oversight

Farm Programs: Direct Payments Should Be Reconsidered

Published by the Government Accountability Office on 2012-07-03.

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

             United States Government Accountability Office

GAO          Report to Congressional Requesters




July 2012
             FARM PROGRAMS

             Direct Payments
             Should Be
             Reconsidered




GAO-12-640
                                             July 2012

                                             FARM PROGRAMS
                                             Direct Payments Should Be Reconsidered

Highlights of GAO-12-640, a report to
congressional requesters




Why GAO Did This Study                       What GAO Found
Through one facet of the farm safety         From 2003 through 2011, the U.S. Department of Agriculture (USDA) made more
net, USDA provides farmers and other         than $46 billion in direct payments to farmers and other producers. These
producers with fixed annual payments,        producers planted varying percentages of acres that qualified for payments
called direct payments, based on their       based on their historical planting yields and designated payment rates (qualifying
farms’ historical crop production. Direct    acres). Cumulatively, USDA paid $10.6 billion—almost one-fourth of total direct
payments do not vary with crop prices        payments made from 2003 through 2011—to producers who did not, in a given
or crop yields. In March 2011, GAO           year, grow the crop associated with their qualifying acres, which they are allowed
reported on observations and options         to do. About 2,300 farms (0.15 percent of farms receiving direct payments)
regarding direct payments and
                                             reported all their land as “fallow,” and producers did not plant any crops on this
suggested to Congress that they be
                                             land for each year for the last 5 years, from 2007 through 2011; in 2011, these
eliminated or reduced. GAO was asked
(1) to provide information regarding the
                                             producers received almost $3 million in direct payments.
geographic distribution and ownership        Direct payments generally do not align with the principles significant to integrity,
characteristics of payment recipients,       effectiveness, and efficiency in farm bill programs that GAO identified in an April
as well as the dollar amount of direct       2012 report. These payments align with the principle of being “distinctive,” in that
payments made for farms with acreage         they do not overlap or duplicate other farm programs. However, direct payments
that qualified, and the amount and           do not align with five other principles. Specifically, they do not align with the
types of crops grown on such acreage         following principles:
for years 2003 to 2011, and (2) to
examine whether direct payments are          •   Relevance: When the precursors to direct payments were first authorized in
aligned with principles significant to           1996 legislation, they were expected to be transitional, but subsequent
integrity, effectiveness, and efficiency         legislation passed in 2002 and 2008 has continued these payments as direct
in farm bill programs. To conduct this           payments. However, in April 2012, draft legislation for reauthorizing
work, GAO analyzed USDA data and                 agricultural programs through 2017 proposed eliminating direct payments.
interviewed agency officials.                •   Targeting: Direct payments do not appropriately distribute benefits consistent
                                                 with contemporary assessments of need. For example, they are
What GAO Recommends                              concentrated among the largest recipients based on farm size and income; in
Congress should consider eliminating or          2011, the top 25 percent of payment recipients received 73 percent of direct
reducing direct payments. GAO also               payments.
recommends that USDA take four               •   Affordability: Direct payments may no longer be affordable given the United
actions to improve its oversight of direct       States’ current deficit and debt levels.
payments including developing a              •   Effectiveness: Direct payments may have unintended consequences. Direct
systematic process to report on land             payments may have less potential than other farm programs to distort prices
that may no longer be usable for                 and production, but economic distortions can result from these payments.
agriculture, and considering ways to             For example, GAO identified cases where direct payments support recipients
increase the number of cases selected            who USDA officials said own farmland that is not economically viable in the
for end-of-year reviews and completing           absence of these payments.
these reviews in a timely manner.            •   Oversight: Oversight of direct payments is weak. With regard to oversight,
USDA generally agreed with two of                USDA has not systematically reported on land that may no longer be eligible
GAO’s recommendations and disagreed
                                                 for direct payments because it has been converted to nonfarm uses, as
with two others, stating that it believes
                                                 required for annual reporting to Congress. In addition, GAO identified
its current processes or practices are
adequate. GAO continues to believe               weaknesses in USDA’s end-of-year compliance review process. For
that it is important for USDA to take the        example, USDA conducts relatively few reviews and generally does not
recommended actions.                             complete these reviews within expected time frames.
                                             Continuing to provide payments that generally do not align with principles
View GAO-12-640. For more information,       significant to integrity, effectiveness, and efficiency in farm bill programs raises
contact Lisa Shames at (202) 512-3841 or
shamesl@gao.gov.                             questions about the purpose and need for direct payments.

                                                                                       United States Government Accountability Office
Contents


Letter                                                                                     1
               Background                                                                  5
               Varied Producers, Who Are Geographically Concentrated, Received
                 More Than $46 Billion in Direct Payments from 2003 through
                 2011                                                                      8
               Direct Payments Do Not Align with Certain Principles                       15
               Conclusions                                                                29
               Matter for Congressional Consideration                                     30
               Recommendations for Executive Action                                       31
               Agency Comments and Our Evaluation                                         31

Appendix I     Objectives, Scope, and Methodology                                         36



Appendix II    Principles Significant to the Integrity, Effectiveness, and
               Efficiency of Farm Bill Programs                                           40



Appendix III   Ownership Characteristics of Land for Which Direct
               Payments Were Made                                                         41



Appendix IV    Analysis of Direct Payment Crops Grown Compared with
               Base Acreage Allocations                                                   43



Appendix V     Analysis of Extent to Which Producers Did Not Grow Any of
               the Crop Associated with Their Base Acres in a Given Year                  44



Appendix VI    Analysis, by State, of the Number of Farms Fallow from 2007
               through 2011 and the Value of Direct Payments Made to Producers for
               These Farms in 2011                                                        45




               Page i                                                GAO-12-640 Farm Programs
Appendix VII           Comments from the U.S. Department of Agriculture                        47



Appendix VIII          GAO Contact and Staff Acknowledgments                                   49



Related GAO Products                                                                           50



Tables
                       Table 1: Status of FSA’s End-of-Year Reviews for 2008 and 2009, as
                                of September 2011                                              25
                       Table 2: Amounts by Which FSA Reduced Direct Payments for
                                Selected Reasons in 2010 and 2011                              28
                       Table 3: Changes in Ownership of Land for Which Direct Payments
                                Were Made, All Covered Crops                                   41
                       Table 4: Ownership Characteristics, All Covered Crops, Corn,
                                Cotton, Oats, Rice, Soybeans, and Wheat, 2011                  42
                       Table 5: Planted Acres of Base Acre Crop as a Percentage of Base
                                Acres, from 2003 through 2011                                  43
                       Table 6: Cumulative Value of Direct Payments Made for Which the
                                Crop Associated with the Base Acres Was Not Grown in a
                                Given Year from 2003 through 2011                              44
                       Table 7: Number of Farms Where Producers Planted No Crop of
                                Any Type from 2007 through 2011 and Value of Direct
                                Payments Received by These Producers in 2011, by State         45


Figures
                       Figure 1: How Direct Payments Are Calculated                             6
                       Figure 2: Direct Payments by County, 2011                               10
                       Figure 3: Distribution of “Fallow” Farms—Those That Did Not
                                Grow Any Crop of Any Type—Each Year from 2007
                                through 2011 for Which Direct Payments Were Made               14




                       Page ii                                            GAO-12-640 Farm Programs
Abbreviations
ACRE                  Average Crop Revenue Election
CCC                   Commodity Credit Corporation
FSA                   Farm Service Agency
GDP                   gross domestic product
OIG                   Office of Inspector General
USDA                  U.S. Department of Agriculture
2008 Farm Bill        The Food, Conservation, and Energy Act of 2008


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Page iii                                                       GAO-12-640 Farm Programs
United States Government Accountability Office
Washington, DC 20548




                                   July 3, 2012

                                   Congressional Requesters:

                                   From 2006 through 2010, the U.S. Department of Agriculture (USDA)
                                   spent about $13 billion annually on federal programs to support farm
                                   income, assist farmers after disasters, and conserve natural resources.
                                   Through one facet of this farm safety net, USDA provides farmers and
                                   other producers with fixed annual payments—called direct payments—
                                   based on their farms’ historical crop production. USDA makes these
                                   payments regardless of whether these producers grow crops, as long as
                                   they and their farms meet certain eligibility criteria. Amounting to nearly
                                   $5 billion annually since 2002, direct payments do not vary with crop
                                   prices, crop yields, or producers’ incomes. 1 Unlike other major farm
                                   programs, which compensate farmers for declines in price or for lost
                                   crops, direct payments go to farmers regardless of risk factors. Direct
                                   payments were most recently authorized in the Food, Conservation, and
                                   Energy Act of 2008 (2008 Farm Bill), and without future action, will expire
                                   in September 2012. USDA’s Farm Service Agency (FSA) is responsible
                                   for administering direct payments and for ensuring that recipients of such
                                   payments meet eligibility criteria, and that payment limitations and other
                                   applicable provisions are applied.

                                   Increased national budget deficits, record levels of farm income and
                                   prices for major crops, and sensitivity within the agricultural industry and
                                   among the public to potentially unnecessary budget outlays have
                                   heightened concerns about the viability of and need for direct payments.
                                   In March 2012, the President’s fiscal year 2013 budget called for the
                                   elimination of direct payments, noting that more than 50 percent of direct
                                   payments go to farmers with more than $100,000 in income and
                                   questioning whether taxpayers should continue to “foot the bill.” 2 For
                                   2011, USDA reported that net farm income was a record $98.1 billion. For
                                   2012, USDA estimates that net farm income will decline to $91.7 billion—



                                   1
                                    Under the 2008 Farm Bill, a person or entity whose 3-year average farm income exceeds
                                   $750,000 and/or 3-year average non-farm income exceeds $500,000 is ineligible for direct
                                   payments.
                                   2
                                    Office of Management and Budget, Fiscal Year 2013 Budget: Cutting Waste, Reducing
                                   the Deficit, and Asking All To Pay Their Fair Share (Washington, D.C.: Feb. 13, 2012).




                                   Page 1                                                       GAO-12-640 Farm Programs
still the second highest level on record. Moreover, according to USDA,
the top 5 earnings years for the past 3 decades have occurred since
2004, attesting to the recent profitability of farming. Furthermore, farmland
values, another measure of farm prosperity, increased by 85 percent from
2003 through 2011. Since August 2011, the trade associations of five
major crops for which the bulk of direct payments are made—corn,
cotton, wheat, rice, and soybeans—have stated that direct payments may
need to be eliminated in favor of other elements of the government-
subsidized farm safety net. In addition, in our March 2011 report on
overlap and duplication in federal programs, we made several
observations regarding direct payments, and we noted that GAO and
others have proposed options to reduce or eliminate direct payments. 3

In April 2012, we identified certain principles as applicable to Congress’s
deliberations for the 2012 farm bill and significant to the integrity,
effectiveness, and efficiency of farm bill programs, such as direct
payments. 4 Specifically, the principles we identified were (1) relevance of
program purpose, (2) distinctiveness, (3) targeting benefits, (4)
affordability, (5) effectiveness, and (6) oversight. See appendix II for the
list of principles and associated key questions.

We have further reported that strengthened oversight of direct payments
and other farm program payments can save taxpayer dollars. For
example, we reported in July 2007 that USDA made $1.1 billion in
potentially improper farm program payments, including direct payments,




3
 GAO, Opportunities to Reduce Potential Duplication in Government Programs, Save Tax
Dollars, and Enhance Revenue, GAO-11-318SP (Washington, D.C.: Mar. 1, 2011). In
February 2012, we reported that no legislative action was taken on this recommendation.
See GAO, Follow-up on 2011 Report: Status of Actions Taken to Reduce Duplication,
Overlap, and Fragmentation, Save Tax Dollars, and Enhance Revenue, GAO-12-453SP
(Washington, D.C., Feb. 28, 2012). See also GAO, 2012 Annual Report: Opportunities to
Reduce Duplication, Overlap and Fragmentation, Achieve Savings, and Enhance
Revenue, GAO-12-342SP (Washington, D.C.: Feb. 28, 2012). Others who proposed such
options included the National Commission on Fiscal Responsibility and Reform, the Debt
Reduction Taskforce, the Administration, Members of Congress, and some farming
groups.
4
 GAO, Farm Bill: Issues to Consider for Reauthorization, GAO-12-338SP (Washington,
D.C.: Apr. 24, 2012). USDA’s Office of Inspector General issued a companion report using
these principles. See U.S. Department of Agriculture, Office of Inspector General, Farm
Bill: Issues to Consider for Reauthorization, 50099-0001-10 (Washington D.C.:
April 2012).




Page 2                                                       GAO-12-640 Farm Programs
to more than 170,000 deceased individuals. 5 According to USDA officials,
since 2007, they have begun taking additional steps to verify that
payment recipients are alive, and if the payment is determined
inappropriate, recover it. We also reported, in April 2004, that USDA was
not effectively overseeing its farm program payments, including direct
payments. In particular, we reported that FSA did not review a valid
sample of producers’ farm operating plans to ensure compliance with
eligibility requirements and thus did not ensure that only eligible recipients
received payments. Moreover, we found that FSA’s reviews of these
plans were often completed late. 6 USDA has since implemented some
management controls in response to our recommendations.

Because the expected reauthorization of the farm bill this year provides
an opportunity to reexamine direct payments, you asked us to review
them. In this context, this report (1) provides information on the
geographic distribution and ownership characteristics of payment
recipients, the dollar amounts of direct payments made for farms with
acreage that qualifies for such payments, and the amount and types of
crops grown on such acreage from 2003 through 2011 and (2) examines
whether direct payments are aligned with principles significant to integrity,
effectiveness, and efficiency in farm bill programs.

To conduct this work, we analyzed USDA data, interviewed agency
officials, and reviewed and updated our past work. Specifically, to provide
information about the ownership characteristics and geographic distribution
of payment recipients and determine the dollar amount of direct payments
made for farms with qualifying acreage, we obtained USDA data indicating
the number, amount, and recipient for direct payments made from program
years 2003 through 2011—that is, from the program’s first full year of
operation through the most recent year for which complete program data
are available. 7 We also obtained and analyzed data detailing the acreage



5
 GAO, Federal Farm Programs: USDA Needs to Strengthen Controls to Prevent Improper
Payments to Estates and Deceased Individuals, GAO-07-818 (Washington, D.C.:
July 9, 2007).
6
 GAO, Farm Program Payments: USDA Needs to Strengthen Regulations and Oversight
to Better Ensure Recipients Do Not Circumvent Payment Limitations, GAO-04-407
(Washington, D.C.: Apr. 30, 2004).
7
 A program year is the year for which the program runs and benefits may be received. For
direct payments, the program year corresponds with the federal fiscal year.




Page 3                                                       GAO-12-640 Farm Programs
of qualifying farms and the planting history for each farm for which direct
payments were made and other records pertaining to the share of
payments received by various individuals and entities. In particular, we
obtained data from USDA’s compliance share file that indicates how a
producer—whether an individual or an entity—is involved and whether they
own a particular farm field or area of land for which direct payments were
made. Producers report they either (1) own and operate the farm (“owner-
operators”), (2) operate but do not own the farm (“tenants”), or (3) are an
owner of the farm (“other owners”). To assess the reliability of USDA’s
data, we (1) performed electronic testing of required data elements, (2)
reviewed existing information about the data and the system that produced
them, and (3) interviewed agency officials knowledgeable about the data.
We found these data to be sufficiently reliable for the purposes of this
report. 8 To examine whether direct payments are aligned with principles
significant to integrity, effectiveness, and efficiency in farm bill programs,
we reviewed our previous work in the area—in particular our March 2011
report on overlap and duplication of federal programs, which discussed
observations regarding direct payments. 9 We also reviewed our April 2012
report, which reviewed our recent work on farm bill programs and identified
the principles and associated key questions. 10 These principles may not
represent all potential principles that could be considered. We collected
additional data where possible to determine how circumstances regarding
direct payments may have changed more recently and evaluated direct
payments according to the principles identified in our earlier work. We
spoke with officials in FSA headquarters, state, and county offices who are
responsible for ensuring that direct payment recipients meet requirements
for such payments. We also visited five selected FSA county offices located
in Arizona and Louisiana. We selected these county offices because FSA
data showed a relatively high number of end-of-year reviews of farming
operations in these counties. In addition, some of these counties had
experienced high levels of residential growth in recent years. During our
visits, we reviewed case files, including those of farming operations that
had undergone or were undergoing end-of-year reviews, and observed


8
 However, for years before 2008, USDA was unable to provide reliable address files for
recipients, which we needed to determine the geographic distribution of direct payments.
Therefore, we were unable to analyze the geographic distribution of direct payments
before 2008.
9
GAO-11-318SP.
10
    GAO-12-338SP.




Page 4                                                        GAO-12-640 Farm Programs
             some of these farms. Appendix I describes our objectives, scope, and
             methodology in more detail.

             We conducted this performance audit from August 2011 to June 2012 in
             accordance with generally accepted government auditing standards.
             Those standards require that we plan and perform the audit to obtain
             sufficient, appropriate evidence to provide a reasonable basis for our
             findings and conclusions based on our audit objectives. We believe that
             the evidence obtained provides a reasonable basis for our findings and
             conclusions based on our audit objectives.


             Federal law mandates support for farmers through various programs,
Background   including direct payments. USDA, through its Commodity Credit
             Corporation (CCC), 11 calculates direct payments using a formula that
             factors in “base acres,” a measure of a farm’s crop production history
             based on the number of acres planted on the farm during certain past
             years. The term base acres refers to a farm’s average planted acreage of
             specific crops during those years; the term does not refer to specific
             physical acres on that farm. The direct payment formula uses a fixed
             percentage of the average number of acres planted on the farm from
             1998 through 2001 and multiplies that number by the farm’s historical
             crop yield and a statutorily fixed payment rate. 12 The percentage and
             payment rates for each crop are specified in legislation, commonly
             referred to as farm bills, passed by Congress roughly every 5 years. For
             2009 through 2011, this percentage was set at 83 percent; for 2012, it
             was set at 85 percent. Figure 1 illustrates the process for calculating a
             producer’s direct payment.




             11
               The CCC is a federally owned and operated corporation within USDA created to
             stabilize and support agricultural prices and farm income by making loans and payments
             to producers, purchasing commodities, and engaging in various other operations. The
             CCC handles all money transactions for agricultural price and income support and related
             programs. FSA distributes direct payments for the CCC.
             12
               In 2002, producers were given the option of updating their base acre allocations based
             on the farm’s production from 1998 through 2001. Producers who opted not to update at
             that time maintained base acre allocations based on the farm’s production from earlier
             years.




             Page 5                                                        GAO-12-640 Farm Programs
Figure 1: How Direct Payments Are Calculated




                                       Through this system, a producer’s direct payments are based on the
                                       historical production of a particular crop. Moreover, producers have
                                       almost complete flexibility in deciding which crops to plant, and they
                                       receive payments as long as they meet eligibility criteria, even if they
                                       decide to plant different crops or not plant crops at all. In years in which
                                       they do not plant, however, the farm bill requires that the relevant land be
                                       maintained in accordance with sound agricultural practices. For example,
                                       producers must take steps to minimize the growth of weeds on the land.
                                       Producers also are required to report planting information each year on
                                       forms called acreage reports. 13 The United States has classified direct
                                       payments as meeting World Trade Organization rules for nontrade
                                       distorting payments; direct payments are not tied to specific production or
                                       prices, and they are generally deemed not to distort international
                                       agricultural markets.




                                       13
                                         Such reporting is outlined in FSA guidance and program documents and required by the
                                       2008 farm bill. See FSA, Direct and Counter-Cyclical Payment Handbook,1-DCP
                                       (Washington, D.C.: Aug. 14, 2008), and FSA, Direct and Counter-Cyclical Payment and
                                       Average Revenue Crop Election Contract, CCC-509 (Washington, D.C. Apr. 16, 2009). In
                                       addition, the acreage report that FSA uses to collect such production information is more
                                       specifically known as FSA’s Form-578 “Report of Acreage.”




                                       Page 6                                                        GAO-12-640 Farm Programs
After learning of instances where farm payments were made to
individuals not involved in farming, Congress enacted the Agricultural
Reconciliation Act of 1987, commonly referred to as the Farm Program
Payments Integrity Act. The act, among other measures, sets eligibility
criteria to ensure that only individuals and entities “actively engaged in
farming” receive certain farm program payments. 14 Specifically, according
to the 2008 Farm Bill, direct payments, Average Crop Revenue Election
(ACRE), and counter-cyclical payment recipients are required to be
actively engaged in farming. 15 FSA is responsible for ensuring that direct
payment recipients meet program eligibility criteria. FSA carries out this
responsibility through its headquarters office, 50 state offices, and
approximately 2,200 county offices. Producers file with their local FSA
county office a farm operating plan in which they document the number of
recipients qualifying for payments, the name of each payment recipient,
and each recipient’s role in the farming operation and share of profits and
losses. Producers must update this plan when a change in their operation
occurs, such as a change in the farm’s ownership.

FSA reviews these plans to determine, among other things, the number of
recipients who qualify for payments and whether they are actively engaged
in farming. To be considered actively engaged in farming, an individual
recipient must make significant contributions to the farming operation in two
areas: (1) capital, land, or equipment and (2) personal labor or active
personal management. An entity, such as a corporation, limited
partnership, or trust is generally considered actively engaged in farming if
the entity separately makes a significant contribution of capital, land, or
equipment, and its members collectively make a significant contribution of
personal labor or active personal management to a farming operation. In
2010, FSA issued a rule stating that members of a legal entity are excepted
from the requirement to make contributions of active personal labor or
active person management if (1) at least 50 percent of the interest is held
by members that are providing active personal labor or active personal
management and (2) total payments, including direct payments, counter-
cyclical payments, and ACRE payments are less than or equal to one


14
 We previously reported on USDA’s enforcement of “actively engaged” provisions. See
GAO-04-407.
15
  ACRE is a revenue-support program, under which payments are made based on a
producer’s production of certain crops and a crop price index. Counter-cyclical payments
are price supports paid when the actual price of covered crops falls below a legislatively
determined target price.




Page 7                                                          GAO-12-640 Farm Programs
                        “payment limitation”—a statutorily set limit on the value of the payment
                        made to the producer(s). FSA’s regulations define active personal
                        management to include such tasks as arranging financing for the operation,
                        supervising the planting and harvesting of crops, and marketing crops. For
                        both individuals and entities, their contributions to the farming operation
                        must also be commensurate with their share of the farming operation’s
                        profits or losses.

                        To help oversee direct payments, FSA monitors farm operations’ land
                        usage through producers’ acreage reports, and at the end of the year it
                        conducts a detailed review of a sample of farm operating plans.
                        Specifically, FSA field offices compare selected plans against supporting
                        documentation to help monitor whether farming operations were
                        conducted in accordance with their plans. These end-of-year reviews
                        include an assessment of whether payment recipients met program
                        requirements. FSA selects its sample of farming operations for these
                        reviews on the basis of, among other criteria, the restructuring or
                        formation of a farming operation in the past year and the number of
                        farming operations in which an individual or legal entity is involved.
                        According to FSA officials, the selection process emphasizes farm
                        operations involving six or more producers.


                        From 2003 through 2011, USDA made more than $46 billion in direct
Varied Producers,       payments, which was concentrated among certain counties, among
Who Are                 recipients located within 100 miles of farms qualifying for payments, and
                        among certain types of producers. We also found that producers of
Geographically          different qualifying crops planted varying percentages of their base acres
Concentrated,           in those crops. Cumulatively, almost one-fourth of the total value of direct
Received More Than      payments made during this period went to producers who did not, in a
                        given year, grow any of the crop associated with their base acres—as
$46 Billion in Direct   they are allowed to do.
Payments from 2003
through 2011




                        Page 8                                               GAO-12-640 Farm Programs
Payments Were                According to our analysis of USDA data, more than $46 billion in direct
Concentrated among           payments were made from 2003 through 2011, 16 with counties in the
Certain Counties,            Midwest and Mississippi River Basin accounting for a large share of the
                             value of payments made and smaller amounts distributed among other
Recipients Located within
                             counties throughout the United States. In addition, our analysis showed
100 Miles of the Farm, and   that total payments varied widely by county: in 2011, about 9 percent of
Certain Types of Producers   counties received less than $250,000 in payments countywide, and about
                             8 percent of counties received at least $5 million countywide. Figure 2
                             shows the distribution of direct payments in 2011, the most recent year
                             for which data are available.




                             16
                               We included all the direct payment crops in our analysis: barley, canola, corn, cotton
                             (upland), crambe, flax, mustard, oats, peanuts, rapeseed, rice, safflower, sesame,
                             sorghum, soybeans, sunflower, and wheat.




                             Page 9                                                          GAO-12-640 Farm Programs
Figure 2: Direct Payments by County, 2011




                                        Note: Data for Alaska and Hawaii indicate that all of the counties in these states fall in the lowest
                                        range. Therefore, we excluded these states from the map. However, the 278 counties listed for this
                                        dollar range include those in Alaska and Hawaii.




                                        Page 10                                                                 GAO-12-640 Farm Programs
With regard to the geographic distribution of payment recipients,
according to our analysis of USDA data, from 2008 through 2011, 17 about
97 percent of the value of payments, or about $18.8 billion, went to
recipients located within 100 miles of the farm on which their direct
payments were based. In addition, for that period, about 1.4 percent of
the value, or about $269 million, went to recipients located 300 miles or
more from the farm. Furthermore, our analysis shows that cumulatively
from 2008 through 2011, 0.56 percent of direct payments, or $109 million,
was made to recipients located 800 or more miles from the farm. For the
complete results of our analysis on ownership characteristics of land for
which direct payments were made, see appendix III.

With regard to the ownership characteristics of farms, direct payments
may be made to producers with varying degrees of involvement in the
farming operation, including individuals or entities that either (1) own and
operate the farm (owner-operators), (2) operate but do not own the farm
(tenants), or (3) are an owner of the farm (other owners). 18 According to
our analysis of USDA data from 2003 through 2011, 86 to 88 percent of
acreage for direct-payment eligible crops was operated by producers who
were listed as owner-operators or tenants, while 12 to 14 percent of
acreage was operated by producers who were listed as other owners—
but not necessarily operators. In addition, we found that from 2003
through 2011, the share of acreage operated by owner-operators
decreased and the share operated by tenants increased, while the share
operated by other owners was relatively consistent. Specifically, from
2003 to 2011, the percentage of acreage, including acreage qualifying for
direct payments, which was operated by owner-operators decreased from
77 million acres in 2003 (30 percent of all eligible acreage) to 67 million
acres (26 percent) in 2011. Acreage operated by tenants increased from
145 million acres in 2003 (56 percent of eligible acreage) to 159 million
acres (62 percent) in 2011. Meanwhile, the acreage operated by other
owners decreased slightly, from 35 million acres in 2003 (14 percent of
eligible acreage) to 30 million acres (12 percent) in 2011.



17
  USDA was unable to provide reliable address files for recipients for years before 2008.
We obtained available data for the centroid point—the geometric center—of the county in
which the farm resides and calculated the distance from it to the centroid point of the
payment recipient’s zip code.
18
  Producers report how they are involved in and whether they own a particular farm field
or area of land in what is known as the compliance share file. FSA officials noted that
producers may operate on more than one farm, in different capacities.




Page 11                                                       GAO-12-640 Farm Programs
                            In addition, our analysis identified variation in the ownership
                            characteristics of farms receiving direct payments, depending on crops
                            grown. For example, owner-operators operated 12 percent of acreage,
                            including base acreage, for cotton in 2011 and 44 percent of acreage for
                            oats that year. Also in 2011, tenants operated 78 percent of the acreage
                            for rice and 58 percent of wheat acreage. Other owners operated 5
                            percent of the acreage for oats, and 10 percent of corn acreage that year.
                            For crop-specific analyses for corn, cotton, rice, soybeans, and wheat,
                            see appendix III.


Producers Planted Varying   Since direct payments allow producers almost complete flexibility in which
Percentages of Base Acres   crops to plant, we analyzed USDA data to determine the type and
                            quantity of crops that producers who received direct payments chose to
                            grow. According to our analysis, from 2003 through 2011, producers
                            planted from 2 to 126 percent of their base acres with the crop associated
                            with their base acres. For example, over the period, producers with cotton
                            base acres planted 59 percent of their base acres with cotton, whereas
                            producers with soybean base acres planted soybeans on all of their base
                            acres for soybeans, as well as on additional acres on their farms; in other
                            words, they planted an area equivalent to 126 percent of their base acres
                            with soybeans. 19 Specifically, our analysis showed that from 2003 through
                            2011, producers with cotton base acres cumulatively planted 100 million
                            acres of their 169 million base acres with cotton, whereas producers with
                            soybean base acres cumulatively planted 593 million acres, including 472
                            million base acres, with soybeans. 20 For the complete results of our


                            19
                              USDA data do not differentiate between the program’s qualifying acreage, or “base
                            acres,” and a farm’s other acreage, and producers report one aggregated number of acres
                            for each crop planted. In addition, the term base acres refers to a farm’s average planted
                            acreage of specific crops during certain past years; the term does not refer to specific
                            physical acres on that farm. To determine the relative percentage of base acres planted in
                            the base acre crop, we compared the acres of a farm planted in a particular crop with its
                            base acres of that crop. Because a producer may plant 100 percent of the farm’s base
                            acres in any crop, plus additional acres on the farm in excess of the base acre amount,
                            more than 100 percent of base acres may be planted with a certain crop.
                            20
                              According to FSA officials, variation in planting decisions is to be expected for a number
                            of reasons. For example, the practice of crop rotation between corn and soybeans is
                            common. In addition, these officials said that producers in recent years are planting more
                            corn and soybeans compared with wheat, whereas wheat was a relatively dominant crop
                            when base acres were first established. In addition, according to FSA officials, the
                            variation in planting may be attributable to other factors, such as the relative prices of
                            various crops and local soil conditions.




                            Page 12                                                         GAO-12-640 Farm Programs
                           analysis of the type and quantity of crops that producers who received
                           direct payments chose to grow, averaged for years 2003 through 2011, of
                           all crops and by crop type, see appendix IV.


More Than $10 Billion in   In addition, we analyzed USDA data to determine the extent to which
Payments Was Made for      producers did not grow any of the crop for which their base acres were
Base Acres That Did Not    allocated—something they are allowed to do. Cumulatively, USDA paid
                           $10.6 billion—almost one-fourth of total direct payments from 2003
Grow the Base Acre Crop    through 2011—to producers who did not, in a given year, plant any of the
in a Given Year            crop for which they had base acres. Specifically, during this period,
                           producers cumulatively did not plant more than 633 million acres with the
                           crops associated with their base acres in a given year. This amounted to
                           an average of 70 million acres each year, or 26 percent of the 268 million
                           base acres on average that are annually eligible for direct payments. For
                           the complete results of our analysis on the extent to which producers did
                           not grow any of a crop for which they had base acreage in a given year,
                           by crop, see appendix V.


About 2,300 Farms for      Also according to our analysis of USDA data, about 2,300 farms, or about
Which Direct Payments      0.15 percent of the 1.6 million farms receiving direct payments in 2011,
Were Made Did Not Plant    reported all their land as “fallow,” that is, producers did not plant any
                           crops of any type on this land, for each year of the last 5 years (i.e., 2007
Any Crop of Any Type       through 2011), as allowed under the farm bill. These producers received
Each Year From 2007        a total of about $2.9 million in direct payments in 2011. Our analysis of
through 2011               USDA data showed that these approximately 2,300 farms, comprising in
                           total about 132,000 acres, were distributed among 402 counties in
                           40 states. In addition, according to our analysis, one county in Louisiana
                           had the most farms (190) with all their acreage reported fallow from 2007
                           through 2011; producers on these farms received a total of about
                           $203,000 in direct payments in 2011 for this land. For the results of our
                           analysis, by state, of the number of fallow farms from 2007 through 2011
                           and the value of direct payments made for such farms in each state, see
                           appendix VI. Figure 3 shows the geographic distribution of the farms that
                           our analysis indicated had all their acreage as fallow each year from 2007
                           through 2011.




                           Page 13                                              GAO-12-640 Farm Programs
Figure 3: Distribution of “Fallow” Farms—Those That Did Not Grow Any Crop of Any Type—Each Year from 2007 through
2011 for Which Direct Payments Were Made




                                       Notes: Data for Alaska and Hawaii indicate that none of the counties in these states had producers
                                       who received direct payments and reported all their acreage as fallow; we therefore excluded these
                                       states from the map.


                                       In addition, according to our analysis of USDA data, 622 farms reported
                                       all of their farm’s acreage as fallow for each of the previous 10 years,
                                       from 2002 through 2011. Those farms were distributed among
                                       178 counties in 28 states.




                                       Page 14                                                               GAO-12-640 Farm Programs
                         Direct payments generally do not align with the principles significant to
Direct Payments Do       integrity, effectiveness, and efficiency in farm bill programs, identified in
Not Align with Certain   our April 2012 report, which could be used to guide implementation of the
                         2012 Farm Bill. 21 These payments align with the principle of being
Principles               “distinctive,” in that they do not overlap or duplicate other farm programs.
                         However, they do not align with the five other principles. Specifically,
                         (1) direct payments may no longer be relevant, (2) they do not
                         appropriately target benefits, (3) they may no longer be affordable,
                         (4) they may have unintended consequences, and (5) oversight of direct
                         payments is weak.


Direct Payments May No   Direct payments were expected to be transitional when first authorized
Longer Be Relevant       and may no longer be relevant. According to the conference report
                         accompanying the 1996 Farm Bill, 22 production flexibility contract
                         payments—the precursors to direct payments, which were similar in
                         design—were established to help farmers make a transition to basing
                         their planting decisions on market signals rather than on government
                         programs. Accordingly, production flexibility contract payments were
                         scheduled to decrease over time and expire in 2002. Subsequent farm
                         bills, however, including those passed in 2002 and 2008, have continued
                         these payments as “direct payments.” In a press statement released in
                         February 2012, the Chairwoman of the U.S. Senate Committee on
                         Agriculture, Nutrition and Forestry, referred to direct payments as “an
                         indefensible program of the past.” In April 2012, this committee’s website
                         posted draft legislation on the reauthorization of agricultural programs
                         through 2017 that proposed eliminating direct payments.

                         In addition, direct payments may no longer be needed to comply with
                         certain aspects of international trade agreements. Proponents of direct
                         payments say that such payments help the United States meet certain
                         commitments under international trade agreements, which set ceilings on
                         government payments classified as trade distorting. Unlike other farm
                         program payments, direct payments do not depend on current market
                         prices or production, so the World Trade Organization generally considers
                         them to be nontrade-distorting, and the United States does not count


                         21
                          GAO-12-338SP.
                         22
                           Federal Agricultural Improvement and Reform Act of 1996, Pub. L. No. 104-127, 110
                         Stat. 888.




                         Page 15                                                     GAO-12-640 Farm Programs
                         them against these payment ceilings. In recent years of high crop prices,
                         the United States has not been in danger of meeting or exceeding its
                         limits for trade-distorting payments. For example, in 2009—the most
                         recent year for which the United States notified the World Trade
                         Organization of its use of subsidies—the United States used about
                         $4.3 billion of its $19.1 billion authorized allocation of trade-distorting
                         subsidies.


Direct Payments Do Not   Direct payments do not appropriately target benefits (i.e., distribute
Appropriately Target     benefits consistently with contemporary assessments of need) in three
Benefits                 key ways. First, farmers receive direct payments even in years of record
                         farm income. Production flexibility contract payments, the precursors to
                         direct payments, were established after a period in the early 1990s of
                         relatively low farm income. In August 2011, however, USDA reported that
                         all three measures of farm-sector earnings—net farm income, net cash
                         income, and the value of the farm sector’s production of goods and
                         services from farming versus its outlays to nonfarm sectors (i.e., “net
                         value added”) were forecast to rise more than 20 percent in 2011 over
                         recent historical highs or near-highs. Second, according to USDA, the
                         average income for farm households is higher than that of the average for
                         U.S. households. For example, in 2010, average farm household income
                         was 25 percent higher than that of the average U.S. household.
                         Moreover, in 2008, we reported that individuals who receive farm program
                         payments, including direct payments, were more than twice as likely as
                         other tax filers to have higher incomes. 23 Third, direct payments are
                         concentrated among the largest recipients—based on farm size and
                         income—because the payments are tied to land and paid on a per-acre
                         basis. According to our review of FSA direct payment data, in 2011, the
                         top 10 percent of payment recipients received 51 percent of direct
                         payments, and the top 25 percent of payment recipients received
                         73 percent of direct payments. In addition, according to USDA, larger
                         farms, including those receiving direct payments, have higher operating
                         profit margins. Specifically, in 2010, farms with $1 million or more in sales
                         had a 24 percent operating profit margin, on average, whereas farms of
                         any size had an 8.8 percent operating profit margin, on average.



                         23
                           GAO, Federal Farm Programs: USDA Needs to Strengthen Controls to Prevent
                         Payments to Individuals Who Exceed Income Eligibility Limits, GAO-09-67 (Washington,
                         D.C.: Oct. 24, 2008). We defined “higher incomes” in this report as adjusted gross
                         incomes of $500,000 or more per year.




                         Page 16                                                     GAO-12-640 Farm Programs
                         Furthermore, according to USDA data, larger farms, including those
                         receiving larger direct payments, are generally financially better able to
                         cover their debt than smaller-sized farms. For example, according to
                         USDA’s Agricultural Resource Management Survey data for 2010, farms
                         with sales of $1 million dollars or more were more highly leveraged (i.e.,
                         they had higher debt-to-asset ratios), but they had higher debt-coverage
                         ratios (i.e., they had more financial capacity to cover interest and principal
                         payments on debt) than “all farms” or farms in smaller economic size
                         classes. Yet, as discussed, it is these larger farms that are receiving the
                         preponderance of direct payments.


Direct Payments May No   When direct payments were first authorized in 2002, the nation’s annual
Longer Be Affordable     deficit equaled 1.5 percent of gross domestic product (GDP), and debt
                         was 59 percent of GDP, according to the Office of Management and
                         Budget. In 2011, the deficit was projected to be 10.9 percent, and debt
                         was projected to be 103 percent of GDP, respectively. In July 2003, we
                         testified before the House Committee on Ways and Means about the
                         need to improve the economy, efficiency, and effectiveness of
                         government programs, policies, and activities and to undertake a
                         fundamental reassessment of what government does and how it does it. 24
                         We stated that this undertaking would require looking at current federal
                         programs in terms of their goals and results and determining whether
                         (1) other approaches might succeed in achieving the goal, (2) taxpayers
                         are getting a good “return on investment” from the program, and (3) the
                         program’s priority is higher or lower today given the nation’s evolving
                         challenges and fiscal constraints. In light of the nation’s difficult fiscal
                         situation and pressure to reduce government spending, the President’s
                         fiscal year 2013 budget proposes eliminating direct payments. In addition,
                         USDA’s Acting Undersecretary for Farm and Foreign Agricultural
                         Services testified before the Senate Committee on Agriculture, Nutrition,
                         and Forestry in March 2012 that eliminating direct payments could save
                         $31.1 billion, over 10 years, while maintaining other farm programs that
                         target assistance when and where it is most needed. In addition, in April
                         2012, the Congressional Budget Office estimated that repealing direct
                         payments would save about $24.8 billion from fiscal year 2014 through
                         fiscal year 2018.



                         24
                          GAO, Federal Budget: Opportunities for Oversight and Improved Use of Taxpayer
                         Funds, GAO-03-1030T (Washington, D.C.: July 17, 2003).




                         Page 17                                                   GAO-12-640 Farm Programs
Direct Payments May Have   Studies by USDA have found that direct payments result in higher prices
Unintended Consequences    to buy or rent land because in some cases the payments go directly to
                           landowners—raising land values—and in other cases the payments go to
                           tenants, prompting landlords to increase cash rental rates. For example,
                           in June 2009, USDA’s Economic Research Service reported that the
                           primary economic effects of direct payments are increases in producers’
                           incomes and land values. 25 In this way, direct payments may compound
                           challenges for beginning farmers. We reported in September 2007 that
                           beginning farmers face multiple challenges, including a need for funds to
                           purchase farmland. 26 In this regard, an increase in the price of land as a
                           result of direct payments—or other farm program subsidies—may
                           potentially raise the amount of debt beginning farmers need to incur to
                           buy their own farm or additional farmland.

                           During the course of our work, we identified cases where direct payments
                           support recipients who FSA officials said own farmland that would not be
                           economically viable in the absence of these payments. For example, in 1
                           county, 190 farms were fallow—they did not grow any crop of any type—
                           for 5 consecutive years, and producers claimed payments for these
                           farms. According to FSA county officials, these recipients are unable to
                           profitably farm their land or lease it to other producers because the land is
                           of poor quality and lacks access to irrigation. Another FSA county official
                           from another state said that the producers associated with the 32 farms in
                           that county that were fallow for 5 consecutive years were generally
                           unable to obtain financing for their farming operations and could not
                           profitably farm their land. Nevertheless, these landowners remain eligible
                           for direct payments under a provision of the 2008 Farm Bill known as the
                           “landowner exemption.” 27 Under this exemption, landowners can remain
                           eligible for direct payments as long as the landowners’ interest in their
                           acreage depends directly on the output of that acreage. In practice,
                           therefore, landowners can remain eligible if they (1) operate the land



                           25
                             USDA Economic Research Service, Farm and Commodity Policy: Program Provisions:
                           Direct Payments (Washington, D.C.: June 15, 2009).
                           26
                            GAO, Beginning Farmers: Additional Steps Needed to Demonstrate the Effectiveness of
                           USDA Assistance, GAO-07-1130 (Washington, D.C.: Sept. 18, 2007).
                           27
                             Under the “landowner exemption,” landowners are not required to contribute both
                           (1) capital, equipment, or land and (2) personal labor or active personal management, as
                           are other producers. However, landowners must make contributions that are at risk, and
                           commensurate with their share of profits or losses in the farming operation.




                           Page 18                                                       GAO-12-640 Farm Programs
                               themselves, (2) lease the land for a rent that depends on the production
                               of a crop, or (3) do not lease or operate the land and therefore receive no
                               production-related revenue from it. In practice, however, it appears the
                               landowner exemption allows landowners to receive payments for land
                               that is no longer economically viable for farming. Direct payments may
                               have less potential than other farm programs to distort prices and
                               production, but economic distortions can nonetheless result from these
                               payments. Furthermore, a trade-off exists between being less market
                               distorting—as direct payments are considered to be—and targeting
                               benefits to adjust to need.


Oversight of Direct            During the course of our work, we identified several concerns with regard
Payments Is Weak               to FSA’s oversight of direct payments: FSA has not developed a
                               systematic process to report on acreage that may no longer be usable for
                               agriculture and therefore ineligible for direct payments; FSA conducts
                               relatively few end-of-year reviews and generally does not complete these
                               reviews within expected time frames; and FSA has not kept data on
                               enforcement.

FSA Has Not Systematically     FSA has not systematically reported or corroborated the extent to which
Reported or Corroborated       land may no longer be eligible for direct payments because it has been
Acreage No Longer Usable for   converted to nonfarm uses. The 2008 Farm Bill instructed the Secretary
Agriculture                    of Agriculture to establish procedures to identify such land and each year,
                               to “ensure, to the maximum extent practicable, that payments are
                               received only by producers,” submit to Congress a report describing the
                               results of USDA’s actions to identify and reduce base acres for land that
                               has been subdivided and developed for nonfarm use. The 2008 Farm Bill
                               uses base acres to determine direct payments, Average Crop Revenue
                               Election (ACRE) payments, and counter-cyclical payments. FSA issued
                               its first report in response to this mandate in September 2011, covering
                               2009 and 2010. 28 According to this report, about 190,000 acres—about
                               129,000 in 2009 and 61,000 in 2010—were converted to nonfarm use
                               during this period. However, the report noted that these estimates were
                               likely low, stating that USDA’s periodic Natural Resources Inventory




                               28
                                 Farm Service Agency, A Report to Congress on Base Acre Reduction When Base Acres
                               Are Converted to a Non-Agricultural Use (Washington, D.C.: September 2011).




                               Page 19                                                  GAO-12-640 Farm Programs
estimated that an average of 440,000 cropland acres were converted to
nonfarm uses annually from 1982 through 2007. 29

FSA’s report had several methodological limitations that we identified. For
example, FSA relied exclusively on surveying the 50 FSA state offices for
information on such conversions. It did not use or corroborate the state
offices’ results with other possible sources of information, including
geospatial information on land use gathered by USDA’s National
Agriculture Imagery Program, which provides geospatial imagery data to
support FSA compliance activities. FSA also did not provide its state
offices with guidance for collecting information on such conversions. As a
result, these offices, and their associated county offices, used a variety of
methods to collect this information. For example, FSA officials in one
county office said they identified base acreage reductions by consulting
records of County Committee meetings. 30 In another case, FSA county
office officials said they used Base Acreage Yield Adjustment reports to
identify base acreage that was already permanently reduced, and Out of
Balance Tracts reports to identify other base acreage that may signal the
need for a base acreage reduction. 31 As a result of these varying methods
and consequently unsystematic process, FSA may have
underrepresented the extent to which land may no longer be eligible for
direct payments because it has been converted to nonfarm uses in its
required report to Congress.

FSA headquarters officials said that, because in the past they were not
required to report land converted from agriculture to residential or other



29
  The National Resources Inventory is a statistical survey of land use and natural
resource conditions and trends on nonfederal lands in the United States conducted by
USDA’s Natural Resource Conservation Service. Conversion rates of land from
agricultural to nonfarm or commercial use may vary according to prevailing economic
conditions. Specifically, when the profitability of land in agricultural use is high relative to
other potential uses, conversion rates from agricultural to nonfarm or commercial use
would likely be low. If, however, business conditions improve and demand for residential
housing increases, then conversion rates could increase.
30
  FSA County Committees consist of farmers and ranchers elected by other producers to
help deliver FSA programs in their local farming communities.
31
  FSA officials can query a database to identify a farm’s acreage and base acreage and
compare it with reports on yield for that farm. In some cases, Out of Balance Tracts
reports may indicate that base acreage is greater than the yield, in which case the FSA
official can determine whether further information is needed to confirm that the farm’s
reported base acreage is accurate.




Page 20                                                             GAO-12-640 Farm Programs
nonfarm use, they had not systematically tried to track such land. They
also stated that because producers, including direct payment recipients,
are required to report planting information each year and certify the
accuracy of this information, FSA has been able to identify land subject to
base acre reductions manually through such reports. 32 These officials
stated that FSA relied on such manual records to report on land that was
converted to nonfarm uses in its September 2011 mandated report, and it
has begun compiling data for the next report, covering 2011, using the
same methodology. However, these officials noted that in October 2011
FSA updated its data collection systems to compile the mandated report
covering 2012 base acre reductions through a computerized tracking
system. This system includes a reporting code to identify whether the
base acre reduction was made because land was converted to nonfarm
uses, including residential or commercial uses.

All of the FSA county officials we spoke with said that geospatial imagery
was very helpful in identifying land that may no longer be usable for
agriculture, and some noted this was particularly so as budget constraints
have precluded more frequent on-site farm inspections. For example,
some of these officials spoke of instances where they knew from
geospatial imagery that land had been converted from agricultural use,
and the producer had not informed FSA. Nevertheless, officials said, the
National Agriculture Imagery Program did not provide such imagery
regularly and they received updated imagery only every few years,
limiting their ability to identify land that may no longer be usable for
agriculture—and therefore ineligible for direct payments. An imagery
program official stated that the program had received inconsistent funding
since its establishment in 2002. As a result, this official said, in 2008 the
office began collecting imagery data in 3-year cycles rather than annually,
as would meet program needs. The official stated that three USDA
agencies and the Department of the Interior are funding the
approximately $40-million-per-year effort. The official added that the


32
  In addition, as part of FSA’s National Compliance Program, USDA’s National
Agricultural Statistics Service selects a statistical sample of 2,000 producers each year—
including some of the approximately 1.6 million producers who receive direct payments—
and FSA staff perform spot checks to verify that reported planting information is accurate.
We note that based on this information, approximately 0.13 percent of producers receiving
direct payments could potentially be selected to have their reported planting information
verified each year through this process. FSA state and county offices may elect to spot
check any producer if there is reason to question the producer’s compliance with any
program provision.




Page 21                                                        GAO-12-640 Farm Programs
                            imagery program’s own requirements and FSA’s needs continue to call
                            for collecting and reporting data annually, but funding constraints
                            preclude the program from doing so.

FSA’s End-of-Year Reviews   FSA’s detailed end-of-year reviews, in which FSA officials assess
Have Key Weaknesses         whether direct payment recipients met program requirements, such as
                            being actively engaged in farming, have key weaknesses. Specifically,
                            FSA conducts relatively few end-of-year reviews, and generally does not
                            complete these reviews within expected time frames.

                            FSA guidance states that the purpose of end-of-year reviews is to
                            maintain the integrity of payment limitation and payment eligibility
                            provisions by verifying that farming operations were carried out as
                            producers reported on their farm operating plans. One such provision for
                            direct payments is that all payment recipients be actively engaged in
                            farming, which, according to the 2008 Farm Bill, generally includes
                            making a “significant contribution” that is at risk and commensurate with
                            the recipient’s share of profits and losses from the farming operation.
                            Recipients of payments under ACRE and counter-cyclical payment
                            programs also are required to be “actively engaged” in farming. According
                            to FSA officials, to verify the extent to which producers’ contributions
                            meet these, as well as other, eligibility requirements, FSA selects a
                            judgmental sample of farming operations for review on the basis of,
                            among other criteria, (1) whether the operation has undergone an
                            organizational change in the past year by, for example, adding another
                            entity or partner to the operation and (2) whether the operation receives
                            payments above a certain threshold. FSA officials said that their selection
                            process for end-of-year reviews is designed to direct limited resources
                            toward categories of recipients among whom officials most expect to find
                            wrongdoing such as fraud or other deliberate misrepresentation of a
                            farming operation. 33 These officials explained that the recipient categories
                            emphasized for review include joint operations, particularly those
                            comprising three or more entities, because such operations offer more
                            potential and incentive for partners to exaggerate their contributions.



                            33
                              Misrepresentation could include exaggerating the number of participants in a farming
                            operation, or the stake of any participant in the operation, to increase the amount of the
                            payment received. Fraud may be falsifying documentation to circumvent provisions
                            defining payment eligibility and payment limitations. According to FSA officials, the
                            distinction between fraud and other misrepresentation is one of degree, where fraud is
                            more serious.




                            Page 22                                                          GAO-12-640 Farm Programs
Producers in farming operations selected for end-of-year review must
provide documentation to verify that the information they report on their
farm operating plan, including their contributions of land, capital,
equipment, labor, and management, is accurate. By reviewing such
documentation, FSA officials can determine whether the contributions, in
terms of risk and share of profits and losses, made by each participant in
a farming operation match the contributions reported for that participant
on the farm operating plan. FSA officials said that end-of-year reviews are
a key means of identifying potentially improper payments. In addition,
some FSA county officials said end-of-year reviews were useful in
identifying irregularities and fraud and cited cases in their experience
where producers returned direct payments determined to have been
erroneously disbursed. Nonetheless, we identified two key weaknesses in
FSA’s end-of-year review process.

First, FSA selects relatively few cases for annual end-of-year review. Our
analysis of FSA data showed that in 2008 and 2009, FSA selected for
review 0.04 percent of farming operations receiving direct payments. By
comparison, for fiscal year 2010, the Internal Revenue Service selected
at least 0.7 percent of taxpayers, from every income level—an average of
1.1 percent of all taxpayers—for examination. According to FSA
headquarters officials, they would like to select additional cases for
review, but the selection rate is relatively small because the reviews are
resource intensive. 34 Increasing budget constraints and USDA’s
announced plans to close some of FSA’s 2,200 county offices and reduce
field staffing may further limit the number of cases for review the agency
can select in the future. These officials said that, because of resource
constraints, they select the sample according to categories of recipients
where they most expect to find wrongdoing, and waive categories of
recipients, such as landowners and spouses among whom they least
expect to find misrepresentation. However, we found that when FSA
waives reviews for some of the cases selected, the agency does not
replace them with reviews of other cases, as we recommended in April
2004. 35 At the time, we reported that FSA was not reviewing a valid
sample of farm operating plans to reasonably assess the overall level of



34
  FSA guidance allows state and county FSA officials to add cases for end-of-year
reviews; however, FSA officials did not provide data regarding how often this has occurred
in recent years.
35
 GAO-04-407.




Page 23                                                       GAO-12-640 Farm Programs
compliance because its selection methodology did not replace waived
cases, resulting in a smaller sample size that might have affected the
validity of the sample results. 36 In response to our recommendation, FSA
reduced the number of compliance reviews it waived each year but did
not act to replace reviews that were waived with new cases. FSA
continues to select a small sample of cases for review: in 2008 and 2009,
respectively, 23 and 154, or just under 6 and 13 percent, of selected
cases were waived, further decreasing the number of farming operations
reviewed.

Second, FSA often completes end-of-year reviews late with respect to its
own expected time frames. According to an FSA official in charge of
selecting cases and monitoring the end-of-year review process, FSA
headquarters generally selects cases for review within the first 6 months
of the following year and generally expects county office staff to perform
their assigned reviews within a year of receiving the cases selected. 37 As
of September 2011, however, 271 of 380 pending reviews for 2008
(71 percent) were more than 6 months past the expected 18-month
completion time frame, which includes the selection, assignment, and
conducting of these reviews. In May 2012, FSA reported that as of
February 2012, nearly 24 percent of pending reviews for 2008 were still
incomplete. Table 1 summarizes the status of end-of-year reviews for
2008 and 2009, as of September 2011 and February 2012. 38



36
  For example, for 2001, FSA developed a judgmental sample of 1,573 farm operating
plans from the 247,831 entities (0.6 percent) that received federal farm payments. The
sample selection included 966 farming operations that were waived for various reasons,
leaving 523 farming operations to be reviewed (0.2 percent). See GAO-04-407.
37
  This schedule is informal and may vary. FSA’s handbook on producer compliance states
that FSA state directors will determine the official completion dates for end-of-year reviews
but does not specify or suggest a particular time frame. In addition, FSA headquarters
may not meet its target date of selecting end-of-year reviews within 6 months of the new
calendar year. For example, FSA headquarters did not send 2010 cases selected for end-
of-year reviews to states until December 2011, more than 5 months after the expected
selection date according to nominal FSA time frames.
38
  The most recent years for which complete data were available were 2008 and 2009;
FSA first provided these data as of September 2011, and, in May 2012, provided updated
data as of February 2012. We are reporting the data as of September 2011 in addition to
the most recent data to more fully illustrate the status of these reviews at a date 3 months
past the expected time frame for completion. FSA provided data indicating that in 2006
and 2007, an average of 0.04 percent of cases were selected for review. FSA did not
provide the number of cases waived or completion time frames for those years.




Page 24                                                         GAO-12-640 Farm Programs
Table 1: Status of FSA’s End-of-Year Reviews for 2008 and 2009, as of September
2011

                                                          2008           2009         Total
Farming operations for which direct payments         1,815,520      1,654,200    3,469,720
were made
Farming operations selected for review                      403         1,208        1,434
Farming operations selected for review and                   23           154          177
waived
Reviews of farming operations completed                     109           212          321
Percentage of farming operations receiving               0.02%         0.06%         0.04%
payments, selected for review
Percentage of reviews completed as of                    28.7%         20.1%         22.4%
September 2011
Percentage of reviews completed as of                    76.6%         55.0%        60.7%
February 2012
Source: GAO analysis of USDA data.



In addition, in February 2012 FSA reported that county offices in three
states—California, Louisiana, and Mississippi—had not completed some
of their 2006 or 2007 end-of-year reviews. 39 FSA officials said they do not
regularly collect data on the number of end-of-year reviews completed
and pending. FSA officials also said that taking corrective action against
payment recipients becomes more difficult as reviews are delayed. For
example, with the passage of time, it is more difficult for FSA to collect
evidence of potential misrepresentation or fraud, as well as for producers
to provide the requested documentation. Furthermore, according to FSA
officials, completed end-of-year reviews are needed for USDA’s Office of
Inspector General (OIG) to investigate cases of potential fraud or other
illegal activity.

Federal internal control standards call for agencies to obtain, maintain,
and use relevant, reliable, and timely information for program oversight
and decision making, as well as for measuring progress toward meeting



39
   In May 2012, FSA provided updated information, reporting that California had completed
its 2006 and all but two of its 2007 end-of-year reviews; Louisiana had completed all but
one of its 2006 and all of its 2007 end-of-year reviews; and Mississippi had completed all
its 2006 and all but two of its 2007end-of-year reviews. FSA officials said the five pending
reviews for these states were due to pending appeal at the state or county level. FSA did
not provide updated data regarding completion of 2008 or 2009 end-of-year reviews.




Page 25                                                           GAO-12-640 Farm Programs
                            agency performance goals. 40 In addition, the Office of Management and
                            Budget directs agency managers to take timely and effective action to
                            correct internal control deficiencies. 41 Furthermore, FSA’s handbook on
                            determining eligibility for farm program payments states that “[d]etecting
                            schemes, fraudulent representations, and other equally serious actions of
                            persons and legal entities to circumvent payment eligibility and payment
                            limitation provisions is essential for producer compliance.” 42 The issues
                            we identified in FSA’s end-of-year compliance review process leave the
                            agency with a less effective management oversight tool. For example, in
                            light of these problems, FSA is less able to identify potential fraud, waste,
                            and abuse; avert potentially improper payments; and enforce farm bill
                            provisions and related implementing regulations.

USDA Has Not Kept Data on   USDA does not have data to demonstrate that it is using available
Enforcement                 enforcement mechanisms against payment recipients found to have
                            misrepresented their farming operation so as to increase their direct
                            payments improperly, and the agency generally has not centrally tracked
                            data on such cases of misrepresentation. Specifically, when asked, FSA
                            officials were unable to provide the number of direct payment cases FSA
                            has referred to OIG for further investigation and potential prosecution by
                            U.S. Attorneys’ Offices, but according to FSA officials, the number of such
                            cases has been small. For example, regarding potential fraud, FSA
                            officials cited only one case that was currently under active litigation. FSA
                            state offices are required to report any known or suspected violations of
                            criminal statutes to OIG for investigation, but according to OIG officials,
                            their investigators will pursue cases of potential fraud only if they




                            40
                              GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1
                            (Washington, D.C.: November 1999).
                            41
                             Office of Management and Budget, Management’s Responsibility for Internal Control,
                            OMB Circular No. A-123 (Washington, D.C.: Dec. 21, 2004).
                            42
                             Farm Service Agency, Payment Eligibility, Payment Limitation, and Average Adjusted
                            Gross Income, 4-PL, Amendment 10, Sec. 4 Para. 42.




                            Page 26                                                     GAO-12-640 Farm Programs
anticipate a “good outcome,” that is, a successful prosecution. 43 The
potential amount of funds to be recovered is another consideration.
According to FSA officials, the number of cases accepted for investigation
varies by region. For example, according to these officials, in regions with
significant drug crime, such as southern Texas, U.S. Attorneys give
priority to drug cases and accept virtually no farm program cases. This
situation notwithstanding, OIG and FSA officials said that FSA offices in
Texas refer very few compliance and payment limitation cases to OIG.
According to OIG officials, depending on the circumstances, FSA may be
able to take administrative action against a producer in an attempt to
recover inappropriately disbursed funds even if the producer is not
prosecuted by state or federal authorities for violations of law, by following
its own procedures or consulting with the Office of General Counsel.
However, both OIG and FSA officials said that, in cases of alleged fraud,
the payment recipient may not be subject to additional enforcement
mechanisms unless prosecuted and convicted. FSA regulations provide
that any producer found to have committed fraud may be debarred from
receiving further payments for up to 5 years. 44 These regulations also
provide that any producer found to have engaged in misrepresentation
may be debarred from receiving further payments for up to 2 years.
However, if FSA does not maintain comprehensive data on payment
recipients that may have misrepresented their farming operation,
including by name of producers, it is unclear how it can consistently
pursue and recover improper payments.

FSA headquarters officials stated that most payment recipients are
honest and comply with direct payment eligibility requirements, and that
the level of enforcement is appropriate. However, the officials could not


43
  For example, in a September 2005 report, we found that few suspicious crop insurance
claims payments resulted in a conviction for fraud. We reported that, while the number of
USDA OIG referrals to the Department of Justice on suspicious claims payments had
increased, the Department of Justice declined more cases than it had accepted since
2000. According to Department of Justice officials, the factors considered when accepting
a case include sufficiency of the evidence, complexity of the case, whether the fraudulent
activity is part of a pattern or scheme, and workload and resources that would be needed
to investigate and prosecute the case. With regard to crop insurance, these officials told
us that fraud cases are highly complex and involve a significant number of documents that
must be reviewed and presented in court and that the dollar value of such cases
frequently is not as large as in other cases, such as drug trafficking or some white-collar
crime. See GAO, Crop Insurance: Actions Needed to Reduce Program’s Vulnerability to
Fraud, Waste, and Abuse, GAO-05-528 (Washington, D.C.: Sept. 30, 2005).
44
 See 7 C.F.R. 1400.5.




Page 27                                                        GAO-12-640 Farm Programs
provide data on compliance. Some FSA county officials expressed
concerns about discouraging producers from farming, should the
producer be debarred from receiving further payments. They also said
that they can and do recover improper payments from producers without
pursuing potential prosecution. However, FSA’s reluctance to pursue
these cases and enforcement mechanisms could encourage some
producers to engage in and profit from submitting false information with
little fear of being caught or punished.

Moreover, FSA officials acknowledged that the agency lacks
comprehensive data on its enforcement actions. Specifically, FSA officials
said that the agency does not keep a centralized, national database or list
of direct payment recipients found to be at fault for misrepresentation,
including recipients convicted of fraud, debarred from future payments,
referred to OIG for investigation, or found by county or state FSA offices
to have received improper payments by misrepresenting their farming
operation—including in cases in which these payments were later
recouped. FSA does, however, maintain data at the national level on
payments it reduced because it determined a certain producer was
ineligible before making the payment. According to these data, in 2011
FSA reduced payments to certain direct payment recipients by almost
$20 million for not being actively engaged in farming; by more than
$89 million for exceeding payment limitations; by over $37 million for
exceeding income limitations; and by $3,393 for fraud. Table 2
summarizes the amount of these reduced payments for 2010 and 2011.

Table 2: Amounts by Which FSA Reduced Direct Payments for Selected Reasons in
2010 and 2011

Dollars in millions
    Reason for reduction                                                        2010        2011
    Producer not actively engaged in farming                                   $23.5        $19.9
    Producer’s payment would exceed payment limitations                          80.8        89.2
    Producer’s income exceed income limitations                                30.95        37.39
    Fraud                                                                        0.05         0.0a
    Total for these reasons                                                   $135.3      $146.5
Source: GAO analysis of USDA data.

Note: These numbers include direct payments and counter-cyclical payments; as a point of reference,
counter-cyclical payments averaged $1.45 billion annually from 2006 through 2010.
a
In 2011, FSA reported reducing payments by $3,393 because of fraud.




Page 28                                                              GAO-12-640 Farm Programs
              Under the Improper Payments Information Act of 2002, as amended,
              federal agencies are required to estimate the level of improper payments
              in their programs. 45 In November 2011 USDA reported that its error rate
              for making direct and counter-cyclical payments was 0.05 percent, which
              was below its 2010 error rate of 0.96 percent and below its target of 0.40
              percent. 46 However, because USDA does not keep comprehensive data
              on its enforcement actions or the amount of money it recovers after
              improper disbursements are made, the level of improper payments
              reported by FSA for the direct payments program may be understated.


              Direct payments allow producers flexibility in the type and amount of
Conclusions   crops to plant by making payments based on historical production trends,
              rather than current production. However, the fiscal health of our nation,
              recent and expected high national budget deficits, and pressures to
              reduce federal spending mean that every federal dollar should be
              scrutinized to ensure it is spent efficiently and for the most worthwhile
              purposes. Maintaining a safety net for farmers is worthwhile, but during
              times of record-high crop prices and farm incomes, providing payments
              that do not align with principles significant to integrity, effectiveness, and
              efficiency in farm bill programs raises questions about the continued need
              for direct payments. In a March 2011 report, we and others proposed
              options to reduce or eliminate direct payments.

              FSA monitors land usage and conducts a detailed review of a sample of
              farm operating plans at the end of the year to help oversee direct
              payments and other farm programs, including ACRE and counter-cyclical
              payments, which require payment recipients to be actively engaged in
              farming. There have been proposals to eliminate direct payments, but as
              long as they remain in effect, it is worth noting several weaknesses
              concerning FSA’s oversight of these programs that our work identified.
              First, because FSA does not have a systematic process to identify land
              that may no longer be usable for agriculture and therefore eligible for
              direct payments—or ACRE or counter-cyclical payments—FSA’s reports
              to Congress may underreport the extent to which land may no longer be
              eligible for these payments. Second, because FSA does not regularly


              45
                Pub. L. No. 107-300, 116 Stat. 2350 (2002), as amended by Pub. L. No. 111-204, 124
              Stat. 2224 (2010).
              46
               USDA, 2011 Performance and Accountability Report (Washington, D.C.: Nov. 15, 2011).




              Page 29                                                     GAO-12-640 Farm Programs
                update the geospatial imagery FSA county offices use to corroborate that
                direct payments are made only for lands usable for agriculture, FSA could
                potentially be making payments to individuals and entities that should not
                be receiving them. Third, because FSA’s process for selecting and
                performing end-of-year reviews has key weaknesses, FSA is less able to
                identify potential fraud, waste, and abuse; avert potentially improper
                payments; and enforce farm bill provisions and related implementing
                regulations. We acknowledge the budget constraints that, according to
                FSA officials, make the case for a judgmental sample and limit the
                number of end-of-year reviews FSA conducts. However, similarly to what
                we reported in April 2004—that FSA was not reviewing a valid sample of
                farm operating plans to reasonably assess the overall level of
                compliance—FSA continues to select a small sample of cases to review
                and does not complete reviews in a timely manner, exposing the agency
                and taxpayers to potential waste, fraud, and abuse of taxpayer dollars.

                While FSA officials state that most producers are honest and comply with
                eligibility requirements, it is in the interest of all producers, as well as
                taxpayers, to maintain the integrity of direct payments and other farm
                program payments. FSA regulations provide enforcement mechanisms
                for producers found to have engaged in misrepresentation or to have
                committed fraud, but FSA does not maintain comprehensive data on
                payment recipients that have misrepresented their farming operation,
                including data by producer name. As a result, it is unclear how
                consistently FSA has pursued and recovered improper payments. In sum,
                as a result of FSA’s decision to not pursue a more comprehensive
                oversight process—including maintaining comprehensive data on
                misrepresentation and tracking the referral of cases for enforcement—the
                number and value of improper payments and program fraud may be
                underrepresented.


                In light of the need to identify potential savings in the federal budget and
Matter for      questions about the continued need for direct payments, Congress should
Congressional   consider eliminating or reducing these payments.
Consideration




                Page 30                                              GAO-12-640 Farm Programs
                      To help ensure that direct payments, while they remain in effect, and
Recommendations for   other farm programs, including ACRE and counter-cyclical payments, are
Executive Action      made in a manner consistent with farm bill provisions and related
                      implementing regulations, and to minimize the potential for improper
                      payments, we recommend that the Secretary of Agriculture direct the
                      Administrator of the Farm Service Agency to take the following four
                      actions:

                      •   Develop and implement a systematic process to report on land that
                          may no longer be usable for agriculture, as required for annual
                          reporting to Congress.

                      •   Ensure the more timely and consistent regular collection and
                          distribution of geospatial imagery needed to corroborate that
                          payments are only made for lands usable for agriculture.

                      •   Consider options within given budget constraints to improve FSA’s
                          end-of-year reviews by selecting a larger sample of cases to review
                          and ensuring that these reviews are completed in a timely manner.

                      •   Maintain comprehensive data on misrepresentation and enforcement
                          actions taken nationwide, as needed for management oversight and
                          reporting purposes.


                      We provided a draft of this report to USDA for review and comment. In
Agency Comments       written comments, which are reproduced in appendix VII, USDA generally
and Our Evaluation    agreed with two of our recommendations and disagreed with two others.
                      USDA also noted our Matter for Congressional Consideration to eliminate
                      or reduce direct payments, stating that the President’s financial year 2013
                      budget recommended eliminating direct payments while maintaining a
                      strong safety net for farmers.

                      Regarding our first recommendation that USDA develop and implement a
                      systematic process to report on land that may no longer be usable for
                      agriculture, as required for annual reporting to Congress, USDA
                      disagreed, stating that it considers its current process to be adequate.
                      Among other points, USDA noted that it already selects a statistical
                      sample of producers for spot checking to determine that all land reported
                      as cropland remained in cropland status for the year the spot check was
                      conducted. Nevertheless, as discussed in this report, only about 2,000
                      producers─and potentially 0.13 percent of the approximately 1.6 million
                      producers receiving direct payments─could be selected for annual spot



                      Page 31                                             GAO-12-640 Farm Programs
checks. Further, in a September 2011 report in response to a
congressional mandate USDA stated that its estimates of base acres
converted to nonfarm uses in 2009 and 2010 were likely understated. We
also note, as discussed in the report, that USDA’s current procedures to
collect these data are subject to methodological limitations and
inconsistencies in how its field offices collect these data. For example,
USDA relied exclusively on surveying the 50 FSA state offices for
information on such conversions, and did not use or corroborate the state
offices’ results with other possible sources of information, such as
geospatial imagery. USDA also did not provide its state offices with
guidance for collecting information on such conversions. As a result,
these offices, and their associated county offices, used a variety of
methods to collect this information. Given this very small sample and the
department’s likely underestimation of the extent of conversions to
nonfarm uses, we maintain that development of an improved process is
needed for identifying land that may no longer be usable for agriculture.
For added clarity, we revised the report to make clear that USDA uses a
statistical sample and that its field offices may spot-check other producers
if there are concerns. In addition, USDA noted that the 2008 Farm Bill,
among other sources requires producers to file acreage reports on all
cropland on the farm. In response to USDA’s comment, we added
clarifying language to the report to identify the sources that USDA cites as
requiring such reporting.

Regarding the second recommendation that USDA ensure the more
timely and consistent collection and distribution of geospatial imagery
needed to corroborate that payments are only made for lands usable for
agriculture, USDA stated that it agrees that geospatial imagery is a useful
tool to identify land use changes. It also said, however, that its ability to
update this imagery more frequently would require increased funding from
Congress. As discussed in the report, USDA already leverages resources
from other agencies, such as the Department of the Interior, to help cover
the costs of collecting this imagery. Further opportunities may exist to do
so. In addition, USDA could consider options to reallocate more funding
to geospatial imagery within its existing budget resources.

Regarding the third recommendation that USDA consider options within
given budget constraints to improve FSA’s end-of-year reviews by selecting
a larger sample of cases to review and ensuring that these reviews are
completed in a timely manner, USDA disagreed. USDA stated that it
concurs that timely, high-quality end-of-year reviews are important;
however, it also stated that its current practices already meet this standard.
According to USDA, in the early 1990’s its Office of Inspector General


Page 32                                               GAO-12-640 Farm Programs
determined that a judgmental sample completed in USDA headquarters
was the most consistent and beneficial in terms of detecting problematic
issues and potential compliance problems. In addition, USDA said that, in
consideration of efficiency, FSA has made a targeted selection and
devoted its limited resources to identifying farming operations considered
most likely to have potential payment eligibility and payment limitation
compliance issues. However, as discussed in our report, USDA selects
very few cases for end-of-year reviews. For example, in 2008 and 2009,
only 0.04 percent of operations receiving direct payments were selected. In
addition, as noted in the report, these reviews were often not done in a
timely fashion as measured by USDA’s own time frames. For example, as
of September 2011, 271, or 71 percent, of 380 pending reviews for 2008
were more than 6 months past USDA’s expected completion date. Given
this very small sample and the lack of timeliness associated with many of
these reviews, we continue to believe that USDA should consider options
to increase the number and improve the timeliness of these reviews. To
eliminate potential confusion about FSA’s use of a judgmental sample, we
revised our third recommendation by removing the words “the quantity and
quality” from an earlier draft to clarify our emphasis on improving the scope
and timeliness of these reviews.

Regarding the fourth recommendation that USDA maintain
comprehensive data on misrepresentation and enforcement actions taken
nationwide as needed for management oversight and reporting purposes,
USDA agreed and stated there is value in maintaining data on
misrepresentation and enforcement actions. It stated that the
development of such a capability has been planned for a number of years
but that other projects, such as the implementation of the 2008 Farm Bill
and the development and implementation of a robust process for verifying
producer compliance with adjusted gross income limits have taken
precedence. We understand that USDA has many competing priorities,
but its decision to not pursue a more comprehensive oversight process—
including maintaining comprehensive data on misrepresentation and
tracking the referral of cases for enforcement—means the number and
value of improper payments and program fraud may be
underrepresented.




Page 33                                              GAO-12-640 Farm Programs
We are sending copies of this report to the Secretary of Agriculture,
appropriate congressional committees, and other interested parties. The
report also is available at no charge on the GAO website at
http://www.gao.gov.

If you or your staff members have any questions about this report, please
contact me at (202) 512-3841 or shamesl@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. GAO staff who made key contributions to
this report are listed in appendix VIII.




Lisa Shames
Director
Natural Resources and Environment




Page 34                                            GAO-12-640 Farm Programs
List of Requesters

The Honorable Henry A. Waxman
Ranking Member
Committee on Energy and Commerce
United States House of Representatives

The Honorable Darrell E. Issa
Chairman
The Honorable Elijah Cummings
Ranking Member
Committee on Oversight
  and Government Reform
United States House of Representatives

The Honorable Jim Cooper
Ranking Member
Subcommittee on Oversight
  and Investigations
Committee on Armed Services
House of Representatives

The Honorable Earl Blumenauer
House of Representatives

The Honorable Ron Kind
House of Representatives

The Honorable Jeff Flake
House of Representatives




Page 35                                  GAO-12-640 Farm Programs
Appendix I: Objectives, Scope, and
              Appendix I: Objectives, Scope, and
              Methodology



Methodology

              The objectives of our review were to: (1) provide information regarding
              the geographic distribution and ownership characteristics of payment
              recipients, as well as the dollar amount of direct payments made for land
              with qualifying acreage and amount and types of crops grown on
              qualifying acreage from 2003 through 2011 and (2) examine whether
              direct payments are aligned with principles significant to integrity,
              effectiveness, and efficiency in farm bill programs.

              To conduct this work, we analyzed U.S. Department of Agriculture
              (USDA) data, interviewed agency officials, reviewed applicable laws,
              regulations, and guidance, and reviewed and updated past GAO work.
              Specifically, to provide information about the geographic distribution and
              ownership characteristics of payment recipients and to determine the
              dollar amount of direct payments made for land with qualifying acreage,
              we obtained disaggregated data from USDA’s Farm Service Agency
              (FSA) indicating the number, amount, and payee for direct payments
              made from program years 2003 through 2011—that is, from the
              program’s first full year of operation through the most recent year for
              which complete program data are available. 1 In particular, we reviewed
              the Food, Conservation, and Energy Act of 2008 (2008 Farm Bill) to
              determine which crops are eligible for direct payments and determined
              that we would include barley, canola, corn, cotton (upland), crambe, flax,
              mustard, oats, peanuts, rapeseed, rice, safflower, sesame, sorghum,
              soybeans, sunflower, and wheat in our analysis. Further, we reviewed
              and evaluated USDA documents for collecting data from direct payment
              recipients regarding land usage, in particular the Farm Operating Plan for
              Payment Eligibility Review for individuals and entities, to identify
              appropriate data elements for use in our analyses. In particular, we
              obtained data from USDA’s compliance share file that indicates how
              producers—whether individuals or entities—are involved and whether
              they own a particular farm field or area of land for which direct payments
              were made. Producers report they either (1) own and operate the farm
              (“owner-operators”), (2) operate but do not own the farm (“tenants”), or (3)
              are an owner of the farm (“other owners”). We also obtained
              disaggregated USDA data indicating the number of base acres and
              planting history for each farm for which direct payments were made.
              When analyzing direct payments spending, we assigned a payment



              1
               A program year is the year for which the program runs and benefits may be received. For
              direct payments, the program year corresponds with the federal fiscal year.




              Page 36                                                      GAO-12-640 Farm Programs
Appendix I: Objectives, Scope, and
Methodology




according to its program year; that is, the year in which the payment was
associated with since it is possible for payments to be made after the end
of the program year for which they are made.

USDA does not collect the zip codes of farms with which direct payment
are associated. We therefore obtained data for the centroid point—the
geometric center—of the county in which the farm resides and calculated
the distance from it to the centroid point of the payment recipient’s zip
code. In addition, USDA provided reliable address files for payees from
2008 through 2011. USDA data do not differentiate between the
program’s base acres and a farm’s other acres, and producers report one
aggregated number of acres for each crop planted. To determine the
relative percentage of base acres planted with the base acre crops, we
compared the acreage of a farm planted in a particular crop with its base
acres of that crop. Because a producer may plant 100 percent of the
farm’s base acres in any crop, plus a portion of additional acres on the
farm that exceeds the base acre amount, more than 100 percent of base
acres may be planted in a certain crop. We assessed the reliability of
USDA’s data by (1) performing electronic testing of required data
elements, (2) reviewing existing information about the data and the
system that produced them, and (3) interviewing agency officials
knowledgeable about the data. We determined that the data were
sufficiently reliable for the purposes of this report. We used geographic
information system (“GIS”) software to map selected results of our
quantitative analyses. We also interviewed FSA officials regarding the
results of our data analysis; these officials indicated that they generally
found these results to be credible.

To examine whether direct payments are aligned with principles
significant to integrity, effectiveness, and efficiency in farm bill programs,
we reviewed our past work, particularly more recent work that identifies
relevant principles to consider for farm bill reauthorization. These
principles are relevance, distinctiveness, targeting, affordability,
effectiveness, and oversight. 2 The resulting principles and associated key
questions may not represent all potential principles that could be
considered. We collected additional data where possible to determine
how circumstances regarding direct payments may have changed more
recently and evaluated direct payments according to the principles



2
GAO-12-338SP.




Page 37                                               GAO-12-640 Farm Programs
Appendix I: Objectives, Scope, and
Methodology




identified for in our earlier work. We also reviewed our March 2011 report,
which discussed observations regarding direct payments. 3 In applying the
identified principles to direct payments, we considered information on the
program’s original purpose; its potential, if any, to duplicate payments
under other programs; who benefits from the program; the nation’s deficit
and debt challenges; the program’s potential, if any, to have unintended
consequences; and program oversight measures taken by FSA.
However, based on our past work, we believe these principles to be
significant to integrity, effectiveness, and efficiency in farm bill programs
since 2003, when much of the 2002 Farm Bill was implemented. Further,
USDA’s Office of Inspector General shares this point of view and issued a
companion report to our report using the same principles and based on its
own past work for this time frame. 4

Regarding oversight, we interviewed FSA and Office of Inspector General
officials and reviewed documentation FSA provided, including information
related to investigations of potential fraud related to direct payments. We
also visited several FSA county offices in each of two states—Arizona
and Louisiana—to discuss oversight issues, review farm operating plan
files, and observe the use of cropland in these counties associated with
direct payments. 5 In addition, we interviewed officials by phone in FSA
county offices in two other states—California and Mississippi—to discuss
oversight issues. 6 In general, we judgmentally selected these offices
because (1) the office has a relatively large number of end-of-year
compliance reviews, 7 (2) the county has a relatively large number of
farms with cropland associated with direct payments that has not been



3
GAO-11-318SP.
4
 USDA Office of Inspector General, Farm Bill: Principles to Help Guide Its Design and
Implementation, IG-50099-001-10 (Washington, D.C.: Apr. 20, 2012).
5
 In Arizona, we visited FSA county offices in Maricopa, Pima, and Pinal counties. In
Louisiana, we visited FSA county offices in Madison, Morehouse, and Richland parishes.
6
 In California, we spoke by phone with FSA county office officials in Colusa and Fresno
counties. In Mississippi, we spoke by phone with FSA county office officials in Bolivar and
Coahoma counties.
7
 To ensure compliance with payment limitation and eligibility provisions (as provided in
statute and regulation), FSA conducts end-of-year compliance reviews of some farming
operations each year to determine that they were carried out as represented in their farm
operating plans. This includes an assessment of whether individuals associated with a
farming operation meet criteria for being actively engaged in farming.




Page 38                                                         GAO-12-640 Farm Programs
Appendix I: Objectives, Scope, and
Methodology




planted with crops in recent years, and/or (3) the county is experiencing
rapid urban development. The information gathered at these locations
cannot be generalized to the experience of all FSA county offices.

We conducted this performance audit from August 2011 to June 2012 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.




Page 39                                             GAO-12-640 Farm Programs
Appendix II: Principles Significant to the
               Appendix II: Principles Significant to the
               Integrity, Effectiveness, and Efficiency of Farm
               Bill Programs


Integrity, Effectiveness, and Efficiency of
Farm Bill Programs
               In April 2012 we identified certain principles as applicable to Congress’s
               deliberations for the 2012 Farm Bill and significant to the integrity,
               effectiveness, and efficiency in farm bill programs, such as direct
               payments. 1 Specifically, we identified these principles to be relevance,
               distinctiveness, targeting, affordability, effectiveness, and oversight. Key
               questions associated with these principles are shown below. Our list of
               principles may not represent all potential principles that could be
               considered.

               1. Relevance: Does the program concern an issue of national interest?
                  Is the program consistent with current statutes and international
                  agreements? Have the domestic and international food and
                  agriculture sectors changed significantly, or are they expected to
                  change, in ways that affect the program’s purpose?

               2. Distinctiveness: Is the program unique and free from overlap or
                  duplication with other programs? Is it well coordinated with similar
                  programs?

               3. Targeting: Is the program’s distribution of benefits consistent with
                  contemporary assessments of need?

               4. Affordability: Is the program affordable, given the nation’s severe
                  budgetary constraints? Is it using the most efficient, cost-effective
                  approaches?

               5. Effectiveness: Are program goals clear, with a direct connection to
                  policies, resource allocations, and actions? Does the program
                  demonstrate measurable progress toward its goals? Is it generally
                  free of unintended consequences, including ecological, social or
                  economic effects? Does the program allow for adjustments to
                  changes in markets?

               6. Oversight: Does the program have mechanisms, such as internal
                  controls, to monitor compliance and help minimize fraud, waste, and
                  abuse in areas where these are most likely to occur?




               1
                GAO-12-338SP.




               Page 40                                               GAO-12-640 Farm Programs
Appendix III: Ownership Characteristics of
                                       Appendix III: Ownership Characteristics of
                                       Land for Which Direct Payments Were Made



Land for Which Direct Payments Were Made

                                       Data from USDA’s compliance share file indicate how producers—
                                       whether individuals or entities—are involved and whether they own a
                                       particular farm field or area of land for which direct payments were made.
                                       Producers report they either (1) own and operate the farm (“owner-
                                       operator”), (2) operate but do not own the farm (“tenants”), or (3) are an
                                       owner of the farm (“other owners”). Our analysis of USDA data found that
                                       ownership characteristics of land for which direct payments were made
                                       have changed from 2003 through 2011, as shown in table 3.

Table 3: Changes in Ownership of Land for Which Direct Payments Were Made, All Covered Crops

                      Millions of                               Millions of
                   acres, owner-        Millions of            acres, other  Percentage,              Percentage,    Percentage,
Year                   operators    acres, tenants                 owners owner-operators                 tenants   other owners
2003                       76.76            144.65                          35.16   29.92%                56.38%          13.70%
2004                       73.87            146.83                          33.46     29.07                 57.77           13.16
2005                       66.65            150.85                          32.41     26.67                 60.36           12.97
2006                       57.85            154.53                          30.64     23.81                 63.59           12.61
2007                       58.82            157.30                          30.76     23.82                 63.72           12.46
2008                       60.64            161.74                          31.02     23.93                 63.83           12.24
2009                       59.51            160.70                          30.09     23.78                 64.20           12.02
2010                       66.39            153.48                          29.32     26.64                 61.59           11.77
2011                       67.03            158.73                          29.67   26.24%                62.14%          11.62%
                                       Source: GAO analysis of USDA data.

                                       Note: Numbers may not total 100 percent because of rounding.




                                       Page 41                                                            GAO-12-640 Farm Programs
                                        Appendix III: Ownership Characteristics of
                                        Land for Which Direct Payments Were Made




                                        Moreover, we found that the ownership characteristics regarding the
                                        operation of land for which direct payments were made varied according
                                        to which crops were grown. Table 4 shows these variations by crop, for all
                                        covered crops, corn, cotton, oats, rice, soybeans, and wheat in 2011.

Table 4: Ownership Characteristics, All Covered Crops, Corn, Cotton, Oats, Rice, Soybeans, and Wheat, 2011

                       Millions of                              Millions of
                    acres, owner-        Millions of           acres, other            Percentage,    Percentage,    Percentage,
Crop type               operators    acres, tenants                owners           owner-operators       tenants   other owners
All covered crops           67.03            158.73                      29.67              26.24%        62.14%          11.62%
Corn                        25.48              56.79                         9.64             27.73         61.79           10.49
Cotton (upland)              1.74              10.82                         1.87             12.05         74.97           12.98
Oats                         0.76                0.87                        0.09             44.06         50.70            5.24
Rice                         0.28                2.31                        0.36              9.54         78.19           12.27
Soybeans                    19.65              47.29                         8.31             26.11         62.84           11.04
Wheat                       15.97              32.47                         7.79           28.39%        57.75%          13.86%
                                        Source: GAO analysis of USDA data.

                                        Note: Percentages may not total to 100 because of rounding.




                                        Page 42                                                           GAO-12-640 Farm Programs
Appendix IV: Analysis of Direct Payment
             Appendix IV: Analysis of Direct Payment Crops
             Grown Compared with Base Acreage
             Allocations


Crops Grown Compared with Base Acreage
Allocations
             Our analysis of USDA data found variation in the extent to which
             producers grew the crop associated with their base acres. Table 5 depicts
             the results for each crop eligible for direct payments, as well as the totals
             for all eligible crops, from 2003 through 2011.

             Table 5: Planted Acres of Base Acre Crop as a Percentage of Base Acres, from 2003
             through 2011

                                            Millions of actual                                   Planting as
                                             planted acres of       Millions of base           percentage of
              Crop name                       base acre crop                   acres              base acres
              Barley                                       27.61              79.39                    34.78%
              Canola                                        6.57                6.46                   101.65
              Corn                                        692.38             791.14                      87.52
              Cotton (upland)                             100.42             169.00                      59.42
              Crambe                                        0.00                0.17                      2.43
              Flax                                          1.57                1.65                     95.49
              Mustard                                       0.10                0.27                     35.13
              Oats                                         15.74              29.19                      53.91
              Peanuts                                       6.89              13.67                      50.38
              Rapeseed                                      0.00                0.02                     17.44
              Rice                                         26.18              40.67                      64.38
              Safflower                                     0.61                0.95                     63.73
              Sesame                                        0.01                0.01                     60.69
              Sorghum                                      45.95             108.63                      42.30
              Soybeans                                    592.76             472.19                    125.53
              Sunflower                                    10.70              16.49                      64.87
              Wheat                                       488.14             685.18                      71.24
                                                  Total: 2,015.63    Total: 2,415.08       Average: 83.46%
             Source: GAO analysis of USDA data.

             Notes: (1) The millions of actual planted acres of base crop was more specifically 0.0042 million
             acres for crambe and 0.0058 for sesame; the planting as percentage of base acres was more
             specifically 2.4282 for crambe and 60.6945 for sesame. (2) Numbers may not add to totals because
             of rounding.




             Page 43                                                              GAO-12-640 Farm Programs
Appendix V: Analysis of Extent to Which Producers
                                          Appendix V: Analysis of Extent to Which
                                          Producers Did Not Grow Any of the Crop
                                          Associated with Their Base Acres in a Given

Did Not Grow Any of the Crop Associated with
                                          Year



Their Base Acres in a Given Year

                                          Our analysis of USDA data found that some producers chose to not grow
                                          any of the crop associated with their base acres in a given year—as they
                                          are allowed to do. Table 6 depicts our results of this analysis, by crop,
                                          and the corresponding value of direct payments made for each crop.

Table 6: Cumulative Value of Direct Payments Made for Which the Crop Associated with the Base Acres Was Not Grown in a
Given Year from 2003 through 2011

                       Millions of base acres
                            for which no base                                               Percentage of base        Millions paid for base
                       acre crop was planted                                             acres not planted with      acres not planted with
                                in a given year                  Millions of            any of the base acreage         any base acre crop
Crop name                          (cumulative)     base acres (cumulative)                 crop in a given year                (cumulative)
Barley                                   54.07                                  79.39                   68.11%                       $457.13
Canola                                    3.75                                   6.46                     58.02                         23.82
Corn                                    138.91                                 791.14                     17.56                      2,659.77
Cotton (upland)                          62.06                                 169.00                     36.72                      1,907.38
Crambe                                    0.17                                   0.17                     98.88                          1.22
Flax                                      1.16                                   1.65                     70.20                          4.99
Mustard                                   0.24                                   0.27                     88.05                          0.91
Oats                                     20.02                                  29.19                     68.57                         17.24
Peanuts                                   6.58                                  13.67                     48.13                        272.35
Rapeseed                                  0.01                                   0.02                     89.67                          0.09
Rice                                     10.64                                  40.67                     26.17                        885.49
Safflower                                 0.68                                   0.95                     71.67                          2.98
Sesame                                    0.01                                   0.01                     77.69                          0.01
Sorghum                                  70.04                                 108.63                     64.47                      1,098.26
Soybeans                                 73.71                                 472.19                     15.61                        732.21
Sunflower                                10.97                                  16.49                     66.50                         73.37
Wheat                                   180.11                                 685.18                     26.29                      2,507.65
                                 Total: 633.11                    Total: 2,415.08              Average: 26.22%            Total: $10,644.88
                                          Source: GAO analysis of USDA data.

                                          Notes: (1) The producer could have planted another crop, as they are allowed to do. (2) The millions
                                          of acres for which no base acre crop was planted in a given year (cumulative) was more precisely
                                          0.169 for crambe and 0.007 for sesame; the millions of base acres (cumulative) for the period was
                                          more precisely 0.171 for crambe and 0.009 for sesame. (3) The dollar totals represent the amount
                                          paid for producers of a particular crop who did not plant any of the base acre crop in a given year,
                                          cumulative from 2003 through 2011. (4) Numbers may not add to the totals because of rounding.




                                          Page 44                                                                  GAO-12-640 Farm Programs
Appendix VI: Analysis, by State, of the Number of Farms
                  Appendix VI: Analysis, by State, of the Number
                  of Farms Fallow from 2007 through 2011 and
                  the Value of Direct Payments Made to

Fallow from 2007 through 2011 and the Value of Direct
                  Producers for These Farms in 2011



Payments Made to Producers for These Farms in 2011

                  According to our analysis of USDA data, 2,327 farms, or about
                  0.15 percent of the 1.6 million farms receiving direct payments in 2011,
                  reported all their land as “fallow” from 2007 through 2011. That is,
                  producers did not plant any crops of any type on this land in any year
                  during this 5-year period, as they are allowed to do in accordance with
                  planting flexibility rules. Table 7 presents the results of our analysis, by
                  state, of the number of such fallow farms in each state, including the
                  direct payments received by producers on these farms in 2011.

                  Table 7: Number of Farms Where Producers Planted No Crop of Any Type from
                  2007 through 2011 and Value of Direct Payments Received by These Producers in
                  2011, by State

                                                    Number of farms that       Direct payments made in
                                             reported all their land fallow   2011 for such fallow farms
                  State                          from 2007 through 2011                          (dollars)
                  Alabama                                               82                       $44,105
                  Alaska                                                 0                              0
                  Arizona                                               85                       750,531
                  Arkansas                                             124                       135,216
                  California                                            85                       307,182
                  Colorado                                              14                         11,216
                  Connecticut                                            1                            280
                  Delaware                                               0                              0
                  Florida                                               60                         25,716
                  Georgia                                              551                       307,388
                  Hawaii                                                 0                              0
                  Idaho                                                 20                         17,726
                  Illinois                                               6                          1,675
                  Indiana                                               13                          3,668
                  Iowa                                                   0                              0
                  Kansas                                                 8                          4,957
                  Kentucky                                               1                            144
                  Louisiana                                            322                       346,514
                  Maine                                                  0                              0
                  Maryland                                               4                            832
                  Massachusetts                                          0                              0
                  Michigan                                              27                          7,544
                  Minnesota                                              3                          1,141
                  Mississippi                                           83                         41,735




                  Page 45                                                      GAO-12-640 Farm Programs
Appendix VI: Analysis, by State, of the Number
of Farms Fallow from 2007 through 2011 and
the Value of Direct Payments Made to
Producers for These Farms in 2011




                                            Number of farms that       Direct payments made in
                                     reported all their land fallow   2011 for such fallow farms
 State                                   from 2007 through 2011                          (dollars)
 Missouri                                                        7                           2,758
 Montana                                                         1                           1,693
 Nebraska                                                        4                           2,441
 Nevada                                                          0                               0
 New Hampshire                                                   0                               0
 New Jersey                                                      3                           1,007
 New Mexico                                                     68                        204,381
 New York                                                       18                           6,198
 North Carolina                                                169                         34,389
 North Dakota                                                    8                           3,052
 Ohio                                                           32                         11,840
 Oklahoma                                                       22                         12,909
 Oregon                                                          3                             984
 Pennsylvania                                                    5                           2,004
 Rhode Island                                                    0                               0
 South Carolina                                                283                        103,858
 South Dakota                                                    1                           1,413
 Tennessee                                                      28                           6,382
 Texas                                                         134                        449,438
 Utah                                                            3                           3,569
 Vermont                                                         1                             334
 Virginia                                                       25                           2,902
 Washington                                                     11                         11,103
 West Virginia                                                   0                               0
 Wisconsin                                                      11                           6242
 Wyoming                                                         1                             261
 Total                                                       2,327                    $2,876,728
Source: GAO analysis of USDA data.

Note: We are reporting payments made in the most recent year for which data are available, 2011, to
producers of farms that we identified as being fallow for 5 consecutive years, from 2007 through
2011.




Page 46                                                                GAO-12-640 Farm Programs
Appendix VII: Comments from the U.S.
              Appendix VII: Comments from the U.S.
              Department of Agriculture



Department of Agriculture




              Page 47                                GAO-12-640 Farm Programs
Appendix VII: Comments from the U.S.
Department of Agriculture




Page 48                                GAO-12-640 Farm Programs
Appendix VIII: GAO Contact and Staff
                  Appendix VIII: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  Lisa Shames, (202) 512-3841 or shamesl@gao.gov
GAO Contact
                  In addition to the individual named above, James R. Jones, Jr. (Assistant
Staff             Director); Alisa Beyninson; Ellen W. Chu; Michael Kendix; and Michelle
Acknowledgments   Munn made key contributions to this report. Important contributions were
                  also made by Benjamin Bolitzer, Kevin Bray, Tom Cook, Melinda
                  Cordero, Greg Dybalski, Barbara El Osta, Rebecca Makar, John Mingus,
                  Susan Offutt, Anne Rhodes-Kline, Ardith A. Spence, Kiki
                  Theodoropoulous, and Michelle K. Treistman.




                  Page 49                                            GAO-12-640 Farm Programs
Related GAO Products
             Related GAO Products




             Farm Bill: Issues to Consider for Its Reauthorization, GAO-12-338SP.
             April 24, 2012.

             Crop Insurance: Savings Would Result from Program Changes and
             Greater Use of Data Mining, GAO-12-256. Washington, D.C.:
             March 13, 2012.

             Follow-up on 2011 Report: Status of Actions Taken to Reduce
             Duplication, Overlap, and Fragmentation, Save Tax Dollars, and Enhance
             Revenue, GAO-12-453SP. Washington, D.C.: February 28, 2012.

             Opportunities to Reduce Potential Duplication in Government Programs,
             Save Tax Dollars, and Enhance Revenue GAO-11-318SP. Washington,
             D.C.: March 1, 2011.

             2012 Annual Report: Opportunities to Reduce Duplication, Overlap and
             Fragmentation, Achieve Savings, and Enhance Revenue,
             GAO-12-342SP. Washington, D.C.: February 28, 2012.

             USDA Crop Disaster Programs: Lessons Learned Can Improve
             Implementation of New Crop Assistance Program, GAO-10-548.
             Washington, D.C.: June 4, 2010.

             Crop Insurance: Opportunities Exist to Reduce the Costs of Administering
             the Program, GAO-09-445. Washington, D.C.: April 29, 2009.

             Federal Farm Programs: USDA Needs to Strengthen Controls to Prevent
             Payments to Individuals Who Exceed Income Eligibility Limits,
             GAO-09-67. Washington, D.C.: October 24, 2008.

             Agricultural Conservation: Farm Program Payments Are an Important
             Factor in Landowners’ Decisions to Convert Grassland to Cropland.
             GAO-07-1054. Washington, D.C.: September 18, 2007.

             Beginning Farmers: Additional Steps Needed to Demonstrate the
             Effectiveness of USDA Assistance, GAO-07-1130. Washington, D.C.:
             September 10, 2007.

             USDA Needs to Strengthen Management Controls to Prevent Improper
             Payments to Estates and Deceased Individuals. GAO-07-1137T.
             Washington, D.C.: July 24, 2007.




             Page 50                                           GAO-12-640 Farm Programs
           Related GAO Products




           Federal Farm Programs: USDA Needs to Strengthen Controls to Prevent
           Improper Payments to Estates and Deceased Individuals, GAO-07-818.
           Washington, D.C.: July 9, 2007.

           Crop Insurance: Continuing Efforts Are Needed to Improve Program
           Integrity and Ensure Program Costs Are Reasonable, GAO-07-944T.
           Washington, D.C.: June 7, 2007.

           Crop Insurance: Continuing Efforts Are Needed to Improve Program
           Integrity and Ensure Program Costs Are Reasonable, GAO-07-819T.
           Washington, D.C.: May 3, 2007.

           Crop Insurance: More Needs to Be Done to Reduce Program’s
           Vulnerability to Fraud, Waste, and Abuse, GAO-06-878T. Washington,
           D.C.: June 15, 2006.

           Crop Insurance: Actions Needed to Reduce Program’s Vulnerability to
           Fraud, Waste, and Abuse, GAO-05-528. Washington, D.C.: September
           30, 2005.

           Farm Program Payments: USDA Should Correct Weaknesses in
           Regulations and Oversight to Better Ensure Recipients Do Not
           Circumvent Payment Limitations, GAO-04-861T. Washington, D.C.: June
           16, 2004.

           Crop Insurance: USDA Needs to Improve Oversight of Insurance
           Companies and Develop a Policy to Address Any Future Insolvencies,.
           GAO-04-517. Washington, D.C.: June 1, 2004.

           Farm Program Payments: USDA Needs to Strengthen Regulations and
           Oversight to Better Ensure Recipients Do Not Circumvent Payment
           Limitations, GAO-04-407. Washington, D.C.: April 30, 2004.

           Federal Budget: Opportunities for Oversight and Improved Use of
           Taxpayer Funds, GAO-03-1030T. Washington, D.C.: July 17, 2003.




(361318)
           Page 51                                         GAO-12-640 Farm Programs
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