oversight

Objectives of the Feed Grain Program Not Attained Because of Inclusion of Nonagricultural Land

Published by the Government Accountability Office on 1971-01-12.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

Objectives Of The Feed
Grain Program Not Attained
Because Of Inclusion Of
Nonagricultural Land                 B-114824




Agricultural Stabilization and   \
  Conservation Service
Commodity Credit Corporation
Department of Agriculture




BY THE COMPTROLLER GENERAL
OF THE UNITED STATES
                  COMPTROLLER       GENERAL     OF   THE       UNITED   STATES
                                  WASHINGTON,    D C       20548




B-114824




To the     Fresldent      of the Senate     and the
Speaker      of the    House   of Representatives

        This   IS our report       on objectives    of the Feed Gram               Pro-
gram    not attained    because       of mcluslon    of nonagricultural             land,
The program        IS admmlstered         by the Agricultural        Stabllleatlon
and Conservation        Service,      Department     of Agriculture,          for the
Commodity        Credit  Corporation.

      Our review  was made    pursuant                          to the Budget    and Account-
mg Act, 1921 (31 U.S.C.  53), and the                          Accounting     and Auditing
Act of 1950 (31 U S.C. 67).

         Copies of thrs         report  are      being  sent to the Director,      Of-
fice of Management              and Budget,       and to the Secretary     of Agrl-
culture.




                                                Comptroller               General
                                                of the United             States
                                              .


                            Contents
                                                                        Page

DIGEST                                                                    1

CHAPTER

   1      INTRODUCTION                                                    5
              Description      and objectives     of the Feed
                 Grain Program
              Program regulations
                    Small-farm     regulations
              Program administration
              Changes in the Feed Grain Program au-
                 thorized     by the Agricultural      Act of
                 1970                                                     8

   2      PAYMENTS FOR DIVERSION OF NONAGRICULTURAL
          LAND                                                           10
              Examples of diversion              payments for non-
                agricultural         land                                12
                   Housing and commercial               developments     12
                   Recreation                                            23
                   Hobby farms and country                estates        26
                                   .
                    Sod nurseries,         garbage dumps, and
                      gravel     pits                                    27
                    Speculative        and idle land                     30
                   Other types of land use                               32
              Revisions      in regulations           and procedures
                required       to provide         assurance that
                program objectives             are met                   36
                   Need to strengthen               ASCS regulations     36
                   Need for change in procedure                   for
                      determining         eligibility        of land
                      for enrollment            in the Feed Grain
                      Program                                            37

   3      CONCLUSIONS, RECOMMENDATIONS, AND AGENCY
          ACTIONS                                                        39
               Conclusions                                               39
               Recommendations to the Administrator,
                 ASCS                                                    39
              Agency actions                                             40
CRAPTER                                                                  Page

   4       INTERNAL AUDIT OF FEED GRAIN PROGRAM                           43

   5       SCOPE OF REVIEW                                                45

APPENDIX

       I   Letter     dated September 23, 1970, from the
              Administrator,     Agricultural   Stabilization
              and Conservation      Service,  Department      of
              Agriculture,    to the General Accounting
              Office                                                      49

  II       Principal      officials      of the Department        of
              Agriculture        responsible      for administra-
              tion of activities           discussed   in this re-
              port                                                            52

                                 ABBREVIATIONS

ASC        Agricultural         Stabilization     and Conservation

ASCS       Agricultural         Stabilization     and Conservation     Ser-
           vice

GAO        General        Accounting     Office
COMPTROLLERGENERAL'S                            OBJECTIVES OF THE FEED GRAIN PROGRAM
REPORT TO THE CONGRESS                          NOT ATTAINED BECAUSE OF INCLUSION OF
                                                NONAGRICULTURAL LAND
                                                Agricultural Stabilization    and
                                                Conservation Service
                                                Commodity Credit Corporation
                                                Department of Agriculture    B-114824


DIGEST
------

WHYTHE REVIEW WASMADE

    The obJectives    of the Feed Grain Program are to maintain farm income;
    stabilize   prices of the grains used primarily       for feeding farm animals;
    and ensure adequate, but not excessive,       supplies of the feed gralns--
    barley, corn, and grain sorghum--included        in the program.    The program
    1s administered    by the Agricultural  Stabilization     and Conservation   Ser-
    vice for the Commodity Credit Corporation.

     Program ObJectives     remain unchanged under the recently     enacted Agncul-
     tural Act of 1970. Changes in the Feed Grain Program made by that act
     do not materially     affect  the findings and recommendations    contained in
     this report.      (See p. 8.)

     An important   element of the program is the diversion      of land from the
     growing of feed grains to an approved conservation        use. This includes
     the planting   of grass or other cover crops or allowing       the land to lie
     fallow.    The purpose of the diversion    1s twofold:    controlling    feed grain
     production   and conserving  land for future agricultural      or related uses.

     Partlclpatlon     in the Feed Grain Program is        voluntary.    A producer who
     elects to participate      must divert   a portion      of his land from production
     to an approved conserving        use. In return,       he becomes eligible    for pnce-
     support payments and loans on the balance            of his feed grain crop.       In ad-
     dition,     he may earn diversion    payments by     diverting   additional   land above
     the required     minimum.    (See p. 6.)

     The General Accounting Office         (GAO) made a review in 14 counties in six
     States of the types of land being diverted            from production    under the
     Feed Grain Program to see if the diversions             were aiding in the accompllsh-
     ment of program ObJectives.          Most of the 14 counties were undergoing         ur-
     banization   and therefore     were areas in which the changing status of land
     could likely   result in nonagricultural        land's being enrolled       in the pro-
     gram. GAO's findings       therefore    should not be considered      typical    of the
     entire program.
FINDINGS AND CONCLUSIONS

    Substantial  payments were being made for the dlverslon  from production
    of land that was being used9 or was designated   for use, for other than
    agricultural  purposes.

     In the 1969 crop year, questionable   dlverslon  payments totaling      about
     $618,000 were made to 938 farm owners or operators     ln the 14 counties.
     Payments of about $789,000 made to 215 lndlvlduals     or organlzatlons      from
     that group were selected for detailed    review.   (See p. 10.)

    Of these payments, 136 totaling       about $116,000 were made for land used,
    or designated     for use, for such purposes as housing and commercial de-
    velopment,    recreation,   country estates,  sod nurseries9 garbage dumps, and
    gravel pits.      About $87,000 was paid for the dlverslon   of certain of
    these tracts ln prior years.        (See pa 10.)

    Since the current or intended use of the land ruled out the growing of
    feed grain or was lnconslstent         with crop production,     the dlverslon    pay-
    ments did not contribute       to the control of production--the        principal
    obJectlve   of the diversion     portion    of the Feed Grain Program.        Most of
    the payments were to reclplents          engaged ln businesses or occupations
    other than agriculture      and thus were inconslstent       with the program ob-
    Jective   of maintaining    farm income.

     Further, the making of dlverslon     payments for land being used, or in-
     tended to be used, for nonagrlcultural     purposes does not aid in attaln-
     ing the secondary program obJective     of conserving land for future agn-
     cultural or related uses.    (See p* 11.)

     Examples of nonagricultural      land enrolled    ln the program     follow.

       --In 1969, a payment of $1,484 was made for the dlverslon        of 25 acres
          which were being developed as part of a resldentlal       community.    In
           early 1970, a substantial     amount of construction  had been completed
           and construction    actlvlty  had made much of the land unsuitable   for
           cultivation,     (See p. 12.)

       --In 1968-69, dlverslon    payments totaling    $1,400 were made to a garbage
           disposal  company. An lnspectlon   of diverted    acreage disclosed that
           the owner was selling  the tops011 and was planning to use the exca-
           vated area as a garbage dump. (See p. 28.)

       --In 1969, a payment of $2,000 was made to a participant     for the diver-
           sion of leased land within a privately  owned ordnance proving ground.
           The ordnance manufacturer  described the land--which  1s not readily




                                        2
        accessible,   because of fences and padlocked gates--as    a completely
        equipped facility    for the loading and testing of ordnance devices
        ranging from small-caliber     ammunition to bomblets, grenades, land
        mines, and fuses of all types.      (See p. 32.)
    During GAO's review,       it became evident    that Agricultural       Stablllzatlon
    and Conservation     Service regulations     governing   the eligibility         of land
    for diversion     payments were being subJected to various          Interpretations
    by its county offices        and county committees, both of which have respon-
    slbllltles    for the local administration       of the program.        Also, national
    and State offices     were not providing     the guidance to the county offices
    and committees necessary to ensure uniform interpretation                of the regula-
    tions.     (See pp. 36 and 38.)

    GAO recognizes that the Feed Grain Program IS difficult            to administer
    because of the dispersal     of program operations       and because of rapid
    changes in land use resulting        from urban development.      Those difficulties
    underscore the need for (1) revised regulations           to ensure that only ell-
    gable land is enrolled     in the Feed Grain Program and (2) procedures re-
    quiring   the Agricultural   Stabilization     and Conservation    Service's     na-
    tional   and State offices   to make periodic     reviews of county operations
    to ensure that regulations      are being applied consistently       and in fur-
    therance of program ObJectives.          (See p. 39.)


RECOMMENDATIONS
              OR SUGGESTIONS
    The Administrator      of the Agricultural     Stablllzatlon     and Conservation
    Service should

      --revise   regulations      to exclude from the program       all   land devoted   to,
         or designated     for,   nonagricultural uses.

      --establish   revlew procedures at the national    and State levels  to pro-
         vide assurance that adequate surveillance     IS maantalned over the
         land being enrolled    In the program and that regulations   are being
         uniformly  and consistently   applied.   (See p, 39.)


AGENCYACTIONS AND UNRESOLVEDISSUES
    The Administrator     agreed with GAO's conclusions and reported  that all
    State offices     were instructed in August 1970 to direct county committees
    to review all cases of the type described ln the GAO report and to take
    action to recover any overpayments or unearned payments, where appropri-
    ate.

    The Administrator       pointed out that the Congress was then conslderlng            new
    agricultural    legislation     which would provide for a dlverslon program           for




                                           3
     5~: grains,    wheat, and cotton for the crop years 1971-73.                The Admlnls-
     trator  stated that, If this new leglslatlon  was enacted--and               it was on
     November 30, 1970--he would take immediate action to:

          --Review regulations   with the aim of more clearly         defining    farms in-
             eligible for the diversion  programs.

          --Strengthen     administrative     controls     at national   and State levels to
             provide assurance that (1) regulations            are uniformly   applied in de-
             termining  land eligibility       and (2) county committees maintain ade-
             quate surveillance       of land to promptly identify        those tracts shift-
             ing from agricultural        to nonagricultural      uses.

     The actions proposed by the Administrator       are responsive    to GAO's rec-
     ommendations.    Since the changes made by the new agricultural        legisla-
     tion do not materially    affect GAO's findings     and recommendattons,     GAO
     plans to evaluate    the adequacy of specific    actions taken to ensure that
     diversion  payments are not made for the diversion       of ineligible    land.
      (See p. 40. )~

MATTERS    FOR CONSIDERATION     BY THE CONGRESS

     Thss report should be of particular      interest     to the Congress because of
     the significant  amount of nonagricultural        land that has been placed in
     the Feed Grain Program in disregard      of congressiona lly estab lished pro-
     gram obJectives.




                                             4
                                     CHAPTER 1

                                  INTRODUCTION
                                  PI--
         The Feed Grain Program is one of several                     Commodity
Credit     Corporation     agricultural         commodity adjustment           pro-
grams administered         by the Agricultural            Stabilization        and
Conservation       Service     (ASCS), Department           of Agriculture.
Under the program, producers                who voluntarily        divert    land
from feed grain production              are eligible        for price-support
payments and may be eligible                for diversion       payments.       The
General Accounting         Office's       review was directed           to deter-
mining if diversion         payments were being made for nonagri-
cultural     land,     For purposes of our review,                we considered
land to be nonagricultural              if its then-current            use prevented
the growing of feed grain or if its intended                       future   use was
inconsistent       with crop production.

         Our review was conducted           in 14 counties        in six States,
Most     of the counties     selected      were undergoing          urbanization
and    therefore    were areas in which the changing status of
land     could result    in ineligible         tracts's      being enrolled      in
the    program.     Our findings       therefore        should not be consid-
ered     typical   of the entire       program.        The scope of the re-
view     is shown on page 45.

DESCRIPTION AND OBJECTIVES
OF THE FEED GRAIN PROGRAM

       The Feed Grain Program            began during crop year 1961.
The program in effect      at the         time of our detailed     review
and described   in thisrreport            was authorized  by title      III of
the Food and Agriculture       Act        of 1965, as amended (16 U.S.C.
59Op.(i.W
----
1A new Feed Grain Program for crop years 1971-73 was autho-
 rized by title     V of the Agricultural     Act of 1970, effec-
 tive November 30, 1970 (Public         Law 91-524).  See page 8
 for a brief    discussion   of program changes authorized      by
 that act.



                                          5
       The program's       objectives          are to

       --stabilize      feed    grain     prices,

       --maintain      farm     income,    and

       --ensure      adequAte     but not excessive       supplies   of feed
          grains,

      A secondary objective,              set forth     in ASCS regulations,
is to conserve the land for               future   agricultural    or related
uses.

        The Feed Grain Program was designed to achieve the ob-
jectives      of the act and the ASCS regulations               by providing
financial       incentives     to producers     who voluntarily       divert
all or part of their           farm feed grain base acreage from pro-
duction     to an approved conserving           use.    Producers partici-
pating    in the program are compensated for diverting                   land
from production          by receiving    price-support      payments on the
feed grains        produced on the remaining          base acreage.        The
producers      are also eligible       for payments for the diversion
of land beyond a prescribed            minimum acreage.          The principal
objective      of the diversion       portion     of the Feed Grain Pro-
gram is to control          feed grain production.

        Price-support      and diversion    payments made to producers
under the 1969 Feed Grain Program totaled              approximately
$1.6 billion.         Of this amount, about $915 million         was for
diversion      payments,     The  grains  included   in  the   Feed  Grain
Program are corn, grain sorghum (mile),             and barley     and are
used primarily        for feeding    farm animals.

PROGRAMREGULATIOXS

        The regulations      provide  that,   to be eligible     to par-
trcipate    in the Feed Grain Program, a producer            have land
on which a feed grain base acreage has been established
with the ASCS county office.            A farm's feed grain base
acreage represents        the average acreage of feed grains grown
on the farm in crop years 1959-60,            adjusted    for such ab-
normal factors       as the effects     of weather and drought occur-
ring during     the base period      and affecting     the acreage.      For
farms which were not used I_"or growing feed grains during

                                           6
crop years 1969-60,       the regulations  provide       an alternatlve
means of establishing        feed grain bases.

       To be eligible       for program benefits,        a producer must
agree to (1) divert        a minimum of 20 percent          of his farm's
feed grain base acreage from production                to an approved con-
serving   use and (2) limit         his planting      of feed grains     to
the remainder      of his base acreage.          No payments are made
for the required       minimum diversions        of land, except for
small farms.       The requirement        that diverted     acreage be
placed in an approved conservlng              use is designed to ensure
that the land does not deteriorate              and will    be available
for production       in future     years.     Examples of conserving
uses include     planting      cover crops, such as legumes and
grasses,   and allowing        the land to lie fallow.

      A producer may agree to divert         farmland     above the re-
quired minimum acreage and may receive            a diversion       payment
on the basis of the larger       of (1) 25 acres, limited            to the
farm's feed grain base acreage,          or (2) 50 percent        of the
farm's feed grain base acreage.           Payme;lts for acreage di-
verted beyond the required       minimum are calculated           by apply-
ing to the estimated     grain yield      of the diverted       acreage a
rate representing    45 percent     of the applicable        price-
support rate.     Thus, if,    in addition     to diverting       the re-
quired minimum acreage,       a producer    diverted     10 acres of
corn land yieldin, * an estimated        80 bushels an acre and if
the price-support    rate for corn was $1.35 a bushel,               the
producer would receive      a diversion     payment of $486, calcu-
lated as follows:
Estimated      yield  of diverted   acreage
   (10 acres x 80 bushels)                                    800 bushels
Applicable       rate (45 percent   of price-support
   rate--$1.35)                                              $0.6075
Diversion      payment (estimated    yield    x rate)        $486.00
Most of the instructions       for the implementation    of the Feed
Grain Program regulations        are contained  in ASCS handbooks
"Diversion   Program - Feed Grain and Wheat (25-GR),"         and
"Farm Constitution     and Allotment     Record (3-CP)."

        The ASCS instructions      require   ASCS county offlces   to
verify    producers'   compliance     with the Feed Grain Program
regulations     by annually    spot-checking    at least 25 percent
                                     7   ,
of those participating       in the program.   These spot checks
include  measuring     the diverted   acreage and determining
whether  it has been devoted to an approved conserving        use.

Small-farm      regulations

         The Feed Grain Program authorizing                 legislation        and im-
plementing       regulations       contain    special      provisions       for small
farms which are defined              as those having a feed grain base
acreage of 25 acres or less,                 The regulations          provide    that
a small-farm        producer may divert         the entire         feed grain base
acreage from production              and may be paid for the entire
acreage diverted,            For   the   minimum required          diversion,      the
payment is computed by applying                20 percent        of the local
price-support         rate to the estimated           grain yield.          For ad-
ditional      diversion,      the payment is computed in the manner
previously       described      for other farms.

PROGRAMADMINISTMTION

        The Feed Grain Program is administered                 under the gen-
eral supervision          of the Administrator,         ASCS, and is carried
out in the field         by Agricultural      Stabilization         and Conser-
vation     (ASC) State and county committees               operating      in 50
ASCS State offices           and in about 2,900 ASCS county offices.
Each ASC State committee comprises from three to five mem-
bers appointed       by the Secretary        of Agriculture;         each ASC
county committee comprises three farmer-members                      elected    by
the farmers       in the county.         An ASC county committee is
responsible      for local program administration               under the di-
rection     of the ASCS national          and State offices.          A list    of
the principal       officials      of the Department        of Agriculture
responsible      for administration         of activities       discussed     in
this report       is included      as appendix    II.

CHANGES IN THE FEED GRAIN PROGRAMAUTHORIZED
BY THE AGRICULTURAL ACT OF 1970

         Title     V of the Agricultural         Act of 1970 provides     for
a new feed grain program for crop years 1971-73.                     The  pro-
visions        of the new law relating          to diversion   of land from
production          are not greatly    different      from the old law.       The
Secretary         is authorized     to require,     as a condition    of eli-
gibility        for program benefits,         that a producer     set aside

                                          8
 (divert)    to conservation    uses a specific      percentage      of his
farm feed grain base acreage and continue              in a soil-
conserving      use the cropland    acreage that had been devoted
to such use in preceding        years.    The Secretary      may also
authorize      payment for diversion     of additional      acreage.      The
new legislation,       however, does not contain         any special    pro-
visions    for small feed grain farms.

        The Agricultural         Act of 1970 provides    new methods for
calculating        payments,      limitations  on payments,  greater
planting      flexibility       to program participants,    and a means
of shifting        feed grain       bases from farms which do not plant
their     bases to active         feed grain farms.

        These and other changes do not materially       affect    our
findings    and recommendations,    since the diversion     program
 is continued   under the new legislation      and since many of
the problems discussed      in this report    could occur unless
ASCS improves its administration        of the program.




                                        9
                                  CHAPTER 2

        PAYMENTS FOR DIVERSION OF NONAGRICULTURAL                 LAND

       Substantial    payments were made under            the Feed Grain
Program for diverting        land from production,           even though the
land either      was being used, or designated            to be used, for
nonagricultural      purposes.

        In the 14 counties   In the SIX States where we made our
revlew,    diversion  payments of about $4.8 mllllon    had been
made to 7,200 farm owners or operators.        Through discussions
with program officials,      reviews of local ASCS records,     and
other lnformatlon     coming to our attention,   we identified    for
the 1969 crop year questionable      diversion  payments totaling
about $618,000 made to 938 farm owners or operators.

      We selected        for detailed     review questionable       payments
of $189,397 made to 215 rndlvlduals               or organlzatlons.       Our
review revealed        that 136 payments totaling          $116,176 pertained
to land already        being used, or designated         for use, for spe-
cific  nonagricultural        purposes.        About $87,000 was paid for
the diversion      of certain       of these tracts     prior    to 1969.

         Our selection     of cases for review was based prrmarily
on (1) evidence        in ASCS county office           records   indicating
that land being diverted          from farm production           was owned by
indlvlduals      or organizations       engaged in nonagricultural             ac-
tivities     and (2) specific       identifications         by ASC county com-
mittees     or ASCS county office          personnel      of land used for
nonagricultural        purposes,    which land, they believed,              ASCS
regulations      permitted     to be enrolled        in the program.

       We considered        the land to be nonagricultural           if It
failed    to aid in accomplishing          the principal     objective      of
the diversion       portion     of the FeedGralnProgram--controlling
productlon--     either     because its then-current       use prevented
the growing of feedgralnsor             because Its intended         future     use
was inconsistent         with crop production.         In our oprnion,the
diverted     land involved        in the 136 cases reviewed        could not
have been used for growing feed grains or would not have been
used for such purpose in the absence of the diversIon                      pro-
gram.

                                        10
       Because the diversion          payments were usually     made to re-
crpients     who were engaged In nonagricultural           busrnesses       or
occupations,      we concluded      that such payments did not contrib-
ute to the accomplishment           of another principal      Feed Grain
Program objective     --maintaining       farm Income.     Further,      the
making of diversion       payments for land already         being used, or
intended     to be used, for nonagrrcultural          purposes does not
ald rn attaining      the secondary program objectrve,            set forth
in ASCS regulations,        of conserving      land for future      agricul-
tural    or related   uses.                                                    ,

       We concluded       that there was a need for ASCS to revise
Its Feed Grain Program regulations               and admrnrstratlve       pro-
cedures to provide          greater     assurance that drversron        payments
are made only for land that 1s actually                  diverted   from grain
productron       to an approved conserving          use.      The ASCS regula-
tions governing       the elrgrbillty         of land for dlverslon       pay-
ments have been subjected             to varying    interpretatrons      by ASCS
county offices       and ASC county commrttees,             both of which have
responslbrlitles        for local admrnistratron            of the program.

      Also  our revrew indicated      that ASCS national       and State
offices  drd not provide    needed guidance        to the ARCS county
offices  and ASC county committees         in interpreting      the reg-
ulations  unrformly.     We believe     that the lack of program dl-
rection  by the ASCS national       and State offices      contributed
to the questronable    payments identified         In our review.

       Since the drversron        payments we reviewed were selected
on a judgment,       rather  than a random, basis,        our findings     do
not permit nationwide,         State or county statistical         projec-
tions.      Because dlversron      payments were made for nonagrrcul-
tural    land In each of the SIX States included             rn our review
and because weaknesses existed            rn ASCS regulations      and pro-
cedures,     we believe,    however,    that such payments are wrde-
spread and could be slgnlflcant.

        Examples ofpayments    for drverslon  of nonagricultural
land and a drscussion       of the weaknesses in ASCS regulatrons
and procedures     are presented   In subsequent  sectrons       of this
report.




                                       11
EXAMPLES OF DIVERSION PAYMENTS
FOR NONAGRICULTURAL LAND
       Our review showed that diversion            payments had been made
for nonagricultural        land,  such   as   (1)  land used for housing
and commercial      developments,     recreation,      hobby farms and
country    estates,   sod nurseries,      garbage dumps, and gravel
pits,   (2) land held for speculation,            and (3) idle land.

Housing         and commercial -_ developments
             Ii-l-.----                   --


         Land being used for housing and commercial developments
constituted        the most significant         nonagricultural     land use
Identified       by us.         In most instances,     the land was owned by
housing or commercial              developers   and some construction         had
been completed or was in progress.                  The remaining     portion
of such land was committed to future                  development   of housing
or commercial          facilities.        The committed land not developed
was enrolled         in the program by the developer            or by an indi-
vidual     renting       it from the developer.

        As an Indication      of the degree to which such situations
exlsted,    we identified       in one of the urbanized   counties,     173
tracts    of land which had established        feed grain base acreages
and which were owned by developers           or similar  organizations.
The owners or rentors         enrolled  72 of the 173 tracts     in the
1969 feed grain program and received           diversion  payments to-
taling    $84,000.      Our review of seven of the 72 tracts         showed
that varying      degrees of conversion      of the land for nonagri-
cultural    purposes had taken place.
       Five               examples of diversion         payments for land   used or
designated                 for nonagricultural         purposes follow,

          Example            1

       In 1969, ASCS paid $1,484 for the diversion              from grain
production    of 25 acres of a 70-acre tract           of land which was
part of a l,OOO-acre       tract    being developed      as a residential
community.     (See  exhibit     obtained     at developer's    sales of-
fice,    shown on the following        page.)    ASCS county office       rec-
ords showed that the developer            had rented the 70-acre tract
to an operator    who received       the diversion     payment.

                                                  12
         In dlscusslng        this case wrthASCScounty               office   officnals,
we were told thattheywere                aware that some construction                would
take place on the land and that In March 1969 they had
arbltrarlly       reduced the tract on their               records from 98 to
70 acres.        The   offlclals      stated,      however,     that they did
not know the location              of the construction,           the acreage
involved,      the    number      of acres    rented    by   the    operator,     or
the location        of the dlverted         acreage.       In early 1970, we
made several        visits      to this tract and were accompanred on
some vlslts       by representitlves            of the ASCS county or State
office.       During our vlslts          we observed that:

       --A substantial   amount of construction                  had been com-
          pleted on part of the 70-acre tract.

       --Construction       materials,    debris,         and equipment        were
          scattered      about the tract.

       --Tops011  had been removed from some areas                     while    other
          areas were covered with heavy weeds

       --The land surrounding    the construction      was very rough,
          underground  utlllties   had been installed,      and storm
          sewer manholes and hydrants    protruded     above the
          ground level

The following       photographs       illustrate       some of these       condltlons.




                                           14
                                EXAMPLE   1




                 -                              CLAY SUBSOIL FROM SEWER
       TOPSOIL       REMOVED
                                              CONSTRUCTION  AND ROUGH LAND



         At the developer's  sales office,    we were advised that
construction     had begun In January 1968 and that by Novem-
ber 1, 1968, model homes, a community center,          and many other
facilities     had been open for public    inspection.

        The developer       stated that he had rented the land to an
operator      on the basis of the operator's          judgment of the num-
ber of remaining        farmable     acres.    In 1969, the operator
rented 50 acres.          In discussions      with ASCS State and county
officrals,      we learned that the operator          had grown soybeans
on at least 35 acres during             1969.    Most of the remaining   15
acres could not have been farmed because of the effects                of
construction       which we observed during our visits.           In any
event,     since the operator        had rented only 50 acres and had
farmed 35 acres, the maximum acreage divertable                was 15 acres.
The operator,       however, was paid $1,484 for the diversion           of
25 acres.       The diversion       payment was made on the basis of
ASCS county office          records which showed that the operator
was renting      the entire      70-acre tract.

      ASCS county office      records   showed that the operator
had applied  for participation        in the 1970 Feed Grain Pro-
gram stating   that he would divert        17.5 acres of the feed
grain base acreage.

                                     15
      Example    2

        Thss 120-acre      tract  was included       In the l,OOO-acre
tract    referred     to in the preceding       example.      Plans called
for a shopping center to be constructed                on the tract.
Therefore       the 120-acre tract,     because of its nonagricultural
status,     could not aid in achieving          the program objectrve
of conserving       land for future     agricultural       use,    (See ex-
hibit    on p* 13,)      The tract   contained       114 acres of cropland
having a feed grarn base acreage of 58 acres.

        In 1969, the developer       rented 93 acres of the cropland
to an operator     for $30 an acre.        Although     the operator
rented only 93 of the 114 acres of cropland,                he clarmed
dlversion    and price-support       payments based on the entire
feed grain base acreage,        Instead    of on a proportionate
share of+ that acreage.        He received      a dlversion    payment of
$l;OOO for diverting       29 acres from production          and a prlce-
support payment of $800 for planting             corn on 29 acres.

      Our inspection   of the tract  showed that the equivalent
of about one half an acre of the designated      diverted    acre-
age consisted    of a blacktopped,  access road
                                             -.  to  the  devel-
oper's property.
       Example   3

        ASCS county office        records    showed that a 165-acre
tract     having an establlshed         68-acre feed grain base was
owned by a large developer            who leased it to the former
owner.       In crop year 1969, the tract          was reduced on county
offlce     records     from 180 to 165 acres with a proportionate
reduction       in rts feed grain base acreage,          due to hospital
construction.          County office     personnel   told us that the
15-a&e       reduction      had been based on the area staked out for
hosp"ital      construct;on.

        We found that,       of the 165 acres, 60 were owned or con-
trolled    by a hosprtal       foundation.   The hospital    foundatron,
which acquired        the 60 acres In 1964, designated        28 acres
as the hospital         site and assigned the remaining      32 acres
to two holding        companies control17ed Iby the hospital      founda-
tion.     The remalnlng       105 acres were owned by-the operator,
an adjoining     village,      and various  other Interests.      The
 105 acres, except                for       one parcel,        were zoned for                residen-
 tial development.

        We were unable to establish      from available     information
 the degree to which the 105 acres were controlled             by the
 operator.     With regard to the hospital      acreage,    the hospi-
 tal administrator       advised us that a rental     agreement with
 the operator      for crop year 1969 provided     for the lease at
 $16 an acre of the number of acres the operator            considered
 farmable.

        In 1969, the operator    diverted from production      27.2
 acres of the tract's     68-acre feed grain base, for which he
 received   a diversion   payment of $788, and planted     corn on
 the remaining    40 acres, for which he received     a price-
 support payment of $938.

        We visrted       the tract    in December 1969 when the hospital
 construction         was nearing    completion.          We observed that,     as
 shown in the following           photographs,         the designated   diverted
 acreage for 1969 was rough, rutted,                   and packed because of
 the installation          of underground      utilities      and because of
 vehicular      traffic.
                                              EXAMPLE     3




UTILITY     INSTALLATIONS      PROTRUDING                   DIVERTED      ACREAGE        IN FOREGROUND
          ABOVE     GROUND   LEVEL                      SHOWING      EFFECTS      OF   VEHICULAR       TRAFFIC




                                                   17
       The dlverslon        payment was based on the inclusion         of
4.1 acres of the acreage designated             as the hospital     site by
the hospital       foundation      and of the l-acre   backyard   to the
operator's      residence.      3Although'the   ASK3 county offlce       spot
checked the diverted           acres during the 1969 crop year, Its
report     did not make any mentlpn of the condition            of the di-
verted     acreage or of the above-mentloned          5.1 acres.

      The operator     Informed the county offnce that he in-
tended to divert      34 acres of the 68-acre feed grain base in
crop year 1970.




                                      18
    Example    4
       ASCS county    offlce     records identified    as a ranch 11 par-
cels of land--l0        scattered      In and about an Industrial   park
and one (zoned for community commercial              development  and
multifamily     housing)      located    about 2 miles distant.

      The 11 parcels,     combined,    contained   150 acres of crop-
land with a feed grain base of 35 acres.              During crop year
1969, the operator       of the ranch received       a dlversion      payment
of $847.     Information    concerning     the parcels    of land com-
prosing   the ranch, obtained       from several     sources,    follows,

     --The owners of four of the parcels were a railroad
        company and its subsidiary.         A representative   of the
        railroad  subsidiary    stated that the land,which      was
        being held for sale as industrial          property, was leased
        to an operator     for weed-control     purposes to keep the
        property  presentable.

     --According   to the local       chamber of commerce,       the land
        In the industrial   park      IS valued at between       $15,000
        and $20,000 an acre.

     --The extent   of development   on the parcels    in recent
        years is evidenced   by the fact that cropland      acres
        since 1965 have been significantly    reduced.

     --During   1969, construction of a new street,     a railway
        spur, and a track for a rapid transit     system affected
        three of the land parcels,   as indicated   by the follow-
        ing photographs.




                                     19
                                        EXAMPLE   4




   ROAD  CONSTRUCTION          ACROSS
   THE INDUSTRIAL       PARK     LAND                 RAPID   TRANSIT   ROUTE




      The ASC county commlttee members advised us that they
believed   that the feed grain base acreage for the property
probably   should be canceled;    however,     they stated that they
did not know how, under exlstlng       regulations,      they could re-
fuse to enroll    this land In the Feed Grain Program or to
cancel the feed grain base until       there was actual       conversion
of the property     to some other use.

     Example       5

     This tract    of land was one of 30 pointed          out to us by an
ASCS county office      official as nonagricultural          land which he
felt  should not be eligible     for enrollment       in the Feed Grain
Program.    He stated that more specific        guidelines       were needed
to support such a determination.        Pertinent       facts concerning
this tract   follow.

    --For crop year 1969, the ASC county committee reduced
       the area of the cropland   from 67 to 61 acres and re-
       duced the corn portlon   of the feed grain base from 22
       to 20 acres because of housing construction   on the
       property.


                                            20
     --In 1968-69,       the owner developing     the land received
         diversion     payments totaling    $1,745 for enrolling    the
         entire    corn base acreage in the Feed Grain Program.

     --Although   the land was not being farmed and although                a
        prominent   sign advertised   the property    for sale as
        housing sites,   as indicated    by the following     photo-
        graph, the ASCS county office      records classified       it      as
        a farm.

                                    EXAMPLE       5




                         CURRENT   CONSTRUCTION       AREA




      We believe    that the foregoing       examples indicate       that the
objectives     of the Feed Grain Program--to         control     production
and maintain      or increase  farm income--are       not being met by
allowing    land held for housing       and commercial       development    in
urban areas to be enrolled        in the program.        Further,      the
secondary program objective         set forth    in ASCS regulations        of
conserving     land for future    agricultural      and related      uses is
not being met.

                                          21
                                                               , -

     Many ASCS county officials          and ASC county committees         ex-
pressed the view that, under current           ASCS regulations,        only
that portion  of a tract     of land which cannot possibly            be re-
turned to farming    as a result       of commercial   or residential
development  can be declared       ineligible    for enrollment       in the
Feed Grain Program.       Some county officials,       however, held
the opposite  view --that    all land designated       for future       devel-
opment could be declared      ineligible.

      In our opinion , program objectives           logically       dictate
eliminating      the feed grain base acreage from all lands not
to be preserved      for future   agricultural        or relateduses.            We
believe     that the type of ownership,        current      value,     and zon-
ing classification       of the land often provide            valuable      infor-
mation for use by an AX county committee to determine
whether land is eligible        to be enrolled        in the program.




                                        22
Recreation

       In 17 cases, dlversion     payments were made for land
used for recreational     purposes,   including   a nudist club, a
county park and recreation      area, camp sites,    and sportsmen
clubs.    Two examples follow.

      Example   6

      Since 1962, dlversion       payments totaling   about $1,000
have been made for the diversron         of a 7-acre feed grain
base located    on a 40-acre    tract   of land used as a nudist
club.    This tract   of land was pointed      out to us by ASCS
county office    personnel    as an example of nonagricultural
land that was enrolled      In the Feed Grain Program.

      The land was acquired     by the nudist         club in 1962, and
no grain crops have been grown on it since that time.                The
land is fenced,     and the designated       diverted     acreage has sev-
eral house trailers     located    on it.     A permanent water pump
was also located     on the diverted      acreage.

      We questioned    the propriety      of dlverslon     payments to
the nudist   club, since such payments did not benefit              farmers
and since the land was committed to a nonagricultural                 use.
An ASCS county office     official     stated that ASCS regulations
did not restrict    the eligibility       of such land for enrollment
in the Feed Grain Program and that,          In his opinion,      the land
would remain eligible     until     the owners voluntarily       surren-
dered the establlshed     feed grain base acreage.

      Example   7

      During crop year 1969,       a diversion    payment of $910 was
made to the Oakland County,        Mlchlgan,   Parks and Recreation
Commission for the diversion        from production     of 25 acres of
land.

        The commission acquired     the land in 1968 for public
recreational     purposes.   Approximately     half of the purchase
price of $657,000 was provided         by a grant from the U.S. De-
partment     of Housing and Urban Development       under the Open
Space Program.


                                    23
      The commlsslon requested         that the land be enrolled    In
the program for 1969.        The   Oakland   County  ASC  commlttee de-
clared the land inellglble         for diversion    because of the
commlsslon's    public    announcement that the land had been ac-
quired for recreatlonal        purposes.     ASCS records Indicated
that the commlsslon had not renewed a rental             agreement with
a farm operator      because the commlsslon wanted to proceed
promptly   with development       of the land.

       The commission,     in requesting    the ASC county committee
to reconsider     its decision,     stated that it would have rented
the land for farming had It known that the land would be ad-
judged ineligible      for the 1969 program.      The ASCS county
committee,    in reconsidering      its decision,  decided that the
land would be eligible        for the 1969 program but not there-
after.

      We believe that allowing   this land to be enrolled   in
the program was contrary    to ASCS regulations which provide
that.

      "The following     are not    eligible   for       designation
      as diverted    acreage:
            *            *           *               *                 *


      "I.   Land intended      to be used for a specific        non-
            farm use in a later       year, which would not be
            devoted in the current         year to an agricul-
            tural   use.    All public     land not leased or
            rented for the production          of crops is in this
            category,    unless the owner (State,         county or
            local Government)      established      to the satis-
            faction   of the COC [ASC County Committee]
            that:

            "1.   Adequate equipment       and other facilities
                  are readily    available    for the success-
                  ful production      of row crops and small
                  grains.

            "2.   Production   of such crops     is a normal
                  practice."


                                     24
        In January 1970, we visited       the property  and found
that the primary use being made of the land was for recre-
ational    purposes.   We observed that the tract was posted
with signs advertising       its recreational     use, as indicatsd
by the following     photograph.




                              ACCESS GATE




                                  25
Hobby farms    and country
                     r L4d #-,estates-*                   c r
                                           3' @c" a'
      The Cal&gory aof-hobby farms aqd'c&&y'estates                    in-
cludes small parcel2 of Land%hi'ch          arecow$e-d'by     nonfarmers
and on"which no grain crops a'& grown.             The-small      acreages--
some with as little     as a l-acre     Feed)*grain‘bdse--are         uneco-
nomical farming units and generally          are the subdivided
remnants of former farms,        Payments for the diversion              of
the feed grain base acreage in this category               are illustrated
by the foilowing    examples.

      Example    8

       Payments of at least $1,300 for the diversion             of the
S-acre feed grain base acreage of an 18-acre country                estate
have been made since the estate was acquired               by a business-
man in 1964.      The owner of the estate had no farming equip-
ment except a lawn tractor         and had grown no crops on the
property.     Moreover,     two ASC committee spot checks of the
property   revealed     that the diverted      &&age      was not in an
acceptable    condition     for farming.     Nevertheless     the ASC
county committee granted the owner a 7-bushel-an-acre                in-
crease in the estimated corn yield          of his base acres, which
resulted   in an increase       in the diversion     payments.

      Example    9

       ASCS county office     offic&als     identified  a 40-acre par-
cel of land which had an established            15-acre feed grain
base and which should not have been enrolled            in the program
because it was the country         estate of a construction       firm
owner.    Payments for diversion         of the entire  base acreage
in 1967-69 totaled     $1,646.      ASCS county office     records
showed that no crops had been grown on the estate during
those years.

      Example    10

      A payment of $54 was made in 1969 for the diversion     of
a Z-acre feed grain base on a 7-acre parcel of land.      Ex-
cept for that part of the property   occupied by a house near
the road, the property  was covered with grass and weeds.
According  to the ASCS county office  personnel, the owner of
the land was not a farmer,
       Hobby farms constitute      a sizable     percentage   of the
farms in the 14 counties       where we made our review.           Al-
though our review indicated        that most of these small tracts
were not enrolled    in the Feed Grain Program, it appeared
nevertheless    that a significant       portion    of the diversion
payments for nonagricultural         land were being made to owners
of such farms.

        We believe     that hobby farms and country                 estates       owned
by nonfarmers       should be excluded            from enrollment          in the
Feed Grain Program, particularly                  when the tracts          are too
small to be considered            economic farming units.                In our
opinion,    excluding       these tracts        from participation             in the
program would be consistent              with the objectives             of the Feed
Grain Program and ASCS regulations.                     Dlvertlng      these tracts
from farm production           to conserving         uses (1) does not aid in
maintaining      farm income, because the tract                   owners are not
farmers and (2) has only a negligible                     effect    on controlling
farm production        and assisting         in stabilizing         feed grain
prices.     Although      these diversions           may contribute          slightly
to conserving       land for future          agricultural        use, we believe
that the Government's            administrative         efforts     to accomplish
this objective        are out of proportion             to the benefits           to be
realized.

Sod nurseries,          garbage   dumps, and gravel          pits

         We found that eight activities       in the category     of sod
nurseries,      garbage dumps, and gravel       pits were enrolled     in
the Feed Grain Program.         Four were sod nurseries.         Examples
illustrative       of these operations   follow.

       Example     11

        ASCS made diversion       payments totaling      $4,400, covering
crop years 1967-69,        for a 157-acre    tract    of land having an
established       30-acre feed grain base.        This tract       of land
has been used solely         for growing sod since 1963.            The tract
was pointed       out to us by ASCS county office         officials      as an
example of nonagricultural          land that was enrolled          in the
Feed Grain Program by owners for the sole purpose of re-
ceiving     diversion    payments,


                                           27
      Opinions      differed     among AX county commlttees      concern-
ing the eligibility          of sod nurserres    for enrollment   rn,the
Feed Gram Program.            ASCS regulations     state that land can-
not be designated          as diverted   from grain production    when sod
is berng removed.

       Example      12

        ASCS made dlversron        payments totalrng          $1,400 In 1968-69
to an owner who,        according     to  ASCS    county    offrce     records,
was operating       a garbage disposal        company.       During      our v>srt
to the property,        we observed that the owner was removrng
the tops011 from one of his two tracts                  of land.       He In-
formed us that he was selling             the topsoil       and subs011 and
that he would use the excavated              area as a garbage dump.
                                                                         , I -       *‘
        The two tracts,      which covered 41 acres, had an estab-
lished      feed grain base of 15 acres.             Although      a portion    of
the cropland       had been reduced by soil removal and debris                     ~
accumulation,       the  feed   grain    base   had    not  been    proportion-
ately reduced to reflect           this change in land use.               After we
brought       this case to the attention          of the county office
manager, the tracts         were declared       ineligible       for further
participation.         The  owner    agreed   with     this   determination.


                                     EXAMPLE   121




                                                 SOIL   BEING   REMOVED   FROM   CROPLAND
          DEBRIS   ON CROPLAND



                                          28
     Example     13

     A 140-acre     tract     of land having     a gravel       pit was ac-
quired    by a gravel     pl-t operator    in 1963         The tract      had an
established     18-acre     feed grain base.        During the period
1963-69,    the gravel      pit operator     received      dlverslon      pay-
ments totalrng      about $3,400 for annually            diverting      the feed
grain base acreage.           During that period,        the ASC county
committee     made only one reduction          of the cropland         and feed
grain base because of encroachment              of the gravel        removal
operations     upon the tract,       even though (1) no feed grains
had been grown on the 140-acre           tract     during     the period       and
(2) the land was being used, or was intended                    to be used,
for nonagricultural        purposes.




                                        29
Speculative     and idle    land

          Most of the land in the category     of speculative     and
adle land was considered        by local ASCS officials       to be too
valuable      to hold for feed grain production.        Although   land
held for investment       purposes could include-farmland,        our at-
tention      was directed  to those properties     which could not be,
or would not have been, farmed.          The following     examples are
illustrative       of such cases.

      Example    14

       During 1968-69,      diversion       payments totaling       $473 were
made to the owner of a 7-acre parcel of idle land which had
an established      5-acre feed grain base and which was located
within   a city's    corporate      limits.      This tract,     classified   as
a farm by the ASCS county office,              is lowland and is not
easily   accessible     because of obstacles          surrounding      it.

        During a visit     to the property  in February   1970, we ob-
served that it was covered with weeds and that about 25 per-
cent of the area was inundated         by water which was being
pumped from a nearby sewer project.           Inquiry  at the sewer
project     revealed   that the pumping operation     had begun in
July 1969 and had continued        at the rate of about 600 gallons
a minute.

       When we informed   the ASCS county office       manager of the
land's   condition,   he stated that the mud, wet conditions,
and new fence along the only side available          for access pre-
vented the participant      from cutting    the weeds.    In our opin-
ion, this property     is submarginal    land that could not be
farmed.    (See photos on following      page.)




                                       30
                                              EXAMPLE   14




    DIVERTED         ACREAGE’UNDER    WATER
               AND     WEED COVERED                          DRAINAGE   DITCH



       Example            15

       In 1969, ASCS made a diversion           payment of $376 for a
20-acre parcel      of land which had an established            12-acre feed
grain base and which had been acquired               by an investment
group for speculation.          A sign prominently       displayed     on the
property   advertised     it as industrial        land for sale.       A mem-
ber of the investment        group objected       to receiving     a diver-
sion payment because-the         group did not intend to farm the
land.    On January 13, 1970, the ASC county committee de-
clared the land ineligible          for participation        in the Feed
Grain Program.

       Example           16

        In 1969, a doctor living     in the State of Washington
wrote to the ASCS county office        requesting    any possible     pro-
gram benefits     for his 1600acre farm that was "lying         idle"    in
the State of Minnesota.        Subsequently,     he was paid $125 for
diverting    acreage equal to the farm's 5-acre feed grain
base.




                                                31
     Example 17
      The owners of a parcel of idle land which had an estab-
lished 8-acre barley feed grain base and which was sur-
rounded by commercial property enrolled it in the Feed Grain
Program in 1966 and 1969 and received diversion payments of
$327. Because barley was determined not to be a surplus
commodity during crop years 1967-68, ASCS regulations      pre-
vented the owners from enrolling     this land in the Feed Grain
Program during these years.     Although the land was not eli-
gible for diversion,  it remained idle during crop years
1967-68. We believe that failure      to grow feed grains on
this land in the absense of a diversion program clearly in-
dicated that it was not being held for agricultural      uses.
Other types of land use
       We noted several diversion payments which, because of
the unique characteristics       of the land, did not fall within
any of the previously      discussed categories.     These payments
pertained to land used for a privately        owned ordnance prov-
ing ground, land around the runways of a major metropolitan
airport,    and land for a complex of greenhouses used to grow
carnations.     Information on the ordnance proving ground is
presented below.                                 - 2
       Example 18
      In 1969, ASCS made a payment of $2,000 to a-participant
for diverting  parcels of land within a 2,400-acre ordnance
proving ground comprising numerous farms acquired by the
ordnance manufacturer.
     The manufacturer    described        its   proving   ground as:
     "***afully      staffed and completely equipped facil-
     ity for the loading and testing of ordnance de-
     vices from small caliber ammunition to bomblets,
     grenades, land mines and fuses of all types.
     With a wide variety of permanent equipment, load-
     ing facilities,       ranges and experienced staff, ***
     is one of the most complete private ordnance prov-
     ing ground and testing facilities         available. ***I'

                                     32
          *          *          *          *          *


     "*    Whether aerially   delivered,  gun launched or
     fired by a mortar or howitzer *       can provide the
     specific testing facility      M+ needed ** to meet
     the munition requirements."
       In 1969, the program participant    rented four tracts of
land that were a part of the proving ground. According to
ASCS county office records, the rented land included 190
cropland acres which had an established      77-acre feed grain
base-and which, when combined with the participant's        owned
farm, gave him a 156-acre feed grain base. In 1969, the
participant,   for designating  78 acres of the rented land as
diverted acreage and growing corn on 77.4 acres of his own
farmland, received a price-support      payment of about $1,700
and a diversion payment of $2,000. We visited       the property
accompanied by the participant     and observed that the rented
tracts of land were not easily accessible because of pad-
locked gates, fences, and distances from the participant's
farm. We believe that, because of the dangerous environment,
the land could no longer be considered agricultural       land.
      The following exhibit and photo show the location of
the diverted acres on the ordnance proving ground and the
warning signs attached to every fourth fence post around the
proving ground.




                                33
                                          /----      -
                                      :       BURN       :
                                      \       AREA        ’
                                          L   ---        ,’




                                                                                       MORTAR   RANGE




                   ENVIRONMENTAL   AREA
                                                         \        /


lIIzIzl-   -DIVERTED     ACRES
                                                                                       500         2000
                                                              Y


                                                                      ORDNANCE
                                                                            PROVING
                                                                                  GROUND
        EXAMPLE          18




ORDINANCE        PROVING      GROUND
            WARNING      SIGN




                        35
REVISIONS IN REGULATIONS AND PROCEDURES
REQUIRED TO PROVIDE ASSURANCE THAT
PROGRAM OBJECTIVES ARE MET

       As Illustrated       by the preceding       examples,       there 1s a
need for ASCS to revise           its regulations        and admlnistrative
procedures        to ensure that only agricultural              land will be
eligible      for drverslon      payments under the Feed Grain Pro-
gram.      Improved regulations         and procedures        are necessary       to
the effective         accomplishment      of the Feed Grain Program ob-
jectives--control          of production,      maintenance        of farm Income,
and conservation          of land for future       agricultural        or related
uses.

Need to strengthen         ASCS regulations

      The ASCS regulations        provide     a basis for excluding       non-
agricultural     land from enrollment           in the Feed Grain Program
under certain      circumstances.         The regulations,       however,
have been subjected        to various      interpretations       by ASCS
county office      personnel    and by ASC county committees that
are responsible       for the local administration            of the program,
We believe    that,     to ensure that nonagricultural            land of the
types revealed       during our review is excluded            from the pro-
gram, ASCS should establish           more specific        and clear-cut
regulations.
      For example, we found that,          under similar     circumstances,
acreage in the process of being developed              for housing had
been declared    eligible    or ineligible       for enrollment       in the
Feed Grain Program depending upon the ASC county committee
making the determination.         One of the ASCS regulations             re-
garding   such uses of land states that the following                 type of
land is not eligible      for designation        as diverted      acreage.

       "Land which at the time the diverted     acreage is
       designated  is expected to be utilized    in the cur-
       rent year for industrial    development,  housing,
       highway construction,    or other NONFARM use."

      In applying  the above regulation,  one ASC county com-
mittee   ruled that a tract   of land was eligible     under the
program although     the land (1) was not being farmed, (2) had
been earmarked for housing construction,        and (3) was part of
an overall  housing development       site on which construction
was well under way.      (See example 5 on p. 20.)         The ASC
county committee members stated that,          in their   opinion,     such
land should not be enrolled      in the program; however,          the
unused land was eligible     for participation       in the program
because it remained suitable       for farming.

       In contrast,    another ASC county committee,         after    learn-
ing that a 30-acre tract        of land contained      housing and that
additional     development    was planned,   declared    the land In-
elrgible    for enrollment     rn the program.      The committee ob-
tained a refund of the advance diversion            payment,      even
though a portion       of the land could have been farmed.              An-
other ASC county committee declared         a tract of land rneli-
gible because the owner was a developer            and had built        two
houses on the property.

      Other regulations     also relate         to the eligibility    of
land for enrollment       rn the Feed Grain Program and are like-
wise subject    to diverse      interpretations.        Where appropriate,
the more pertinent      regulations        are referred     to in this re-
port.

Need for change in procedure    for
determining   elinibility of land for
enrollment  in the Feed Grain Program

       Most of the ASCS officials       whom we interviewed      stated
that the most significant        problem in administering        the Feed
Grain Program was keeping abreast          of constant     changes in
land use.     ASCS officials     stated that it was impossible,          in
many of the urban counties,         to keep up with changes in land
use due to the rapid urbanization          and that,    as a consequence,
ineligible    land was being enrolled       in the program.        These
statements,     we believe,   are borne out by our review of
many cases in which the ASCS county offices'             farm records
were inaccurate     or incomplete.

      The ASCS county offices'          farm records often did not
correctlyidentifythe            owners of land for which feed grain
base acreages had been established            nor contain      sufficient
information        to determine    that the land was currently          eli-
gible     for enrollment      in the program.      In some instances,
the records had not been updated to reflect               lnformatlon

                                       37
available    In the offices.      For example, one ASCS county
office's  files    showed that a participant        in the program had
refunded  his advance diversion        payment in 1969 because his
land was being used for a housing development.              As of March
1970, the ASCS county office,         however, had not removed the
land from its records.         In another   instance,    the ASCS county
records were adjusted        to remove a tract of land after we in-
formed the office     that a church, a school,        and several
houses were located      on the land.

     With  the exception     of making spot checks of farms en-
rolled  in the Feed Grain Program, ASCS county offlces        are
not required      to verify  the data contained  in its farm rec-
ords.   Officials     in only one of the ASCS county offices      In-
cluded In our review stated that they made a special         effort
to keep current      with changes taking place in farm areas
being developed.

      We believe    that,     to avoid the need for ASCS county of-
fices to maintain         farm records    showing the up-to-date      sta-
tus of land in predominantly           urban and nonagricultural
areas and to lessen the burden on ASC county committees                   In
determining      whether applicants'        lands are eligible    for en-
rollment     in the program, ASCS should adopt procedures             re-
qulrlng     such applicants      to furnish     evidence  that the lands
are being held for agricultural             uses.            .

      We believe     also that improved administrative           procedures
are required      to provide     for more uniform       and consistent
application      of ASCS regulations        by the over 2,900 ASC county
committees     throughout     the United States.         The ASCS national
and State offices        should, we believe,       periodically     review
the actions      of ASC county committees--particularly             in devel-
oping urban areas-- to determine            whether payments are being
made for diversion        of nonagricultural       land.




                                      38
                                 CHAPTER3

      CONCLUSIONS, RECOMMENDATIONS, AND AGENCY ACTIONS

CONCLUSIONS

      We believe     that the primary        objectives    of the Feed Grain
Program--to      control     production,     stabilize   feed grain prices,
and maintain      farm income --are not being met by diversion
payments for land devoted to, or designated                 for, nonagricul-
tural   uses.     Furthermore,        the program is not achieving          the
secondary objective          of conserving      land for future    agricul-
tural   or related       uses.

      We recognize     that the Feed Grain Program is difficult             to
administer     because of the dispersal         of program operations
and because of the changes in land use due to urban develop-
ment.     These difficulties       emphasize the need for (1) revised
regulations     to ensure that only eligible          land is enrolled      in
the program and (2) procedures          requiring     ASCS national     and
State offices      to make periodic     reviews of county operations
to ensure that regulations          are being applied      consistently
and in furtherance         of program objectives.

 RECOMMENDATIONS TO THE ADMINISTRATOR,              ASCS

      We recommend that the Administrator,     ASCS, revise  the
regulations    to exclude from the program all land devoted to,
or designated    for, nonagricultural    uses.  We suggest that
consideration    be given to:

     --Providing    criteria     for determining     when an area       should
        be considered      predominantly   nonagricultural,

     --Requiring    applicants       for enrollment    of land in the pro-
        gram in predominantly          nonagricultural   areas to furnish
        evidence  to A!XS that they are actively            engaged in an
        ongoing farming      operation.

      Because nonagricultural        land could be enrolled     in the
Feed Grain Program in other than predominantly            urban areas,
the matters    discussed      in this report   should be brought     to the
attention    of appropriate      ASCS county officials     in all coun-
ties involved     in the Feed Grain Program.

                                       39
       We recommend also that the Administrator,          ASCS, estab-
lish review procedures        at the national     and State levels    to
provide     assurance that (1) ASCS county offices          and ASC com-
mittees     are maintaining    adequate surveillance      over land en-
rolled    in the feed grain acreage diversion         program and
(2) ASC county committees        are uniformly     and consistently
applying     ASCS regulations    governing    the Feed Grain Program.

AGENCY ACTIONS

        In commenting on a draft         of this report,         the Adminis-
 trator,     ASCS, advised us by letter            dated September 23, 1970
 (see app. I), that ASCS concurred               in our conclusions         and
 that certain     actions had been taken or planned pursuant                     to
 our recommendations.           He stated that ASCS believed             that it
 had developed      administrative       regulations        which would give
 adequate guidance       and authority       to ASC county commLttees to
 enable them to exclude nonagricultural                  land from the diver-
'sion program, but that,           on the basis of our findings,              the
 regulations     appeared to be inadequate             for ensuring      uniform
 county committee application            of the provisions          designed to
 exclude     such land from the program.

     The Administrator stated also that, on August 25, 1970,
a wire notice was sent to all ASCS State offices   in which a
feed grain program was in effect,  as follows:

     "Several     cases have come to our attention         where
     land has been bought for housing developments               or
     other nonagricultural        uses and acreage thereon has
     been diverted     under the wheat or feed grain program.
     In some cases no farming operations           were carried
     out.     In other cases the *** [feed grain base acre-
     age] or allotment       was too large because a part of
     the cropland     used for establishing      the base or
     allotment     has already    been used for nonagricultural
     purposes.      Other cases around urban areas were re-
     ported where no farming operations         were carried
     out but the land was signed up as diverted             under
     the program and payments were made. You are in-
     structed    to direct    county committees     to carefully
     review all cases of this kind and to take action
     to recover     any overpayments    or unearned payments,
     The only exception       is where a prodwer       acted in

                                         40
      good faith     on mlslnformatlon  furnished      by a repre-
      sentative     of the county committee.      Further   in-
      structions     will  follow."

       The Administrator        pointed     out that the Congress was then
considering      new agricultural         legislation         which would provide
for a diversion        program for feed grains,               wheat, and cotton
for 1971-73 crops.           He stated that,          if this legislation           was
enacted--and      it was on November 30, 1970--he would take lm-
mediate action       to (1) review the admlnlstratlve                   regulations
with the obJective         of more clearly          defining      those farmlands
which would be ineligible             to participate          in the feed grain,
wheat, and cotton programs because they were currently                             de-
voted to, or designated            for, nonagricultural             uses and
(2) strengthen       ASCS admlnistrative            controls      at the national
and State levels         to ensure that there was uniform                  applica-
tion of the regulations            with regard to land falling                into the
nonagricultural        category      and to ensure that ASC county com-
mlttees     and office     personnel      maintained        adequate surveil-
lance of land in their           respective       counties      to immediately
identify     those tracts       which had shifted           from agricultural
uses to nonagricultural            uses.

       The Administrator        stated that ASCS had some reservation
regarding       our suggestion       to exclude land in predominantly
nonagricultural         areas from enrollment         in the Feed Grain Pro-
gram, except where the program applicant                   could prove, to the
satisfaction         of the ASC county committee,            that he was ac-
tively     engaged in an ongoing farming operation.                    He stated
also that,       although    ASCS agreed,       in principle,       with our sug-
gestion,     he questioned       whether ASCS could enforce such a
regulation       in the absence of congressional               or legislative
direction.         The Administrator       sald,however,        that ASCS would
study our suggestion          further    to determine        its feasiblllty.

     Cur suggestion   was not intended       toprecludea     farmer In
an urban area from enrolling      land in the Feed Grain Program
but rather   to ensure that those who do enroll          land in the
program have bonafide    farming    operations.

      We believe      that the actions    proposed by the Admlnistra-
tor are responsive         to our recommendations.      Since the
changes effected         by the new agricultural   leglslatlon    do not
materially     affect     our findings   and recommendations,    we plan

                                          41
  to evaluate      the adequacy    of specific     actions       taken by A!XS
to ensure     that    payments  are not made     for    diversion      of non-
agrxultural        land.




                                      42
                                   CHAPTER 4

                INTERNAL AUDIT OF FEED GRAIN PROGRAM

      The Office     of the Inspector      General,      Department    of Agri-
culture,     conducted    an audrt of the 1968 Feed Grain Program
in 10 States.        The purpose of the audit was to determine
whether program participants           were complying         with program
requirements      in accordance     with their      certifications       to ASC
county committees       and to appraise      the adequacy of the ASCS
State-   and county-level      reviews and spot checks to verify
that participants       were complying      with program requirements.

       The Office          of the Inspector      General's     review disclosed
significant          deflciencres        in the certification        of compliance
aspect of the Feed Grain Program.                    In its report,         dated
June 30, 1969, the Office                  of the Inspector      General stated
that,     from its audit tests on a random sample of 958 farms
in the 10 States and 507 counties,                   compliance      had been in-
correctly         certified       on 121 of the farms.         Erroneous payments
on these farms totaled               about $65,000.         The Office      of the In-
spector General proJected                  that, at a 95-percent-confidence
level,      total      ineligiblepayments,        xncluding      penalties,       for
all feed grain farms in the 10 States would amount to at
least $39.3 million.

      The most serious       violation,         in the opinion       of the Office
of the Inspector        General,     was the failure          of program partic-
ipants    to comply with program requirements                  on all farms in
which they had an interest.                ASCS regulations        require      that
a participant,      if he owns or has an Interest                in more than
one farm, meet the program requirements                    on all such farms.
Almost one third        of the erroneous          payments of $65,000 found
by the Office     of the Inspector            General involved        violations
of this requirement.           Most of the remaining            erroneous       pay-
ments involved      failure      of participants         to comply with acre-
age requirements,         such as (1) exceeding            the permitted        feed
grain acres,     (2) deficient          diverted     acres, and (3) deficient
conserving     base acres.

     The Office   of the Inspector   General"s   report concluded
that the deficiencies    were due, in part,    to weaknesses in
program administration     at the State and county level     and


                                          43
that there was a need for more effective       prosecution                      of
participants   who knowinglymade  false certifications                        regard-
ing compliance   with program regulations.

       The Office        of the Inspector        General made several           recom-
mendations        for corrective         measures to the Deputy Adminis-
trator,       State and County Operations,              ASCS. The recommen-
dations      were aimed at (1) improving               procedures    for obtaln-
ing certification             from participants        as to acreage on non-
participating          farms In which they had an interest,                  (2) im-
proving      management of compliance              operations,    (3) issuing         or
revising       instructions         regarding    the measurement of conserv-
ing base acres and the control                  of weeds, and (4) taking
action      to strengthen         cases submitted        to the Department         of
Justice       against     participants        who had knowingly      falsified
their     compliance        reports     to obtain program benefits.

     In a report   to the Inspector          General dated August 1,
1969, the Deputy Administrator,             State    and County Operations,
ASCS, described    certain     actions      which had been or were being
taken to correct     the deficiencies          disclosed   by the Office
of the Inspector     General's      review.       These actions    covered,
to a large extent,      all  the    recommendations       enumerated    above.
The only recommendation        with which ASCS disagreed           concerned
the need for measurement of conserving                base acres.




                                          44
                                CHAPTER 5

                             SCOPE OF REVIEW

        We revrewed   (1) the legrslative       history    of the act au-
thorizing     payment for diverting       land from production     under
the Feed Grain Program, (2) pertinent            ASCS regulations,
procedures,     and practices    in administering       the program,   and
(3) the use of land enrolled         in the program.

      Also, we reviewed ASCS's farm records;             interviewed       ASC
county committee members and ASCS county office                personnel,
and farm owners and operators;      and   inspected        many   tracts    of
land.    Our fieldwork  was performed     at 14 ASCS county offices
in the States of California,      Colorado,    Illinois,         Michigan,
Minnesota,   and Texas.




                                     45
APPENDIXES




  47
                                                                                                         APPENDIX I
                                                                                                             Page 1

                                     UNlTEQ         STATES DEPARTMENT                OF AGRICULTURE
                                     AGWKLILTURAL     STAL4lllZATIOM   AND    CONSERWATIOM     SERVICE   * WASHIHGTOMUZU4250



                                                                                             DATE.       SEP 23 1970
        TO.     Victor     L. Lowe, Assocaate         Director,        GAO




SUBJECT:        GAO Draft of Report to the Congress                    on Feed Grain         Program     Payments
                Made for Diversion  of Nonagricultural                   Land


                We concur rJlCh the conclusion    of the SubJect     audit that the prllnary
                ObJ@CtiveS of the feed grain program--to        control production,         strengthen
                prices and maintain    or improve farm mcome--are         not being met with
                regard to payments made for the dlverslon        from feed grain productlon
                of land devoted to or designated      for nonagricultural      uses.      It is not
                the intent    of this agency to provide admlnistratlve        regulations       which
                would allow psyments for diversion       of land which is or will be devoted
                50 nonagricultural    uses0

                In compliance     with one of the maJor ObJectlves       of the feed grain
                orogrsm-- to assure adequate but not excessive supplies            of feed grams--
                we have developed administrative         regulations   which we believed    would
                give adequate guidance and authority           to ASC county committees    to enable
                them to exclude from the dlverslon          program those tracts of land which
                would be devoted to nonagricultural          uses. Follanng      are the pertinent
                guldellnes    whzch we have issued m regulations         and admmfstratlve       hand-
                book rnstructlons      to accomplish   the ObJectlVe    of excluding    nonagricultural
                land from partlclpatlng       111 the program:

                    1.    Daverted acreage must be land which was croplsnd 111 the preceding
                          year and 1s currently   classified     as cropland which, under normal
                          conditions,  could reasonably      be expected to produce a crop.

                    2.    The followrng      are not ellglble           for    designatzon       as diverted
                          acreage:

                          (a)   Land which the county committee determznes the producer
                                reasonably  could not expect to use in the absence of the
                                program for the production    of the crop being diverted
                                because of the physical    condition of the land or any other
                                reason.




Form ASCS 620 (5 23 69)




                                                             49
APPENDIX I
    Page 2


       (b) Land which at the time the diverted acreage   is designated
            is expected to be utilized in the current year for indus-
            trial development, housing, highwey construction, or other
            nonfarm use.
       (cl Land devoted to nonagricultural   uses on or before
            September 30 of the current year-
       (d) Land intended to be used for a specific nonfarm use III a
            later year, which would not be devoted xn the current year
            to an agricultural use. All public land leased or intended
            for the production of crops is in this category, unless the
            owner (State, county and local government) establishes to
            the satisfaction of the county that adequate equipment is
            readily   ax&able for the successful production of row crops
            and mall gram and the productxon of such crops is a nom&L
            practice.
 Based upon our revxew of the cases set forth in the ,!+ubJeCtaudit, it
 would appear that the above cxted administrative   regulations are not
  sufflclently  adequate to insure uniform county comtnxttee application
 of the provzslons which were designed to exclude nonagricultural      land
 from program payments. This audit would also seem to Indicate that
 the administratzve control through national and State offxces has not
 been suffzclently strong to provide uniform application of the
 admmlstrative regulat%ons.
 We have elready taken action to comply with one of the recommendations
 set forth in the subject audzk. The problem discussed in this audit
 report has been brought to the attention of the State offices in all
 States in which a feed gram progrsm is in effect.   Following is the
 content of a wire notice which was issued to the chairmen of all of
 the feed grain States on August 25:
        "Several cases have come to our attention where land has been
       bought for housing developments or other nonagricultural   uses
       and acreage thereon has been diverted under the wheat or feed
       graj n program. In some cases no farming operations were
       carried out. In other cases the base or allotment was too
       large because a part of the cropland used for establishing
       the base or allotment has already been used for nonagricultural.
       purposes. Other cases around urban areas were reported where
       no farmulg operations were carried out but the land was signed
       up as diverted under the program and payments were made, You
       are instructed to direct county committees to carefully review




                                         50
                                                                                      APPENDIX I
                                                                                          Page 3


        all cases of this kind and to take action to recover any over-
        payments or unearned payments.   The only exception        is where a
        producer acted U-I good fazth on mlsinformatlon      furnlshed    by a
        representative  of the county comcnlttee.     Further instructions
        Will   f0ll0w."

The wheat and feed grain diversion                programs tennrnate          mth the 1970
crop year.       Congress is currently           consadering      legzslation     which would
provide for a diversion            program for wheat, feed grains and cotton for
the 1971 through 1973 crops.                If this legislation          1s enacted, we would
plan to take lmnaedlate action to review our admmlstrative                           regulations
with the objective        of more clearly         deflnlng     those farms which would
be ineligible        to participate       In the feed gram, wheat and cotton pro-
grams because they are currently                devoted to or designated           for non-
agricultural       uses.     We would also plan to strengthen                our administrative
controls      at the natlonal        and State levels to assure that there be a
uniform application          of the regulations         with regard to land fallrng
into the nonagricultural             category and to assure that county ASC
committees      and office personnelmamtam                 adequate surveillance          of land
 in their respective         counties to mediately              zdentify     those tracts which
have shifted       fram agricultural          to nonagricultural         uses,

We have some reservation                with regard to the suggestion      contained     m the
recommendations            of the audit report which would exclude all land 111
predomrnantly           nonagricultural       areas frcrm the feed grain program, except
where the program applicant                 can prove, to the satlsfactlon       of the
county committee,             that he 1s actively      engaged u an ongotig farming
operation.           Although we do not disagree with thm suggestion                in prm-
ciple,      we question whether U-I the absence of congressional                 or legls-
lative       direction      that we could enforce a regulation         of this nature.
However, we will study this suggestion                   further to determine     its
feaslblllty.




              Administrator




                                                51
                   PRINCIPAL   OFFICIALS     OF

                THE DEPARTMENT OF AGRICULTURE

              RESPONSIBLE FOR ADMINISTRATION           OF

            ACTIVITIES   DISCUSSED IN THIS REPORT


                                              Tenure      of -office
                                              From                     Td
                                                                       -
                  DEPARTMENT
                  -_-          OF AGRICULTURE
                      - ---m---w
SECRETARY OF AGRICULTURE:
    Orville  L. Freeman                    Jan.    1961       Jan.    1969
    Clifford  M. Hardln                    Jan.    1969       Present

UNDER SECRETARY OF AGRICULTURE:
    Charles S. Murphy                      Mar.    1961       June 1965
    John A. Schnittker                     June    1965       Jan.    1969
    J. P. Campbell                         Jan.    1969       Present


               AGRICULTURAL STABILIZATION         AND
                    CONSERVATION---SERVICE

ADMINISTRATOR:
    Horace D. Godfrey                      Jan.    1961       Jan.    1969
    Kenneth E. Frick                       Mar.    1969       Present

DEPUTY ADMINISTRATOR, STATE AND
  COUNTY OPERATIONS:
    R. V. Fitzgerald                       June    1962       Feb.    1969
    William   E. Galbraith                 Feb.    1969       May     1969
    George V. Hansen                       %Y      1969       Present




                                                             V S GAO Wash.,   D C

                               52