Examine the activities of the FHA, Department of Agriculture, in connection with the financing of recreational facilities such as golf courses for associations, with
emphasis on certain specific questions.
During a meeting on March 3, 1970, with you, Congressman
Charles C. Diggs, Jr., and staff members of three of the other Congressmen,
it was agreed that (1) our review would include not only golf facilities
but also all other types of recreational facilities financed by the
FHA, such as swimming pools, tennis courts,
recreation centers, and water sports, and (2) separate statistics of the
same nature as requested in your letter for golf courses would be provided
on each type of recreation facility. In accordance with other agreements
reached at this meeting, we have obtained a substantial amount of
statistical data related to the association recreation loan program through
our analyses of questionnaires and through other information available at
the National Headquarters Office of the FHA.
In August 1969 the FHA initiated a review
of its association recreation loan program and required each of its county
supervisors to complete a questionnaire for each association which had
received a loan for the construction of recreational facilities from inception
of the program in September 1962 through August 1, 1969. The completed
questionnaires, for the most part, represented the most recent
La information available on loans made under this program. As of June 1,
1970, the FHA had not issued a report on the
results of its review of the association recreation loan program.
We also reviewed (1) the policies and procedures under which the
FHA administers the association recreation
loan program, (2) pertinent legislation relating to the civil rights aspect
of the program, and (3) an internal audit report of the Office of the Inspector
General, Department of Agriculture, on its review of the assoe;iation
recreation loan program.
+-{W<~ rot01fL
B-114873
Information and our comments relating to each of the 11 questions
raised in your letter of February 4, 1970, are included in the enclosure
to this letter. Also, certain additional information is provided which we
believe may be of assistance to you. The additional information relates
to (1) the number of loans made and the types of recreation facilities which
were approved by the FHA from August 2, 1969,
through March 31, 1970, and (2) the amount of recreation loans made in
fiscal years 1968 and 1969 and the amount of loans the FHA
expects to make in fiscal years 1970 and 1971.
We have informally discussed the information presented in the enclosure
with officials of the FHA.
This report is being forwarded to each of the other members of the
Congress who signed the request.
We plan to make no further distribution of this report unless copies
are specifically requested and then we shall make distribution only after
your agreement has been obtained or public announcement has been made
by you or one of the other congressional representatives concerning the
contents of the report.
SUMMARY OF INFORMATION REGARDING
THE ASSOCIATION RECREATION LOAN PROGRAM
FHA
DEPARTMENT OF AGRICULTURE
INFORMATION REGARDING QUESTIONS RAISED
1. Total loans made or insured by FHA under:
its association recreation loan program from inception of the
program in September 1962 through August 1, 1969.
Direct Insured
loans loans
Type of facility (note a) (note b) Total
Golf, with other types of facilities 15 391 406
Golf only 18 197 215
Swimming only 5 58 63
Other--such as baseball diamonds, water
sports, shooting sports, winter
sports, and recreation centers
(note c) 7 142 149
Total 45 788 833
aDirect loans to associations are financed by Treasury borrowings
and are made from the FHA's Direct Loan
Account.
bInsured loans are generally made to associations from the Farmers
Home Administration's Agricultural Credit Insurance Fund. After t
making these loans at interest rates not to exceed 5 percent, the
FHA sells the association notes to private
investors for periods ranging from 1 to 25 years and guarantees
repayment of the loans. At June 1, 1970, the FHA
was selling association notes to private investors at
interest rates in excess of 8 percent.
CThese facilities were generally constructed in various types of
combinations and the portion of loan funds used to develop each
type of facility was not readily available from the records of the
FHA.
2. Total borrowers requiring membership and requiring payment of
fees and total borrowers not requiring membership and payment of
fees, as of August 1, 1969.
Number of borrowers
Private
Membership required by Public nonprofit Total
Type of facility organization organization (note a)
Golf, with other types of
facilities 1 314 315
Golf only 1 176 177
Swimming only 1 55 56
Other 6 125 131
Total 9 670 679
Membership not required
by type of facility
Swimming only 1 1
Other 2 2
Total 3 - 3
Total 12 670 682
The range of initial membership fees to join
associations as of August 1. 1969.
Number of associations
(exclusive
of the
three associations
not Range of fees (in dollars)
requiring 1 to 51 to 101 to Over
Type of facility membership) 0 50 100 200 200
Golf, with other
types of facilities
315 15 25 118 106 51
Golf only 177b 43 38 70 17 8
Swimming only 56c 9 30 9 5 2
Other 131b 30 82 16 2 -
Total 679 97 175 213 130 61
2
The range of annual membership dues assessed by
associations as of August 1, 1969.
Number of associations
(exclusive
of the
three associa- Range of annual dues
tions not (in dollars)
requiring 1 to 51 to 101 to Over
Type of facility membership) 0 50 100 200 200
Golf, with other
types of facilities
315d 1 9 72 211 20
Golf only 177e 1 37 92 41 5
Swimming only 56 3 47 6 - -
Other 131e 14 90 21 5 -
Total 679 19 183 191 257 25
aSome borrowers received more than one loan under the program. The
682 borrowers had received the 833 loans shown in item 1.
bone association did not indicate whether initial membership fees
were charged.
COne association required the purchase of 25 shares of stock, but
the cost per share was not shown.
dTwo associations did not indicate whether they required annual
membership dues.
eOne association did not indicate whether it required annual membership
dues.
3
3. Total funds loaned by the FHA under its
association recreation loan program from inception of the program
in September 1962 through August 1, 1969.
Type of Direct Insured
facility loans loans Total
Golf, with other types
of facilities $1,796,120 $57,427,651 $59,223,771
Golf only 1,153,600 16,234,910 17,388,510
Swimming only 316,450 3,860,280 4,176,730
Other 308,950 9,761,150 10,070,100
Total $3,575,120 $87,283,991 $90,859,111
4. Number of association borrowers that have integrated facilities
with no restrictions upon membership by Negroes or other minority
citizens.
The questionnaires completed by the FHA's
county supervisors in August 1969 did not contain information
on how many associations have integrated facilities
with no restrictions upon membership by Negroes or other minority
citizens. Our analysis of the completed questionnaires
showed that, of the 682 associations, 106 were reported to have
minority members. Our analysis showed also that, of the 106
associations, 52 had no Negro members; 33 had one to four
Negro members; and 21 had five or more Negro members. The types
of facilities and the membership of the 106 associations follows.
Number of
Type of associ- Membership
facility ations Total White Negro Other
Golf, with other
types of facilities 31 8,050 7,686 66 298
Golf only 27 5,140 5,038 17 85
Swimming only 13 3,984 2,851 474 659
Other 35 24,394 11,140 12,856a 398
Total 106 41,568 26,715 13,413 1,440
One association was reported to have 12,000 Negro members.
4
5. Instances in which an investigation into the composition of the
memberships of these association borrowers have been conducted.
The Office of the Inspector General, Department of Agriculture,
made a review of 107 associations in 14 States and issued a report
in January 1970 covering the results of its review. In
summary, the report pointed out that the associations generally
did not benefit minority groups in their communities. Sixtyfive
of the 107 associations were located in areas with substantial
minority groups, usually Negroes. The report pointed out
that of the 107 associations, only 10 had members from minority
groups. The Office's workpapers on the 10 associations did not
contain information on the extent of integration.
In August 1969 the FHA initiated a review
of the association recreation loan program and required
each of its county supervisors to complete a questionnaire for
each association which had received a loan for the construction
of recreation facilities from inception of the program in September
1962 through August 1, 1969. In order to complete the
questionnaire, the county supervisors had to obtain information
on the composition of the membership of each association.
A FHA official advised us that, as of
June 1, 1970, the FHA had not issued
a report covering the results of its review. He advised us
also that the Administrator, FHA,had
assigned an individual to review the information on a state
by state basis.
5
6. Total membership of all associations and the number of Negro
members from inception of the program in September 1962 through
August 1, 1969.
Number
of
Type of associ- Membership
facility ations Total White Negro Other
Golf, with other
types of facilities 315 68 ,95 6a 67,954 271 298
Golf only 177 29,332 29,230 17 85
Swimming only 57 13,222 11,538 1,025 659
Other 133 37,661b 23,003 13,330c 398
Total 682 149,171 131,725 14,643 1,440
a0 ne association with 433 members did not show a breakdown of
members according to race.
bTwo associations with 930 members did not show a breakdown of
members according to race.
COne association was reported to have 12,000 Negro members.
6
7. Number of loans made to associations with all Negro members and to
associations with predominantly Negro members from inception of the v
program in September 1962 through August 1, 1969.
NUMBER OF ASSOCIATIONS HAVING ALL NEGRO MEMBERS
Num- Number
ber of
of loans
asso- Number all
Type of cia- of in- Amount
facility tions members sured loaned
Golf, with other types bf
facilities 1 205 2 $208,650
Swimming only 3 551 4 170,580
Other 8 474 10 215.980
Total 12 1,230 16 $595,210
NUMBER OF ASSOCIATIONS HAVING PREDOMINANTLY NEGRO MEMBERS
Num- Number
ber of
of loans
asso- all
Type of cia- Membership in- Amount
facility tions Total White Negro Other sured loaned
Swimming only 1 318 4 314 - 1 $ 70,000
Other 6 12.864 184 12,680a - 7 420,000
Total 7 13,182 188 12,994 _ 8 $490,000
aOne association was reported to have 12,000 Negro members.
7
8. Number of loans, if any, that have been canceled.
According to FHA officials, no loan under
this program has been foreclosed or written off. However,
FHA records show that, as of February 1,
1970, 152 of the 682 associations were delinquent on repayment
of their loans, in the amount of $2,465,027.
9. Number of loans, if any, that are in violation of title VI of
the Civil Rights Act or any other Federal law or policy.
Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d) vests
in each department and agency empowered to extend Federal financial
assistance the responsibility for enforcement of the
national policy that no person shall, on the ground of race,
color, or national origin, be subject to discrimination under
any program or activity receiving Federal financial assistance.
(See 28 CFR 50.3(b), for guidelines promulgated by the Attorney
General for the enforcement of title VI.) Title VI also provides
the procedures for an express administrative finding of
noncompliance after an opportunity for a hearing and a report
of the case to the legislative committees having jurisdiction
over the program or activity involved.
The Department of Agriculture has promulgated regulations (See 7
CFR 15) to carry out the provisions of title VI which are applicable
to the association recreation loan program administered by
the FHA. The regulations provide, among
other things, that any person who belives himself or any specific
class of individuals to be subjected to discrimination
prohibited by the regulations may by himself or by an authorized
representative file with the Secretary of Agriculture or any
agency of the Department a written complaint. The regulations
also provide that the complaint:
--be filed not later than 90 days from the date of the alleged
discrimination, unless the time for filing is extended by the
Secretary or the agency,
--be promptly referred to the Office of the Inspector General,
and
--be investigated in the manner determined by the Inspector General
and such further action taken by the Secretary of the
agency as may be warranted.
8
FHA officials have advised us that they
have not received any complaints from individuals or organizations
of discrimination by associations assisted under the association
recreation loan program and that there is not pending
any administrative action to terminate or refuse to continue assistance
because of noncompliance with the departmental regulations
seeking to effectuate title VI of the Civil Rights Act of
1964.
10. Number of associations that attracted industry to rural-oriented
areas.
The questionnaires completed by the FHA's
county supervisors stated that, of the 682 associations, 150 had
attracted a total of 231 industries to rural areas. The questionnaires
did not contain any indication of the basis on which
a decision was made that the industries had been attracted by
the presence of the recreational facilities. FHA
officials advised us that they did not provide the
county supervisors any specific criteria for use in making such
a determination.
11. The General Accounting Office's previous investigation into the
FHA recreation loan program.
The General Accounting Office made a review of the association
recreation loan program and issued a report in September 1966
to the Administrator, FHA. Our report
pointed out that there was a need for the FHA
to (1) make adequate determinations that recreational
facilities will primarily benefit farmers and rural residents,
(2) obtain assurance that land purchased with loan funds will
be limited to recreational use, and (3) define the type of clubhouse
facilities which may be constructed with loan funds.
We noted that the 1970 Office of the Inspector General, Departs
ment of Agriculture report pointed out weaknesses similar to
some of those reported by our Office in September 1966.
The General Accounting Office is presently making a review of
loans made by the FHA to individual
farmers, associations, and municipalities for rural recreational
facilities. This review was initiated in June 1969 and is still
in process. The areas being reviewed relate to the (1) eligibility
and feasibility of recreation projects. (2) degree of
9
the Administration's analysis of the financial soundness of the
projects, (3) extent to which the borrowers are meeting the loan
closing conditions, (4) extent to which the Administration is involved
in approving significant changes in construction contracts,
(5) existence and feasibility of operations and management
plans for projects, and (6) extent to which the Administration
is timing cash advances with the cash requirements of
the borrowers.
10
OTHER RELATED INFORMATION
1. Number of loans closed by the FHA from
August 2, 1969, through March 31, 1970. (Membership composition
and membership fee data for the associations to whom the
loans were made is not available at the FHA
Headquarters Office.)
Number of
borrowers Number of Amount of
Type of facility (note a) loans loans
Golf, with other types of
facilities 33 36 $3,874,990
Swimming only 2 2 41,500
Other 9 9 1,236,000
Total 44 47b $5,152,490
aAll loans were made to private, nonprofit organizations.
bLoans were made from the FHA Agricultural
Credit Insurance Fund.
2. Amount of recreation loans made in fiscal years 1968 and 1969
and the amount of loans the FHA expects
to make in fiscal years 1970 and 1971.
Amount of loans
Fiscal year (in millions)
1968 $23.9
1969 18.3
1970 7.0a
1971 2.0a
aEstimated