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

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1 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 nonsupervisory 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 nonsupervisory 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.

2 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 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 2

3 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 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 subspecializations: agricultural, commercial, realty and general. Grade-level descriptions are 2 Adapted from Preface to The Classifiers Handbook, August

4 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 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 4

5 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. 5

6 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 of delinquent 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. 6

7 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 Loan Specialist positions within FSA, I reviewed studies done previously by the agency and a third party in 2002 and 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 7

8 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 8

9 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 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 over more 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),

10 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 nonfarm 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 10

11 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 nonsupervisory 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 11

12 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 12

13 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 13

14 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 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 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. 14

15 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 substantial portion 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. 15

16 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 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. 16

17 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 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. Slagle Human Resources Consultant April 13, 2010 Attachments Attachment 1 What Changed? What New Duties, Responsibilities and Challenges Are Farm Loan Managers Facing? 17

18 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 18