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
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)