USDA Crop Disaster Programs
Lessons Learned Can Improve Implementation of New Crop Assistance Program Gao ID: GAO-10-548 June 4, 2010The U.S. Department of Agriculture's (USDA) Farm Service Agency (FSA) provides programs to help farmers recover financially from natural disasters. Congress has historically supplemented these programs with ad hoc programs that pay farmers who experienced crop losses. The 2008 farm bill established a program through 2011 to pay farmers who lose crops. To receive these payments, farmers must purchase coverage under federal crop insurance or the Noninsured Crop Disaster Assistance Program, and receive claims payments for losses. GAO was asked to evaluate (1) how FSA administered the crop disaster programs for losses from 2001 through 2007 and the results of payments under these programs and (2) what lessons FSA can learn from the previous crop disaster programs to manage its new crop disaster program. GAO reviewed statutes, regulations, and guidance; analyzed USDA data; and interviewed USDA officials.
FSA largely used crop insurance data from USDA's Risk Management Agency (RMA) to calculate nearly $7 billion in crop disaster payments under the 2001 through 2007 ad hoc crop disaster programs. FSA made about $395 million in payments under these programs to 8,463 farmers who RMA identified as having received suspicious crop insurance claims payments in those same years. Almost half of crop disaster payments for farmers RMA identified as having suspicious crop insurance claims payments were in five states. RMA provides its annual list of suspicious claims payments to FSA state and county offices and to the insurance company selling the policy to the farmer for appropriate follow-up action. However, GAO previously reported that few suspicious claims payments resulted in a conviction for fraud. As reported, the factors considered when accepting a case for investigation and prosecution include sufficiency of the evidence, complexity of the case, whether the fraudulent activity is part of a pattern or scheme, and workload and resources that would be needed to investigate and prosecute the case. For 2001 through 2007, GAO could not use FSA's electronic data files to determine whether crop disaster payments complied with a statutory cap because the reliability of these files is undetermined for the purpose of assessing whether a crop disaster payment was in compliance with the cap. However, in using hard copy files to determine compliance with the cap, GAO found that payments to selected farmers were in compliance. Furthermore, FSA officials did not provide systems documentation, such as specifications and business rules on how FSA used data in its systems to calculate crop disaster payments. FSA's experience with ad hoc crop disaster programs shows that a lag--as much as 4 years--between the occurrence of a disaster-related crop loss and the application for a disaster payment for that loss prevented FSA county officials from verifying the cause of the loss. Under the new program, there will still be a lag before farmers can apply for a payment; in contrast, farmers have to file a crop insurance claim immediately after a loss and be subject to insurance verification. Without more timely eligibility determinations for the new crop disaster program, FSA county officials will be unable to verify that applicants experienced losses due to an eligible cause. In addition, insufficient documentation of the data systems FSA used for calculating and issuing payments under the ad hoc programs makes it difficult to validate the accuracy of those payments. A similar lack of documentation under the new program could hamper FSA officials' efforts to track payments and ensure the payments adhere to statutes, regulations, and FSA guidelines.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Lisa R. Shames Team: Government Accountability Office: Natural Resources and Environment Phone: (202) 512-2649GAO-10-548, USDA Crop Disaster Programs: Lessons Learned Can Improve Implementation of New Crop Assistance Program
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
June 2010:
USDA Crop Disaster Programs:
Lessons Learned Can Improve Implementation of New Crop Assistance
Program:
GAO-10-548:
GAO Highlights:
Highlights of GAO-10-548, a report to Congressional Requesters.
Why GAO Did This Study:
The U.S. Department of Agriculture‘s (USDA) Farm Service Agency (FSA)
provides programs to help farmers recover financially from natural
disasters. Congress has historically supplemented these programs with
ad hoc programs that pay farmers who experienced crop losses. The 2008
farm bill established a program through 2011 to pay farmers who lose
crops. To receive these payments, farmers must purchase coverage under
federal crop insurance or the Noninsured Crop Disaster Assistance
Program, and receive claims payments for losses.
GAO was asked to evaluate (1) how FSA administered the crop disaster
programs for losses from 2001 through 2007 and the results of payments
under these programs and (2) what lessons FSA can learn from the
previous crop disaster programs to manage its new crop disaster
program. GAO reviewed statutes, regulations, and guidance; analyzed
USDA data; and interviewed USDA officials.
What GAO Found:
FSA largely used crop insurance data from USDA‘s Risk Management
Agency (RMA) to calculate nearly $7 billion in crop disaster payments
under the 2001 through 2007 ad hoc crop disaster programs. FSA made
about $395 million in payments under these programs to 8,463 farmers
who RMA identified as having received suspicious crop insurance claims
payments in those same years. Almost half of crop disaster payments
for farmers RMA identified as having suspicious crop insurance claims
payments were in five states. RMA provides its annual list of
suspicious claims payments to FSA state and county offices and to the
insurance company selling the policy to the farmer for appropriate
follow-up action. However, GAO previously reported that few suspicious
claims payments resulted in a conviction for fraud. As reported, the
factors considered when accepting a case for investigation and
prosecution include sufficiency of the evidence, complexity of the
case, whether the fraudulent activity is part of a pattern or scheme,
and workload and resources that would be needed to investigate and
prosecute the case.
For 2001 through 2007, GAO could not use FSA‘s electronic data files
to determine whether crop disaster payments complied with a statutory
cap because the reliability of these files is undetermined for the
purpose of assessing whether a crop disaster payment was in compliance
with the cap. However, in using hard copy files to determine
compliance with the cap, GAO found that payments to selected farmers
were in compliance. Furthermore, FSA officials did not provide systems
documentation, such as specifications and business rules on how FSA
used data in its systems to calculate crop disaster payments.
FSA‘s experience with ad hoc crop disaster programs shows that a lag”
as much as 4 years”between the occurrence of a disaster-related crop
loss and the application for a disaster payment for that loss
prevented FSA county officials from verifying the cause of the loss.
Under the new program, there will still be a lag before farmers can
apply for a payment; in contrast, farmers have to file a crop
insurance claim immediately after a loss and be subject to insurance
verification. Without more timely eligibility determinations for the
new crop disaster program, FSA county officials will be unable to
verify that applicants experienced losses due to an eligible cause. In
addition, insufficient documentation of the data systems FSA used for
calculating and issuing payments under the ad hoc programs makes it
difficult to validate the accuracy of those payments. A similar lack
of documentation under the new program could hamper FSA officials‘
efforts to track payments and ensure the payments adhere to statutes,
regulations, and FSA guidelines.
What GAO Recommends:
GAO recommends that, among other things, USDA implement procedures to
notify FSA county officials at the time of crop insurance claims for
disaster-related losses so they can verify loss eligibility. In
commenting on a draft of this report, USDA disagreed with some
findings as well as the wording of this recommendation and provided
technical comments. GAO revised the recommendation and made other
changes as appropriate.
View [hyperlink, http://www.gao.gov/products/GAO-10-548] or key
components. For more information, contact Lisa Shames at (202) 512-
3841 or shamesl@gao.gov.
[End of section]
Contents:
Letter:
Background:
FSA Largely Based Crop Disaster Payments on RMA Data, Resulting in
About $395 Million to Farmers RMA Identified as Having Received
Suspicious Crop Insurance Payments:
FSA Can Learn Lessons for the New Crop Disaster Program from Three
Prior Programs:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Supplemental Revenue Assistance Payments Program:
Appendix III: Selected Information on Distribution of 2001 through
2007 Crop Disaster Program Payments:
Appendix IV: Comments from the U.S. Department of Agriculture:
Appendix V: GAO Contact and Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: Recipients and Payments for 2001 through 2007 Crop Disaster
Programs, by Program:
Table 2: Crop Disaster Payments to Recipients Identified by RMA as
Receiving Payments for Suspicious Crop Insurance Claims in Top Five
States, 2001 through 2007:
Table 3: Percentage of Expected Value Received by 75 Selected Farmers
on Fields with Crop Losses, 2001 through 2007 Crop Disaster Programs:
Table 4: Crop Disaster Program Payments for 2001 through 2007, by
State:
Table 5: Number of Recipients and Total Payments for the 2001 through
2007 Crop Disaster Programs, by Payment Size:
Table 6: Payments and Number of Recipients of 2001 through 2007 Crop
Disaster Program Payments, by Type of Recipient:
Figures:
Figure 1: Number of Disaster Designations from 2001 through 2007, by
County:
Figure 2: USDA Secretarial Disaster Designations for 2008, by County:
Abbreviations:
FSA: Farm Service Agency:
RMA: Risk Management Agency:
USDA: U.S. Department of Agriculture:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
June 4, 2010:
The Honorable Paul Ryan:
Ranking Member:
Committee on the Budget:
House of Representatives:
The Honorable Jeff Flake:
House of Representatives:
The U.S. Department of Agriculture (USDA) provides a safety net of
permanently authorized and regularly funded programs, including
federally subsidized crop insurance and emergency disaster loans, to
help farmers recover financially from natural disasters. Congress has
historically supplemented these ongoing programs in an ad hoc manner
by providing one-time payments through crop disaster programs that
compensate farmers for disaster-related crop losses they sustained.
Most recently, under three separate congressionally authorized ad hoc
crop disaster programs, USDA provided $7 billion in disaster payments
to farmers whose crops were damaged or destroyed by natural disasters
from 2001 through 2007.[Footnote 1],[Footnote 2] The Food,
Conservation, and Energy Act of 2008 (the 2008 farm bill) established
and funded a $3.8 billion permanent trust fund, and directed the
Secretary of Agriculture to make crop disaster assistance payments to
eligible producers who suffer crop losses on or before September 30,
2011, under a new program--the Supplemental Revenue Assistance
Payments Program. Under this new program, USDA--through its Farm
Service Agency (FSA)--began making payments in early 2010 for crop
losses incurred in 2008. Crop disaster payments are largely based on
data from USDA's Risk Management Agency (RMA), which is responsible
for administering the federally subsidized crop insurance program. In
addition to crop disaster payments, farmers may also receive federal
assistance through crop subsidy programs and the crop insurance
program.
You asked us to review USDA's ad hoc crop disaster assistance
programs, as well as the new crop disaster program. Accordingly, we
determined (1) how FSA administered its three crop disaster programs
for crop losses from 2001 through 2007 and the results of payments
made under these programs and (2) what lessons FSA can learn from its
experience with the previous three crop disaster programs for managing
its new crop disaster program.
To determine how FSA administered its crop disaster programs for crop
losses from 2001 through 2007 (the period covered by the three
programs), we reviewed statutes, regulations, and guidance related to
the programs. We also obtained and analyzed electronic data files from
FSA to determine how FSA applied statutes, regulations, and guidance
in administering the programs. To assess the reliability of the data
in these files, we performed electronic testing of the required data
elements, reviewed existing information, and interviewed knowledgeable
FSA officials about the data and the systems that produced them. We
determined that the payment data in the files were sufficiently
reliable for the purpose of determining the distribution of crop
disaster payments by state, program, and type of recipient. However,
the reliability of FSA's electronic data files is undetermined for the
purpose of assessing whether a crop disaster payment complied with a
statutory cap. In addition, to develop nongeneralizeable examples of
farmers receiving disaster payments for crop losses, we first
identified the four states with the highest amount of total crop
disaster program payments for all three programs: Kansas, North
Dakota, South Dakota, and Texas. We also selected North Carolina,
another state with high payment levels, to expand the geographic
dispersion of our review. We identified the 27 counties comprising the
top 20 percent of the crop disaster payments FSA administered in each
of those five states. For these 27 counties, we interviewed FSA
officials about their experiences administering crop disaster
programs. In addition, we reviewed hard copy payment files for 75
selected farmers who received disaster payments from among the 10
percent of farmers receiving the largest payments under all three
programs (i.e., 15 farmers from each county that received the largest
disaster payments under all three programs in each of these five
states).
Because FSA bases its disaster assistance payments largely on RMA
data, we also obtained information on crop insurance claims payments
from RMA. We interviewed RMA officials and reviewed relevant
documentation to assess the reliability of the RMA data and determined
the data to be sufficiently reliable for the purposes of our report.
To determine what lessons FSA can learn from its experience with past
crop disaster programs for managing the new crop disaster program, we
reviewed statutes, regulations, and guidance related to the new
program. We also interviewed FSA officials responsible for
administering crop disaster programs and FSA data experts responsible
for developing the crop disaster payment systems. A more detailed
description of our scope and methodology is presented in appendix I.
We conducted this performance audit from November 2008 through June
2010, in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
Background:
FSA has overall responsibility for administering crop disaster
programs, including ensuring that recipients meet eligibility
requirements and do not receive payments that exceed program
limitations. FSA guidance directs the agency to annually notify every
farming operation--whether an individual farmer or an entity, such as
a corporation or a partnership--that it must file documents, including
a farm operating plan and an acreage report, with its local FSA county
office if the operation is seeking farm program payments. These
documents record farming information, such as which crops are planted
on each field, the farming practices used, and the name of each
individual with an interest in the farming operation. FSA uses this
information to determine farm program payments, including payments for
various agriculture disaster assistance programs.
According to USDA documents, agriculture-related disasters are common:
one-half to two-thirds of the counties in the United States have been
designated as disaster areas in each of the past several years. As
shown in figure 1, many counties received disaster designations for
multiple years from 2001 through 2007.
Figure 1: Number of Disaster Designations from 2001 through 2007, by
County:
[Refer to PDF for image: U.S. map]
Depicted on the map are the number of disaster designations by county
in the following categories:
0:
1 to 2:
3 to 4:
5 to 6:
7:
Sources: GAO analysis of USDA data; Map Information (map).
[End of figure]
In order for a county to qualify for a USDA secretarial disaster
designation, a disaster must have caused a minimum loss of 30 percent
of production of at least one crop in the county. The secretarial
disaster designation process begins when an eligible disaster event,
such as hail or drought, occurs in a county. After monitoring and
recording the disaster conditions, local officials, including FSA
county officials, contact their governor to request a disaster
designation for the county. Next, the governor submits a written
disaster designation request to the Secretary of Agriculture. As a
result of this request, FSA directs its county officials to complete a
damage assessment report to show whether the minimum loss requirement
was met. A state emergency board reviews the report, and if the report
is approved, it is forwarded to FSA's national headquarters for the
Secretary of Agriculture's approval or disapproval of the request. The
approved counties are designated as disaster counties.
RMA's Role in Federal Crop Insurance:
RMA has overall responsibility for administering the federal crop
insurance program, through the Federal Crop Insurance Corporation, and
in partnership with private insurance companies that share a
percentage of the risk of loss or opportunity for gain associated with
each insurance policy written. RMA is also to address program
compliance issues, including protecting the program against fraud,
waste, and abuse. Under the Agricultural Risk Protection Act of 2000,
RMA uses information technologies, such as data mining, to identify
anomalous patterns of crop insurance claims payments that are
consistent with actions farmers could take to obtain personal benefit
through fraud or abuse of the crop insurance program. RMA has
identified 45 patterns of crop insurance payments that it defines as
anomalous, such as receiving payments while experiencing high
frequency of losses or high severity of losses in comparison with
surrounding farming operations; using poor farming practices; or
exhibiting irregular behavior with insurance agents or adjusters that
suggests collusion. RMA's data mining does not identify specific
instances of fraud or abuse of the crop insurance program; rather, it
identifies anomalous patterns of crop insurance claims payments that
are consistent with the potential for fraud and abuse and considers
these payments as "suspicious." RMA places farmers who exhibit such
patterns on an annual list, after the year in which the crop insurance
claims payments are made, to monitor their current or future farming
practices. Farmers may be on the list for multiple anomalous patterns
in 1 year.
RMA provides its annual list to the appropriate FSA state offices for
distribution to FSA county offices, as well as to the insurance
company selling the policy to the farmer. Staff in FSA county offices
advise the selected farmers that they have been identified for an
inspection as a result of data mining and conduct field inspections
during the growing season. In conducting these inspections, FSA
inspectors are to determine, among other things, the tillage method
used; weed control practices; type and amount of fertilizer applied;
weather conditions; and how the inspected crop compares with others in
the area. As a result of these inspections and other information, RMA
reported total cost savings from 2001 through 2007 of $564 million,
primarily in the form of estimated claims payments avoided: $140
million in 2005, $27 million in 2006, and $85 million in 2007.
RMA has the authority to impose sanctions against farmers, agents,
loss adjusters, and insurance companies that willfully and
intentionally provide false or inaccurate information to RMA or to
insurance companies. RMA also has the authority to disqualify farmers
who have committed a violation not only from the insurance program but
also from most other farm programs for up to 5 years. RMA also can
refer suspicious crop insurance claims payments to USDA's Office of
Inspector General, which can open investigations and, when warranted,
refer cases to the Department of Justice for prosecution.
Ad Hoc Crop Disaster Programs, 2001 through 2007:
Through supplemental appropriations, Congress authorized three
multiyear crop disaster programs for 2001 through 2007. The first
program provided financial assistance for crop losses that occurred in
crop year 2001 or 2002.[Footnote 3] The second program provided
assistance for losses in 2003 or 2004 or for losses in 2005 that
resulted from a hurricane or tropical storm during the 2004 hurricane
season. The third program provided assistance for crop losses in 2005,
2006, or 2007. Generally, under each program, crop losses were
eligible for crop disaster payments if the losses resulted from any of
the following: (1) damaging weather, such as drought, excessive
moisture, hail, freeze, tornado, or hurricane; (2) an adverse natural
occurrence, such as an earthquake; or (3) a condition related to
damaging weather or an adverse natural occurrence such as saltwater
intrusion, rationing of irrigation water, disease, or insect
infestation.
The authorizing statutes and program regulations established payment
limitations and eligibility requirements for the three crop disaster
programs. For example, the statutes prohibited producers--who we refer
to as farmers in this report--from receiving a payment for more than 1
year for each of the multiyear disaster programs. In addition, USDA
regulations prohibited an individual farmer or member of a farming
operation from receiving a crop disaster payment greater than $80,000.
Regarding eligibility requirements, the statutes provided that farmers
were only eligible to receive crop disaster payments if they had
previously obtained federal crop insurance or coverage through FSA's
Noninsured Crop Disaster Assistance Program for the crop that suffered
weather-related damage.[Footnote 4] Specifically, for crops covered by
the federal crop insurance program (insured crops), farmers must have
obtained crop insurance coverage through that program. For crops for
which insurance was not available in the county where the crops were
farmed (noninsurable crops),[Footnote 5] farmers must have obtained
coverage through the Noninsured Crop Disaster Assistance Program.
"Uninsured crops," for the purposes of this report, refers to crops
for which coverage was available in the county under either the
federal crop insurance program or the Noninsured Crop Disaster
Assistance Program, but the farmer did not purchase it. Not all
uninsured crops were eligible for payment under the crop disaster
programs. Furthermore, a statutory payment cap prohibited USDA from
paying an individual or a farming operation for more than 95 percent
of what the value of the crop would have been in the absence of the
loss (expected value). Specifically, the sum of the disaster payment,
the value of the salvageable crops, and any crop insurance payments
could not exceed 95 percent of the crop's expected value in the
absence of a disaster.
Provisions under the Supplemental Revenue Assistance Payments Program:
The 2008 farm bill authorized and funded a new disaster program for
losses in crop years 2008 through 2011.[Footnote 6] This new program
provides funds that will be available to assist farmers when disasters
occur, without the need for further congressional action. While the
past crop disaster programs separately considered each individual
field,[Footnote 7] the new disaster program considers aggregate losses
on an entire farming operation, which includes all land in all
counties where a farmer planted or intended to plant crops for
harvest. To be eligible under the new program, a farming operation
must:
* be located in or contiguous to counties that received a USDA
secretarial disaster designation and have lost at least 10 percent of
production on at least one crop of economic significance;[Footnote 8]
or:
* incur eligible total crop losses of greater than 50 percent of the
normal production, including a loss of at least 10 percent of
production on at least one crop of economic significance.
Furthermore, farmers must have purchased either federal crop insurance
coverage or be covered under the Noninsured Crop Disaster Assistance
Program for all crops of economic significance on their farming
operation in order to qualify for a disaster payment. In addition, the
2008 farm bill prohibits any individual or member of a farming
operation from receiving more than $100,000 per year in combined
payments from the new crop disaster program and other disaster
programs for livestock and specialty crops. See appendix II for
additional information on the Supplemental Revenue Assistance Payments
Program.
Concerns about Potential Waste and Abuse in Federal Farm Programs Have
Been Raised in the Past:
USDA's Office of Inspector General identified problems under the past
crop disaster programs. For example, in 2006, the Office of Inspector
General reported reviewing three FSA county offices, one of which
issued $103,065 in crop disaster payments to farmers who did not meet
program eligibility requirements under the 2001 through 2002 crop
disaster program.[Footnote 9] The Office of Inspector General found
that in that county office, FSA relied on verbal statements from some
farmers to determine their eligibility for crop disaster program
payments. The Office of Inspector General also found weaknesses in
FSA's management controls for the crop disaster programs in all three
FSA county offices in its review. For example, the Office of Inspector
General found that the three FSA county offices were not following the
program guidance for verifying the accuracy of crop disaster payments--
which states that FSA county offices are to perform three types of
reviews to ensure the accuracy of payments--nor consistently
interpreting or using data from RMA's crop insurance program when
calculating crop disaster payments. The Office of Inspector General
recommended that FSA improve its training of county office employees.
In addition, we and others have long raised concerns about the
potential for waste and abuse in the federal crop insurance program.
For example, in 2005, we reported that while RMA strengthened
procedures for preventing questionable crop insurance claims, the
federal crop insurance program remains vulnerable to abuse.[Footnote
10] We recommended that RMA inform FSA's inspectors on the details of
claims that they are to investigate, including the type of suspected
fraudulent behavior. RMA concurred with this recommendation and in
2006 took actions to implement it. Specifically, RMA now provides
detailed information to FSA's inspectors on the nature of each
suspicious claim.
In 2008, we also identified strengthening the integrity and efficiency
of federal farm programs, including the crop insurance program, as a
major cost-saving opportunity for Congress and the administration.
[Footnote 11] More recently, USDA's Office of Inspector General
reported that RMA needs to strengthen its quality assurance and
compliance activities under the federal crop insurance program to
ensure compliance with program requirements.[Footnote 12]
FSA Largely Based Crop Disaster Payments on RMA Data, Resulting in
About $395 Million to Farmers RMA Identified as Having Received
Suspicious Crop Insurance Payments:
FSA largely used RMA crop insurance payment data to calculate nearly
$7 billion in crop disaster payments under the three crop disaster
programs from 2001 through 2007. Of these crop disaster payments,
about $395 million (almost 6 percent) were issued by FSA to
individuals or entities that RMA had identified as having received
suspicious crop insurance claims payments from 2001 through 2007.
FSA Relied Largely on RMA Data to Calculate Crop Disaster Payments:
Under the three crop disaster programs from 2001 through 2007, FSA
calculated and issued crop disaster payments largely based on crop
insurance data from RMA for these years, but also information on farm
operating plans and production records from the farmers requesting
payment. According to the program guidelines, each FSA county office
received information from RMA that listed all individuals and entities
who had purchased insurance on a crop in that county. For the insured
crops, the disaster payment system used RMA data to prefill
information on the damaged crops, including the crop name, amount of
damaged acres, and value of any salvageable crops. For noninsurable
crops and uninsured crops, FSA employees used the farm operating plans
and production records to manually enter data into the system. Using
the prefilled RMA data or the manually entered data, the system in
each county office calculated an estimated crop disaster payment for
each applicant. Specifically, the system:
* determined the amount of the lost or damaged crops on each of the
payment applicant's fields;
* multiplied the amount of the lost or damaged crops on each field by
a payment rate--determined by whether the damaged crops were insured,
noninsurable, or uninsured--to calculate the maximum payment for each
field;
* compared this maximum payment for each field with the statutory
percentage cap to ensure that the payment complied with this cap; and:
* combined all payments for each field and compared this maximum
allowable crop disaster payment with the $80,000 payment limit to
ensure payments complied with this limitation.
Once the FSA county office system determined the estimated maximum
allowable payment, the system transmitted the payment information to
FSA's Application Development Center. According to staff at this
center, systems at the center then verified the payment amount by
performing a series of checks that ensured the payment did not exceed
the statutory payment cap and complied with applicable eligibility
requirements and payment limitations. If errors were found in the
payment calculation or if the payment did not comply with applicable
eligibility requirements or payment limitations, FSA Application
Development Center staff said that the payment amount was adjusted
accordingly before FSA issued the final payment.
Table 1 shows the number of recipients and the amount of payments for
each of the three programs.
Table 1: Recipients and Payments for 2001 through 2007 Crop Disaster
Programs, by Program:
Crop disaster program: 2001-2002 program;
Number of recipients: 381,029;
Payments: $2,563,838,885.
Crop disaster program: 2003-2005 program;
Number of recipients: 329,997;
Payments: $2,446,167,967.
Crop disaster program: 2005-2007 program;
Number of recipients: 300,341;
Payments: $1,938,383,603.
Crop disaster program: Total;
Number of recipients: [A];
Payments: $6,948,390,455.
Source: GAO analysis of FSA data.
[A] The number of recipients is not additive because some individuals
and entities may have received payments in multiple programs.
[End of table]
We found that FSA data about the farming structure of the 2001 through
2007 crop disaster program payment recipients shows that the majority
of recipients were individuals. According to our analysis, individuals
received a total of about $4.9 billion in payments while entities
received about $2.1 billion under the three crop disaster programs.
See appendix III for additional information on the distribution of
payments under the 2001 through 2007 crop disaster programs.
Crop Disaster Programs Resulted in Payments to Farmers RMA Identified
as Having Received Suspicious Crop Insurance Payments:
Of the nearly $7 billion in payments made under the 2001 through 2007
crop disaster assistance programs, we found that FSA made about $395
million in crop disaster payments to farmers or entities that were
identified by RMA's data mining as having received suspicious crop
insurance claims payments during that same period of time. In
addition, our review of hard copy files found that payments to 75
farmers in the five selected states we reviewed complied with the
statutory cap of 95 percent of the expected crop value.
FSA Paid About $395 Million to Farmers under the 2001 through 2007
Crop Disaster Programs Largely on the Basis of Crop Insurance Payments
RMA Had Identified as Suspicious:
For crop losses from 2001 through 2007, FSA made about $395 million in
crop disaster payments to 8,463 individuals and entities that RMA
identified, through data mining, as having received payments for
suspicious crop insurance claims during the same time period. However,
in a 2005 report, we found that few suspicious claims payments
resulted in a conviction for fraud.[Footnote 13] We reported that
while the number of USDA Office of Inspector General referrals to the
Department of Justice on suspicious crop insurance claims payments had
increased, the Department of Justice declined more cases than it had
accepted since 2000. According to Department of Justice officials, the
factors considered when accepting a case include sufficiency of the
evidence, complexity of the case, whether the fraudulent activity is
part of a pattern or scheme, and workload and resources that would be
needed to investigate and prosecute the case.[Footnote 14] We also
reported that insurance agents and company officials we contacted
believed that RMA needs to more aggressively penalize those who abuse
the program. Table 2 shows the five states with the largest dollar
amounts of crop disaster payments for recipients listed as having
suspicious crop insurance claims payments from 2001 through 2007.
These five states represent about 47 percent of the crop disaster
payments to farmers that RMA identified as receiving suspicious crop
insurance payments from 2001 through 2007.
Table 2: Crop Disaster Payments to Recipients Identified by RMA as
Receiving Payments for Suspicious Crop Insurance Claims in Top Five
States, 2001 through 2007:
State: Texas;
Number of recipients: 1,222;
Payments: $66,758,006;
Percent of payments: 16.9.
State: North Dakota;
Number of recipients: 963;
Payments: $46,578,801;
Percent of payments: 11.8.
State: South Dakota;
Number of recipients: 487;
Payments: $30,216,141;
Percent of payments: 7.6.
State: Kansas;
Number of recipients: 424;
Payments: $21,075,987;
Percent of payments: 5.3.
State: North Carolina;
Number of recipients: 378;
Payments: $20,990,788;
Percent of payments: 5.3.
State: Subtotal;
Number of recipients: 3,474;
Payments: $185,619,724;
Percent of payments: 46.9.
State: Remaining 45 states;
Number of recipients: 4,989;
Payments: $209,861,716;
Percent of payments: 53.1.
State: Total;
Number of recipients: 8,463;
Payments: $395,481,440;
Percent of payments: 100.0.
Source: GAO analysis of FSA and RMA data.
Note: The payments in this table represent the crop disaster program
payments for 2001 through 2007 that FSA made to recipients RMA
identified as receiving suspicious crop insurance claims payments for
the crop years covered by the crop disaster program under which they
received payments.
[End of table]
By comparing RMA's crop insurance data on suspicious payments with
FSA's crop disaster payments, we identified payments made under the
crop disaster programs to farmers RMA identified as having received
suspicious crop insurance payments. The following are examples of
farmers who received crop disaster payments from 2001 through 2007 and
were identified by RMA as receiving suspicious crop insurance claims
payments:
* In South Dakota, a farmer received almost $900,000 in crop disaster
payments that were based on suspicious crop insurance claims payments.
RMA put this farmer's operation on its annual list because the farmer
received crop insurance payments while exhibiting such anomalous
patterns as (1) having at least 2 consecutive years of crop insurance
claims larger than those of similar farmers in the area and (2)
frequently filing prevented planting claims when compared with similar
farmers in the area.[Footnote 15]
* A North Carolina farmer received about $720,000 in crop disaster
payments that were based on suspicious crop insurance claims payments.
RMA put this farmer's operation on its annual list because the farmer
received crop insurance payments while exhibiting such anomalous
patterns as (1) having unusually large yields on some land while
experiencing severe losses on other land for the same crop during the
same year and (2) filing insurance claims for 2 consecutive years that
were significantly larger claims than those filed by similar farmers
in the area.
* One farmer who operated farms in Kansas received over $635,000 in
crop disaster payments that were based on suspicious crop insurance
claims payments. RMA put this farmer's operation on its annual list
because the farmer received crop insurance payments while exhibiting
such anomalous patterns as (1) having a loss ratio 150 percent greater
than other farmers within the area and (2) experiencing abnormally
large crop insurance claims in comparison with similar farming
operations in the county and repeating this behavior for multiple
years.
Similarly, the FSA county officials we interviewed identified some
farmers in their counties who received crop disaster payments that the
FSA county officials believed were based on suspicious crop insurance
claims payments. These FSA county officials told us that they were
familiar with the farmers in their county and could identify those who
may have received suspicious crop insurance payments, but because the
county officials received the crop insurance claim information several
years after the crop losses occurred, they could not verify the
farmers' crop losses and relied on RMA data to issue the crop disaster
payments. The FSA county officials provided the following as examples:
* One farmer in North Dakota received over $85,000 in disaster
payments under the 2001 through 2007 crop disaster programs, claiming
that disaster conditions caused losses to his crops. According to an
FSA county official, the farmer's crop losses were likely due to poor
farming practices because this farmer did not fertilize his crops.
* A farmer in North Carolina received almost $160,000 in disaster
payments from 2001 through 2007, including about $60,000 for tobacco
that he claimed was damaged or could not be harvested. According to an
FSA county official, although this farmer received crop insurance
payments, he did not have the required barn space to dry and cure the
total amount of tobacco planted and had not obtained contracts
necessary to sell the tobacco crop. The county official added that
area farmers informed the FSA county office that this farmer
experienced crop losses as a result of poor farming practices.
In commenting on crop disaster payments that they believed were based
on suspicious crop insurance claims payments, some FSA county
officials stated that they did not challenge or deny the applications
for these crop disaster payments because they expected the applicants
would appeal any challenge to USDA's National Appeals Division.
[Footnote 16] These officials added that in their past experience with
appeals, USDA rarely upheld FSA county office decisions to deny
payments. One official said that USDA generally approved appeals
related to crop disaster applications unless the FSA county office
produced evidence that the payment applicant did not meet program
eligibility requirements. The official added that he did not collect
such evidence because, at the time of the crop loss, he did not
anticipate that a disaster program would provide assistance for those
crop losses. However, according to our analysis of data from USDA's
National Appeals Division, FSA was more likely to be favored in an
appeal related to the 2001 through 2007 crop disaster programs than
were the farmers. We found the National Appeals Division upheld FSA's
denial of crop disaster payment applications for about 72 percent of
the appeals, and the division overturned FSA's denial, deciding that
the farmer should have received a crop disaster payment, for the
remaining 28 percent.[Footnote 17]
Although Weaknesses Exist in FSA's Data Systems, Hard Copy Files Show
That Payments Complied with the Statutory Cap:
Under the crop disaster programs from 2001 through 2007, a statutory
payment cap allowed FSA to provide a farmer up to 95 percent of the
expected value of the crop in the absence of a disaster. We found
certain weaknesses in FSA's data systems, which precluded us from
determining whether FSA's electronic data files are reliable for the
purpose of assessing whether a crop disaster payment complied with
this statutory cap. For example, FSA's data systems (1) could not be
reliably merged using program year, tax identification number, tax
identification number type, FSA state code, and FSA county code to
determine whether payments complied with the statutory cap and (2)
were not sufficiently documented. However, we assessed hard copy
payment files for 75 selected farmers in the five states and found
that the payments made to these farmers complied with the statutory
payment cap.
We found that FSA could not provide documentation on how its systems
captured and processed data in order to calculate disaster payments
for crop losses from 2001 through 2007. Specifically, FSA officials
could not provide us with business rules, system specifications, or
processing algorithms associated with the payment calculations
executed at FSA's Application Development Center in Kansas City,
Missouri. Such documentation is important because it typically
translates policies and procedures into specific, unambiguous rules
that govern how data are entered, validated, stored, processed, and
reported. As such, the documentation facilitates accurate and
consistent implementation of policies and procedures. Although FSA
officials provided copies of program guidance and described actions
FSA has taken to ensure the quality of the data it generates, they
could not provide sufficient documentation for us to verify the
agency's stated actions. For example, FSA could not provide design
specifications about the functional requirements of the data systems
it used to capture information about disaster payments for crop losses
from 2001 through 2007. Detailed design specifications are important
because they are used for developing thorough test plans, maintaining
the system, and ensuring that risks associated with building and
operating the system are adequately controlled. Furthermore, FSA's
documentation of the crop disaster program data systems does not meet
Office of Management and Budget documentation guidelines.[Footnote 18]
These guidelines require federal agencies, among other things, to
identify and document business rules; information relationships; and
the functional requirements, capabilities, and interconnections of the
computer systems. FSA officials could not provide documentation
describing how its systems operated.
Also, for the purpose of assessing whether crop disaster payments
complied with the statutory cap, we performed a detailed review of
hard copy crop disaster payment files for 75 selected farmers who
received payments under all three crop disaster programs from the five
counties receiving the largest amount of crop disaster payments in
each of five selected states. According to our analysis, these 75
selected farmers received payments that complied with the 95 percent
statutory percentage cap on all of their 2,263 fields that sustained
crop losses from 2001 through 2007. Overall, as shown in table 3, 328
of these fields qualified for a disaster payment that allowed the
farmers to receive 95 percent of the expected value of their crops for
these fields.
Table 3: Percentage of Expected Value Received by 75 Selected Farmers
on Fields with Crop Losses, 2001 through 2007 Crop Disaster Programs:
Percent of expected value: 95;
Number of fields: 328.
Percent of expected value: 90-94;
Number of fields: 228.
Percent of expected value: 80-89;
Number of fields: 489.
Percent of expected value: 70-79;
Number of fields: 520.
Percent of expected value: 60-69;
Number of fields: 373.
Percent of expected value: 50-59;
Number of fields: 171.
Percent of expected value: 40-49;
Number of fields: 89.
Percent of expected value: 30-39;
Number of fields: 47.
Percent of expected value: 20-29;
Number of fields: 14.
Percent of expected value: 10-19;
Number of fields: 4.
Percent of expected value: >0-9;
Number of fields: 0.
Percent of expected value: Total;
Number of fields: 2,263.
Source: GAO analysis of FSA data.
[End of table]
We also found that the total payment received by the 75 selected
farmers for the three programs varied from $61,592 to $2,256,386.
According to our analysis of the hard copy files, 24 percent of the
fields we reviewed qualified for payments because disaster conditions
prevented farmers from harvesting any crops from the fields; 69
percent because disaster conditions reduced the amount of crops
produced on the fields; and 7 percent because disasters prevented
farmers from planting crops on the fields.
Forty-nine of the 75 selected farmers received payments for at least
one field they were unable to harvest. Furthermore, although not
exceeding the 95 percent cap, the crop disaster programs provided 37
of these 49 farmers--who grew crops such as corn, cotton, soybeans,
and wheat--90 percent or more of the expected value of the crops.
However, these farmers did not incur harvesting costs for these
fields. Based on our review of two academic studies,[Footnote 19]
about 15 percent of the cost of producing such crops can be associated
with harvesting the crops. Thus, although these 37 farmers may have
incurred about 85 percent of the cost of producing these crops, crop
disaster program payments allowed these farmers to receive 90 percent
or more of the expected value of the crops, even though FSA offices
reduced farmers' crop disaster payments by a certain percentage--known
as the "unharvested" payment factor--to reflect the fact that the
farmers had not harvested these crops.
FSA Can Learn Lessons for the New Crop Disaster Program from Three
Prior Programs:
FSA's experience with ad hoc crop disaster programs provides lessons
that could benefit the agency's implementation of the new program.
First, under the past programs, FSA county officials could not verify
the cause of a crop loss because of the lag--as much as 4 years--
between the occurrence of a disaster-related crop loss and the
application for a disaster payment for that loss. Under the new
program, FSA officials will still face a lag time, and without more
timely eligibility determinations, FSA county officials will be unable
to verify that applicants experienced losses due to an eligible cause.
Second, the lack of documentation in FSA's data systems for
calculating and issuing payments under the ad hoc programs makes it
difficult to validate the accuracy of those payments. A similar lack
of documentation under the new program could hamper FSA officials'
efforts to track payments and ensure the payments adhere to statutes,
regulations, and FSA guidelines.
Lack of Timely Eligibility Determinations Provides Lessons for New
Crop Disaster Program:
Under the ad hoc crop disaster programs from 2001 through 2007, USDA
regulations and program guidance specified disaster conditions--such
as hail, drought, or excessive rainfall--that qualified as eligible
causes of crop loss. As such, FSA county officials reviewed each
payment application to determine whether the crop loss was eligible
for payment. However, because the programs were enacted on an ad hoc
basis after the disaster-related crop losses, these application
reviews took place as many as 4 years after the losses occurred. With
such a lag, we found that FSA county officials could not take actions,
such as conducting field inspections, to validate whether the crops
suffered damage as a result of a qualifying disaster condition.
Instead, the FSA county officials relied on information farmers
supplied on their disaster payment applications and information from
RMA, such as crop insurance payment records, to determine if an
eligible disaster condition caused a farmer's crop losses. Fourteen of
the 27 FSA county officials we spoke with identified the absence of
making timely cause of loss eligibility determinations as a concern
under the 2001 through 2007 crop disaster programs, and many of these
county officials said that having the opportunity to determine the
eligibility of losses soon after the disaster would increase assurance
that crop disaster program payments are proper. This opportunity could
exist under the new Supplemental Revenue Assistance Payments Program.
Determining the cause of crop losses for each farmer will remain
critically important under the Supplemental Revenue Assistance
Payments Program because a farming operation must have lost at least
10 percent of production on at least one crop of economic significance
as a result of an eligible disaster condition to qualify for a
payment. Under the program, FSA county officials are to determine crop
loss eligibility at least 1 year after crop losses occur because,
under the new program guidelines, FSA officials are to make this
determination using annual market prices for each crop to calculate
payments, which are generally established at the end of the crop year.
As a result, crop disaster payment applicants can submit their
applications several months after their crop loss occurs, and FSA
officials will continue to depend on information from farmers and RMA
crop insurance data to determine whether applicants experienced crop
losses due to an eligible disaster condition. For example, a farmer
who planted corn in the spring of 2010 would not harvest that crop
until fall. Therefore, if a disaster destroyed the corn during the
summer, the farmer may wait until the fall of 2011--after the crop
year for corn ended and when FSA could determine the market prices
needed to calculate a payment and process a claim--before filing a
loss claim. Without more timely eligibility determinations, FSA county
officials will not have the opportunity to verify that payment
applicants experienced crop losses due to an eligible disaster
condition. Because farmers know that, under the new program, FSA
cannot make determinations until the annual market prices for each
crop are available to calculate payments, there is no incentive to
file crop disaster claims when a crop loss occurs.
In contrast, under the federal crop insurance program, if farmers
incur crop losses and file a claim with their insurance agent or
company, the company assigns an adjuster who visits the farm at the
time of the disaster-related loss and, using RMA guidance, determines
the percentage of loss for the acres planted. The adjuster forwards
the claim to the insurance company, which verifies and recalculates
the claim. If all company and RMA requirements are met, the company
pays the claim to the farmer.[Footnote 20] According to RMA guidance,
a farmer may destroy any of the damaged crops or replant a new crop
after the insurance adjuster has inspected the farmer's crop loss and
provided written consent that the farmer may take such actions.
However, we have previously raised concerns of fraud and abuse of the
crop insurance program's claims adjustment process. For example, in
2005,[Footnote 21] we reported that crop insurance fraud cases,
investigated by USDA's Office of Inspector General and resulting in
criminal prosecutions between June 2003 and April 2005, show how
farmers, sometimes in collusion with insurance agents and others,
falsely claim prevented planting, weather damage, and low production.
In addition, we found that several of these cases demonstrated the
importance of having FSA and RMA work together to identify and share
information on questionable farming practices and activities. Under
the Supplemental Revenue Assistance Payments Program, as under the
2001 through 2007 crop disaster programs, FSA county officials receive
information about crop losses at the time the farmer submits an
application for payment. As a result, FSA officials may become aware
of crop losses after the claims adjustment process and after farmers
have planted a new crop on their fields that suffered disaster-related
damage. Without notification of the crop losses closer to the time of
the disaster, FSA county officials will not have the opportunity to
verify the eligibility of crop losses.
Weaknesses in Data Systems Provide Lessons for New Crop Disaster
Program:
Under past crop disaster programs, FSA's automated payment system used
information in multiple data systems to calculate and issue payments.
However, we identified limitations in this payment system that
prevented us from making a determination about the reliability of
FSA's data files for the purpose of assessing the extent to which
payments for the 2001 through 2007 crop disaster programs complied
with the statutory payment cap that limited payments to no more than
95 percent of the expected value of the crop in the absence of a
disaster. These limitations included a lack of sufficient
documentation and our determination that FSA's data systems could not
be reliably merged using program year, tax identification number, tax
identification number type, FSA state code, and FSA county code for
this purpose. For additional information, see appendix I.
We and others have previously reported on concerns with FSA's
information technology systems. As we reported in 2008, FSA's
information technology systems, which date to the 1980s, do not fully
meet the agency's business needs or readily share data.[Footnote 22]
In August 2009, USDA's Office of Inspector General reported that
integration of USDA's information management systems, including FSA
and RMA systems, could improve the integrity of farm programs, such as
the new crop disaster program.[Footnote 23]
In the context of these information technology issues, in early 2010,
FSA began issuing payments for the new crop disaster program using an
interim payment system that has weaknesses. According to FSA
documents, because of the significant amount of data required to
calculate payments under the new crop disaster program, FSA does not
expect to complete the development of a fully automated payment system
that will allow the agency to issue timely payments to farmers who
sustained crop losses in 2008. As a result, FSA developed an interim
payment system that requires FSA county office staff to use a manual
process to complete applications and calculate payments for 2008 crop
losses, storing each application in a single spreadsheet maintained in
FSA county offices. FSA staff at each county office manually enter
applicant data into this spreadsheet to calculate applicants'
payments, and an independent official verifies the accuracy of the
data entry. According to program guidelines, once the payment
calculations are complete, the FSA county office staff are to record
the payment amounts in a Web-based system that automatically issues
the payments. FSA officials said that once the agency fully develops
the automated payment system, it plans to validate and make any
necessary adjustments to the payments calculated and issued using the
interim payment system. However, according to the FSA officials
responsible for implementing the new crop disaster program, the agency
did not develop a mechanism to link the final payment amounts in the
Web-based system to the application data in the spreadsheets
maintained in each FSA county office. Therefore, if USDA or an
independent entity sought to audit the payments under the new crop
disaster program to ensure they are proper, the auditor would have to
manually review the files in each of about 2,300 FSA county offices.
Also, the program and the auditors would not have the benefit of
electronic edit checks to ensure the accuracy of payments.
Furthermore, according to FSA officials, the agency is still in early
development stages of the final automated payment system and has not
developed documentation of the data systems or written business rules
that describe how the final automated system will calculate and issue
payments. However, according to FSA officials responsible for
developing the final payment system for the Supplemental Revenue
Assistance Payments Program, FSA plans to issue the necessary
documentation, including design specifications and functional
requirements, and perform system testing. As of March 2010, FSA
officials were uncertain when this documentation would be issued.
Conclusions:
FSA helps the nation's farmers recover financially from natural
disasters. For the three former ad hoc crop disaster programs, owing
to the time between when a disaster occurred and applications for
disaster payments were filed, FSA officials did not have the
opportunity to verify whether an eligible disaster condition caused
farmers' crop losses. Instead, FSA officials relied largely on
information from farmers and RMA to determine the cause of crop
losses. The Supplemental Revenue Assistance Payments Program provides
an opportunity to eliminate this problem. Under this program, however,
FSA county officials will not receive information about crop losses
until the time the farmer submits an application for payment, which
may occur after farmers have planted a new crop on their fields that
suffered disaster-related damage. Without notification of the crop
losses closer to the time of the disaster, FSA county officials will
not have an opportunity to make timely loss eligibility
determinations. Such determinations would reduce reliance on crop
insurance information and the potential for disaster payments for
suspicious crop losses.
Because of limitations in FSA's data systems, including insufficient
systems documentation and the inability to reliably merge files from
these systems using program year, tax identification number, tax
identification number type, FSA state code, and FSA county code, the
reliability of FSA's electronic data files for the purpose of
assessing whether payments under the past crop disaster programs
complied with relevant statutes and regulations is undetermined. Many
of the limitations in FSA's data systems will most likely continue
under the new crop disaster program because FSA county office staff
are using a manual process to enter application data into spreadsheets
and payment data into a Web-based system, and FSA does not plan to
develop a mechanism to electronically link the final payments to the
supporting spreadsheets. Without such a mechanism to link the Web-
based system and the spreadsheets FSA uses to calculate and issue
payments under the new crop disaster program in an integrated way, it
will be difficult for USDA or audit organizations to evaluate the new
program and to ensure that payments are properly made.
Recommendations for Executive Action:
We are making the following three recommendations to the Secretary of
Agriculture:
To better ensure that payments under the Supplemental Revenue
Assistance Payments Program compensate farmers who experienced
eligible crop losses, we recommend that the Secretary of Agriculture
implement procedures so that FSA county officials are notified at the
time of crop insurance claims for disaster-related losses so those
officials have an opportunity to verify that crop disaster payment
applicants experienced losses because of an eligible cause.
To ensure that crop disaster payments under the Supplemental Revenue
Assistance Payments Program can be assessed as to whether they comply
with relevant statutes and regulations, we recommend that the
Secretary of Agriculture direct the Administrator of the Farm Service
Agency to:
* develop and maintain data system documentation, including written
business rules, of the interim payment system and the final automated
payment system that are used to calculate and issue crop disaster
payments; and:
* develop and implement a mechanism to link Web-based payments to the
application data in the spreadsheets maintained in the FSA county
offices that would result in an integrated interim payment system.
Agency Comments and Our Evaluation:
We provided the Secretary of Agriculture with a draft of this report
for review and comment. We received written comments from the USDA
Under Secretary for Farm and Foreign Agricultural Services. In his
comments, the Under Secretary addresses only the first recommendation
and those findings with which USDA does not agree. With respect to the
recommendation that FSA county officials be notified at the time of
crop insurance claims for disaster-related losses, the comment letter
states that the Administrator of FSA does not have the authority to
establish such a notification process. Instead, the Under Secretary
points out that the Administrator of RMA would be the party
responsible for alerting FSA when crop insurance claims are filed. As
a result of this comment, we redirected the recommendation to the
Secretary of Agriculture, who has the authority to direct RMA to
provide this information to FSA.
USDA disagreed with two statements in the draft report. First, USDA
disagreed with our statement that FSA officials did not provide
systems documentation, such as specifications and business rules on
how FSA used data in its systems to calculate crop disaster payments.
While we appreciated FSA officials' cooperation in discussing the
agency's data systems with us, these officials could not provide 7 of
the 10 items we requested in order to understand how FSA's data
systems operate. Instead, FSA referred us to handbooks for each of the
crop disaster programs, but these handbooks are standard operating
procedures for county office staff to implement each program and do
not take the place of systems documentation. Second, USDA also did not
agree with our statement that, under the 2001 through 2007 crop
disaster programs, FSA made payments that are questionable because
they were made to individuals and entities identified by RMA's data
mining as having received suspicious crop insurance claims payments
during that same period of time. We modified this text to be
consistent with our characterization of FSA payments in the rest of
the report.
USDA also provided technical comments, which we incorporated into the
report as appropriate. USDA's written comments and our responses are
presented in appendix IV.
We are sending copies of this report to appropriate congressional
committees; the Secretary of Agriculture; the Director, Office of
Management and Budget; and other interested parties. The report also
will be available at no charge on the GAO Web site at [hyperlink,
http://www.gao.gov].
If you or your staffs have any questions about this report, please
contact me at (202) 512-3841 or shamesl@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. Key contributors to this report are
listed in appendix V.
Signed by:
Lisa Shames:
Director, Natural Resources and Environment:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
Our objectives were to determine (1) how the U.S. Department of
Agriculture's (USDA) Farm Service Agency (FSA) administered its crop
disaster programs for losses from 2001 through 2007 and the results of
payments under these programs and (2) what lessons FSA can learn from
its experience with the previous crop disaster programs for managing
its new crop disaster program.
Objective 1:
To determine how FSA administered its crop disaster programs for crop
losses from 2001 through 2007, we reviewed statutes, regulations, and
guidance, such as the FSA Handbook on the Crop Disaster Program, 5-DAP
(Revision 2), as well as relevant studies prepared by the USDA's
Office of Inspector General and the Congressional Research Service and
our own past reports. In addition, we spoke with relevant USDA
officials in headquarters and in FSA's Application Development Center
in Kansas City, Missouri.
Because FSA bases its disaster assistance payments largely on USDA's
Risk Management Agency (RMA) data, we also obtained information on
suspicious crop insurance claims payments identified by RMA, which is
responsible for administering the crop insurance program, and the
Center for Agribusiness Excellence, which is an independent
organization that conducts data mining on crop insurance and farm
program data. Specifically, RMA uses data mining to identify patterns
in crop insurance claims payments that are consistent with the
potential for fraud and abuse. For example, these patterns include:
* farmers, agents, and adjusters linked in irregular behavior that
suggests collusion;
* farmers who for several consecutive years received most of their
crop insurance payments from prevented planting claims;
* farmers who appear to have claimed the production amounts for
multiple fields as only one field's yield, thereby creating an
artificial loss on their other fields; and:
* farmers who, in comparison with their peers, have excessive
harvested losses over many years.
We compared RMA information with FSA records of crop disaster payments
to identify payments to farmers that RMA identified as receiving
suspicious crop insurance claims payments from 2001 through 2007.
Specifically, we identified crop disaster payments made to farmers who
RMA identified as receiving suspicious crop insurance payments for at
least 1 year of the crop disaster program under which the farmer
received a disaster payment. We interviewed agency officials and
reviewed relevant documentation to assess the reliability of the RMA
data and determined the data to be sufficiently reliable for the
purposes of our report.
We also obtained and analyzed data files from FSA to determine how FSA
applied legal requirements and policy directives articulated in the
statutes, regulations, and guidance in administering the programs.
Specifically, we obtained the following data files:
* Producer Payment Reporting System file, which contains summary
information on farm program payments made to individuals and entities;
* crop disaster program payment history file, which contains
information on the dollar amount of crop disaster program payments;
* crop disaster program crop loss application file, which contains
information from the applications that farmers submit when applying
for crop disaster program payments;
* crop disaster program crop prices file, which contains the crop
prices used to calculate payments under the crop disaster programs;
* USDA National Agricultural Statistics Service crop prices file,
which contains crop prices used to calculate payments under multiple
federal farm programs; and:
* permitted entity file, which contains information on individuals and
entities receiving farm program payments.
We used these data to determine the distribution of crop disaster
program payments to recipients. To assess the reliability of these
data, we:
* obtained and reviewed the available documentation about the data
elements in the data files;
* performed electronic testing on the data elements that we used;
* reconciled the two sources of crop disaster program payment data--
Producer Payment Reporting System and crop disaster program payment
history records--by matching common data elements including FSA state
code, FSA county code, and tax identification number;
* worked with FSA Application Development Center staff to determine
how to merge all of the data files because FSA did not have written
business rules or overall system documentation;
* discussed our results from merging these data files with officials
in FSA's Production, Emergency, and Compliance Division and in FSA's
Application Development Center, which administers and oversees the
crop disaster program payments; and:
* compared the results of merging all data files to FSA county office
hard copy payment records that contain the calculations for the
statutory payment cap.
We also attempted to use FSA's data files to determine if any payments
exceeded the statutory payment cap of no more than 95 percent of the
crop's expected value in the absence of a disaster. More specifically,
the sum of the disaster payment, the value of the salvageable crops,
and any crop insurance payments cannot exceed 95 percent of the crop's
expected value. In attempting to determine whether payments exceeded
the statutory cap of 95 percent of the crop's expected value in the
absence of a disaster, we merged the crop disaster program crop loss
records and crop disaster program payment history records. We found
that the crop disaster payment crop loss application records could not
be reliably merged with the crop disaster program payment history
records using the following data elements--program year, tax
identification number, tax identification number type, FSA state code,
and FSA county code. We also found discrepancies between the data that
resulted from merging the data files and the hard copy payment records
that we obtained for selected farmers. Specifically, we found
discrepancies in some of the data elements--insurance payments and
expected values of production from the crop disaster program crop loss
application records, as well as crop prices that FSA uses to calculate
the statutory payment cap. A potential complex alternative method for
using FSA's data systems to compare crop disaster payments to
statutory payment caps might have permitted a comparison of estimated
disaster payments with statutory payment caps. Even if this
alternative method were viable, additional research would have been
necessary to reach a different conclusion about the reliability of
FSA's data systems for the purpose of determining the extent to which
actual disaster payments met statutory payment caps. This additional
research would have required data reliability assessments of
additional specific data elements, an examination of the differences
between estimated and actual disaster payments at the detail and
summary levels, and validating calculated fields not saved or recorded
by FSA. We did not fully pursue this alternative method owing to
insufficient documentation of FSA's data systems and a consideration
of the large amount of time and effort it would have required.
Therefore, the reliability of FSA's electronic data files for the
purpose of assessing whether a crop disaster payment complied with a
statutory cap is undetermined.
In summary, (1) the payment data from the reconciled crop disaster
program payment data--Producer Payment Reporting System and crop
disaster program payment history records--were sufficiently reliable
for determining the distribution of crop disaster payments by state,
program, and type of recipient and (2) the reliability of FSA's
electronic data files for the purpose of assessing whether payments
under the past crop disaster programs complied with relevant statutes
and regulations is undetermined.
In addition, we identified the four states with the highest dollar
amount of total crop disaster program payments: Kansas, North Dakota,
South Dakota, and Texas. We also selected North Carolina, another
state with high payment levels, to expand geographic dispersion. We
identified the 27 counties representing the top 20 percent of the crop
disaster payments FSA administered in each of those five states. We
interviewed FSA officials in each of these 27 counties about their
experiences administering crop disaster programs. Within each of these
27 counties, we identified the farmers representing the top 10 percent
of total crop disaster payments and randomly selected 15 of these
farmers in each county that received disaster payments under all three
programs, and we collected their payment records from the FSA county
office that administered their payments. Although these farmers were
selected randomly from the top 27 counties in these five states,
because this selection does not constitute a probability sample of
farmers receiving crop disaster payments, it is not generalizable to a
larger population.
Because we could not reliably merge the data files to determine
whether payments complied with the statutory payment cap, we reviewed
the hard copy payment records for 75 farmers. To select these 75
farmers, we identified the county administering the largest dollar
amount of disaster payments within each of our five selected states
and analyzed the payment records we collected for 15 farmers in each
of these five counties to determine the total payments each of the 75
farmers received through crop insurance payments, sales of salvageable
crops, and crop disaster payments. We then compared this total with
the farmer's expected value of production in the absence of a disaster
to arrive at the total value as a percent of expected production. We
analyzed field-level disaster payment data for these selected farmers.
A field, in this report, refers to the lowest, detailed level at which
a crop loss is defined and includes RMA-and FSA-defined crop
characteristics such as the crop price, farming practices, insurance
coverage, and planting period for units and subunits that describe
contractual relationships or different crop yields associated with the
acreage or producer share. For example, a field might be a farmer's 20
acres (not necessarily contiguous) devoted to a corn crop--but it
would only be classified as a "field" if that farmer filed a claim and
received a disaster payment for that specific corn crop.
Objective 2:
To determine what lessons FSA can learn from its experience with past
crop disaster programs for managing the new crop disaster program, we
reviewed relevant statutes, regulations, and guidance, including the
FSA Handbook on the Supplemental Revenue Assistance Payments Program,
SURE-1. We also interviewed FSA officials from the agency's
Production, Emergency, and Compliance Division; FSA's Application
Development Center in Kansas City, Missouri; and the counties in the
five states we examined. We asked these officials to identify
challenges, if any, they faced in administering past programs and
spoke with them about their plans for administering the new program.
We analyzed this information to determine how FSA could use lessons
learned to manage the new program.
We conducted this performance audit from November 2008 through June
2010, in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
[End of section]
Appendix II: Supplemental Revenue Assistance Payments Program:
The Food, Conservation, and Energy Act of 2008 (the 2008 farm bill)
created the Supplemental Revenue Assistance Payments Program to assist
farmers for crop losses incurred on or before September 30, 2011.
Under the program, USDA provides crop disaster payments based on a
farmer's revenue from all crops in all counties. That is, the program
considers the impact of a disaster on a farmer's entire operation,
including revenue losses from crops that sustained damage, as well as
revenue gains from crops that were successfully grown and harvested.
In general, if the farmer's revenue is less than a guaranteed level of
revenue, which is based on the farmer's production history, the farmer
receives a payment. In contrast, if the farmer's revenue is equal to
or greater than the guaranteed level of revenue (i.e., revenue losses
are offset by revenue gains) the farmer does not receive a payment.
Eligibility Requirements and Payment Limitations:
To be eligible under the new program, a farming operation must be
located in or contiguous to counties that received a USDA secretarial
disaster designation (see fig. 2 for the counties that met this
requirement in 2008), and have lost at least 10 percent of production
on at least one crop of economic significance.[Footnote 24] Eligible
disaster conditions include damaging weather, weather-related disease,
and weather-related insect infestation. Alternatively, a farming
operation must incur eligible total crop losses of greater than 50
percent of the normal production, including a loss of at least 10
percent of production on at least one crop of economic significance.
Figure 2: USDA Secretarial Disaster Designations for 2008, by County:
[Refer to PDF for image: U.S. map]
The following USDA Secretarial Disaster Designations by County are
depicted on the map:
No designation:
Contiguous designation:
Primary designation:
Sources: GAO analysis of USDA data; Map Information (map).
[End of figure]
Furthermore, farmers must have purchased either federal crop insurance
coverage or be covered under the Noninsured Crop Disaster Assistance
Program for all crops of economic significance on their farming
operation in order to qualify for a disaster payment. The Supplemental
Revenue Assistance Payments Program considers revenue losses or gains
from crops that are eligible for coverage through crop insurance or
the Noninsured Crop Disaster Assistance Program. However, an amendment
to the 2008 farm bill extended the date by which the federal crop
insurance program and the Noninsured Crop Disaster Assistance Program
required farmers to purchase coverage for their 2009 crops to be
eligible for payment. Also, the Supplemental Revenue Assistance
Payments Program includes an income eligibility requirement that
prohibits any individual or a farming operation with an average
adjusted gross income that exceeds $2.5 million, over the previous 3
tax years immediately preceding the applicable crop year, from
receiving program payments, unless 75 percent or more of their income
is from farming. For 2009 and subsequent crop years, individuals and
entities with an average adjusted gross income of $500,000 or more,
excluding income from farming, are not eligible to receive payments.
In addition, there are two basic payment limitations under the
Supplemental Revenue Assistance Payments Program. First, the 2008 farm
bill prohibits any person from receiving more than $100,000 in
combined payments from the Supplemental Revenue Assistance Payments
Program; the Livestock Forage Program; the Livestock Indemnity
Program; and Emergency Assistance for Livestock, Honeybees, and Farm-
raised Fish. Second, the 2008 farm bill limits payments by prohibiting
a farmer's guaranteed revenue level from exceeding 90 percent of the
farmer's expected revenue in the absence of a disaster.
Payment Calculation:
USDA calculates payments under the Supplemental Revenue Assistance
Payments Program by comparing a farmer's total revenue with the
farmer's guaranteed level of revenue. If the farmer's total revenue is
less than the guaranteed level of revenue, the payment is equal to 60
percent of the difference between the two. In order to calculate the
payment amount, USDA must determine the total revenue and the
guaranteed level of revenue. A farmer's total revenue includes the
actual value of all crops, crop insurance payments, and other farm
program payments, including other disaster payments and some farm
subsidy payments. A farmer's guaranteed level of revenue equals the
sum of the guaranteed revenue the farmer will receive from each crop.
For insured crops, the guaranteed revenue is based on the level of
crop insurance coverage the farmer purchased for each crop. Higher
levels of crop insurance coverage result in higher guaranteed revenue
for that crop. For crops covered by the Noninsured Crop Disaster
Assistance Program, the guaranteed revenue is based on the crop price,
the number of acres the farmer planted or intended to plant, and the
amount of harvested crops.
Special Provisions for 2008 Payments:
The American Recovery and Reinvestment Act of 2009 expanded
eligibility and increased the benefits farmers could receive for the
2008 crop year. The act created an extension of the date by which
farmers must have purchased crop insurance coverage or coverage
through the Noninsured Crop Disaster Assistance Program for their 2008
crops to be eligible for payment. Regarding increased benefits, the
statute allowed farmers to receive potentially larger payments by
altering the method for calculating a farmer's guaranteed revenue.
[End of section]
Appendix III: Selected Information on Distribution of 2001 through
2007 Crop Disaster Program Payments:
FSA administered a total of $6.9 billion in payments for the three
crop disaster programs from 2001 through 2007. The state receiving the
largest dollar amount in payments under the three programs was Texas,
which received a total of $867.5 million in crop disaster payments
under the 2001 through 2007 programs. Table 4 shows the dollar amount
of crop disaster payments that states received under each of the three
programs and as a combined total for all three programs from 2001
through 2007.
Table 4: Crop Disaster Program Payments for 2001 through 2007, by
State:
State: Texas;
2001-2002 program: $310,405,053;
2003-2005 program: $283,002,363;
2005-2007 program: $274,141,304;
Total: $867,548,720.
State: North Dakota;
2001-2002 program: $228,194,676;
2003-2005 program: $290,486,210;
2005-2007 program: $177,649,567;
Total: $696,330,453.
State: Kansas;
2001-2002 program: $225,650,813;
2003-2005 program: $195,782,810;
2005-2007 program: $169,357,163;
Total: $590,790,786.
State: South Dakota;
2001-2002 program: $215,822,272;
2003-2005 program: $156,250,855;
2005-2007 program: $176,213,853;
Total: $548,286,980.
State: Nebraska;
2001-2002 program: $169,204,178;
2003-2005 program: $104,174,004;
2005-2007 program: $53,824,443;
Total: $327,202,625.
State: Minnesota;
2001-2002 program: $83,927,610;
2003-2005 program: $142,593,584;
2005-2007 program: $99,530,035;
Total: $326,051,229.
State: Colorado;
2001-2002 program: $103,080,100;
2003-2005 program: $95,343,964;
2005-2007 program: $56,627,499;
Total: $255,051,563.
State: North Carolina;
2001-2002 program: $77,893,857;
2003-2005 program: $76,962,245;
2005-2007 program: $85,418,178;
Total: $240,274,280.
State: Georgia;
2001-2002 program: $80,977,637;
2003-2005 program: $75,417,739;
2005-2007 program: $74,927,314;
Total: $231,322,690.
State: California;
2001-2002 program: $60,454,530;
2003-2005 program: $79,464,918;
2005-2007 program: $61,254,939;
Total: $201,174,387.
State: Montana;
2001-2002 program: $90,622,087;
2003-2005 program: $68,775,072;
2005-2007 program: $40,260,580;
Total: $199,657,739.
State: Oklahoma;
2001-2002 program: $63,016,075;
2003-2005 program: $35,203,089;
2005-2007 program: $82,805,472;
Total: $181,024,636.
State: Iowa;
2001-2002 program: $47,060,748;
2003-2005 program: $82,526,995;
2005-2007 program: $32,257,278;
Total: $161,845,021.
State: Wisconsin;
2001-2002 program: $33,195,463;
2003-2005 program: $84,220,977;
2005-2007 program: $42,851,238;
Total: $160,267,678.
State: Missouri;
2001-2002 program: $45,996,079;
2003-2005 program: $58,345,102;
2005-2007 program: $44,416,459;
Total: $148,757,640.
State: Ohio;
2001-2002 program: $73,597,267;
2003-2005 program: $37,957,270;
2005-2007 program: $21,092,656;
Total: $132,647,193.
State: Michigan;
2001-2002 program: $61,666,602;
2003-2005 program: $44,377,925;
2005-2007 program: $25,487,765;
Total: $131,532,292.
State: Illinois;
2001-2002 program: $44,872,563;
2003-2005 program: $41,950,176;
2005-2007 program: $37,028,516;
Total: $123,851,255.
State: Florida;
2001-2002 program: $47,127,857;
2003-2005 program: $42,946,938;
2005-2007 program: $30,304,659;
Total: $120,379,454.
State: Indiana;
2001-2002 program: $41,137,104;
2003-2005 program: $38,528,136;
2005-2007 program: $20,007,651;
Total: $99,672,891.
State: Idaho;
2001-2002 program: $34,037,278;
2003-2005 program: $50,533,014;
2005-2007 program: $11,937,763;
Total: $96,508,055.
State: Washington;
2001-2002 program: $34,011,192;
2003-2005 program: $42,403,015;
2005-2007 program: $15,041,983;
Total: $91,456,190.
State: Mississippi;
2001-2002 program: $39,571,669;
2003-2005 program: $17,509,226;
2005-2007 program: $25,503,700;
Total: $82,584,595.
State: South Carolina;
2001-2002 program: $36,985,971;
2003-2005 program: $21,594,238;
2005-2007 program: $23,762,775;
Total: $82,342,984.
State: Alabama;
2001-2002 program: $27,338,196;
2003-2005 program: $20,684,316;
2005-2007 program: $33,214,332;
Total: $81,236,844.
State: Arkansas;
2001-2002 program: $27,072,564;
2003-2005 program: $20,965,310;
2005-2007 program: $24,564,548;
Total: $72,602,422.
State: Louisiana;
2001-2002 program: $36,530,697;
2003-2005 program: $22,604,777;
2005-2007 program: $11,793,312;
Total: $70,928,786.
State: Tennessee;
2001-2002 program: $11,800,552;
2003-2005 program: $17,929,741;
2005-2007 program: $39,560,820;
Total: $69,291,113.
State: New York;
2001-2002 program: $25,709,582;
2003-2005 program: $30,028,720;
2005-2007 program: $13,035,764;
Total: $68,774,066.
State: Kentucky;
2001-2002 program: $11,462,659;
2003-2005 program: $15,806,469;
2005-2007 program: $33,100,340;
Total: $60,369,468.
State: Pennsylvania;
2001-2002 program: $31,865,771;
2003-2005 program: $13,641,250;
2005-2007 program: $12,488,804;
Total: $57,995,825.
State: Virginia;
2001-2002 program: $21,079,878;
2003-2005 program: $14,716,189;
2005-2007 program: $22,153,092;
Total: $57,949,159.
State: Oregon;
2001-2002 program: $23,285,671;
2003-2005 program: $14,646,815;
2005-2007 program: $8,904,272;
Total: $46,836,758.
State: Wyoming;
2001-2002 program: $12,532,123;
2003-2005 program: $16,346,080;
2005-2007 program: $7,123,421;
Total: $36,001,624.
State: Maryland;
2001-2002 program: $14,450,410;
2003-2005 program: $7,573,288;
2005-2007 program: $13,469,150;
Total: $35,492,848.
State: New Mexico;
2001-2002 program: $11,301,600;
2003-2005 program: $16,561,748;
2005-2007 program: $5,595,315;
Total: $33,458,663.
State: Utah;
2001-2002 program: $13,367,311;
2003-2005 program: $9,784,309;
2005-2007 program: $3,516,302;
Total: $26,667,922.
State: New Jersey;
2001-2002 program: $7,046,761;
2003-2005 program: $5,822,770;
2005-2007 program: $4,600,040;
Total: $17,469,571.
State: Maine;
2001-2002 program: $2,142,602;
2003-2005 program: $11,564,866;
2005-2007 program: $1,883,451;
Total: $15,590,919.
State: Massachusetts;
2001-2002 program: $5,177,016;
2003-2005 program: $5,358,485;
2005-2007 program: $4,825,335;
Total: $15,360,836.
State: Puerto Rico;
2001-2002 program: $5,651,715;
2003-2005 program: $8,282,014;
2005-2007 program: $1,258,089;
Total: $15,191,818.
State: Vermont;
2001-2002 program: $8,178,614;
2003-2005 program: $6,346,072;
2005-2007 program: $611,637;
Total: $15,136,323.
State: Arizona;
2001-2002 program: $5,746,541;
2003-2005 program: $5,706,784;
2005-2007 program: $1,976,987;
Total: $13,430,312.
State: Delaware;
2001-2002 program: $3,950,004;
2003-2005 program: $2,564,679;
2005-2007 program: $6,146,483;
Total: $12,661,166.
State: Nevada;
2001-2002 program: $4,244,861;
2003-2005 program: $3,826,882;
2005-2007 program: $1,578,496;
Total: $9,650,239.
State: Connecticut;
2001-2002 program: $1,839,161;
2003-2005 program: $4,238,166;
2005-2007 program: $2,888,210;
Total: $8,965,537.
State: West Virginia;
2001-2002 program: $827,993;
2003-2005 program: $1,678,058;
2005-2007 program: $1,071,123;
Total: $3,577,174.
State: New Hampshire;
2001-2002 program: $1,214,449;
2003-2005 program: $615,909;
2005-2007 program: $451,162;
Total: $2,281,520.
State: Guam;
2001-2002 program: $725,399;
2003-2005 program: $636,152;
2005-2007 program: $82,771;
Total: $1,444,322.
State: Hawaii;
2001-2002 program: $209,323;
2003-2005 program: $697,300;
2005-2007 program: $356,092;
Total: $1,262,715.
State: Rhode Island;
2001-2002 program: $348,815;
2003-2005 program: $316,556;
2005-2007 program: $380,939;
Total: $1,046,310.
State: Alaska;
2001-2002 program: $174,585;
2003-2005 program: $387,808;
2005-2007 program: $19,177;
Total: $581,570.
State: Northern Mariana Islands;
2001-2002 program: $55,351;
2003-2005 program: $196,626;
2005-2007 program: $21,156;
Total: $273,133.
State: American Samoa;
2001-2002 program: $0 ;
2003-2005 program: $248,756;
2005-2007 program: $ 0;
Total: $248,756.
State: Virgin Islands;
2001-2002 program: $0 ;
2003-2005 program: $41,207;
2005-2007 program: $10,193;
Total: $51,400.
State: Total;
2001-2002 program: $2,563,838,885;
2003-2005 program: $2,446,167,967;
2005-2007 program: $1,938,383,603;
Total: $6,948,390,455.
Source: GAO analysis of FSA data.
[End of table]
More recipients of 2001 through 2007 crop disaster program payments
(80,129 recipients) received a total of $1,001 to $2,000 under the
three programs combined than any other payment level. In addition, the
recipients of total crop disaster payments from 2001 through 2007 that
were larger than $1 million received an average payment of $1.3
million. Table 5 shows the number of recipients and their total
payments under the 2001 through 2007 crop disaster programs,
distributed by total payment size.
Table 5: Number of Recipients and Total Payments for the 2001 through
2007 Crop Disaster Programs, by Payment Size:
Payment size: $1-500;
Recipients: Number: 74,496;
Recipients: Percent: 12.8;
Total payments: Total: $18,863,685;
Total payments: Percent: 0.3;
Total payments: Average: $253.
Payment size: 501-1,000;
Recipients: Number: 60,031;
Recipients: Percent: 10.3;
Total payments: Total: $44,256,980;
Total payments: Percent: 0.6;
Total payments: Average: $737.
Payment size: 1,001-2,000;
Recipients: Number: 80,129;
Recipients: Percent: 13.8;
Total payments: Total: $116,915,493;
Total payments: Percent: 1.7;
Total payments: Average: $1,459.
Payment size: 2,001-3,000;
Recipients: Number: 52,125;
Recipients: Percent: 9.0;
Total payments: Total: $128,797,558;
Total payments: Percent: 1.9;
Total payments: Average: $2,471.
Payment size: 3,001-4,000;
Recipients: Number: 37,687;
Recipients: Percent: 6.5;
Total payments: Total: $130,953,339;
Total payments: Percent: 1.9;
Total payments: Average: $3,475.
Payment size: 4,001-5,000;
Recipients: Number: 28,886;
Recipients: Percent: 5.0;
Total payments: Total: $129,459,526;
Total payments: Percent: 1.9;
Total payments: Average: $4,482.
Payment size: 5,001-7,500;
Recipients: Number: 50,853;
Recipients: Percent: 8.8;
Total payments: Total: $313,033,620;
Total payments: Percent: 4.5;
Total payments: Average: $6,156.
Payment size: 7,501-10,000;
Recipients: Number: 33,665;
Recipients: Percent: 5.8;
Total payments: Total: $292,018,904;
Total payments: Percent: 4.2;
Total payments: Average: $8,674.
Payment size: 10,001-15,000;
Recipients: Number: 42,857;
Recipients: Percent: 7.4;
Total payments: Total: $526,351,065;
Total payments: Percent: 7.6;
Total payments: Average: $12,282.
Payment size: 15,001-20,000;
Recipients: Number: 26,678;
Recipients: Percent: 4.6;
Total payments: Total: $462,330,171;
Total payments: Percent: 6.7;
Total payments: Average: $17,330.
Payment size: 20,001-25,000;
Recipients: Number: 18,493;
Recipients: Percent: 3.2;
Total payments: Total: $413,913,203;
Total payments: Percent: 6.0;
Total payments: Average: $22,382.
Payment size: 25,001-50,000;
Recipients: Number: 43,079;
Recipients: Percent: 7.4;
Total payments: Total: $1,507,598,878;
Total payments: Percent: 21.7;
Total payments: Average: $34,996.
Payment size: 50,001-100,000;
Recipients: Number: 22,927;
Recipients: Percent: 4.0;
Total payments: Total: $1,584,613,935;
Total payments: Percent: 22.8;
Total payments: Average: $69,116.
Payment size: 100,001-500,000;
Recipients: Number: 8,362;
Recipients: Percent: 1.4;
Total payments: Total: $1,235,599,099;
Total payments: Percent: 17.8;
Total payments: Average: $147,764.
Payment size: 500,001-1,000,000;
Recipients: Number: 50;
Recipients: Percent: 0.0;
Total payments: Total: $32,893,115;
Total payments: Percent: 0.5;
Total payments: Average: $657,862.
Payment size: 1,000,001-5,000,000;
Recipients: Number: 8;
Recipients: Percent: 0.0;
Total payments: Total: $10,791,884;
Total payments: Percent: 0.2;
Total payments: Average: $1,348,986.
Payment size: Total/average;
Recipients: Number: 580,326;
Recipients: Percent: 100.0;
Total payments: Total: $6,948,390,455;
Total payments: Percent: 100.0;
Total payments: Average: $11,973.
Source: GAO analysis of FSA data.
[End of table]
Finally, when reviewing the farming structure of the 2001 through 2007
crop disaster program payment recipients, we found that the majority
of recipients were individuals. Individuals received a total of about
$4.9 billion in payments, while entities received about $2 billion
under the crop disaster programs from 2001 through 2007. Table 6 shows
the number of recipients and the payments they received under each
crop disaster program and for all three programs combined, distributed
by type of recipient.
Table 6: Payments and Number of Recipients of 2001 through 2007 Crop
Disaster Program Payments, by Type of Recipient:
Crop disaster program: 2001-2002 program;
Individuals: Number of recipients: 324,169;
Individuals: Payments: $1,835,356,576;
Entities: Number of recipients: 56,860;
Entities: Payments: $$728,482,309;
Total: Number of recipients: 381,029;
Total: Payments: $2,563,838,885.
Crop disaster program: 2003-2005 program;
Individuals: Number of recipients: 276,189;
Individuals: Payments: $1,712,160,806;
Entities: Number of recipients: 53,808;
Entities: Payments: $734,007,161;
Total: Number of recipients: 329,997;
Total: Payments: $2,446,167,967.
Crop disaster program: 2005-2007 program;
Individuals: Number of recipients: 247,995;
Individuals: Payments: $1,327,490,815;
Entities: Number of recipients: 52,346;
Entities: Payments: $610,892,788;
Total: Number of recipients: 300,341;
Total: Payments: $1,938,383,603.
Crop disaster program: Total;
Individuals: Number of recipients: [A];
Individuals: Payments: $4,875,008,197;
Entities: Number of recipients: [A];
Entities: Payments: $$2,073,382,258;
Total: Number of recipients: [A];
Total: Payments: $6,948,390,455.
Source: GAO analysis of FSA data.
[A] The number of recipients is not additive since some individuals
and entities may have received payments under multiple programs.
[End of table]
[End of section]
Appendix IV: Comments from the U.S. Department of Agriculture:
Note: GAO comments supplementing those in the report text appear at
the end of this appendix. Page numbers in draft report may differ from
those in this report.
USDA:
United States Department of Agriculture:
Farm and Foreign Agricultural Services:
Farm Service Agency:
Operations Review and Analysis Staff:
1400 Independence Ave, SW:
Stop 0540:
Washington, DC 20250-0501:
May 18, 2010:
TO: Lisa Shames:
Director:
Natural Resources and Environment:
Government Accountability Office
From: [Signed by] James W. Miller:
Under Secretary:
Farm and Foreign Agricultural Services:
Subject: Government Accountability Office (GAO) Draft Report Entitled,
"USDA Crop Disaster Programs: Lessons Learned Can Improve
Implementation of New Crop Assistance Program", GA0-10-548:
GAO conducted an audit to assess the effectiveness of Farm Service
Agency's (FSA) program delivery of three multiyear crop disaster
programs operated from 2001 through 2007, and to identify lessons
learned that could improve the implementation of the new Supplemental
Revenue Assistance Payments (SURE) Program, authorized under the 2008
Farm Bill. FSA is providing the following comments that specifically
address where FSA does not agree with GAO's finding as identified
below.
The "Highlights" page of the draft report incorrectly states that FSA
officials did not provide systems documentation such as specifications
and business rules on how FSA used data in its systems to calculate
crop disaster payments. FSA made available and provided to GAO for
review, all requirements specifications, handbook documentation, and
other system documentation utilized in the delivery of the crop
disaster programs contained in the draft report. [See comment 1]
Page 7 of the draft report references that eligible causes of loss
under the disaster programs were eligible for crop disaster payments
if the losses resulted from any of the following: (1) damaging
weather, such as drought, excessive moisture, hail, freeze, tornado,
or hurricane; (2) and adverse natural occurrence, such as earthquake;
or (3) a condition related to damaging weather or an adverse natural
occurrence, such as excessive wind, excessive heat, saltwater
intrusion, rationing of irrigation water, disease, or insect
infestation. FSA considers excessive wind and excessive heat as an
adverse weather condition and not as a related weather condition. [See
comment 2]
Page 8 of the draft report incorrectly references Risk Management
Agency (RMA) as the agency who uses the term "uninsured crops". This
reference should be removed. The wording of sentence should reflect
that crops, crop types, intended uses, and practices for which Federal
crop insurance or Noninsured Crop Disaster Assistance Program (NAP)
was not purchased, were not eligible for payment under the crop
disaster program implemented for crop losses in 2005, 2006, or 2007.
FSA does not agree with GAO's conclusion on pages 12 and 13 of the
draft report that FSA made questionable crop disaster payments to
farmers identified by RMA as having received suspicious crop insurance
payments. [See comment 3] Specifically, GAO's conclusion questions
$395 million that FSA paid to farmers under the 2001 through 2007 crop
disaster programs because RMA identified the crop insurance payments
to those farmers as possibly suspicious. On pages 5 and 6 of the draft
report, it is pointed out that RMA has identified 45 patterns of crop
insurance payments that RMA defines as anomalous, such as receiving
crop insurance payments while experiencing high frequency of losses in
comparison with surrounding farming operations; using poor farming
practices; or exhibiting irregular behavior with insurance agents or
adjusters that suggest collusion. RMA's data mining does not identify
specific instances of fraud or abuse of the crop insurance program;
rather it identifies anomalous patterns of crop insurance claim
payments that are consistent with the potential for fraud and abuse
and considers these payments as "suspicious". RMA places farmers who
exhibit such patterns on an annual list, after the year in which crop
insurance claims payments are made, to monitor their current or future
farming practices. RMA provides its annual list to FSA, and FSA
notifies the selected farmers that crop inspections will be conducted.
[See comment 4] The draft report does not provide information on FSA's
use of the suspicious payment report and that FSA conducts a minimum
of 2 documented field inspections with representative digital
photographs that have an embedded date and time with GPS points, and
that the inspections are required within 30 calendar days after the
final planting date and before harvest becomes general in the area. If
producers listed on the report have not filed an acreage report with
FSA, the producers are requested to identify the location of the
planted crops being reviewed to ensure that inspections can begin to
document such items as tillage methods, weed control, application of
fertilizer, and how the crop compares with similar crops in the
general area. [See comment 5] In addition, the draft report does not
address that FSA was not authorized to disapprove crop disaster
program applications solely because a farmer was identified on RMA's
suspicious payment report. [See comment 6] The draft report does not
provide information on the number of incorrect payments or the dollar
amount of incorrect payments because the producer was determined to
have acted fraudulently. The draft report does not include the process
utilized by FSA for review and approval of crop disaster program
applications, or the process for collection of payments that were
determined to be in error. [See comment 5] Further, during previous
discussions with GAO on the three examples provided on pages 14 and 15
of the draft report, FSA recommended that GAO determine whether or not
any of the three producers listed received crop insurance payments
that were incorrect or based on fraudulent claims. [See comment 6] The
draft report does not provide additional information on any action by
RMA to obtain refunds of indemnities.
Page 17 of the draft report discussed the lack of documentation on how
FSA's automated systems captured and processed data to calculate
disaster payments for crop losses. FSA made available and provided to
GAO for review, all requirements specifications, handbook
documentation, and other system documentation utilized in the delivery
of the crop disaster programs contained in the draft report. This
collaboration was intended to assist GAO in its understanding of the
business rules and the computations required for determination of
program benefits. In addition, FSA staff participated in
teleconferences and exchanged emails to assist GAO, and FSA is willing
to again make these documents available to GAO. [See comment 1]
Also on page 17 of the draft report, GAO states that FSA's data
systems could not be reliably merged. FSA worked with GAO to explain
the automated processes and the tracking of data in the automated
systems. During a meeting held in Kansas City, GAO was focused on how
to recalculate the "Estimated Calculated Payment Report" according to
the 5-DAP (Rev. 2) handbook and compare that amount to the Producer
Payment Reporting System (PPRS). FSA provided supporting documentation
and verified the production files needed to support this effort. Prior
to the meeting held in Kansas City, GAO visited the Wharton County,
Texas office and had the Estimated Calculated Payment reports that GAO
wanted to recreate by using the live data provided by FSA. GAO raised
a concern that the payment history data could be different than what
was in the PPRS. The primary focus for GAO was to tie the PPRS payment
back to the Crop Disaster files (field, unit, crop, acres indemnity
payment, harvested amount and the expected yield). Payment history
records are rolled up to the producer level when sent to the National
Payment Service (NPS) and subsequently PPRS. Many units and crops may
be tied to the actual payment amount. The actual payment amount is
calculated based on the payment grouping which includes: unit,
state/county location, crop, crop type, planting period, practice and
insured type. There can be multiple groupings calculated and included
in a payment to a producer. [See comment 7]
Further confusion was encountered by GAO when trying to interpret the
internal indicators and values in the files to determine if the
calculation was for single or multiple market crops; yield based
crops; value loss crops; quality adjustments, or whether the 95% Cap
reductions applied to the pay crop. FSA agrees the internal coding of
the data files used to determine these conditions was difficult to
understand. [See comment 7]
GAO created a SAS data set of the payment history to try and reconcile
the Calculated Estimated Payment amount to PPRS. There was confusion
around how eligibility conditions that can occur prior to sending the
record to NPS can change the payment amounts recorded in PPRS.
Eligibility conditions include reductions for permitted entity share,
AGI share, ineligibility, payment limitations, and combined producers.
Data files used to support this evaluation could have changed between
the time of issuing a payment and when the files were sent to GAO for
their review. [See comment 7]
Page 19 of the draft report identifies concerns surrounding a farmer's
inability to harvest crops and the fact that 37 farmers received 90
percent or more of the expected value of the crops however they only
incurred 85 percent of the cost of producing these crops due to not
incurring harvest expenses, and implies that FSA paid for costs not
incurred by the farmer. As required by statute, FSA did apply an
unharvested payment factor for the specific crop acreage that was
either prevented from planting or that was not harvested, and this
factor did reduce the disaster benefit to the farmer. [See comment 8]
Page 24 of the draft report references that FSA will validate 2008
Supplemental Revenue Assistance Payments (SURE) Program payments after
FSA fully develops an automated payment system. For 2008, FSA does not
have the resources to develop an automated payment system for SURE.
FSA does plan to use an interim process developed using RMA data and a
workbook application to validate 2008 SURE payments. [See comment 9]
In addressing the first GAO recommendations on pages 25 and 26, the
FSA Administrator does not exercise administrative control over filing
crop insurance claims so that notification could be provided to FSA
county officials. The RMA Administrator would be the responsible party
to alert FSA when crop insurance claims are filed. In addition, RMA is
responsible for verifying the validity of crop insurance claims. [See
comment 10]
On page 37 of Appendix II of the draft report, FSA would like to
clarify that the guarantee for the Noninsured Crop Disaster Assistance
Program is similar to the crop insurance calculation. Similar to the
crop insurance calculation, the NAP calculation for guaranteed revenue
is based on the acres planted or intended to be planted, the adjusted
NAP approved yield, the catastrophic level of coverage offered under
NAP with an increase in price coverage from 55 percent to 100 percent,
and the crop price. [See comment 2]
Thank you for the opportunity to provide comments on the subject draft
report.
The following are GAO's comments on the U.S. Department of
Agriculture's letter, dated May 18, 2010.
GAO's Comments:
1. We appreciate FSA officials' cooperation in discussing the agency's
data systems with us. In April 2009, we visited USDA's Application
Development Center in Kansas City, Missouri; interviewed officials
responsible for each program file; and requested documentation for all
files used in determining payments under each of the crop disaster
programs. Specifically, in order to understand how FSA's data systems
operate, we requested 10 items: (1) descriptions of all data elements,
(2) code values for each variable, (3) key required to join the files,
(4) system documentation required to use the data field both within
and between files, (5) business rules, (6) tables showing the
relationships between the various files, (7) data descriptions, (8)
state and county codes, (9) information on how each file is related to
the other files, and (10) process flow charts that should provide
system details. FSA provided the first three items requested but not
the remaining seven. Instead, FSA referred us to handbooks for each of
the crop disaster programs, but these handbooks are standard operating
procedures for county office staff to implement each program and do
not take the place of systems documentation. As late as March 5, 2010,
we asked FSA officials about systems specifications and user
requirements for the ad hoc crop disaster programs and the
Supplemental Revenue Assistance Payments Program. These officials
stated that they may not have provided these documents, but even if
they had, the documents for the ad hoc disaster assistance programs
would not be usable for our purposes since they were not official, and
the documents for Supplemental Revenue Assistance Payments Program are
in the initial phases of development. Under these circumstances, we
stand by our statement that FSA officials could not provide systems
documentation, such as specifications and business rules on how FSA
used data in its systems to calculate crop disaster payments.
2. We made these technical changes as appropriate.
3. We recognize that FSA received claims for disaster-related crop
losses, and the funds to pay for these losses, years after these crop
losses occurred. We modified the text to be consistent with our
characterization of FSA payments in the rest of the report.
4. We revised this report to note that FSA inspects fields for
practices in addition to those we discussed in a draft of this report.
5. We do not question FSA's approval of crop disaster payments.
Instead, we recommend that FSA county officials be notified at the
time of crop insurance claims for these losses so these officials have
an opportunity to verify that crop disaster payment applicants
experienced losses because of an eligible cause. In general, we did
not seek to validate individual applications for crop disaster
payments.
6. In this report, we focused on FSA's crop disaster payments and not
on RMA's crop insurance claims payments. FSA bases its crop disaster
payments primarily on RMA's crop insurance data. As we noted in this
report, we found that about 6 percent of FSA's crop disaster payments
went to farmers who were identified by RMA's data mining as having
received suspicious crop insurance claims payments during that same
period. We did not follow up on whether farmers had acted fraudulently
or whether RMA took any actions to obtain refunds of crop insurance
claims payments because these issues were not the focus of this report.
7. We acknowledge that the data systems for the ad hoc crop disaster
programs are complex and include numerous data files. Nonetheless,
reconciling the information in farmers' disaster applications and
their payments was important in addressing part of our first
objective: how FSA administered its three ad hoc crop disaster
programs for crop losses from 2001 through 2007. To this end, in
February 2009, we met with FSA Wharton County, Texas, officials to
understand how, within a county office, the estimated disaster
payments were calculated. In April 2009, we visited USDA's Application
Development Center to discuss the files we needed, and how the files
should be linked to determine how the actual payments were calculated.
At that time, center officials explained that the system--files and
their linkages--was not well documented. On several occasions, we
requested information on the formulas and variables used to recreate
the actual payments, but center officials did not respond to our
requests. Because center officials could not provide us with
documentation for business rules and file specifications (see response
to comment 1), we asked these officials if we could use specific
variables--tax identification number, tax identification type, FSA
state code, and FSA county code--maintained in the history file to
determine whether payments complied with the statutory cap that
payments not exceed 95 percent of the crop's expected value in the
absence of the disaster. These officials noted that this approach
should provide the information we needed. From July 2009 through
December 2009, we found discrepancies in this approach and contacted
center officials to gain additional clarification on this approach. In
each case, center officials continued to confirm that this approach
seemed reasonable. In October 2009, we provided center officials with
a list of farmers whose payments appeared to exceed the statutory cap,
resulting in overpayments, but FSA did not provide comments. In
December 2009, we provided FSA headquarters officials with a more
refined list of farmers who appeared to have been paid in excess of
the statutory cap. FSA headquarters officials responded that they
would investigate the farmers on this list. In December 2009, these
officials examined the apparent overpayments, found that the payments
were made correctly, and informed us that the originally agreed upon
approach would not provide us with accurate calculations. Because we
had already invested significant time and resources on the approach
FSA had told us represented a reasonable approach, and because we
still lacked adequate documentation of the system, we used hard copy
payment files for 75 selected farmers in five states to determine if
these farmers' payments complied with the statutory payment cap. For
these 75 farmers, we found that the payments complied with the cap.
As USDA observes, the system, and its internal coding, used to
calculate payments (and determine compliance with the payment cap) is
very difficult to understand. Although these systems are difficult to
understand, delays in and lack of responses to our questions further
complicated our analyses. We also agree with USDA that eligibility
conditions that are not well documented are very difficult to discern.
Finally, although we requested that all files cover the same time
periods, FSA did not provide us with consistent files.
8. We revised this report to reflect the use of the unharvested
payment factor. As we note, however, even with the use of this factor,
farmers may still have received payments that exceeded their costs of
producing these crops.
9. In response to USDA's comment that FSA has limited resources for
developing the automated payment system for 2008, we revised this
report to more clearly acknowledge that FSA verifies the data entries.
Furthermore, as we state in this report, FSA officials said that once
the agency fully develops the automated payment system, it plans to
validate and make any necessary adjustments to the payments it
calculates and issues using the interim payment system.
10. We revised this report to recommend that the Secretary of
Agriculture implement procedures so that FSA county officials have
timely notice of crop insurance claims for disaster-related losses.
[End of section]
Appendix V: GAO Contact and Staff Acknowledgments:
GAO Contact:
Lisa Shames (202-512-3841) or shamesl@gao.gov:
Staff Acknowledgments:
In addition to the individual named above, Thomas Cook, Assistant
Director; Kevin Bray; Richard Brown; Arturo Cornejo; Kristin Hughes;
Paula Moore; Carol Herrnstadt Shulman; Kiki Theodoropoulos; and James
W. Turkett made key contributions to this report.
[End of section]
Related GAO Products:
Crop Insurance: Opportunities Exist to Reduce the Costs of
Administering the Program. [hyperlink,
http://www.gao.gov/products/GAO-09-445]. Washington, D.C.: April 29,
2009.
Information Technology: Agriculture Needs to Strengthen Management
Practices for Stabilizing and Modernizing Its Farm Program Delivery
Systems. [hyperlink, http://www.gao.gov/products/GAO-08-657].
Washington, D.C.: May 16, 2008.
Supplemental Appropriations: Opportunities Exist to Increase
Transparency and Provide Additional Controls. [hyperlink,
http://www.gao.gov/products/GAO-08-314]. Washington, D.C.: January 31,
2008.
Agricultural Conservation: Farm Program Payments Are an Important
Factor in Landowners' Decisions to Convert Grassland to Cropland.
[hyperlink, http://www.gao.gov/products/GAO-07-1054]. Washington,
D.C.: September 10, 2007.
Suggested Areas for Oversight for the 110th Congress. [hyperlink,
http://www.gao.gov/products/GAO-07-235R]. Washington, D.C.: November
17, 2006.
Crop Insurance: Actions Needed to Reduce Program's Vulnerability to
Fraud, Waste, and Abuse. [hyperlink,
http://www.gao.gov/products/GAO-05-528]. Washington, D.C.: September
30, 2005.
Crop Insurance: USDA Needs to Improve Oversight of Insurance Companies
and Develop a Policy to Address Any Future Insolvencies. [hyperlink,
http://www.gao.gov/products/GAO-04-517]. Washington, D.C.: June 1,
2004.
Agricultural Conservation: USDA Needs to Better Ensure Protection of
Highly Erodible Cropland and Wetlands. [hyperlink,
http://www.gao.gov/products/GAO-03-418]. Washington, D.C.: April 21,
2003.
[End of section]
Footnotes:
[1] The Agricultural Assistance Act of 2003, Pub. L. No. 108-7, tit.
II, 117 Stat. 538; the Military Construction Appropriations and
Emergency Hurricane Supplemental Appropriations Act, 2005, Pub. L. No.
108-324, div. II, § 101, 118 Stat. 1220, 1232 (2004); and the U.S.
Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq
Accountability Appropriations Act, 2007, Pub. L. No. 110-28, tit. IX,
121 Stat. 112, 211.
[2] We have also reported on the lack of transparency in funding
conducted under emergency-designated supplemental appropriations. See
GAO, Supplemental Appropriations: Opportunities Exist to Increase
Transparency and Provide Additional Controls, [hyperlink,
http://www.gao.gov/products/GAO-08-314] (Washington, D.C.: Jan. 31,
2008).
[3] A crop year is measured from the time the crop is planted through
the time it is harvested and may not correspond with the calendar year.
[4] The Consolidated Appropriations Resolution, 2003 and the Military
Construction Appropriations and Emergency Hurricane Supplemental
Appropriations Act, 2005, allowed farmers who had failed to purchase
insurance to receive payments for crop losses incurred in 2001 or 2002
and 2003, 2004, or 2005, respectively, if the farmers signed a
statement agreeing to purchase insurance in each of the next 2 years.
[5] RMA uses noninsurable crops to mean crops that are agricultural
commodities for which the catastrophic risk protection level of crop
insurance is not available, including crops grown for food; crops
planted and grown for livestock consumption; and crops grown for
fiber, such as cotton and flax.
[6] In addition, the American Recovery and Reinvestment Act of 2009
expanded eligibility and increased the benefits farmers could receive
for the 2008 crop year.
[7] A field, in this report, refers to the lowest, detailed level at
which a crop loss is defined and includes RMA-and FSA-defined crop
characteristics such as the crop price, farming practices, insurance
coverage, and planting period for units and subunits that describe
contractual relationships or different crop yields associated with the
acreage or producer share.
[8] FSA defines an economically significant crop as one that has
contributed or would have contributed or is expected to contribute 5
percent or more of the total expected revenue from all crops to the
farming operation.
[9] U.S. Department of Agriculture, Office of Inspector General,
Disaster Assistance Payments for Crop Years 2001 and 2002 (Feb. 8,
2006).
[10] GAO, Crop Insurance: Actions Needed to Reduce Program's
Vulnerability to Fraud, Waste, and Abuse, [hyperlink,
http://www.gao.gov/products/GAO-05-528] (Washington, D.C.: Sept. 30,
2005). In addition, we reported on the federal crop insurance program
in Crop Insurance: Opportunities Exist to Reduce the Costs of
Administering the Program, [hyperlink,
http://www.gao.gov/products/GAO-09-445] (Washington, D.C.: Apr. 29,
2009) and Crop Insurance: USDA Needs to Improve Oversight of Insurance
Companies and Develop a Policy to Address Any Future Insolvencies,
[hyperlink, http://www.gao.gov/products/GAO-04-517] (Washington, D.C.:
June 1, 2004). See also, GAO, Suggested Areas for Oversight for the
110th Congress, [hyperlink, http://www.gao.gov/products/GAO-07-235R]
(Washington, D.C.: Nov. 17, 2006).
[11] Major cost-saving opportunities are those that can limit costs
and reduce waste across agencies and programs. This information is
accessible through GAO's High Risk and Other Major Government
Management Challenges page at [hyperlink, http://www.gao.gov/highrisk].
[12] U.S. Department of Agriculture, Office of Inspector General,
Major USDA Management Challenges (Aug. 11, 2009).
[13] [hyperlink, http://www.gao.gov/products/GAO-05-528].
[14] These officials told us that crop insurance fraud cases are
highly complex and involve a significant number of documents that must
be reviewed and presented in court and that the dollar value of crop
insurance cases frequently is not as large as in other cases, such as
drug trafficking or some white-collar crime.
[15] Insurance companies pay farmers who were unable to plant the
insured crop because of an insured cause of loss that is general in
their surrounding area, such as weather conditions causing wet fields,
and that prevents other farmers from planting acreages with similar
characteristics.
[16] In a prior report, FSA officials identified having their
decisions overturned by the National Appeals Division as a hindrance
to their enforcement of certain agricultural conservation provisions.
GAO, Agricultural Conservation: USDA Needs to Better Ensure Protection
of Highly Erodible Cropland and Wetlands, [hyperlink,
http://www.gao.gov/products/GAO-03-418] (Washington, D.C.: Apr. 21,
2003).
[17] According to an FSA official, the 72 percent of appeals that
favored FSA includes appeals that may have been decided on technical
and procedural issues, as well as appeals that were decided based on
the merit of the farmer's crop disaster payment application.
[18] Office of Management and Budget, Circular No. A-130, Revised,
transmittal Memorandum No. 4 (Nov. 28, 2000).
[19] See, Iowa State University Extension, Estimated Costs of Crop
Production in Iowa--2010, FM 1712 (Ames, Iowa, December 2009) and
University of Illinois Extension, Cost to Produce Corn and Soybeans in
Illinois--2007, FEFO 08-05 (Urbana, Ill., March 2008).
[20] All paid claims are subject to review by the insurance companies
and various government agencies, including RMA and USDA's Office of
Inspector General.
[21] [hyperlink, http://www.gao.gov/products/GAO-05-528].
[22] GAO, Information Technology: Agriculture Needs to Strengthen
Management Practices for Stabilizing and Modernizing Its Farm Program
Delivery Systems, [hyperlink, http://www.gao.gov/products/GAO-08-657]
(Washington, D.C.: May 16, 2008).
[23] U.S. Department of Agriculture, Office of Inspector General,
Major USDA Management Challenges.
[24] FSA defines an economically significant crop as one that has
contributed or would have contributed or is expected to contribute 5
percent or more of the total expected revenue from all crops to the
farming operation.
[End of section]
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