The NSIIC has a unique organizational structure that has some characteristics of a privately held business but works within the framework of the U.S. Department of Agriculture.  The Board found that this was a double edged sword with both helpful and cumbersome bureaucratic elements.  They began developing a loan program that would be administered directly by the NSIIC.  They had drafted an application, lending policies and were working on the servicing elements when they hit a dead end.  In the government all actions taken by any agency must be authorized by the Office of Management and Budget (OMB).  In the initial meetings with OMB to get the loan program approved they learned that NSIIC was subject to the Credit Reform Act.  The section of the Credit Reform Act that was particularly troublesome for NSIIC was that it required all principal and interest payments that were received when loans were repaid to go into an account in the Treasury Department.  All of the repayments would then become part of the General Fund and no longer be available to the Board of Directors to relend.  The Board maintained that Congress had authorized NSIIC to be a revolving fund and, that NSIIC should be exempt from the Credit Reform Act.  Principle and interest payments should be made available for their original purpose and revolve into perpetuity.  The Board's efforts fell on deaf ears in OMB and all avenues available to change their mind including contacts from members of Congress were unsuccessful.  By this time there were several issues in addition to the Credit Reform Act that the Board felt could only be resolved by going back to Congress to amend the original act.  The Board worked with Congress to resolve these issues while OMB also worked with Congress to block the NSIIC exemption to the Credit Reform Act.  While many of the other issues were favorably resolved and the Board secured authority to use an intermediary, OMB prevailed in blocking an exemption to the Credit Reform Act.  The revised authority states:

"The Center may use amounts in the Fund to make direct loans, loan guarantees, cooperative agreements, equity interests, investments, repayable grants, and grants to eligible entities, either directly or through an intermediary, in accordance with a strategic plan submitted under subsection (d)."

The Board then had to make a decision, were they going to implement a loan program where the loan repayments went back into Treasury, forever lost to the industries or use an intermediary where someone other than they would be making the loan decisions but the interest and loan repayments would remain to help the various segments of the sheep and goat industries into perpetuity.  They chose to work with an intermediary.

The concept of an intermediary is that the NSIIC would contract with another organization to make low interest loans.   The Board began the search for an intermediary in early 1999.  They set a list of criteria that they felt an intermediary must have including:

• expertise with livestock production, processing and marketing-related lending.

• nationwide capability in urban and rural areas.

• the ability to process and service loans from all segments of the sheep and goat industries, from production through the packer/processor/retail level.

The Board of Directors pursued a number of different avenues through government lending agencies, existing intermediaries that worked with other USDA programs, commercial banks and non-profits organizations.  The Board found a lot of dead ends with groups that either didn't have the resources or the desire to serve as an intermediary. 

The Board had an ongoing dialog within USDA to establish the parameters of the relationship between NSIIC and an intermediary.  The USDA - Office of General Council (OGC) was very helpful in guiding the Board with the formal arrangement with any intermediaries.   OGC insisted that the arrangement have an overall "arms length relationship"   OGC was concerned that NSIIC have the proper oversight of the funds but was also insistent that an intermediary not be in any way considered a puppet of The National Sheep Industry Improvement Center.  Finally after an exhaustive search there was only one group that the Board found that had the ability, desire and flexibility to deliver financial assistance to the sheep and goat industries.  The Board determined that the National Livestock Producers Association (NLPA) met all of the qualifications. 

The National Livestock Producers Association (NLPA) was founded in 1926 and is headquartered in Colorado Springs, Colorado.  They have a long history of working with specialized livestock related lending issues.  They have nationwide capabilities through their subsidiary organizations and can process and service loans from all segments of the sheep and goat industries, either directly or through contract services.

The agreement between the National Sheep Industry Improvement Center and the National Livestock Producers Association (Intermediary), to deliver direct low interest loans to the sheep and goat industries was signed on November 18, 1999.

The agreement establishes that the funds made available from NSIIC can only be used to benefit the American sheep and goat industries and their various products and as those monies are lent, repaid and relent they must always be used for this purpose.  This will allow the original fund to grow over time and benefit the various segments of the two industries into perpetuity.  The agreement establishes the NLPA Sheep and Goat Fund, a separate fund that is administered by  the Sheep and Goat Fund Committee.  That group is made up of seven individuals with livestock lending experience or with industry experience. 

The NLPA Sheep and Goat Fund overall goal is to:

• Make capital available for increasing production or improving production efficiency.

• Improve marketing efficiency or product quality.