Comprehensive areawide water and sewer planning grants Comprehensive area water and sewer planning grants are made to planning commissions and other public agencies having authority to prepare official plans. These plans promote orderly community growth and preclude overlapping and duplication of facilities. The following table shows the record for 1970 and the estimate for fiscal years 1971 and 1972:

We plan to continue our program of loans for community irrigation and drainage facilities and grazing associations at a modest level.

We will not request any funds for community recreational facilities as we believe that such funds can be used to better advantage in water and sewer loan programs.

Loans to Indian tribes

Public Law 91-229, approved April 11, 1970, provided the Farmers Home Administration with authority for loans to Indian tribes for the acquisition of lands within the reservation or community. We plan to operate a $5 million program this year and propose a $10 million program for fiscal 1972. These loans are made using insured funds.

RURAL HOUSING

Rural housing has grown to become our major activity. In dollar terms, it has tripled in 3 years: From $500 million in fiscal 1969 to $800 million in 1970 and to $1.5 billion this year. Next year's total program Projected at $1.6 billion.

During these years, much of our energy and resources have been devoted to building the capacity to deliver mortgage credit to low- and moderate-income families. The sheer bulk of the program created severe manpower problems, particularly in our county offices. As you know, these are the contact points for all borrowers. As of December 31, 1970, we had a backlog of almost 70,000 applications. New applications during the first 6 months of this year totaled about 100,000, and interest in homes usually picks up in the spring of each year.

As I mentioned earlier, revamping internal operations for greater efficiency and the greater involvement of the private sector have helped us keep pace.

The building industry has learned that there is a strong market for housing in rural areas, and that credit available through Farmers Home Administration enables them to develop this new market. This has brought additional private capital to the scene, and additional hands to help extend our efforts on behalf of low- and moderate-income families. There is strong public support for the rural housing program, as well as recognition of FHA as an important source of supplementary mortgage credit.

Congress has significantly broadened our area of service in several respects. It enabled us to make loans to rural towns of populations up to 10,000. Previously our limit was 5,500. This, we estimate, will enable about 800 additional towns, nationally, to participate in our programs. The other action of the Congress will enable us to make loans to low- and moderate-income families who live and work in nonrural towns. Previously we could not help urban families unless they worked in a rural area.

Here is a brief résumé of progress in rural housing programs:

Although over 98 percent of the funds in our program are now obtained from private sources, several significant phases of our housing program require consideration by your committee. These items are included in the figures above:

One is the $10 million item for shelter-type loans to very low-income families to help them make repairs for their homes essential to the health and safety of the family and the community. Loan limits were increased last year to permit loans up to $2,500 for essential house repairs and an additional $1,000 if needed for a water supply, plumbing installations, and waste disposal. This program is specially designed to help low-income families make their homes weathertight and remove hazards to their health.

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For fiscal year 1971, we have authorized approval of 10 applications for technical assistance grants for self-help totaling $1,147,550. This will enable an estimated 786 low-income families to have decent homes of their own. We anticipate an increased interest in this program during fiscal 1972 and believe that the $2,450,000 budget estimated could be used. These funds could help about 2,000 families build homes by the self-help method. Associated with the self-help program is the development of suitable building sites, a small but important part of our operations.

We anticipate that the broadened authorizations we now have for labor housing loans and grants will stimulate more activity in this

area.

Replenishment of insurance funds

Owing to the general increase in interest rates over the past several years since 1965, it has been necessary, in order to market our insured loans, to pay purchasers of these loans a higher interest rate than the rate charged FHA borrowers. The difference, or premium, between the amount of interest paid noteholders and the amount collected from borrowers has caused a severe drain on the rural housing and agricultural credit insurance funds. The Congress has recognized this fact in connection with rural housing loans made to persons of low- and moderate-income and loans made to provide rural or cooperative housing for persons of low- and moderate-income and elderly persons, and their families. Public Law 90-448, August 1, 1968, amended title V of the Housing Act of 1949, by adding section 521 (c). This section provides in essence that the amounts of interest paid noteholders in excess of the amounts of interest due from such borrowers shall be reimbursed to the rural housing insurance fund by annual appropriations.

While no specific provision is contained in the Consolidated Farmers Home Administration Act of 1961, as amended, with respect to premium interest paid by the Agricultural Credit Insurance Fund. there is a general authorization for appropriations to carry out the purposes of the act in section 338 (a).

As of June 30, 1970, the Rural Housing Insurance Fund had an accumulated deficit from operations, excluding provisions for losses on bad debts, of $23,663,000. Of this amount, $6,860,000 is directly attributable to premium interest on those loans covered by section 521 (c) of Public Law 90-448. The remaining $16,803,000 resulted from premium interest and other costs incurred prior to enactment of Public Law 90-448. The 1972 budget contains a request for an appropriation of $23,663,000, the full amount of the accumulated deficit through June 30, 1970.

The accumulated deficit from operations of the Agricultural Credit Insurance Fund as of June 30, 1970, amounted to $37,192,000 for which amount an appropriation request is contained in the 1972 budget.

ESTABLISHMENT OF NONMETROPOLITAN DISTRICTS AND OPERATION

OF COMPREHENSIVE PLANNING PROGRAMS

The Housing and Urban Development Act of 1968 authorizes the Secretary of Agriculture to provide technical assistance in connec

with the establishment of nonmetropolitan districts and operation

of comprehensive planning programs within the districts. These districts are generally made up of several rural counties and are served by planning and development agencies under the direction of local government officials and other civic leaders in the area. There is growing interest in using such districts as a means of improving planning, development, and administrative services for smaller rural communities. The Agricultural Act of 1970 restated the commitment of Congress to the pursuance of this work. The act requires the Secretaries of Agriculture and HUD to submit a joint report annually on the assistance their Departments are providing for planning and development programs of nonmetropolitan districts.

The Farmers Home Administration has the responsibility in the Department for coordinating this function and providing leadership to assure that planning agencies for districts are receiving the benefits of the Department's many technical and other services to strengthen their programs.

In testimony before this committee on the fiscal year 1970 budget, changes were requested in the language of the appropriation for "Salaries and expenses," Farmers Home Administration, to permit use of these funds to enable the Department to carry out its responsibilities under this program. The requested changes were incorporated in the appropriation language for fiscal years 1970 and 1971.

The amounts estimated for use in fiscal years 1971 and 1972 to carry out the Department's efforts in those areas where our services can be of particular benefit in the planning and development work of the districts are shown in the following schedule:

The agency is requesting an appropriation of $92,800,000 for fiscal year 1972. This is an increase of $2,336,000 over last year, after adjustment for 1971 Pay Act costs. The 91st Congress enacted two items of pay legislation. The first, Public Law 91-231, is included in the budget. The more recent Pay Act, Public Law 91-656, known as the Federal Pay Comparability Act of 1970, is not included in the budget figures. The 1971 appropriation enabled the Farmers Home Administration to hire additional personnel for our field offices in order to help alleviate the severe understaffing problems created by the rapid expansion of our programs over the past several years. Since the personnel added to our field offices during fiscal year 1971 will be on the rolls for only a portion of the year, the increase requested will help annualize the salaries and related costs of these additional employees during fiscal year 1972.

Since my last appearance before the committee, we have installed a new work measurement system. Under this new system we account for 100 percent of time put in by the employees. This contrasts with our previous system where we measured only the time spent on specified type of dockets.

We have been collecting data under this system from a sample of 355 county offices, stratified as to size of office and dispersed geographically. The sample will give us a statistically valid measure of the county office field organization by the end of this fiscal year.

We have just completed the first analysis of the results of this work measurement system covering the 6 months period ending December 31, 1970. We are coming up with interesting insights into the work patterns of our field offices. Here are some of the first findings from the system: Loan making accounts for 24 percent of the time; loan servicing accounts for 32 percent of the time; and administrative functions, including leave time, accounts for 44 percent of the time.

Our study also shows that workload is such that supervisory personnel are putting in voluntary overtime of from 5 to 9 percent of their total time an average of 6.4 percent.

In addition we have calculated the average direct time required by county office personnel to make and service various types of loans. The following table shows average time (excluding administrative time) for major loan types:

At midpoint in our study we cannot validly define conclusions but it is clear that our results will provide valuable statistical and management data for determining program and administrative costs and other information heretofore not available.

Mr. Chairman, this concludes my statement. I appreciate the attention you have given me and will be glad to respond to any questions the committee may have.

Mr. WHITTEN. Thank you, Mr. Smith.

BUDGETARY RESERVES

I notice that the 1971 budget included $94 million for direct water and sewer loans. Only $30 million is being spent-leaving $64 million which has been placed in "reserve."

On this side of the table, as I said earlier, we call it "frozen.” On insured loans we find that the total amount appropriated in 1971 was $86 million. $130 million is being spent, which means that you have shifted $44 million from direct loans to insured loans. So the net amount frozen or placed in reserve is $20 million less than was proided by the Congress.