a department to help with marketing a product. If they have a program to assist beginning farmers.

Extension – We have to know who the Extension Agents are in every county area and how they can help the producers in your area. We have to keep up on any classes Extension agents put on to help farmers.

County Programs – Many counties have programs to help producers. Some counties have started buying development rights to keep the land in farm use.

Other – We have to know the banks in the area that want to help farmers with or without a guarantee. We have to know who the lender is and how they can assist them. We have to know about bankruptcy law and when to advise the producer to seek attorney advice. We have to know about real estate law such as ratified contracts, leases, title clearance, etc.

Liquidations and how they are assigned to handle those accounts

Another example occurred whenwe inherited a caseload from an office that closed. Half the accounts were on a 5-year deferral with no supervision or follow-up. Within a year, 7 producers filed bankruptcy, either Chapter 7, 11, 12, or 13. Bankruptcies are more complicated and time consuming; therefore I normally handle servicing of these cases. I review the proposed plan, if applicable, to determine if the plan is feasible. I determine if the collateral and the debt are listed on the bankruptcy schedules. I appraise the chattels and conduct a lien search

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at the courthouse and State Corporation Commission. I make recommendation to the State Office on how to handle the account and as in most cases, attend the meeting of creditors. I work closely with the bankruptcy trustee and the borrower’s attorney to work out any discrepancies. I had a chapter 7 case where the producer had sold some items of collateral and was hiding other pieces. I investigated the case and made contact with the local sheriff’s office. I made recommendation and worked with OGC and the borrower’s attorney to work out a payment agreement to recover the value or we press charges and go to jail. Another bankruptcy case started out as a Chapter 12 and was later converted to a Chapter 7. I worked with the borrower and his attorney to allow him to keep the house and 12 acres and pay FSA the value over 25 years. I had to foreclose on the rest of the land and sell.

Farm Storage Facility LoanBy regulation, the FLM is responsible for determining repayment ability for a FSFL and providing guidance to obtain adequate collateral. The FSFL program is a non-FLP program whereby all farm Producers are able to apply no matter what their assets or income. In most cases, these are entities made up of at least 4 individuals. We meet with the producer to gather the financial information and then formulate that information into balance sheets and projected cash flows. We evaluate in writing their repayment ability, credit worthiness, if the down payment is available, and what is needed to obtain collateral. If the loan involves title work, we work with the attorney or title company to obtain a title search and close the loan with real estate collateral.

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Classification Title: Loan Specialist (Agricultural)Organizational Title: Farm Loan ManagerLocation: USDA Service Center

Farm Loan Program BranchSupervisory Code: Non Supervisory (8)Bargaining Unit Status: Bargaining Unit (BU)FLSA Status: E (Exempt)Full Performance Level GS-12

INTRODUCTION

This incumbent of this position manages and directs the Farm Loan Program administered in one or more USDA Service Centers providing services to one or more counties in the state. The Farm Loan Manager serves as the Service Center technical authority on the Farm Loan Programs and is the primary point-of-contact on all farm loan issues in the area to which he or she is assigned. With respective to farm loan matters, the Farm Loan Manager has wide latitude for independent action within established guidelines. Her or his guidance and judgment is considered authoritative and is given considerable deference even with regard to matters beyond her or his delegated authority.

The incumbent is a recognized authority on farm loan program matters within theassigned geographical area and provides administrative and technical supervision to farm loan program specialist within her or his assigned area. Moreover, the Farm Loan Manager deals with the more complex loans, either directly or through technical advice toFarm Loan Officers in the area. He or she is recognized by conventional lenders, who do employ specialists in agricultural loans, as an expert in the field.

The incumbent specializes in suggesting creative approaches to financing complex entities and multiple lenders which include the Government as a direct lender or guarantor or both. He or she is often called upon to provide extensive and, sometimes extended, advice to borrowers, and to propose corrective action to make a borrower’s business viable, or if that is not possible, to accomplish bankruptcy, liquidation or debt settlements which best preserve the Government’s interest. Successful performance in the position requires extensive knowledge of other farm programs offered by both state and federal cooperators in order to advise and counsel farm loan program participants on the full range of possible solutions available to them.

The full performance level is GS-12. The position is FLSA exempt.

MAJOR DUTIES

As the senior agricultural loan specialist in an assigned area, the Farm Loan Managerplans and directs the Farm Loan Programs, performing a wide variety of management and administrative functions to accomplish the agency’s program goals. The Farm Loan Manager manages an extensive portfolio of direct and/or guaranteed loans, either personally or through subordinates, to family–size farmers and ranchers who cannot

obtain commercial credit from other lenders. Increasingly, these “family-sized” units are made up of complex arrangements with multiple subsidiaries or ownership arrangements which make extremely difficult the financial analyses prerequisite to arranging loans. In addition, many of these entities, more and more of which are pursuing new agricultural ventures, depend on non-farm income in order to make the farm enterprise profitable.A high order of seasoned judgment and related experience is required to determine eligibility for, and to service, these loans.

Regularly creates and develops loan packages, combining loans from conventional lenders with direct loans and guarantees from FSA, in order to meet the needs of borrowers. Often, the Farm Loan Manager lends subject-matter expertise to the conventional lender who rarely continues to maintain such expertise in order to gain acceptance of proposed loan arrangements.

Monitors the loan portfolio in the assigned area to detect the need for intervention in order to prevent default, including counseling changes in the borrower’s operations, or when default is inevitable, recommends liquidation, bankruptcy and/or debt settlement. Although recommendations for debt settlement must be referred to higher levels, generally the Farm Loan Manager’s proposal is accepted. Prepares necessary positions and documents and represents the agency in mediations, bankruptcies, and liquidations; in the case of bankruptcies and liquidations, refers cases to the Office of General Counsel or the U.S. Attorney’s office and, as appropriate; acts as an expert resource to the OGC or the U.S. Attorney’s Office.

Directs an Outreach Program to expand access to farm loans, particularly to underserviced populations and to others who are unaware of eligibility for farm program loans. Among other outreach efforts, either personally or through subordinates, maintains communications and cooperative relationships with producers, lenders, commercial and educational institutions, rural community groups, and other Federal, State and local agencies. Through knowledge gained from these relationships is able to provide borrowers and other constituents with pertinent information regarding cooperative programs that may of value as the borrower seeks to maintain a viable enterprise.

Keeps abreast of commodity markets, new trends in agriculture and agricultural markets, farm and farm equipment prices, agricultural programs, and the agricultural economy generally. Combines such knowledge with an extensive background in agriculture and the economics of agriculture to analyze loan requests, and to advise and counsel borrowers and prospective borrowers. Maintains the ability to appraise chattel and real property, or to review and accept contract appraisals, in order to carry out loan approval and servicing responsibilities. Approves loan requests within the limits of delegated authority and makes authoritative recommendations for approval beyond those limits.

Reviews recommendations made by Farm Loan Officers for technical adequacy, sound judgment, and compliance with policies, handbooks,

and procedures. Within delegated loan approval authority, approves or disapproves loans referred by Farm Loan Officers that are beyond the Farm Loan Officer’s delegated authority. Personally approves and services more complex loans that appear to require, or over time come to require, the seasoned judgment and experience of the Farm Loan Manager.

Exercises expertise in farming, farm practices, and farm financing to analyze the financial condition of borrowers, including those involving complex entities with interlocking operations, dependency on non-farm income, ventures into new markets and crops, and volatile market prices where stable conditions and prices are elusive.

Provides continuing loan supervision, oversight and servicing of borrower accounts through the use of supervised credit as envisioned by agency guidelines. Provides technical advice and counsel on the selection, expansion and use of farm assets, land development, improvements, organization of farm and rural enterprises and related matters. Reviews, analyzes, then approves or denies significant operational changes such as releases, subordinations, adjustments, transfers and similar matters. Assists borrowers in adjusting operations through loan restructuring and modification. Analyzes and evaluates restructuring requests to make sure all assets are included, the borrower has adequate repayment capability, and the request complies with applicable guidelines and not jeopardize the agency’s position.

Carries out such other program management responsibilities as are necessary to fulfill strategic and operational plans for the farm loan program and fully meet performance requirements for the position.

Supervision Exercised

The Farm Loan Manager provides both technical and administrative supervision to a small staff of loan officers and program technicians when such duties constitute less than 25 percent of the manager’s time. The range of these responsibilities general includes selecting and developing subordinates as vacancies occur; planning, scheduling, and assigning work; developing or applying performance standards and evaluating performance; providing or arranging for necessary training and interpreting and providing background for agency guidelines; resolving minor complaints or problems; recommending promotion, reassignment, awards, and similar personnel actions; effecting minor disciplinary actions and recommending action in more serious cases. The Farm Loan Manager reviews Farm Loan Officer reports and recommendations for technical adequacy and compliance with agency policies, regulations, and procedures, and either approves or disapproves such recommendations within her or his delegated authority or recommends approval or disapproval to higher authority.

EEO RESPONSIBILITIES

The incumbent is responsible for knowing and supporting equal opportunity and civil rights policies; performing assigned duties in full compliance with the letter and spirit of

equal opportunity and civil rights laws and regulations, assuring bias free written and oral communications; and respecting and valuing differences among employees and clients.

In supervising others, provides equal employment opportunities to subordinates, including equal access to training and promotion; prohibits discrimination based on race, color, religion, gender, national origin, age, disability, marital status, or any other non-merit factor; and promotes a full realization of equal employment through continuous affirmative actions within the work environment. Initiates and takes all reasonable measures to maintaining a work place free of sexual harassment. Ensures that subordinates provide clients fair and equal treatment and equal access to agency programs, regardless of the client’s status as described above.

NATURE OF LOANS

The Farm Loan Manager is responsible for the agency’s loan portfolio within an assigned area. Loans and prospective loans vary in complexity, but the Farm Loan Manager tends to handle or become involved in the more complex loans. Developments in the agricultural economy and the economy in general have resulted in increasingly complex farming entities and interlocking financial and operational arrangements which impose substantial difficulties in analyzing the financial condition of the prospective borrowers and complicate monitoring the activities of borrowers and detect potential default.

In complex cases, when it is necessary to combine conventional loans with direct loans and guarantees, it is usually the Farm Loan Manager who is expected to create loan packages and work with conventional lenders to gain their cooperation. Often, conventional lenders who have given up their own experienced agricultural loan officers, will rely on the experience and judgment of the Farm Loan Manager in make their decision to participate in the loan package. The effective Farm Loan Manager will have, and need, for the analyses supporting such loan decisions, a breadth of experience and depth of knowledge of the full range of farm financing, farm practices, local conditions, farm markets, commodity prices, farm equipment and farm equipment prices and operating costs, emerging markets and crops, and other relevant factors.

Complicating the work of the Farm Loan Manager is the greater risk inherent in the Farm Loan Program, as FSA makes direct and guaranteed farm ownership and operating loans only to farms and ranchers who cannot obtain commercial credit. Consequently, the Farm Loan Manager must make more difficult judgments than conventional lenders, more closely monitor borrowers, and more often provide advice, counsel, and direction to borrowers whose loans otherwise may become in default.

KNOWLEDGE REQUIRED

A comprehensive knowledge of agricultural production, economics and marketing and of the policies, regulations, and procedures governing the farm loan program in order to make informed, authoritative judgments involving a variety of complex loans and loan

applications. Knowledge is applied in analyzing the financial and operating condition of borrowers or potential borrowers to determine the viability of farm and ranch clientoperations as business enterprises. The Farm Loan Manager also employs this knowledge to advise and recommend to clients management and operating choices which have the potential to increase profitability or in cases of potential default to turn around failing operations.

Knowledge of financial management and credit principles and practices sufficient to analyze the solvency, credit risk, and future repayment capacity of integrated agricultural operations. Knowledge is required to analyze financial information from individuals, partnerships, corporations, joint operations, and trust in order to assess their capacity to operate profitable farming enterprises and arrange for timely repayment of all liabilities.

Knowledge of laws, policies and regulations concerning agricultural trade and business practices and of relevant tax laws, bankruptcy laws, and related statutes, as well as knowledge of programs of other state and federal cooperators that may provide recourse to clients. Knowledge is required to advise and assist applicants, borrowers, farm clients and conventional lenders with respect to liquidating assets or restructuring loans or businesses when necessary, and to insure that lending activities and decisions comply with legal requirements.

A high order of oral and written communication skills is required to communicate with clients and cooperators, often in high stress situations when difficult courses of action are being recommended and when multiple parties with competing interests must be convinced to take such action. Must have the ability to conduct outreach to new and under-serviced client groups and attract their interest or gain cooperation.

Ability to manage an office, oversee and manage the Farm Loan Programs within the assigned area, organize the work, effectively maintain and utilize records, and coordinate the work of others.

Highly developed and seasoned judgment in order to make sound decisions under pressure.

SUPERVISION RECEIVED

A designated supervisor within the assigned area, usually the District Director, provides administrative supervision. However, the Farm Loan Manager is the senior loan specialist within an assigned area whose decisions are generally considered technically authoritative. He or she keeps the supervisor informed of program progress and keeps the her or him abreast of controversial or potentially controversial matters. The supervisor reviews recommendations for action beyond the incumbent’s delegated authority for anomalies or implications which may adversely affect the operations of the office.

GUIDELINES

Guidelines are in the form of applicable laws, policies, streamlined handbooks, and relevant procedures. These guidelines are general in nature and require interpretation and adaptation to specific situations, both of which require the careful utilization of deep experience and seasoned judgment. The incumbent makes authoritative interpretations of the guidelines for the benefit of subordinates, applicants, cooperators and others.