Certified Mediation Program

AGENCY:

Farm Service Agency, Department of Agriculture.

ACTION:

Final rule.

SUMMARY:

The Farm Service Agency (FSA) is amending its agricultural loan mediation regulations to implement the requirements of the Federal Crop Insurance Reform and Department of Agriculture Reorganization Act of 1994 (the 1994 Act) and the United States Grain Standards Act of 2000 (the Grain Standards Act). This rule establishes and modifies requirements and procedures for certification and funding of State mediation programs. This rule also moves the mediation provisions, as amended, from the Rural Development chapter of title 7 of the Code of Federal Regulations (CFR) to the FSA chapter of the same title.

EFFECTIVE DATE:

September 10, 2002.

FOR FURTHER INFORMATION CONTACT:

Chester A. Bailey, Mediation Program Manager, FSA, telephone 202-720-1471.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This final rule has been determined to be not significant for purposes of Executive Order 12866 and, therefore, has not been reviewed by the Office of Management and Budget (OMB).

Federal Assistance Program

The title and number of the Federal assistance program, as found in the Catalog of Federal Domestic Assistance, to which this rule applies, are Certified Mediation Program—10.435.

Executive Order 12372

This activity is not subject to the provisions of Executive Order 12372, which requires intergovernmental consultation with State and local officials. See the notice related to 7 CFR part 3015, subpart V, published at 48 FR 29115 (June 24, 1983).

Environmental Evaluation

It has been determined that this action will not have a significant impact on the quality of the human environment. Therefore, neither an Environmental Assessment nor an Environmental Impact Statement is needed under the National Environmental Policy Act of 1969.

Executive Order 12612

This document has been reviewed in accordance with Executive Order 12612, Federalism. The agency has determined that this action does not have significant Federalism implications.

Executive Order 12988

This final rule has been reviewed in accordance with Executive Order 12988, Civil Justice Reform. All State and local laws and regulations that are in conflict with this rule will be preempted, no retroactive effect will be given to this rule, and administrative proceedings published at 7 CFR part 11 must be exhausted before action for judicial review may be brought.

Regulatory Flexibility Act

It has been determined that the Regulatory Flexibility Act is not applicable to this program. The administration certifies that this program will not have a significant impact on a substantial number of small entities. By statute, this grant program applies only to States. These grants cannot be made to small entities or individuals. Small entities may participate in mediation, however, to the same extent as individuals and other entities affected by adverse decisions covered by certified mediation programs.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104-4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, tribal governments, and the private sector. Under section 202 of the UMRA, the Agency generally must prepare a written Statement, including a cost-benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures by State, local, or tribal governments, in the aggregate, or to the private sector, of $100 million or more in any 1 year. When such a Statement is needed for a rule, section 205 of the UMRA generally requires the Agency to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, more cost-effective or least burdensome alternative that achieves the objective of the rule.

This rule contains no Federal mandates (under the regulatory provisions of Title II of the UMRA) for State, local, tribal governments, or the private sector. Thus, this rule is not subject to the requirements of sections 202 and 205 of the UMRA.

Paperwork Reduction Act

In accordance with the Paperwork Reduction Act of 1995, FSA submitted a request to OMB for the approval of the certified mediation program information collection package (0560-0165). OMB control number 0560-0165 was approved for use through February 29, 2004.

Background

On November 9, 1999, FSA published a proposed rule (64 FR 61034) to amend its agricultural loan mediation program regulations to implement the requirements of the Federal Crop Insurance Reform and Department of Agriculture Reorganization Act of 1994 (the 1994 Act) (Pub. L. 103-354). The 1994 Act expanded the scope of issues that may be mediated in State mediation programs certified by FSA. The proposed rule modified previously established requirements and procedures for certification and funding of State mediation programs under the Agricultural Credit Act of 1987 (the 1987 Act) (7 U.S.C. 5101 et seq.).

On November 9, 2000, the Grain Standards and Warehouse Improvement Act of 2000 (the Grain Standards Act) (Pub. L. 106-472) was enacted, making a number of additional amendments to the 1987 Act. Section 306 of the Grain Standards Act reauthorizes the mediation program through fiscal year 2005, and provides that funds appropriated by Congress to the state agricultural mediation program must be used for farm credit disputes and may be used, if available, for other specified U.S. Department of Agriculture (USDA) program disputes. This section also clarifies that the term “mediation services,” with respect to mediation or a request for mediation, may include all activities related to the intake and scheduling of cases, the provision of background and selected information regarding the mediation process, appropriate financial advisory and counseling services performed by a person other than a State mediation program mediator, and the mediation session. The Grain Standards Act also clarifies that the persons eligible for mediation include: agricultural producers, creditors of producers (as applicable), and persons directly affected by actions of the USDA. The Grain Standards Act further provides that mediation is voluntary and that a person may not be compelled to participate in such mediation, but that the statute does not affect any law requiring mediation before foreclosure on agricultural land or property.

FSA has incorporated these statutory provisions in the final rule. Section 785.1(d) of the final rule provides that mediation is voluntary and a that a person may not be compelled to participate in a mediation, but that the statute does not affect any law requiring mediation before foreclosure on agricultural land or property. A conforming definition of mediation services has been added in § 785.2, and a new definition of “covered persons” in § 785.2 specifies who may request mediation and issues that may be mediated.

This rule also removes the mediation provisions from the Rural Development chapter of Title 7 of the CFR (Chapter 18) and incorporates those provisions into a new part 785 in the FSA chapter (Chapter 7) of Title 7.

Public Comment

The comment period for the proposed rule ended on January 10, 2000. FSA solicited comments on the proposed rule in general, and particularly on certain specific matters addressed or considered during development of the proposed rule, specifically: Training programs implemented by States, the requirement for quarterly reporting by certified State mediation programs, the experience of States in mediating the additional issues authorized for mediation in the 1994 Act, mediation not involving USDA agencies and programs, the proposed changes in procedures for determining grant awards and managing an administrative reserve, and the appropriateness of requiring mediation program participants to satisfy a needs test as a condition for use of grant funds to pay for financial advisory and counseling services in preparing participants for mediation.

Summary of Comments

Comments were received from the Coalition of Agricultural Mediation Programs (CAMP) representing 25 USDA-certified State mediation programs, 12 USDA-certified State mediation programs, the American Bar Association, the Nebraska Legal Aid Society, the Oklahoma Farmers Union, and two mediators. The comments addressed a number of issues relating to the proposed rule in addition to those for which we had specifically solicited comment. FSA considered the comments and incorporates many of the recommendations and suggestions in this rule. The following is a review of the general subjects of comments and of the changes made in the final rule in response.

Training Programs Implemented by States

The proposed rule required a state requesting certification to describe the State mediation program education and training requirements for mediators. One commentor stated that the request for information concerning State programs for training mediators is appropriate provided that FSA understands that each program will employ different models of mediation, and that the training curricula will vary from one program to another. The commentor also stated that it is necessary for the various USDA agencies to work with the State agricultural mediation programs to provide training so that mediators are adequately trained on issues relating to USDA programs.

The commentor observed that USDA personnel need additional training regarding the objectives of mediation and its potential benefits. The commentor recommended that as part of a cooperative training effort, USDA personnel who will be involved in the mediation process receive training on mediation. Another comment proposed that the USDA conduct routine mediation training and orientation workshops for USDA staff and other consumer populations on the use and processes associated with mediation services.

Several other comments came from certified State mediation programs pointing out that their State laws set standards for training, qualifications, ethics and continuing education requirements for approved mediation programs and mediators. Other comments encouraged FSA to work with CAMP and States with certified mediation programs to develop criteria for those training requirements if there are specific areas that FSA believes it needs to monitor considering that training requirements are generally approved under individual State laws as well. Other commentors suggested that the USDA work with certified States to develop curriculum and materials that comport with USDA standards, for example, in a joint project with special funding. In contrast, other comments suggested that because of the diversity of State laws and the specific needs of the individual State programs, mediator qualifications and training requirements generally should be left to the respective certified mediation programs.

FSA agrees that both USDA employees and mediators must be adequately trained for the mediation process to function effectively. In response to the comments, FSA has added minimum Federal standards of mediator training to this rule to ensure a threshold level of mediator qualifications in all certified State mediation programs. For clarity, “mediator” and “qualified mediator” are separately defined in § 785.2. The definition of “qualified mediator” establishes a minimum training requirement that will apply in any State without a law prescribing mediator qualifications. The minimum training requirements in the final rule correspond to the minimums among States that prescribe mediator qualifications by law. As one condition of USDA certification under § 501 of the 1987 Act, a State mediation program must train its mediators. FSA also intends to work with certified States on an on-going basis to schedule joint training programs from time to time as funding is available.

Quarterly Reporting by Certified State Mediation Programs

One commentor stated that reporting requirements need to stay proportional to the level of funding that is received by the States. Because of the relatively small size of the maximum grants to certified State mediation programs, annual rather than quarterly reporting is appropriate. Comments from certified State mediation programs concurred that quarterly reporting beyond financial reporting would greatly increase the reporting burden on States and that quarterly reporting would be excessively burdensome, especially on smaller programs where administrative staff and time are limited. All comments concurred that, with the exception of financial reporting, reporting by certified State mediation programs should be on an annual basis. One commentor suggests that programs receiving grants of less than $100,000 should report under a simplified system. Another commented that as a general matter the collection of information from the certified programs is necessary and that the commentor would like to work with FSA to develop a uniform reporting system that minimizes the burden of collecting information and provides a better measure of program performance.

In light of these comments, the final rule does not modify reporting requirements in § 785.8 to require quarterly reporting on program performance except as required under the Uniform Federal Assistance Regulations, 7 CFR part 3015, and the Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments, 7 CFR part 3016. FSA will continue to work with certified State mediation programs to determine how best to minimize the paperwork burden on certified States and, at the same time, provide a better method of measuring annual performance of the States' mediation programs.

Funding and Administrative Reserve

The procedure for determining grant awards to certified State mediation programs in the proposed rule represented an important change from the existing regulations. Under current regulations, certified States are awarded grants based on their requests, subject to the statutory limitations. Where States' total grant requests exceeded the funds appropriated, funds are allocated to States pro-rata. The proposed rule set forth a series of criteria as factors that would be considered in making awards to States.

In addition, the proposed rule provided for an administrative reserve that would be funded by withholding 10 percent of the total funds so that funds from the reserve could be obligated later in the fiscal year to newly qualified States or reallocated to States to meet demand for mediation services exceeding States' initial projections, and then, subsequently, to requesting States. In addition, to provide for flexibility in allocation of the program's limited funding, the reserve mechanism is intended to provide a means for the program to award funding at the beginning of the second half of a fiscal year for a mediation program in a State that newly qualifies in the first half of a fiscal year. Under the current regulation, a newly certified State program is required to wait for an award of grant funds until the following fiscal year.

Administrative Reserve

Several State mediation programs suggested that 5 percent of the total grant funds should be held in reserve rather than 10 percent because the sum withheld would be excessive when total funds appropriated are not sufficient to meet all eligible State matching grant needs. These commentors also suggested that making the reserve a bit smaller rather than larger should encourage States to submit applications for new certification or re-certification by the August 1 deadline. The commentors further suggested that meeting excess demand for mediation in existing certified States should be a priority over making grants to States newly certified in the current fiscal year or to previously certified States missing the August 1 deadline for recertification. FSA agrees with these comments, and the final rule provides in § 785.7(d) for a reserve of 5 percent of the total grant funds appropriated for the fiscal year. The final rule also revises priorities for disbursements from the administrative reserve fund to provide in § 785.7(d)(1) that additional unbudgeted demands for mediation services in qualifying States submitting certifications or recertifications on or before August 1 in a calendar year that are received on or before March 1 of the fiscal year will be given priority over requests for certification received between August 2 and March 1. As suggested by commentors, this change will provide additional incentive for States to submit timely requests for certification and re-certification.

One commentor questioned why FSA will accept requests for certification after the annual August 1 deadline, objecting because the policy reduces funding available to States that submit timely grant requests. To clarify the purpose of the reserve, the reserve is relabeled an “administrative reserve” in the final rule to reflect its administrative utility more clearly. FSA policy to receive and consider requests for certification and recertification submitted after the August 1 deadline reflects its belief that FSA should accommodate the varying schedules on which States may be able to meet certification requirements, particularly those requiring legislative action by the respective State governments. In response to other comments, the final rule provides in § 785.7(d)(1)(i)—(ii) that grant requests received between August 2 and March 1 will not be considered for funding in a fiscal year until the Administrator has determined what additional funding from the administrative reserve should be allocated to qualifying States that submitted timely requests.

The final rule also provides in § 785.7(d)(1)(ii) that funding granted in response to a late-submitted request for a grant by a State requesting re-certification may be made effective as of the beginning of the fiscal year. To accommodate the differences in designations of fiscal years by the Federal Government and the States, the final rule expressly provides in § 785.7(e), pursuant to 7 CFR 3016.23, that any State receiving a grant may carry forward funds unobligated at the end of the Federal fiscal year into the next fiscal year.

In combination, these provisions in the final rule are intended to provide a measure of administrative flexibility to support USDA policy favoring increased use of mediation as a means for resolution of administrative disputes, to assist efficient allocations of limited funds in response to unanticipated demands, and to accelerate start-up of newly certified State mediation programs.

Funding Criteria

Several commentors expressed concern about the criteria that are to be used to determine funding. There were concerns that using both objective criteria and criteria providing for discretion could operate unfairly. States with mandatory mediation programs would clearly serve more clients while States without mandatory agricultural mediation programs would need to commit resources for outreach that would be unnecessary in States with mandatory agricultural mediation requirements. The existence of these competing concerns is a reason why the final rule must provide for discretion in allocating grant funds. The criteria in the final rule accordingly identify considerations that will affect determinations of grant awards but do not specify a formula. No substantive changes were made in response to these comments.

Certification Requests

One commentor stated that it appreciates the need for USDA to receive sufficient information and documentation to adequately evaluate whether a State's request for certification meets the eligibility criteria to become a certified mediation program. However, it maintains that the existing certification process provides USDA with adequate information to make this decision. The commentor requested that the certification process be kept as simple as possible so as not to discourage new or existing States from participating.

FSA agrees that the procedures for requesting certification of a State mediation program and for requesting grant assistance should be manageable for States participating in the certified State mediation program. The final rule is reorganized to reflect more clearly the differing requirements for certification of a State mediation program (§ 785.3) and submission of a request to obtain grant funds for a certified program (§ 785.4). For purposes of certification, FSA will rely on the certification required of a governor or the head of a State agency designated by the governor. The changes from the proposed rule requiring submission by States of information concerning training of mediators and the State's experience in delivery of mediation services are adopted to achieve a better allocation of grant funds relative to needs while preserving some administrative flexibility to make grants to support mediation programs in newly qualifying States.

Also, while, pursuant to 7 U.S.C. 5101(c)(3)(E)-(F), the governor of a State must certify that lenders and borrowers of agricultural loans received adequate notification of the mediation program (§ 785.3(a)(2)(v)) and that, in the case of other issues covered by the mediation program, persons directly affected by actions of the USDA received adequate notification of the mediation program (§ 785.3(a)(2)(vi)), these requirements are effectively met by USDA agencies. As required by 7 U.S.C. 6995, covered agencies must offer mediation when a certified mediation program is available as part of their informal appeals process.

Several commentors recommended that regulations be modified to identify what specific information must be included in a grant request in compliance with 7 CFR parts 3015 and 3016. FSA believes that modifying the rule as suggested would introduce either redundancy or inconsistency, so no changes have been made in response to these comments. Parts 3015 and 3016 contain uniform rules that apply to USDA grants and cooperative agreements to State and local governments, universities, non-profit and for-profit organizations. The State mediation programs qualifying to date are operated primarily by State universities or State departments of agriculture, but other State agencies can be certified as State mediation programs. As a general matter, States are familiar with the uniform requirements set forth in parts 3015 and 3016. It is the responsibility of the State to know and comply with the applicable sections of parts 3015 and 3016 when applying for and receiving USDA grants.

Use of Grant Funds To Support Mediation in Other Programs of the USDA

Several commentors stated that the allowable costs provision in the proposed rule appears to authorize mediation programs to use grant funds to mediate disputes for persons directly affected by actions of any USDA agency, but that the USDA has required that the Secretary make a specific designation for grant funds to be used to mediate disputes in other programs of the USDA. The final rule removes this inconsistency and provides in § 785.2, in the definition of “covered persons,” that the Secretary may designate issues for mediation where other persons are directly affected by actions of the USDA and that State mediation programs may certify that they provide mediation services to such persons (§ 785.3(a)(2)). Within the general scope of the discretion of the Secretary authorized by section 501(c)(1) of the 1987 Act, the final rule contemplates that the specific authorizations for uses of grant funds to mediate such disputes will vary with particular circumstances and should not be specified in the final rule.

The final rule also provides that a certified State mediation program may require non-USDA participants in mediations to pay a fee for mediation services (§ 785.5), but that no such fee may be required of any USDA agency that is mandated to participate in mediation. The restriction against imposition of fees on USDA agencies mandated to participate in mediations reflects that the USDA is already funding the mediation program through grants and cannot reasonably be expected to pay twice. In addition, one of the primary reasons to charge a fee for mediation is to ensure good-faith participation. By law, USDA agencies must participate in good faith in mediation. As a result, there is no reason to charge USDA agencies a fee to participate in mediation to ensure their good faith.

Experience in Mediating the Additional Issues Authorized for Mediation in the 1994 Act

Both the 1994 Act and the Grain Standards Act expanded the statutory coverage of issues that may be mediated by a State mediation program and the categories of persons that may be eligible for mediation services through a certified program. The proposed rule reflected the specific expansions of coverage under the 1994 Act and also its authorization for the Secretary to identify other issues appropriate for mediation.

The Secretary's Memorandum 4710-1, dated March 23, 2000, entitled “USDA Alternative Dispute Resolution Policy,” authorized expansion of the issues handled by USDA-certified State mediation programs in accordance with the 1994 Act to include rural housing loans; rural business loans; crop insurance; and other issues the Secretary may subsequently consider appropriate. The final rule also reflects further expansions of coverage of issues and of persons eligible for mediation services under the Grain Standards Act to include mediations of disputes between producers and their creditors involving agricultural loans, regardless of whether the loans are made or guaranteed by the USDA or are made by a third party (§§ 785.2 (“Covered persons”) and 785.3(b)(2)). Significantly, the final rule does not refer to “agricultural loan mediation,” but instead refers to mediation services delivered by certified State mediation programs. Pursuant to the Secretary's alternative dispute resolution policy, the final rule also supports greater utilization of the certified State mediation programs to resolve both credit and non-credit issues in rural communities.

In light of this policy, the USDA solicited specific comments regarding program experience to date in mediating the broader range of issues covered by the 1994 Act. Comments from the certified State programs were generally supportive that the coverage of issues for mediation under their programs could be expanded. With respect to mediation of non-credit issues, one mediator commented that the opportunities for resolution of such issues in mediation has been constrained by rigidity in the program regulations governing many such disputes. For mediation to be effective, participants must have confidence that there are options that can be explored with the assistance of a mediator. The commentor observed that many of the regulations implicated in mediations of non-credit issues were published prior to 1994 and the regulations may need modification to create more opportunity for mediated resolutions of disputes.

Other commentors suggest that the differing opportunities for developing options are a consideration that States are taking into account in management of their mediation intake processes. These States are determining at an early stage whether an issue in dispute may be amenable to mediation, so that their clients may be soundly advised whether mediation is a good option for resolution of the dispute.

FSA agrees that mediation programs should take appropriate steps to determine at an early stage whether the issues in a dispute are subject to statutory or regulatory requirements that must apply uniformly that diminish or eliminate opportunities for effective mediation of a dispute. FSA likewise agrees that in situations where there is a sense that nothing can be accomplished, the mediation program as a whole is adversely affected. In a number of situations, however, mediations involving disputes under uniformly applicable regulatory standards may focus on strategies for resolution of a dispute with options, e.g., in wetlands disputes, options for mitigation or restoration of wetlands, or in claims disputes, options for repayment of debts.

Mediation Not Involving USDA Agencies and Programs

One commentor noted that agriculture disputes not involving USDA or agricultural credit may be mediated by certified programs, but that USDA funds may not cover such costs. FSA agrees that with regard to the costs of non-USDA non-agricultural credit mediation, grant funds are not allowed to assist producers who have disputes with other producers. The Grain Standards Act clarified that persons eligible for mediation services include agricultural producers, creditors of producers (as appropriate), and persons directly affected by actions of the USDA. It is intended that grant funds will be used by certified States to assist producers resolve agriculture-related disputes with the USDA that, if not timely resolved, would discourage lenders from financing their operations. FSA has clarified this issue in the final rule in § 785.4(c)(1) by providing that grant funds can be used to pay eligible costs that are reasonable and necessary to carry out the State's certified mediation program in providing mediation services to covered persons, i.e., agriculture producers and their creditors, and other persons directly affected by actions of the USDA.

Use of a Financial Needs Test as a Condition for Use of Grant Funds To Pay for Financial Advisory and Counseling Services in Preparing Clients for Mediation

The proposed rule provided that costs of providing financial advisory and counseling services to mediation clients would be allowed if: the services were incidental to a mediation case, a financial need was demonstrated under guidelines established by the program and reported to FSA, the work product was made available to all parties to a mediation, the services were provided under the control of a mediator, and were determined in advance to be reasonable, necessary, and consistent with the goal of mediation in the particular case. Comments were solicited particularly regarding this financial needs test.

One commentor stated that the requirement that preparatory financial advisory and counseling services should be provided under the control of the mediator should be deleted, or at least modified to provide for control by staff of the mediation program rather than by the mediator. The commentor believed that mediators would be exposed to ex parte communications from assisted parties prior to mediation, which would appear to compromise their neutrality and interfere with their ability to get a balanced understanding of the facts implicated in a mediation. These concerns are also reflected in other comments on the proposed rule. The commentor suggested, and FSA agrees, that costs of financial advisory services provided by a person other than a mediator are allowable when approved under guidelines established by the certified State mediation program and are reported to FSA.

Several commentors stated that the requirement in the proposed rule that the results of financial analysis be made available to all parties as a condition for allowing the cost should be deleted. One commentor observed that, as a practical matter, participants are going to provide all relevant information to an analyst only if participants are reasonably certain to retain some control over the information that they provide. This suggested change is reflected in § 785.4 of the final rule, however, which provides that such services may be provided under guidelines established by the certified State mediation program. To ensure accountability in delivery of such services under guidelines established by certified State mediation programs, the final rule also provides, in § 785.9(a), that records of delivery of financial advisory and counseling services are pertinent records for review that must be maintained by the program and that the USDA or other Federal Departments must be granted access to these records for purposes of evaluation, audit, and monitoring of the certified State mediation program.

As a general matter, commentors supported providing financial and counseling services by certified mediation programs, but did not support the requirement of a financial needs test. The commentors stated that requiring a financial needs test would be a burden on both mediation programs and producers seeking assistance. In cases where a mediation client might be desperately in need of assistance simply to sort out financial documents prior to a mediation, requiring the mediation client to complete a financial needs assessment could impede the client from actually requesting financial advice because the process to qualify for assistance would appear too complicated.

Other commentors pointed out that in an overwhelming majority of the credit cases handled, producers will have financial need; otherwise, they would not be seeking mediation in the first place. Given these general circumstances, the commentors suggested that administering the financial needs test would delay and interfere with time better spent assisting mediation clients with preparations for productive mediation sessions. FSA agrees and has revised § 785.4 accordingly.

Comments on Other Matters

Notice of Mediation Services

One comment was received suggesting that the proposed rule should clarify how potential mediation clients receiving adverse decisions in USDA programs are to be notified of mediation services. The final rule clarifies in § 785.1(b) that, where a certified State mediation program is available, USDA agency notices of decisions will offer as part of the agency's informal appeal process the opportunity to mediate the decision under the certified State mediation program, in accordance with the agency regulations applicable to its informal appeals process. The USDA adverse decision notice will satisfy the grantee's notice requirement.

Because section 274 of the 1994 Act requires that notices of decisions by covered agencies must offer the opportunity to mediate in States with certified State mediation program as part of their informal appeals processes, State mediation programs need only ensure that appropriate procedures are in place to schedule mediations and to notify parties when a mediation closes. In addition, State mediation programs shall also ensure that procedures in place publicize the availability of mediation so as to ensure that persons involved in agricultural loans, regardless of whether the loans are made or guaranteed by the Secretary or made by a third party, also receive adequate notification of the mediation program.

Guidance for Agency Participation in Mediations

One commentor suggested that FSA should clarify the manner in which USDA agencies are to participate in mediations, specifically, that FSA should “clearly delineate both the format and the level of participation the Department and its sub-agencies will follow.” The commentor observed that the proposed rule does not adequately establish how the assistance to mediation programs provided for in the rule is to culminate in delivery of mediation services.

FSA agrees that its guidance regarding the duties of agency participants in mediations should be clarified. For example, FSA is currently streamlining its farm loan program regulations and expects to resolve the apparent inconsistencies and update many obsolete provisions in current regulations during this process. As to a need for more general guidance regarding the duties of agency participants in mediation programs, FSA agrees that guidance regarding the contours and constraints on agency participation in mediation processes should be addressed in the rules governing informal agency appeals processes, e.g., 7 CFR parts 614 and 780. While agreeing in principle with this comment, FSA believes that agencies must adopt rules tailored to their respective programs and is more generally concerned that any such regulations provide sufficient flexibility to permit States latitude to experiment with different mediation strategies within the guidelines that agencies may establish. Section 785.1(b) has been revised accordingly.

Access to Records and Confidentiality

The proposed rule expressly provided that pertinent records of certified State mediation programs must be made available to the Government in accordance with 7 CFR 3015.24. It further provided that parties in a mediation should sign an acknowledgment that the Government would have access to mediation records to conduct an audit or evaluation of mediation services funded in whole or part by the USDA.

One commentor stated that “records” should be defined and that the rule should expressly identify what records will be considered pertinent that must be made available for an audit. Section 785.9 of the final rule identifies specific “pertinent records” of mediations to be maintained and made available for purposes of audit, evaluation, or monitoring. “Pertinent records” include the following: (i) Names and addresses of applicants for mediation services; (ii) dates mediations are opened and closed; (iii) issues mediated; (iv) records of financial advisory and counseling services furnished to parties in mediation; (v) dates of sessions with mediators; (vi) names of mediators; (vii) other mediation services furnished to participants by the program; (viii) sums charged for each mediation service; and (ix) outcomes of mediation services including formal settlement results and supporting documentation. These are the minimum records needed for FSA and the Office of Inspector General to monitor the use of Federal grants for certified mediation programs and ensure the integrity of the grant program. Most of these items would not be protected as “dispute resolution communications” under sections 571 and 574 of the Administrative Dispute Resolution Act of 1996 (ADR Act) (5 U.S.C. 571 et seq.) because the basic information would be included in any written agreement to mediate or any final mediation resolution agreement. Section 574 prohibitions also do not apply to information necessary to document such mediation resolutions according to paragraph (g) of that section. To the extent that “pertinent records” are normally protected by the ADR Act, the parties will acknowledge and consent to their release for the limited purposes of 7 CFR 785.9. FSA has adopted a reasonable maintenance requirement of 5 years for these acknowledgments.

The final rule also clarifies in § 785.9 that, notwithstanding 7 CFR 3015.24, pertinent records must be disclosed to the USDA, the Comptroller General of the United States, the Administrator, and their representatives only as necessary to monitor, audit or evaluate mediation services funded in whole or in part by the USDA. This access provision is not intended to be used to seek information to use against the participant in an unrelated administrative decision. FSA recognizes that not all communications made to a mediator in confidence or all mediator work product, including records of mental impressions, will be maintained indefinitely. The final rule is intended to clarify that mediators' notes, other highly sensitive documents prepared for mediation, and other records of mediators' impressions will not be the “pertinent records” that mediators will be expected to produce to substantiate services delivered during a mediation. The purpose of the access requirement is to ensure that there is adequate documentation for the Government to review to verify that only authorized mediation services have in fact been furnished by a certified State mediation program in connection with a mediation.

Two State mediation programs commented that the requirement for execution of an acknowledgment of Government access to records by parties in a mediation was “an extreme example of overkill” that would encourage disputing parties simply to go through motions and not help mediation programs in their effort to solve problems. FSA believes that clarification of the limited purposes for which Government access may be required should minimize this potential obstacle. Credible mediators should be able to explain that as recipients of Federal grant funds their mediation programs have a responsibility to be accountable to the Government. No changes were made in response to these comments.

Several commentors suggested that the definition of confidentiality be changed to make divulging of mediation records subject to section 574 of the ADR Act. Some suggested that the rule expressly provide that to the extent that 7 CFR 3015.24 conflicts with statutory provisions for confidentiality in the ADR Act or section 501 of the Agricultural Credit Act of 1987, as amended, 7 U.S.C. 5101(c)(3), the statutory provisions would take precedence. FSA agrees that the definition of “confidential mediation” should be consistent with the ADR Act to the extent possible in carrying out the Federally funded certified mediation programs in accordance with authorizing legislation and regulations. FSA, therefore, has revised the proposed definition of the term to mean a mediation in which the mediator will not disclose to any person oral or written communications provided in confidence to the mediator except as allowed by section 574 of the ADR Act or the record access provisions in 7 CFR 785.9.

Annual Reporting and Program Evaluation

Several commentors suggested that the USDA should continue to use an annual reporting system for monitoring the effectiveness and productivity of all State mediation services, inclusive of all affiliated services incidental to caseload. These commentors encouraged the USDA to clearly delineate the categories, methodologies, measurement criteria, forms, and other equations for those purposes. The final rule is responsive to these suggestions and includes in section 785.8 more specific guidance regarding matters to be contained in the annual report than was set forth in the proposed rule. The emphasis of the revisions is to afford certified State mediation programs better means to report uniformly on the costs and benefits of their services and on areas where delivery of mediation services to covered persons can be improved. Because the final rule furnishes additional detail regarding the organization and coverage expected in the annual report, FSA believes that the revisions will simplify reporting for certified State mediation programs and will reduce the burden on the grantee.

Several commentors observed that FSA and other USDA agencies are in a better position than the mediation programs to track which cases go from mediation to appeals. They stated that it is the responsibility of the USDA to articulate a standard for data comparisons and recommended that data on administrative appeal costs should be furnished to certified States by the USDA. The final rule adopts this suggestion in section 785.8(a)(2) and provides that the mediation program will project costs of avoided administrative appeals based on data furnished by FSA.

One commentor observed that the proposed rule was unclear regarding who should receive annual reports from mediation programs, the Administrator of FSA, or the FSA State Executive Directors. The final rule clarifies that annual reports must be submitted to the Administrator.

Other significant changes are as follows:

Section 785.5 Fees for Mediation Services

This new section expressly provides that non-USDA parties who elect to participate in mediation may be required to pay a fee for mediation services, but that a State certified mediation program may not require a USDA agency to pay a fee to participate in a mediation. Because of the grant funding made available by the USDA for certified State mediation programs, the restriction against imposition of fees on USDA agencies protects against double charging of the Government. Further, charging fees ensures good faith participation by the parties. By law USDA agencies must participate in mediation in good faith. Charging a fee to USDA agencies under such circumstances is, therefore, not warranted.

Section 785.11 Reconsideration by the Administrator

This new section provides for reconsideration by the Administrator of any determination that a State is not a qualifying State or of penalties imposed pursuant to section 785.10. The decision of the Administrator following reconsideration is the final administrative decision of FSA.

List of Subjects in 7 CFR Parts 785 and 1946

• Agriculture
• Federal-State relations
• Grant programs—Intergovernmental relations
• Mediation

Accordingly, 7 CFR chapters VII and XVIII are amended as follows:

1. Part 785 is added to read as follows:

PART 785—CERTIFIED STATE MEDIATION PROGRAM

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; and 7 U.S.C. 5101-5104.

PART 1946—[Removed and Reserved]

2. Part 1946 is removed and reserved.