Agency 

Financial Report 2016

Creating prosperity for self-sustaining, repopulating 

and economically thriving communities.

 
NON-DISCRIMINATION S TATEMENT 

Non-Discrimination Statement

The U.S. Department of Agriculture (USDA) prohibits discrimination against its customers, 

employees, and applicants for employment on the basis of race, color, national origin, age, 

disability, sex, gender identity, religion, protected genetic information, reprisals for whistle 

blowing or filing grievances, and where applicable, political beliefs, marital status, familial or 

parental status, sexual orientation; or whether all or part of an individual’s income is derived 

from any public assistance program or any program or activity conducted or funded by the 

Department. (Not all prohibited discrimination will apply to all programs and/or employment 

activities.)

To File an Employment Complaint 

If you wish to file an employment complaint, you must contact your agency’s Equal 

Employment Opportunity (EEO) Counselor within 45 days of the date of the alleged 

discriminatory act, event, or personnel action. Additional information can be found on the 

USDA Office of the Assistant Secretary of Civil Rights web site. 

To File a Program Complaint 

To file a program discrimination complaint, please complete the USDA Program 

Discrimination Complaint Form. You or your authorized representative must sign the 

complaint form. You are not required to use the complaint form; you may write a letter instead. 

If you write a letter, it must contain all of the information requested in the form and be signed 

by you or your authorized representative. Incomplete information will delay the processing of 

your complaint. Employment civil rights complaints will not be accepted through the email

address below. 

Persons with disabilities who require alternative means for communication of program 

information (Braille, large print, audiotape, etc.) should contact USDA’s TARGET Center at 

(202) 720-2600 (voice and TDD). 

Send your completed complaint form or letter to us by mail, fax, or email: 

Mail

U.S. Department of Agriculture 

Director, Office of Adjudication

1400 Independence Avenue, SW

Washington, DC 20250-9410 

Fax: (202) 690-7442 

E-mail: program.intake@usda.gov
USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

About the Report

The purpose of the U.S. Department of Agriculture (USDA) fiscal year (FY) 2016 Agency 

Financial Report (AFR) is to inform Congress, the President, and the American people on how 

USDA has used Federal resources entrusted to the Department in FY 2016 in order to do the 

following: expand economic opportunity through innovation; help rural America to thrive 

while promoting agriculture production sustainability that better nourishes the population; and 

preserve and conserve the Nation’s natural resources. USDA has demonstrated good 

stewardship of financial resources by putting in place well controlled and managed business 

lines and financial management systems and processes. USDA has chosen to produce both an 

AFR and an Annual Performance Report (APR) for FY 2016. USDA will include its FY 2016 

APR with its Congressional Budget Justification and will post this AFR on the following 

Department Web Page.

This AFR provides high-level financial and highlighted performance results with assessments 

of controls, a summary of challenges, and USDA stewardship information. The AFR enables 

the President, Congress, and the public to assess USDA accomplishments and understand its 

financial position. USDA’s end-of-fiscal-year financial position includes, but is not limited to, 

financial statements, notes to the financial statements, and a report of the independent auditors. 

The report satisfies the reporting requirements contained in the following laws and regulations: 

• Improper Payments Elimination and Recovery Act of 2010; 

• Improper Payments Elimination and Recovery Improvement Act of 2012 (IPERIA); 

• Government Performance and Results Modernization Act of 2010; 

• Improper Payments Information Act of 2002; 

• Reports Consolidation Act of 2000; 

• Government Management Reform Act of 1994; 

• Chief Financial Officers Act of 1990; 

• Federal Managers’ Financial Integrity Act of 1982; 

• Federal Financial Management Improvement Act of 1996; 

• Office of Management and Budget Circular A-123, Management’s Responsibility for 

Internal Controls; and 

• Office of Management and Budget Circular A-136, Financial Reporting Requirements. 
ABOUT THIS REPORT 

The APR is a detailed report on USDA’s progress toward achieving the goals and objectives 

described in the Agency’s Strategic Plan and Annual Performance Plan, including progress on 

the strategic objectives, performance goals, and Agency Priority Goals. The report will be 

delivered to Congress with the annual budget submission. 

This report is to be posted on these Web sites: Performance.gov and the USDA Performance 

Improvement and Accountability at USDA Web page. Previous reports are posted as well. 
USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Table of Contents

Message from Secretary Vilsack ................................................................................................. i

Section I: Management’s Discussion and Analysis ..................................................................... 1

About USDA ................................................................................................................................ 1

Mission Statement ..................................................................................................................... 1

Strategic Plan and Program Performance................................................................................. 7

Future Demands, Risks, Uncertainties, Events, Conditions, and Trends...............................18

Analysis of Financial Information and Highlights....................................................................19

Statement of Assurance...........................................................................................................22

Federal Managers’ Financial Integrity Act Report on Management Control........................25

Federal Financial Management Improvement Act Report on Financial 

 Management Systems.........................................................................................................38

Financial Management Systems Strategy ...............................................................................41

Other Management Information, Initiatives, and Issues.......................................................46

Limitations of Financial Statement..........................................................................................47

Section II: Financial Information .............................................................................................. 48

Message from Chief Financial Officer .....................................................................................48

Independent Auditors Report..................................................................................................50

Agency Response to Auditors Report......................................................................................72

Consolidated Balance Sheet ....................................................................................................75

Notes to the Consolidated Balance Sheet...............................................................................76

Required Supplementary Stewardship Information.............................................................120

Required Supplementary Information ..................................................................................132

Section III: Other Information ................................................................................................ 138

Unaudited Financial Statements ...........................................................................................138

Unaudited Notes to Financial Statements............................................................................141

Schedule of Spending.............................................................................................................161

Response to Management Challenges..................................................................................163

Summary of Financial Statement Audit and Management Assurances..............................184

Improper Payments................................................................................................................186

Inspector General Act Amendments of 1988: Management’s Report on 

 Audit Follow Up .................................................................................................................264

Freeze the Footprint ..............................................................................................................279

Civil Monetary Penalties ........................................................................................................280

Abbreviations—Acronyms ..................................................................................................... 300
MESSAGE FROM THE SECRETARY i 

Message from Secretary Vilsack

In fulfillment of our duty to the people, the President, and Congress, 

the U.S. Department of Agriculture (USDA) respectfully submits the 

Fiscal Year 2016 Agency Financial Report. 

For more than 7 years, I have had the honor and privilege of serving 

as Secretary of Agriculture. I have traveled to all 50 states and heard 

rural Americans—from local businesses, community leaders, farmers, ranchers and other 

Americans far and wide, from all walks of life talk about the impact that USDA’s staff, 

programs and services have on their lives. I could not be more proud of the work the men and 

women of USDA do each and every day. 

In fiscal year (FY) 2016, the final full year of this Administration, these men and women 

continued to press on in their work and celebrate the many successes of programs they have 

helped to implement. While 2016 was not without its challenges, these were outshined by 

achievements in every one of USDA’s mission areas on behalf of the American people. We 

saw record amounts of credit and support delivered to America’s farmers and ranchers, the 

lowest child food insecurity rates on record, and booming local and regional and organic sales, 

to name several. 

Our efforts not only supported the most productive agricultural sector in the world, but also 

helped rural communities become places where businesses, farm and non-farm alike, prosper 

and create jobs. Even as commodity prices have weakened and farm incomes have decreased, 

the rural economy remains strong. Our work to increase trade, grow the bioeconomy, 

strengthen local and regional food systems, and expand conservation have resulted in a more 

resilient rural economy. 

Like urban areas, rural America is continuing to recover from the Great Recession. Median 

income for farm households remains near the historic high of 2014—35 percent higher than 

median U.S. household income in 2015. Nationally, the real median household income for 

middle class Americans saw a record 5.2 percent increase in 2015. While the nonmetro rates of 

unemployment still lag behind the metro areas, nonmetro rates have been recovering at about 

the same pace, and we know that both are approaching pre-recessional levels of around 

5 percent, providing increasing opportunities for farm families. While the population of rural 

areas has been flat or declining lately, we also see that the proportion of adults living in rural 
i i USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

areas with some college training now exceeds metro areas. Those bode well for rural America, 

and we have seen poverty in nonmetro areas falling in 2015 to its lowest point since 2008. 

A major component of USDA’s mission is to provide food assistance to America’s most 

vulnerable citizens, including children. A September 2016 report by USDA’s Economic 

Research Service shows that since President Obama took office, 7.9 million fewer people are 

struggling to provide adequate food for themselves or household members. The report also 

shows that in 2015, household food insecurity fell 1.3 percentage points from 2014 and 

2.2 points from 2011—the peak of the recession. At the same time, very low food security has 

dropped to 5 percent from a peak of 5.7 percent. The report showed the lowest figures on 

record for food insecurity among children—a major achievement in our country’s efforts to 

ensure every child has a safer, healthier future filled with unlimited opportunity. 

In 2016, this Administration continued its strong support for the Supplemental Nutrition 

Assistance Program (SNAP). SNAP kept at least 4.7 million people, including nearly 

2.1 million children, out of poverty in 2014. During the 2014-2015 school year, over 97 percent 

of schools successfully met the nutrition standards of the Healthy, Hunger-Free Kids Act by 

serving meals with more whole grains, fruits, vegetables, lean protein, and low-fat dairy, and 

less sodium and fat. In the first year of nationwide implementation of the Community 

Eligibility Provision (CEP), we have also seen progress in reducing the administrative burden 

on schools and improving program integrity while increasing the number of low-income 

children certified for school meals. About 60 percent of eligible schools in nearly 3,000 school 

districts are participating in CEP, reaching more than 8.5 million students. 

Over 22 million students participate in free and reduced-price meals during the school year, but 

only a fraction are participating in summer meals. Because hunger does not take a vacation 

during the summer months when school meals are unavailable, we have expanded the Summer 

EBT for Children demonstration pilots over the last 2 years. Rigorous evaluations of Summer 

EBT pilots demonstrate how the program effectively reduces food insecurity and improves 

nutrition. In tandem, we have expanded summer food programs—serving nearly 4 million 

children in the summer of 2015. 

Records were also set last year in terms of agricultural trade. In FY 2015, American 

agricultural producers achieved $139.7 billion in exports, the third highest year on record and 

up 45 percent from FY 2009. Agricultural exports totaled over $911 billion for the period 

FY 2009 through FY 2015, the best 7-year stretch in history. The volume and value of 

agricultural exports support more than one million American jobs both on and off the farm each 

year, a significant part of the estimated 11.5 million jobs supported by exports all across the 

country. Agricultural exports support farm income, which translates into more economic 
MESSAGE FROM THE SECRETARY iii 

activity in rural areas. Each dollar of agricultural exports is estimated to stimulate another 

$1.27 in business activity. 

USDA’s efforts knocked down trade barriers to U.S. exports in more than 18 countries, 

reopening markets to U.S. agricultural exports. In 2015 alone, USDA resolved foreign access 

market issues involving U.S. agricultural exports valued at $3.6 billion. In 2016, Saudi Arabian 

and Peruvian markets reopened for U.S. beef; the South Korean market reopened for U.S. 

poultry; and the South African market reopened for U.S. poultry, pork, and beef.

U.S. agricultural exports to Panama, Colombia, and South Korea grew by nearly 28 percent, 

from $7.6 billion in FY 2012, when the trade agreements with those countries first went into 

effect, to $9.7 billion in FY 2015, supporting approximately 73,000 American jobs. Following 

years of USDA-led technical exchange, the United States and China signed an agreement in 

2015 to expand market access for U.S. apples from just two varieties to all U.S.-grown 

varieties. The Chinese apple market could be worth nearly $100 million per year to 

U.S. producers. U.S. agricultural exports to all U.S. Free Trade Agreement partners grew from 

$15.5 billion in 1994 to $57 billion in 2015, a nearly four-fold increase in 20 years.

Closer to home, USDA has established an in-country presence in Cuba to cultivate key 

relationships, gain firsthand knowledge of the country’s agricultural challenges and 

opportunities, and begin to explore fruitful information exchanges and research collaboration.

To strengthen our bond, USDA also will allow the 22 industry-funded Research and Promotion 

Programs and 18 Marketing Order organizations to conduct authorized research and 

information exchange activities in Cuba.

USDA has also made significant strides in expanding our domestic markets for agricultural 

goods. The growing consumer interest in buying locally produced products has created major 

new market opportunities for American farmers, ranchers, and food-related businesses while 

opening the doors of USDA to new stakeholders. USDA resources to strengthen local and 

regional food systems extend throughout the supply chain, starting with producers, including 

new insurance offerings to help diversified operations better manage risk, right-sized loans for 

farms of all sizes, financial support for season-extending tools like high tunnels, and innovative 

programs to make food safety verification more affordable. 

The value of local food sales has grown from $5 billion in 2008, and some industry sources 

estimate that sales could hit $20 billion by 2019. Between 2009 and 2015, USDA invested over 

$1 billion in more than 40,000 local and regional food businesses and infrastructure projects. 

Today, more than 160,000 farmers and ranchers nationwide are tapping into growing consumer 

demand by selling their products locally. USDA support has helped to nearly double the 

number of food hubs since 2009; and there are now over 8,500 farmers markets nationwide, 

an increase of almost 98 percent since 2006. 
i v USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

USDA is also helping producers tap into the market for local and regional foods in schools, 

which are now serving healthier breakfasts, lunches, and snacks. In the 2013-14 school year 

alone, which is the most recent data available, school districts spent nearly $800 million on 

locally and regionally sourced food. 

Between 2008 and 2015, the number of farmers markets and direct marketing farmers that 

accepted SNAP rose from about 750 to almost 6,500. Over $19 million in SNAP dollars was 

spent at farmers markets in 2015, up from less than $3 million in 2008. This is a win-win for 

both farmers and SNAP participants, and it shows how our investments are simultaneously 

improving the health of low-income shoppers and bolstering the incomes of local farmers. 

We have also taken significant steps to grow the emerging bioeconomy, which creates new 

uses for agricultural products and is bringing manufacturing jobs back to rural America. 

Environmentally, the increased use of biobased products currently displaces about 300 million 

gallons of petroleum per year—equivalent to taking 200,000 cars off the road. Since 2009, 

Rural Development has supported almost 400 biofuel producers with the production of 

advanced biofuels through the Bioenergy for Advanced Biofuel Program. Further, the 

Department has helped roughly 15,000 rural small businesses, farmers, and ranchers improve 

their bottom lines by installing renewable energy systems and energy efficiency solutions. 

This focus on renewable energy has resulted in support for the construction of six advanced 

biofuels production facilities, over 4,000 wind and solar renewable electricity generation 

facilities, and more than 100 anaerobic digesters to help farm operations capture methane to 

produce electricity. 

In 2015, we made available $100 million in grants under the Biofuel Infrastructure Partnership 

(BIP), estimated to nearly double the number of fueling pumps nationwide that supply 

renewable fuels, such as E15 and E85, to American motorists. As of 2016, 21 states are 

participating in the BIP, with matching funds from state and private partners, providing 

$210 million to build nearly 5,000 pumps at over 1,400 fueling stations to strengthen the rural 

economy and increase the demand for agricultural commodities used in the production of 

biofuels. We are also proud of our effort to partner with the U.S. Department of Energy (DOE) 

and the U.S. Department of the Navy to create advanced drop-in biofuels that will power both 

the U.S. Department of Defense and private-sector transportation throughout America—which 

to date has led to the procurement of 77.7 million gallons of blended drop in biofuel—and with 

the Federal Aviation Administration, DOE, and the commercial aviation sector to sustainably 

increase the production and use of alternative jet fuel. 

Under this Administration, we have added 70 new categories of qualified biobased products to 

our catalog for Federal procurement, which includes over 14,000 products. Currently, more 

than 2,700 products have received certification to display the USDA Certified Biobased 
MESSAGE FROM THE SECRETARY v 

Product label, creating and increasing consumer and commercial awareness about a material’s 

biobased (new carbon) content as one measure of its environmental footprint. We awarded 

funds through the Forest Service’s Wood Innovations Grants Program and the U.S. Tall Wood 

Building Prize Competition to support pioneering demonstration projects, business planning, 

and research that can advance new markets for mass timber construction that can support the 

health and resilience of our forests and our forested communities alike. 

Another way that USDA is strengthening the rural economy is by expanding natural resources 

conservation. During this Administration, we have enrolled a record number of private working 

lands in conservation programs and implemented strategies to restore our forests and clean our 

water supply. This has also created significant economic opportunities in the forms of 

recreation and improved resilience to withstand major weather events.

A new model for conservation investment established by the 2014 Farm Bill for the Regional 

Conservation Partnership Program (RCPP) has allowed USDA to leverage $800 million to 

support 115 high-impact conservation projects across the Nation that will improve the nation’s 

water quality, support wildlife habitat, and enhance the environment. In addition to RCPP, 

NRCS addresses water quality conservation concerns through other landscape-scale water 

quality conservation initiatives, such as the Great Lakes Restoration Initiative (GLRI). From 

2009-2015, over $22 million in GLRI funds were used to install conservation practices on 

103,000 acres in the Western Lake Erie Basin.

USDA is experiencing record demand from producers interested in participating in the 

Conservation Reserve Program (CRP), which improves water quality, prevents soil erosion, 

and strengthens wildlife habitat. The recent general and CRP Grassland sign-ups were the most 

selective enrollment periods in CRP’s 30-year history with a record high Environmental 

Benefits Index cut-off, ensuring that conservation benefits are being maximized. USDA 

accepted 101,000 acres in the first-ever CRP Grasslands enrollment, providing participants 

with financial assistance for establishing approved grasses, trees and shrubs on pasture and 

rangeland that can continue to be grazed. More than 70 percent of these acres are diverse native 

grasslands under threat of conversion, and more than 97 percent of the acres have a new, 

military veteran, or underserved farmer or rancher as a primary producer. 

Using the authorities provided in the 2014 Farm Bill, we have developed “The Building Blocks 

for Climate Smart Agriculture and Forestry” strategy to reduce net emissions and enhance 

carbon sequestration by over 120 million metric tons of CO2 equivalent (MMTCO2e) per year 

by 2025, while also boosting productivity and resilience in the face of a changing climate. 

Conservation programs on private working lands have reduced net greenhouse gas emissions 

by over 360 million metric tons since 2009, and through this initiative we will give producers 

the tools and resources to continue their global leadership in meeting our climate and food 
v i USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

security challenges moving forward. Since the announcement of these building blocks, USDA 

and its partners have taken actions to reduce Greenhouse Gas (GHG) emissions and increase 

carbon sequestration from agriculture, forests, and rural areas.

Finally, any discussion of conservation and adapting to a changing climate would be 

incomplete without USDA’s expressing the need to fix fire budget funding. The frequency and 

intensity of wildfire is increasing while the cost of controlling the spread of wildfire is rising, 

and the way we pay for fire suppression constrains the agency’s capacity to realize additional 

gains through efficiencies and partnerships alone. Planned wildland firefighting (suppression) 

activities are currently funded entirely within the U.S. Forest Service budget based on a 10-year 

rolling average. Today, the agency spends over half of its budget on fire management activities 

and has seen a corresponding 39-percent decline in non-fire staffing since 1998. Left 

unchecked, two out of every three dollars appropriated to the Forest Service will be spent on 

fire programs in the next 10 years. In addition to the rising costs of fire, when appropriated 

resources fall short, as they did in 2015 by $700 million dollars, the Forest Service is forced to 

transfer funds from non-fire programs to cover the costs of suppression. These mid to late 

season transfers stop projects, cause uncertainty and instability in planning, and impact the 

agency’s ability to implement projects. Congress must provide a comprehensive solution that 

will address both the growth of fire programs as a percent of the agency’s budget and the 

compounding problem of fire transfers. 

To create a strong resilient farm economy built around trade, the bioeconomy, local and 

regional food systems, and conservation, it was clear that we must have basic investments to set 

the stage for growth. To accomplish this, we have made historic investments in rural 

communities, making them more attractive to non-farm businesses and talented hard-working 

individuals looking for opportunities. In FY 2015 alone, we helped 141,000 rural Americans 

become homeowners.

USDA also supports innovation to keep U.S. agriculture competitive. Long-term agricultural 

productivity growth relies on innovation through research funded by both the public and private 

sectors. Innovations in animal/crop genetics, chemicals, equipment, and farm organization all 

result in American farmers producing more with less. I am proud that during my service as 

Secretary, we have increased investments in peer-reviewed competitive grants through the 

Agriculture and Food Research Initiative (AFRI) from $201.5 million in FY 2009 to 

$350 million in FY 2016, while still achieving growth in formula funding to our partner 

institutions of higher education. 

However, over the past 2 years, the combination of a strengthening dollar and relatively high 

global production leading to lower prices for commodities has resulted in large drops in 2015 

and 2016 net farm income, relative to the 2011 through 2014 period. USDA expects real net 
MESSAGE FROM THE SECRETARY vii 

farm income this year to be the lowest since 2009. Demand for farm loans has been increasing, 

driven in part by the need to cover operating expenses as commodity prices have fallen more 

quickly than costs. As a result, the debt-to-asset ratio for U.S. producers has increased over the 

past 2 years, but in aggregate is still near historic lows. While the data suggest that net farm 

income remains relatively high by historical standards—for example, the 5-year average of net 

farm income since 2014 has ranged between $85 billion (for 2012–2016) to $96 billion (for 

2010–2014), the highest levels since the mid-1970’s—and that most farms have a strong 

balance sheet and delinquency rates remain lower than the 2005 to 2014 average, it is clear that

financial stress is increasing and that some producers are more exposed to financial risk.

The current conditions are leading to increased uncertainty and concern in rural America, but 

the current farm safety net that was created during the last Farm Bill is providing support for 

producers. In 2015, government farm program payments totaled about $10.8 billion and are 

expected to increase to nearly $13.8 billion in 2016. In addition the crop insurance program 

offset more than $6 billion in farm losses in 2015 and is expected to cover more than $9 billion 

in 2016. 

Last year, USDA enrolled 1.76 million farmers in the new Agriculture Risk Coverage (ARC) 

and Price Loss Coverage (PLC) programs by conducting an unprecedented education 

campaign. ARC and PLC are a part of the farm-safety net, providing assistance only when 

there are year-to-year crop revenue or commodity price downturns. ARC and PLC will provide 

more than $7 billion to farmers this year, roughly 10 percent of net farm income as projected by 

USDA. In addition, more than half of all dairy farms in the U.S.—over 23,000—have enrolled 

in the Margin Protection Program for Dairy (MPP-Dairy). This voluntary program provides 

financial assistance to participating farmers when the margin—the difference between the price 

of milk and feed costs—falls below the coverage level selected by the producer. In 2015, over 

$11 million in payments were made to over 4,600 dairy operations for the May/June payment 

period. This is the largest payment for any 2-month period since MPP-Dairy was enacted in 

2014. 

The 2014 Farm Bill indefinitely extended the Farm Service Agency’s livestock disaster 

programs and the Tree Assistance Program. Since the passage of the Farm Bill, these programs 

have paid producers over $6 billion dollars to recover from natural disasters, including drought 

and wildfires. 

USDA has continued to strengthen crop insurance to ensure the program works for all farmers 

and ranchers. The Risk Management Agency (RMA) has expanded access to crop insurance 

options for organic and specialty crop producers through new and innovative programs, 

including the Whole-Farm Revenue Protection policy, and coverage options that allow organic 

farmers to protect their products at the market value. The number of crops eligible for organic 
viii USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

premium pricing went from four in 2011 to 57 for the 2016 crop year. The number of acres 

insured by organic producers grew from 576,700 in 2009 to 1.1 million in 2016. The new 

Whole-Farm Revenue plan is being offered in all counties in the United States in 2016. In 

addition, RMA has worked to ensure that new crop insurance programs from the 2014 Farm 

Bill are available for as many crops as possible. The Supplemental Coverage Option (SCO) is 

now available for 58 crops, and the Actual Production History Yield Exclusion is available for 

50 crops. The Stacked Income Protection Plan for Producers of Upland Cotton (STAX) is 

currently available for every county that has a crop insurance policy for cotton. Peanut Revenue 

Protection is available in every county with peanut coverage, and Margin Protection Insurance 

is available for wheat, corn, rice, and soybeans in select counties. Finally, the new and 

beginning farmers and ranchers incentives authorized in the 2014 Farm Bill make crop 

insurance more affordable for beginning farmers and ranchers by providing a 10-percent 

premium discount, on top of the premium subsidy all producers receive, as well as a waiver of 

the catastrophic and additional coverage of administrative fees. Over 13,500 producers have 

taken advantage of these incentives and saved around $14.5 million annually in premiums and 

administrative fees because of the incentives.

USDA worked with crop insurance companies to educate farmers and ranchers about the new 

conservation compliance requirements in the 2014 Farm Bill, and as a result, over 98 percent of 

Federal crop insurance participants provided the documentation necessary to comply with those 

requirements and maintain their benefits. 

Access to credit remains a critical issue for producers, in particular for small and beginning 

farmers and ranchers. Since 2009, USDA has provided approximately 276,000 loans totaling 

over $39.5 billion to farmers and ranchers. In 2016 alone, FSA has made over 28,000 direct 

loans and nearly 10,000 guaranteed loans for a record loan volume of nearly $6.2 billion.

While the Farm Bill has resulted in a strong safety net for producers, the Department has also 

utilized other existing authorities to provide assistance to producers when possible. We have 

used the Commodity Credit Corporation’s (CCC’s) statutory authority to implement the Cotton 

Ginning Cost-Share (CGCS) program, which is providing needed assistance to financially 

stressed cotton producers. Through the CGCS program, eligible producers receive a one-time 

cost share payment to expand and maintain the domestic marketing of cotton. The program has 

provided about $328 million to assist cotton producers. We approved more than $320 million in 

section 32 purchases that have the dual benefits of helping producers and providing nutritious 

foods to those in need, including a $20 million cheese buy to assist the dairy industry.

The Department’s management team continues to oversee USDA’s assessment of internal 

control over its programs, operations, financial systems, and financial reporting. The 

Department’s work is consistent with the provisions of the Federal Managers’ Financial 
MESSAGE FROM THE SECRETARY i x 

Integrity Act (FMFIA) and the Federal Financial Management Improvement Act (FFMIA). 

USDA’s continuous monitoring and remediation efforts allow us to provide taxpayers with 

reasonable assurance that this report is based on sound, accurate data.

Despite USDA's many successes, continued improvement is needed to remediate the 

Department existing material weakness and financial system noncompliance. To accomplish 

this goal, management continues to implement corrective action plan activities. Therefore, I 

provide a modified statement of assurance that, except for the areas in need of improvement as 

described in the Management Assurances section of this report, USDA’s internal control over 

operations, financial systems, and financial reporting meets the objectives of FMFIA and 

FFMIA. The financial and performance information presented herein is complete and accurate, 

and is in accordance with law and Office of Management and Budget guidance.

USDA is often referred to as “the People’s Department,” and this past year the men and women 

who are employed here have delivered record service that has impacted every single American 

in some way. While my time as Secretary is coming to a close, I am confident that all 

Americans, especially those in rural communities, will continue to see results from this 

dedicated team for years to come.

Thomas J. Vilsack

Secretary of Agriculture

December 5, 2016 
SECT ION I MANAGEMENT’S DISCUSS ION AND ANALYSIS 1 

Section I

Management’s Discussion 

and Analysis

About USDA

President Abraham Lincoln founded the U.S. Department of Agriculture (USDA) in 1862 with 

the goal of providing effective leadership to the Nation on food, agriculture, natural resources, 

and related issues. Since 1862, the dedicated public servants at USDA help millions of 

Americans every day. As Americans, you are part of the USDA story that has had a tradition of 

excellence in public service for over 150 years.

We would like you to learn more about USDA and the Agencies and Offices that touch every 

American, every day. More information about the Department, our history, and our leaders can 

be found at www.usda.gov. 

Mission Statement

We provide leadership on food, agriculture, natural resources, rural development, nutrition, and 

related issues based on sound public policy, the best available science, and efficient 

management.

Vision Statement

To expand economic opportunity through innovation, helping rural America to thrive; to 

promote agriculture production sustainability that better nourishes Americans while also 

helping feed others throughout the world; and to preserve and conserve our Nation’s natural 

resources through restored forests, improved watersheds, and healthy private working lands. 
2 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Core Values

Our success depends on the following: 

• Transparency—Making the Department’s management processes more open so that the 

public can learn how USDA supports Americans every day. 

• Participation—Providing opportunities for USDA constituents to shape and improve 

services provided by the Department. 

• Collaboration—Working cooperatively at all governmental levels domestically and 

internationally on policy matters affecting a broad audience. 

• Accountability—Ensuring that the performance of all employees is measured against the 

achievement of the Department’s strategic goals. 

• Customer Focus—Serving USDA’s constituents by delivering programs that address 

their diverse needs. 

• Professionalism—Building and maintaining a highly skilled, diverse, and compassionate 

workforce. 

• Results Oriented—Measuring performance and making management decisions in order 

to direct resources to where they are used most effectively. 
SECTION I MANAGEMENT’S DISCUSSION AND ANALYSIS 3 

USDA Organization Chart

Level 1: 

Secretary

Level 2: 

Deputy Secretary

Level 3: 

Chief 

Economist

Director, 

National 

Appeals 

Division

Office of Small 

and 

Disadvantaged 

Business 

Utilization

Director of 

Communications

Inspector 

General

Office of 

Tribal 

Relations

General 

Counsel

Office of the 

Chief 

Financial 

Officer

Office of 

Budget 

and 

Program 

Analysis

Assistant 

Secretary for 

Congressional 

Relations

Assistant 

Secretary for 

Administration

Assistant

Secretary for 

Civil Rights

Sub-level 3, under the Assistant Secretary for Administration: Chief 

Information 

Officer Level 4

Under Secretary for 

Natural Resources and 

Environment

• Forest Service

• Natural Resources

Conservation Service

Under Secretary for 

Farm and Foreign 

Agricultural Services

• Farm Service Agency

• Foreign Agricultural

Service

• Risk Management

Agency

Under Secretary for 

Rural Development

• Rural Utilities Service 

• Rural Housing Service

• Rural Business

Cooperative Service

Under Secretary for 

Food, Nutrition, and 

Consumer Services

• Food and Nutrition 

Service 

• Center for Nutrition 

Policy and Promotion

Under Secretary for 

Food Safety

• Food Safety and 

Inspection Service

Under Secretary for 

Research, Education, and 

Economics

• Agricultural Research 

Service 

• National Institute of

Food and Agriculture 

• Economic Research 

Service 

• National Agricultural

Statistics Service

Under Secretary for 

Marketing and 

Regulatory Programs

• Agricultural

Marketing Service

• Animal and Plant

Health Inspection 

Service

• Grain Inspection 

Packers and 

Stockyards 

Administration
4 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

USDA Mission Areas

The U.S. Department of Agriculture’s (USDA) work is organized by mission areas, which are 

collections of agencies that work together to achieve USDA’s strategic goals. A brief 

description of USDA’s seven mission areas follows and may be found at: USDA Mission 

Areas. 

Farm and Foreign Agricultural Services (FFAS)

Farm and Foreign Agricultural Services helps to keep America’s farmers and ranchers in 

business as they face the uncertainties of weather and markets. FFAS delivers commodity, 

credit, conservation, disaster, and emergency assistance programs that help improve the 

stability and strength of the agricultural economy. The agencies under FFAS are as follows:

• Farm Service Agency (FSA) 

o Commodity Credit Corporation (CCC) 

• Foreign Agricultural Service (FAS)

• Risk Management Agency (RMA)

o Federal Crop Insurance Corporation (FCIC) 

Food, Nutrition and Consumer Services (FNCS)

Food, Nutrition and Consumer Services works to harness the Nation’s agricultural abundance 

to end hunger and improve health in the United States. It administers Federal domestic nutrition 

assistance programs. The Center for Nutrition Policy and Promotion, which links scientific 

research to the nutritional needs of consumers through science-based dietary guidance, nutrition 

policy coordination, and nutrition education. 

• Center for Nutrition Policy and Promotion (CNPP)

• Food and Nutrition Service (FNS)

Food Safety 

The Office of Food Safety ensures that the Nation’s commercial supply of meat, poultry, and 

egg products is safe, wholesome, and properly labeled and packaged. This mission area also 

plays a key role in the President’s Council on Food Safety and has been instrumental in 
S ECT ION I MANAGEMENT’S DISCUS SION AND ANALYSIS 5 

coordinating a national food safety strategic plan among various partner agencies including the 

Department of Health and Human Services and the Environmental Protection Agency. 

• Food Safety and Inspection Service (FSIS)

Marketing and Regulatory Programs (MRP)

Marketing and Regulatory Programs facilitates domestic and international marketing of 

U.S. agricultural products and ensures the health and care of animals and plants. MRP agencies 

are active participants in setting national and international standards, and include as follows: 

• Agricultural Marketing Service (AMS)

• Animal and Plant Health Inspection Service (APHIS)

• Grain Inspection, Packers, and Stockyards Administration (GIPSA)

Natural Resources and Environment (NRE)

Natural Resources and Environment ensures the health of the land through sustainable 

management. Its agencies work to prevent damage to natural resources and the environment, 

restore the resource base, and promote good land management. 

• Forest Service (FS)

• Natural Resources Conservation Service (NRCS)

Research, Education, and Economics (REE)

Research, Education, and Economics is dedicated to the creation of a safe, sustainable, 

competitive U.S. food and fiber system, as well as strong communities, families, and youth 

through integrated research, analysis, and education. These agencies include as follows: 

• Agricultural Research Service (ARS)

• Economic Research Service (ERS)

• National Agricultural Statistics Service (NASS)

• National Institute of Food and Agriculture (NIFA)

• National Agricultural Library (NAL)
6 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Rural Development (RD)

Rural Development is committed to helping improve the economy and quality of life in all of 

rural America by providing financial programs to support essential public facilities and services 

such as water and sewer systems, housing, health clinics, emergency service facilities, and 

electric and telephone service. Rural Development promotes economic development by 

providing loans to businesses through banks and community-managed lending pools, while also 

assisting communities to participate in community empowerment programs. 

• Rural Housing Service

• Rural Utilities Service

• Rural Business Cooperative Service
S ECT ION I MANAGEMENT’S DISCUS SION AND ANALYSIS 7 

Strategic Plan and Program Performance

USDA Performance, Goals, and Results FY 2016 

The U.S. Department of Agriculture’s (USDA) mission is to provide leadership on food, 

agriculture, natural resources, rural development, nutrition, and related issues based on sound 

public policy, the best available science, and efficient management. Through implementing our 

mission, the Department aspires to achieve five strategic goals as reflected in USDA’s 

2014–2018 Strategic Plan:

• Assist rural communities to create prosperity so they are self-sustaining, re-populating,

and economically thriving;

• Ensure our national forests and private working lands are conserved, restored, and made

more resilient to climate change, while enhancing our water resources;

• Help America promote agricultural production and biotechnology exports as America

works to increase food security;

• Ensure that all of America’s children have access to safe, nutritious, and balanced meals;

and

• Create a USDA for the 21st century that is high-performing, efficient, and adaptable.

USDA has also established five Agency Priority Goals (APGs) for fiscal years (FY) 2016 and 

2017 that identify near-term goals to help USDA progress toward meeting our longer term 

strategic goals and objectives. USDA’s APGs are as follows: 

• Access and Opportunity for Beginning Farmers and Ranchers;

• Soil Health and Sustainability;

• Increasing assistance for rural, persistent poverty communities;

• Pollinator Habitat Health; and

• Increased food security and diet quality.

More information and reports on the APGs and quarterly progress can be found at 

https://www.performance.gov/agency/department-agriculture?view=public#apg. 

For purposes of the AFR, a performance summary is provided using the Department’s key

performance indicators as a mechanism to gauge progress in achieving priorities, goals, and 
8 USD A F I S C A L Y E A R 2 0 1 6 AGENC Y F INANC I A L R EPORT

strategic objectives. In FY 2016, USDA had 38 key performance indicators, as reflected in the 

Department’s FY 2016 Annual Performance Plan 

(https://www.obpa.usda.gov/budsum/fy16budsum.pdf). 

The following tables and discussion provide a high-level description of key focus areas for the 

Department that are being tracked and managed through USDA’s performance management

process, in alignment with the Department’s strategic goals and objectives. The tables provide 

key performance indicator historical results, and includes FY2016 preliminary results 

indicating anticipation in meeting/not meeting performance targets. 

Final performance information and a detailed discussion of results for the Department’s 

FY 2016 performance goals, assessment methodologies, metrics, external reviews, and

documentation of performance data will be presented in the FY 2016 USDA Annual 

Performance Report. The report is planned to be released with the President’s 2018 budget in 

February and will be available on the USDA Performance Improvement and Accountability

website.

The data used by the Department to measure performance is collected using standardized

methodology. This methodology has been vetted by federally employed scientists and 

policymakers, and, ultimately, the leadership and Under Secretaries of each respective mission 

area. All attest to the completeness, reliability, and quality of the data. 
S ECT ION I MANAGEMENT’S DISCUS SION AND ANALYSIS 9 

GOAL #1: RURAL PROSPERITY

A vibrant American economy depends on a prosperous rural America. Our four primary pillars 

of economic opportunity in agriculture are: 1) exports, 2) local food systems, 3) conservation 

and outdoor recreation, and 4) enhancing the bio-based economy. USDA is making an impact 

on persistent poverty, out-migration, and rural income through increases in the number of 

homeownership opportunities provided in rural communities and the percentage of direct and 

guaranteed lending to beginning farmers. 

Exhibit 1: USDA Strategic Plan Goal #1 – Rural Prosperity Key Performance Indicators

Fiscal Year 2012

Actual

2013

Actual

2014

Actual

2015 

Actual

2016

Target

2016 

Preliminary

Number of jobs created 

or saved through USDA 

financing of businesses

52,468 44,419 41,202 52,697 40,877 Met

Homeownership 

opportunities provided 153,027 170,055 146,388 141,314 173,150 Unmet1

Health Facilities: 

Percentage of customers 

who are provided access 

to new and/or improved 

essential community 

facilities 

7.3% 5.4% 6.8% 12.0% 4.5% Met

 

1 Direct Program obligations exceeded FY 2016 early year expectations. In response to strong 

program demand, the agency utilized the Secretary’s 7-percent interchange authority to 

increase program funding and provide homeownership opportunities for an additional 430 lowand very low- income rural borrowers. Guaranteed program obligations fell short of projections 

due to multiple market and program factors including: continuing weakness in the refinance 

market; lenders’ adjustment to new Truth in Lending Act and Real Estate Settlement 

Procedures Act Integrated Disclosure (TRID) rules; the reduction in program-eligible areas 

caused by the recent Farm Bill adjustment to the rural definition population limit; and most 

importantly, limited inventory in the lower-priced end of the housing market. As a result of the 

Guaranteed program shortfall, Rural Development did not provide 129,862 new single family 

housing homeownership opportunities, which was the lower bound of its target range, and 

therefore, did not meet target expectations. The program is projecting demand to increase in 

FY 2017, with the introduction of lower origination fees, a new construction loan product, and 

increased outreach to underserved areas.
1 0 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Fiscal Year 2012

Actual

2013

Actual

2014

Actual

2015 

Actual

2016

Target

2016 

Preliminary

Safety Facilities: 

Percentage of customers 

who are provided access 

to new and/or improved 

essential community 

facilities 

3.7% 3.4% 3.7% 7.2% 2.7% Met

Educational Facilities: 

Percentage of customers 

who are provided access 

to new and/or improved 

essential community 

facilities 

6.4% 9.3% 6.2% 7.9% 4.5% Met

Number of 

borrowers/subscribers 

receiving new and/or 

improved electric 

facilities (millions)

8.3 8.7 4.6 5.5 5.1 Met

Number of 

borrowers/subscribers 

receiving new or 

improved 

telecommunications 

services (millions)

.06 .12 .084 .095 .120 Unmet2

Number of population 

receiving new or 

improved service from 

agency funded water 

facilities (millions)

2.5 1.8 2.2 2.4 2.2 Met

 

2 In March 2016, The Federal Communications Commission released a Report and Order, Order 

and Order on Reconsideration, and Further Notice of Proposed Rulemaking, reforming the 

universal service program for rate-of-return carriers. The order made a number of changes to 

the mechanisms that provide substantial revenue to rate-of-return carriers. All existing loan 

applications had to be held until applicants provided information that took into consideration 

the impact of the Order on the feasibility of the loan request. This added about 2 to 3 months 

to the loan processing time, thereby having to carry over some loans to complete in FY 2017. 

Of the 22 loans processed, 8 applications were not feasible thereby reducing the number of 

new subscribers. Loan demand is trending higher, however since as many as 15 applications 

were received towards the end of the fiscal year the processing will be completed in FY 2017 

and if approved the associated subscribers will be counted in FY 2017. 
S ECT ION I MANAGEMENT’S DISCUS SION AND ANALYSIS 1 1 

Fiscal Year 2012

Actual

2013

Actual

2014

Actual

2015 

Actual

2016

Target

2016 

Preliminary

Value of agricultural 

exports resulting from 

participation in foreign 

food and agricultural 

trade shows ($ In Billions) 

$1.46 $1.48 $1.50 $1.523 $1.55 Met

Percentage of Direct and 

Guaranteed lending to 

Socially Disadvantaged 

Farmers (SDA)

13.30% 13.60% 14.20% 15.00% 14.00% Met

Percentage of Direct and 

Guaranteed lending to 

Beginning Farmers (BF)

68.80% 70% 79.2% 85.6% 76.5% Met

Normalized value of risk 

protection provided to 

agricultural producers 

through the Federal Crop 

Insurance Program 

($ In Billions) 

$62.10 $66.00 $67.90 $68.7 $63.3 Met

Value of trade preserved 

annually through USDA 

staff intervention leading 

to resolution of foreign 

market access issues such 

as U.S. export 

detainment, restrictive 

Sanitary/ Phytosanitary or 

Technical Barrier to Trade 

issues and trade 

regulations ($ In Billions) 

$3.70 $3.80 $6.40 $3.6 $4.1 Met

 

3 The 2015 actual result shown on the FY 2015 Agency Financial Report was reported 

incorrectly, this report reflects the corrected 2015 actual results. 
1 2 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

GOAL #2: RESOURCE CONSERVATION, RESTORATION, AND RESILIENCY

A healthy and prosperous America relies on the health of our natural resources, and particularly 

our forests and agricultural working lands. Forests and other lands absorb approximately 

14 percent of U.S. carbon dioxide emissions. To help improve the health of our natural 

resources, USDA has worked to increase the annual acres of public and private forest lands 

which are being restored or enhanced and to increase the percentage of national forests and 

grasslands in compliance with a climate change adaption and mitigation strategy.

Exhibit 2: USDA Strategic Plan Goal #2 – Resource Conservations, Restoration, and Resiliency 

Key Performance Indicators

Fiscal Year 2012 

Actual 

2013

Actual

2014

Actual

2015

Actual

2016

Target

2016

Preliminary

Conservation Reserve Program 

(CRP) restored wetland acreage 

(millions of acres)

2.29 2.09 2.00 1.93 1.9 Met

Conservation Technical 

Assistance (CTA) land with 

conservation applied to 

improve water quality (millions 

of acres)

N/A N/A 18.2 18.1 17.9 Unmet4

CTA cropland with conservation 

applied to improve soil quality 

(millions of acres)

N/A N/A 6.2 6.0 5.9 Met

CTA grazing and forest land 

with conservation applied to 

protect and improve the

resource base (millions of 

acres)

N/A N/A 13.1 13.1 13.0 Unmet5

 

4 The minor shortfall was due primarily to the fact that new hiring has only recently caught up 

with attrition. New hires take some time to be productive. Only in FY2016 did hiring finally 

exceed attrition.

5 The minor shortfall was due primarily to the fact that new hiring has only recently caught up 

with attrition. New hires take some time to be productive. Only in FY2016 did hiring finally 

exceed attrition.
S ECT ION I MANAGEMENT’S DISCUS SION AND ANALYSIS 1 3 

Fiscal Year 2012 

Actual 

2013

Actual

2014

Actual

2015

Actual

2016

Target

2016

Preliminary

Environmental Quality 

Incentives Program (EQIP) land 

with conservation applied to 

improve water quality (millions 

of acres)

N/A N/A 12.3 12.7 12.0 Unmet6

EQIP cropland with 

conservation applied to 

improve soil quality (millions of 

acres)

N/A N/A 3.1 3.0 3.0 Met

EQIP grazing land and forest 

land with conservation applied 

to protect and improve the 

resource base (millions of 

acres)

N/A N/A 14.8 13.9 13.9 Met

EQIP non-Federal land with 

conservation applied to 

improve fish and wildlife 

habitat quality (millions of 

acres)

N/A N/A 1.4 1.4 1.1 Met

Annual acres of public and 

private forest lands restored or 

enhanced (millions of acres)

2.57 2.533 2.91 3.10 2.9 Met

Volume of timber sold (billion 

board feet) 2.644 2.610 2.831 2.867 3.2 Met

Percentage of National Forests 

and Grasslands in compliance 

with a climate change 

adaptation and mitigation 

strategy

36% 49% 64% 89% 100% Met

Percentage of National Forests 

and Grassland watersheds in 

properly (class 1 watersheds) 

functioning condition

52% 52% 52% 52% 52% Met

 

6 The minor shortfall was due primarily to various factors that contributed to a delay in 

conservation implementation of some very large tracts of land initially planned for application 

in FY 2016. These acres are now scheduled for FY 2017 and FY 2018. 
1 4 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Fiscal Year 2012 

Actual 

2013

Actual

2014

Actual

2015

Actual

2016

Target

2016

Preliminary

Acres of Wildland Urban 

Interface hazardous fuels 

treated to reduce the risk of 

catastrophic wildfire (millions of 

acres)

1.867 1.737 1.725 1.577 1.800 Met

GOAL #3: INCREASED EXPORTS AND GLOBAL FOOD SECURITY 

Working with other Federal partners, USDA is working toward reducing global food insecurity 

and increasing agriculture-led economic growth in developing countries. The Department 

continues to seek new trade opportunities for American agricultural producers and is also 

striving to bring products with new and emerging technologies to the worldwide marketplace. 

In addition, USDA is focused on improving efforts to reduce food insecurity across the world 

by providing technical assistance to people in food-insecure countries. 

Exhibit 3: USDA Strategic Plan Goal #3 – Increased Exports and Global Food Security

Fiscal Year 2012 

Actual

2013

Actual

2014 

Actual

2015

Actual

2016

Target

2016

Preliminary

Cumulative number of 

biotechnology products 

deregulated by USDA 

based on scientific 

determinations that they 

do not pose a plant pest 

risk to agriculture

93 102 109 117 122 Met
S ECT ION I MANAGEMENT’S DISCUS SION AND ANALYSIS 1 5 

GOAL #4: SAFE AND NUTRITIOUS FOOD

A plentiful supply of safe and nutritious food is essential to the healthy development of every 

child in America and to the well-being and productivity of every family. Over the past 4 years, 

USDA’s food assistance programs have contributed to a steady decrease in the prevalence of 

food insecurity in households with children. Regarding USDA’s Food Safety and Inspection 

Service (FSIS)-regulated meat, poultry, and processed egg products, USDA also saw that the 

estimated illnesses attributed to the FSIS regulated products decreased by 12 percent from 

FY 2009 to FY 2015. 

Exhibit 4: USDA Strategic Plan Goal #4 – Safe and Nutritious Food

Fiscal Year

2012 

Actual

2013 

Actual

2014

Actual

2015

Actual

2016

Target

2016 

Preliminary

Prevalence of food 

insecurity in households 

with children 

20% 19.5% 19.2% 16.6% 18.8% Deferred7

Annual percentage of 

eligible people 

participating in SNAP

83% 85% 85% N/A 85.0% Deferred8

SNAP payment accuracy 

rate 96.6% 96.8% 96.3% N/A 96.3% Deferred9

SNAP benefits redeemed 

at farmers markets and 

direct marketing farmers 

annually (millions)

$16.60 $ 17.5 $ 18.8 $19.4 $ 20.00 Deferred10

Annual percentage of 

eligible people 

participating in the 

National School Lunch 

Program

57.6% 55.7% 54.8% 55.4% 56.8% Met11

 

7 The actual measure for 2016 will be released in September 2017.

8 FY 2016 data will be available in 2018.

9 FY 2016 data will be available in 2018.

10 FY 2016 data will be available in 2017.

11 Rationale for Met Range: Thresholds for 4.1.2 reflect the margin of error in forecasts of 

future participation, estimated at 5 percent for school meals programs. This reflects the 

pattern of variance between actual and target performance for both programs during the past 

5 years. For FY 2016, this percentage range allows for actual performance that meets the 

targets in the range of 54.0-59.6 percent. 
1 6 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Fiscal Year

2012 

Actual

2013 

Actual

2014

Actual

2015

Actual

2016

Target

2016 

Preliminary

Annual percentage of 

children participating in 

the free/reduced price 

school lunch program 

that participate in 

summer feeding 

programs 

15.5% 16.3% 17.5% 17.1% 17.2% Deferred12

Increase percentage of 

broiler plants passing the 

carcass Salmonella 

Verification Testing 

Standard 

90% 90% 92% 96% 95% Unmet13

Percentage of 

establishments with a 

functional food defense 

plan (annual measure)

77% 83% 84% 85% 90% Unmet14

Total illnesses from all 

FSIS products 479,621 427,171 386,265 382,123 363,547 Unmet15

 

12 Initial reports for 2016 will be available in December 2016.

13 While FSIS did not meet the FY2016 target for the percent of broiler establishments passing 

the carcass Salmonella verification testing standard, the overall percent of establishments’ 

passing the standard has risen consistently over the past 5 years, and in Q4, FSIS failed to meet 

the target as a result of just 2 establishments not meeting the target. 14 While FSIS did not meet the FY2016 target for voluntary adoption of food defense plans, it 

has seen a 34% increase since 2006. FSIS will continue to focus on small and very small 

establishments, which represent a majority of those that have not adopted a plan, and will also 

focus on assessing to what extent all establishments have good practices in place. 15 FSIS set illness reduction targets for FY2020 with the goal of achieving ambitious Healthy 

People 2020 targets. FSIS did not achieve the FY2016 All Illness target; however, FSIS did meet 

its E. coli O157:H7 and Lm targets. FSIS did not meet these targets in FY16 because the data 

used to determine illnesses attributable to FSIS regulated products—CDC outbreak data from 

2011-2013—excluded a very large outbreak in FDA-regulated shell eggs, and included a large 

outbreak in FSIS regulated chicken products. As our current methodology includes only 3 years 

of data, large outbreaks coming into or falling out of the dataset highly influences the 

attribution estimates. 
S ECT ION I MANAGEMENT’S DISCUS SION AND ANALYSIS 1 7 

GOAL #5: DEPARTMENTAL MODERNIZATION

Through its Blueprint for Stronger Service, USDA is building and implementing a modern 

workforce, and exercising good stewardship of the resources entrusted to the Department. 

During FY 2016, USDA implemented policies to achieve a more efficient use of funds through 

decreases in the amount of leased office and warehouse space controlled by USDA and to build 

a more effective workforce through process improvements and increased use of telework. 

Exhibit 5: USDA Strategic Plan Goal #5 – Departmental Modernization

Fiscal Year 2012

Actual

2013 

Actual

2014

Actual

2015 

Actual

2016

Target

2016

Preliminary

Number of employees 

participating in core 

telework

7,926 9,723 10,455 11,798 12,000 Met

Amount of leased 

office and warehouse 

space controlled by 

USDA (millions of 

square feet) 

26 25.6 24.9 23.9 23.7 Met
1 8 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Future Demands, Risks, Uncertainties, 

Events, Conditions, and Trends

Farmers and ranchers operate in highly competitive markets, both domestically and 

internationally. Rapid shifts in consumer demands associated with quality, convenience, taste, 

and nutrition dictate that farming, ranching, and marketing infrastructures become more fluid 

and responsive. National security is a significant, ongoing priority for the U.S. Department of 

Agriculture (USDA). USDA science research, education, and extension will continue to be the 

foundation for understanding developments and making advances in solving agricultural and 

societal challenges. USDA is working with the U.S. Department of Homeland Security to help 

protect agriculture from intentional and accidental acts that might impact America’s food 

supply or natural resources. 

External factors that challenge USDA’s ability to achieve its 

goals include the following: 

• Weather-related hardships, including disasters related to the increasing intensity and

duration of extreme weather and climate change, both domestically and internationally;

• The risk of catastrophic fire, depending on weather, drought conditions, and the expanding

number of communities in the wildland-urban interface;

• Non weather-related hardships and other uncontrollable events, both domestically and

internationally;

• Domestic and international macroeconomic factors, including consumer purchasing

power, the strength of the U.S. dollar, and political changes abroad that could impact

domestic and global markets greatly at any time;

• Sharp fluctuations in farm prices, interest rates, and unemployment that could impact the

ability of farmers, other rural residents, communities, and businesses to qualify for credit

and manage debt;

• The impact of future economic conditions and actions by a variety of Federal, State, and

local Governments that could influence the sustainability of rural infrastructure;

• The increased movement of people and goods, which provides the opportunity for crop

and animal pests and diseases to move quickly across domestic and international

boundaries; and

• Potential exposure to hazardous substances, which may threaten human health as well as

the environment, and the ability of the public and private sectors to collaborate effectively

on food safety, security, and related emergency preparedness efforts.
S ECT ION I MANAGEMENT’S DISCUS SION AND ANALYSIS 1 9 

Analysis of Financial Information and 

Highlights

Balance Sheet

TOTAL ASSETS

Total assets for FY 2016 were $228 billion. The following exhibit presents FY 2016 total 

assets. 

Exhibit 6: Total Assets ($ In Billions) 

 

Direct Loan and Loan Guarantees, Net, is one of the largest assets on the USDA Balance Sheet. 

RD offers both direct and guaranteed loan products for rural housing and rural business 

infrastructure. These products represent 87 percent of the total Department loan programs. 

Loan programs administered by FSA represent 10 percent of the total. FSA supports farmers 

who are temporarily unable to obtain private, commercial credit. The remaining 3 percent 

represents commodity loans and credit programs administered by the CCC. These loans are 

used to improve economic stability and provide an adequate supply of agricultural 

commodities. CCC credit programs provide international food assistance, expand international 

markets, and provide domestic low cost financing to protect farm income and prices. 
2 0 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

The following exhibit presents significant changes in total assets.

Exhibit 7: Significant Changes in Assets ($ In Billions) 

 

The increase in Fund Balance with Treasury was primarily due to a $5 billion increase at FNS 

for SNAP and a $5 billion increase at RD for the Guaranteed Single Family Housing program. 

TOTAL LIABILITIES

Total liabilities for FY 2016 were $174 billion. The following exhibit presents FY 2016 total 

liabilities. 

Exhibit 8: Total Liabilities ($ In Billions)

 

Debt is the single largest liability on USDA’s balance sheet. It represents amounts owed 

primarily to Treasury by CCC, FSA and RD. For CCC, the debt primarily represents financing 

for price support, export credit guarantees, disaster programs and loans related to farm storage 

facilities. For FSA, the debt primarily represents financing to support direct and guaranteed 

loan programs, with the majority supporting operating, ownership, and emergency loans. For 
S ECT ION I MANAGEMENT’S DISCUS SION AND ANALYSIS 2 1 

RD, the debt primarily represents financing to support electric and housing loan programs. 

The following exhibit presents significant changes in total liabilities.

Exhibit 9: Significant Changes in Total Liabilities ($ In Billions) 

 

Loan Guarantee Liability decreased primarily due to Guaranteed Rural Housing at RD. Debt 

increased $7 billion at CCC primarily due to ARC and PLC. Other Liabilities increased 

$6 billion primarily due to Guaranteed Rural Housing at RD and $4 billion at CCC due to 

ARC, PLC and the Conservation Reserve Program. 

Stewardship Investments (Unaudited)

Stewardship investments are substantial investments made by the Federal Government for the 

benefit of the Nation but are not physical assets owned by the Federal Government. When 

incurred, they are treated as expenses in determining the net cost of operations. However, these 

items merit special treatment so that users of Federal financial reports know the extent of 

investments that are made for long-term benefit. Such investments are measured in terms of 

expenses incurred for non-Federal physical property, human capital, and research and 

development. The following exhibit presents stewardship investments. 

Exhibit 10: Stewardship Investments ($ In Millions) 

 
2 2 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Statement of Assurance

The U.S. Department of Agriculture (USDA) is providing modified 

assurance that USDA’s systems of internal control comply with the 

Federal Managers’ Financial Integrity Act (FMFIA) objectives. 

USDA’s systems of internal control meet the objectives of the FMFIA 

and the Federal Financial Management Improvement Act (FFMIA), 

with the exception of two material weaknesses in internal control, one 

financial system non-conformance, and two instances of noncompliance with laws and regulations. Management is providing 

reasonable assurance that the internal controls over operations are 

effective. The details of the exceptions are provided in the FMFIA, FFMIA, and Summary of 

Financial Statement Audit and Management Assurances sections of this report.

USDA assessed its financial management systems and internal controls over the effectiveness 

and efficiency of operations and compliance with applicable laws and regulations as of 

September 30, 2016, and financial reporting as of June 30, 2016. The assessment included the 

safeguarding of assets and compliance with applicable laws and regulations in accordance with 

the requirements of Office of Management and Budget (OMB) Circular No. A-123, 

Management’s Responsibility for Enterprise Risk Management and Internal Control. 

In fiscal year (FY) 2015, the Forest Service identified an Antideficiency Act (ADA) violation 

for FY 1990 through FY 2009 under 31 United States Code (U.S.C.) § 1341(a)(1). The 

violation related to the agency’s employment in California of two citizens of Palau. This use of 

Federal appropriations violated a general provision of appropriations acts from FY 1990–2009, 

which prohibited the use of appropriations to employ non-U.S. citizens. This ADA violation is 

in the process of being reported to Congress and the President. 

The Farm Service Agency (FSA) identified an ADA violation under 31 U.S.C. § 1517(a). 

In September 2013, OMB approved an apportionment request for $1 million from FSA for the 

purchase of guaranteed loans in FY 2014. On February 25, 2014, FSA made several loan 

purchases, obligating $1,302,823.57, thus exceeding the apportionment for such purchases. 

On March 7, 2014, FSA requested another apportionment to cover the deficiency. OMB 

approved the request and apportioned funds on March 31, 2014. FSA’s Farm Loan Operations 

Office completed corrective actions to ensure future payments are obligated only within 

approved apportionment limits. The ADA violation is in the process of being reported to 

Congress and the President. 

The Office of Advocacy and Outreach (OAO) identified an ADA violation for FY 2011 under 

31 U.S.C. § 1517(a). The Food, Conservation, and Energy Act of 2008, Public Law 110-234 

(Farm Bill of 2008) permitted OAO to award up to $19 million in FY 2011 for Outreach and 

Assistance for Socially Disadvantaged and Veteran Farmers and Ranchers (Section 2501) 
S ECT ION I MANAGEMENT’S DISCUS SION AND ANALYSIS 2 3 

Grants. OAO exceeded the amount available. The ADA violation is in the process of being 

reported to Congress and the President.

In FY 2015, an erroneous transaction was identified associated with the StrikeForce Initiative 

funded through transfers from USDA agencies for FY 2010 and 2011. No ADA violation 

occurred and all transactions have been corrected.

In FY 2015, The Foreign Agricultural Service (FAS) identified a potential violation of the 

ADA that may have occurred in its FY 2009 appropriation. FAS has completed its analyses and 

identified the causes of this potential violation. A corrective transaction was processed to clear 

the negative cash balances and the U.S. Department of the Treasury (Treasury) and the OMB 

approved the transaction on June 30, 2016. Therefore, the FY 2009 appropriation no longer has 

a negative cash balance. FAS has requested a final determination on the status of the potential 

ADA violation from the Office of the General Counsel. 

USDA’s Office of Inspector General determined that improper bank reconciliations were 

completed for two ratifications totaling $17,709 on behalf of the Office of the Assistant 

Secretary for Civil Rights (OASCR). As a result of the improper reconciliations, two USDA 

offices each paid for a procurement contract that should have been charged to OASCR. This 

ultimately resulted in OASCR’s FY 2012 appropriation potentially being augmented, which 

was considered a possible ADA violation. A review determined that the temporary 

augmentation of OASCR’s account, which was corrected with available (unobligated) FY 2012 

funds, did not result in an ADA violation. All that was necessary was for the OASCR to correct 

the improper charges using the FY 2012 appropriation. 

In FY 2016, the Office of the Chief Financial Officer (OCFO) received a determination on four 

ADA violations. General Provision (GP) 706 of the Agriculture, Rural Development, Food and 

Drug Administration, and Related Agencies Appropriations Act, 2016, Pub. L. 114-113, Div. A 

(Dec. 18, 2015), prohibits the USDA from making certain obligations for information 

technology (IT) projects without the prior written approval of the Chief Information Officer 

(CIO). Specifically, GP 706 states, “none of the funds available to the Department of 

Agriculture for information technology shall be obligated for projects, contracts, or other 

agreements over $25,000 prior to receipt of written approval by the Chief Information Officer.” 

OCFO obligated funds in excess of the $25,000 on four occasions prior to an approved 

Acquisition Approval Request (AAR) from the CIO. These violations are in the process of 

being reported to Congress and the President.

In FY 2016, Commodity Credit Corporation (CCC) identified a potential ADA violation that 

may have occurred in CCC expenditures. Expenditures for CCC interest to Treasury appear to 

have exceeded amounts initially apportioned by OMB. CCC expended approximately 

$37 million in interest to Treasury, more than the apparently apportioned amount of 

$29.9 million; however, there is some question about the apportionment requirements for 

interest to Treasury. FSA will seek further review of the legal authority of CCC with respect to 

the apportionment requirements with the Office of the General Counsel in conjunction with the 

Office of Management and Budget.
2 4 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

No other material weaknesses were found in the design or operation of the internal control over 

(1) the effectiveness and efficiency of operations and compliance with applicable laws and 

regulations as of September 30, 2016, and (2) financial reporting as of June 30, 2016. 

Thomas J. Vilsack

Secretary of Agriculture

December 5, 2016 
S ECT ION I MANAGEMENT’S DISCUS SION AND ANALYSIS 2 5 

Federal Managers’ Financial Integrity Act 

Report on Management Control

Background

The Federal Managers’ Financial Integrity Act (FMFIA) requires ongoing evaluations of 

internal controls and financial management systems. These evaluations lead to an annual 

statement of assurance that:

• Obligations and costs comply with applicable laws and regulations; 

• Federal assets are safeguarded against fraud, waste, abuse, and mismanagement;

• Transactions are accounted for and properly recorded; and 

• Financial management systems conform to standards, principles, and other requirements 

to ensure that Federal managers have timely, relevant, and consistent financial information 

for decision-making purposes. 

The U.S. Department of Agriculture (USDA) evaluated its internal controls in accordance with 

Office of Management and Budget (OMB) Circular No. A-123, Management’s Responsibility 

for Enterprise Risk Management and Internal Control. 

The Department operates a comprehensive internal control program. This program ensures 

compliance with the requirements of FMFIA and other laws, and OMB Circular No. A-123, 

Appendices A through D. All USDA managers must ensure that their programs operate 

efficiently and effectively, and comply with relevant laws. They must also ensure that financial 

management systems conform to applicable laws, standards, principles, and related 

requirements. In conjunction with the Office of Inspector General and the Government 

Accountability Office, USDA’s management works decisively to determine the root causes of 

its material weaknesses so that it can direct resources to focus on their remediation.

USDA remains committed to reducing and eliminating the risks associated with its 

deficiencies. It also strives to efficiently and effectively operate its programs in compliance 

with FMFIA and other applicable laws and regulations. 
2 6 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Fiscal Year 2016 Results

The Department has two existing material weaknesses in internal controls over financial 

reporting: information technology and financial management. The material weakness for 

financial management is due to improvements needed in accounting and internal controls 

related to the Natural Resources Conservation Service (NRCS) and the Commodity Credit 

Corporation (CCC). USDA also has one existing system non-conformance related to Funds 

Control Management within the CCC, which will be resolved by the end of FY 2019. 

The fiscal year 2015 results disclosed that the Federal Crop Insurance Corporation (FCIC) did 

not have adequate controls over estimating losses on insurance claims. Similar deficiencies 

were not identified during the current year audit. The FY 2015 report also disclosed 

improvements were needed in the credit reform subsidy model and the process to assess the 

results of the re-estimates for Rural Development's Guaranteed Single Family Housing 

program. Again, similar deficiencies were not identified in the current year audit. The FY 2015 

material weakness for the credit reform subsidy model has been reassessed as a significant 

deficiency for FY 2016. 

The Food and Nutrition Service and the Farm Service Agency (FSA) are noncompliant with 

laws and regulations related to the Improper Payments Information Act of 2002, as amended by 

the Improper Payments Elimination and Recovery Act of 2010 and the Improper Payments 

Elimination and Recovery Improvement Act of 2012. 

The Secretary’s Statement of Assurance provides modified assurance that USDA’s system of 

internal control complies with FMFIA objectives. For additional details on the results reported 

in USDA’s Consolidated Financial Statements Audit Report, see the Summary of Financial 

Statement Audit and Management Assurances section of this report. 
S ECT ION I MANAGEMENT’S DISCUS SION AND ANALYSIS 2 7 

Summary of Outstanding Material Weaknesses

The following exhibit provides FY 2016 accomplishments and FY 2017 planned actions toward 

resolving the outstanding material weaknesses. 

Exhibit 11: Summary of Outstanding Material Weaknesses

1. USDA Information Technology (IT)

Material Weaknesses 

Existing

Pervasive internal control design and operating effectiveness 

deficiencies occurred in two areas: logical access control/personnel 

security and configuration management. These deficiencies represent 

an overall IT material weakness. (Department)

Overall Estimated 

Completion Date FY 2017

FY 2016 Accomplishments: FY 2017 Planned Actions:

 Monitored Plan of Actions and Milestones 

(POA&Ms) identified as part of the IT 

Material Weakness. Tracked and reported

on progress weekly to USDA leadership, 

and ensured proper and full remediation of 

weaknesses across the USDA enterprise;

 Performed security assessments to analyze 

component agencies’ information 

architecture and related processes to 

develop a threat profile; 

 Performed penetration testing: OCIO 

expects the U.S. Department of Homeland 

Security (DHS) to continue their scans 

under the Binding Operational Directive, 

and the Agricultural Security Operation 

Center plans to continue integration with 

the DHS Continuous Diagnostics Mitigation 

program; 

 Enhanced centralized configuration 

management monitoring tools (Tivoli 

Endpoint Manager/BigFix) to monitor 

agency assets running specific operating 

systems;

 Formalized its internal monitoring 

processes into a Standard Operating 

Procedure;

The Office of the Chief Information Officer 

(OCIO) will: 

 Continue to monitor and close outdated 

POA&Ms identified as part of the IT Material 

Weakness. Track and report on progress 

weekly to USDA leadership, and ensure 

proper and full remediation of weaknesses 

across the USDA enterprise;

 Continue to perform security assessments to 

analyze component agencies’ information 

architecture and related processes to

develop a threat profile; 

 Continue to perform penetration testing: 

OCIO expects the U.S. Department of 

Homeland Security (DHS) to continue their 

scans under the Binding Operational 

Directive, and the Agricultural Security 

Operation Center plans to continue 

integration with the DHS Continuous 

Diagnostics Mitigation program; 

 Continue to enhance centralized 

configuration management monitoring tools 

(currently IBM BigFix, formerly known as 

Tivoli Endpoint Manager) to monitor agency 

assets running specific operating systems;
2 8 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

1. USDA Information Technology (IT)

Material Weaknesses 

Existing

Pervasive internal control design and operating effectiveness 

deficiencies occurred in two areas: logical access control/personnel 

security and configuration management. These deficiencies represent 

an overall IT material weakness. (Department)

Overall Estimated 

Completion Date FY 2017

FY 2016 Accomplishments: FY 2017 Planned Actions:

 Waited on the finalization of the DHS’s 

Continuous Diagnostics and Monitoring 

(CDM), which will further enhance OCIO’s 

configuration management oversight 

function and timely coordination with 

subcomponents to ensure policy 

compliance;

 Enforced Personal Identity Verification 

(PIV) / Homeland Security Presidential 

Directive (HSPD) 12 mandatory compliance 

for privileged and non-privileged users to 

meet published FY 2016 Conservation 

Activity Plan (CAP) and Federal Information 

Security Management (FISMA) goals; and

 Developed additional implementation 

guidance for multi-factor authentication 

for network and application access.

 Continue to formalize its internal monitoring 

processes into a Standard Operating Procedure;

 USDA is waiting on the finalization of the 

DHS’s Continuous Diagnostics and 

Monitoring (CDM), which will further 

enhance OCIO’s configuration management 

oversight function and timely coordination 

with subcomponents to ensure policy 

compliance;

 Continue to further enforce PIV/HSPD12 

mandatory compliance for privileged and 

non-privileged users to meet published

FY 2017 CAP and FISMA goals; and

 Continue to develop additional 

implementation guidance for multi-factor 

authentication for network and application 

access, as needed.
S ECT ION I MANAGEMENT’S DISCUS SION AND ANALYSIS 2 9 

2. Financial Management — Natural Resources Conservation Service

Material Weakness

Existing

The Natural Resources Conservation Service (NRCS) was unable to 

provide sufficient evidential matter in support of certain transactions 

and account balances. 

In addition, improved accounting and controls are needed over 

expenses. 

Overall Estimated 

Completion Date FY 2017

FY 2016 Accomplishments: FY 2017 Planned Actions:

NRCS: 

 Reviewed the results of supporting 

obligation balances that include referenced 

accruals; 

 Developed and issued formal instruction for 

entering accruals that reference an 

obligation; 

 Reconciled feeder systems (financial 

assistance, contracts, travel, etc.) with the 

financial system; and

 Engaged with an external firm to perform 

100% review of all direct entry documents 

and any feeder system documents where 

reconciliation is not practical.

NRCS will: 

 Monitor the activity of upward and 

downward adjustments to ensure balances 

are appropriate.

 Monitor open obligations to ensure they are 

recorded and liquidated timely.

 Enhance policy and control procedures for 

period end accruals.
3 0 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

2. Financial Management – Commodity Credit Corporation

Material Weaknesses 

Existing

The Commodity Credit Corporation (CCC) needs to address material 

weaknesses identified in the following areas: Financial Reporting, 

Accounting for Parent/ Child Transactions of the United States 

Agency for International Development (USAID), Accounting for 

Commodity Certificate Exchange (CCE), Accounting for Budgetary 

Transactions and Fund Balance with Treasury (FBWT). 

Overall Estimated 

Completion Date FY 2017 

FY 2016 Accomplishments: FY 2017 Planned Actions:

During FY 2016, CCC: 

 Designed and implemented Business 

Portfolio Manual to document business 

procedures including program accounting 

flow and key internal controls; 

 Designed and implemented policies, 

procedures, and controls to accept, track, 

and monitor agreements entered into with 

other agencies (customers); 

 Reconciled budgetary and proprietary 

balances with trading partners; 

 Conducted training for the Financial 

Management Division staff and managers to 

provide an in-depth look at the U.S. 

Standard General Ledger and its practical 

uses in performing key activities that 

ultimately support data integrity and the 

agency’s ability to compile complete, 

accurate and reliable financial statements; 

 Implemented reconciliation processes to 

ensure FBWT transactions are timely and 

accurately recorded in the general ledger 

system;

 Implemented a reconciliation process to 

assess and review CCC-related transactions 

and balances reported in the USAID general 

ledger for FBWT, Accounts Receivable, and 

Accounts Payable; 

During FY 2017, CCC will: 

 Update Standard Operating Procedures 

(SOPs), policies, checklists, etc., to 

incorporate the requirements for 

identifying the need for, preparing, 

supporting, validating, reviewing and 

recording, and performing look-backs of 

accounting estimates; 

 Develop effective information and 

communication processes to ensure that 

policies and procedures related to 

programs or events that may give rise to 

the recognition of accounting transactions 

are consistently communicated and applied 

throughout the agency and that technical 

accounting issues are identified, analyzed, 

and resolved in a timely manner; 

 Implement processes, procedures, and 

effective controls to enable the timely 

preparation of financial statements and 

sufficient evidential matter to support 

accounting transactions;

 Continue with the execution of the existing 

OMB A-123, Appendix A Corrective Action 

Plan, Maintaining, Controlling, and 

Monitoring the CORE General Ledger by 

further improving and enhancing CCC 

reconciliations and account analysis; 
S ECT ION I MANAGEMENT’S DISCUS SION AND ANALYSIS 3 1 

2. Financial Management – Commodity Credit Corporation

Material Weaknesses 

Existing

The Commodity Credit Corporation (CCC) needs to address material 

weaknesses identified in the following areas: Financial Reporting, 

Accounting for Parent/ Child Transactions of the United States 

Agency for International Development (USAID), Accounting for 

Commodity Certificate Exchange (CCE), Accounting for Budgetary 

Transactions and Fund Balance with Treasury (FBWT). 

Overall Estimated 

Completion Date FY 2017 

FY 2016 Accomplishments: FY 2017 Planned Actions:

 Implemented a process to calculate 

accruals and advances for CCC funded 

USAID grants funded; and 

 USAID and CCC revised and signed a 

Memorandum of Understanding.

 Expand tie-point analysis process to include 

additional training and workshops to 

provide expert assistance with 

reconciliations, trial balance analytics, 

clean-up projects, abnormal balances, and 

variances; 

 Develop and implement software 

modifications to the Commodity Loan 

Processing System and Automated Cotton 

Reporting System to incorporate CCE 

functionality, including providing the 

correct accounting entries to CCC’s General 

Ledger - CORE which will remediate the 

condition;

 Continually refine the accrual and advance 

calculation process for USAID grants funded 

by CCC; and

 Implement reconciliation process for 

unexpended appropriations, cumulative 

results of operations, allocation transfers, 

unapportioned authority, allotments, 

undelivered orders, delivered orders, 

expended appropriations, and operating 

expenses.
3 2 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Summary of Outstanding System Non-conformance

Funds Control Management non-conformance is also reported as a system non-compliance, and 

is included in the FFMIA Report on Financial Management Systems (Exhibit 12). The 

weakness involves component agency-specific deficiencies for CCC.

The following exhibit provides FY 2016 accomplishments and FY 2017 planned actions toward 

resolving the Department’s outstanding system non-conformances.

Exhibit 12: Summary of Outstanding System Non-conformance

1. Funds Control Management

System Non-conformance

Existing

System improvements needed in recording obligations at the 

transactional level. (CCC)

Non-compliance with Federal Financial Management 

Improvement Act of 1996. (CCC)

Overall Estimated 

Completion Date 2019

FY 2016 Accomplishments: FY 2017 Planned Actions:

During FY 2016, CCC: 

 Continued to modernize program and 

financial systems to eliminate the 

standing material weakness (MW) and 

become substantially compliant with the 

Funds Control/Obligation requirements 

related to obligations at the transactional 

level; 

 Implemented standardized 

apportionment processes for program 

divisions; 

 Evaluated and documented all CCC 

program’s obligation life cycle; 

 Implemented functionality to 

automatically de-obligate unliquidated 

obligations at time of payment; and

During FY 2017, CCC will: 

 Establish Funds Control Levels by Program; 

 Develop policy, procedures and systems 

functionality to support the budget 

execution process for CCC programs; 

 Work with Deputy Administrator Farm 

Programs and Information Technology 

Services Division towards completing 

software modifications to ensure all program 

applications are in full compliance with the

Funds Control/Obligation Requirements (i.e., 

business events, establishments, 

liquidations, adjustments {downward and

upward}, etc.) related to obligations at the 

transaction level; and
S ECT ION I MANAGEMENT’S DISCUS SION AND ANALYSIS 3 3 

1. Funds Control Management

System Non-conformance

Existing

System improvements needed in recording obligations at the 

transactional level. (CCC)

Non-compliance with Federal Financial Management 

Improvement Act of 1996. (CCC)

Overall Estimated 

Completion Date 2019

FY 2016 Accomplishments: FY 2017 Planned Actions:

 Completed the following deployments:

o The new Agriculture Risk Coverage

/Price Loss Coverage software was

integrated with the Common

Obligation Framework to obligate

contracts at a transactional level and

properly sequester funds;

o The Commodity Loan Processing

System to obligate loan Crop Year

2015 and future applications at the

transactional level.

o The Direct Loan System/Farm Storage

Facility Loans Phase 2 that replaces

the CORE Accounting System budget

tables as a funds control mechanism.

 Complete the integration of two "material"

CCC programs (the Non-Insured Crop

Disaster Assistance Program and the

Livestock Indemnity Program) with the

electronic Funds Management System

(eFMS)/County Office (COF) to achieve full

funds control at a transaction level
3 4 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Compliance with Laws and Regulations

In fiscal year (FY) 2015 the Forest Service identified an Antideficiency Act (ADA), 31 United 

States Code (U.S.C.) § 1341 (a) (1), and Government-wide General Provisions § 603 violation 

for FY 1990 through FY 2009. The violation related to the agency’s employment in California 

of two citizens of Palau. The two Palauan employees did not, in 1990, fall within any of the 

categories that would have permitted payment of their salaries using Forest Service 

appropriations. In FY 2010, Congress added the following language to the general provision: 

“Provided further, That this section shall not apply to any person who is an officer or employee 

of the Government of the United States on the date of enactment of this Act.” This proviso 

applies to the Palauan Forest Service employees. It has been included in all subsequent 

appropriations acts, including the current act for FY 2016. Therefore, payment of the 

employees with appropriated funds has not violated the general provision since FY 2010. In 

addition, since FY 2010, the general provision has allowed for the Federal employment of 

“a person who is lawfully admitted for permanent residence and is seeking citizenship as 

outlined in 8 U.S.C. § 1324b(a)(3)(B).” The ADA violation is in the process of being reported 

to Congress and the President. 

The Farm Service Agency (FSA) identified an ADA violation under 31 U.S.C. § 1517(a). In 

September 2013, the Office of Management and Budget (OMB) approved an apportionment 

request for $1 million from FSA for the purchase of guaranteed loans in FY 2014. On 

February 25, 2014, FSA made several loan purchases, obligating $1,302,823.57, thus exceeding 

the apportionment for such purchases. On March 7, 2014, FSA requested another 

apportionment to cover the deficiency. OMB approved the request and apportioned funds on 

March 31, 2014. FSA’s Farm Loan Operations Office completed corrective action to ensure 

future payments are obligated only within approved apportionment limits. This ADA violation 

is in the process of being reported to Congress and the President. 

The Office of Advocacy and Outreach (OAO) identified an ADA violation for FY 2011 under 

31 U.S.C. § 1517(a). The Food, Conservation, and Energy Act of 2008, Public Law 110-234 

(Farm Bill of 2008) permitted OAO to award up to $19 million in FY 2011 for Outreach and 

Assistance for Socially Disadvantaged and Veteran Farmers and Ranchers (Section 2501) 

Grants. OAO exceeded the amount available. The ADA violation is in the process of being 

reported to Congress and the President. Also, an erroneous transaction occurred with the 

StrikeForce Initiative; however, there was no violation of an ADA. 

The Foreign Agricultural Service (FAS) identified a potential violation of the ADA that may 

have occurred in its FY 2009 appropriation. FAS has completed its analyses and identified the 

causes of this potential violation. The Office of the General Counsel has been requested for a 

determination on the status of this potential ADA violation.
S ECT ION I MANAGEMENT’S DISCUS SION AND ANALYSIS 3 5 

USDA’s Office of Inspector General investigated the Office of the Assistant Secretary for Civil 

Rights (OASCR) to determine whether (1) expenditures were properly supported by 

documentation, (2) unauthorized commitments were properly ratified by the Office of 

Procurement and Property Management, and (3) whether there was adherence to Federal legal 

authorities and Departmental regulations. The appropriate accounting adjustments have been 

completed, and no ADA violation occurred. The OASCR had sufficient FY 2012 funds to 

cover the improper payments. 

In FY 2016, the Office of the Chief Financial Officer (OCFO) received a determination on four 

ADA violations. General Provision (GP) 706 of the Agriculture, Rural Development, Food and 

Drug Administration, and Related Agencies Appropriations Act, 2016, Pub. L. 114-113, Div. A 

(Dec. 18, 2015), prohibits USDA from making certain obligations for IT projects without the 

prior written approval of the Chief Information Officer (CIO). Specifically, GP 706 states 

“none of the funds available to the Department of Agriculture for information technology shall 

be obligated for projects, contracts, or other agreements over $25,000 prior to receipt of written 

approval by the Chief Information Officer.” OCFO obligated funds in excess of the $25,000 on 

four occasions prior to an approved Acquisition Approval Request (AAR) from CIO. These 

violations are in the process of being reported to the Congress and President. 

Lastly, in FY 2016, Commodity Credit Corporation (CCC) identified a potential ADA violation 

that may have occurred in CCC expenditures. Expenditures for CCC interest to Treasury appear 

to have exceeded amounts initially apportioned by OMB. CCC expended approximately 

$37 million in interest to Treasury, more than the apparently apportioned amount of 

$29.9 million; however, there is some question about the apportionment requirements for 

interest to Treasury. FSA will seek further review of the legal authority of CCC with respect to 

the apportionment requirements with the Office of the General Counsel in conjunction with the 

Office of Management and Budget. 
3 6 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

The following exhibit provides a summary of agency programs not compliant with the 

Improper Payment Act.

Exhibit 13: Outstanding Initiative to Achieve Compliance

Initiative Improper Payments Elimination and Recovery Act of 2010Section of Non-compliance Agency/Program Target Completion 

Date

Publish improper payment 

estimates for all high-risk 

programs and activities 

Food and Nutrition Service 

(FNS) Supplemental Nutrition 

Assistance Program (SNAP)

12/31/2017

FNS Child and Adult Care Food 

Program

12/31/2020

Publish and meet annual 

reduction targets for each 

program assessed to be at 

risk and measured for 

improper payments 

Farm Service Agency (FSA) Loan 

Deficiency Program

11/15/2017

FSA Livestock Indemnity 

Program

11/15/2017

FSA Livestock Forage Disaster 

Program (LFP)

11/15/2017

FSA Supplemental Revenue 

Assistance Payments

11/15/2017

FNS National School Lunch 

Program

11/15/2017

FNS School Breakfast Program 11/15/2017

Special Supplemental Nutrition 

Program; Women, Infants, and 

Children (WIC)

11/15/2017

Report a gross improper 

payment rate of less than 

10 percent for each 

program and activity for 

which an improper payment 

estimate was obtained and 

published in the 

Performance and 

Accountability Report (PAR) 

or Agency Financial Report 

(AFR) 

FSA Livestock Indemnity 

Program

11/15/2017

FSA Supplemental Revenue 

Assistance Payments

10/01/2016

FNS National School Lunch 

Program

11/15/2017

FNS School Breakfast Program 11/15/2017
S ECT ION I MANAGEMENT’S DISCUS SION AND ANALYSIS 3 7 

Exhibit 14: Summary of Corrective Actions/Non-compliance with Laws and Regulations

Summary of Corrective Actions/Non-compliance with Laws and Regulations

Improper Payments 

Elimination and Recovery 

Act of 2010 (IPERA)

IPERA non-compliance issues (Food and Nutrition Service 

[FNS] and Farm Service Agency [FSA]).

Overall Estimated 

Completion Date FY 2021

FY 2016 Accomplishments FY 2017 Planned Actions

FNS has: 

 Published a proposed rule on March 29, 

2016, which strengthened program 

compliance by prohibiting any school, 

institution, or individual that is 

terminated from one of the Child 

Nutrition Programs and is on a list of 

disqualified institutions and individuals 

from participating in, or administering

any of the Child Nutrition Programs 

 In March 2016, FNS provided an overview 

of the Child Nutrition Integrity Proposed 

Rule to State agency personnel through 

Webinar training.

FNS will: 

 Publish SNAP improper payment rates for 

both FY 2016 and FY 2017 reporting.

 Issue Certification Guidance by 

December 31, 2016 that will provide 

clarification of policy related to income, 

identity and residency requirements in a 

single document. This will provide easy 

reference for State and local agency use. 

FSA has: 

 A notice was issued in September 2016 to 

field offices to reinforce and outline 

program policies and procedures for LFP.

 An LFP checklist form was developed for 

the District Director (DD) review of LFP 

applications to ensure payment eligibility 

and payment documentation are 

correctly reviewed and documented

FSA will: 

N/A
3 8 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Federal Financial Management 

Improvement Act Report on Financial 

Management Systems

Background

The Federal Financial Management Improvement Act (FFMIA) is designed to improve 

financial and program managers’ accountability, provide better information for decisionmaking, and improve the efficiency and effectiveness of Federal programs. FFMIA requires 

that financial management systems provide reliable, consistent disclosure of financial data in 

accordance with generally accepted accounting principles and standards. These systems must 

also comply with (1) Federal Financial Management System (FFMS) requirements;

(2) applicable Federal accounting standards; and (3) the U.S. Standard General Ledger 

(USSGL) at the transaction level. 

Additionally, the Federal Information Security Management Act (FISMA) requires that there 

be no significant weaknesses in information security policies, procedures, or practices to be 

substantially compliant with FFMIA. The IT non-compliance is also reported as a material 

weakness and is included in the Federal Managers’ Financial Integrity Act (FMFIA), Report on 

Management Control (Exhibit 11). This weakness is comprised of two major issues: 1) logical 

access controls/personnel security, and 2) configuration management. More detailed 

information on the status of corrective actions planned and to be completed to comply with 

FISMA is also provided in the Response to Management Challenges section of this report, 

Challenge 2: Information Technology Security Needs Continuing Improvement. 
S ECT ION I MANAGEMENT’S DISCUS SION AND ANALYSIS 3 9 

The following exhibit contains the outstanding initiatives to achieve compliance. 

Exhibit 15: Initiatives to Be Completed

Outstanding Initiatives to Achieve FFMIA Compliance

Initiative Section of Non-compliance Agency

Target 

Completion Date

Information 

Technology

Federal Financial Management System 

(FFMS) requirements, and information 

security policies, procedures, and/or 

practices.

Multiple 9/30/2017

Financial 

Management

Federal accounting standards, and U.S. 

Standard General Ledger (USSGL) at the 

transaction level.

NRCS 9/30/2017

Federal accounting standards, and

USSGL at the transaction level. CCC 9/30/2017

Fiscal Year 2016 Results

During fiscal year (FY) 2016, the U.S. Department of Agriculture (USDA) evaluated its 

financial management systems to assess compliance with FFMIA. In assessing FFMIA 

compliance, USDA considered auditors’ opinions on component agencies’ financial statements, 

and progress made in addressing the material weaknesses identified in the FY 2015 Agency 

Financial Report. USDA is not compliant with Federal accounting standards and the USSGL at 

the transaction level due to Commodity Credit Corporation and Natural Resources 

Conservation Service. Additionally, as reported in the FMFIA section of this report, USDA 

continues to have weaknesses in IT controls and Federal Financial Management Systems 

requirements that result in non-compliance with the FISMA requirement. As part of its 

financial systems strategy, USDA agencies continue working to meet FFMIA and FISMA 

objectives. 

COMMODITY CREDIT CORPORATION (CCC)

Noncompliance with Federal accounting standards was noted for weaknesses in the accounting 

for Pre-Credit and Credit Reform receivables, accrued liabilities, parent-child transactions, 

allowance for uncollectible accounts receivable, and environmental and disposal liabilities. 

During FY 2016, CCC continued their efforts to modernize their systems to become compliant 

with the Funds Control/Obligation Requirements related to recording obligations at the 

transactional level. 
4 0 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

CCC deployed the following software releases during FY 2016: 1) the Agriculture Risk 

Coverage (ARC)/Price Loss Coverage (PLC); 2) the Commodity Loan Processing System 

(CLPS) transitioning from the Automated Price Support System (APSS); 3) the Margin Dairy

Protection Program (MPP); and 4) Phase II of the Direct Loan System (DLS) for the Farm 

Storage Facility Loans (FSFL), which replaced the CORE Budget Tables with the real-time 

obligations functionality and proper obligation liquidations for FSFL loan closings. 

In addition, the Farm Service Agency (FSA)/CCC has successfully moved off the IBM 

AS400/S36 platform that hosts some of its County Office (CO) applications, addressing CCC’s 

deficiencies of having antiquated hardware and expired system maintenance plans. The former 

platform lacked the ability to fix system issues due to the vendors no longer being able to

support the operating systems. 

NATURAL RESOURCES CONSERVATION SERVICE (NRCS)

Deficiencies in applicable Federal accounting standards, including the USSGL at the 

transaction level, were noted for obligations incurred, including accrued expenses and 

undelivered orders; recoveries of prior year unpaid obligations and unexpended appropriations 

as it relates to accrued expenses.

NRCS continues working to mitigate auditor-identified deficiencies and substantially comply 

with FFMIA. 
S ECT ION I MANAGEMENT’S DISCUS SION AND ANALYSIS 4 1 

Financial Management Systems Strategy

On May 2, 2014, the Office of Management and Budget (OMB) and the U.S. Department of the 

Treasury (Treasury) designated the U.S. Department of Agriculture (USDA) a Federal 

Financial Shared Service Provider (FSSP). 

USDA is supporting OMB Memorandum M-13-08, Improving Financials through Shared 

Services, which directs agencies to do the following: 

• Move from agency-specific financial systems to a shared service provider; 

• Consolidate financial management systems; and 

• Use existing FSSP operations and maintenance teams to support systems and 

infrastructures.

The designation allows USDA to provide financial management services to Federal agencies. 

In 2015, the USDA Office of the Chief Financial Officer (OCFO) joined financial operations 

with financial systems and added the General Services Administration’s (GSA) financial 

operations and systems to provide an integrated solution and better customer service. 

Financial Management Lines of Business

USDA has two separate lines of business to support existing and future customers. The 

Systems, Applications, and Products (SAP) offering is housed in the Financial Management 

Services (FMS) Division. This is the standard USDA solution that has been developed over the 

last 8 years and now covers almost all USDA accounting activity. Momentum is part of the 

Pegasys Financial Systems (PFS) Division, and provides financial operations and systems for 

GSA and 38 Boards and Commissions. 

USDA has recently expanded its portfolio of services to include ezFedGrants (EFG), a 

SAP-based grants management tool that is fully integrated with the USDA core accounting 

system. It helps grants managers run their grants programs efficiently and improve the accuracy 

of their accounting. 

Mission

USDA’s mission as an FSSP is to provide reliable, cost-effective, employee-centric systems 

and services to Federal organizations, thus allowing our customers to focus on serving this 

great Nation through their mission delivery. FMS’ goal is to provide the necessary activities for 

executing the Financial Management Line of Business vision. The three key components of this 
4 2 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

vision are communication, governance, and operations. By executing these components, USDA 

will deliver a successful shared service offering.

USDA’s activities are focused on financial management services. The list of financial 

management services includes:

• Budget execution;

• General ledger accounting;

• Financial reporting;

• Audit support; 

• Payroll accounting; 

• Investment accounting; 

• Commercial vendor payments; 

• Temporary duty travel payments; 

• Permanent change of station employee relocation payments; 

• Grant payments; 

• Purchase card payments;

• Lease accounting;

• Intragovernmental payments; 

• Intragovernmental collections; 

• Receivable management; 

• Property accounting; and 

• Grants management.

By offering a solution that is proven and operating, and which meets all compliance 

requirements, a customer is jump-started in coming online with a state-of-the-art, fully 

financially configured Enterprise Resource Planning (ERP) solution. USDA’s primary 

objectives for this shared services effort are to provide the following: 

• An enterprise financial management service that allows customers to reap the benefits in 

increased service quality, including faster, less expensive, and less risky as compared to 

starting with a new Enterprise Resource Planning or financial management 

implementation;
S ECT ION I MANAGEMENT’S DISCUS SION AND ANALYSIS 4 3 

• Integration with the National Finance Center (NFC) payroll processing services; 

• Budget Status Forecasting;

• An enterprise grants management service that allows customers to utilize a full life-cycle 

management tool for grants administration that provides visibility to both the government 

and the grant recipient;

• A complete audit-compliant financial solution with full documentation meeting financial 

requirements; 

• Continuous process, operational, and organizational improvements for those shared 

services retained in the future state portfolio; 

• More powerful and flexible financial management and reporting; 

• Administrative payments, collections, and certifications;

• Editing/auditing capabilities that are 100 percent computerized; and 

• The best possible customer-focused service and support. 

Provider Status

As an FSSP, USDA continues to work with the Unified Shared Services Management (USSM) 

at GSA and the Office of Financial Innovation and Transformation (OFIT) at Treasury to 

ensure our FMS-based services adhere to the required guidelines with respect to services, 

pricing, governance and service level metrics. In September, 2016, OMB and Treasury certified 

USDA’s CGI-Momentum product, making USDA is the only organization that offers Federal 

customers a choice of SAP or Momentum. These products have certain strengths that may 

make one a better match for a particular customer. USDA PFS currently services GSA and 

38 boards and commissions using the Momentum product. Most of USDA uses the SAP 

product. Our experience with both sets us apart from any other shared service provider. 

Successes

During fiscal year (FY) 2016, USDA succeeded in the following ways: 

• Streamlined Automated Standard Application for Payments (ASAP) processing in 

anticipation of making it part of the enterprise solution, and, in due course, make it part of 

the enterprise solution. ASAP is a Treasury-developed tool that helps agencies manage 

payment processing at very low cost. Several USDA agencies use it for grants payments;
4 4 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

• Built a data extraction methodology and harmonized data model that allows future grants 

customers to develop reports using data from Estimated Construction Cost (ECC), 

Certified Reference Material (CRM), Pega, and agency repositories. This enhances the 

attractiveness of our grants management solution for USDA customers, as well as 

customers in other organizations; 

• Completed high-level requirements gathering to enable the Forest Service to fully deploy 

EFG by 2018; 

• Opened discussions with Rural Development about bringing loans into the USDA SAP 

corporate solution; 

• Opened discussions with the U.S. Department of Homeland Security (DHS), the Federal 

Emergency Management Agency (FEMA), and Treasury to explore partnering to use 

EFG;

• Completed requirements and began testing an interface between EFG and Grants.gov for 

implementation in the first quarter of FY 2017. Grants.gov is a clearinghouse that allows 

federal agencies to get grant opportunities out to the public and receive applications from 

the public. The interface with EFG will streamline the process with a paperless flow;

• Conducted pre-discovery sessions with the U.S. Department of Veterans Affairs on both 

Momentum and SAP; and 

• Began preparations to move USDA’s SAP-based financial management system to the 

cloud in FY 2017. This will improve performance, reduce risks and costs, increase 

flexibility, and improve testing and training. By working in the cloud, we will be able to 

offer shared service customers a robust and reliable platform that allows them to focus on 

their core mission.

Future Roadmap: SAP

USDA goals for the future include as follows: 

• Providing Financial Systems and Services to Federal agencies outside USDA, using both 

the SAP and Momentum products; 

• Rolling the SAP Grants solution out to all USDA agencies and to agencies outside USDA; 

and 

• Beginning the integration of loan programs into the SAP solution within USDA.
S ECT ION I MANAGEMENT’S DISCUS SION AND ANALYSIS 4 5 

Projected FY 2016 and FY 2017 planned releases and upgrades include the following: 

• SAP software release;

• General Financial Management Modernization Initiative enhancements;

• High-Performance Analytic Appliance (HANA) business warehouse; and

• Financial Statement Data Warehouse (FSDW) migration.

Future Roadmap: Momentum

Momentum 7.1.2 incorporates more than 160 new features and enhancements designed to meet 

current legislative and Government-mandated Federal financial management requirements and 

recommendations, including the Government-wide Treasury Account Symbol Adjusted Trial 

Balance System (GTAS), Do Not Pay (DNP), the System for Award Management (SAM), and 

Payment Application Modernization (PAM). 

In FY 2017, we plan to upgrade to Momentum 7.5, which includes the latest features available 

in the Momentum product line. 
4 6 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Other Management Information, Initiatives, 

and Issues: 

Digital Accountability and Transparency Act (DATA Act)

The Digital Accountability and Transparency Act (DATA Act) was enacted on May 9, 2014. 

This Act amends the Federal Financial Accountability and Transparency Act of 2006 (FFATA) 

and requires reporting of all Federal Funds, as well as Financial Assistance and Procurement 

transactions, to a public web site by May 2017. FFATA requires reporting of obligations and 

award-related information for all Federal financial assistance and procurement awards. The 

DATA Act expands upon FFATA by adding U.S. Department of the Treasury (Treasury) 

account-level reporting; this includes reporting all Treasury Account Symbols that fund each 

award and contract transaction, budget authority, program activity, outlays, and budget object 

classes, among other data elements. The DATA Act also requires the Federal Government to 

collectively standardize the data elements that will be reportable under the Act. The Office of 

Management and Budget (OMB) and the Treasury are conducting a pilot to reduce reporting 

burdens on recipients of awards and contracts. 

OMB and Treasury developed phased guidance for implementation of the DATA Act. 

Guidance to date includes OMB Memorandum 15-12,16 and Management Procedures 

Memorandum (MPM) 2016-03.17 OMB plans to issue another MPM with additional guidance 

for DATA Act Implementation in September 2016. A Treasury version 1.0 of the Requirements 

Submission Specifications (RSS) and Interface Design Document (IDD) were provided on 

April 29, 2016. USDA is a government leader in the workgroups charged with the 

government-wide DATA Act implementation and in developing the guidance listed above. 

The Office of the Chief Financial Officer (OCFO) leads the DATA Act implementation for 

USDA. OCFO Financial Management Services (FMS) is developing technical and functional 

requirements for the data elements that will need to be reported and is establishing the 

account-level reports needed to be compliant. OCFO FMS is developing a data repository for 

the Department to collect all DATA Act elements. The repository will connect to 

USAspending.gov and will report the data using Treasury’s data broker.

16 https://www.whitehouse.gov/sites/default/files/omb/memoranda/2015/m-15-12.pdf

17 https://www.whitehouse.gov/sites/default/files/omb/financial/memos/managementprocedures-memorandum-no-2016-03-additional-guidance-for-data-act-implementation.pdf
S ECT ION I MANAGEMENT’S DISCUS SION AND ANALYSIS 4 7 

USDA’s Senior Accountable Official, the Chief Financial Officer, established a USDA DATA 

Act implementation team, led by OCFO. This group inventoried DATA Act elements in the 

USDA agency source systems and is preparing for any needed system changes to become 

compliant. USDA has four main general ledgers and multiple awards systems where data 

resides. USDA expects to be DATA Act compliant by the May 2017 deadline. 

By May 2017, at least four USDA agencies will be using the Department’s grants system, 

which will improve reporting capabilities and will provide standardization for many grants 

programs. More agencies are exploring migration to the Department’s grants solution, which 

may potentially yield even more efficiencies and standardization.

OCFO also works with the Office of Procurement and Property Management (OPPM) to ensure 

that procurement reporting will adhere to DATA Act requirements. Together, OCFO and 

OPPM are reviewing procurement reporting policies and procedures to ensure that data is 

reported and certified by the agencies to be both timely and accurate in the Department’s 

Integrated Acquisition System (IAS), as well as other procurement systems used by the Forest 

Service and the Farm Service Agency.

Limitations of Financial Statement

The Consolidated Balance Sheet has been prepared to report the financial position of the entity, 

pursuant to the requirements of 31 U.S.C. 3515(b). While the balance sheet has been prepared 

from the books and records of the entity in accordance with generally accepted accounting 

principles for Federal entities and the formats prescribed by OMB, the statement is in addition 

to the financial reports used to monitor and control budgetary resources, which are prepared 

from the same books and records. The statement should be read with the realization that it is for 

a component of the U.S. Government, a sovereign entity. 
4 8 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Section II: 

Financial Information

Message from Chief Financial Officer

The U.S. Department of Agriculture (USDA) is leading the charge in providing a safe, 

nutritious and efficient food supply with a concentrated investment in the economic growth of 

rural America. With over $200 billion in assets, $143 billion in annual spending, and over 

$100 billion in loans to America’s farmers and ranchers, responsible financial controls are a 

necessity that we embrace. Our mission includes feeding upwards of 46 million families a day 

and would not be possible without reliable controls. USDA’s focus on responsible financial 

stewardship is a vital component in supporting program delivery of the very tangible work of 

the Department.

As Chief Financial Officer for the U.S. Department of Agriculture (USDA), I am pleased to 

present our Agency Financial Report (AFR) for fiscal year (FY) 2016. This report shows the 

progress made to provide fiscally sound, cost-effective program delivery. Because we are 

accountable to the American taxpayer, we strive for peak performance in all facets of our work. 

Through the collaborative efforts of USDA managers, employees, business partners, and 

stakeholders, we have made significant strides in advancing the Department’s record of 

excellence in financial management. Highlights of this progress include: 

• NRCS made significant progress with improper payments making them compliant with 

the Improper Payments Elimination and Recovery Improvement Act of 2012 (IPERIA) for 

the first time in four years;

• NRCS partnered with FSA to remediate the material weakness on the Grassland Reserve 

Program. Their combined records were reconciled, which allowed detailed samples to be 

pulled to support the outstanding balances of the program; and 

• RMA/FCIC remediated their material weakness related to Estimated Losses on Insurance 

Claims

Though we are continually making progress in financial management, we cannot yet give 

unmodified assurance of compliance with the Federal Managers’ Financial Integrity Act, or 
SECTION I I FINANCIAL INFORMATION 4 9

with the financial systems requirements of the Federal Financial Management Improvement 

Act. We will continue to focus on these efforts in the coming year. 

We are proud of the accomplishments of our hard-working employees at USDA. All of us are 

committed to the sound management of resources under our stewardship. We remain steadfast 

and committed to making greater financial management improvements in FY 2017. At every 

level, we are committed to being a proactive, cost-effective organization that is transparent and 

accountable for the programs we deliver. Ultimately our efforts will result in setting the highest 

achievable standard of excellence in managing taxpayers’ dollars.

Jon M. Holladay 

Chief Financial Officer

December 5, 2016 
5 0 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Independent Auditors Report

United States Department of Agriculture 

Office of Inspector General

Washington, D.C. 20250

DATE: December 6, 2016 

AUDIT

NUMBER: 50401-0011-11 

TO: Jon M. Holladay 

Chief Financial Officer

Office of the Chief Financial Officer

ATTN: Annie Walker 

Director

Internal Control Division 

FROM: Gil H. Harden

Assistant Inspector General for Audit 

SUBJECT: Department of Agriculture’s Consolidated Balance Sheet for

Fiscal Year 2016 

This report presents the results of our audit of the Department of Agriculture’s consolidated 

balance sheet for the fiscal year ending September 30, 2016. The report contains an unmodified 

opinion on the financial statement, as well as the results of our assessment of the Department’s 

internal control over financial reporting and compliance with laws and regulations. Your 

response is included in its entirety in Exhibit D. 

In accordance with Departmental Regulation 1720-1, please furnish a reply within 60 days 

describing the corrective actions taken or planned, and timeframes for implementing the

recommendations for which management decisions have not been reached. Please note that the 

regulation requires management decision to be reached on all recommendations within 6 months 

from report issuance, and final action to be taken within 1 year of each management decision to 

prevent being listed in the Department’s annual Agency Financial Report. 

We appreciate the courtesies and cooperation extended to us by members of your staff during our 

audit. This report contains publicly available information and will be posted in its entirety to 

our website https://www.usda.gov/oig in the near future.
SECTION II FINANCIAL INFORMATION 5 1

Table of Contents

Independent Auditor’s Report .............................................................................. 1

Report on the Financial Statements ............................................................. 1

Opinion on the Consolidated Financial Statement..................................... 2

Other Matters................................................................................................. 2

Report on Internal Control Over Financial Reporting.............................. 3

Report on Compliance and Other Matters................................................. 4

Purpose of the Report on Internal Control Over Financial Reporting

and the Report on Compliance and Other Matters ................................... 6

Section 1: Material Weaknesses in Internal Control Over Financial

Reporting............................................................................................................... 7

Finding 1: Improvements are Needed in Overall Financial

Management................................................................................................... 7

Finding 2: Improvements are Needed in Overall Information

Technology Security Program...................................................................... 8

Section 2: Significant Deficiency in Internal Control Over Financial

Reporting............................................................................................................... 9

Finding 3: Controls Over Financial Reporting Can Be Strengthened.... 9

Recommendation 1 ................................................................................10

Recommendation 2 ................................................................................10

Section 3: Noncompliance with Laws and Regulations .................................11

Finding 4: Lack of Substantial Compliance with FFMIA Requirements

.......................................................................................................................11

Finding 5: Anti-deficiency Act Violations................................................12

Abbreviations........................................................................................................14

Exhibit A: Summary of Open Recommendations from Prior Years .............15

Exhibit B: Status of Prior Year Material Weaknesses and Significant

Deficiencies............................................................................................................19

Exhibit C: Status of Prior Year Noncompliance Findings..............................20

Exhibit D: Agency’s Response............................................................................21

Exhibit E: Agency’s Financial Report...............................................................22
5 2 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Independent Auditor’s Report

Jon M. Holladay

Chief Financial Officer

Office of the Chief Financial Officer

The United States Department of Agriculture’s (USDA) Office of Inspector General (OIG) has 

audited the consolidated balance sheet of the Department for fiscal year 2016. We also 

considered USDA’s internal control over financial reporting and tested USDA’s compliance with 

certain provisions of applicable laws, regulations, contracts, and grant agreements that could 

have a direct effect on the determination of material financial statement amounts and disclosures 

related to the balance sheet.

The “Findings and Recommendations” section presents the material weaknesses and significant 

deficiencies in internal control and instances of noncompliance with laws and regulations, as of 

and for the fiscal year ended September 30, 2016. Exhibit A summarizes the current year status 

of prior years’ open audit recommendations. Exhibit B shows the status of prior year internal 

control weaknesses. Exhibit C provides an update to previously reported instances of 

noncompliance with laws and regulations. USDA’s response is presented in its entirety in 

Exhibit D.

Report on the Financial Statements

We have audited the accompanying consolidated balance sheet of USDA as of

September 30, 2016, and the related notes (hereinafter referred to as “consolidated financial 

statement”).

Management’s Responsibility for the Consolidated Financial Statement

Management is responsible for the preparation and fair presentation of this consolidated financial 

statement in accordance with accounting principles generally accepted in the United States of 

America (U.S.); and the design, implementation, and maintenance of internal control relevant to 

the preparation and fair presentation of the consolidated financial statement that is free from 

material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on this consolidated financial statement based on 

conducting our audit in accordance with auditing standards generally accepted in the U.S.; the 

standards applicable to financial audits contained in Government Auditing Standards issued by 

the Comptroller General of the U.S.; and the Office of Management and Budget (OMB) 

Bulletin 15-02, Audit Requirements for Federal Financial Statements. Those standards and 

OMB Bulletin 15-02 require that we plan and perform the audit to obtain reasonable assurance 

about whether the consolidated financial statement is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and 

disclosures in the consolidated financial statement. The procedures selected depend on the

AUDIT REPORT 50401-0011-11 1
SECTION II FINANCIAL INFORMATION 5 3

auditors’ judgement, including the assessment of the risks of material misstatement of the 

consolidated financial statement, whether due to fraud or error. In making those risk 

assessments, the auditor considers internal control relevant to the entity’s preparation and fair 

presentation of the consolidated financial statement in order to design audit procedures that are 

appropriate in the circumstances, but not for the purpose of expressing an opinion on the 

effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit 

also includes evaluating the appropriateness of the accounting policies used and the 

reasonableness of significant accounting estimates made by management, as well as evaluating 

the overall presentation of the consolidated financial statement.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a 

basis for our audit opinion.

Opinion on the Consolidated Financial Statement

In our opinion, the consolidated financial statement referred to above presents fairly, in all 

material respects, the financial position of USDA as of September 30, 2016, in accordance with

U.S. generally accepted accounting principles.

Other Matters

Required Supplementary Information

U.S. generally accepted accounting principles require that the information in the Management’s 

Discussion and Analysis (MD&A), Required Supplementary Information (RSI), and Required 

Supplementary Stewardship Information sections be presented to supplement the basic 

consolidated financial statement. Such information, although not part of the basic consolidated 

financial statement, is required by the Federal Accounting Standards Advisory Board, which 

considers it to be an essential part of financial reporting for placing the basic consolidated 

financial statements in an appropriate operational, economic, or historical context. We have 

applied certain limited procedures to the required supplementary information in accordance with 

auditing standards generally accepted in the U.S., which consisted of inquiries of management 

about the methods of preparing the information and comparing the information for consistency 

with management’s responses to our inquiries, the basic consolidated financial statement, and 

other knowledge we obtained during our audit of the basic consolidated financial statement. We 

do not express an opinion or provide any assurance on the information because the limited 

procedures do not provide us with sufficient evidence to express an opinion or provide any 

assurance.

Other Information

Our audit was conducted for the purpose of forming an opinion on the basic consolidated 

financial statement as a whole. The “Message from the Secretary” and the “Other Information” 

sections are presented for purposes of additional analysis, and are not a required part of the 

financial statement or the RSI. Additionally, the accompanying consolidated statement of net 

cost, consolidated statement of changes in net position, combined statement of budgetary

2 AUDIT REPORT 50401-0011-11
5 4 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

resources, and the related notes for the fiscal year ended September 30, 2016, are included. This 

information has not been subjected to the auditing procedures applied in our audit of the basic 

consolidated balance sheet, and, accordingly, we express no opinion and provide no assurance on 

it.

Other Reporting Required by Government Auditing Standards 

Report on Internal Control Over Financial Reporting

In planning and performing our audit of the consolidated financial statement, we considered 

USDA’s internal control over financial reporting (internal control) to determine the audit 

procedures that are appropriate in the circumstances for the purpose of expressing our opinion on 

the consolidated financial statement, but not for the purpose of expressing an opinion on the 

effectiveness of USDA’s internal control or on management’s assertion on internal control 

included in the MD&A. Accordingly, we do not express an opinion on the effectiveness of 

USDA’s internal control or on management’s assertion on internal control included in the 

MD&A. We did not test all internal controls relevant to operating objectives as broadly defined 

by the Federal Managers’ Financial Integrity Act of 1982 (FMFIA).

Our consideration of the internal control was for the limited purposes described in the preceding 

paragraph and was not designed to identify all deficiencies in the internal control over financial 

reporting that might be significant deficiencies or material weaknesses and, therefore, material 

weaknesses or significant deficiencies may exist that were not identified.

A deficiency in internal control exists when the design or operation of a control does not allow 

management or employees, in the normal course of performing their assigned functions, to 

prevent, or detect and correct, misstatements on a timely basis. A material weakness is a 

deficiency or a combination of deficiencies, in internal control, such that there is a reasonable 

possibility that a material misstatement of USDA’s consolidated financial statement will not be 

prevented, or detected and corrected, on a timely basis.

A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is 

less severe than a material weakness, yet important enough to merit attention by those charged 

with governance.

In our fiscal year 2016 engagement, we noted certain matters involving internal control that we 

consider to be significant deficiencies. Specifically, we identified weaknesses in USDA’s:

• overall financial management,

• information technology (IT) security program, and

• controls over financial reporting.

We determined that the first two deficiencies are also material weaknesses. These deficiencies 

are discussed in this report in the “Findings and Recommendations,” Sections 1 and 2.

AUDIT REPORT 50401-0011-11 3
SECTION II FINANCIAL INFORMATION 5 5

Also, as required by OMB Bulletin 15-02, we compared the material weaknesses identified in the 

audit with those material weaknesses included in USDA’s FMFIA Report on Management 

Control that relate to financial reporting. We noted no exceptions.

Report on Compliance and Other Matters

As part of obtaining reasonable assurance about whether USDA’s consolidated financial 

statement is free from material misstatement, we performed tests of its compliance with certain 

provisions of laws, regulations, contracts, grant agreements, and Governmentwide policy 

requirements, noncompliance with which could have a direct and material effect on the 

determination of consolidated financial statement amounts and disclosures. However, providing 

an opinion on compliance with those provisions was not an objective of our audit and, 

accordingly, we do not express such an opinion.

We also performed tests of USDA’s compliance with certain provisions referred to in 

Section 803(a) of the Federal Financial Management Improvement Act of 1996 (FFMIA).

Providing an opinion on FFMIA was not an objective of our audit and, accordingly, we do not 

express such an opinion. The results of our tests disclosed instances, described in more detail in 

Finding 4 in the “Findings and Recommendations,” Section 3, of this report, where USDA was 

not substantially compliant with Federal Financial Management System Requirements (FFMSR), 

applicable Federal Accounting Standards, and the U.S. Standard General Ledger (USSGL) at the 

transaction level.

Also, as discussed in Finding 5 of the “Findings and Recommendations,” Section 3, of this 

report, our tests disclosed instances of noncompliance with the Anti-Deficiency Act (ADA); 

some of these ADA violations are still in the process of being reported to Congress and the 

President.

Additionally, during fiscal year 2016, we identified instances of noncompliance with the 

requirements of the Improper Payments Elimination and Recovery Act of 2010 (IPERA), 

regarding the design of program internal controls related to reporting improper payments. A 

separate report will be issued with further details on the Department’s compliance with improper 

payment requirements.1

Management’s Responsibility for Internal Control and Compliance

USDA’s management is responsible for (1) evaluating the effectiveness of internal control over 

financial reporting based on criteria established under FMFIA, (2) providing a statement of 

assurance on the overall effectiveness of internal control over financial reporting, (3) ensuring 

USDA’s financial management systems are in substantial compliance with FFMIA requirements, 

and (4) ensuring compliance with other applicable laws, regulations, contracts, and grant 

agreements.

1 IPERA amended the Improper Payments Information Act of 2002, Public Law 107-300. These two laws address 

improper payment requirements.

4 AUDIT REPORT 50401-0011-11
5 6 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Auditor’s Responsibilities

We are responsible for: (1) obtaining a sufficient understanding of internal control over financial 

reporting and compliance to plan the audit, (2) testing whether USDA’s financial management 

systems substantially comply with FFMIA requirements referred to above, and (3) testing 

compliance with certain provisions of laws, regulations, contracts, and grant agreements that 

have a direct and material effect on the financial statement and applicable laws.

We did not evaluate all internal controls relevant to operating objectives as broadly established 

by FMFIA, such as those controls relevant to preparing statistical reports and ensuring efficient 

operations. We limited our internal control testing to controls over financial reporting and 

compliance. Because of inherent limitations in internal control, misstatements due to error or 

fraud, losses, or noncompliance may nevertheless occur and not be detected. We also caution 

that projecting our audit results to future periods is subject to risk that controls may become 

inadequate because of changes in conditions or that the degree of compliance with controls may 

deteriorate. In addition, we caution that our internal control testing may not be sufficient for 

other purposes.

We did not test compliance with all laws, regulations, contracts, and grant agreements applicable 

to USDA. We limited our tests of compliance to certain provisions of laws, regulations, 

contracts, and grant agreements that have a direct effect on the determination of material 

financial statement amounts and disclosures that we deemed applicable to USDA’s consolidated 

financial statement for the fiscal year ended September 30, 2016. We caution that 

noncompliance may occur and not be detected by these tests and that such testing may not be 

sufficient for other purposes. Also, our work on FFMIA would not necessarily disclose all 

instances of noncompliance with FFMIA requirements.

Management’s Response

Management’s response to the report is presented in Exhibit D. We did not audit USDA’s 

response and, accordingly, we express no opinion on it.

Status of Prior Year’s Findings and Recommendations

We reviewed the status of open recommendations from prior years; prior year internal control 

deficiencies, and prior year noncompliance issues. The status of these items is presented in 

Exhibits A, B, and C.

AUDIT REPORT 50401-0011-11 5
SECTION II FINANCIAL INFORMATION 5 7

Purpose of the Report on Internal Control Over Financial Reporting and the 

Report on Compliance and Other Matters

The purpose of the “Report on Internal Control Over Financial Reporting” and the “Report on 

Compliance and Other Matters” sections of this report is solely to describe the scope of our 

testing of internal control and compliance and the result of that testing, and not to provide an 

opinion on the effectiveness of USDA’s internal control or on compliance. Accordingly, these 

reports are not suitable for any other purpose.

Gil H. Harden

Assistant Inspector General for Audit

Washington, D.C. 

December 5, 2016

6 AUDIT REPORT 50401-0011-11
5 8 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Findings and Recommendations

Section 1: Material Weaknesses in Internal Control Over Financial 

Reporting

Finding 1: Improvements are Needed in Overall Financial Management

The material weakness for financial management is due to improvements needed in accounting 

and internal controls related to the Commodity Credit Corporation (CCC) and the Natural 

Resources Conservation Service (NRCS). USDA also has one existing non-conformance related 

to Funds Control Management within CCC, which is expected to be resolved by the end of fiscal 

year 2019. In conducting our review, we noted the following areas where improvements are 

needed in overall financial management. Specifically:

• One component of USDA’s financial reporting, CCC disclosed material weaknesses 

related to accounting estimates and maintenance of accounting records. The Department 

also continued to report improvements needed in recording obligations at the transaction 

level for CCC.

• One component of USDA’s financial reporting, NRCS disclosed material weaknesses 

related to controls over obligations and undelivered orders; and accounting and controls 

over expenses.

In its FMFIA Report on Management Control for fiscal year 2016, the Department reported the 

above material weakness for overall financial management with the following corrective action 

plans:

• For CCC, in fiscal year 2017, the Department plans to implement corrective actions to 

address weaknesses identified in financial reporting, accounting for parent/child 

transactions of U.S. Agency for International Development, accounting for Commodity 

Certificate Exchange, accounting for budgetary transactions and fund balance with 

Treasury. Some of these actions include updating procedures, developing effective 

communication processes, and improve timeliness of financial statement preparationand 

the applicable support. In 2019, CCC plans to complete the improvements needed to 

record obligations at the transaction level.

• NRCS, in fiscal year 2017, plans to monitor adjustments and open obligations and 

enhance policy and control procedures for period end accruals.

Because USDA has actions planned and in progress, we are making no further recommendations 

herein.

AUDIT REPORT 50401-0011-11 7
SECTION II FINANCIAL INFORMATION 5 9

Finding 2: Improvements are Needed in Overall Information Technology 

Security Program

As required by the Federal Information Security Modernization Act of 2014 (FISMA), OIG 

reviewed USDA’s ongoing efforts to improve its IT security program and practices as of fiscal 

year 2016.2

USDA is working to improve its IT security posture, but many longstanding weaknesses remain. 

We continue to find that the Office of the Chief Information Officer (OCIO) has not 

implemented corrective actions that the Department has committed to in response to prior 

recommendations from OIG. In fiscal years 2009 through 2015, OIG made 61 recommendations 

for improving the overall security of USDA’s systems, 39 have been closed (i.e., the agreedupon corrective action has been implemented), 4 are current and have not yet reached the 

estimated completion date; however, 18 are overdue for completion. Our testing identified that 

security weaknesses still exist in 3 of the 39 closed recommendations.

Our testing also identified weaknesses in eight subject areas as defined for review by FISMA: 

risk management, contractor systems, configuration management, identity and access 

management, security and privacy training, Information Security Continuous Monitoring 

program maturity level, incident response program maturity level, and contingency planning.

We noted that OCIO continues to take positive steps towards improving the Department’s 

security posture. OCIO released two critical policies this year that, once implemented, should 

improve IT security within USDA, and also began implementation of the Continuous Diagnostic 

and Mitigation project.

OCIO concurred with the findings in the report and generally agreed with the recommendations 

made in our FISMA audit; therefore, we are making no further recommendations in this report.

2 Audit Report 50501-0012-12, U.S. Department of Agriculture, Office of the Chief Information Officer, Fiscal Year 

2016 Federal Information Security Modernization Act, issued November 2016.

8 AUDIT REPORT 50401-0011-11
6 0 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Section 2: Significant Deficiency in Internal Control Over Financial 

Reporting

Finding 3: Controls Over Financial Reporting Can Be Strengthened

During our audit, we noted that controls relating to certain financial management practices could 

be strengthened to operate more effectively throughout the fiscal year. Details follow.

• Last year, our report identified deficiencies with controls over inactive Unliquidated 

Obligations (ULO).3 This year, our review disclosed that additional improvements are 

needed for selected agencies.

We statistically selected 100 ULOs from 14 agencies and offices for which no activity had 

occurred for over 1 year, as of March 31, 2016. We found that eight ULOs from five 

agencies4 were invalid because no future expenditures were expected or because there were 

adjustments that lacked support. We also found one ULO which was valid, but should have 

been de-obligated in a prior fiscal year had it been properly monitored.

We nonstatistically selected three agencies and reviewed their obligation certifications 

submitted to the Department for the third quarter of fiscal year 2016. To assess the 

appropriateness of the ULO certifications, we then selected 10 obligation balances 

nonstatistically from each of the three certifications. We found that two agencies did not 

deobligate ULOs deemed invalid within the required time frame and inappropriately certified 

to the validity of the ULO balances.5

The U.S. Department of the Treasury’s (Treasury) annual closing guidance (Treasury 

Bulletin 2016-06, 2016 Yearend Closing, dated July 31, 2016), requires an annual review of 

ULOs. Departmental Regulation 2230-1, Reviews of Unliquidated Obligations, dated 

October 15, 2014, further requires quarterly reviews and certifications as to the validity of 

ULO balances from agency Chief Financial Officers (CFO).

Ineffective monitoring and reviewing, as well as inappropriate certifying to the validity of 

obligation balances, resulted in invalid obligations remaining open. Invalid obligations 

improperly restrict the availability of funding authority. This also increases the risk of 

misstating obligations as of yearend.

3 An obligation is a binding agreement that will result in outlays, immediately or in the future. Budgetary resources

must be available before obligations can be incurred legally.

4 Economic Research Service, National Appeals Division, Animal and Plant Health Inspection Service (APHIS), 

Foreign Agriculture Service (FAS) and Agricultural Research Service.

5 Eight ULOs from FAS and one ULO from the Farm Service Agency (FSA) should have been deobligated shortly

after being deemed invalid.

AUDIT REPORT 50401-0011-11 9
SECTION II FINANCIAL INFORMATION 6 1

• Our review again disclosed abnormal balances6 in USDA’s fiscal yearend trial balance 

that were not fully researched and corrected. For fiscal year 2016, we noted 31 abnormal 

balances with an absolute value of approximately $337 million. According to the 

Department, the existence of an abnormal balance indicates that transactions or 

adjustments may have been posted in error. In addition, abnormal balances increase the 

risk of material misstatement on the financial statements. The Department closed the 

recommendation in fiscal year 2016, however we continue to identify similar deficiencies 

in our review and have modified the repeat recommendation.

• Last year, our review of real property balances and transactions disclosed that 

depreciation expenses were not always properly recorded and real property costs werenot 

always properly classified. This year we found that leases and Work-in-Progress (WIP) 

were not always classified properly or in the correct amount. Detailsfollow:

• We found that APHIS incorrectly classified 2 of the 10 leases sampled as cancellable 

leases causing an understatement of future operating lease payments by at least $60 

million. We also found a lease for APHIS that reported an annual rent of over $100 

million when the correct amount was only $120,000.

• In Forest Service (FS) we found that a change in a lease agreement was not timely 

recorded, causing an understatement of $31 million in future operating lease 

payments.

• We found real and personal property that was classified as WIP that should havebeen 

moved to general Property, Plant and Equipment (PP&E) and depreciated or 

amortized accordingly. Specifically, in FS 53 percent or $70 million of the WIP 

balance reported to the Office of the Chief Financial Officer (OCFO) should have 

been moved to general PP&E. Additionally, FSA reported as WIP in fiscal year 

2016, $69 million in Internal Use Software in development projects for fiscal year 

2011 that had been identified as completed.

Management generally agreed with our findings and is working to correct the errors.

Recommendation 1:

Provide additional oversight to ensure that controls over financial reporting are strengthened and 

maintained, including those over ULOs and transactions resulting in negative (abnormal) fund 

balances.

Recommendation 2:

Provide oversight to ensure that property is classified properly, including WIP and lease 

agreements.

6 A balance that deviates from the standard balance as defined by the Treasury’s USSGL.

10 AUDIT REPORT 50401-0011-11
6 2 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Section 3: Noncompliance with Laws and Regulations 

Finding 4: Lack of Substantial Compliance with FFMIA Requirements

FFMIA requires agencies to annually assess whether their financial management systems comply 

substantially with (1) FFMSR, (2) applicable Federal accounting standards, and (3) the USSGL 

at the transaction level. In addition, FISMA requires each agency to report significant 

information security deficiencies, relating to financial management systems, as a lack of 

substantial compliance under FFMIA. FFMIA also requires auditors to report in their CFO Act 

financial statement audit reports whether financial management systems substantially comply 

with FFMIA’s system requirements. 

During fiscal year 2016, USDA evaluated its financial management systems to assess 

compliance with FFMIA. The Department reported that it was not compliant with FFMSR, 

applicable accounting standards, USSGL at the transaction level, and FISMA requirements. As 

noted in its MD&A, USDA continues its work to meet FFMIA and FISMA objectives. 

Specifically, in its FFMIA and FMFIA reports, the Department reported internal control design 

and operating effectiveness, deficiencies with logical access controls/personnel security and 

configuration management. See Finding 2 for more details. 

Additionally, in its FFMIA report, the Department noted noncompliances for two of its 

component agencies relating to financial management, described below.

1. CCC was not compliant with applicable Federal accounting standards and USSGL at the

transaction level. Noncompliance with Federal accounting standards was noted for

weaknesses in the accounting for Pre-Credit and Credit Reform receivables, accrued

liabilities, parent-child transactions, allowance for uncollectible accounts receivable,

environmental and disposal liabilities. During fiscal year 2016, CCC continued their

efforts to modernize their systems to become compliant with the Funds

Control/Obligation Requirements related to recording obligations at the transaction level.

2. Deficiencies in NRCS’ applicable Federal accounting standards, including the USSGL at

the transaction level, were noted for obligations incurred, including accrued expenses and

undelivered orders; recoveries of prior year unpaid obligations and unexpended

appropriations as it relates to accrued expenses. NRCS continues working to mitigate

auditor-identified deficiencies and substantially comply with FFMIA.

See Finding 1 for more details on NRCS and CCC issues.

Because of planned actions, we are making no further recommendations in this report. 

AUDIT REPORT 50401-0011-11 11
SECTION II FINANCIAL INFORMATION 6 3

Finding 5: Anti-deficiency Act Violations

In fiscal year 2016, the Department reported several actual and potential ADA violations in its 

Agency Financial Report. These violations are discussed in detail below.

In fiscal year 2015, FS identified an ADA violation for fiscal years 1990 through 2009, under 

31 U.S. Code (U.S.C.) § 1341(a)(1). The violation related to the agency’s employment in 

California of two citizens of Palau. This use of Federal appropriations violated a general

provision of appropriations acts from fiscal years 1990 through 2009, which prohibited the use of 

appropriations to employ non-U.S. citizens. This ADA violation is in the process of being 

reported to Congress and the President.

FSA identified an ADA violation under 31 U.S.C. § 1517(a). In September 2013, OMB 

approved an apportionment request for $1 million from FSA for the purchase of guaranteed loans 

in fiscal year 2014. On February 25, 2014, FSA made several loan purchases, obligating

$1,302,823.57, thus exceeding the apportionment for such purchases. On March 7, 2014, FSA 

requested another apportionment to cover the deficiency. OMB approved the request and 

apportioned funds on March 31, 2014. FSA’s Farm Loan Operations Office completed 

corrective actions to ensure future payments are obligated only within approved apportionment 

limits. The ADA violation is in the process of being reported to Congress and the President.

The Office of Advocacy and Outreach (OAO) identified an ADA violation for fiscal year 2011, 

under 31 U.S.C. § 1517(a). The Food, Conservation, and Energy Act of 2008, Public Law

110-234 (Farm Bill of 2008) permitted OAO to award up to $19 million in fiscal year 2011 for 

“Outreach and Assistance for Socially Disadvantaged and Veteran Farmers and Ranchers” 

(Section 2501) Grants. OAO exceeded the amount available. The ADA violation is in the 

process of being reported to Congress and the President.

In fiscal year 2015, an erroneous transaction was identified associated with the StrikeForce 

Initiative funded through transfers from USDA agencies for fiscal years 2010 and 2011. No 

ADA violation occurred and all transactions have been corrected.

In fiscal year 2015, FAS identified a potential violation of the ADA that may have occurred in its 

fiscal year 2009 appropriation. FAS has completed its analyses and identified the causes of this 

potential violation. A corrective transaction was processed to clear the negative cash balances 

and the Treasury and OMB approved the transaction on June 30, 2016. Therefore, the fiscal year 

2009 appropriation no longer has a negative cash balance. FAS has requested a final 

determination on the status of the potential ADA violation from the Office of the General 

Counsel.

USDA’s OIG determined that improper bank reconciliations were completed for two 

ratifications totaling $17,709 on behalf of the Office of the Assistant Secretary for Civil Rights 

(OASCR). As a result of the improper reconciliations, two USDA offices each paid for a 

procurement contract that should have been charged to OASCR. This ultimately resulted in 

OASCR’s fiscal year 2012 appropriation potentially being augmented, which was considered a 

possible ADA violation. A review determined that the temporary augmentation of OASCR’s

12 AUDIT REPORT 50401-0011-11
6 4 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

account, which was corrected with available (unobligated) fiscal year 2012 funds, did not result 

in an ADA violation. OASCR only needed to correct the improper charges using the fiscal year 

2012 appropriation.

In fiscal year 2016, OCFO received a determination on four ADA violations. General Provision 

(GP) 706 of Agriculture, Rural Development, Food and Drug Administration, and Related 

Agencies Appropriations Act of 2016, Public Law 114-113, Div. A (Dec. 18, 2015), prohibits 

USDA from making certain obligations for IT projects without prior written approval of OCIO. 

Specifically, GP 706 states, “none of the funds available to USDA for IT shall be obligated for 

projects, contracts, or other agreements over $25,000 prior to receipt of written approval by the 

Chief Information Officer (CIO).” OCFO obligated funds in excess of the $25,000 on four 

occasions prior to an approved Acquisition Approval Request from the CIO. These violations 

are in the process of being reported to Congress and the President.

In fiscal year 2016, CCC identified a potential ADA violation that may have occurred in CCC 

expenditures. Expenditures for CCC interest to Treasury appear to have exceeded amounts 

initially apportioned by OMB. CCC expended approximately $37 million in interest to Treasury, 

more than the apparently apportioned amount of $29.9 million; however, there is some question 

about the apportionment requirements for interest to Treasury. FSA will seek further review of 

the legal authority of CCC with respect to the apportionment requirements with the Office of the 

General Counsel in conjunction with OMB.

AUDIT REPORT 50401-0011-11 13
SECTION II FINANCIAL INFORMATION 6 5

Abbreviations

ADA...........................Anti-Deficiency Act

APHIS ........................Animal and Plant Health Inspection Service

CCC............................Commodity Credit Corporation

CFO............................Chief Financial Officer

CIO.............................Chief Information Officer

FAS ............................Foreign Agriculture Service

FFMIA .......................Federal Financial Management Improvement Act of 1996

FFMSR.......................Federal Financial Management System Requirements

FISMA .......................Federal Information Security Modernization Act of 2014

FMFIA .......................Federal Managers’ Financial Integrity Act of 1982

FMMI.........................Financial Management Modernization Initiative

FS ...............................Forest Service

FSA ............................Farm Service Agency

GP ..............................General Provisions

IPERA ........................Improper Payments Elimination and Recovery Act of 2010

IT................................information technology

LAA ...........................logged access authority

MD&A .......................Management’s Discussion and Analysis

NRCS .........................Natural Resources Conservation Service

OAO...........................Office of Advocacy and Outreach

OASCR ......................Office of the Assistant Secretary for Civil Rights

OCFO.........................Office of the Chief Financial Officer

OCIO..........................Office of the Chief Information Officer

OIG ............................Office of Inspector General

OMB ..........................Office of Management and Budget

PP&E..........................Property, Plant and Equipment

RSI .............................Required Supplementary Information

USSGL.......................U.S. Standard General Ledger

Treasury .....................U.S. Department of the Treasury

U.S. ............................United States of America

U.S.C..........................United States Code

ULO ...........................Unliquidated Obligations

USDA.........................United States Department of Agriculture

WIP ............................Work-in-Progress

14 AUDIT REPORT 50401-0011-11
6 6 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Exhibit A: Summary of Open Recommendations from Prior Years

Report 50401-0009-11, Department of Agriculture’s Consolidated Financial Statements for 

Fiscal Years 2015 and 2014, dated February 12, 2016.

Finding 3: Controls Over Financial Reporting Can be Strengthened 

Recommendation 1

Provide oversight to ensure that real property is accounted for appropriately, including its 

classification and depreciation expenses.

Departmental Status

OCFO stated that final action was complete on this recommendation and the recommendation is 

closed.

OIG Results

OIG continued to find similar deficiencies in our review of the fiscal year 2016 financial 

statement audit and has issued a repeat of Finding 3 and a modified recommendation.

Finding 4: IT Controls Can Be Strengthened in One Financial System 

Recommendation 2

Revise logged access authority (LAA) procedures to address approvals for permanent LAA and 

to include timeframes and enforcement actions requiring the monitoring activities to be 

completed within a defined number of days.

Recommendation 3

Update system specific procedures to reflect current National Institute of Standards and 

Technology and USDA requirements for password settings.

Recommendation 4

Revise and/or develop mitigating controls that fully reflect applicability of the risks in the 

Financial Management Modernization Initiative (FMMI) environment, preventative mitigations 

associated with system and change management controls, and detective manual controls 

performed.

AUDIT REPORT 50401-0011-11 15
SECTION II FINANCIAL INFORMATION 6 7

Exhibit A: Summary of Open Recommendations from Prior Years

Recommendation 5:

Revise the System Security Plans and Cyber Security Assessment and Management 

interconnections tables to accurately reflect current system interconnections and interfaces.

Departmental Status

OCFO stated that final action was complete on these recommendations and the recommendations 

are closed.

OIG Results

OIG did not identify similar deficiencies during our review of the fiscal year 2016 financial 

statements.

16 AUDIT REPORT 50401-0011-11
6 8 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Exhibit A: Summary of Open Recommendations from Prior Years

Report 50401-0007-11, Department of Agriculture’s Consolidated Financial Statements for 

Fiscal Years 2014 and 2013, dated December 18, 2014.

Finding 3: Controls Over Financial Reporting Can be Strengthened 

Recommendation 1

Provide additional oversight to FAS to ensure that controls over financial reporting are 

strengthened and maintained, including those over ULOs and transactions resulting in negative 

(abnormal) fund balances.

Departmental Status

OCFO stated that final action was complete on this recommendation and the recommendation is 

closed.

OIG Results

OIG continued to find similar deficiencies in our review of the FAS ULOs and abnormal 

balances in the fiscal year 2016 financial statement audit and has issued a repeat of Finding 3 and 

a modified recommendation.

AUDIT REPORT 50401-0011-11 17
SECTION II FINANCIAL INFORMATION 6 9

Exhibit A: Summary of Open Recommendations from Prior Years

Report 50401-0003-11, Department of Agriculture’s Consolidated Financial Statements for 

Fiscal Years 2012 and 2011, dated November 14, 2012.

Finding 3: Controls Over Financial Reporting Can be Strengthened 

Recommendation 1

Continue to analyze the abnormal balances to identify and implement the actions needed to 

correct those balances, to include providing oversight to ensure reimbursable activities are timely 

billed for collection.

Departmental Status

OCFO stated that final action was complete on this recommendation and the recommendation is 

closed.

OIG Results

OIG continued to find similar deficiencies in our review of abnormal balances in the fiscal year 

2016 financial statement audit and has issued a repeat of Finding 3 and a modified 

recommendation.

18 AUDIT REPORT 50401-0011-11
7 0 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Exhibit B: Status of Prior Year Material Weaknesses and 

Significant Deficiencies

Control Deficiency 2015 Status 2016 Status

Overall Financial 

Management Material Weakness Material Weakness

Overall Information 

Technology Security Program Material Weakness Material Weakness

Financial Reporting Controls Significant Deficiency Significant Deficiency

Information Technology 

Controls Significant Deficiency Closed7

7 In fiscal year 2015, Audit Report 50401-0009-11, Department of Agriculture’s Consolidated Financial Statements 

for Fiscal Years 2015 and 2014, issued February 12, 2016, disclosed weaknesses in the FMMI system. OIG did not 

identify similar deficiencies in our fiscal year 2016 review of FMMI.

AUDIT REPORT 50401-0011-11 19
SECTION II FINANCIAL INFORMATION 7 1

Exhibit C: Status of Prior Year Noncompliance Findings

Report 50401-0009-11, U.S. Department of Agriculture’s Consolidated Financial 

Statements for Fiscal Years 2015 and 2014, dated February 12, 2016.

Finding 5: Lack of Substantial Compliance with FFMIA Requirements 

Reported Noncompliance

The Department reported a lack of substantial compliance with the FFMIA requirements. The 

Department reported that it was not compliant with FFMSR, applicable accounting standards, 

USSGL at the transaction level, and FISMA requirements.

Status

In fiscal year 2016, the Department continued to report substantial noncompliance with FFMSR, 

applicable accounting standards, USSGL at the transaction level, and FISMA requirements, as 

discussed in Finding 4.

Finding 6: ADA Violation 

Reported Noncompliance

In fiscal year 2015, the Department reported four actual and one potential ADA violation in its 

Agency Financial Report. Specifically, FS identified and resolved as of April 1, 2015, an ADA 

of $6,781.90 in excess of $72,000 carried over from fiscal year 2012. FS identified an ADA 

related to the agency’s employment of non-U.S. citizens, FSA reported an ADA exceeding 

OMB approved apportionment request by $302,823.57, and OAO identified an ADA exceeding 

the amount available for “Outreach and Assistance for Socially Disadvantaged and Veteran 

Farmers and Ranchers” grants. These ADA’s are in the process of being reported to Congress 

and the President. Also, FAS identified a potential ADA with its fiscal year 2009 appropriation, 

and is in the process of researching to make a determination.

Also in fiscal year 2015, the Department reported a potential ADA by OAO associated with the 

Strikeforce Initiative and a potential ADA by OASCR, however after further research; both 

agencies determined these were not ADA violations.

Status

As discussed in Finding 5, this weakness continues to exist.

20 AUDIT REPORT 50401-0011-11
7 2 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

AUDIT REPORT 50401-0011-11 21

Agency Response to Auditors Report

Exhibit D: Agency’s Response

USDA’S RESPONSE TO AUDIT REPORT
SECTION II FINANCIAL INFORMATION 7 3

United States 

Department of 

Agriculture 

Office of the Chief 

Financial Officer 

14001ndependence 

Avenue, SW 

Washington, DC 

20250 TO: Phyllis K. Fong

Inspector General

Office oflnspector General

FROM: Jon M. Holladay

Chief Financial Off;; · DEC - 5 2016

SUBJECT: U.S. Depaitment of Agriculture's Consolidated Balance Sheet for

Fiscal Year 2016 

The Department is pleased to respond to your audit repo1t on the Consolidated Balance

Sheet for fiscal yeai· 2016. 

We concur with the findings in the report. We generally agree with the recommendations

in the rep01t and will develop conective action plans with milestones to address the 

findings within 60 days. 

I would like to express my appreciation for the cooperation and professionalism

displayed by your staff and your contract auditors during the course of your audit.

AN EQUAL OPPORTUNITY EMPLOYER
7 4 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Exhibit E: Agency’s Financial Report

AGENCY’S FINANCIAL REPORT

FISCAL YEARS 2016 AND 2015 

FINANCIAL STATEMENTS

PREPARED BY USDA

ONLY CONOLIDATED BALANCE SHEET AND 

RELATED FOOTNOTES ARE AUDITED

22 AUDIT REPORT 50401-0011-11
SECTION I I FINANCIAL INFORMATION 7 5

Consolidated Balance Sheet

As of September 30, 2016 ($ In Millions)

 

The accompanying notes are an integral part of these statements.
7 6 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Notes to the Consolidated Balance Sheet 

As of September 30, 2016 ($ In Millions)

Note 1: Significant Accounting Policies

ORGANIZATION

USDA provides a wide variety of services in the United States and around the world. USDA is 

organized into seven distinct mission areas and their agencies that execute these missions. 

Listed below are the missions and the agencies within each mission including three 

Government corporations: 

FARM AND FOREIGN AGRICULTURAL SERVICES (FFAS)

• Farm Service Agency (FSA)

o Commodity Credit Corporation (CCC) 

• Foreign Agricultural Service (FAS)

• Risk Management Agency (RMA)

o Federal Crop Insurance Corporation (FCIC) 

FOOD, NUTRITION, AND CONSUMER SERVICES (FNCS)

Food and Nutrition Service (FNS) 

FOOD SAFETY

Food Safety and Inspection Service (FSIS) 

MARKETING AND REGULATORY PROGRAMS (MRP)

• Agricultural Marketing Service (AMS)

• Animal and Plant Health Inspection Service (APHIS)

• Grain Inspection, Packers and Stockyards Administration (GIPSA) 

NATURAL RESOURCES AND ENVIRONMENT (NRE)

• Forest Service (FS)

• Natural Resources Conservation Service (NRCS)
SECTION I I FINANCIAL INFORMATION 7 7

RESEARCH, EDUCATION, AND ECONOMICS (REE)

• Agricultural Research Service (ARS)

• National Institute of Food and Agriculture (NIFA) 

• Economic Research Service (ERS)

• National Agricultural Statistics Service (NASS)

RURAL DEVELOPMENT

• Rural Development (RD) 

o Alternative Agricultural Research and Commercialization Corporation (AARC) 

PRESENTATION

The Consolidated Balance Sheet for FY 2016 is presented for audit, in lieu of the basic 

statements on a comparative basis as required by OMB Circular A-136, to demonstrate 

incremental improvement from the prior year. The Consolidated Statement of Net Cost, 

Consolidated Statement of Changes in Net Position and the Combined Statement of Budgetary 

Resources and related notes are presented in the Other Information section as unaudited. The 

financial statements consolidate all of the agencies' results. The effects of intradepartmental 

activity and balances are eliminated, except for the Statement of Budgetary Resources that is 

presented on a combined basis. The financial statements are prepared in accordance with 

generally accepted accounting principles for the Federal Government. 

RECLASSIFICATIONS

Note 7 was reclassified to add Community Facility and Intermediary Relending programs. 

USE OF ESTIMATES

The preparation of financial statements requires management to make estimates and 

assumptions that affect the amounts reported in the financial statements and accompanying 

notes. Actual results could differ from those estimates. 

REVENUE AND OTHER FINANCING SOURCES

Revenue from exchange transactions is recognized when persuasive evidence of an 

arrangement exists, delivery has occurred or services have been rendered, sales price is fixed or 

determinable, and collection is reasonably assured. In certain cases, the prices charged by the 

Department are set by law or regulation, which for program and other reasons may not 

represent full cost. Prices set for products and services offered through the Department’s 
7 8 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

working capital funds are intended to recover the full costs incurred by these activities. 

Revenue from non-exchange transactions is recognized when a specifically identifiable, legally 

enforceable claim to resources arises, to the extent that collection is probable and the amount is 

reasonably estimable. Appropriations are recognized as a financing source when used. An 

imputed financing source is recognized for costs subsidized by other Government entities. 

INVESTMENTS

The Department is authorized to invest certain funds in excess of its immediate needs in 

Treasury securities. Investments in non-marketable par value Treasury securities are classified 

as held to maturity and are carried at cost. Investments in market-based Treasury securities are 

classified as held to maturity and are carried at amortized cost. The amortized cost of securities 

is based on the purchase price adjusted for amortization of premiums and accretion of discounts 

using the straight-line method over the term of the securities.

ACCOUNTS RECEIVABLE

Accounts receivable are reduced to net realizable value by an allowance for uncollectible 

accounts. The adequacy of the allowance is determined based on past experience and age of 

outstanding balances. 

DIRECT LOANS AND LOAN GUARANTEES

Direct loans obligated and loan guarantees committed after fiscal 1991 are reported based on 

the present value of the net cash-flows estimated over the life of the loan or guarantee. The 

difference between the outstanding principal of the loans and the present value of their net cash 

inflows is recognized as a subsidy cost allowance; the present value of estimated net cash 

outflows of the loan guarantees is recognized as a liability for loan guarantees. The subsidy 

expense for direct or guaranteed loans disbursed during the year is the present value of 

estimated net cash outflows for those loans or guarantees. A subsidy expense also is recognized 

for modifications made during the year to loans and guarantees outstanding and for reestimates 

made as of the end of the year to the subsidy allowances or loan guarantee liability for loans 

and guarantees outstanding. 

Direct loans obligated and loan guarantees committed before fiscal 1992 are valued using either 

the present-value or net realizable methods. Under the present-value method, the outstanding 

principal of direct loans is reduced by an allowance equal to the difference between the 

outstanding principal and the present value of the expected net cash flows. The liability for loan 

guarantees is the present value of expected net cash outflows due to the loan guarantees. Under 

the net realizable value method, the average rate of the last five years of write-offs is used. 
SECTION I I FINANCIAL INFORMATION 7 9

INVENTORIES AND RELATED PROPERTY

Inventories to be consumed in the production of goods for sale or in the provision of services 

for a fee are valued on the basis of historical cost using a first-in, first-out method. 

Commodities are valued at the lower of cost or net realizable value using a weighted average 

method. Barter Delivery Obligations (BDO) are valued at the net sales proceeds. BDO are 

exchanged for food products to be utilized in domestic and export food programs. 

PROPERTY, PLANT AND EQUIPMENT

Property, Plant and Equipment (PP&E) are stated at cost less accumulated depreciation. 

Depreciation is determined using the straight-line method over the estimated useful lives of the 

assets. Useful lives for PP&E are disclosed in Note 9. Capitalization thresholds for personal 

property and real property are $25,000 and $100,000 for internal use software. There are no 

restrictions on the use or convertibility of PP&E. 

PENSION AND OTHER RETIREMENT BENEFITS

Pension and other retirement benefits (primarily retirement health care benefits) expense is 

recognized at the time the employees’ services are rendered. The expense is equal to the 

actuarial present value of benefits attributed by the pension plan’s benefit formula, less the 

amount contributed by the employees. An imputed cost is recognized for the difference 

between the expense and contributions made by and for employees. 

OTHER POST-EMPLOYMENT BENEFITS

Other post-employment benefits expense for former or inactive (but not retired) employees is 

recognized when a future outflow or other sacrifice of resources is probable and measurable on 

the basis of events occurring on or before the reporting date. The liability for long-term other 

post-employment benefits is the present value of future payments. 

FUNDS FROM DEDICATED COLLECTIONS

In accordance with Statement of Federal Financial Accounting Standards (SFFAS) 43, Funds 

from Dedicated Collections, USDA has reported the funds from dedicated collections for which 

it has program management responsibility when the following three criteria are met: 1) a 

statute committing the Federal Government to use specifically identified revenues and/or other 

financing sources that are originally provided to the Federal Government by a non-Federal 

source only for designated activities, benefits or purposes; 2) explicit authority for the fund to 

retain revenues and/or other financing sources not used in the current period for future use to 

finance the designated activities, benefits, or purposes; and 3) a requirement to account for and 
8 0 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

report on the receipt, use, and retention of the revenues and/or other financing sources that 

distinguishes the fund from the Federal Government’s general revenues. 

CONTINGENCIES

Contingent liabilities are recognized when a past event or exchange transaction has occurred, a 

future outflow or other sacrifice of resources is probable, and the future outflow or sacrifice of 

resources is measurable.

ALLOCATION TRANSFERS

USDA is a party to allocation transfers with other federal agencies as both a transferring 

(parent) entity and/or a receiving (child) entity. Allocation transfers are legal delegations by 

one department of its authority to obligate budget authority and outlay funds to another 

department. A separate fund account (allocation account) is created in the U.S. Treasury as a 

subset of the parent fund account for tracking and reporting purposes. All allocation transfers of 

balances are credited to this account, and subsequent obligations and outlays incurred by the 

child entity are charged to this allocation account as they execute the delegated activity on 

behalf of the parent entity.

USDA allocates funds, as the parent, to a number of U.S. Government agencies, including: 

Department of the Interior, Department of Defense, Department of Housing and Urban 

Development, Agency for International Development and the Small Business Administration. 

USDA receives allocation transfers, as the child, from the Department of Labor, Department of 

Transportation, Department of the Interior, Agency for International Development, Economic 

Development Administration, Appalachian Regional Commission and the Delta Regional 

Authority. 

INTER-ENTITY COSTS 

Each entity’s full cost should incorporate the full cost of goods and services that it receives 

from other entities. The entity providing the goods or services has the responsibility to provide 

the receiving entity with information on the full cost of such goods or services either through 

billing or other advice. 

Recognition of inter-entity costs that are not fully reimbursed is limited to material items that: 

1) are significant to the receiving entity, 2) form an integral or necessary part of the receiving 

entity’s output, and 3) can be identified or matched to the receiving entity with reasonable 

precision. Broad and general support services provided by an entity to all or most other entities 

should not be recognized unless such services form a vital and integral part of the operations or 

output of the receiving entity. 
SECTION I I FINANCIAL INFORMATION 8 1

FIDUCIARY ACTIVITIES

Fiduciary activities are the collection or receipt, and the management, protection, accounting, 

investment, and disposition by the Federal Government of cash or other assets in which 

non Federal individuals or entities have an ownership interest that the Federal Government 

must uphold. Fiduciary assets are not assets of the Federal Government and are not recognized 

on the balance sheet.

ASBESTOS-RELATED CLEANUP COSTS

Effective October 1, 2012, Technical Bulletin (TB) 2006-1, Recognition and Measurement of 

Asbestos-Related Cleanup Costs, as amended, requires an estimate of both friable and 

non-friable asbestos-related cleanup costs; recognition of a liability and related expense for 

those costs that are both probable and reasonably estimable; and disclosure of information 

related to friable and non-friable asbestos-related cleanup costs that are probable but not 

reasonably estimable in a note to the financial statements. 

DEFERRED MAINTENANCE AND REPAIRS

Deferred maintenance and repairs are such that were not performed when they should have 

been or were scheduled to be and which are put off or delayed for a future period. Maintenance 

and repairs are activities directed toward keeping fixed assets in an acceptable condition. 

Activities include preventive maintenance; replacement of parts, systems, or components; and 

other activities needed to preserve or maintain the asset. Maintenance and repairs, as 

distinguished from capital improvements, exclude activities directed towards expanding the 

capacity of an asset or otherwise upgrading it to serve needs different from, or significantly 

greater than, its current use. SFFAS 42, Deferred Maintenance and Repairs: Amending 

Statements of Federal Financial Accounting Standards 6, 14, 29 and 32, became effective 

October 1, 2014. Estimates for deferred maintenance and repairs are disclosed in required 

supplementary information. 
8 2 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Note 2: Non-Entity Assets

Non-entity assets include proceeds from the sale of timber payable to the U.S. Treasury, timber 

contract performance bonds, employer contributions and payroll taxes withheld for agencies 

serviced by the National Finance Center, rural housing escrow, interest, fines, and penalties. 

 
SECTION I I FINANCIAL INFORMATION 8 3

Note 3: Fund Balance with Treasury

Other Fund Types include deposit and clearing accounts. Borrowing Authority not yet 

Converted to Fund Balance represents unobligated and obligated amounts recorded at year-end 

that will be funded by future borrowings. Non-Budgetary Fund Balance with Treasury includes 

special fund receipt accounts, and clearing and suspense account balances awaiting disposition 

or reclassification.

 

Note 4: Cash and Other Monetary Assets

For FY 2016, cash mostly consists of Federal crop insurance escrow amounts of $108 million

and deposits in transit of $49 million. In FY 2016, cash includes Single Family Housing 

borrowers escrow amounts of $44 million. 

 
8 4 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Note 5: Investments

 

Note 6: Accounts Receivable, Net

 
SECTION I I FINANCIAL INFORMATION 8 5

Note 7: Direct Loans and Guarantees, Non-Federal Borrowers

DIRECT LOANS

Direct loan obligations or loan guarantee commitments made pre-1992 and the resulting direct 

loans or loan guarantees are reported at either net present-value or net realizable value. 

Direct loan obligations or loan guarantee commitments made post-1991 and the Federal Credit 

Reform Act of 1990 as amended govern the resulting direct loan or loan guarantees. The Act 

requires agencies to estimate the cost of direct loans and loan guarantees at present value for 

the budget. Additionally, the present value of the subsidy costs (i.e., interest rate differentials, 

interest subsidies, delinquencies and defaults, fee offsets, and other cash flows) associated with 

direct loans and loan guarantees are recognized as a cost in the year the loan or loan guarantee 

is disbursed. The net present value of loans or defaulted guaranteed loans receivable at any 

point in time is the amount of the gross loan or defaulted guaranteed loans receivable less the 

present value of the subsidy at that time.

The net present value of Direct Loan and Loan Guarantees, Net is not necessarily 

representative of the proceeds that might be expected if these loans were sold on the open 

market.

Direct Loan and Loan Guarantees, Net at the end of FY 2016 was $98,813 million. Loans 

exempt from the Federal Credit Reform Act of 1990 represent $564 million of the total. Table 1

illustrates the overall composition of the Department’s credit program balance sheet portfolio 

by mission area and credit program for FY 2016. 

Beginning in FY 2012, advance payments surpassed the loans receivable balance in the Rural 

Utilities Liquidating Fund. This was due to an increased volume in advance payments and a 

normal reduction to the Liquidating Portfolio. The Omnibus Budget Act of 1987, section 313, 

authorized the accumulation of Cushion of Credit (CoC) in the Revolving Fund. Borrowers 

may make advance payments up to their liquidating and financing total Rural Utilities Service 

debt. To accurately represent the value of Electric and Telecommunication assets, RD reports 

the CoC amounts as a separate line item in Table 1. 

During the fiscal year, the gross outstanding balance of the direct loans obligated post-1991 is 

adjusted by the value of the subsidy cost allowance held against those loans. Current year 

subsidy expense, modifications and reestimates all contribute to the change of the subsidy cost 

allowance throughout the year. The subsidy cost allowance was $4,824 million during 

FY 2016. Table 2 shows the subsidy cost allowance balances for FY 2016. 
8 6 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Total direct loan subsidy expense is a combination of subsidy expense for new direct loans 

disbursed in the current year, modifications to existing loans, and interest rate and technical 

reestimates to existing loans. Total direct loan subsidy expense in FY 2016 was negative 

$71 million. Table 3 illustrates the breakdown of total subsidy expense for FY 2016 by 

program. 

Direct loan volume was $9,499 million in FY 2016. Volume distribution between mission area 

and program is shown in Table 4. 

GUARANTEED LOANS 

Guaranteed loans are administered in coordination with conventional agricultural lenders for up 

to 95 percent of the principal loan amount. Under the guaranteed loan programs, the lender is 

responsible for servicing the borrower’s account for the life of the loan. The Department, 

however, is responsible for ensuring borrowers meet certain qualifying criteria to be eligible 

and monitoring the lender’s servicing activities. Borrowers interested in guaranteed loans must 

apply to a conventional lender, which then arranges for the guarantee with a Department 

agency. Estimated losses on loan and foreign credit guarantees are reported at net present value 

as Loan Guarantee Liability. Defaulted guaranteed loans are reported at net present value as 

Loans Receivable and Related Foreclosed Property, Net.

Guaranteed loans outstanding at the end of FY 2016 were $139,656 million in outstanding 

principal and $124,871 million in outstanding principal guaranteed. Table 5 shows the 

outstanding balances by credit program.

During the fiscal year, the value of the guaranteed loans is adjusted by the value of the loan 

guarantee liability held against those loans. Current year subsidy expense, modification, and 

reestimates all contribute to the change of the loan guarantee liability through the year. The 

loan guarantee liability is a combination of the liability for losses on pre-1992 guarantees and 

post-1991 guarantees. Table 6 shows that total liability was $1,529 million during FY 2016. 

Table 7 shows the total loan guarantee liability.

Total guaranteed loan subsidy expense is a combination of subsidy expense for new guaranteed 

loans disbursed in the current year, modifications to existing loans, and interest rate and 

technical reestimates to existing loans. Total guaranteed loan subsidy expense in FY 2016 was 

negative $4,215 million. Table 8 illustrates the breakdown of total subsidy expense for 

FY 2016 by program. 

Guaranteed loan volume was $23,903 million in FY 2016. Volume distribution between 

mission area and program is shown in Table 9. 
SECTION I I FINANCIAL INFORMATION 8 7

ADMINISTRATIVE EXPENSES

Consistent with the Federal Credit Reform Act of 1990, as amended, subsidy cash flows 

exclude direct Federal administrative expenses. Administrative expenses for FY 2016 are 

shown in Table 10. 

SUBSIDY RATES

Subsidy rates are used to compute each year’s subsidy expenses. The subsidy rates disclosed in

Table 11 and Table 12 pertain only to the FY 2016 cohorts. These rates cannot be applied to the 

direct and guaranteed loans disbursed during the current reporting year to yield the subsidy 

expense. The subsidy expense for new loans reported in the current year could result from 

disbursements of loans from both current year cohorts and prior-year cohorts. The subsidy 

expense reported in the current year also includes reestimates. 

CREDIT PROGRAM DISCUSSION AND DESCRIPTIONS

The Department offers direct and guaranteed loans through credit programs in the FFAS 

mission area through the FSA and the CCC, and in the RD mission area. 

FARM AND FOREIGN AGRICULTURAL SERVICES (FFAS) MISSION AREA

The FFAS mission area helps keep America’s farmers and ranchers in business as they face the 

uncertainties of weather and markets. FFAS delivers commodity, credit, conservation, disaster, 

and emergency assistance programs that help strengthen and stabilize the agricultural economy. 

FFAS contributes to the vitality of the farm sector with programs that encourage the expansion 

of export markets for U.S. agriculture. 

FSA offers direct and guaranteed loans to farmers who are temporarily unable to obtain private, 

commercial credit, and nonprofit entities that are engaged in the improvement of the nation’s 

agricultural community. Often, FSA borrowers are beginning farmers who cannot qualify for 

conventional loans due to insufficient financial resources. Additionally, the agency helps 

established farmers who have suffered financial setbacks from natural disasters or have limited 

resources to maintain profitable farming operations. FSA officials also provide borrowers with 

supervision and credit counseling. 

FSA’s mission is to provide supervised credit. FSA works with each borrower to identify 

specific strengths and weaknesses in farm production and management, and provides 

alternatives to address weaknesses. FSA is able to provide certain loan servicing options to 

assist borrowers whose accounts are distressed or delinquent. These options include 

reamortization, restructuring, loan deferral, lowering interest rates, acceptance of easements, 

and debt write-downs. The eventual goal of FSA’s farm credit programs is to graduate its 

borrowers to commercial credit.
8 8 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

CCC’s foreign programs provide economic stimulus to both the U.S. and foreign markets, 

while giving humanitarian assistance to the most needy people throughout the world. CCC 

offers both credit guarantee and direct credit programs for buyers of U.S. exports, suppliers, 

and sovereign countries in need of food assistance. 

CCC permits debtor nations to reschedule debt under the aegis of the Paris Club. The Paris 

Club is an informal group of official creditors whose role is to facilitate debt treatments based 

on an internationally recognized set of rules and principles, facilitated by the senior officials of 

the French Treasury. Its sole purpose is to assess, on a case-by-case basis, liquidity problems 

faced by economically disadvantaged countries. The general premise of Paris Club is to provide 

disadvantaged nations short-term liquidity relief to enable them to reestablish their credit 

worthiness. The U.S. Departments of State and Treasury lead the U.S. Delegation and 

negotiations for all U.S. Agencies. 

CCC also provides loans for Farm and Sugar Storage Facilities (FSFL). FSFL provides low 

interest financing for producers to build or upgrade farm storage and handling facilities. FSFL 

program regulations were amended during FY 2016 to add eligibility for portable storage 

structures, portable equipment, and storage and handling trucks, and to reduce the down 

payment and documentation requirements for a new “microloan” category of FSFLs up to 

$50,000. 

FARM AND FOREIGN AGRICULTURAL SERVICE LIST OF PROGRAMS

Farm Service Agency Commodity Credit Corporation

Direct Farm Ownership

Direct Farm Operating

Direct Emergency Loans

Direct Indian Land Acquisition

Direct Boll Weevil Eradication

Direct Seed Loans to Producers

Direct Conservation

Guaranteed Farm Operating 

Subsidized/Unsubsidized

Guaranteed Farm Ownership Unsubsidized

Guaranteed Conservation

American Recovery and Reinvestment Fund 

General Sales Manager Export Credit Guarantee 

Program

Facility Program Guarantee

P.L. 480 Title 1 Program

Direct Farm Storage Facility

Direct Sugar Storage Facilities
SECTION I I FINANCIAL INFORMATION 8 9

RURAL DEVELOPMENT (RD) MISSION AREA

Each year, RD programs create or preserve tens of thousands of rural jobs and provide or 

improve the quality of rural housing. To leverage the impact of its programs, RD works with 

State, local and Indian Tribal governments, as well as private and not-for-profit organizations 

and user-owned cooperatives.

Through its rural housing loan and grant programs, RD provides affordable housing and 

essential community facilities to rural communities. Rural housing programs help finance new 

or improved housing for moderate, low, and very low-income families each year. The programs 

also help rural communities finance, construct, enlarge, or improve fire stations, libraries, 

hospitals and medical clinics, industrial parks, and other community facilities.

The Rural Business Program goal is to promote a dynamic business environment in rural 

America. RD partners with the private sector and community-based organizations to provide 

financial assistance and business planning. It also provides technical assistance to rural 

businesses and cooperatives, conducts research into rural economic issues, and provides 

cooperative educational materials to the public.

The Rural Utilities Program helps to improve the quality of life in rural America through a 

variety of loan programs for electric energy, telecommunications, and water and environmental 

projects. This program leverages scarce Federal funds with private capital for investing in rural 

infrastructure, technology, and development of human resources. 

RD programs provide certain loan servicing options to borrowers whose accounts are distressed 

or delinquent. These options include reamortization, restructuring, loan deferral, lowering 

interest rate, acceptance of easements, and debt write-downs. The choice of servicing options 

depends on the loan program and the individual borrower. 
9 0 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

RURAL DEVELOPMENT LIST OF PROGRAMS

Rural Housing Program Rural Business Program Rural Utilities Program

Single Family Housing Direct 

Loans

Single Family Housing 

Guaranteed Loans

Self Help Housing Direct 

Loans

Single Family Housing Credit 

Sales

Farm Labor Housing Direct 

Loans

Multi-Family Housing Direct 

Loans

Multi-Family Housing 

Guaranteed Loans

Multi-Family Housing-Credit 

Sales

Multi-Family Housing 

Relending Program

Multi-Family Housing 

Revitalization Program

Community Facilities Direct 

Loans

Community Facilities 

Guaranteed Loans

Business and Industry Direct 

Loans

Business and Industry 

Guaranteed Loans

Intermediary Relending 

Program Direct Loans

Rural Economic Development 

Direct Loans

Biorefinery Guaranteed Loans

Rural Energy for America 

Guaranteed Loans

Rural Microenterprise 

Investment Direct Loans

Water and Environmental 

Direct Loans

Water and Environmental 

Guaranteed Loans

Electric Direct Loans

Electric Guaranteed Loans

Telecommunications Direct 

Loans

Federal Financing BankElectric

Federal Financing BankTelephone

Distance Learning and 

Telemedicine Direct

Broadband 

Telecommunications Services

EVENTS AND CHANGES HAVING A SIGNIFICANT AND MEASURABLE EFFECT ON 

SUBSIDY RATES, SUBSIDY EXPENSE, AND SUBSIDY RE-ESTIMATES

The Federal Credit Reform Act of 1990, as amended, governs the proprietary and budgetary 

accounting treatment of direct and guaranteed loans. The long-term cost to the Government for 

direct loans or loan guarantees is referred to as “subsidy cost.” Under the Act, subsidy costs for 

loans obligated beginning in FY 1992 are recognized at the net present value of projected 

lifetime costs in the year the loan is disbursed. Subsidy costs are revalued annually. 

Components of subsidy include interest subsidies, defaults, fee offsets, and other cash flows. 

The annual reestimate process updates the budget assumptions with actual portfolio 

performance, interest rates, and updated estimates for future loan performance. The FY 2016 
SECTION I I FINANCIAL INFORMATION 9 1

reestimate process resulted in a $37 million decrease in the post-1991 estimated cost of the 

direct loan portfolio and a $4,264 million decrease in the post-1991 estimated cost of the 

guaranteed loan portfolio, primarily comprised of the following programs. 

Direct Loans

The Community Facilities Program had an overall upward reestimate of $176 million. The 

projected future interest from borrowers declined due to higher projected prepayments for the 

2012 through 2016 cohorts, which was partially offset by a $54 million downward reestimate in 

the 2011 cohort caused by a decrease in projected borrowing costs as a result of the cohort’s 

interest rate reestimate.

The Direct Electric Programs had an overall upward reestimate of $103 million comprised 

primarily of a $137 million upward reestimate in the FFB Underwriting Program, a $91 million 

downward reestimate in the Electric Municipal Program, and a $43 million upward reestimate 

in the Electric Note Extension Program. The upward reestimate in the FFB Underwriting 

Program is attributed to more current interest rate projections being used in the economic 

assumptions. Lower projected future interest rates occurred as a result of the updated 

assumptions, and caused a decrease in total scheduled interest payments. The downward 

reestimate within the Electric Municipal Program is attributed to higher actual and higher 

projected loan prepayments. The upward reestimate in the Electric Note Extension Program is 

do to an update of actual interest received. The update decreased the amount of interest 

received for 2015 thus increasing the Agency’s cost of administering the program. 

The Housing Program had an overall downward reestimate of $82 million comprised primarily 

of a $76 million downward reestimate in the Section 502-Single Family Housing. The 

reestimate was mostly due to an increase in prepayments in cohort years 2015 and 2016. Since 

this program had payment assistance that brings the borrower interest rate to 1 percent, which is 

lower than the Single Effective Rate (SER), it would cause a downward reestimate.

The Water and Environmental Program had an overall downward reestimate of $78 million as 

compared to a $133 million downward reestimate in FY 2015. The impact to the overall 

downward reestimate was contributed to a decrease in the SER, or the rate at which the Agency 

pays/earns interest on Treasury borrowings from the previous year. The decrease in the SER 

created a larger variance between the SER and the borrower interest rate thus reducing the 

Agency’s cost. 

In FY 2016, the post-1991 Housing Program had a significant decrease in the defaulted 

guaranteed loans receivable and corresponding allowance. RD policy changed to suspend 

referral for Treasury debt offset. Previously, losses paid were referred to Treasury for 

collection. Losses referred to Treasury were recalled. As a result, RD wrote off approximately 

$1,000 million.
9 2 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Guaranteed Loans

In FY 2016, the Agency implemented a new econometric model to estimate the cost of the 

Guaranteed Single Family Housing Program. The industry standard model incorporates the use 

of key loan and borrower attributes and economic variables to better estimate the future 

program performance. The implementation of this new model, along with lower than 

previously projected losses for 2015, resulted in significantly lower projected defaults for 

cohort years 2011through 2016, slightly offset by higher projected default costs for the 2004 

through 2008 cohorts, resulting in a net downward reestimate of $4,200 million.

Loan Modifications

A modification is any Government action different from the baseline assumptions that affect 

the subsidy cost, such as a change in the terms of the loan contract. The cost of a modification 

is the difference between the present value of the cash flows before and after the modification. 

Multi-Family Housing direct loan modifications related to the revitalization program, which 

began in FY 2006, continued through FY 2016. In this program, Rural Development provides 

restructured loans and grants to development owners to revitalize multi-family housing 

development projects in order to extend the affordable use without displacing tenants due to the 

increased rent.

The Debt Reduction Fund is used to account for CCC’s “modified debt.” Debt is considered to 

be modified if the original debt has been reduced or the interest rate of the agreement changed. 

In contrast, when debt is “rescheduled,” only the date of payment is changed. Rescheduled debt 

is carried in the original fund until paid. With one exception, all outstanding CCC modified 

debt is carried in the Debt Reduction Fund and is governed by the Federal Credit Reform Act 

of 1990, as amended. 

Foreclosed Property

Property is acquired largely through foreclosure and voluntary conveyance. Acquired 

properties associated with loans are reported at their market value at the time of acquisition. 

The projected future cash flows associated with acquired properties are used in determining the 

related allowance (at present value).

As of September 30, 2016, foreclosed property consisted of 1,239 rural single-family housing 

dwellings, with an average holding period of 16 months. As of September 30, 2016, FSA-Farm 

Loan Program properties consist primarily of 89 farms. The average holding period for these 

properties in inventory for FY 2016 was 61 months. Certain properties can be leased to eligible 

individuals. 
SECTION I I FINANCIAL INFORMATION 9 3

Other Information

Non-performing loans are defined as receivables that are in arrears by 90 or more days or are 

on rescheduling agreements until such time two consecutive payments have been made 

following the rescheduling. When RD, FSA and CCC calculate loan interest income, however, 

the recognition of revenue is deferred. Late interest is accrued on arrears. 

Approximately $15,900 million of Rural Housing Service unpaid loan principal as of 

September 30, 2016 were receiving interest credit. If those loans receiving interest credit had 

accrued interest at the full-unreduced rate, interest income would have been approximately 

$777 million higher for FY 2016. 

At the end of FY 2016, the RD portfolio contained approximately 60,734 restructured loans 

with an outstanding unpaid principal balance of $2,900 million. At the end of FY 2016, the 

farm loan portfolio contained approximately 17,087 restructured loans with an outstanding 

unpaid principal balance of $1,133 million. Direct credit and credit guarantee principal 

receivables in the food aid and export programs under rescheduling agreements as of 

September 30, 2016 were $1,382 million. 

Change in Accounting Estimate

Beginning in FY 2016, the Guaranteed Single Family Housing (GSFH) program started using 

an econometric model to develop credit subsidy formulation estimates and reestimates. This 

was a change from previous fiscal years where a historical weighted average approach was 

used. 

RD made the change to an econometric model after experiencing several years of large 

fluctuations in the Liability for Loan Guarantee year-end balances. The historical weighted 

average approach for projecting cash flows relied on averages of actual loan performance data, 

and could not adequately predict future cash flows for the GSFH program based on the volatile 

economy. For example, during the housing crisis the model was inadequate at capturing the 

projected losses that were likely to occur given the observed decline in housing prices and 

increased defaults. 
9 4 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Table 1: Direct Loan and Loan Guarantees, Net

 
SECTION I I FINANCIAL INFORMATION 9 5

Table 2: Subsidy Cost Allowance Balances (Post-1991) Direct Loans

 

Table 3: Subsidy Expense for Direct Loans by Program and Component

 

Table 4: Total Amount of Direct Loans Disbursed (Post-1991)

 
9 6 USDA FISCAL YEAR 2016 AGENCY FINANC IAL REPORT

Table 5: Guaranteed Loans Outstanding

 

Table 6: Liability for Loan Guarantees (Present Value Method for Pre-1992 Guarantees)

 
SECTION I I FINANCIAL INFORMATION 9 7

Table 7: Loan Guarantee Liability

 

Table 8: Subsidy Expense for Loan Guarantees by Program and Component

 
9 8 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Table 9: Guaranteed Loans Disbursed

 

Table 10: Administrative Expenses

 
SECTION I I FINANCIAL INFORMATION 9 9

Table 11: Subsidy Rates for Direct Loans (percentage)

 
100 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Table 12: Subsidy Rates for Loan Guarantees (percentage)

 

Note 8: Inventory and Related Property, Net

Commodity inventory is restricted for the purpose of alleviating distress caused by natural 

disasters, providing emergency food assistance in developing countries and providing price 

support and stabilization. 

 
SECTION I I FINANCIAL INFORMATION 101

Note 9: General Property, Plant, and Equipment (PP&E), Net

 

Note 10: Stewardship PP&E 

Stewardship PP&E consist of assets whose physical properties resemble those of general PP&E 

that are traditionally capitalized in the financial statements. Due to the nature of these assets, 

valuation would be difficult and matching costs with specific periods would not be meaningful. 

Stewardship PP&E include heritage assets and stewardship land. 

HERITAGE ASSETS

Heritage assets are unique and are generally expected to be preserved indefinitely. Heritage 

assets may be unique because they have historical or natural significance, are of cultural, 

educational or artistic importance, or have significant architectural characteristics. The assets 

are reported in terms of physical units rather than cost, fair value, or other monetary values. No 

amounts are shown on the Balance Sheet for heritage assets, except for multi-use heritage 

assets in which the predominant use of the asset is in general government operations. The costs 

of acquisition, betterment, or reconstruction of multi-use heritage assets is capitalized as 

general PP&E and depreciated. The costs of acquiring, constructing, improving, reconstructing, 

or renovating heritage assets, other than multi-use is considered an expense in the period 

incurred when determining the net cost of operations. Heritage assets consist of collection type, 

such as objects gathered and maintained for exhibition, such as library collections, and 

non-collection type, such as memorials, monuments and buildings. 

National Forests, National Grasslands and Other Sites

FS manages its heritage assets by site. Sites include national forests, national grasslands, other 

FS-managed sites, and non-FS-managed sites such as museums and university laboratories. The 
102 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

mission of the FS is to sustain the health, diversity, and productivity of the Nation’s forests and 

grasslands to meet the needs of present and future generations. The FS strives to achieve 

quality land management under the sustainable multiple-use management concept, to deliver 

the necessary products and services that are essential for enhancing natural resource 

stewardship, and to meet the diverse needs of people. 

Heritage Asset categories can include the following:

Priority Heritage Assets (PHA): Heritage assets of distinct public value that are, or should be, 

actively maintained, and meet one or more of the following criteria: 

• The property is recognized through an official designation, such as a listing on the 

National Register of Historic Places, State register, etc.

• The property is recognized through prior investment in preservation, interpretation, and 

use. Any improvement to a PHA that meets real property designation criteria is considered 

real property.

• The property is recognized in an Agency-approved management plan. 

• The property exhibits critical deferred maintenance needs, and those needs have been 

documented. 

Other Heritage Assets: Assets that may have potential important historical or cultural 

significance but lack formal listing and the demonstrated need for active maintenance.

Assemblage Assets: Any grouping of artifacts or archival materials aggregated through 

donation, agency events, site-specific or other field collection, other acquisition method, or 

combination therein. 

Research Centers

Agricultural Research Service (ARS) conducts research at centers nationwide to develop and 

transfer solutions to agricultural problems of high national priority. ARS provides information 

access and dissemination to ensure high-quality, safe food and other agricultural products; 

assess the nutritional needs of Americans; sustain a competitive agricultural economy; enhance 

the natural resource base and the environment; and provide economic opportunities for rural 

citizens, communities, and society as a whole.

NRCS owns one heritage asset, the Tucson Plant Materials Center (TPMC), which is included 

in general PP&E as a multi-use asset. It was listed in the National Register of Historic Places 

(NRHP) on July 2, 1997. The TPMC develops and evaluates native plants and addresses an 

array of resource issues in the areas of rangeland, mined land, urban lands, cropland riparian 

areas, and desert lands. The TPMC provides technical assistance to NRCS field offices; 
SECTION I I FINANCIAL INFORMATION 103

Resource Conservation and Development (RC&D) groups; conservation districts; Federal, 

State, and Tribal agencies; and private landowners through the greater Southwest. Research 

centers are considered heritage assets because one or more buildings or structures at these 

centers is on (or eligible for inclusion on) the NRHP. 

Library Collections

The National Agricultural Library (NAL) comprises one of the largest collections of materials 

devoted to agriculture in the world. The collections are in constant use to support the research 

activities of USDA, assist policymakers, and answer inquiries from citizens such as writers, 

editors, historians, filmmakers, and university researchers. NAL houses and provides access to 

millions of books and periodicals. The majority of these items were published more than 

25 years ago and almost all of them are out of print. By statute, NAL is the primary depository 

of publications and information concerning the research and other activities of USDA. Included 

in the collection are government documents and many items that are unique and irreplaceable. 

NAL collects, preserves and provides access to manuscripts, rare books, photographs, posters, 

oral histories, agricultural objects and tools, and other unique materials. Collection 

concentrations include the fields of agriculture, forestry, horticulture, entomology, poultry 

science, animal science, nutrition, botany, natural history, and agricultural history. Although 

focused primarily on American agriculture and related sciences, NAL holds numerous items of 

international origin. 

Acquisition and Withdrawal of Heritage Assets

The FS generally does not construct heritage assets, although in some circumstances important 

site-structural components may be rehabilitated or reconstructed into viable historic properties 

to provide forest visitors with use and interpretation. Heritage assets may be acquired through 

the procurement process, but this rarely occurs. Normally, heritage assets are part of the land 

acquisition and inventory process. Withdrawal occurs through land exchange or natural 

disasters. Most additions occur through inventory activities where previously undocumented 

sites are discovered and added to the total. 

STEWARDSHIP LAND 

Stewardship land is land and land rights not acquired for or in connection with items of general 

PP&E. Land is defined as the solid surface of the earth, excluding natural resources. 

Stewardship land is valued for its environmental resources, recreational and scenic value, 

cultural and paleontological resources, vast open spaces, and resource commodities and 

revenue provided to the Federal Government, States, and counties. These assets are reported in 

terms of physical units rather than cost, fair value, or other monetary values. No asset amount is 

shown on the balance sheet for stewardship land. The acquisition cost of stewardship land is 

considered an expense in the period acquired when determining the net cost of operations. 
104 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Stewardship land consists primarily of the national forests and grasslands owned by the FS and 

conservation easements purchased by NRCS.

National Forests

National forests are formally established and permanently set aside and reserved for national 

forest purposes, including National Wilderness, National Primitive, National Wild and Scenic 

River, National Recreation, National Scenic Research, National Game Refuges and Wildlife 

Preserve, and National Monument areas.

National Grasslands

National grasslands are designated by the Secretary of Agriculture and permanently held by the 

USDA under Title III of the Bankhead-Jones Farm Tenant Act.

Research and Experimental Areas

Research and experimental areas are reserved and dedicated by the Secretary of Agriculture for 

forest and range research experimentation. Areas reported are located outside the exterior 

boundaries of a national forest or national grassland. 

National Preserves and Other Areas

National preserves are units established to protect and preserve scientific, scenic, geologic, 

watershed, fish, wildlife, historic, cultural and recreational values; and to provide for multiple 

use and sustained yield of renewable resources. Other areas include areas administered by the 

FS that are not included in one of the above groups. 

Conservation Easements

NRCS’s mission objectives in administering the conservation easement programs are to 

provide landowners with financial and technical assistance in return for maintaining and 

improving high quality productive soils, clean and abundant water, healthy plant and animal 

communities, clean air, an adequate energy supply, and working farm and ranch land. 

NRCS’s objectives in managing, monitoring and enforcing the terms and conditions of 

easement deeds are to ensure that: 1) taxpayer investments are properly used in accordance 

with the intent of the program; 2) the agency is a good steward of the land; and 3) the land is 

properly maintained. 

Stewardship resources involve substantial investment in order to gain long-term benefits for the 

American public and help the Agency satisfy its mission. The purpose of purchasing easements 

is to restore or enhance wetlands; protect farmland; restore and protect grassland; restore and

protect forest ecosystems; and restore, protect, maintain, and enhance the functions of 

floodplains. 
SECTION I I FINANCIAL INFORMATION 105

NRCS, on behalf of USDA, administers and owns conservation easements on private lands. 

Landowners are not allowed to withdraw from the program; however, termination or expiration 

may occur. For the purpose of stewardship asset reporting, all easements where NRCS is the 

grantee of the easement are included as stewardship land. Also included are easements that are 

administered by NRCS on behalf of other USDA agencies. 

Acquisition and Withdrawal of Stewardship Lands

The Land and Water Conservation Fund (L&WCF) Land Acquisition Program acquires land 

for the FS National Forest System (NFS). The program coordinates with a variety of partners, 

including State, local, and Tribal governments, and private landowners through statewide 

planning for development of a land-adjustment strategy.

The Land Acquisition Program preserves, develops, and maintains access to NFS lands and 

waters for the public and provides permanent access to public lands for recreation, commodity 

production, resource management, public safety, and community economic viability. 

The L&WCF statutory authority specifically defines the purpose to also include protecting the 

quality of scientific, scenic, historical, ecological, environmental, air and atmospheric, water 

resource, archeological values, as well as food and habitat for fish and wildlife, and managing 

the public lands for minerals, food, timber, and fiber. 

From these several allowable uses of program funding, the program concentrates on protecting 

habitat for priority species identified in the national forest and grassland’s Land Management 

Plans and enhancing recreational opportunities for areas with high demand for recreation. The 

program focuses acquisitions on inholdings and areas adjacent to existing NFS lands. 

 
106 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Note 11: Other Assets

In FY 2016, other assets included investments in trust for loan asset sales of $37 million. 

 

Note 12: Liabilities Not Covered By Budgetary Resources

In FY 2016, other intragovernmental liabilities not covered by budgetary resources included 

accruals for Federal Employee Compensation Act (FECA) of $158 million, contract disputes 

claims payable to Treasury’s Judgment Fund of $26 million, unemployment compensation of 

$15 million, and custodial of $6 million. 

In FY 2016, other liabilities with the public not covered by budgetary resources included future 

funded indemnity costs of $5,098 million, estimated underwriting gain on crop insurance of 

$1,998 million, unfunded leave of $615 million, contingent liabilities of $512 million, 

Payments to States of $79 million, clearing accounts of $19 million, credit programs of 

$8 million, custodial of $5 million, and cleanup cost of $2 million. 

 
SECTION I I FINANCIAL INFORMATION 107

Note 13: Debt

 

Note 14: Environmental and Disposal Liabilities

USDA is subject to the Comprehensive Environmental Response, Compensation, and Liability 

Act, the Clean Water Act, and the Resource Conservation and Recovery Act for cleanup of 

hazardous waste. In FY 2016, FS estimates the liability for total cleanup costs for sites known 

to contain hazardous waste to be $2 million, based on actual cleanup costs at similar sites. In 

FY 2016, CCC estimates the liability for total cleanup costs for sites known to contain 

hazardous waste to be $21 million, based on actual cleanup costs at similar sites. CCC 

estimates the range of potential future losses due to remedial actions to be between $21 million

and $160 million. These estimates will change as new sites are discovered, remedy standards 

change, and new technology is introduced. 

In FY 2016, ARS estimated the liability for cleanup of the Beltsville Agricultural Research 

Center (BARC) to be $20 million. ARS is evaluating and remediating areas of concern on 

BARC that are contaminated or threaten to contaminate ground and surface water with 

pesticides, solvents, metals, and other hazardous substances. 

USDA is also subject to Asbestos National Emissions Standards for Hazardous Air Pollutants. 

In FY 2016, the Department estimated its liability for asbestos-related cleanup of real property 

to be $153 million. The liability is calculated using total square footage of real property 

expected to contain asbestos times a cost factor based on historical actual cleanup costs, 

adjusted for inflation, including any other identifiable costs, e.g., survey cost. As additional 

information becomes available, key assumptions will be reevaluated, cost estimates will be 

revised, and necessary adjustments will be made to the liability recognition.
108 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Note 15: Other Liabilities

In FY 2016, other liabilities with related budgetary obligations with the public include 

Agricultural Risk Coverage and Price Loss Coverage of $7,917 million; Grants, Subsidies, and 

Contributions of $3,044 million; Conservation Reserve Program of $1,682 million; 

underwriting gains on crop insurance of $1,809 million; indemnity payments not yet disbursed 

of $108 million; and other accrued liabilities of $709 million. 

In FY 2016, other liabilities without related budgetary obligations with the public include 

estimated underwriting gains on crop insurance of $1,998 million, Payments to States of 

$79 million, loans paid in advance for multi-family housing of $24 million, and other accrued 

liabilities of $2 million. 

 
SECTION I I FINANCIAL INFORMATION 109

Note 16: Leases

USDA activities based in the Washington, D.C. area are located in General Services 

Administration (GSA) leased facilities and USDA owned buildings. The USDA Headquarters 

complex (Whitten Building and South Building) is a government owned facility, which is part 

of the GSA Federal Buildings Inventory. As the result of a 1998 agreement between GSA and 

USDA, a moratorium was placed on the rental billings for the Headquarters complex beginning 

in FY 1999. 

At current market rate, the estimated yearly rental payment for the above mentioned space 

would be $64 million. This agreement is still in effect and as a result, USDA activities located 

in the Headquarters complex are not billed for rental costs. 

 
110 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Note 17: Commitments and Contingencies

The Department is subject to various claims and contingencies related to lawsuits as well as 

commitments under contractual and other commercial obligations.

For cases in which payment has been deemed probable and for which the amount of potential 

liability has been estimated, $512 million has been accrued in the financial statements as of 

September 30, 2016. 

No amounts have been accrued in the financial statements for claims where the amount is 

uncertain or where the probability of judgment against USDA is remote. The Department’s 

potential liability for claims where a judgment against the Department is reasonably possible 

ranges from $67 million to $202 million as of September 30, 2016. 

Through the Conservation Reserve Program (CRP), eligible participants sign 10- to 15-year 

contracts to remove land from production in exchange for an annual rental payment. The 

participants also receive cost-share assistance for establishing conservation practices on the 

reserve acreage and additional incentive payments for adopting high-priority conservation 

measures. 

Commitments to extend loan guarantees are estimated to be $4,876 million in FY 2016. 

Note 18: Funds from Dedicated Collections

Funds from dedicated collections are financed by specifically identified revenues, often 

supplemented by other financing sources, which remain available over time. These specifically 

identified revenues and other financing sources are required by statute to be used for designated 

activities or purposes and must be accounted for separately from the Government’s general 

revenues. 

Financial information for all significant funds from dedicated collections follows the 

descriptions of each fund’s purpose shown below. 

AGRICULTURAL MARKETING SERVICE (AMS)

Funds for Strengthening Markets, Income, and Supply 

This fund is used to purchase commodities for schools and elderly feeding programs, to provide 

goods and other necessities in emergencies and disasters, and to purchase agricultural 

commodities to stabilize markets. The fund is permanently financed by statutory transfer of an 

amount equal to 30 percent of customs receipts collected during each calendar year and is 
SECTION I I FINANCIAL INFORMATION 111

automatically appropriated for expanding outlets for perishable, non-price supported 

commodities. An amount equal to 30 percent of receipts collected on fishery products is 

transferred to the Food and Nutrition Service and is used to purchase commodities under 

section 6 of the National School Lunch Act and other authorities specified in the child nutrition 

appropriation. Funds are available under section 32 of the Act of August 24, 1935, as amended 

(7 U.S.C. 612c). 

Expenses and Refunds, Inspection and Grading of Farm Products

The commodity grading programs provide grading, examination, and certification services for a 

wide variety of fresh and processed food commodities using federally approved grade standards 

and purchase specifications. This fund is financed by the collection of fees charged to 

producers of various food commodities who request, on a voluntary basis, inspection and 

grading of agricultural food commodities. This program is authorized by the Agricultural 

Marketing Act of 1946 (7 U.S.C. 1621-1627). 

ANIMAL PLANT HEALTH INSPECTION SERVICE (APHIS)

Agricultural Quarantine Inspection User Fee Account 

This fund is used to record and report expenditures and revenue associated with operating 

Agricultural Quarantine Inspection (AQI) activities at ports of entry. The Farm Bill of 1990, as 

amended by the Federal Agriculture Improvement and Reform Act of 1996, gave the Animal 

and Plant Health Inspection Service (APHIS) the authority to charge user fees for AQI services 

and to use the revenue to fund AQI activities. In March of 2003, a portion of the AQI program 

was transferred to the Department of Homeland Security (DHS); however, APHIS retained the 

authority to collect AQI revenue. APHIS transfers a portion of the revenue to DHS periodically 

throughout the year to fund its expenditures. The revenue in the fund is collected from airlines, 

air passengers, vessels, trucks, and railroad cars that are subject to AQI inspection at ports of 

entry. These user fees are an inflow of revenue from the public that is used to fund AQI 

inspections that are required by APHIS and DHS. The authority is codified in 21 U.S.C. 136(a). 

FOREST SERVICE (FS)

Cooperative Work

Cooperative contributions are deposited for disbursement in compliance with the terms and 

provisions of the agreement between the cooperator and the FS. Cooperators include timber 

purchasers, not-for-profit organizations, and local hunting and fishing clubs. The governing 

authorities are the Cooperative Funds Act of July 31, 1914 (16 U.S.C. 498) and the Knutson 

Vandenberg Act. 
112 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Land Acquisition

Each fiscal year this fund receives a transfer of recreation user fees from the Department of the 

Interior’s Land and Water Conservation Fund, to be used for the acquisition of land or waters, 

or interest therein, including administrative expenses, to carry out the provisions of the Land 

and Water Conservation Fund Act of 1965, as amended (16 U.S.C. 460l-4-11), pertaining to the 

preservation of watersheds. The Land Acquisition program is authorized by the Interior and 

Related Agencies Appropriations Act of December 30, 1982 (96 Stat. 1983, Public Law 97-

394). 

Payments to States, National Forest Fund 

The Act of May 23, 1908, as amended (16 U.S.C. 500), commonly known as Payments to 

States, requires with a few exceptions, that 25 percent of all monies received from the national 

forests and deposited into the National Forest Fund during a fiscal year from timber, grazing, 

special-use permits, power and mineral leases, and admission and user fees be paid to the States 

in which the national forests are located, for public schools and public roads in the county or 

counties in which the national forests are situated. 

Timber Salvage Sales

The Salvage Sale Fund, Treasury account 12X5204, was established to facilitate the timely 

removal of timber damaged by fire, wind, insects, diseases, or other events. Amounts collected 

from the sale of salvaged timber are used on other qualifying salvage sales to cover the cost of 

preparing and administering the sales. The Timber Salvage Sales program is authorized by 

16 U.S.C. 472(a). 

Expenses, Brush Disposal 

Deposits from timber purchasers are recorded in Treasury account 12X5206 and used to cover 

the cost required to dispose of slash, brush, and other debris resulting from timber cutting 

operations and for supplemental protection of the cutover areas in lieu of actual disposal. The 

Expenses, Brush Disposal program is authorized by 16 U.S.C. 490-498. 

State, Private, and International Forestry, Land and Water Conservation Fund

The Fiscal Year 2004 Department of the Interior and Related Agencies Appropriation Act 

(Public Law 108-108) authorizes the Forest Service to receive a transfer of receipts from the 

Department of the Interior’s Land and Water Conservation Fund to finance the existing Forest 

Legacy Program, funded previously by State and Private Forestry general appropriation. To 

accommodate the new financing arrangement and at OMB’s request, the U.S. Department the 

of Treasury established a new special fund, “State, Private and International Forestry, Land and 

Water Conservation Fund.” The program expenditures include grants and an occasional land 

purchase, but no real property will be procured or constructed. 
SECTION I I FINANCIAL INFORMATION 113

Recreation Fee Demonstration Program 

The Recreation Fee Demonstration Program fund receives deposits of recreation fees collected 

from projects that are part of the Recreation Fee Demonstration Program. These monies are 

retained and used for backlog repair and maintenance of recreation areas, sites or projects. 

These funds are also used for interpretation, signage, habitat or facility enhancement, resource 

preservation, annual operation, maintenance, and law enforcement related to public use of 

recreation areas and sites. The Recreation Fee Demonstration Program is authorized by 

16 U.S.C. 4601-6(a).

National Forest Fund Receipts

The Act of May 23, 1908, as amended (16 U.S.C. 500), requires (with a few exceptions) that all 

receipts from national forest activities be aggregated each fiscal year in order to calculate the 

portion which is paid to the States in which the national forests are located. The payments must 

be used for public schools and roads in the county or counties in which the national forests are 

situated. Originally, the States’ portion of receipts was 25 percent but past statutory 

amendments have changed the calculation factors from time to time. Receipts include revenues 

from the sale of timber and other forest products; fees for grazing, special-use permits, power 

and mineral leases; and recreation user fees. 

Restoration of Forest Lands and Improvements

The Restoration of Forest Lands and Improvements Acts (16 U.S.C. 579(c)) states any monies 

received by the United States with respect to lands under the administration of the Forest 

Service (a) as a result of the forfeiture of a bond or deposit by a permittee or timber purchaser 

for failure to complete performance of improvement, protection, or rehabilitation work required 

under the permit or timber sale contract or (b) as a result of a judgment, compromise, or 

settlement of any claim, involving present or potential damage to lands or improvements, shall 

be deposited into the United States Treasury and are appropriated and made available until 

expended to cover the cost to the United States of any improvement, protection, or 

rehabilitation work on lands under the administration of the Forest Service rendered necessary 

by the action which led to the forfeiture, judgment, compromise, or settlement: Provided, that 

any portion of the monies received in excess of the amount expended in performing the work 

necessitated by the action which led to their receipt shall be transferred to miscellaneous 

receipts.

Payments to Counties, National Grasslands

Payments to Counties, Title III, Bankhead-Jones Farm Tenant Act (Act) authorizes national 

grassland or land utilization project receipts to be shared through grants with local governments 

for the purposes stated in the Act. At the end of each calendar year, 25 percent of the net 

revenues from each national grassland or land utilization project are paid to the counties in 
114 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

which such lands are located. These payments are not in lieu of taxes. Receipts from the Act 

designated as either national grasslands or land utilization projects are to be credited to a 

special account. 

Acquisition of Lands to Complete Land Exchanges

As authorized by 7 statutes, this program is funded annually by congressional appropriation 

action, with forest revenues generated by the occupancy of public land or from the sale of 

natural resources other than minerals. All funds appropriated that remain unobligated at the end 

of the fiscal year are returned to the receipts of the affected national forests. These funds are 

used to purchase land and for related expenditures such as title search, escrow, recording, and 

personnel costs when the purchase is considered necessary to minimize soil erosion and flood 

damage. This appropriation is available for land acquisition within the exterior boundaries of 

the national forests. 

Stewardship Contracting Product Sales

Stewardship End Result Contracting Projects (16 U.S.C. 6591c), amends the Healthy Forests 

Restoration Act of 2003, and states the Forest Service, via agreement or contract as appropriate, 

may enter into stewardship contracting projects with private persons or other public or private 

entities to perform services to achieve land management goals for the national forests and the 

public lands that meet local and rural community needs. The value of timber or other forest 

products removed may be applied as an offset against the cost of services received under the 

agreements or contracts. Monies earned from such agreements or contracts may be retained by 

the Forest Service and shall be available for expenditure without further appropriation at the 

project site from which the monies are collected or at another project site. In addition, if the 

offset value of the forest products exceeds the value of the resource improvement treatments, 

the Forest Service may collect any residual receipts under the Act of June 9, 1930 (commonly 

known as the Knutson-Vandenberg Act, 16 U.S.C. 576); and apply the excess to other 

authorized stewardship projects. Finally, the Forest Service is required to annually report to the 

Committee of Agriculture, Nutrition, and Forestry of the Senate and the Committee on 

Agriculture of the House of Representatives on the status and accomplishments of these 

agreements and contracts.

NATIONAL INSTITUTE OF FOOD AND AGRICULTURE (NIFA)

Native American Institutions Endowment Fund

The Native American Institutions Endowment Fund was authorized by Public Law 103-382 

and provided an initial installment to establish an endowment to benefit the 1994 land-grant 

institutions. The public law states that “This program will enhance educational opportunities 

for Native Americans by building educational capacity at these institutions in the areas of 
SECTION I I FINANCIAL INFORMATION 115

student recruitment and retention, curricula development, faculty preparation, instruction 

delivery systems, and scientific instrumentation for teaching.” While the principal (corpus) of 

the fund cannot be used, the interest that is earned on the endowment fund investments in 

Treasury instruments can be used for the purposes described above. After the close of a fiscal 

year, the income is distributed after making adjustments for the cost of administering the fund. 

OTHER

Financial information is summarized for all other funds from dedicated collections with total 

assets less than $50 million listed below.

Agricultural Marketing Service

Perishable Agricultural Commodities Act 

Wool Research, Development and Promotion Trust Fund 

Animal Plant Health Inspection Service

Miscellaneous Contributed Funds 

Gifts and Bequests 

Forest Service

Roads and Trails for States, National Forest Fund 

Reforestation Trust Fund 

Timber Sales Pipeline Restoration Fund 

Operation and Maintenance of Forest Service Quarters

Timber Roads, Purchaser Elections 

Range Betterment Fund

Acquisition of Lands for National Forests, Special Acts 

Construction of Facilities or Land Acquisition 

Payment to Minnesota (Cook, Lake and Saint Louis Counties) 

Licensee Program

Resource Management Timber Receipts

Quinault Special Management Area

MNP Rental Fee Account
116 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Land Between the Lakes Management Fund

Administration of Rights-of-Way and Other Land Uses Fund 

Hardwood Technology Transfer and Applied Research Fund 

Gifts, Donations and Bequests for Forest and Rangeland Research 

Land Between the Lakes Trust Fund

Land and Water Conservation Fund 

Tongass Timber Supply Fund 

Midewin National Tallgrass Prairie Restoration Fund

Gifts and Bequests 

Natural Resources Conservation Service

Damage Assessment and Restoration Revolving Fund 

Miscellaneous Contributed Funds 

Agricultural Research Service

Concessions Fees and Volunteer Services 

Gifts and Bequests 

Miscellaneous Contributed Funds 

Rural Development

Alternative Agricultural Research and Commercialization Revolving Fund 

Foreign Agricultural Service

Miscellaneous Contributed Funds 

Gifts and Bequests 

Foreign Service National Separation Liability Trust Fund 

Grain Inspection, Packers and Stockyards Administration

Inspection and Weighing Services 

Food Safety and Inspection Service

Expenses and Refunds, Inspection of Farm Products 
SECTION I I FINANCIAL INFORMATION 117

Office of the Inspector General

Inspector General Assets Forfeiture, Department of Justice

Inspector General Assets Forfeiture, Department of Treasury

National Agricultural Statistics Service

Miscellaneous Contributed Funds 

Economic Research Service

Miscellaneous Contributed Funds 

Departmental Offices

Gifts and Bequests 
118 USDA F ISCAL YEAR 2016 AGENCY FINANCIAL REPORT

 
SECTION I I FINANCIAL INFORMATION 119 

 
120 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Required Supplementary Stewardship 

Information

Stewardship Investments (Unaudited)

 
SECTION I I FINANCIAL INFORMATION 121

 
122 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Non-Federal Physical Property

FOOD AND NUTRITION SERVICE

FNS’ non-Federal physical property consists of computer systems and other equipment 

obtained by State and local governments for the purpose of administering the SNAP. The total 

SNAP expense for ADP Equipment & Systems has been reported as of the date of FNS’ 

financial statements. FNS’ non-Federal physical property also consists of computer systems 

and other equipment obtained by the State and local governments for the purpose of 

administering the Special Supplemental Nutrition Program for Women, Infants, and Children. 

NATIONAL INSTITUTE OF FOOD AND AGRICULTURE 

The Extension 1890 facilities program supports the renovation of existing buildings and the 

construction of new facilities as well as computers and equipment purchases that permit 

faculty, students, and communities to benefit fully from the partnership between USDA and the 

1890 Land-Grant Universities. 

Human Capital

NATIONAL INSTITUTE OF FOOD AND AGRICULTURE (NIFA)

The higher education programs include graduate fellowship grants, competitive challenge 

grants, secondary/2-year postsecondary grants, Hispanic serving institutions education grants, a 

multicultural scholars program, a Native American institutions program, a Native American 

institutions endowment fund, an Alaska Native serving and a Native Hawaiian serving 

institutions program, resident instruction grants and distance education grants for insular areas, 

and a capacity building program at the 1890 institutions. These programs enable universities to 

broaden their curricula, increase faculty development and student research projects, and 

increase the number of new scholars recruited in the food and agriculture sciences. NIFA also 

supports extension-related work at 1862 and 1890 land-grant institutions throughout the 

country through formula and competitive programs.

FOOD AND NUTRITION SERVICE (FNS)

FNS’ human capital consists of employment and training (E&T) for SNAP. The E&T program 

requires recipients of SNAP benefits to participate in an employment and training program as a 

condition to SNAP eligibility.
SECTION I I FINANCIAL INFORMATION 123

Outcome data for the E&T program is only available through the third quarter. As of this 

period, FNS’ E&T program has placed 662,005 work registrants subject to the 3-month SNAP 

participant limit and 1,067,825 work registrants not subject to the limit in either job-search, job 

training, job-workfare, education, or work experience. 

AGRICULTURAL RESEARCH SERVICE (ARS)

As the Nation’s primary source for agricultural information, the National Agricultural Library 

(NAL) has a mission to increase the availability and utilization of agricultural information for 

researchers, educators, policymakers, consumers of agricultural products, and the public. The 

NAL is one of the world’s largest and most accessible agricultural research libraries and plays a 

vital role in supporting research, education, and applied agriculture. 

The NAL was created as the departmental library for USDA in 1862 and became a national 

library in 1990. One of four national libraries of the U.S. (with the Library of Congress, the 

National Library of Medicine, and the National Library of Education), it is also the coordinator 

for a national network of State land-grant and USDA field libraries. In its international role, the 

NAL serves as the U.S. center for the international agricultural information system, 

coordinating and sharing resources and enhancing global access to agricultural data. The NAL 

collection of over 8 million items and its leadership role in information services and technology 

applications combine to make it the foremost agricultural library in the world.

RISK MANAGEMENT AGENCY (RMA)

Federal Crop Insurance Corporation (FCIC) has formed partnerships with NIFA, the 

Commodity Futures Trading Commission, the USDA National Office of Outreach, the 

Economic Research Service (ERS), and private industry to leverage the Federal Government’s 

funding of its Risk Management Education (RME) program by using both public and private 

organizations to help educate their members in agricultural risk management. RME expanded 

State and Regional education partnerships; encouraged the development of information and 

technology-based decision aids; facilitated local crop insurance education and risk management 

training workshops throughout the Nation through cooperative agreements with educational 

institutions and community-based outreach organizations. 

During fiscal year 2016, the RME program worked toward its goals by funding risk 

management sessions, most of which directly target producers. The number of producers 

reached through these sessions is approximately 96,467 in fiscal year 2016. In addition to 

reaching producers, some training sessions helped those who work with producers (such as 

lenders, agricultural educators, and other agricultural professionals) to better understand those 

areas of risk management with which they may be unfamiliar. Total RME obligations incurred 

by FCIC were approximately $9 million in fiscal year 2016. 
124 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Research and Development

AGRICULTURAL RESEARCH SERVICE (ARS)

ARS’ mission is to conduct research to develop and transfer solutions to agricultural problems 

of high national priority and provide information access and dissemination to: ensure high 

quality, safe food, and other agricultural products; assess the nutritional needs of Americans; 

sustain a competitive agricultural economy; enhance the natural resource base and the 

environment; and provide economic opportunities for rural citizens, communities, and society 

as a whole. ARS’ programs are aligned under the Department’s priorities as follows:

USDA Strategic Goal 1: Assist Rural Communities to Create Prosperity So They Are Self 

Sustaining, Repopulating, and Economically Thriving 

New Products/Product Quality/Value Added

ARS has active research programs directed toward: improving the efficiency and reducing the 

cost for the conversion of agricultural products into biobased products and biofuels; developing 

new and improved products for domestic and foreign markets; and providing higher quality, 

healthy foods that satisfy consumer needs in the United States and abroad. Note: Some of 

ARS’ Livestock and Crop Production research is carried out under this Strategic Goal and 

Strategic Goal 3.

National Agricultural Library (NAL)

NAL, among the world’s largest libraries serving agriculture, delivered about 54 million page 

views and almost 1 million searches in FY 2016. 

Buildings and Facilities

ARS has approximately 95 laboratory locations, primarily located throughout the United States. 

ARS’ facilities programs are designed to meet the needs of its scientists and support personnel 

to accomplish the Agency’s mission.

USDA Strategic Goal 2: Ensure Our National Forests and Private Working Lands Are Conserved, 

Restored, and Made More Resilient to Climate Change, While Enhancing Our Water Resources 

Environmental Stewardship

ARS’ research program emphasis is in developing technologies and systems that support 

sustainable production and enhance the Nation’s vast renewable natural resource base. The 

agency is currently developing the scientific knowledge and technologies needed to meet the 

challenges and opportunities facing U.S. agriculture in managing water resource quality and 

quantity under different climatic regimes, production systems, and environmental conditions. 
SECTION I I FINANCIAL INFORMATION 125

ARS’ research also focuses on developing measurement, prediction, and control technologies 

for emissions of greenhouse gases, particulate matter, ammonia, hydrogen sulfide, and volatile 

organic compounds affecting air quality and land-surface climate interactions. The agency is a 

leader in developing measurement and modeling techniques for characterizing gaseous and 

particulate matter emissions from agriculture. In addition, ARS is evaluating strategies for 

enhancing the health and productivity of soils, including developing predictive tools to assess 

the sustainability of alternative land management practices. Finding mechanisms to aid 

agriculture in adapting to changes in atmospheric composition and climatic variations is also an 

important component of this program. 

ARS’ range and grazing land research objectives include the conservation and restoration of the 

Nation’s range land and pasture ecosystems and agroecosystems through improved 

management of fire, invasive weeds, grazing, global change, and other agents of ecological 

change. The agency is currently developing improved grass and forage legume germplasm for 

livestock, conservation, bioenergy, and bioproduct systems as well as grazing-based livestock 

systems that reduce risk and increase profitability. In addition, ARS is developing whole 

system management strategies to reduce production costs and risks. 

USDA Strategic Goal 3: Help America Promote Agricultural Production and Biotechnology 

Exports As America Works to Increase Food Security 

Livestock Production

ARS’ research program is directed toward fostering an abundant, safe, nutritionally 

wholesome, and competitively priced supply of animal products produced in a viable, 

competitive, and sustainable animal agriculture sector of the U.S. economy by: safeguarding 

and utilizing animal genetic resources, associated genetic and genomic databases, and 

bioinformatic tools; developing a basic understanding of food animal physiology to address 

priority issues related to animal production, animal well-being, and product quality and 

healthfulness; and developing information, best management practices, novel and innovative 

tools, and technologies that improve animal production systems, enhance human health, and 

ensure domestic food security. The research is heavily focused on the development and 

application of genomics technologies to increase the efficiency and product quality of beef, 

dairy, swine, poultry, aquaculture, and sheep systems. Areas of emphasis include increasing the 

efficiency of nutrient utilization, increasing animal well-being and reducing stress in production 

systems, increasing reproductive rates and breeding animal longevity, developing and 

evaluating non-traditional production systems (e.g., organic and natural), and evaluating and 

conserving animal genetic resources.
126 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Crop Production

ARS’ program focuses on developing and improving ways to reduce crop losses while 

protecting and ensuring a safe and affordable food supply. The program concentrates on 

production strategies that are environmentally friendly, safe to consumers, and compatible with 

sustainable and profitable crop production systems. Research activities are directed at 

safeguarding and utilizing plant genetic resources and their associated genetic, genomic, and 

bioinformatic databases that facilitate selection of varieties and/or germplasm with significantly 

improved traits. Research activities attempt to minimize the impacts of crop pests while 

maintaining healthy crops and safe commodities that can be sold in markets throughout the 

world. The agency is conducting research to discover and exploit naturally occurring and 

engineered genetic mechanisms for plant pest control, develop agronomic germplasm with 

durable defensive traits, and transfer genetic resources for commercial use. ARS is also 

providing taxonomic information on invasive species that strengthens prevention techniques, 

aids in detection/identification of invasive pests, and increases control through management 

tactics that restore habitats and biological diversity.

USDA Strategic Goal 4: Ensure that All of America’s Children Have Access to Safe, Nutritious, 

and Balanced Meals 

Food Safety

ARS’ research program is designed to yield science-based knowledge on the safe production, 

storage, processing, and handling of plant and animal products, and on the detection and 

control of pathogenic bacteria and fungi, parasites, chemical contaminants, and plant toxins. All 

of ARS’ research activities involve a high degree of cooperation and collaboration with 

USDA’s Research, Education, and Economics agencies, as well as with the Food Safety and 

Inspection Service (FSIS), Animal and Plant Health Inspection Service (APHIS), the Food and 

Drug Administration (FDA), the Centers for Disease Control and Prevention (CDC), the 

Department of Homeland Security (DHS), and the Environmental Protection Agency (EPA). 

The agency also collaborates in international research programs to address and resolve global 

food safety issues. Specific research efforts are directed toward developing new technologies 

that assist ARS stakeholders and customers, including regulatory agencies, industry, and 

commodity and consumer organizations in detecting, identifying, and controlling foodborne 

diseases that affect human health.

Livestock Protection

ARS’ program is directed at protecting and ensuring the safety of the Nation’s agriculture and 

food supply through improved disease detection, prevention, control, and treatment. Basic and 

applied research approaches are used to solve animal health problems of high national priority. 

Emphasis is given to methods and procedures to control animal diseases through the discovery 
SECTION I I FINANCIAL INFORMATION 127

and development of diagnostics, vaccines, biotherapeutics, animal genomics applications, 

disease management systems, animal disease models, and farm biosecurity measures. The 

research program has the following strategic objectives: establish ARS laboratories into a 

fluid, highly effective research network to maximize use of core competencies and resources; 

use specialized high containment facilities to study zoonotic and emerging diseases; develop an 

integrated animal and microbial genomics research program; establish core competencies in 

bovine, swine, ovine, and avian immunology; launch a biotherapeutic discovery program 

providing alternatives to animal drugs; build a technology driven vaccine and diagnostic 

discovery research program; develop core competencies in field epidemiology and predictive 

biology; establish a best-in-class training center for our Nation’s veterinarians and scientists; 

and develop a model technology transfer program to achieve the full impact of ARS research 

discoveries. The ARS animal research program includes the following core components: 

biodefense research, animal genomics and immunology, zoonotic diseases, respiratory diseases, 

reproductive and neonatal diseases, enteric diseases, parasitic diseases, and transmissible 

spongiform encephalopathies.

Crop Protection

ARS’ Crop Protection research program is directed to protect crops from insect and disease loss 

through research to understand pest and disease transmission mechanisms, and to identify and 

apply new technologies that increase our understanding of virulence factors and host defense 

mechanisms. The program’s research priorities include: identification of genes that convey 

virulence traits in pathogens and pests; factors that modulate infectivity, gene functions, and 

mechanisms; genetic profiles that provide specified levels of disease and insect resistance under 

field conditions; and mechanisms that reduce the spread of pests and infectious diseases. ARS 

is developing new knowledge and integrated pest management approaches to control pest and 

disease outbreaks as they occur. Its research will improve the knowledge and understanding of 

the ecology, physiology, epidemiology, and molecular biology of emerging diseases and pests. 

This knowledge will be incorporated into pest risk assessments and management strategies to 

minimize chemical inputs and increase production. Strategies and approaches will be available 

to producers to control emerging crop diseases and pest outbreaks and to address quarantine 

issues.

Human Nutrition

Maintenance of health throughout the lifespan along with prevention of obesity and chronic 

diseases via food-based recommendations are the major emphases of ARS’ Human Nutrition 

Research Program. These health-related goals are based on the knowledge that deficiency 

diseases are no longer the primary public health concerns in the United States; excessive 

consumption has become the primary nutrition problem in the American population. This is 

reflected by increased emphasis on prevention of obesity, from basic science through 
128 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

intervention studies to assessments of large populations. The agency’s research program also 

studies essential nutrients and nonessential, health promoting components in foods. To better 

define the role of nutrition in pregnancy and growth of children, and for healthier aging, four 

specific areas of research are emphasized: nutrition monitoring; the scientific basis for dietary 

recommendations; prevention of obesity and related diseases; and life stage nutrition and 

metabolism. 

NATIONAL INSTITUTE OF FOOD AND AGRICULTURE (NIFA)

NIFA participates in a nationwide land-grant university system of agriculture related research 

and program planning and coordination between State institutions and USDA. It assists in 

maintaining cooperation among the State institutions, and between the State institutions and 

their Federal research partners. NIFA administers competitive grants and capacity/formula 

payments to State institutions to leverage State and local funding for agriculture research. 

FOREST SERVICE (FS)

Forest Service Research & Development (R&D) has an integrated portfolio that supports 

achievement of the agency’s strategic goals. The FS R&D structure has two components: 

Priority Research Areas and Strategic Program Areas (SPAs). 

The Priority Research Areas address urgent needs in seven areas: Forest Disturbances, Forest 

Inventory and Analysis, Watershed Management and Restoration, Bioenergy and Biobased 

Products, Urban Natural Resources Stewardship, Nanotechnology, and Localized Needs 

Research. 

The SPAs are the long-term programs from which Priority Research Areas are funded; the 

SPAs are summarized here.

Wildland Fire and Fuels

R&D provides managers with the knowledge and tools to reduce negative impacts, while 

enhancing the beneficial effects of wildland fire, as a natural process. This knowledge and these 

tools are critical to understanding the human process of fire and fuels management on society 

and the environment. 

Research focuses on understanding and modeling fundamental fire processes; interactions of 

fire with ecosystems; and the environmental, social, and economic aspects of fire, as well as 

evaluating the integrated management strategies and disturbance interactions at multiple scales

and the application of fire research to address management problems. 
SECTION I I FINANCIAL INFORMATION 129

Invasive Species

R&D provides the scientific information, methods, and technology to reduce or eliminate the 

introduction, spread, and impact of invasive species and to restore or improve the functionality 

of ecosystems affected by invasive species. 

Research focuses on non-native plants, animals, fish, insects, diseases, invertebrates, and other 

species whose introduction is likely to cause economic or environmental harm to an ecosystem. 

Water, Air, and Soil

R&D enables the sustainable management of these essential resources by providing clear air 

and safe drinking water, by protecting lives and property from wildfire and smoke, and by 

adapting to climate variability and change. 

The program features ecosystem services with a high level of integration between water, air, 

and soil research, such as the effects of climate variability and change on water budgets or 

carbon sequestration metrics from an ecosystem perspective.

Wildlife and Fish

R&D relies upon interdisciplinary research to inform policy initiatives affecting wildlife and 

fish habitat on private and public lands, and the recovery of threatened or endangered species. 

Scientists investigate the complex interactions among species, ecosystem dynamics and 

processes, land use and management, and any emerging broadscale threats, including global 

climate change, loss of open space, invasive species, and disease. 

Resource Management and Use

R&D provides the scientific and technology base to sustainably manage and use forest 

resources and forest fiber-based products. 

Research focuses on the plant sciences, soil sciences, social sciences, silviculture, productivity, 

forest and range ecology management, harvesting and operations, forest and biomass products 

and utilization, economics, urban forestry, and climate change. 

Outdoor Recreation

R&D promotes human and ecological sustainability by researching environmental 

management, activities, and experiences that connect people with the natural world. 

Research in outdoor recreation is interdisciplinary, focusing on nature-based recreation and the 

changing trends in American society; connections between recreation visitors, communities, 

and the environment; human benefits and consequences of recreation and nature contact; the 
130 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

effectiveness of recreation management and decision-making; and sustaining ecosystems 

affected by recreational use.

Inventory and Monitoring

R&D provides the resource data, analysis, and tools needed to monitor forest ecosystems 

vulnerable to rapid change due to threats from fire, insects, disease, natural processes, or 

management actions. From their research, scientists determine the status and trend of the health 

of the Nation’s forests and grasslands, and the potential impact from climate change.

Their research integrates the development and use of science, technology, and remotely sensed 

data to better understand the incidences of forest fragmentation over time from changes in land 

use or from insects, disease, fire, and extreme weather events.

A representative summary of FY 2016 accomplishments include the following: 

• 19 new interagency agreements and contracts 

• 44 interagency agreements and contracts continued 

• 2,022 articles published in journals 

• 249 articles published in all other publications 

• 5 patents granted 

• 2 patent licenses executed

ECONOMIC RESEARCH SERVICE (ERS)

ERS provides economic and other social science research and analysis for public and private 

decisions on agriculture, food, natural resources, and rural America. Research results and 

economic indicators on these important issues are fully disseminated through published and 

electronic reports and articles, special staff analyses, briefings, presentations and papers, 

databases, and individual contacts. ERS’ objective information and analysis helps public and 

private decision makers attain the goals that promote agricultural competitiveness, food safety 

and security, a well-nourished population, environmental quality, and a sustainable rural 

economy. 

NATIONAL AGRICULTURAL STATISTICS SERVICE (NASS)

Research is conducted to improve the statistical methods and related technologies used to 

produce U.S. agricultural statistics. The research agenda has two primary areas of emphasis: 

the National Agricultural Statistics Service estimation program and the Census of Agriculture 

program. For each, the goal is the development of improved estimates at lower cost, with 
SECTION I I FINANCIAL INFORMATION 131

reduced respondent burden, and with valid measures of uncertainty. All facets of the estimation 

process are considered, from increasing efficiencies in sampling and data collection to 

enhancing the statistical methodology used to analyze the data. Two high priority items within 

the research effort are significance editing (cleaning of respondent data) and model-based 

estimates. Significance editing has the potential to enhance the quality of survey data and to 

reduce manual operations in preparing survey responses summaries. Model-based estimates are 

used to combine data from disparate sources, from sample surveys to remote sensing, resulting 

in improved estimates with valid measures of uncertainty. Going forward, users of NASS 

services and products will be increasingly dependent upon methodological and technological 

efficiencies.
132 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Required Supplementary Information 

Deferred Maintenance and Repairs (Unaudited)

The Forest Service is steward to nearly 193 million acres of national forests and grasslands 

within the NFS. On these NFS lands, the agency manages major assets that are categorized as 

general PP&E, including nearly 40,000 administrative, recreation, and research buildings and 

approximately 27,000 recreational sites, such as campgrounds, picnic areas, trailheads, and 

interpretive sites.

Across the NFS, the agency also manages over 371,000 miles of roads, of which 65,000 miles 

are for passenger vehicles; over 151,000 miles of trails for motorized and non-motorized use; 

nearly 13,000 road and trail bridges; and over 1,700 Forest Service-owned and Special Use 

Permitted dam structures.

ARS owns/manages approximately 15 million gross square feet of facility space in 

3,000 buildings on 400,000 acres of land. APHIS operates approximately 28 facilities, which 

includes 378 buildings, in the United States and 14 facilities/buildings internationally. The 

NRCS portfolio of owned assets encompasses 29 sites, including 13 parcels of owned land, 

260 buildings, and about 250 other structures. 

Deferred Maintenance & Repairs (DM&R) estimates include capitalized PP&E, 

non-capitalized heritage assets, and non-capitalized or fully depreciated PP&E. 

No DM&R is reported for stewardship land because land is considered to be in acceptable 

condition unless an environmental contamination or liability is identified and the land cannot 

be used for its intended purpose. Stewardship land easements are excluded from DM&R since 

ownership is retained by the landowner. 

DEFINING AND IMPLEMENTING MAINTENANCE AND REPAIRS POLICIES IN 

PRACTICE 

The Forest Service uses condition surveys to estimate DM&R on all major classes of its PP&E 

and heritage assets. DM&R estimates for most assets—except bridges—are based on condition 

surveys performed on a 5-year maximum revolving schedule. The bridge class is on a 2-year 

maximum revolving schedule. The agency’s DM&R for NFS passenger-car roads is determined 

annually—from random sample surveys—providing an 80 percent level of confidence. DM&R 

is not reported for roads that are not part of the passenger-car system.

ARS, APHIS, and NRCS use similar condition surveys to estimate DM&R on all major classes 

of its PP&E and heritage assets.
SECTION I I FINANCIAL INFORMATION 133

RANKING AND PRIORITIZING MAINTENANCE AND REPAIRS ACTIVITIES

Maintenance and repair activities are prioritized based on condition surveys and ranked based 

on PP&E and heritage assets that pose serious threats to public health or safety, a natural 

resource, or the ability of the agency to implement its mission. 

FACTORS CONSIDERED IN SETTING ACCEPTABLE CONDITION

The standards for acceptable operating condition for various classes of PP&E and heritage 

assets are as follows:

Conditions of roads and bridges within the NFS road system are measured by various 

standards: 

• Federal Highway Administration regulations for the Federal Highway Safety Act. 

• Best management practices for the nonpoint source provisions of the Clean Water Act 

from U.S. Environmental Protection Agency and States. 

• Road management objectives developed through the National Forest Management Act 

forest planning process. 

• Forest Service directives—Forest Service Manual (FSM) 7730, Operation and 

Maintenance (August 25, 2005, amendment was superseded with October 1, 2008, 

revision); Forest Service Handbook (FSH) 7709.56a, Road Preconstruction, and FSH 

7709.56b, Transportation Structures Handbook. 

Dams in the NFS are managed according to FSM 7500, Water Storage and Transmission, and 

FSH 7509.11, Dams Management Handbook. The condition of a dam is acceptable when the 

dam meets current design standards and does not have any deficiencies that threaten the safety 

of the structure or public. For dams to be rated in acceptable condition, the agency needs to 

restore the dams to the original functional purpose, correct unsightly conditions, or prevent 

more costly repairs.

Buildings in the NFS shall comply with the International Family of Building and Related 

Codes, the National Fire Protection Association Life Safety Code, the Forest Service Health 

and Safety Handbook, and the Occupational Safety Health Administration as determined by 

condition surveys and safety inspections. These requirements are found in FSM 7310, 

Buildings and Related Facilities, revised November 19, 2004. 

Recreation facilities in the NFS are located within recreation sites that range from highly 

developed sites to general forest areas such as campgrounds, trailheads, trails, water and 

wastewater systems, interpretive facilities, and visitor centers. Recreation sites are managed in 

accordance with Federal laws and regulations (Code of Federal Regulations [CFR] 36). 
134 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Detailed management guidelines are contained in FSM 2330, Publicly Managed Recreation 

Opportunities, and forest- and regional-level user guides. Quality standards for developed 

recreation sites in the NFS were established as Meaningful Measures for health and cleanliness, 

settings, safety and security, responsiveness, and the condition of the facility. 

The condition assessment for range structures in the NFS (fences and stock handling facilities) 

is based on (1) a determination by knowledgeable range specialists or other district personnel of 

whether the structure would perform the originally intended function and (2) a determination 

through the use of a protocol system to assess conditions based on age. A long-standing range 

methodology is used to gather this data. 

Trails and trail bridges in the NFS are managed according to Federal law and regulations 

(CFR 36). More specific direction is contained in FSM 2350, Trail, River, and Similar 

Recreation Opportunities, and the FSH 2309.18, Trails Management Handbook. 

DM&R of NFS structures for wildlife, fish, and threatened and endangered species is 

determined by field biologists using their professional judgment. The DM&R is considered 

critical if resource damage or species endangerment would likely occur if maintenance were 

deferred much longer. 

ARS, APHIS, and NRCS define acceptable condition in accordance with standards comparable 

to those used in private industry for buildings and other structures. 

DEFERRED MAINTENANCE AND REPAIR COSTS

 
SECTION I I FINANCIAL INFORMATION 135 

Statement of Budgetary Resources (Unaudited)

 
136 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

 
SECTION I I FINANCIAL INFORMATION 137

Risk Assumed Information (Unaudited)

Risk assumed is generally measured by the present value of unpaid expected losses net of 

associated premiums based on the risk inherent in the insurance or guarantee coverage in force. 

Risk assumed information is in addition to the liability for unpaid claims from insured events 

that have already occurred. The assessment of losses expected based on the risk assumed are 

based on actuarial or financial methods applicable to the economic, legal and policy 

environment in force at the time the assessments are made. The FCIC has estimated the loss 

amounts based on the risk assumed for its programs to be $8,343 million as of September 30, 

2016. 
138 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Section III:

Other Information

Unaudited Financial Statements

Consolidated Statement of Net Cost

For the Year Ended September 30, 2016 ($ In Millions)

 

The accompanying notes are an integral part of these statements.
S ECT ION I I I OTHER INFORMATION 139 

Consolidated Statement of Changes in Net Position

For the Year Ended September 30, 2016 ($ In Millions)

 

The accompanying notes are an integral part of these statements.
140 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Combined Statement of Budgetary Resources

For the Year Ended September 30, 2016 ($ In Millions)

 

The accompanying notes are an integral part of these statements.
S ECT ION I I I OTHER INFORMATION 141 

Unaudited Notes to Financial Statements

Note 7: Direct Loans and Guarantees, Non-Federal Borrowers

Table 2: Schedule for Reconciling Subsidy Cost Allowance Balances (Post-1991) Direct Loans

 
142 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Table 7: Schedule for Reconciling Loan Guarantee Liability

 
S ECT ION I I I OTHER INFORMATION 143

Note 8: Inventory and Related Property, Net

Commodity inventory is restricted for the purpose of alleviating distress caused by natural disasters, providing emergency food 

assistance in developing countries and providing price support and stabilization. 

 
144 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Note 10: Stewardship PP&E 

 

Note 13: Debt

 
S ECT ION I I I OTHER INFORMATION 145

Note 18: Funds from Dedicated Collections

 
146 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

 
S ECT ION I I I OTHER INFORMATION 147

Note 19: Sub-Organization Program Costs/Program Costs by Segment

FY 2016

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public

Assist Rural Communities to Create Prosperity so They Are

Self-Sustaining, Repopulating, and Economically Thriving:

Gross Costs $ 899 $ 1,062 $ 1,268 $ 11,623 $ 102 $ 252

Less: Earned Revenue 153 202 8 1,380 91 -

Net Costs 746 860 1,260 10,243 11 252

Ensure Our National Forests and Private Working Lands Are

Conserved, Restored, and Made More Resilient to Climate Change,

While Enhancing Our Water Resources:

Gross Costs 203 240 433 2,009 - -

Less: Earned Revenue 35 46 16 1 - -

Net Costs 168 194 417 2,008 - -

Help America Promote Agricultural Production and 

Biotechnology Exports as America Works to Increase Food Security:

Gross Costs - - 79 1,962 28 68

Less: Earned Revenue - - 21 99 24 -

Net Costs - - 58 1,863 4 68

Ensure that All of America's Children Have Access

to Safe, Nutritious, and Balanced Meals:

Gross Costs - - - - - -

Less: Earned Revenue - - - - - -

Net Costs - - - - - -

Create a USDA for the 21st Century That is High Performing, 

Efficient, and Adaptable:

Gross Costs - - - - - -

Less: Earned Revenue - - - - - -

Net Costs - - - - - -

Total Gross Costs 1,102 1,302 1,780 15,594 130 320

Less: Total Earned Revenue 188 248 45 1,480 115 -

Net Cost of Operations $ 914 $ 1,054 $ 1,735 $ 14,114 $ 15 $ 320

FSA CCC FAS
148 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

 
S ECT ION I I I OTHER INFORMATION 149

 
150 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

 
S ECT ION I I I OTHER INFORMATION 151

 
152 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

 
S ECT ION I I I OTHER INFORMATION 153

 
154 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Note 20: Cost of Stewardship PP&E 

The acquisition cost of stewardship land in FY 2016 was $216 million.

Note 21: Terms of Borrowing Authority Used

The Secretary of Agriculture has the authority to make and issue notes to the Secretary of the 

Treasury for the purpose of discharging obligations for RD’s insurance funds and CCC’s 

nonreimbursed realized losses and debt related to foreign assistance programs. The permanent 

indefinite borrowing authority includes both interest bearing and non-interest bearing notes. 

These notes are drawn upon daily when disbursements exceed deposits. Notes payable under 

the permanent indefinite borrowing authority have a term of one year. On January 1 of each 

year, USDA refinances its outstanding borrowings, including accrued interest, at the January 

borrowing rate.

In addition, USDA has permanent indefinite borrowing authority for the foreign assistance and 

export credit programs to finance disbursements on post-credit reform, direct credit obligations, 

and credit guarantees. In accordance with the Federal Credit Reform Act of 1990, as amended, 

USDA borrows from Treasury on October 1, for the entire fiscal year, based on annual 

estimates of the difference between the amount appropriated (subsidy) and the amount to be 

disbursed to the borrower. Repayment under this agreement may be, in whole or in part, prior 

to maturity by paying the principal amount of the borrowings plus accrued interest to the date 

of repayment. Interest is paid on these borrowings based on weighted average interest rates for 

the cohort, to which the borrowings are associated. Interest is earned on the daily balance of 

uninvested funds in the credit reform financing funds maintained at Treasury. The interest 

income is used to reduce interest expense on the underlying borrowings. 

USDA has authority to borrow from the Federal Financing Bank (FFB) in the form of 

Certificates of Beneficial Ownership (CBOs) or loans executed directly between the borrower 

and FFB with an unconditional USDA repayment guarantee. CBOs outstanding with FFB are 

generally secured by unpaid loan principal balances. CBOs outstanding are related to pre-credit 

reform loans and no longer used for program financing. 

FFB CBOs are repaid as they mature and are not related to any particular group of loans. 

Borrowings made to finance loans directly between the borrower and FFB mature and are 

repaid as the related group of loans become due. Interest rates on the related group of loans are 

equal to interest rates on FFB borrowings, except in those situations where an FFB funded loan 

is restructured and the terms of the loan are modified. 
S ECT ION I I I OTHER INFORMATION 155 

Prepayments can be made on Treasury borrowings without a penalty; however, they cannot be 

made on FFB CBOs, without a penalty. 

Funds may also be borrowed from private lending agencies and others. USDA reserves a 

sufficient amount of its borrowing authority to purchase, at any time, all notes and other 

obligations evidencing loans made by agencies and others. All bonds, notes, debentures, and 

similar obligations issued by the Department are subject to approval by the Secretary of the 

Treasury. Reservation of borrowing authority for these purposes has not been required for 

many years.

Note 22: Available Borrowing Authority, End of Period

Available borrowing authority at September 30, 2016 was $41,349 million. 

Note 23: Apportionment Categories of Obligations Incurred: 

Direct vs. Reimbursable Obligations 

 

Note 24: Undelivered Orders at the End of the Period

Budgetary resources obligated for undelivered orders as of September 30, 2016 were 

$52,604 million.

Note 25: Permanent Indefinite Appropriations

USDA has permanent indefinite appropriations available to fund (1) subsidy costs incurred 

under credit reform programs, (2) certain costs of the crop insurance program, (3) certain 

commodity program costs, and (4) certain costs associated with FS programs. 

The permanent indefinite appropriations for credit reform are mainly available to finance any 

disbursements incurred under the liquidating accounts. These appropriations become available 

pursuant to standing provisions of law without further action by Congress after transmittal of 
156 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

the budget for the year involved. They are treated as permanent the first year they become 

available, as well as in succeeding years. However, they are not stated as specific amounts but 

are determined by specified variable factors, such as cash needs for liquidating accounts, and 

information about the actual performance of a cohort or estimated changes in future cash flows 

of the cohort in the program accounts. 

The permanent indefinite appropriation for the crop insurance program is used to cover 

premium subsidy, delivery expenses, losses in excess of premiums, and research and delivery 

costs.

The permanent indefinite appropriation for commodity program costs is used to encourage the 

exportation of agricultural commodities and products, to encourage domestic consumption of 

agricultural products by diverting them, and to reestablish farmers’ purchasing power by 

making payments in connection with the normal production of any agricultural commodity for 

domestic consumption. 

The permanent indefinite appropriation for FS programs is used to fund Recreation Fee 

Collection Costs, Brush Disposal, License programs, Smokey Bear and Woodsy Owl, 

Restoration of Forest Lands and Improvements, Roads and Trails for States, National Forest 

Fund, Timber Roads, Purchaser Elections, Timber Salvage Sales and Operations, and 

Maintenance of Quarters. Each of these permanent indefinite appropriations is funded by 

receipts made available by law and is available until expended.

Note 26: Legal Arrangements Affecting Use of Unobligated 

Balances

Unobligated budget authority is the difference between the obligated balance and the total 

unexpended balance. It represents that portion of the unexpended balance unencumbered by 

recorded obligations. Appropriations are provided on an annual, multi-year, and no-year basis. 

An appropriation expires on the last day of its period of availability and is no longer available 

for new obligations. Unobligated balances retain their fiscal-year identity in an expired account 

for an additional five fiscal years. The unobligated balance remains available to make 

legitimate obligation adjustments, i.e., to record previously unrecorded obligations and to make 

upward adjustments in previously underestimated obligations for five years. At the end of the 

fifth year, the authority is canceled. Thereafter, the authority is not available for any purpose. 

Any information about legal arrangements affecting the use of the unobligated balance of 

budget authority is specifically stated by program and fiscal year in the appropriation language 

or in the alternative provisions section at the end of the appropriations act. 
S ECT ION I I I OTHER INFORMATION 157 

Note 27: Explanation of Differences Between the SBR and the 

Budget of the U.S. Government

A comparison between the FY 2016 SBR and the FY 2016 actual numbers presented in the 

FY 2018 Budget cannot be performed as the FY 2018 Budget is not yet available. The FY 2018 

Budget is expected to be published in February 2017 and will be available from the U.S. 

Government Publishing Office. 

Note 28: Incidental Custodial Collections

Custodial collections represent collections on land leases for resource extraction, National 

Forest Fund receipts from the sale of timber and other forest products, miscellaneous general 

fund receipts such as collections on accounts receivable related to canceled year appropriations, 

civil monetary penalties and interest, and commercial fines and penalties. Custodial collection 

activities are considered immaterial and incidental to the mission of the Department.

 
158 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Note 29: Fiduciary Activities

Rural Housing Insurance Fund (RHIF) was established by Public Law 89-117 pursuant to 

section 517 of title V of the Housing Act of 1949, which authorized RD to collect escrow 

payments on behalf of new and existing Single Family Housing borrowers. Other fiduciary 

activities by RD include but are not limited to collections from borrowers, interest paid on 

escrow accounts, and payments to insurance agencies and taxing authorities. 

 

 
S ECT ION I I I OTHER INFORMATION 159 

Note 30: Reconciliation of Budgetary Resources Obligated to 

Net Cost of Operations 

Budgetary and proprietary accounting information are inherently different because of the types 

of information and the timing of their recognition. The reconciliation of budgetary resources 

obligated and the net cost of operations provides a link between budgetary and proprietary 

accounting information. It serves not only to explain how information on net obligations relates 

to the net cost of operations, but also to assure integrity between budgetary and proprietary 

accounting. 

Net obligations and the net cost of operations are different because (1) the net cost of 

operations may be financed by non-budgetary resources (e.g., imputed financing); (2) the 

budgetary and non-budgetary resources used may finance activities that are not components of 

the net cost of operations; and (3) the net cost of operations may contain components that do 

not use or generate resources in the current period.
160 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

 
S E C T I O N I I I O T H E R I N F O R M A T I O N 1 61 

Schedule of Spending

The Schedule of Spending (SOS) presents an overview of how and where agencies are 

spending (i.e., obligating) money for the reporting period. The data used to populate this 

schedule is the same underlying data used to populate the Statement of Budgetary Resources 

(SBR). The “Total Amounts Agreed to be Spent” line item of the SOS should reconcile to the 

“Obligations Incurred” line in the SBR. These amounts may not reconcile to USAspending.gov 

because the SOS and the website have different reporting requirements.

For the Year Ended September 30, 2016 ($ In Millions)

Non-budgetary

Credit Reform

Budgetary Financing Accounts

What Money is Available to Spend?

Total Resources $ 238,705 $ 33,562

Less Amount Available but Not Agreed to be Spent 18,136 11,477

Less Amount Not Available to be Spent 38,287 3,942

Total Amounts Agreed to be Spent 182,282 18,143

How was the Money Spent/Issued?

Assist Rural Communities to Create Prosperity so They Are

Self-Sustaining, Repopulating, and Economically Thriving:

Personnel Compensation and Benefits 2,157 -

Travel and transportation 8 0 -

Rent, communications, and utilities 176 -

Other contractual services 5,717 2,291

Supplies and materials 401 -

Equipment, land, and structures 4 2 -

Investments and loans 8,565 11,142

Grants, subsidies, and contributions 32,747 6

Insurance claims and indemnities 5,287 -

Interest, dividends, and refunds 119 4,050

Other 5 4 -

Total 55,345 17,489

Ensure Our National Forests and Private Working Lands Are Conserved,

Restored, and Made More Resilient to Climate Change, While

Enhancing Our Water Resources:

Personnel Compensation and Benefits 4,454 -

Travel and transportation 246 -

Rent, communications, and utilities 347 -

Other contractual services 3,340 6

Supplies and materials 280 -

Equipment, land, and structures 425 -

Investments and loans - 446

Grants, subsidies, and contributions 5,363 -

Insurance claims and indemnities 6 -

Interest, dividends, and refunds (8) 9 7

Other 265 -

Total 14,718 549

2016
1 62 U S D A F I S C A L Y E A R 2 0 1 6 A G E N C Y F I N A N C I A L R E P O R T

Schedule of Spending (continued)

For the Year Ended September 30, 2016 ($ In Millions)

Non-budgetary

Credit Reform

Budgetary Financing Accounts

Help America Promote Agricultural Production and Biotechnology

Exports as America Works to Increase Food Security:

Personnel Compensation and Benefits 178 -

Travel and transportation 8 -

Rent, communications, and utilities 1 5 -

Other contractual services 202 -

Supplies and materials 6 6 105

Equipment, land, and structures 1 1 -

Investments and loans - -

Grants, subsidies, and contributions 2,461 -

Insurance claims and indemnities 1 -

Interest, dividends, and refunds - -

Other 2 1 -

Total 2,963 105

Ensure that All of America's Children Have Access to Safe, 

Nutritious, and Balanced Meals:

Personnel Compensation and Benefits 2,249 -

Travel and transportation 125 -

Rent, communications, and utilities 148 -

Other contractual services 887 -

Supplies and materials 2,308 -

Equipment, land, and structures 7 5 -

Investments and loans - -

Grants, subsidies, and contributions 101,777 -

Insurance claims and indemnities 2 2 -

Interest, dividends, and refunds 1 -

Other 274 -

Total 107,866 -

Create a USDA for the 21st Century that is High Performing, 

Efficient, and Adaptable:

Personnel Compensation and Benefits 554 -

Travel and transportation 1 3 -

Rent, communications, and utilities 151 -

Other contractual services 591 -

Supplies and materials 9 -

Equipment, land, and structures 6 4 -

Investments and loans - -

Grants, subsidies, and contributions 9 -

Insurance claims and indemnities - -

Interest, dividends, and refunds - -

Other (1) -

Total 1,390 -

USDA Total 

Personnel Compensation and Benefits 9,592 -

Travel and transportation 472 -

Rent, communications, and utilities 837 -

Other contractual services 10,737 2,297

Supplies and materials 3,064 105

Equipment, land, and structures 617 -

Investments and loans 8,565 11,588

Grants, subsidies, and contributions 142,357 6

Insurance claims and indemnities 5,316 -

Interest, dividends, and refunds 112 4,147

Other 613 -

Total 182,282 18,143

Total Amounts Agreed to be Spent 182,282 18,143

Who did the Money go to?

Federal 11,951 5,909

Non-Federal 170,331 12,234

Total Amounts Agreed to be Spent $ 182,282 $ 18,143
S ECT ION I I I OTHER INFORMATION 163 

Response to Management Challenges

The Reports Consolidation Act of 2000 requires the U.S. Department of Agriculture’s (USDA) 

Office of Inspector General (OIG) to report annually on the most serious management 

challenges USDA and its agencies face. To identify these Departmental challenges, OIG 

examined previously issued audit reports where corrective actions have yet to be taken. OIG

also assessed ongoing investigative and audit work to ascertain significant vulnerabilities, and 

analyzed new programs and activities that could pose significant challenges due to their range 

and complexity.

Annually, OIG assesses the previous year’s challenges to determine if those are still critical 

challenges; examines recently issued audit reports to identify critical issues that remain topical and 

where corrective action has not been satisfactorily implemented; identifies repeated inquiries or 

hotline trends in risk areas; assesses ongoing audit and investigative work to identify new issues; 

and analyzes new programs and activities that pose significant challenges due to size and 

complexity.

OIG reviewed the challenges cited in 2015, and concluded that they continue to be critical 

challenges for the Department. Therefore, OIG has not removed or added any challenges to this 

year’s report. However, in this year’s report, OIG added an analysis that measures the Department’s 

progress on implementing corrective actions to resolve each challenge. OIG identified the 

recommendations associated with each management challenge and quantified whether they 

accepted the corrective action or whether the agreed-to corrective action had been implemented, as 

of May 31, 2016.

The following narratives summarize:

• OIG-recognized management challenges;

• USDA’s fiscal year (FY) 2016 agency accomplishments; and 

• FY 2017 planned actions to address these management challenges.

Challenge 1: USDA Needs to Improve Oversight and 

Accountability for its Programs 

In Challenge 1, USDA, much like other agencies and departments throughout the Government, 

faces challenges in overseeing its many programs. USDA employs nearly 100,000 employees 

in 17 agencies and 18 staff offices; in total, these employees operate more than 300 programs 

that are responsible for $144 billion in spending per year. Overseeing these programs so every 
164 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

dollar spent accomplishes the results intended poses significant challenges to USDA program 

managers. 

USDA managers are responsible for the following: 1) establishing an effective internal control 

system, 2) ensuring that a culture of compliance with those controls exists, and 3) holding 

employees accountable for implementing those controls. Internal controls are the tools 

managers use to ensure programs achieve intended results efficiently and effectively; they 

provide for program integrity and proper stewardship of resources. Since systemic control 

flaws can yield systemic program weaknesses—e.g., unrealized goals—managers must 

continuously assess and improve their internal control systems. If management does not 

emphasize those controls, Federal programs will not function as intended. 

OIG DETERMINED THE FOLLOWING: 

• The Animal and Plant Health Inspection Service (APHIS), Agricultural Research Service 

(ARS), and the Food Safety and Inspection Service (FSIS) need to more effectively and 

efficiently manage limited resources for addressing antibiotic resistance issues relating to 

funding and staffing needs. The Department itself does not have a well-developed central 

communication platform for distributing a unified, scientifically based, antibiotic 

resistance message;

• The Natural Resources Conservation Service (NRCS) did not have sufficient controls in 

place to evaluate official determinations or verify data, which led to payments of over 

$43 million for conservation easements on land whose values were not sufficiently 

supported by documented, transparent decisions; 

• NRCS’ control environment did not include a system of management accountability to 

ensure land values for NRCS’ conservation easement programs were properly supported 

and accurately reported before payments were made;

• NRCS did not maintain data for easement payments in a format that would allow the 

agency to monitor program performance. NRCS should reassess its oversight and 

evaluation process to cover key program requirements and ensure fair and compliant land 

valuations; 

• The Risk Management Agency’s (RMA) national office did not fully use the compliance 

review system’s capabilities to identify key performance indicators and generate reports to 

monitor and oversee compliance activities; and 

• APHIS can do more to strengthen controls intended to prevent the environmental release 

of genetically engineered (GE) organisms.
S ECT ION I I I OTHER INFORMATION 165 

CORRECTIVE ACTIONS:

The USDA’s Office of the Chief Scientist and the USDA One Health Joint Working Group 

Co-chairs (APHIS, ARS, and FSIS) hosted a departmental strategic planning meeting for 

USDA agencies addresssing Combating Antibiotic Resistant Bacteria (CARB) National Action 

Plan (NAP) goals. A departmental antimicrobial resistance (AMR) strategic planning meeting 

will occur annually so that antibiotic resistance priorities for achieving NAP goals are 

coordinated before agencies submit their budgets. 

The USDA One Health Joint Working Group Co-chairs, senior executives, and Budget Officers 

from USDA agencies developed a plan to meet annually with the Office of Budget and Program 

Analysis (OBPA) to develop budget language to show intradepartmental agency dependencies 

addressing CARB NAP goals. All AMR budget requests will be harmonized and further 

developed with USDA AMR leadership and OBPA for a strategic budget request that represents 

the entire Department.

The USDA One Health Joint Working Group established a communications AMR sub-group, 

and by March 31, 2017, the new communication working group will develop, for the USDA 

Office of Communications, a comprehensive strategic communications plan for providing 

antibiotic resistance information to stakeholders and to the general public. The plan will 

promote the development of a more robust antibiotic resistance web site that will explore the 

use of other social media outlets, address the needed resources, convey a unified and 

scientifically based message to the public and to all interested parties, and include matters

regarding antibiotic resistance and the gathering of stakeholders’ data.

Natural Resources Conservation Service

NRCS updated its Agriculture Conservation Easement Program (ACEP) manual and issued 

National instructions on guidance for state implementation of easement acquisition and 

enhanced internal controls prior to obligation, payment, and closing to adequately address 

improper payments of the $43 million on land whose values were previously not sufficiently 

supported by documented, transparent decisions. NRCS is currently conducting compliance 

reviews and anticipates completing reviews by October 30, 2016. 

NRCS will continue to work with OIG to determine the corrective actions needed to establish 

the value of the two questioned easements in Kentucky, either by (1) using the cooperating 

entity’s original appraisals, or (2) by obtaining new appraisals for those conservation easements 

and working with the State Conservationist and cooperating entity to recover improper 

payments, if necessary. 
166 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Risk Management Agency

RMA completed the business process review, development, documentation, and 

implementation of a formal strategy for fully utilizing its databases to improve RMA’s internal 

oversight and to increase consistency throughout its compliance case management process. 

This includes the identification of key performance indicators and generation of reports to 

monitor and oversee compliance activities.

RMA performs quarterly peer reviews of its data to enhance oversight of the case management 

process. During its quarterly peer reviews, RMA crosschecks several databases and verifies that 

cases are valid, adequately documented, and closed appropriately. RMA provided the Office of 

the Chief Financial Officer (OCFO) operating procedures for performing quarterly peer 

reviews and documentation supporting the development of key performance indicators that 

RMA will use to provide effective case management oversight. RMA also revised the 

Compliance Manual, including the method for enforcing its use. 

In addition, RMA will provide documentation of consultation with Approved Insurance 

Providers for establishing and documenting reasonable expectations of receiving water. RMA 

will develop policy and/or procedures used to supplement the current guidance.

Animal and Plant Health Inspection Service

In order to prevent the unauthorized dissemination or persistence in the environment of a 

regulated Genetically Engineered (GE) organism after APHIS has issued an authorization for 

an activity involving the regulated GE organism, APHIS will aim to accomplish the following 

in fiscal year (FY) 2017: 

• Develop and implement policies which that require APHIS officials to analyze reports to 

(1) ensure that all release sites are included, (2) identify discrepancies, and (3) require 

immediate resolution; 

• Develop and implement a process, within the new information systems, to document 

report due dates, as well as track, search, and monitor the status of progress reports. In 

addition, include a process to refer report discrepancies, as well as missing and late 

reports, to the APHIS compliance branch; 

• Until a new information system is fully operational, enter into e-Permits the data for all 

progress reports received via mail, email, etc.; this method will allow APHIS officials to 

track and search all received reports;

• Develop and implement a detailed selection policy for permits for inspection that discuss 

which risk factors will be evaluated and how risk factors will be evaluated. The policy 

should also require staff to document the monthly process for permit selections; 
S ECT ION I I I OTHER INFORMATION 167 

• Update the compliance database to allow for more than one category to be selected in 

order to identify the compliance incident; 

• Incorporate compliance reporting and tracking of all incidents in the information system 

being developed; 

• Share the compliance database with the biotechnologists responsible for the review and 

approval of applications, so that compliance history can be reviewed during the approval 

process;

• Develop and implement procedures for the approval process for notification and permits 

which include reviewing the compliance issues against the organization and the 

responsible party; 

• Develop and implement specific policies and procedures for the retention and 

maintenance of all petition documents for each step of the petition process; 

• Develop and implement a Petition Tracking System that identifies each step in the petition 

process in order to allow effective monitoring of the process; and 

• Comply with the regulatory timeframes or revise the regulation to remove the 180-day 

petition decision timeframe in order to reflect the current timeframes required for the new 

review process. 

Challenge 2: Information Technology Security Needs 

Continuing Improvement

In Challenge 2, USDA must efficiently manage vast amounts of data to accomplish its mission 

of providing benefits and services to the American public, including critical information such 

as agricultural statistics that drive domestic and global markets and data from inspection 

systems that help ensure food safety. Not only must USDA employees be able to access, use, 

and communicate this information, but members of the public apply for and access many 

USDA program benefits and other services online, which can require the transfer of personally 

identifiable information through these online portals. USDA therefore faces the critical 

responsibility of protecting the security, confidentiality, and integrity of its IT infrastructure.

Since the passage of the Federal Information Security Management Act of 2002 (FISMA), OIG 

has annually reviewed the Department’s cybersecurity initiatives, including those that shield IT 

equipment and systems from theft, attack, and intrusion. OIG reviews have consistently found 

that the Department faces great challenges in complying with FISMA. Our most recent review 

found that the Office of the Chief Information Officer (OCIO) is taking positive steps to 
168 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

improve its security posture. For example, OCIO has improved its Incident Response and Risk 

Management Framework. 

OIG DETERMINED THE FOLLOWING: 

The Department has not: 

• Implemented all of the requirements for security training, remote access management, and 

contingency planning; 

• Performed an assessment of the skills, knowledge, and resources needed to effectively 

implement an Information Security Continuous Monitoring (ISCM) Strategic Plan; 

• Defined or formally documented within the ISCM Strategic Plan the organization’s 

process for collecting and considering lessons learned to improve ISCM processes; 

• Developed policies and procedures for remote access and teleworking that comply with 

National Institute of Standards and Technology (NIST) guidance; and 

• Examined another aspect of the Department’s IT security through a contracted assessment 

of the implementation of the Continuous Diagnostics and Mitigation (CDM) program, 

which Congress established to provide adequate, risk-based, cost-effective cybersecurity, 

and more efficiently allocate cybersecurity resources. The contractor’s report documented 

concerns and recommendations for actions necessary to increase the probability of success 

for USDA’s CDM program. 

USDA must not only be responsive to IT security needs, but must be vigilant to the potential 

for misuse of the Department’s IT systems.

CORRECTIVE ACTIONS:

Office of the Chief Information Officer

During FY 2016, OCIO began providing a bi-weekly FISMA Cyber Security Scorecard to the 

agency Chief Information Officers (CIO). The data point and status included the following: 

personal identity verification (PIV) implementation for Logical Access Control, open/late plans 

of action and milestones (POA&Ms), authority to operate (ATO) status, and vulnerability 

remediation and patching status. OCIO has fully implemented Continuous Assessment and 

Authorization within USDA enterprise in accordance with NIST Special Publication (SP) 800-

37. OCIO implemented a Continuous Monitoring and Life Cycle Management process for IT 

Security-related Departmental Regulations (DR). Currently, there are 28 policies identified for 

creation, revision, or update. OCIO published DR 3571-001 “Information System Contingency 
S ECT ION I I I OTHER INFORMATION 169 

Planning and Disaster Recovery Planning” and DR 3300-015 “Secure Communication 

Systems.”

As part of OCIO’s ongoing program oversight activities during FY 2017, OCIO will address 

the issues of agency compliance with security training, remote access management, and 

contingency planning by: 

• Addressing these program areas as specific agenda items for the CIO council and the 

Information Security System Council (ISSC) meetings;

• Require and identify specialized role-based training in these program areas for the 

information systems security program managers (ISSPMs); and

• Improve monitoring and configuration of systems, authorized remote access.

OCIO plans to update the Information Security Continuous Monitoring (ISCM) Strategic Plan 

to address gaps by performing an assessment of the skills, knowledge, and resources needed to 

effectively implement the ISCM Strategic Plan. OCIO will conduct a gap analysis between 

current program operation resources and optimum ISCM program resource requirements; 

document a gap analysis between current and optimum workforce resources, skills, and 

knowledge levels; and coordinate with the AgLearn Program Office to evaluate current courses 

available in IT and IT security to identify potential course additions that will support and 

enhance ISCM’s skills and talent base. 

OCIO reviewed and began updating the ISCM Strategic Plan in FY 2016 to reflect changes in 

implementation resulting from the U.S. Department of Homeland Security’s (DHS) Continuous 

Diagnostics and Mitigation (CDM) Program. At this time, DHS has not fully defined their 

technology suite or processes for the CDM Program. In the interim, USDA will establish an 

ISCM Tiger Team to work collaboratively with the Agriculture Security Operations Center 

(ASOC) Security Operations Division to define the strategic roadmap for enterprise-wide 

implementation of ISCM. In addition, OCIO will hold quarterly ISCM Tiger Team meetings to 

analyze, discuss, and document the current status of ISCM implementation; review the strategic 

ISCM roadmap; and assess milestone status to ensure continuing alignment to the Strategic 

Plan. OCIO will implement a web site to document ISCM goals, milestones, and 

communications. 

OCIO will develop policies and procedures for remote access and teleworking that comply with 

NIST guidance. As part of the process, OCIO will conduct a gap analysis between existing 

USDA DRs, NIST, and the Office of Management and Budget (OMB) guidance on secure 

remote access and teleworking, and, based on the analysis, determine if a formal DR is needed.

OCIO continues to aggressively coordinate with DHS and contractors to ensure the success of 

USDA’s implementation of the Continuous Diagnostics and Monitoring Program. Detailed 
170 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

analyses of the contractor’s progress reports by OCIO personnel have identified several 

inaccuracies. OCIO is taking actions to ensure accurate documentation of USDA’s baseline; 

ensure accurate reporting by contractors of critical path elements, risks and accomplishments, 

and status of milestones; and ensure System Development Life Cycle (SDLC) and Risk 

Management Framework (RMF) milestones are achieved on time to achieve successful 

implementation of CDM and provide ATO prior to operations of CDM equipment at USDA. 

Challenge 3: USDA Needs to Strengthen Program Performance 

and Performance Measures

In Challenge 3, USDA manages over 300 programs that provide a variety of services to the 

American public, such as grants and loans for rural communities, food assistance for schools 

and private citizens, and research and technical assistance for environmental projects. This 

diverse portfolio of programs means that, for the Department to be a diligent steward of Federal 

funds, USDA must have well-designed programs. However, designing, developing, and 

implementing programs that reliably achieve their intended results has been a recurring 

challenge for the Department. Most recently, OIG has found that agencies provide payments to 

recipients without adequate reviews or controls to ensure that funds provided are used to 

accomplish the program’s goals.

The Government Performance and Modernization Act of 2010 set new requirements for agency 

reports, including nature and frequency of submission. In keeping with the law, an agency 

should have procedures in place that allow it to regularly review a program’s performance, and 

then compile reports that allow it to measure that performance. These reports enable 

policymakers to fairly evaluate programs and thus make well-informed funding decisions. 

OIG DETERMINED THE FOLLOWING: 

• OIG’s audit of NRCS’ and the Farm Service Agency’s (FSA) processes for the 

identification and proper disposition of compliance violations related to the Highly 

Erodible Land (HEL) and Wetlands Conservation (WC) provisions of the Food Security 

Act of 1985 found problems with the data universe the agencies rely on for conducting 

these compliance reviews;

• NRCS cannot effectively verify that the results of its random sample reviews accurately 

reflect producer compliance with HEL and WC provisions; 

• NRCS compliance reviewers relied on inconsistent or vague guidance when evaluating 

producers’ compliance with HEL and WC provisions, which increases the potential for 

insufficient compliance determinations; 
S ECT ION I I I OTHER INFORMATION 171 

• NRCS is ill-prepared to evaluate the performance and success of programs subject to the 

HEL and WC provisions of the Food Security Act; 

• Rural Business-Cooperative Service (RBS) exhibited problems with performance 

measures when OIG conducted an audit of the agency’s Rural Energy for America 

Program (REAP);

• The RBS program’s award and project performance data were unreliable because of 

incomplete or inaccurate data and unsubmitted performance reports;

• RBS did not monitor the program to ensure grant award integrity; and 

• RBS needs to improve oversight and internal controls so that it can accurately measure the 

REAP performance and provide a successful energy program for rural communities. 

CORRECTIVE ACTIONS:

Natural Resources Conservation Service

A Memorandum of Understanding was developed and approved by the three partner agencies, 

NRCS, FSA, and RMA, to timely and accurately generate a universe of tracts subject to HEL 

and WC provisions. NRCS, FSA, and RMA established an interagency working group to define 

the universe, and developed and implemented an effective methodology for the 2016 

compliance reviews. 

In FY 2017 NRCS will aim to: 

• Update the section of the National Food Security Act Manual (NFSAM) with the revisions 

that detail what constitutes acceptable levels of treatment required to stabilize all types of 

gullies, which include both ephemeral and classical;

• Clarify national guidance to ensure that to the greatest extent possible, representative areas 

most susceptible to gully erosion are reviewed and documented, facilitate subsequent year 

reviews of any compliance issues noted, and provide clarification on the required review 

of tracts for employees;

• Clarify national guidance to ensure quality control reviews are performed in a consistent 

and effective manner and can facilitate a validation of compliance determinations;

• Revise national guidance regarding the roles and responsibilities of the compliance 

reviewers while performing the wetland compliance reviews; and

• Establish additional quality control checks to ensure the sampled tracts are sufficient to 

assess compliance on a national level. Quality control checks will include a review of the 
172 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

process used to select future FSA data to ensure the process sufficiently includes all 

counties with agricultural tracts subject to compliance with the Food Security Act of 1985. 

The sampling process will ensure that only those tracts reviewed once in the past 2 years 

and found to be compliant will be excluded from the sample and that all tracts associated 

with the subject producer will not be excluded. 

Rural Business-Cooperative Service

The RBS Energy Division will consult with the Office of the General Counsel to determine and 

develop guidance on what “other available remedies” may be used to ensure recipient 

compliance with reporting requirements. 

The RBS Energy Division will develop standard operating procedures (SOP) for REAP and 

update the Guaranteed Loan System (GLS) manual to use GLS to track receipt of annual 

performance reports from recipients. Once the SOPs and the GLS manuals are completed, 

training will be conducted for State Office and field staff on the proper use of Routine 

Servicing Actions in GLS that can be used to establish and track annual performance reports. 

Creating SOPs for REAP and updating the GLS manual will be completed by December 31, 

2016. If funding allows, RBS proposes to conduct the in-person trainings early in FY 2017, 

which will be completed by March 31, 2017. The Webinars will be conducted and concluded 

by the end of FY 2017. 

The RBS Energy Division will also develop and implement performance report templates for 

the most common types of energy efficiency improvements projects, where a template is 

commensurate to project scope and complexity. This template will be made available to 

recipients by March 31, 2017. 

Challenge 4: USDA Needs to Strengthen Controls over 

Improper Payments and Financial Management

In Challenge 4, the Department’s annual financial reports provide the public, Congress, and the 

President with information about the nearly $144 billion spent on public services every year. 

These reports account for USDA’s costs and revenues, assets and liabilities, and other 

information, such as improper payments. It is imperative that these reports are accurate and 

timely so that USDA’s financial management is transparent. However, USDA continues to fall 

short of full compliance with Federal requirements for improper payments and needs to address 

control issues in some component agencies in order to resolve ongoing problems with financial 

management. 
S ECT ION I I I OTHER INFORMATION 173 

OIG DETERMINED THE FOLLOWING: 

• USDA did not comply with the Improper Payments Elimination and Recovery Act 

(IPERA); 

• There were instances of inaccuracy or untimely submissions of reporting high-dollar 

overpayments, and the Department itself continued to submit its signed quarterly reports 

after the required date. Although OIG generally found these errors to be minor, OIG 

recommended continued vigilance to prevent and eliminate reporting errors, deficiencies, 

and delays; 

• For FY 2015 the Commodity Credit Corporation (CCC) and NRCS received a disclaimer 

of opinion on their financial statements; and 

• USDA’s consolidated financial statement audit has reported the same two material

weaknesses related to internal controls over financial reporting: improvements are needed 

in overall financial management, and improvements are needed in the overall information 

technology security program. 

CORRECTIVE ACTIONS:

Department-wide

OCFO worked with RMA to send its 2017 Improper Payment Information Act Measurement 

Plan to OMB and OIG for review. The Plan brings RMA’s sampling methodology into a valid 

statistical sample in accordance with OMB Circular A-123. Improved internal controls 

guidance and the template were sent out to agencies in the first quarter in FY 2016. FY 2016 

Accountability, Infrastructure, Barriers, and Other Comment Reporting; Corrective Action Plan 

guidance; and a Risk Assessment Review Checklist were issued. Risk assessments were mostly 

completed in the third quarter. The improper payment section of the Agency Financial Report 

was completed in the fourth quarter. Plans to bring programs non-compliant with IPERA for 

one year were sent to Congress in the fourth quarter. Half of USDA’s High Dollar reporting 

was completed on time. Almost all USDA programs implemented recovery audit programs or 

received an OMB approved waiver in the second half of FY 2016. Recoveries of improper 

payments continued to increase in FY 2016. 

The Department will continue to cooperate with OIG on their improper payment audits and will

strive to assist USDA agencies in becoming compliant with IPERA. OCFO will issue guidance 

for the implementation of “Do Not Pay” in the first quarter of FY 2017. USDA will strengthen 

the risk assessment process by utilizing the OMB Circular A-123 testing method and analyzing 

the results to determine susceptibility of a program to significant improper payments. Guidance 

will be issued in the first quarter with implementation in the third quarter. USDA will improve 
174 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

the speed and frequency of the recovery audit distribution process in FY 2017. Finally, USDA 

will issue plans to bring programs non-compliant with IPERA for one year and will send these 

plans to Congress in the fourth quarter.

Commodity Credit Corporation

During FY 2016, CCC:

• Completed the Agriculture Risk Coverage (ARC)/Price Loss Coverage (PLC) software 

and released obligating Program Year 2014 and future contracts at a transactional level 

and properly sequestered funds; 

• Completed the Commodity Loan Processing System (CLPS) and released obligating loan 

Crop Year 2015 and future applications at the transactional level;

• Completed the Margin Dairy Protection Program software and released obligating 

Program Year 2016 and future contracts at the transactional level;

• Closed out all activity on the IBM AS400/S36 platform hosting county office application; 

• Completed the Phase II Direct Loan System (DLS) for Farm Storage Facility Loans 

(FSFL) software that was released and replaced the Core Accounting System (CORE) 

Budget Tables with the real-time obligations functionality and the proper obligation 

liquidations FSFL loan closing (June 2016), regardless of the cohort year; 

• Completed the Cotton Ginning Cost Share Program software and released obligating 

Program Year 2016 contracts at the transactional level; and

• Designed and implemented processes, procedures, and effective controls related to 

significant accounting estimates. This includes a Business Portfolio Manual (BPM) 

process for each major CCC program to supplement the existing CCC Program Financial 

Manual (PFM) process.

In FY 2017, CCC will continue to modernize FSA’s systems and become substantially 

compliant with the Financial Reporting and Funds Control/Obligation Requirements related to 

obligations at the transactional level. The following programs are planned to be in development 

phase for obligations at the transactional level: 

• Non-Insured Crop Disaster Assistance Program (NAP)

• Livestock Indemnity Program (LIP) 

• Livestock Forage Disaster Assistance Program (LFP)
S ECT ION I I I OTHER INFORMATION 175 

CCC will also:

• Design and implement processes, procedures, and effective controls related to significant 

accounting estimates to ensure personnel preparing and/or utilizing budgetary and/or 

proprietary estimates are qualified, CCC will conduct workshop for staff and managers to 

ensure competency in identifying the need for preparing, supporting, validating, 

reviewing, and recording accounting estimates;

• Implement processes, procedures, and effective controls to enable the timely preparation 

of financial statements and sufficient evidential matter to support accounting transactions 

leveraging existing OMB Circular A-123, Appendix A; 

• Implement a corrective action plan, “Maintaining, Controlling and Monitoring the CORE 

General Ledger (reconciliations)”; and expand the tie-point analysis process to include 

additional training and workshops to provide expert assistance with reconciliations, trial 

balance analytics, clean-up projects, abnormal balances, and variances; and 

• Develop effective information and communication processes to ensure that policies and 

procedures related to programs or events that may give rise to the recognition of 

accounting transactions are consistently communicated and applied throughout the agency 

and that technical accounting issues are identified, analyzed, and resolved in a timely 

manner. SOPs are being developed for BPM’s to include identification of applicable 

programs, annual review of existing BPMs, assessment of new applicable programs, BPM 

template updates, and preparation. 

Natural Resources Conservation Service

During FY 2016, NRCS completed its annual Improper Payment testing and reporting for 

FY 2015. NRCS sampled payments that evaluated actions taken to ensure that they were 

adequate to address the requirements of IPERA. 

In FY 2017, NRCS will: 

• Monitor activity in accordance with the U.S. Standard General Ledger (USSGL) 4871 and 

4881 accounts to ensure that invalid upward and downward adjustments are identified and 

corrected in a timely manner and that balances are appropriate;

• Monitor open obligations (USSGL accounts 4801 and 4802) to ensure that they are 

recorded in the appropriate period and liquidated in a timely manner; 

• Provide adequate training to personnel related to the documentation requirements for 

support; 
176 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

• Assist personnel producing data extracts to determine the completeness and accuracy of 

such extracts; 

• Ensure data extracts are reviewed by process owners regularly for errors; 

• Establish a closing schedule for period 13 transactions in order to avoid any delays in 

producing such extracts; 

• Establish policies/guidelines that assist accounting personnel in properly determining the 

type of sufficient supporting documentation; 

• Continue to develop and implement internal controls and policies and procedures to 

correct or mitigate the risks and potential misstatements within the agency; 

• Enhance policy and control procedures for the accuracy and consistent application of 

period end accruals; 

• Provide adequate training to personnel relating to the new accrual policy; 

• Provide guidance and/or training to employees on policies and procedures to ensure 

purchase transactions have adequate supporting documentation (e.g., purchase 

requisitions, purchase orders, invoices, etc.) to determine if they are accurate and exist;

• Enhance monitoring controls over payment approvals to determine whether appropriate 

documentation is provided to support the disbursement; 

• Enhance procedures to determine if accrued expenses are complete, accurate, and exist at 

quarter end and are properly supported; 

• Implement management’s plan to develop a new process for administering the remaining 

funds for the Grasslands Reserve Program (GRP) in FY 2016; 

• Request and obtain supporting documentation for prior services rendered by FSA to 

NRCS; 

• Review and reconcile the supporting documentation to determine and mutually agree upon 

the amount of services that have been rendered by FSA to NRCS; 

• Make and record any necessary corresponding adjustments to fund balance with the 

U.S. Department of the Treasury (Treasury), accounts receivable, accounts payable, and 

cumulative results of operations balances; 

• Obtain sufficient supporting documentation for the remaining GRP obligations recorded 

in the general ledger at the end of FY 2015; and 
S ECT ION I I I OTHER INFORMATION 177 

• Review existing policies and procedures to ensure that they are adequate to address the 

requirements of the Improper Payments Elimination and Recovery Improvement Act 

(IPERIA) and provide guidance and/or training to employees and outside entities 

regarding the SAM.gov registration requirements. 

Challenge 5: USDA Needs to Improve Outreach Efforts

In Challenge 5, USDA has emphasized its efforts to improve outreach to new and beginning 

farmers and ranchers, local and regional food producers, minorities, women, and veterans. As 

part of those efforts, the Secretary of Agriculture has reiterated the importance of civil rights, 

stressing that significant progress is to be made in working with communities in addressing past 

civil rights issues. Due to a history of public attention concerning how USDA has treated 

members of socially disadvantaged groups, the Department faces challenges in earning those 

groups’ trust.

The Food, Conservation, and Energy Act of 2008 directed that all pending claims and class 

actions (for example, Pigford v. Glickman, Garcia v. Vilsack, and Love v. Vilsack) brought 

against USDA by socially disadvantaged farmers or ranchers, including Hispanics and women, 

based on racial, ethnic, or gender discrimination in farm program participation, be resolved in 

an expeditious and just manner. OIG continues to evaluate the Department’s progress toward 

fulfilling the Congressional mandate.

OIG DETERMINED THE FOLLOWING: 

• FSA could not demonstrate that it successfully reached out to some targeted audiences, 

such as specific underserved groups and veterans. The low percentage of participation by 

some targeted groups suggests FSA needs to increase its outreach to those underserved 

groups; and 

• FSA needs to develop and implement controls and guidance to achieve consistent 

administration of Microloans, periodically evaluate outreach activities to ensure effective 

marketing to target groups, and develop an accurate measurement of success for its 

outreach program.

CORRECTIVE ACTIONS:

Farm Service Agency

The system coding for the Microloan enhancement has been completed through the 

development phase in the Direct Loan System. The enhancement is currently in the testing 

phase. Once deployed, this initiative will help achieve consistent application and 
178 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

documentation of Microloan program security requirements. Implementation was completed by 

September 30, 2016. 

FSA has increased the National Outreach Staff. Each staffer has jurisdiction over outreach 

areas to support field training, provide educational materials, and track outreach activities. FSA 

initiated a software enhancement to the Outreach Tracking and Information System (OTIS) to 

improve specific program and targeted underserved tracking. FSA will review State reports 

monthly in OTIS and provide quarterly progress reviews to the Administrator and State 

Executive Directors. 

In FY 2016, in an effort to improve outreach efforts to current and prospected targeted 

underserved farmers and ranchers, FSA entered into over 50 cooperative agreements with local, 

state, and national partners in over 28 states to conduct outreach, technical, and financial 

assistance to underserved communities. These outreach partnerships will result in measurable 

outreach activities to communities that FSA traditionally has not been able to reach. FSA is 

currently reviewing additional cooperative agreement proposals submitted by organizations in 

Round II to be funded for underserved outreach assistance later this fall. 

FSA State offices have conducted informational sessions with nonprofits and organizations 

who have received funding from USDA and USDA agencies in order to conduct outreach with 

underserved communities. These sessions have introduced trusted organizations to FSA 

program and staff information and have resulted in collaborative outreach meetings in 

underserved communities. 

FSA continues to evaluate an effective means of data collection that may greater enable the 

agency to track customer traffic with respect to outreach activities. Specifically, FSA plans to 

collect basic customer information, such as how they learned of an FSA program, by 

incorporating a multi-pick question into the Receipt for Service log as an efficient way to log 

the customer’s reason for seeking assistance. Discussions continue between FSA and OMB 

regarding the approval requirements associated with the Paperwork Reduction Act. 

Challenge 6: Food Safety Inspections Need Improved Controls 

In Challenge 6, As the Nation’s gatekeeper for safe and wholesome food products, the Food 

Safety and Inspection Service (FSIS) performs a variety of functions. The agency conducts 

inspections of commercial meat, poultry, and egg products. Along with these inspections, FSIS 

coordinates with the Food and Drug Administration to monitor levels of antibiotic-resistant 

bacteria present in slaughtered swine, cattle, and poultry. FSIS also supports the interagency 

National Residue Program to identify, rank, and test for chemical contaminants, including 

antibiotics, in meat, poultry, and egg products. 
S ECT ION I I I OTHER INFORMATION 179 

Given concerns about increasing levels of antibiotic-resistant bacteria in food animals, the 

President issued an executive order to address the issue of antibiotic microbial resistance. This 

executive order resulted in the development of a multi-agency National Action Plan for 

Combating Antibiotic Resistance Bacteria. FSIS, together with ARS and APHIS, is responsible 

for facilitating USDA’s response to certain areas in four goals outlined in the National Action 

Plan: surveillance, stewardship, research, and international coordination. Of particular 

relevance to food safety inspection, the National Action Plan calls for targeted surveillance for 

levels of antibiotic-resistant bacteria in food throughout the production chain. Further 

discussion about this challenge can be found in Challenge 1. 

OIG DETERMINED THE FOLLOWING: 

• FSIS needs to make antibiotic microbial resistance activities a priority in order to 

effectively address the issue and meet executive expectations and actions outlined in the 

National Action Plan.

CORRECTIVE ACTIONS: 

Food Safety and Inspection Service

FSIS’ 2017–2021 Strategic Plan, issued the week of October 17, 2016, addresses antimicrobial 

resistance (AMR). Specifically, its Goal 2: Modernize Inspection Systems, Policies, and the 

Use of Scientific Approaches includes an Objective (2.1.1) entitled Modernize Scientific 

Techniques and Inspection Procedures. This Objective includes a focus on the use of whole 

genome sequencing (WGS), and references, among other approaches, because its use will 

facilitate an in-depth understanding of harmful traits, such as bacterial virulence and AMR. 

FSIS also indicates in this Objective that the agency will share what it learns about the harmful 

traits of pathogens with collaborating partners in order to track and potentially prevent these 

pathogens from adulterating food throughout the farm to fork continuum, as well as develop a 

more in-depth understanding of AMR in bacteria and further help FSIS, APHIS, the Center for 

Disease and Control, and ARS efforts to protect the effectiveness of antibiotics for the U.S. 

population and animal agriculture, including collaborating through the National Antimicrobial 

Resistance Monitoring System for Enteric Bacteria (NARMS). Specific steps FSIS indicates it 

will take in this Plan include continuing to provide data from pathogen sampling it conducts to 

Federal partners; participating in pilot studies, including through partner collaborations; and 

initially identifying the appropriate technologies or tools to better understand the movement of 

AMR along the farm to fork continuum. 

FSIS’ performance measurement framework includes increasing the percentage of all isolates that 

whole genome sequencing sampling generates being subject to FSIS to 100 percent by the end of 

FY 2019.
180 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Challenge 7: FNS Needs to Strengthen SNAP Management 

Controls 

OIG highlights a major USDA program in Challenge 7. As the largest program within USDA 

and one of the largest programs in the Federal Government, the Supplemental Nutrition 

Assistance Program (SNAP) presents a unique challenge for program managers. Administered 

by the Food and Nutrition Service (FNS), SNAP provided monthly food assistance for nearly 

46 million low-income individuals in FY 2015 and disbursed almost $70 billion in benefits that 

year. From 2007 to 2015, program participation grew by 73.9 percent (although participation 

has trended down in recent years). Given SNAP’s size and significance, fraud, waste, and abuse 

are critical concerns. The potential exists for billions of dollars of taxpayer-funded assistance 

not to be delivered or used as intended. OIG works to combat these problems through 

investigations into fraudulent activities by retailers and program participants. OIG also 

conducts audits designed to identify waste and abuse by program administrators and improve 

FNS’ controls over the program. 

OIG DETERMINED THE FOLLOWING: 

• States weakened the quality control (QC) process by using third-party consultants and 

error-review committees to mitigate individual QC-identified errors rather than improving 

eligibility determinations;

• State QC staff treated error cases non-uniformly; 

• FNS’ two-tier QC process is vulnerable to State abuse due to conflicting interests between 

(1) accurately reporting true error rates and incurring penalties, or (2) mitigating errors and 

receiving a bonus for exceeding standards; 

• States’ QC reviews did not meet SNAP regulatory requirements, and Federal oversight of the 

States’ QC, was inadequate;

• As one of the five States OIG reviewed, New Hampshire did not enter Social Security 

numbers (SSN) for every household member applying for SNAP benefits, as required; and 

• New Hampshire did not consistently notify households of the date SNAP benefits expire, 

which could have resulted in households not recertifying and thus having their benefits 

interrupted. 
S ECT ION I I I OTHER INFORMATION 18 1 

CORRECTIVE ACTIONS:

Food and Nutrition Service

FNS conducted monitoring reviews of State QC processes to focus on the integrity of statistical 

reporting. In December 2014, FNS established new internal procedures to review State QC

processes to determine if any State reported error results were based on biased practices. Using 

State reported data, FNS selected seven States for focused QC integrity reviews: Connecticut, 

Florida, Missouri, New Jersey, Texas, Vermont, and Washington. On-site field work was 

completed between April 2015 and December 2015 for all seven States and included an 

analysis of the States’ use of third-party consultants. FNS found biased procedures, including 

mitigation of errors before reporting results to FNS. FNS also found a lack of documentation in 

State QC case files, as required by 7 Code of Federal Regulations (CFR) 273.2(f)(6) of the 

SNAP regulations, that failed to substantiate the conclusions reached by the State QC reviewer.

Due to these concerns, FNS selected a second cohort of 25 States for reviews between January 

and May 2016. Similar results were found in the second cohort. As a result of these findings, 

FNS decided to conduct intensive reviews of State QC operations of the remaining 20 State 

agencies that administer SNAP between July and September 2016. All 53 reviews were 

completed as of September 30, 2016. The information gathered in these reviews will inform the 

calculation of the FY2015 error rate, which will be announced by the end of December 2016. 

These FNS reviews are specifically designed to identify whether any States are operating 

biased QC practices, either intentionally or not intentionally, that may influence the validity of 

statistical reporting. Following each review, FNS issues a report to each State outlining any 

findings or operations that are contrary to regulatory or policy requirements. FNS requires 

States to develop a corrective action plan and submit their plan to FNS within 45 calendar days 

of receipt of the report. FNS then uses an internal quality assurance process to ensure corrective 

actions are implemented in order to prevent future occurrences. Additionally, FNS is evaluating 

administrative options available to address States that fail to come into compliance.

Even prior to issuance of the OIG report, FNS took steps to improve integrity by strengthening 

policies and limiting the use of third-party consultants. On September 23, 2015, FNS issued a 

letter to all States, reminding them of expectations regarding actions that may introduce bias

and that States are responsible for taking action to prevent the introduction of bias into State 

QC case review processes. FNS requested that each State Commissioner initiate an internal 

review of State procedures to ensure compliance with Federal regulations. Additionally, on 

January 20, 2016, FNS issued policy guidance that provides States with further direction 

regarding biased practices to avoid and restrict the use of error review committees to future 

corrective action planning only; remind States of the requirements to provide Federal reviewers 

with full access to certification files; and remind States of the requirements to refer all cases 
182 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

found in error to the State for restitution if an under-issuance occurred or for the establishment 

of a claim if an over-issuance occurred. 

As of the January 20, 2016, policy statement, States are required to notify FNS at least 30 days 

in advance of signing a contract with a third-party consultant to ensure the activities proposed 

adhere to Federal regulatory and policy requirements. Furthermore, States are required to 

provide all deliverables and training materials created by a third-party consultant to FNS. These 

procedures are necessary to ensure that States follow Federal regulations and policies for 

documenting and reporting errors to FNS while working with third-party consultants. 

Furthermore, on September 30, 2016, FNS released a revised QC policy handbook, as well as a 

new training curriculum for all Federal and State QC reviewers. 

The revised policy handbook is in alignment with recommendations from OIG and the results 

of our own reviews. The handbook:

• Provides a definition of bias. Explains that the same policy must be applied to all cases 

regardless of whether or not it results in an error finding. 

• Clarifies verification requirements and what can be used as acceptable verification of 

household circumstances. 

• Revises existing policy to clarify the requirements for State and Federal reviewers to 

independently verify information; 

• Includes greater emphasis on the importance of and need for verification and 

documentation requirements in the files. 

• Notes that review is required for certain prohibitions that would prevent an individual or 

the entire household from being considered categorically eligible for SNAP. 

• Clarifies how to calculate income for simplified reporting households to better align with 

simplified reporting regulations and address a concern from the OIG audit. 

FNS will continue to take action during FY 2017 to strengthen the SNAP error rate process. 

FNS’ planned actions include: 

• Conduct a cost/benefit analysis and pilot of a one-tier QC process;

• Enhance the QC management evaluation review modules based on information learned in 

the reviews described in the corrective actions taken by FNS in FY 2016; 

• Use the new training curriculum to train all Federal and State reviewers in proper policy 

and procedures in order to strengthen the quality and consistency of QC case reviews;
S ECT ION I I I OTHER INFORMATION 183 

• Revise existing policy to address OIG’s concerns regarding the implementation of the 

Comparison I and II calculations and issuing a timeline detailing these policy revisions.

Specific to Comparison II, FNS will ensure it is clear that the QC reviewer must examine 

whether regulatory time frames for reporting and acting on changes were met instead of 

applying a broad exclusionary time frame in instances where there is a variance caused by 

a reportable change; and

• Issue a detailed policy memo providing clarifying guidance on FNS’ Broad-Based 

Categorical Eligibility (BBCE) policies to ensure that States are applying the requirements 

as FNS intended. 

FNS is working closely with the State to implement the above corrective actions in FY 2017. 

The OIG USDA Management Challenges Report issued August 26, 2016, may be viewed in its 

entirety at the following web site: https://www.usda.gov/oig/webdocs/MgmtChallenges2016.pdf. 
184 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Summary of Financial Statement Audit and 

Management Assurances

Summary of Existing Material Weaknesses 

The U.S. Department of Agriculture’s (USDA) material weaknesses and financial system 

non-conformance, as related to management’s assurance for the Federal Managers’ Financial 

Integrity Act (FMFIA) and the certification for the Federal Financial Management 

Improvement Act (FFMIA), are listed in Exhibit 16 and Exhibit 17. 

Exhibit 16: Summary of Financial Statement Audit

Audit Opinion: Unmodified 2016 Consolidated Balance Sheet

Restatement: No

Material Weakness

Beginning 

Balance New Resolved Consolidated Reassessed

Ending 

Balance

Improvement 

Needed in Financial 

Management

1 N/A N/A N/A N/A 1 

Improvement 

Needed in 

Information 

Technology Security 

and Controls

1 N/A N/A N/A N/A 1 

TOTAL MATERIAL 

WEAKNESSES 2 N/A N/A N/A N/A 2 
S ECT ION I I I OTHER INFORMATION 185 

Exhibit 17: Summary of Management Assurances

Effectiveness of Internal Control Over Financial Reporting (FMFIA § 2)

Statement of Assurance: 

Material 

Weakness

Beginning 

Balance New Resolved Consolidated Reassessed

Ending 

Balance

Information 

Technology 1 N/A N/A N/A N/A 1 

Financial 

Management 1 N/A N/A N/A N/A 1 

TOTAL MATERIAL 

WEAKNESSES 2 N/A N/A N/A N/A 2 

Effectiveness of Internal Control Over Operations (FMFIA § 2)

Statement of Assurance:

Material 

Weakness

Beginning 

Balance New Resolved Consolidated Reassessed

Ending 

Balance

TOTAL MATERIAL 

WEAKNESSES 0 N/A N/A N/A N/A 0 

Conformance with Financial Management System Requirements (FMFIA § 4)

Statement of Assurance: Systems do not conform to financial management system requirements

Material Weakness

Beginning 

Balance New Resolved Consolidated Reassessed

Ending 

Balance

Funds Control 

Management 1 N/A N/A N/A N/A 1 

TOTAL NONCONFORMANCES 1 N/A N/A N/A N/A 1 

Compliance with Federal Financial Management Improvement Act (FFMIA)

Item Agency Auditor

1. System Requirements Lack of compliance noted Lack of compliance noted

2. Accounting Standards Lack of compliance noted Lack of compliance noted

3. U.S. Standard General

Ledger at Transaction Level

Lack of compliance noted Lack of compliance noted
186 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Improper Payments

The Improper Payments Information Act of 2002 (IPIA), as amended by the Improper 

Payments Elimination and Recovery Act of 2010 (IPERA), and the Improper Payments 

Elimination and Recovery Improvement Act of 2012 (IPERIA), require that executive agencies 

identify programs that may be susceptible to significant improper payments, estimate the 

annual amount of improper payments, and submit those estimates to Congress. A program with 

significant improper payments (or a high-risk program) has both a 1.5-percent improper 

payment rate and at least $10 million in improper payments, or exceeds $100 million dollars in 

improper payments. 

Fiscal Year 2016 Results

The U.S. Department of Agriculture’s (USDA) improper payment rate is 8.86 percent for fiscal 

year (FY) 2016, an increase from 5.70 percent for FY 2015. USDA’s FY 2016 improper 

payment results are as follows:

• Nine USDA high-risk programs appear to be fully compliant with the Improper Payments 

Elimination and Recovery Act of 2010 in FY 2016; 

• The Natural Resources Conservation Service (NRCS) reduced its improper payment rate 

from 22.04 percent to 2.38 percent for the NRCS Farm Security and Rural Investment Act 

Programs (FSRIP); 

• After 3 consecutive years of non-compliance, the NRCS is compliant for FSRIP; 

• USDA enrolled over 1,600 new users into the U.S. Department of the Treasury’ Do Not 

Pay Portal;

• USDA recovered approximately $0.43 million from its Supplier Credit Audit contractor, 

$9.42 million from USDA programs’ internal payment recapture audits, and 

$1.042 million outside of payment recapture audits; 

• USDA implemented multiple internal recovery audit programs; and 

• USDA distributed $9.81 million in recovered funds in accordance with IPERA. 

Risk Assessment

The Office of the Chief Financial Officer (OCFO) issued detailed guidance for the risk 

assessment process, including templates, and performed extensive reviews of draft risk 
S ECT ION I I I OTHER INFORMATION 187 

assessments. Programs with larger outlays were required to perform more detailed assessments 

than smaller programs. 

The risk assessment process for USDA’s largest programs consists of the following evaluation 

criteria: 

1. Amount of improper payments needed to meet the reporting standards;

2. Description of the program, including purpose and basic eligibility requirements; 

3. Definition of improper payments specific to the program; 

4. Program vulnerabilities linked to improper payments; 

5. Internal controls designed to offset the program vulnerabilities;

6. Test of transactions for selected programs;

7. Listing of significant reviews and audits;

8. Final determination of risk level;

9. Planned future enhancements; and 

10. Description of how improper payments are recovered. 

USDA has 147 programs of which 18 are considered to be at significant risk of improper 

payments, and 129 of the 147 are considered to be low risk. Risk assessments for low-risk 

programs are completed on a 3-year rotating cycle. During FY 2016, the following 42 programs 

completed risk assessments and were determined to be low risk: 

1. Animal and Plant Health Inspection Service Salaries and Expenses

2. Commodity Credit Corporation (CCC) Agriculture Risk Coverage and Price Loss 

Coverage 

3. CCC Agricultural Wool Apparel Manufacturers Trust Fund 

4. CCC Biomass Crop Assistance Program

5. CCC Cotton Transition Assistance Program 

6. CCC Dairy Indemnity

7. CCC Emergency Forestry Conservation Reserve

8. CCC Export 416 Ocean Transportation 

9. CCC Farm Storage Facility Loan
188 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

10. CCC Food for Progress Program 

11. CCC Hazardous Waste Activities

12. CCC Marginal Protection Program for Dairy Producers

13. CCC Pima Agriculture Cotton Trust Fund 

14. Farm and Foreign Agricultural Services (FFAS) Salaries and Expenses

15. Farm Service Agency (FSA) Public Law 480

16. FSA State Mediation Grants

17. Food and Nutrition Service (FNS) American Samoa 

18. FNS Commonwealth of the Northern Marianas Islands 

19. FNS Senior Farmers Market Nutrition Program 

20. FNS Special Milk Program 

21. Forest Service (FS) Capital Improvement and Maintenance 

22. FS Management of National Forest Lands for Subsistence Uses

23. FS National Forest System

24. FS Range Betterment Fund

25. FS Trust Funds 

26. FS Wildland Fire Management 

27. FS Wildland Fire Management – Suppression 

28. National Institute of Food and Agriculture Community Foods Project 

29. Natural Resources Conservation Service (NRCS) Conservation Technical Assistance

30. NRCS Salaries and Expenses

31. NRCS Snow Survey and Water Supply Forecasting 

32. Office of the Chief Information Officer Salaries and Expenses

33. Research, Education and Economics Salaries and Expenses

34. Rural Development (RD) Rural Business Service (RBS) Payment Programs

35. RD RBS Grant Program and RBS Cooperative Agreement Program
S ECT ION I I I OTHER INFORMATION 189 

36. RD Rural Housing Service (RHS) Community Development Initiative Grants 

37. RD Rural Utilities Service (RUS) Electric Loan Programs – Federal Financing Bank 

(FFB) Guaranteed

38. RD RUS Rural Utilities Electric Program – Direct 5 percent

39. RD RUS Water and Waste Disposal Systems for Rural Communities – Loans

40. RD RUS Rural Telecommunications Hardship Loans – Direct Telecom Loans

41. RD RUS Rural Telecommunications Loans – FFB Telecom Loans 

42. RD RUS Water and Waste Disposal Loans and Grants Section 306C 

USDA identified 18 programs shown in Exhibit 18 as susceptible to significant improper 

payments. 

Exhibit 18: Programs Susceptible to Improper Payments

Selection 

Methodology USDA Agency Program

Former Section 57 of 

Office of Management 

and Budget (OMB), 

Circular No. A-11

Preparation, 

Submission, and 

Execution of the 

Budget (Circular 

No. A-11).

Food and Nutrition 

Service (FNS)

Supplemental Nutrition Assistance 

Program (SNAP)

National School Lunch Program (NSLP)

School Breakfast Program (SBP)

Special Supplemental Nutrition Program 

for Women, Infants, and Children (WIC)

USDA Identified as 

Susceptible to 

Significant Improper 

Payments

Farm Service Agency 

(FSA), Commodity Credit 

Corporation (CCC)

Loan Deficiency Payments (LDP)

Livestock Forage Disaster Program (LFP)

Livestock Indemnity Program (LIP)

Supplemental Revenue Assistance 

Payments Program (SURE)

Noninsured Crop Disaster Assistance 

Program (NAP)

FNS Child and Adult Care Food Program 

(CACFP)

Rural Development (RD) Rental Assistance Program (RAP)

Risk Management 

Agency (RMA)

Federal Crop Insurance Corporation 

Program Fund (FCIC)
190 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Selection 

Methodology USDA Agency Program

Natural Resources 

Conservation Service 

(NRCS)

Farm Security and Rural Investment Act 

Programs (FSRIP)

Disaster Relief 

Appropriation Act of 

2013 (Sandy Disaster)

FSA Hurricane Sandy—Emergency 

Conservation Program (ECP)

FSA Hurricane Sandy—Emergency Forest 

Restoration Program (EFRP)

FSA Hurricane Sandy—EFRP

FS Hurricane Sandy—Capital Improvement 

and Maintenance (CIM)

NRCS Hurricane Sandy—Emergency 

Watershed Protection Program (EWPP)

Sampling and Estimation

USDA’s programs, which are susceptible to significant improper payments, are required to 

conduct an annual sample that complies with the Office of Management and Budget (OMB)

Circular A-123, Appendix C. This can be accomplished by conducting a standard statistically 

valid sample or an OMB-approved alternative methodology. 

The following is a list of programs with brief descriptions of the sampling process that utilized 

a standard statistically valid sampling methodology:

1. FSA/CCC’s Livestock Forage Disaster Program (LFP), Livestock Indemnity Program 

(LIP), Noninsured Crop Disaster Assistance Program (NAP), Hurricane Sandy – 

Emergency Conservation Program (ECP), and the Supplemental Revenue Assistance 

Payments Program (SURE)

a. Determined a sample from the payments made in the prior fiscal year using a 

90-percent confidence interval of plus or minus 2.5 percentage points. 

b. Change in sampling process: None. 

2. Hurricane Sandy – Emergency Forest Restoration Program (EFRP)

a. One hundred percent of the payments made in FY 2014 were tested for improper 

payments. 

b. Change in sampling process: None. 
S ECT ION I I I OTHER INFORMATION 191 

3. FSA/CCC’s Hurricane Sandy – ECP

a. One hundred percent of the payments made in FY 2014 were tested for improper 

payments. 

b. Change in sampling process: Tested 100 percent of payments. 

4. NRCS’ FSRIP and Hurricane Sandy – Emergency Watershed Protection Program 

(EWPP)

a. Determined a sample from the payments made in the prior fiscal year using a 

90-percent confidence interval of plus or minus 2.5 percentage points. 

b. Change in sampling process: None. 

5. RHS’ Rental Assistance Program (RAP)

a. Determined a sample from the payments made in the prior fiscal year using a 

99 percent confidence interval of plus or minus 0.05 percent points. 

b. Change in sampling process: None. 

6. FSA’s Hurricane Sandy – EFRP 

a. One hundred percent of the payments made in FY 2015 were tested for improper 

payments. 

b. Change in sampling process: None. 

7. FS’ Hurricane Sandy – Capital Improvement and Maintenance (CIM)

a. One hundred percent of the payments made in FY 2015 were tested for improper 

payments. 

b. Change in sampling process: None. 

The following is a list of programs, brief descriptions of the sampling process, and their 

justifications for utilizing an OMB-approved alternative sampling methodology: 

1. FNS, NSLP, SBP, WIC, and CACFP

a. The National School Lunch Program (NSLP) / School Breakfast Program (SBP)

Access, Participation, Eligibility, and Certification Study-II (APEC-II) 

established estimates of erroneous payments due to certification error and noncertification error for school year 2012–2013. FNS generates an annual update 

for the improper payment measurements of both components using statistical 

techniques based on the findings of this study. The sample universe represents 

payments made in school year 2014–2015. 
192 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

b. Estimates of improper payments in the Special Supplemental Nutrition Program 

for Women, Infants, and Children (WIC) focus on two components: 

certification error and vendor error. FNS makes use of periodic studies to assess 

the level of error in program payments and then “ages” the data to produce 

updated estimates for each reporting year. The National Survey of WIC 

Participants-II Study, published in April 2012, established estimates of 

erroneous payments due to certification error. The 2013 WIC Vendor 

Management Study established the most recent national estimates of erroneous 

payments due to vendor error. FNS generates an annual update for the improper 

payment measurements of both components using statistical techniques based on 

the findings of these bookend studies. The sampling universe represents 

payments made in October 2014 through September 2015. 

c. Child and Adult Care Food Program (CACFP) - In lieu of producing a programwide improper payment measure, FNS has identified the Family Day Care 

Home (FDCH) component of this program as potentially high risk. A three-stage 

sample design was used: the first stage was developing a sample of States, from 

which a sample of sponsors was selected at the second stage, and a sample of 

FDCHs was selected in the final stage. FNS measured the level of erroneous 

payments due to sponsor error for the two types of program reimbursement 

(Tier 1 and Tier 2). The sampling universe represents payments made in 

October 2014 through September 2015. The improper payment measures 

presented do not include improper payments associated with the Adult Day Care 

component or Child Care Centers, nor do they include meal claiming errors at 

this time.

d. Change in sampling process: None. 

e. Justification: Using the OMB-approved alternative methodology is currently the 

only way to report an improper payment rate for these programs.

2. RMA FCIC

a. Uses a statistically valid estimate of the improper payment rate and of the dollar 

amount of improper payments for the Federal Crop Insurance Corporation 

Program Fund (FCIC). The improper payment reviews include all payment 

categories (premium subsidies, administrative and operating expense (A&O) 

subsidies, and indemnity payments) and considers how an improper payment 

can occur. A simple random sample is used to select the policies for review, and 

the previous methodology of using inappropriate weighting factors is no longer 

an issue.
S ECT ION I I I OTHER INFORMATION 193 

b. Change in sampling process: None. 

c. Justification: For FY 2015 and FY 2016, the Risk Management Agency (RMA) 

used an OMB-approved alternative sampling methodology while it was 

developing a more comprehensive approach that would use a larger sample 

stratified by approved insurance providers (AIP). For FY 2017 and beyond, 

RMA intends to sample from all crops and develop an estimated improper 

payment rate applicable to the entire program. These steps will bring RMA’s 

measurement methodology into full compliance with IPERA.

The following program did not sample this year:

1. FNS Supplemental Nutrition Assistance Program (SNAP)

a. Prior to release of the OIG audit report, FNS initiated an in-depth, systematic 

review of all 53 State agency quality control systems. After all reviews had been 

completed, it was determined that USDA would not release a national SNAP 

error rate for FY 2015. For 42 of the 53 State agencies, USDA was unable to 

validate the data provided by the State. There are no statistical procedures that 

can accurately adjust for this unreliability and allow calculation of a national 

error rate. 
194 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Improper Payment Reporting

Table 13 shows USDA’s high-risk programs sampling and estimation results. See the annotated 

notes for additional program explanations as appropriate.

Table 13: Improper Payment Reduction Outlook ($ In Millions) 

Program>>

FNS 

Supplemental 

Nutrition 

Assistance 

Program (SNAP) 

[Note #1] 

FNS National 

School Lunch 

Program (NSLP) 

Total Program 

[Note #2]

FNS School 

Breakfast 

Program (SBP) 

Total Program 

[Note #2]

FNS Special 

Supplemental 

Nutrition Program 

for Women, 

Infants, and 

Children (WIC) 

Total Program

Previous Year (PY) 

Outlays $ 70,022.00 11,319.00 3,812.00 4,542.00

PY Improper 

Payment (IP) % 3.66% 15.66% 22.95% 4.62%

PY IP $ 2,562.81 1,773.00 875 210

Current Year (CY) 

Outlays $ N/A 11,994.80 3,959.60 4,335.00

CY IP % N/A 15.17% 22.48% 4.79%

CY IP $ N/A 1,819.74 890.17 207.65

CY Overpayment $ N/A 1,368.92 722.81 129.62

CY Underpayment $ N/A 450.82 167.36 78.03

CY +1 Est. Outlays $ N/A 12,153.78 4,338.57 4,310.00

CY + 1 Est. IP % N/A 14.43% 21.46% 3.98%

CY + 1 Est. IP $ N/A 1,753.79 931.06 171.54

CY +2 Est. Outlays $ N/A 12,340.00 4,470.00 4,244.00

CY +2 Est. IP % N/A 14.08% 20.75% 3.88%

CY + 2 Est. IP $ N/A 1,737.47 927.53 164.67

CY + 3 Est. Outlays $ N/A 13,508.00 4,677.00 4,333.00

CY + 3 Est. IP % N/A 14.00% 20.07% 3.78%

CY + 3 Est. IP $ N/A 1,891.12 938.46 163.79
S ECT ION I I I OTHER INFORMATION 195 

Program>>

FSA Loan 

Deficiency 

Payments (LDP) 

[Note #3]

FSA Livestock 

Forage Disaster 

Program (LFP)

FSA Livestock 

Indemnity 

Program (LIP)

FSA Supplemental 

Revenue 

Assistance 

Payments 

Program (SURE) 

[Note #4]

Previous Year (PY) 

Outlays $ 0 3,357.00 63 34

PY Improper 

Payment (IP) % N/A 3.10% 6.36% 9.90%

PY IP $ N/A 104.2 4 3.366

Current Year (CY) 

Outlays $ 124.01 2,581.12 54.27 4.55

CY IP % 3.21% 4.74% 12.87% 11.53%

CY IP $ 3.98 122.35 6.98 0.52

CY Overpayment $ 3.84 117.7 6.64 0.52

CY Underpayment $ 0.14 4.65 0.34 0 

CY +1 Est. Outlays $ 121 563 36 0 

CY + 1 Est. IP % 3.00% 4.00% 9.00% 2.73%

CY + 1 Est. IP $ 3.63 22.52 3.24 0 

CY +2 Est. Outlays $ 169 422 35 0 

CY +2 Est. IP % 2.80% 3.25% 6.00% 2.72%

CY + 2 Est. IP $ 4.73 13.72 2.1 0 

CY + 3 Est. Outlays $ 169 422 35 0 

CY + 3 Est. IP % 2.50% 2.75% 3.00% 2.71%

CY + 3 Est. IP $ 4.23 11.61 1.05 0 
196 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Program>>

FSA Noninsured 

Crop Disaster 

Assistance 

Program (NAP)

FNS Child and 

Adult Care Food 

Program (CACFP) 

Total Program 

[Note #5]

RHS Rental 

Assistance 

Program (RAP)

RMA Federal Crop 

Insurance 

Corporation 

(FCIC) Program 

Fund

Previous Year (PY) 

Outlays $ 174 N/A 1,147.00 13,734.00

PY Improper 

Payment (IP) % 7.36% N/A 1.41% 2.20%

PY IP $ 12.8 N/A 16.2 302.15

Current Year (CY) 

Outlays $ 128.85 N/A 1,141.39 11,503.29

CY IP % 5.47% N/A 1.10% 2.02%

CY IP $ 7.05 N/A 12.56 232.37

CY Overpayment $ 6.62 N/A 12.56 218.4

CY Underpayment $ 0.43 N/A 0 13.97

CY +1 Est. Outlays $ 147 N/A 1,198.45 7,267.00

CY + 1 Est. IP % 5.20% N/A 1.09% 2.01%

CY + 1 Est. IP $ 7.64 N/A 13.06 146.07

CY +2 Est. Outlays $ 154 N/A 1,258.37 7,903.00

CY +2 Est. IP % 4.90% N/A 1.08% 2.00%

CY + 2 Est. IP $ 7.55 N/A 13.59 158.06

CY + 3 Est. Outlays $ 154 N/A 1,321.30 7,910.00

CY + 3 Est. IP % 4.65% N/A 1.07 1.99%

CY + 3 Est. IP $ 7.16 N/A 14.14 157.41
S ECT ION I I I OTHER INFORMATION 197 

Program>>

NRCS Farm 

Security and 

Rural 

Investment Act 

Programs 

(FSRIP)

FSA Hurricane 

Sandy —

Emergency 

Conservation 

Program (ECP)

FSA Hurricane 

Sandy —

Emergency 

Forest 

Restoration 

Program (EFRP)

FS Hurricane 

Sandy —EFRP 

[Note #4]

Previous Year (PY) 

Outlays $ 2,122.00 0.4 0.3 0.07

PY Improper 

Payment (IP) % 22.04% 0.50% 1.67% 0.00%

PY IP $ 467.79 0.002 0.005 0 

Current Year (CY) 

Outlays $ 1,994.14 0.04 0.79 0.06

CY IP % 2.38% 0.18% 1.43% 0 

CY IP $ 47.41 0.0001 0.01 0 

CY Overpayment $ 47.41 0.0001 0.01 0 

CY Underpayment $ 0 0 0 0 

CY +1 Est. Outlays $ 2,361.50 0 6 0 

CY + 1 Est. IP % 2.37% 0.17% 0.50% 0.00%

CY + 1 Est. IP $ 55.97 0 0.03 0 

CY +2 Est. Outlays $ 2,637.77 0 6 0 

CY +2 Est. IP % 2.36% 0.16% 0.25% 0.00%

CY + 2 Est. IP $ 62.25 0 0.02 0 

CY + 3 Est. Outlays $ 2,993.31 0 6 0 

CY + 3 Est. IP % 2.35% 0.15% 0.10% 0.00%

CY + 3 Est. IP $ 70.34 0 0.01 0 
198 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Program>>

FS Hurricane 

Sandy —Capital 

Improvement 

and 

Maintenance 

(CIM) [Note #4]

NRCS Hurricane 

Sandy —

Emergency 

Watershed 

Protection 

Program (EWPP)

USDA Total 

[Note #6]

Previous Year (PY) 

Outlays $ 1.18 4.83 110,332.78

PY Improper 

Payment (IP) % 0.06% 0.00% 5.74%

PY IP $ 0 0 6,331.32

Current Year (CY) 

Outlays $ 0.58 5.08 37,827.57

CY IP % 0 0 8.86%

CY IP $ 0 0 3,350.79

CY Overpayment $ 0 0 2,635.05

CY Underpayment $ 0 0 715.74

CY +1 Est. Outlays $ 0 15.97 32,518.27

CY + 1 Est. IP % 0.00% 0.00% 9.56%

CY + 1 Est. IP $ 0 0 3,108.55

CY +2 Est. Outlays $ 0 21.22 33,660.36

CY +2 Est. IP % 0.00% 0.00% 9.18%

CY + 2 Est. IP $ 0 0 3,091.69

CY + 3 Est. Outlays $ 0 21.7 35,547.31

CY + 3 Est. IP % 0.00% 0.00% 9.17%

CY + 3 Est. IP $ 0 0 3,259.41

Note #1: Based on an in-depth, systematic review of all State quality control systems, USDA 

determined it could not release a national SNAP error rate for FY 2015. USDA is unable to 

calculate an FY 2015 national error rate due to the unreliability of some State reported data. 

Note #2: Information has not been adjusted for interaction between the different sources of 

certification error and counting/claiming error. 
S ECT ION I I I OTHER INFORMATION 199 

Note #3: The Loan Deficiency Payments program had no FY 2014 outlays and therefore did 

not conduct a sample in FY 2015. 

Note #4: SURE, FSA EFRP, and FS CIM estimate zero outlays in the current year plus one. 

USDA anticipates that this will be the last year these programs report an error rate.

Note #5: CACFP currently tests and reports on the FDCH-tiering decision component of the 

payment process. FNS continues to evaluate the measurement processes for the CACFP meal 

claim component, and will begin reporting an error rate for this component when a reliable 

methodology is determined. 

Note #6: The Current Year results reflect the sampling results completed in FY 2016 for all 

programs except RMA. USDA sampling typically tests the prior year’s outlays or an OMB 

approved alternative sampling plan. For RMA’s FCIC program, current year reflects the 2014 

reinsurance year which ran from July 1, 2013 through June 30, 2014. Section II above discusses 

this in more detail. 

Note#7: USDA's fiscal year 2017 error rate is estimated to be higher than the fiscal year 2016 

error rate because of changing outlays. Programs with higher error rates like NSLP and SBP are 

estimated to have increasing outlays while programs with lower error rates like FCIC and LFP 

are estimated to have decreasing outlays. These outlay changes cause USDA's weighted 

average error rate to increase.
200 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Table 14 provides supplemental information providing a breakdown of specific USDA programs to the component reporting level. 

Table 14: Program Component Reporting

Program

Previous 

Year (PY) 

Outlays $

PY Improper 

Payment (IP) 

% PY IP $

Current Year 

(CY) Outlays $ CY IP % CY IP $

CY 

Overpayment 

$ 

CY 

Underpayment 

$ 

FNS NSLP Total 

Program 11,319.00 15.66% 1,773.00 11,994.80 15.17% 1,819.74 1,368.92 450.82

FNS NSLP 

Certification Error N/A 9.70% 1.098.00 11,994.80 9.21% 1,105.19 768.51 318.69

FNS NSLP 

Counting/Claiming 

Error

N/A 5.96% 675.00 11994.80 5.96% 714.54 582.41 132.13

FNS SBP Total 

Program 3,812.00 22.95% 875.00 3.959.60 22.48% 890.17 722.81 167.36

FNS SBP 

Certification Error N/A 10.86% 414.00 3.959.60 10.39% 411.22 288.20 122.42

FNS SBP 

Counting/Claiming 

Error

N/A 12.10% 461.00 3.959.60 12.10% 478.95 434.01 44.94

FNS WIC Total 

Program 4,542.00 4.62% 210.00 4,335.00 4.79% 207.65 129.62 78.03

FNS WIC 

Certification Error N/A 2.71% 123.00 N/A 2.71% 123.00 N/A N/A

FNS WIC Vendor 

Error N/A 1.91% 87.00 N/A 1.91% 87.00 N/A N/A
S ECT ION I I I OTHER INFORMATION 201

Program

Previous 

Year (PY) 

Outlays $

PY Improper 

Payment (IP) 

% PY IP $

Current Year 

(CY) Outlays $ CY IP % CY IP $

CY 

Overpayment 

$ 

CY 

Underpayment 

$ 

FNS CACFP Total 

Program [Note #4] N/A N/A N/A N/A N/A N/A N/A N/A

FNS CACFP FDCH 

– Tiering 

Decisions

930.00 0.84% 7.80 910.91 .54% 4.92 3.70 1.21

FNS CACFP FDCH 

– Meal Claims N/A N/A N/A N/A N/A N/A N/A N/A
202 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Discussion of Supplemental Measures

USDA currently has the following four programs designated as high-priority programs: 

1. FNS SNAP

a. State agencies and FNS report the Quality Control (QC) Payment Error Rates to 

PaymentAccuracy.gov every June. 

b. Each month, SNAP cases from every State are sampled for QC review, which 

looks at benefits a household receives and verifies whether the benefit 

determination was correct. This activity identifies where improper payments 

occur. The baseline is the amount of monthly program benefits issued to 

households the QC review identified and whether the benefit payment or any 

portion of it was an improper payment. 

c. Data collected during the QC process is analyzed to identify areas of program 

administration that need improvement. 

d. Each year, SNAP issues QC Payment Error Rates. States with rates above 

6 percent for two consecutive years are subject to a liability, which requires that 

the State invest funds into its program certification activities to reduce the 

amount of improper payments. 

2. FNS NSLP

USDA reports 2 supplemental measures for the NSLP on PaymentAccuracy.gov. 

They are:

a. The first is the percent of students directly certified for free school meals as a 

percent of all students certified for free meals. The figure is updated annually 

based on information reported to FNS by that State each October. This figure 

summarizes State and school district success in moving families from traditional 

applications, which are associated with relatively high error, to direct 

certification, which APEC finds is associated with much lower error. 

b. The second is the number of State agencies that receive State Technology Grants 

from USDA. This figure is an indirect measure of State agency investment in the 

kinds of technology improvements and automation that reduces the risk of 

human error, particularly in recordkeeping and counting and claiming meals for 

Federal reimbursement. This figure is also reported on an annual cycle that 

coincides with the award of State agency grants by USDA. 
S ECT ION I I I OTHER INFORMATION 203 

3. FNS SBP

USDA reports two supplemental measures for the SBP on PaymentAccuracy.gov. 

a. The first is the percent of students directly certified for free school meals as a 

percent of all students certified for free meals. The figure is updated annually 

based on information reported to FNS by that State each October. This figure 

summarizes State and school district success in moving families from traditional 

applications, which are associated with relatively high error, to direct 

certification, which APEC finds is associated with much lower error. 

b. The second is the number of State agencies that receive State Technology Grants 

from USDA. This figure is an indirect measure of State agency investment in the 

kinds of technology improvements and automation that reduce the risk of human 

error, particularly in recordkeeping and counting and claiming meals for Federal 

reimbursement. This figure is also reported on an annual cycle that coincides 

with the award of State agency grants by USDA.

4. RMA FCIC

RMA initiated supplemental measures in FY 2015. RMA will measure the reduction in 

acreage reporting discrepancies greater than 100 acres using data mining techniques. 

a. Description – Producers report farmed acreage to their Approved Insurance 

Provider (AIPs) and to FSA. The AIPs then report the producer’s insured acres

to RMA. The reported acres for a producer are compared between RMA and 

FSA. 

b. Measurement Baseline – As of reinsurance year (RY) 2014, there were 25,904 

Eligible Crop Insurance Contracts (ECIC) having an acreage reporting 

discrepancy of 100 or more acres. This means that 2.64 percent of 

approximately 990,000 ECICs nationwide had an acreage reporting discrepancy 

of over 100 acres. An ECIC represents all insured acres for a producer in a 

county by crop. 

c. Frequency – Annually. 

d. Results – For FY 2015, RMA set a target of 2.6 percent. RMA met this target by 

achieving a rate of 1.68 percent. 

e. Planned Target – Reduce the percentage of ECICs with very large acreage 

discrepancies over 100 acres to 1.63 percent. This could equate to a reduction of 

approximately 500 ECICs with very large acreage discrepancies. 
204 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

f. Benefit – RMA will produce a spot-check list of producers with significant 

discrepancies (over 100 acres) between acreage reported to RMA and FSA. This 

list will be provided to the Approved Insurance Providers for further review and 

reconciliation, as necessary. Corrections to the acreage reports could potentially 

prevent improper payments of insurance premium subsidies and indemnities. 
S ECT ION I I I OTHER INFORMATION 205

Improper Payment Root Cause Categories

Table 15: Type of Improper Payment ($ In Millions)

Reason for Improper Payment

SNAP [Note #1] NSLP SBP WIC

OverpaymentsUnderpaymentsOverpaymentsUnderpaymentsOverpaymentsUnderpaymentsOverpaymentsUnderpayments

Program Design or Structural 

Issue

Inability to Authenticate 

Eligibility

Failure to 

Verify

Death Data

Financial Data

Excluded Party 

Data

Prisoner Data

Other Eligibility

Administrative 

or Process 

Error Made by 

Federal Agency

State or Local 

Agency

Other Party $1,368.92 $450.82 $722.81 $167.36 $129.62 $78.03

Medical Necessity

Insufficient Documentation

Other Reason

TOTAL $1,368.92 $450.82 $722.81 $167.36 $129.62 $78.03 
206 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Reason for Improper Payment

LDP LFP LIP SURE

OverpaymentsUnderpaymentsOverpaymentsUnderpaymentsOverpaymentsUnderpaymentsOverpaymentsUnderpayments

Program Design or Structural 

Issue

Inability to Authenticate 

Eligibility $19.90

Failure to 

Verify

Death Data

Financial Data

Excluded Party 

Data

Prisoner Data

Other Eligibility

Administrative 

or Process 

Error Made by 

Federal Agency $3.47 $0.14 $85.30 $4.65 $5.45 $0.34 $0.48

State or Local 

Agency

Other Party

Medical Necessity

Insufficient Documentation $0.37 $12.50 $1.19 $0.04

Other Reason

TOTAL $3.84 $0.14 $117.70 $4.65 $6.64 $0.34 $0.52 
S ECT ION I I I OTHER INFORMATION 207

Reason for Improper Payment

NAP CACFP [Note #2] RAP FCIC

OverpaymentsUnderpaymentsOverpayments UnderpaymentsOverpaymentsUnderpaymentsOverpaymentsUnderpayments

Program Design or Structural 

Issue

Inability to Authenticate 

Eligibility $0.22 $191.34 $13.62

Failure to 

Verify

Death Data

Financial Data $0.15

Excluded Party 

Data

Prisoner Data

Other Eligibility $0.06

Administrative 

or Process 

Error Made by 

Federal Agency $5.47 $0.43

State or Local 

Agency

Other Party $3.24 $27.06 $0.35

Medical Necessity

Insufficient Documentation $0.72 $9.32

Other Reason

TOTAL $6.62 $0.43 N/A $12.56 $218.40 $13.97 
208 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Reason for Improper Payment

FSRIP ECP FSA EFRP FS EFRP [Note #3]

OverpaymentsUnderpaymentsOverpaymentsUnderpaymentsOverpaymentsUnderpaymentsOverpaymentsUnderpayments

Program Design or Structural 

Issue 0 0 0 0 0 0 0 0 

Inability to Authenticate 

Eligibility $10.19 0 0 0 $0.01 0 0 0 

Failure to 

Verify

Death Data 0 0 0 0 0 0 0 0 

Financial Data 0 0 0 0 0 0 0 0 

Excluded Party 

Data 0 0 0 0 0 0 0 0 

Prisoner Data 0 0 0 0 0 0 0 0 

Other Eligibility 0 0 0 0 0 0 0 0 

Administrative 

or Process 

Error Made by 

Federal Agency $37.22 0 $0.0001 0 0 0 0 0 

State or Local 

Agency

0 0 0 0 0 0 0 0 

Other Party 0 0 0 0 0 0 0 0 

Medical Necessity 0 0 0 0 0 0 0 0 

Insufficient Documentation 0 N/A 0 N/A 0 N/A 0 N/A

Other Reason 0 0 0 0 0 0 0 0 

TOTAL $47.41 0 $0.0001 0 $0.01 0 N/A 0 
S ECT ION I I I OTHER INFORMATION 209

Reason for Improper Payment

CIM [Note #3] EWPP [Note #3]

Over-payments Under-payments Over-payments Under-payments

Program Design or Structural Issue 0 0 0 0 

Inability to Authenticate Eligibility 0 0 0 0 

Failure to Verify

Death Data 0 0 0 0 

Financial Data 0 0 0 0 

Excluded Party Data 0 0 0 0 

Prisoner Data 0 0 0 0 

Other Eligibility 0 0 0 0 

Administrative or 

Process Error Made by 

Federal Agency 0 0 0 0 

State or Local Agency 0 0 0 0 

Other Party 0 0 0 0 

Medical Necessity 0 0 0 0 

Insufficient Documentation o N/A 0 N/A

Other Reason 0 0 0 0 

TOTAL N/A 0 N/A 0 

Note #1: Based on an in-depth, systematic review of all State quality control systems, USDA determined it could not release a 

national SNAP error rate for FY 2015. USDA is unable to calculate an FY 2015 national error rate due to the unreliability of some 

State reported data. 

Note #2: CACFP did not calculate an error rate. As a result, a root cause breakdown cannot be provided. 

Note #3: The FS EFRP, CIM, and EWPP programs did not identify any improper payments. As a result, a root cause breakdown 

cannot be provided. 
210 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Improper Payment Corrective Actions

Each program is required to develop a Corrective Action Plan. Exhibit 19 describes actions

taken and planned. High-priority programs (SNAP, NSLP, SBP, and FCIC) include a 

discussion of actions taken to recover and prevent future improper payments. 

Exhibit 19: Program Corrective Action Plans

Agency Program Corrective Actions

Food and 

Nutrition 

Service (FNS) 

Supplemental 

Nutrition 

Assistance 

Program (SNAP)

Program regulations require State agencies to analyze 

data to develop corrective action plans (CAP) to 

reduce or eliminate program deficiencies. A State with 

a high error rate must conduct an analysis of its State 

QC data to identify the root causes of errors in the 

State and develop a QC CAP to address those specific 

root causes. A State with an excessive error rate will 

be required to invest a specified amount (depending 

on its error rate and size) designated specifically to 

Program improvements that address the root causes 

for its errors. Each State’s CAP or plan to invest in 

Program improvements is unique and based on the 

root causes for the errors that occurred in that State. 

The State will also face further fiscal penalties if it fails 

to lower its error rate in a future fiscal year.

FNS, through its regional offices, works directly with 

States to impart the importance of payment accuracy 

and correct payments to State leadership and to assist 

them in developing effective corrective action 

strategies to reduce payment errors. Regional offices 

will provide technical assistance to States throughout 

FY 2016.

Actions taken to reduce improper payments 

 FNS administers a State Exchange Program whereby 

funds are provided to States to facilitate travel to 

obtain, observe and share information on best 

practices and effective techniques for error 

reduction. Coalitions have been formed among 

States to promote partnerships, information 

exchange, and collaborative efforts that address 

mutual concerns and support development of 

effective corrective action. These activities were 

conducted throughout FY 2016.
S ECT ION I I I OTHER INFORMATION 211 

Agency Program Corrective Actions

Actions planned to reduce improper payments 

 QC Payment Error Rates are announced at the end 

of June in the year following the end of the review 

period. State agencies with error rates of 6 percent

or higher are required to submit CAPs to FNS 

addressing these errors. These CAPs are open-ended 

and remain in effect until all deficiencies in program 

operations have been reduced substantially or 

eliminated. State agencies will provide updates to 

their CAPs through regular, semiannual updates 

received by FNS by May 1, 2016 and November 1, 

2016 respectively.

FNS National School 

Lunch Program 

(NSLP)

Root Cause #1: Certification error in the National 

School Lunch Program (NSLP). 

Certification errors occur when a child is placed in the 

wrong meal reimbursement category, such as when a 

child who should receive reduced-price meals is 

certified for free meals. Certification errors can be 

attributed to a number of factors, including but not 

limited to an inability to verify income due to statutory 

limits on verification, failure to verify income when 

selected for verification, and administrative errors.

Actions Taken to Reduce Improper Payments 

(Actions Taken): 

FNS has completed a number of actions that will serve 

to reduce improper payments due to certification 

error, including:

 FNS is working with a broad group of innovators to 

take the next step in application redesign. The 

agency held a public competition in late 2015 and 

early 2016 to begin development of the agency’s 

first model Web-based application. The agency is 

finalizing that model with the help of software and 

design experts with the Presidential Innovation 

Fellows.

 In school year 2016-2017, the Administrative Review 

updates and final regulations pertaining to the 

Administrative Review will be released. All State 

agencies are expected to implement the updated 

process, which will provide nationwide consistency 

to the monitoring of program requirements. FNS will 
212 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Agency Program Corrective Actions

assess technical assistance needs for State agencies 

and provide any needed additional guidance and 

training that is identified.

 FNS issued an updated Eligibility Manual by the end 

of June 2016. This manual provides information and 

guidance for determining students’ eligibility for free 

and reduced-price meals in the NSLP and the SBP. 

 FNS is working with its State and local agency 

partners to increase the adoption of the Community 

Eligibility Provision:

o The agency’s education, technical assistance, and 

direct engagement plan helped increase local 

election of the Community Eligibility Provision 

(CEP) to nearly 60 percent of eligible schools in 

the fall of 2016, up from 50 percent one year ago.

o In 2016, FNS conducted 7 webinars designed to 

provide technical assistance to districts currently 

implementing or considering CEP. Topics included

the following: Improving Direct Certification 

Systems, Publication and Notification 

Requirements, CEP Messaging and Outreach, 

Making "Cents" of CEP at a 40-50 percent

Identified Student Percentage (ISP), CEP and

Alternative Breakfast Models, and CEP Best 

Practices and Lessons Learned.

o In January 2016, FNS released Community 

Eligibility Provision: Planning and Implementation 

Guidance, which consolidated existing CEP 

guidance and best practices into one, easy-to-use 

manual. The manual will be updated regularly to 

reflect any future guidance and to address any 

requested clarifications.

o FNS released policy memoranda to develop 

administrative review guidance for CEP schools 

(November 2015) and clarify State agency 

requirements for ensuring identified student 

percentages are correct when school districts 

elect CEP (November 2015).

o In 2016, FNS created a recommended CEP 

reporting template in order to facilitate and 

streamline the reporting process. For the data 

publication cycle of May 2016, 40 states used the 
S ECT ION I I I OTHER INFORMATION 213 

Agency Program Corrective Actions

recommended FNS template, and 34 states met 

the data publication deadline. FNS published the 

CEP data in July 2016.

 In January 2016, FNS announced an opportunity for 

States to apply to participate in new demonstrations 

to evaluate direct certification for both free and 

reduced price meals using Medicaid data. Seven 

States applied and have been approved to begin 

demonstrations in school year 2016-2017. FNS 

expects to receive a similar number of applications 

for school year 2017-2018 from additional States 

and will select the additional States by 

approximately November 2016, with the goal to 

expand demonstrations to up to 20 States through 

school year 2018-2019. FNS will conduct an 

evaluation study to determine the effectiveness of 

the demonstrations in improving program access 

and reducing certification errors by conducting 

direct certification for both free and reduced price 

meals.

 In FY 2016, FNS provided technical assistance and 

conducted a Tribal Consultation call associated with 

the furthering of direct certification of children 

through the use of Food Distribution Program on 

Indian Reservations (FDPIR) participant data. 

Technical assistance included the issuance of a 

guidance document, a template Agreement to Share

and Exchange Data, and a presentation during the 

National Association annual conference.

Unpaid Meal Charges: 

 The Healthy, Hunger-Free Kids Act (HHFKA) of 2010

required USDA to take a closer look at unpaid meal 

charges, to examine the current charge and 

alternate meal policies and practices of State 

agencies and local education agencies (LEAs), and to 

report on the feasibility of establishing national 

standards for such policies. USDA submitted final 

recommendations in a Report to Congress in 

June 2016. In developing this report, FNS included 

responses to questions raised during the periodic 

Special Nutrition Program Operation Study and 

responses to a Request for Information (RFI) entitled 
214 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Agency Program Corrective Actions

Unpaid Meal Charges. During the open comment 

period, FNS received 462 comments, 95 percent of 

which came from local officials with firsthand 

experience addressing the unpaid meal challenge, 

such as school principals and school food service 

professionals. Incorporating feedback from local 

officials allowed FNS to ensure the final 

recommendations would be feasible and accurately 

reflect the needs of communities nationwide.

 In February 2016, FNS hosted two webinars to share 

the strategies and best practices related to charge 

and alternate meal policies uncovered through the 

RFI.

 In March 2016, FNS invited representatives from 

professional associations and advocacy groups to 

participate in a roundtable discussion to give a 

broad, national perspective on the challenge of 

unpaid meal charges. FNS invited a range of experts 

from organizations that work on child education and 

hunger issues to share the impact of unpaid meal 

charges on their key constituencies.

Actions Planned to Reduce Improper Payments (Actions 

Planned): 

FNS is executing several key measures to improve 

Federal and State oversight and technical assistance to 

identify and recover improper payments in the NSLP. 

The following outlines the proactive measures FNS is 

taking to strengthen Program integrity:

 FNS and its research partners at the Office of 

Science and Technology Policy’s Social and 

Behavioral Sciences Team (SBST) will finalize analysis 

of their school year 2015-2016 pilot to reduce 

household non-response in the school meal 

verification process. FNS and the SBST will continue 

the pilot with a different set of school districts in 

school year 2016-2017.

 The following initiatives started in previous years will 

extend into FY 2017:

o Further improve the model requirements for State 

and local district automated information systems 

used to manage school meal programs, including 

functionality to capture eligibility certification, 
S ECT ION I I I OTHER INFORMATION 215 

Agency Program Corrective Actions

meal claiming and reporting, program monitoring, 

administrative review, and other components of 

State and local program operations;

o Under a contract with expert consultants, develop 

an intensive data study survey for State and local 

NSLP agencies to establish best practices in the 

collection, reporting, and monitoring of program 

data at State and local levels aimed at improving 

management data. We expect to complete the 

survey development and OMB approval for 

distribution by early FY 2017; and

o FNS is completing or has already completed a 

number of proposed rules resulting from the 2010 

Child Nutrition (CN) Reauthorization Act that will 

serve to reduce improper payments due to 

certification error by applying: 

 As a method for enforcing program compliance, the 

Child Nutrition Program Integrity Proposed Rule will 

call for fines for egregious or persistent problems, as 

well as those that remain unsolved after initial 

reviews. The State agency will be able to fine local 

program operators, and FNS will be able to fine both 

State agencies and local program operators for gross 

mismanagement. The proposed rule was published 

March 29, 2016; and

 FNS’ examination of unpaid meal charges revealed 

where clarification was needed and what policy 

changes would best support local program operators 

and at-risk students participating in the school meal 

programs nationwide. New policies, to be released

in 2016, will: 1) clarify how Federal cost principals 

on allowable and unallowable costs apply when the 

nonprofit school food service account is not repaid 

for meal charges incurred by students, 2) provide 

guidance on developing effective meal charge 

policies, 3) explain how overt identification applies 

to students unpaid meal charges, and 4) address 

other topics needing clarification.

 FNS will also issue a handbook in 2016 summarizing 

the best practices collected throughout the 

examination of unpaid meal charges. The handbook 

will share strategies local program operators can use 
216 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Agency Program Corrective Actions

in their efforts to connect more eligible children with 

free meals, make payment more convenient for 

families, and get buy-in for a local charge policy, 

among other topics.

 In June 2016, FNS issued a policy memorandum that 

encourages LEAs to accept eligibility determinations 

from a transferring student’s former LEA to minimize 

disruptions in meal benefits for low-income students 

and avoid student debt resulting from unpaid meal 

charges. Children who are eligible but not certified 

for free or reduced price meals may be unable to 

afford meals at the "paid" rate. This can result in 

unpaid meal charges and an unnecessary loss of 

funds for the school food service account.

Community Eligibility Provision 

 In the summer of 2016, FNS published the 

Community Eligibility Provision (CEP) final rule, 

which formalized details of the provision, now in its 

second year of nationwide implementation.

 In the summer of 2016, FNS issued an updated 

policy memo providing guidance and updated 

Questions and Answers (Q&As) on the Community 

Eligibility Provision. This memo provided guidance 

on all aspects of CEP implementation, including 

eligibility for CEP election, meal counting and 

claiming, integrity and recordkeeping, and other 

administrative procedures.

Root Cause #2: Meal counting and claiming error. 

These include: 1) meal claiming (cashier) errors, which 

occur when meals are incorrectly categorized as 

reimbursable or non-reimbursable at the point of sale 

(e.g., number of free, reduced-price, and paid meals), 

and 2) aggregation errors, which occur when a school, 

SFA, or State agency tallies the number of 

reimbursable meals incorrectly and thus makes an 

error in the number of meals claimed for 

reimbursement.

Actions Taken: 

 In FY 2016, FNS expanded the "Team Up for School 

Nutrition Success Initiative," to State-level trainings 
S ECT ION I I I OTHER INFORMATION 217 

Agency Program Corrective Actions

through the Institute of Child Nutrition (ICN). This 

Initiative provides training, technical assistance, and 

peer-to-peer mentorship opportunities to school 

food service professionals. The Team Up For School

Nutrition Success training is tailored to schools and 

covers topics including menu planning, financial 

management, procurement and meal presentation 

and appeal, as well as youth engagement tactics and 

strategies to reduce plate waste. Through the Team 

Up initiative, schools have the opportunity to learn 

from each other in order to make positive strides 

toward providing healthy school environments with 

financial stability and strong student participation. 

Actions Planned: 

 FNS will again convene a national workgroup of 

State as well as FNS regional and national office 

representatives to identify priorities for State and 

local automation initiatives to improve program 

accountability, monitoring, training, data quality, 

and other program areas where automation is a 

strong business solution. Initiatives started in

FY 2016 and extending into FY 2017 include:

o Planning for national technology training to take 

place in September 2017 for State agencies to 

showcase best practices in automation for 

program operations, including Federal reporting, 

project management, data analytics, direct 

certification, administrative review, and other 

topics, with the goal of assisting States in better 

use of automation and data analytics to improve 

program operations and integrity.

o FNS has an ongoing contract with expert 

consultants that continued in FY 2016. The 

consultants are required to provide technical 

assistance directly to States in the areas of 

training and automation in order to assist States in 

identifying and targeting LEAs that are at high risk 

for operational errors and also to assist states 

with meeting statutory benchmarks for direct 

certification. In FYs 2013 to date, FNS has 

completed close to 70 site visits to provide State 

agencies with technical assistance on improving 
218 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Agency Program Corrective Actions

automation programs and direct certification, 

training, and monitoring of program operations 

with special emphasis on error-prone LEAs.

On March 29, 2016, FNS published the Child Nutrition 

Program Integrity Proposed Rule. The proposed Rule 

identifies criteria for assessments against State

agencies, School Food Authorities, or Schools whose 

program operators fail to correct severe 

mismanagement of any Child Nutrition program, fail to 

correct repeat violations of program requirements, or 

disregard a requirement of which they have been 

informed. The Rule is expected to serve as a deterrent 

against program violators and contribute to 

safeguarding the integrity of all Child Nutrition 

Programs.

High-Priority Program Discussion: 

Much of the activity summarized above is guided by 

the findings of FNS research. The 2015 APEC-II study, 

in particular, provides the agency with actionable 

information on program error at four critical points: 

1) when households complete applications for school 

meal benefits, 2) when school districts certify those 

applications, 3) when cafeteria staff determine 

whether the meals served are reimbursable, and 

4) when meal counts are aggregated and submitted 

for reimbursement.

In addition to estimating the dollar value of program 

error at each of these steps, APEC II offers insight into 

the nature and causes of that error. With information 

from APEC and other FNS studies, as well as from 

information gathered over many years from State 

agency administrative reviews of school districts and 

FNS reviews of State agencies, FNS has tailored its 

corrective actions to target the processes at greatest 

risk for error. A few examples include:

 The agency’s considerable efforts to improve direct 

certification performance and the adoption of CEP.

APEC-II finds that both of these are associated with 

far less certification error than the traditional 

application process.

 FNS redesign of the Administrative Review (AR) 

process and AR reporting resulted in the following: 
S ECT ION I I I OTHER INFORMATION 219 

Agency Program Corrective Actions

The redesign of the AR was guided by careful review 

and analysis of past review findings, and places 

increased emphasis on the processes and sites that 

pose the greatest risk for error. As mentioned 

above, the redesigned AR reporting form, FNS-640, 

seeks to capture information at a low level of 

aggregation to support more meaningful analysis of 

the data. Better analysis will guide more effective 

monitoring and technical assistance to school 

districts by State agencies and FNS.

 Training modules developed recently for the

Professional Standards requirements include those 

that target administrative tasks and business 

processes identified as high risk by the AR and APEC.

 Development of the agency’s redesigned paper 

application prototype was guided by human 

centered design research that seeks to improve

clarity to reduce household reporting mistakes. The 

agency’s upcoming web-based application prototype 

includes elements that respond directly to APEC 

findings on household and administrative 

certification error.

 The agency’s work on the development of model 

requirements for State agency and school district 

information systems has been guided from the start 

by a careful examination and analysis of existing 

system capabilities. It is also guided by USDA 

research that demonstrates a link between certain 

processes and a reduction in program error, 

particularly the automation of student certification 

and meal counting and claiming.

FNS School Breakfast 

Program (SBP)

Root Cause #1: Certification error in the National 

School Lunch Program (NSLP) 

Certification errors occur when a child is placed in the 

wrong meal reimbursement category, such as when a 

child who should receive reduced-price meals is 

certified for free meals. Certification errors can be 

attributed to a number of factors, including but not 

limited to an inability to verify income due to statutory 

limits on verification, failure to verify income when 

selected for verification, and administrative errors.
220 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Agency Program Corrective Actions

Actions Taken to Reduce Improper Payments 

(Actions Taken): 

FNS has completed a number of actions that will serve 

to reduce improper payments due to certification 

error, including:

 FNS is working with a broad group of innovators to 

take the next step in application redesign. The 

agency held a public competition in late 2015 and 

early 2016 to begin development of the agency’s 

first model Web-based application. The agency is 

finalizing that model with the help of software and 

design experts from the Presidential Innovation 

Fellows.

 In school year 2016-2017, the Administrative Review 

updates and final regulations pertaining to the 

Administrative Review will be released. All State 

agencies are expected to implement the updated 

process, which will provide nationwide consistency 

to the monitoring of program requirements. FNS will 

assess technical assistance needs for State agencies 

and provide any needed additional guidance and 

training that is identified.

 FNS issued an updated Eligibility Manual by the end 

of June 2016. This manual provides information and 

guidance for determining students’ eligibility for free 

and reduced-price meals in the NSLP and the SBP;

 FNS is working with its State and local agency 

partners to increase the adoption of the Community 

Eligibility Provision:

o The agency’s education, technical assistance, and 

direct engagement plan helped increase local 

election of the Community Eligibility Provision 

(CEP) to nearly 60 percent of eligible schools in 

the fall of 2016, up from 50 percent one year ago.

o In 2016, FNS conducted seven webinars designed 

to provide technical assistance to districts 

currently implementing or considering CEP. Topics 

included: Improving Direct Certification Systems, 

Publication and Notification Requirements, CEP 

Messaging and Outreach, Making "Cents" of CEP 

at a 40-50 percent ISP, CEP and Alternative 

Breakfast Models, and CEP Best Practices and 
S ECT ION I I I OTHER INFORMATION 221 

Agency Program Corrective Actions

Lessons Learned.

o In January 2016, FNS released Community 

Eligibility Provision: Planning and Implementation 

Guidance, which consolidated existing CEP 

guidance and best practices into one, easy-to-use 

manual. The manual will be updated regularly to 

reflect any future guidance and to address any 

requested clarifications.

o FNS released policy memoranda to develop 

administrative review guidance for CEP schools 

(November 2015) and to clarify State agency 

requirements for ensuring identified student 

percentages are correct when school districts 

elect CEP (November 2015).

o In 2016, FNS created a recommended CEP 

reporting template in order to facilitate and 

streamline the reporting process. For the data 

publication cycle of May 2016, 40 states used the 

recommended FNS template, and 34 states met 

the data publication deadline. FNS published the 

CEP data in July 2016.

In January 2016, FNS announced an opportunity for 

States to apply to participate in new demonstrations 

to evaluate direct certification for both free and 

reduced price meals using Medicaid data. Seven 

States applied and have been approved to begin 

demonstrations in school year 2016-2017. FNS 

expects to receive a similar number of applications 

for school year 2017-2018 from additional States and 

will select the additional States by approximately 

November 2016, with the goal to expand 

demonstrations to up to 20 States through school 

year 2018-2019. FNS will conduct an evaluation 

study to determine the effectiveness of the 

demonstrations in improving program access and 

reducing certification errors by conducting direct 

certification for both free and reduced price meals.

 In FY 2016, FNS provided technical assistance and 

conducted a Tribal Consultation call associated with 

the furthering of direct certification of children 

through the use of Food Distribution Program on 

Indian Reservations (FDPIR) participant data. 
222 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Agency Program Corrective Actions

Technical assistance included the issuance of a 

guidance document, template Agreement to Share 

and Exchange Data, and presentation during the 

National Association annual conference.

Unpaid Meal Charges: 

 The Healthy, Hunger-Free Kids Act of 2010 required 

USDA to do the following: 1) take a closer look at 

unpaid meal charges, 2) examine the current charge 

and alternate meal policies and practices of State 

agencies and LEAs, and 3) report on the feasibility of 

establishing national standards for such policies. 

USDA submitted final recommendations in a Report 

to Congress in June 2016. In developing this report, 

FNS included responses to questions raised during 

the periodic Special Nutrition Program Operation 

Study and evaluation responses to a Request for 

Information (RFI) entitled Unpaid Meal Charges. 

During the open comment period, FNS received 462 

comments, 95 percent of which came from local 

officials with firsthand experience addressing the 

unpaid meal challenge, such as school principals and 

school food service professionals. Incorporating 

feedback from local officials allowed FNS to ensure 

the final recommendations would be feasible and 

accurately reflect the needs of communities 

nationwide.

 In February 2016, FNS hosted two Webinars to share 

the strategies and best practices related to charge 

and alternate meal policies uncovered through the 

RFI.

 In March 2016, FNS invited representatives from 

professional associations and advocacy groups to 

participate in a roundtable discussion to give a 

broad, national perspective on the challenge of 

unpaid meal charges. FNS invited a range of experts 

from organizations that work on child education and 

hunger issues to share the impact of unpaid meal 

charges on their key constituencies.

Actions Planned to Reduce Improper Payments (Actions 

Planned): 

FNS is executing several key measures to improve 

Federal and State oversight and technical assistance in 
S ECT ION I I I OTHER INFORMATION 223 

Agency Program Corrective Actions

order to identify and recover improper payments in 

the NSLP. The following outlines the proactive 

measures FNS is taking to strengthen Program 

integrity:

 FNS and its research partners at the Office of 

Science and Technology Policy’s Social and 

Behavioral Sciences Team (SBST) will finalize analysis 

of their school year 2015-2016 pilot to reduce 

household nonresponse in the school meal 

verification process. FNS and the SBST will continue 

the pilot with a different set of school districts in 

school year 2016-2017.

 The following initiatives started in previous years will 

extend into FY 2017:

o Further improve the model requirements for the 

States and local districts automated information 

systems used to manage school meal programs, 

including functionality to capture eligibility 

certification, meal claiming and reporting, 

program monitoring, administrative review, and 

other components of State and local program 

operations;

o Under a contract with expert consultants, develop 

an intensive data study survey for State and local 

NSLP agencies to establish best practices in the 

collection, reporting, and monitoring of program 

data at State and local levels aimed at improving 

management data. FNS expects to complete the 

survey development and to obtain OMB approval 

for distribution by early FY 2017; and

FNS is completing or has already completed a number 

of proposed rules resulting from the 2010 Child 

Nutrition Reauthorization Act that will serve to reduce 

improper payments due to certification error by

applying: 

 As a method for enforcing program compliance, the 

Child Nutrition Program Integrity Proposed Rule will 

call for fines for egregious or persistent problems, as 

well as those that remain unsolved after initial 

reviews. The State agency will be able to fine local 

program operators and FNS will be able to fine both 

State agencies and local program operators for gross 
224 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Agency Program Corrective Actions

mismanagement. The proposed rule was published 

March 29, 2016; and

 FNS’ examination of unpaid meal charges revealed 

where clarification was needed and what policy 

changes would best support local program operators 

and at-risk students participating in the school meal 

programs nationwide. New policies, to be released

in 2016, will clarify how Federal cost principals on 

allowable and unallowable costs apply when the 

nonprofit school food service account is not repaid 

for meal charges incurred by students, provide 

guidance on developing effective meal charge 

policies, explain how overt identification applies to 

students unpaid meal charges, and address other 

topics needing clarification.

 FNS will also issue a handbook in 2016 summarizing 

the best practices collected throughout the 

examination of unpaid meal charges. The handbook 

will share strategies local program operators can use 

in their efforts to do the following: 1) connect more 

eligible children with free meals, 2) make payment 

more convenient for families, and 3) get buy-in for a 

local charge policy, among other topics.

In June 2016, FNS issued a policy memorandum that 

encourages LEAs to accept eligibility determinations 

from a transferring student’s former LEA in order to 

minimize disruptions in meal benefits for lowincome students and avoid student debt resulting 

from unpaid meal charges. Children who are eligible 

but not certified for free or reduced price meals may 

be unable to afford meals at the "paid" rate. This can 

result in unpaid meal charges and an unnecessary 

loss of funds for the school food service account.

Community Eligibility Provision 

 In the summer of 2016, FNS published the 

Community Eligibility Provision final rule, which 

formalized details of the provision, now in its second 

year of nationwide implementation.

 In the summer of 2016, FNS issued an updated 

policy memo providing guidance and updated 

Questions and Answers (Q&As) on the Community 

Eligibility Provision. This memo provided guidance 
S ECT ION I I I OTHER INFORMATION 225 

Agency Program Corrective Actions

on all aspects of CEP implementation, including 

eligibility for CEP election, meal counting and 

claiming, integrity and recordkeeping, and other 

administrative procedures.

Root Cause #2: Meal counting and claiming error. 

These include: 1) meal claiming (cashier) errors, which 

occur when meals are incorrectly categorized as 

reimbursable or non-reimbursable at the point of sale 

(e.g., number of free, reduced-price, and paid meals), 

and 2) aggregation errors, which occur when a school, 

SFA, or State agency tallies the number of 

reimbursable meals incorrectly and thus makes an 

error in the number of meals claimed for 

reimbursement.

Actions Taken: 

 In FY 2016, FNS expanded the "Team Up for School 

Nutrition Success Initiative," to State-level trainings 

through the Institute of Child Nutrition (ICN). This 

Initiative provides training, technical assistance, and 

peer-to-peer mentorship opportunities to school 

food service professionals. The Team Up For School 

Nutrition Success training is tailored to schools and 

covers topics including menu planning, financial 

management, procurement, and meal presentation 

and appeal, as well as youth engagement tactics and 

strategies to reduce plate waste. Through the Team 

Up initiative, schools have the opportunity to learn 

from each other in order to make positive strides 

toward providing healthy school environments with 

financial stability and strong student participation. 

Actions Planned: 

 FNS will again convene a national workgroup of 

State as well as FNS regional and national office 

representatives to identify priorities for State and 

local automation initiatives to improve program 

accountability, monitoring, training, data quality, 

and other program areas where automation is a 

strong business solution. Initiatives started in

FY 2016 and extending into FY 2017 include the 

following: 

 Planning for national technology training to take 

place in September 2017 for State agencies to 
226 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Agency Program Corrective Actions

showcase best practices in automation for program 

operations including Federal reporting, project 

management, data analytics, direct certification, 

administrative review, and other topics, with the 

goal of assisting States in better use of automation 

and data analytics to improve program operations 

and integrity.

 FNS has an on-going contract with expert 

consultants that continued in FY 2016. The 

consultants are required to provide technical 

assistance directly to States in the areas of training 

and automation in order to assist States in 

identifying and targeting LEAs that are at high risk 

for operational errors and to assist states with 

meeting statutory benchmarks for direct 

certification. In FYs 2013-2015 to date, FNS has 

completed close to 70 site visits to provide State 

agencies with technical assistance on improving 

automation programs and direct certification, 

training, and monitoring of program operations with 

special emphasis on error-prone LEAs.

On March 29, 2016, FNS published the Child Nutrition 

Program Integrity Proposed Rule. The proposed Rule 

identifies criteria for assessments against State

agencies, School Food Authorities, or Schools whose 

program operators fail to correct severe 

mismanagement of any Child Nutrition program, fail to 

correct repeat violations of program requirements, or 

disregard a requirement of which they have been 

informed. The Rule is expected to serve as a deterrent 

against program violators and to contribute to 

safeguarding the integrity of all Child Nutrition 

Programs.

High-Priority Program Discussion: 

Much of the activity summarized above is guided by 

the findings of FNS research. The 2015 APEC-II study, 

in particular, provides the agency with actionable 

information on program error at four critical points: 

1) when households complete applications for school 

meal benefits, 2) when school districts certify those 

applications, 3) when cafeteria staff determine 

whether the meals served are reimbursable, and 
S ECT ION I I I OTHER INFORMATION 227 

Agency Program Corrective Actions

4) when meal counts are aggregated and submitted 

for reimbursement.

In addition to estimating the dollar value of program 

error at each of these steps, APEC II offers insight into 

the nature and causes of that error. With information 

from APEC and other FNS studies, as well as from 

information gathered over many years from State 

agency administrative reviews of school districts and 

FNS reviews of State agencies, FNS has tailored its 

corrective actions to target the processes at greatest 

risk for error. A few examples include:

 The agency’s considerable efforts to improve direct 

certification performance and the adoption of CEP.

APEC-II finds that both of these are associated with 

far less certification error than the traditional 

application process.

 FNS redesign of the Administrative Review (AR) 

process and AR reporting. The redesign of the AR 

was guided by careful review and analysis of past 

review findings, and places increased emphasis on 

the processes and sites that pose the greatest risk 

for error. As mentioned above, the redesigned AR 

reporting form, FNS-640, seeks to capture 

information at a low level of aggregation to support 

more meaningful analysis of the data. Better analysis 

will guide more effective monitoring and technical 

assistance to school districts by State agencies and 

FNS.

 Training modules developed recently for the

Professional Standards requirements include those 

that target administrative tasks and business 

processes identified as high risk by the AR and APEC.

 Development of the agency’s redesigned paper 

application prototype was guided by 

human-centered design research that seeks to 

improve clarity to reduce household reporting 

mistakes. The agency’s upcoming Web-based 

application prototype includes elements that 

respond directly to APEC findings on household and 

administrative certification error.

o The agency’s work on the development of model 

requirements for State agency and school district 
228 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Agency Program Corrective Actions

information systems has been guided from the 

start by a careful examination and analysis of 

existing system capabilities. It is also guided by 

USDA research that demonstrates a link between 

certain processes and a reduction in program 

error, particularly the automation of student 

certification and meal counting and claiming.

FNS Special 

Supplemental 

Nutrition 

Program for 

Women, Infants, 

and Children 

(WIC)

Root Cause #1: Administrative or Process Error made 

by Other party. 

Actions Taken to reduce improper payments in 

Certification Error: 

 FNS awarded a WIC Special Project Grant to a 

competitively selected State agency to identify and 

test risk factors that could prevent participant 

program fraud and abuse (February 2016). 

 FNS conducted Certification/Eligibility (CE) 

Management Evaluation (ME) Reviews for all 90 WIC 

State agencies (FY 2015 and 2016). 

 FNS developed and implemented uniform indicators 

to identify State agencies at risk for WIC certification 

integrity issues (September 30, 2016). 

FNS conducts monthly CE and ME conference call 

with Regional Office staff to clarify 

certification/eligibility policy (Monthly since 

October 2015). 

Actions Planned to reduce improper payments in 

Certification Error: 

 FNS has conducted quarterly reviews and will 

complete a comprehensive analysis of all the CE ME 

Reviews to identify areas where additional training, 

technical assistance, and policy guidance needed 

(November 2016). 

 FNS is preparing to issue Certification Guidance that 

will provide clarification of policy related to income 

eligibility determination, identity, and residency 

requirements in a single document. This will provide 

easy reference for State and local agency use 

(December 2016).

 FNS will continue to conduct monthly CE ME 

conference calls with Regional Office staff to clarify 
S ECT ION I I I OTHER INFORMATION 229 

Agency Program Corrective Actions

certification/eligibility policy (through 

November 2017). 

Actions Taken to reduce improper payments in Vendor 

Error: 

 FNS issued updated WIC State Plan Guidance as part 

of an overall process to improve and streamline the 

monitoring of State plans (May 16, 2016). 

 FNS formed a Funding and Participation ME

workgroup to revise a uniform set of evaluation 

criteria (June 17, 2016). 

 As of writing, FNS has conducted MEs on Funding 

and Participation for 12 WIC State agencies 

(June 23, 2016). 

 FNS assessed data currently collected from WIC 

State agencies on vendor monitoring, and 

compliance activity (August 15, 2016).

 FNS conducted training on vendor management 

practices for regional office staff tasked with vendor 

management oversight (August 25, 2016). 

 FNS created a Vendor Management Handbook as a 

resource for FNS Regional Offices to assist WIC State 

agencies in their vendor management 

responsibilities (September 30, 2016). 

 FNS provided technical assistance to seven targeted 

State agencies with identified weaknesses in the 

vendor management system (November 15, 2016). 

Actions planned to reduce improper payments in 

Vendor Error: 

 FNS will conduct ME Reviews on Funding and 

Participation for 55 WIC States agencies

(September 30, 2017). 

FNS will establish requirements for a new system to 

collect and analyze data from WIC State agencies on 

vendor authorization, training, monitoring and 

compliance activity (June 2017). 
230 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Agency Program Corrective Actions

FSA, CCC Livestock Forage 

Disaster Program 

(LFP) 

Root Cause #1: Administrative or Process Errors Made 

by Federal Agency. 

Actions taken to reduce improper payments. 

 A CCC-770 LFP checklist form was developed for the 

District Director (DD) review of LFP applications in 

order to ensure that payment eligibility and 

payment documentation are correctly reviewed and 

documented and was provided to the field in 

June 2016. 

 A notice was issued in September 2016 to field 

offices to reinforce and outline program policies and 

procedures that payments are to be made on 

correct forage information and livestock, carrying 

capacities, and complete applications for payment.

Actions planned to reduce improper payments 

 N/A

Root Cause #2: Inability to Authenticate Eligibility. 

Actions Taken: 

 A CCC-770 LFP checklist form was developed for the 

DD review of LFP applications to ensure payment 

eligibility and payment documentation are correctly 

reviewed and documented and was provided to the 

field in June 2016. 

 A notice was issued in September 2016 to field 

offices to reinforce and outline program policies and 

procedures for what is acceptable evidence for 

documenting that grazing land was owned or leased 

by a producer and ensuring that it is on file before 

an application is approved.

Actions Planned: 

 N/A

Root Cause #3: Insufficient Documentation to 

Determine. 

 A CCC-770 LFP checklist form was developed for the 

DD review of LFP applications in order to ensure 

payment eligibility and that payment documentation 

are correctly reviewed and documented and was 

provided to the field in June 2016.
S ECT ION I I I OTHER INFORMATION 231 

Agency Program Corrective Actions

 A notice will be issued in September 2016 to field 

offices to reinforce and outline program policies and 

procedures for the following: 1) what is acceptable 

evidence for documenting, 2) what is acceptable 

documentation for determining eligibility for 

completing paperwork for farm operation plans, 

acreage reports, and highly erodible land 

conservation and wetland conservation 

certifications; and what is acceptable evidence that 

grazing land is owned or leased.

Actions Planned: 

 N/A

FNS Child and Adult 

Care Food 

Program (CACFP)

Root Cause # 1: Improper payments are caused by 

sponsor error in determining a participating home’s 

reimbursement tier (tiering error) and/or by FDCH 

error in reporting the number of meals which are 

eligible for reimbursement (claiming error).

Actions Taken: 

 On March 29, 2016, FNS published the Child 

Nutrition Program Integrity Proposed Rule. This 

proposed rule addresses several provisions of the 

Healthy, Hunger-Free Kids Act of 2010 that are 

designed to further enhance the integrity of the 

Child Nutrition Programs. The Child Nutrition 

Program Integrity Rule provides tools to eliminate 

mismanagement of Federal funds and will help:

o Ensure proper and efficient administration of the 

programs

o Reduce misuse of program funds

o Improve compliance with meal patterns and 

nutrition standards

o Reduce participant certification error

o Improve the integrity of the procurement process 

o Reduce meal counting and claiming error through 

increased administrative review and penalties for 

non-compliance

 In March 2016, FNS provided an overview of the 

Child Nutrition Program Integrity Proposed Rule to 

State agency personnel through Webinar training. 
232 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Agency Program Corrective Actions

 In FY 2015, FNS issued the following guidance 

materials to clarify existing regulations, policy, and 

instructions in order to help States and institutions 

improve administrations of CACFP:

o Serious Deficiency, Suspension, and Appeals for 

State Agencies and Sponsoring Organizations, 

updated February 2015 

o At-Risk Afterschool Care Handbook, updated 

July 2015

o Eligibility Manual for School Meals, updated 

July 2015

 In addition, FNS issued policy memos during FY 2015 

on the following program areas, which are intended 

to minimize meal counting and claiming errors, thus 

decreasing improper payments:

o Area Eligibility in Child Nutrition Programs, CACFP 

04-2015, November 21, 2014

o 2015 Edition of Eligibility Manual for School 

Meals, CACFP 18-2015, July 10, 2015

 In June 2016, FNS updated the CACFP Management 

Evaluation Guide. The workgroup focused on 

improving the efficiency of the ME process to better 

assist states in oversight of the Program.

 The HHFKA strengthened CACFP administration, 

certification, and monitoring processes by:

o Providing additional CACFP audit funding and 

making additional monies available to State

agencies for Program improvement. The audit

funds may equal a maximum of 2 percent of the 

CACFP funds used by each State agency during the 

second preceding fiscal year. The State agency 

must demonstrate it can effectively utilize this 

funding for Program improvement. This provision 

is addressed in the proposed rule, Child Nutrition 

Program Integrity, which was published on 

March 29, 2016. The comment period ended on 

July 7, 2016. 

The following study strengthens the financial integrity 

process and work towards improving the balance of 

erroneous payments:
S ECT ION I I I OTHER INFORMATION 233 

Agency Program Corrective Actions

 CACFP Assessment of Sponsors Tiering 

Determinations: an evaluation providing a national

estimate of the share of CACFP-participating FDCHs 

approved for an incorrect level of per meal 

reimbursement based on sponsor tiering 

determinations. This study assesses sponsor tiering 

determinations for family day care homes (FDCHs) 

participating in the CACFP. The assessment 

evaluated FDCHs that were misclassified by 

sponsoring agencies into the wrong tier and the 

resulting erroneous payments for meals and snacks 

reimbursed at the wrong rate. The study will provide 

estimates of the percent of misclassified FDCHs and 

the associated payment errors. The estimated 

completion date for the study is fall 2016. 

Actions Planned: 

Management Evaluations (MEs) – FNS Regional offices 

are in the process of conducting MEs of State agencies

to ensure State agency compliance with Program 

regulations and the Healthy, Hunger-Free Kids Act of 

2010 (HHFKA; PL 111-296). These reviews contain a 

local component that helps FNS assess how effectively 

State agencies are communicating program 

requirements to the local level, thereby minimizing 

the probability of improper payments. 

Two additional CACFP studies related to CACFP 

improper payments were awarded in 2014:

1. Improper Payments in CACFP Centers

This study will provide a comprehensive measure 

of the level of erroneous payments (dollars and 

rates) to child care centers and center sponsors 

participating in CACFP. It builds on the methods 

developed for school meals in the Access, 

Participation, Eligibility and Certification (APEC) 

study series. Estimates will be designed to meet 

the measurement requirements of the Improper 

Payments Elimination and Recovery Act of 2010 

(IPERA). The findings from this study would 

complement the annual measure of 

reimbursement “Tiering” errors in FDCHs for 

IPERA reporting on CACFP. This study has three 

important goals: 1) provide FNS with a reliable 
234 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Agency Program Corrective Actions

measure to estimate erroneous payments in the 

child care center component of the CACFP, 

2) develop reliable estimation models that FNS 

can use to update erroneous payment estimates 

annually, and 3) prepare a white paper on 

methodologies to compute State-level estimates 

of erroneous payments. Data collection began in 

fall of 2016. The estimated completion date for 

the study is fall 2019.

2. CACFP Family Day Care Homes Meal Claims 

Feasibility Study

The aim of this study is to develop and test 

reliable methods to accurately estimate erroneous 

payments of meal claims in FDCHs participating in 

CACFP. The study is testing the feasibility of two 

automated reporting systems for gathering 

information from parents and FDCH providers. 

The estimated completion date for the study is 

March 2018.

RMA Federal Crop 

Insurance 

Corporation 

(FCIC) Program 

Fund

Root Cause #1: Inability to authenticate eligibility 

Inability to authenticate eligibility was the primary 

reason for improper payments errors in 83 percent of 

policies with errors in RMA’s FY 2016 IPERIA sample. 

Most of these authentication errors were attributable 

to the producers (e.g., the program beneficiary) not 

reporting accurate or complete data needed to 

determine eligibility.

The majority of these authentication errors were 

related to actual production history (APH) issues, such 

as the quality and completeness of supporting 

production records that help determine the 

producer’s premium rate and production guarantees. 

For example, some of these errors were due to 

inaccurate or unsupportable records at the unit 

structure (parcel of land). The unit structure is 

determined by the amount and location of producer 

crops and impacts premium prices and indemnity 

payments.

Actions Taken: 

 Incorporated APH reviews into anomalous agent 

review plan (April 2016). RMA developed a Program 
S ECT ION I I I OTHER INFORMATION 235 

Agency Program Corrective Actions

Review Plan to examine policies on the Anomalous 

Agent List in order to determine whether anomalous 

losses are the result of fraud, waste, or abuse. The 

Program Review Plan focuses on conducting a 

detailed APH review of anomalous yields. This 

review will help increase the accuracy of APH 

records and identify agents responsible for improper 

payments.

 Clarify the consequences for not maintaining 

acceptable production records to support the 

Enterprise Unit structure (July 2016). The revised 

2017 Crop Insurance Handbook will clarify that the 

producer must have acceptable records at the 

reported enterprise unit level (all insurable crops in 

a county). If the producer does not have acceptable 

records at the correct unit level, RMA will assign 

yields, which are often lower than the producer’s 

actual yields and can impact the amount of 

insurance payments. The clarification is intended to 

encourage producers to maintain acceptable records 

and increase consistency in RMA’s oversight.

Actions Planned: 

 N/A. 

Root Cause #2: Administrative or process error: 

The remainder of errors in RMA’s FY 2016 IPERIA 

sample were due to administrative or process errors 

caused by the approved insurance providers (AIPs),

insurance agents, or loss adjusters. The most frequent 

type of administrative or process errors were 

transcription or key-stroke errors in records such as 

acreage reports or production records.

Actions Taken: 

 RMA’s new AIP Performance Review (APR) process 

includes tools that focus on the quality of training 

for stakeholders, such as the AIPs, sales agents, and 

loss adjusters, that can help ensure the accuracy of 

data and reduce errors. In May 2016, RMA trained 

its compliance staff on the revised APR process.

Actions Planned: 

 Solicit AIPs’ input on addressing root causes of 

errors (February 2017).
236 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Agency Program Corrective Actions

 RMA will share the results of the FY 2016 IPERIA 

review process and the types of errors leading to 

improper payments. Through the Data Mining 

Steering Committee, RMA will obtain the AIPs’ 

feedback on strategies to reduce errors, with a 

specific focus on administrative or process errors.

NRCS Farm Security 

and Rural 

Investment Act 

Programs (FSRIP)

Root Cause #1: Inability to authenticate eligibility 

Actions Taken: 

 N/A

Actions Planned: 

NRCS will monitor the ProTracts System for Award 

Management (SAM) interface to ensure it prevents 

payments without an active registration. Any 

discrepancies will be noted, and the interface will be 

modified/corrected if needed. In the event the 

interface cannot be modified for the discrepancy, 

NRCS will establish a mitigating control to detect and 

correct the discrepancy. The proposed completion 

date is June 30, 2017. 

Root Cause #2: Administrative or Process Error by 

Federal Agency 

Actions Taken: 

 N/A

Actions Planned: 

 NRCS will provide training and guidance to Program 

and Financial Managers on Improper Payments. The 

training and guidance shall address the legislative 

requirements, as well as the timing and reporting 

requirements. It shall address what an improper 

payment is, how to classify them, when they are to 

be collected, and the testing that conducted on an 

annual basis. The criteria used to evaluate improper 

payments and the policies that govern the programs 

and their compliance shall be reviewed to ensure 

the staff understands the necessity to adhere not 

only to legislative requirements, but also to internal 

Departmental and agency policy. The proposed 

completion date is July 31, 2017.
S ECT ION I I I OTHER INFORMATION 237 

Agency Program Corrective Actions

 NRCS plans to test and monitor Q3 and Q4 FY 2016 

payments in order to ensure the prior year 

corrective actions have been successful and 

maintained. NRCS has statistically sampled and 

tested the first and second quarter FY 2016 

payments. The results were consistent with the 

FY 2015 results of 2.4 percent. NRCS will review and 

analyze the results to determine if additional 

corrective actions are required. NRCS corrective 

actions identified will be immediately implemented 

throughout the FY 2016 testing process, which is 

proposed to be completed by December 31, 2016. 

Internal Control Over Improper Payments

As shown in Table 16 below, USDA programs have implemented internal controls to prevent 

improper payments. USDA programs are: 

• enhancing communication of updated policies and guidance to the field offices; 

• having managers build an atmosphere in which reducing improper payments is a top 

priority; 

• establishing accountability through performance standards; 

• examining root causes of error; 

• developing appropriate corrective actions; and 

• engaging critical stakeholders through communication and educational efforts. 
238 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Table 16: Status of Internal Controls

Internal Control 

Standards

FNS 

NSLP

FNS 

SBP

FNS 

WIC

FSA/CCC 

LFP

RMA 

FCIC

NRCS 

FSRIP SNAP CACFP

Control 

Environment

3 3 3 4 3 3 3 3 

Risk Assessment 3 3 3 3 3 3 3 3 

Control 

Activities

3 3 3 3 3 2 3 3 

Information and 

Communication

3 3 3 4 3 2 3 3 

Monitoring 3 3 3 4 3 3 3 3 

Legend: 

4 = Sufficient controls are in place to prevent improper payments.

3 = Controls are in place to prevent improper payments but there is room for improvement.

2 = Minimal controls are in place to prevent improper payments.

1 = Controls are not in place to prevent improper payments.

Accountability

The following steps were taken to ensure that agency managers are held accountable for 

reducing and recovering improper payments: 

FOOD AND NUTRITION SERVICE (FNS) 

1. FNS has established corporate priorities to improve stewardship of Federal funds and to 

improve program management. Within these priorities are specific goals applicable to 

programs at high risk for erroneous payments. The goal for SNAP, NSLP, SBP, WIC, and 

CACFP is to continue management improvements. The agency goals and priorities are 

incorporated into each manager’s performance plan. Standards for meeting reduction 

targets and establishing and maintaining sufficient internal controls have been incorporated 

into each manager’s plan since FY 2005. 

2. In NSLP and SBP, USDA has a strategic objective to improve nutrition assistance program 

management that is managed by FNS, including a measure to improve the accuracy of 

school administrative processes that certify children for school meals. As part of its actions 

to advance this objective, FNS sets annual priority goals and initiatives, including specific 

goals applicable to programs at high risk for erroneous payments. These agency goals and 

priorities are incorporated into each manager’s performance plan. Standards for meeting 
S ECT ION I I I OTHER INFORMATION 239 

reduction targets and establishing and maintaining sufficient internal controls have been 

incorporated into each manager’s plan since FY 2005. 

3. FNS has a corporate priority to maintain a high standard of integrity in SNAP. This 

priority includes specific goals to support achievement of error rate goals, to use multiple 

strategies to support payment accuracy even as program participation increases, and to 

participate actively in efforts related to the President’s Executive Order on Improper 

Payments. The agency goals and priorities are incorporated into each manager’s 

performance plan. Standards for meeting reduction targets and establishing and 

maintaining sufficient internal controls have been incorporated into each manager’s plan 

since FY 2005. 

FARM SERVICE AGENCY (FSA) 

The following steps were completed by September 2015 and are ongoing: 

1. FSA has a performance management program in place to improve individual and 

organizational effectiveness in accomplishing the agency’s mission and goals. This 

program provides for improper payments to be included in the State Executive Director’s 

Performance Plan, Element 5, titled “Program Management.” 

2. National Office and State Office (STO) managers are held accountable for ensuring that 

program policies and procedures are provided to the STO and County Office (COF) 

employees accurately and on a timely basis. National Office managers are also held 

accountable, as reflected in the performance-based rating measures, for overall program 

administration at the National level. In accordance with agency performance management 

requirements in FSA Handbook 5-PM and FSA Notice PM-2948, all FSA employees have 

performance elements that are aligned with applicable strategic goals and objectives from 

FSA’s FY 2012-16 Strategic Plan. Goal #4, Objectives 1 and 6, specifically address 

accountability and internal controls. In addition, all field office employees who work with 

farm program payments have an improper payments performance standard as detailed in 

FSA Notice PM-2948. 

3. COF employees, including the County Executive Director, are responsible for making 

payments to producers and for following all administrative steps in doing so. Employees 

will be evaluated, through their performance plans, on program delivery, and also on their 

compliance with regulations, policies, and procedures. 

4. The Deputy Administrator of Field Operations will facilitate meetings with the program 

areas to discuss any additional action necessary for senior management to address 

accountability. 
240 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

5. FSA’s 2016-2018 Strategic Plan provides that, in accordance with USDA’s effort to 

develop comprehensive internal controls, quality assurance processes and systems, as 

well as comply with the IPIA, FSA has incorporated the priority of reducing improper 

payments into its strategic planning documents. 

RISK MANAGEMENT AGENCY (RMA) 

1. RMA senior accountable officials’ annual performance plans are tied to Goal #4 of the 

Strategic Plan – “Safeguarding the integrity of the Federal crop insurance program.” 

The performance measure is to reduce the improper payment rate from 5.23 percent in 

2013 to 4.9 percent by 2018. The rate was reduced to 2.2 percent for FY 2015. 

2. RMA incorporated standards in the FY 2016 annual performance plans to ensure that 

compliance personnel conduct Improper Payments Elimination and Recovery 

Improvement Act of 2012 (IPERIA) reviews to measure the Federal Crop Insurance 

Program (FCIP) improper payment error rate and perform data mining reviews to identify, 

reduce, and collect improper payments. RMA conducted Improper Payments Elimination 

and Recovery Improvement Act of 2012 (IPERA) reviews between May 2015 through 

March 2016 using statistical sampling and data mining reports. 

NATURAL RESOURCES CONSERVATION SERVICE (NRCS) 

1. Reducing improper payments is essential to NRCS management goals. To that end, NRCS 

has conducted on-site State audit remediation reviews of easement programs; reviewed and 

sampled various financial transactions related to obligations, advances, and payments; 

created a robust A-123 testing schedule; and included the reduction of improper payments 

in senior managers performance plans.

Agency Information Systems and Other Infrastructure

FOOD AND NUTRITION SERVICE (FNS) 

1. CACFP does not have an infrastructure or methods for producing yearly estimates of 

improper payment rates and dollar values. FNS has developed a measurement 

methodology for one component of the program and is in the process of determining the 

feasibility of measuring error in a second component. 

CACFP payments and claim information are transferred among FNS, State agencies, 

program sponsors, and program sites; each transaction represents a risk for improper 

payment. Because requirements vary significantly for each different type of program 
S ECT ION I I I OTHER INFORMATION 241 

sponsor and site, a full and rigorous assessment of the rate of improper payments is 

extremely complex. 

FNS did not have the resources to develop a measurement approach for erroneous 

payments in CACFP, and therefore, submitted their initial request for resources in the 

FY 2006 budget. The original plan was to develop a program-wide study to examine 

reimbursements for meals served and develop program error measurements that complied 

with the requirements of the Improper Payments Information Act of 2002 (IPIA). Because 

of the complexities of the program, FNS estimated that it would cost $20 million to 

measure improper payments at the precision required by IPIA. Although the FY 2006 

budget request included funds designated for the nationally representative CACFP 

erroneous payments study, funds were not provided by Congress. 

FNS awarded a contract in September 2014 to conduct a new CACFP study to look at 

alternative methodologies for developing a reliable measurement for the meal claims 

component. This new study was completed on September 30, 2016. 

2. The NSLP does not have an administrative infrastructure for producing yearly estimates of 

improper payment rates and dollar values. FNS uses its periodic Access, Participation, 

Eligibility, and Certification (APEC) study to provide a baseline error rate estimate and an 

aging methodology to update this estimate annually using program administrative data and 

macroeconomic indicators. FNS has worked with OMB to provide an annual estimate 

using an approved methodology to estimate payment errors. The continuance of the APEC 

study will enable FNS to estimate and measure changes in erroneous payments over time 

and would help inform FNS, Congress, the States, and advocacy partners for the 

development of additional guidance, training, and policy options. 

3. The FNS FY 2016 Budget requested an increase in funding for the following program 

integrity line items in order to establish and maintain effective internal controls to reduce 

improper payments as follows: 

a. Training and Technical Assistance

b. CN Payment Accuracy

CN Training and Technical Assistance—an increase of $12.1 million was requested 

($8,137,000 enacted for FY 2015). Effective and continual training and technical 

assistance are necessary to help States properly administer the Child Nutrition program to 

ensure that States are equipped to identify and prevent fraud and abuse. This is especially 

critical because of the changes made to these vital programs by the Healthy, Hunger-Free 

Kids Act of 2010, which reauthorized these programs and instituted new requirements on 
242 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

State agencies. This request reflects an increase in Federal activity associated with this 

project, including implementation of the new requirements.

CN Payment Accuracy—an increase of $658,000 was requested ($9,904 million enacted 

for FY 2015). Robust Federal oversight, monitoring, and technical assistance are essential 

to the identification, prevention, and resolution of erroneous payments. This request 

supports FNS’ efforts to reduce erroneous payments through training, technical assistance, 

and oversight. An increase of $500,000 is related to an Enhanced State/Local Reporting 

proposal. 

FNS’ FY 2016 Budget reflects the same level of funding as in previous years to continue 

effective internal control measures to promote program integrity for the Coordinated 

Review Effort. 

Coordinated Review Effort—$10 million was provided for training and technical 

assistance for State agencies responsible for reviewing local school food authorities that 

participate in the school meal programs. Local administrative reviews help ensure that 

school children are offered meals that meet regulatory standards and that the financial 

claims associated with those meals are appropriate.

FARM SERVICE AGENCY (FSA) 

FSA has the internal controls, human capital, information systems, and other infrastructure 

needed to reduce improper payments. 

RISK MANAGEMENT AGENCY (RMA) 

One of RMA’s primary tools for assessing approved insurance providers’ (AIPs) compliance 

with all crop insurance program requirements is the National Program Operations Review 

(NPOR). RMA contracted with a business consultant to assist in the redesign of RMA’s AIP 

operations reviews to more effectively evaluate the AIP’s internal controls and identify and 

address program vulnerabilities. 

Discretionary Funding – Salaries and Expenses (S&E) – Discretionary funds for the Federal 

crop insurance programs cover most of the Federal salaries and related expenses necessary to 

managing the program. The 2017 Budget includes about $67 million in direct discretionary 

appropriations for these costs, which is $8 million below FY 2016. In addition, Section 11021 

of the Agricultural Act of 2014 allowed the transfer of up to $9 million each fiscal year from 

the FCIC mandatory account to the RMA S&E account for program compliance and integrity 

reviews. Further, the discretionary appropriation would allow the transfer of up to $20 million

in (catastrophic level of coverage) Catastrophic Risk Protection (CAT) fees into the RMA S&E 

account as authorized by the Federal Crop Insurance Act.
S ECT ION I I I OTHER INFORMATION 243 

NATURAL RESOURCES CONSERVATION SERVICE (NRCS)

NRCS has the internal controls, human capital, and information systems and other 

infrastructure it needs to reduce improper payments to the levels the agency has targeted.

Barriers

FOOD AND NUTRITION SERVICE (FNS) 

Federal nutrition assistance was not designed with accuracy as its primary purpose; 

accountability is often a secondary consideration to other concerns in managing the program. 

Some policy choices, many embodied in law, greatly impact the risk of improper payments and 

the ability to mitigate them. Congress, through legislation, defines the limits of authority for 

accountability.

In many instances, the mandated goal of providing easy access to benefits must be balanced 

against the goal of reducing improper and erroneous payments. Provisions that improve access 

can increase the risk of improper payments. While the risks involved vary by program, some 

general characterizations can be made:

Program administration is highly decentralized and can involve a myriad of governmental and 

non-governmental organizations. For example, there are approximately 58,403 child and adult 

care centers, 824 Family Day Care Home (FDCH) sponsoring organizations, and 

approximately 117,621 FDCH providers through which benefits are distributed. Many of these 

simply do not have the capacity to develop robust accountability processes, which puts a 

special burden on Federal and State oversight and technical assistance systems.

States and localities tend to focus on managing local funds, rather than Federal funds. One 

hundred percent of benefit costs and a significant portion of administrative expenses incurred 

by State agencies are funded by Federal appropriations. Although this distribution of costs has 

contributed to the strength of the nutrition safety net with national eligibility standards and 

program access, States and localities may reasonably be expected to put a higher priority on 

managing programs funded with local revenues than those subsidized by the Federal 

government. 

Proper implementation of nutrition assistance programs requires a high degree of accuracy. 

This accuracy helps to ensure that benefits are targeted to those most in need, that there is 

uniformity of access across the country, and that benefits can only be used for food. Such 

exacting standards do, however, create a significant number of opportunities for error. 

Recent Child Nutrition reauthorization legislation, while it did include some changes requested by 

the Administration to improve accountability, limited USDA’s ability to act in this area because of 
244 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

concerns about potential barriers to participation. In many instances, the mandated goal of 

providing easy access to benefits must be balanced against the goal of reducing improper and 

erroneous payments. In addition, program administration is highly decentralized; there are 

approximately 100,000 school meals locations at which benefits are provided. Many of these 

benefit providers simply do not have the capacity to develop robust accountability processes. For 

these reasons, any approach to reducing school meals improper payments must do the following: 

1. Improve accuracy without compromising access for low-income families. A process that 

keeps eligible children from participating would undermine the program; 

2. Not unduly increase burden on schools. Many schools consider the program burdensome 

now. Adding burden could discourage schools from participating; 

3. Be cost effective. Improving accuracy is potentially resource-intensive, and policymakers 

must not create a process that increases net program costs; and 

4. Answer the needs of other users of program data, which often use certification data to 

distribute millions of dollars in other kinds of benefits to schools. As these needs 

contribute to the problem, a solution may also require new commitments from those users. 

In SNAP, the 2002 Farm Bill restricted the liability levels States can be sanctioned due to high 

error rates and also restricted the amount of bonus funding available to States that do a good 

job reducing and maintaining a low error rate. The goal of providing easy access to benefits 

must be balanced with the goal of reducing improper and erroneous payments. 

FARM SERVICE AGENCY (FSA) 

One barrier that limits FSA’s ability to recover improper payments is the Department of 

Agriculture Reorganization Act of 1994, Section 281. This legislation provides that “Each 

decision of a State, County, or area committee or an employee of such a committee, made in 

good faith in the absence of misrepresentation, false statement, fraud, or willful misconduct 

shall be final not later than 90 calendar days after the date of filing of the application for 

benefits, [and]...no action may be taken...to recover amounts found to have been disbursed as 

a result of the decision in error unless the participant had reason to believe that the decision was 

erroneous.” This statute is commonly referred to as the “Finality Rule.” 

RISK MANAGEMENT AGENCY (RMA) 

RMA is not subject to any critical statutory or regulatory barriers to reducing improper 

payments. 
S ECT ION I I I OTHER INFORMATION 245 

NATURAL RESOURCES CONSERVATION SERVICE (NRCS) 

NRCS is not aware of any legislative barriers that will inhibit its payment processes; however, 

in October 2015, NRCS embarked on an Administrative Transformation of its administrative 

services. The consolidation and standardization of functions will lead the way to ensuring that 

all easement and program obligations, acquisitions, and payments will be conducted by one 

centralized national branch, rather than separately by individual States. As with any transition, 

there will be learning curves and challenges associated with change.

Recapture of Improper Payments Reporting

In FY 2016, the Department required that all programs with over $1 million in annual 

expenditures perform payment recapture audits, or provide justification that a payment 

recapture audit program would not be cost effective, per OMB Circular A-123 Appendix C. 

The following results highlight the payment recapture activities completed in FY 2016: 

1. USDA recaptured approximately $0.43 million from its Supplier Credit Recovery Audit 

contractor, $9.42 million from USDA programs’ internal payment recapture audits, and 

$1,041.58 million outside of payment recapture audits. The results are shown in Table 17. 

2. USDA distributed $9.81 million in recovered funds in accordance with IPERA as shown 

in Table 18. 

3. In FY 2016, 126 USDA programs and activities had over $1 million in annual 

expenditures. The Rental Assistance Program conducted payment recapture auditing 

through a Departmental contract; 61 programs participated in the Supplier Credit 

Recovery Audit, and 35 programs developed internal payment recapture plans, which 

were approved by the Office of the Chief Financial Officer (OCFO). These internal plans 

identify and recover improper payments. Activities include data mining-initiated reviews, 

limited scope reviews, special investigations, eligibility verification, agency-wide audits, 

etc. As outlined in OMB Circular A-123 Appendix C Pat 1 Section D.5-6, 30 programs 

notified OMB that payment recapture audits would not be cost effective in May 2016 and 

submitted justifications for that determination. A detailed list of programs by category 

follows. 

SUPPLIER CREDIT RECOVERY AUDIT PROGRAMS

1. Agriculture Marketing Service (AMS) Commodity Purchase Programs

2. AMS Grants Programs

3. AMS Salaries and Expenses
246 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

4. APHIS Buildings and Facilities

5. APHIS Indemnity Program

6. APHIS Salaries and Expenses

7. APHIS Trust Funds 

8. Agricultural Research Service (ARS) Buildings and Facilities

9. CCC Export 416 Ocean Transportation 

10. CCC Food for Progress Program 

11. Office of Civil Rights (CR) Salaries and Expenses

12. Departmental Administration (DA) Agriculture Buildings and Facilities

13. DA Biobased Markets Program

14. DA Hazardous Materials Management

15. Foreign Agricultural Service (FAS) McGovern-Dole Food for Education Grants 

16. FFAS Salaries and Expenses

17. FNS Child and Adult Care Food Program 

18. FNS Commodity Supplement Food Program 

19. FNS The Emergency Food Assistance Program

20. FNS Food Distribution Program on Indian Reservations 

21. FNS National School Lunch Program 

22. FNS Program Administration

23. FNS Summer Food Service Program

24. Food Safety and Inspection Salaries and Expenses 

25. FSA Public Law 480 

26. FS Capital Improvement and Maintenance 

27. FS Forest and Rangeland Research

28. FS Forest Service Permanent Appropriations 

29. FS Forest Service Trust Funds 
S ECT ION I I I OTHER INFORMATION 247 

30. FS Land Acquisition 

31. FS Management of National Forest Lands for Subsistence Uses 

32. FS National Forest System

33. FS Range Betterment Fund

34. FS State and Private Forestry

35. FS Stewardship Contracting Product Sales 

36. FS Wildland Fire Management 

37. FS Wildland Fire Management- Suppression 

38. FS Working Capital Fund 

39. Grain Inspection Packers and Stockyards Administration 

40. National Appeals Division (NAD) Salaries and Expenses 

41. NRCS Conservation Technical Assistance (non-Farm Bill)

42. NRCS Farm Bill Financial Assistance

43. NRRC Farm Bill Technical Assistance

44. NRCS Hurricane Sandy, Emergency Watershed Protection Program 

45. NRCS Plant Materials Centers

46. NRCS Salaries and Expenses

47. NRCS Snow Survey and Water Supply Forecasting 

48. NRCS Soil Surveys 

49. NRCS Watershed Programs

50. Office of Advocacy and Outreach’s Outreach for Socially Disadvantaged Farmers

51. Office of Budget and Program Analysis Salaries and Expenses

52. Office of the Chief Economist Salaries and Expenses

53. OCFO Salaries and Expenses

54. OCIO Salaries and Expenses

55. OGC Salaries and Expenses
248 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

56. OIG Salaries and Expenses

57. Office of the Secretary Salaries and Expenses

58. RD Salaries and Expenses

59. RHS Voucher Program (Section 542) [Note #1] 

60. RUS Water and Waste Disposal Systems for Rural Communities- Loans

61. REE Salaries and Expenses

PROGRAMS AND ACTIVITIES WITH INTERNAL PAYMENT RECAPTURE PLAN 

1. APHIS Internal Program

a. APHIS Cooperative Agreements

2. FSA/CCC Internal Program [Note #2] 

a. CCC Administrative Contracts

b. CCC Agricultural Wool Apparel Manufacturers Trust Funds 

c. CCC Biomass Crop Assistance Program

d. CCC Conservation Reserve Program 

e. CCC Cotton Transition Assistance Program 

f. CCC Emergency Assistance for Livestock, Honeybees, and Farm Raised Fish 

Program

g. CCC Emergency Forestry Conservation Reserve

h. CCC Farm Storage Facility Loan

i. CCC Food for Progress Program [Note #3] 

j. CCC Hazardous Waste Activities

k. CCC Livestock Forage Disaster Program

l. CCC Livestock Indemnity Programs 

m. CCC Loan Deficiency Payments

n. CCC Marketing Assistance Loan Program

o. CCC Marketing Programs
S ECT ION I I I OTHER INFORMATION 249 

p. CCC Noninsured Crop Disaster Assistance Program

q. CCC Pima Agriculture Cotton Trust Fund 

r. CCC Supplemental Revenue Assistance Payments Program

s. CCC Tobacco Transition Payment Program 

t. CCC Tree Assistance Program

u. CCC Upland Cotton Economic Adjustment Assistance Program 

v. FSA Agricultural Credit Insurance Fund - Program Account 

w. FSA Emergency Conservation Program

x. FSA Reimbursement Transportation Cost Payment Program 

y. FSA State Mediation Grants

3. NIFA Internal Program [Note #2] 

a. NIFA Community Foods Project 

b. NIFA Extension Activities

c. NIFA Integrated Activities

d. NIFA Research and Education Activities

4. RD Internal Program

a. RHS Direct Single Family Housing 

b. RHS Guaranteed Single Family Housing

c. RHS Rental Assistance Program [Note #4] 

d. RHS Voucher Program (Section 542) [Note #1] 

5. RMA Federal Crop Insurance Corporation. 

PROGRAMS AND ACTIVITIES THAT DETERMINED PAYMENT RECAPTURE AUDITS

NOT COST EFFECTIVE [NOTE # 5]

1. FSIS Cooperative State Food Safety and Inspection 

2. RBS Grant Programs and RBS Cooperative Agreement Program

3. RBS Guaranteed Loan Programs
250 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

4. RBS Relending Programs

5. RBS Payment Programs

6. RHS Community Program Grants 

7. RD RHS Rural Community Development Initiative Grants

8. RHS Farm Labor Housing Loans (Section 514) Farm Labor Housing Grants 

(Section 516) 

9. RHS Direct Community Facility Loans

10. RHS Housing Loans and Grants - Other

11. RHS Guaranteed Community Facility Loans

12. RHS Guaranteed Multi-Family Housing Loans (Section 583 Loans)

13. RHS MFH Preservation & Revitalization Demo Program: 514/516 Loans/Grants & 

515 Loans 

14. RHS Rural Rental Housing Loans (Section 515 Direction Rural Rental Housing Loans) 

15. RUS Broadband Telecom Loans - Treasury Rate

16. RUS Community Connect Grants 

17. RUS Congressional Earmarked Funds 

18. RUS Electric Loan Programs (CFDA 10.850) - Direct Treasury Rate

19. RUS Electric Loan Programs (CFDA 10.850) - FFB Guaranteed

20. RUS Grants- Other Electric - Telecom. WEP

21. RUS Public Television Digital Transition Grants

22. RUS Revolving Loan Fund Program 

23. RUS Rural Telecommunications Hardship Loans - Direct Telecom. Loans

24. RUS Rural Telecommunications Loans - FFB Telecom. Loans

25. RUS Rural Telecommunications Loans - Treasury Telecom Loans

26. RUS Rural Utilities Electric Program - Direct 5 percent 

27. RUS Rural Utilities Electric Program -Municipal Rate

28. RUS Water and Waste Disposal Systems Loans and Grants Section 306C 
S ECT ION I I I OTHER INFORMATION 251 

29. RUS Water and Waste Disposal Systems for Rural Communities - Grant

30. RUS Water and Waste Disposal Systems for Rural Communities -Loans

31. RUS Water and Waste Guaranteed Loans

PROGRAMS AND ACTIVITIES OVER ONE MILLION DOLLARS NOT CURRENTLY 

CONDUCTING RECOVERY AUDITS 

1. CCC Agriculture Risk Coverage and Price Loss Coverage 

2. CCC Dairy Indemnity

3. CCC Export Guarantee Program 

4. CCC Marginal Protection Program for Dairy Producers

5. FNS America Samoa

6. FNS Commonwealth of the Northern Mariana Islands 

7. FNS Farmers Market Nutrition Program

8. FNS Nutrition Assistance-Puerto Rico

9. FNS School Breakfast Program

10. FNS Senior Farmers Market Nutrition Program 

11. FNS Special Milk Program

12. FNS Supplemental Nutrition Assistance Program 

13. FNS Women, Infants, and Children 
252 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Table 17: Overpayment Recaptures with and without Recapture Audit Programs ($ In Millions) 

Activity

Rental 

Assistance 

[Note #4]

Supplier Credit 

Recovery Audit 

Program

APHIS Internal 

Program

Overpayments Recaptured through Payment Recapture Audits Contracts

Amount Identified $0.00 $0.43 $0.00

Amount Recaptured $0.00 $0.43 $0.00

CY Recapture Rate 0% 100% 0%

CY + 1 Recapture Rate Target 0% 100% 0%

CY + 2 Recapture Rate Target 0% 100% 0%

Grants

Amount Identified $0.00 $0.00 $0.06

Amount Recaptured $0.00 $0.00 $0.06

CY Recapture Rate 0% 0% 100%

CY + 1 Recapture Rate Target 0% 0% 100%

CY + 2 Recapture Rate Target 0% 0% 100%

Loans

Amount Identified $0.00 $0.00 $0.00

Amount Recaptured $0.00 $0.00 $0.00

CY Recapture Rate 0% 0% 0%

CY + 1 Recapture Rate Target 0% 0% 0%

CY + 2 Recapture Rate Target 0% 0% 0%

Other

Amount Identified $0.00 $0.00 $0.00

Amount Recaptured $0.00 $0.00 $0.00

CY Recapture Rate 0% 0% 0%

CY + 1 Recapture Rate Target 0% 0% 0%

CY + 2 Recapture Rate Target 0% 0% 0%

Total

Amount Identified $0.00 $0.43 $0.057

Amount Recaptured $0.00 $0.43 $0.057

Overpayments Recaptured outside of Payment Recapture Audits

Amount Identified $0.00 $0.00 $0.00

Amount Recaptured $0.00 $0.00 $0.00
S ECT ION I I I OTHER INFORMATION 253 

Activity

FSA/CCC 

Internal 

Program

NIFA Internal 

Program

RD Internal 

Programs

Overpayments Recaptured through Payment Recapture Audits Contracts

Amount Identified $0.00 $0.00 $0.00

Amount Recaptured $0.00 $0.00 $0.00

CY Recapture Rate 0% 0% 0%

CY + 1 Recapture Rate Target 0% 0% 0%

CY + 2 Recapture Rate Target 0% 0% 0%

Grants

Amount Identified $0.00 $0.00 $0.00

Amount Recaptured $0.00 $0.00 $0.00

CY Recapture Rate 0% 0% 0%

CY + 1 Recapture Rate Target 0% 0% 0%

CY + 2 Recapture Rate Target 0% 0% 0%

Loans

Amount Identified $0.00 $0.00 $2.05

Amount Recaptured $0.00 $0.00 $1.59

CY Recapture Rate 0% 0% 78%

CY + 1 Recapture Rate Target 0% 0% 83%

CY + 2 Recapture Rate Target 0% 0% 88%

Other

Amount Identified $0.00 $0.00 $0.00

Amount Recaptured $0.00 $0.00 $0.00

CY Recapture Rate 0% 0% 0%

CY + 1 Recapture Rate Target 0% 0% 0%

CY + 2 Recapture Rate Target 0% 0% 0%

Total

Amount Identified $0.00 $0.00 $2.05

Amount Recaptured $0.00 $0.00 $1.59

Overpayments Recaptured outside of Payment Recapture Audits

Amount Identified $0.00 $0.00 $2.29

Amount Recaptured $0.00 $0.00 $1.70
254 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Activity

RMA- Federal 

Crop Insurance 

Corporation 

[Note #6]

Programs Not

Currently 

Conducting 

Recovery Audits

Overpayments 

Recaptured 

Outside of 

Payment 

Recapture 

Audits

Overpayments Recaptured through Payment Recapture Audits Contracts

Amount Identified $0.00 $0.00 $0.00

Amount Recaptured $0.00 $0.00 $0.00

CY Recapture Rate 0% 0% 0%

CY + 1 Recapture Rate Target 0% 0% 0%

CY + 2 Recapture Rate Target 0% 0% 0%

Grants

Amount Identified $0.00 $0.00 $0.00

Amount Recaptured $0.00 $0.00 $0.00

CY Recapture Rate 0% 0% 0%

CY + 1 Recapture Rate Target 0% 0% 0%

CY + 2 Recapture Rate Target 0% 0% 0%

Loans

Amount Identified $0.00 $0.00 $0.00

Amount Recaptured $0.00 $0.00 $0.00

CY Recapture Rate 0% 0% 0%

CY + 1 Recapture Rate Target 0% 0% 0%

CY + 2 Recapture Rate Target 0% 0% 0%

Other

Amount Identified $0.55 $0.00 $0.00

Amount Recaptured $7.77 $0.00 $0.00

CY Recapture Rate 1413% 0% 0%

CY + 1 Recapture Rate Target 100% 0% 0%

CY + 2 Recapture Rate Target 100% 0% 0%

Total

Amount Identified $0.55 $0.00 $0.00

Amount Recaptured $7.77 $0.00 $0.00

Overpayments Recaptured outside of Payment Recapture Audits

Amount Identified $0.00 $0.00 $1,178.84

Amount Recaptured $0.00 $0.00 $1,041.58
S ECT ION I I I OTHER INFORMATION 255 

Activity USDA TOTAL

Overpayments Recaptured through Payment Recapture Audits Contracts

Amount Identified $0.43

Amount Recaptured $0.43

CY Recapture Rate 100%

CY + 1 Recapture Rate Target 100%

CY + 2 Recapture Rate Target 100% 

Grants

Amount Identified $0.057

Amount Recaptured $0.057

CY Recapture Rate 100%

CY + 1 Recapture Rate Target 100%

CY + 2 Recapture Rate Target 100%

Loans

Amount Identified $2.05

Amount Recaptured $1.59

CY Recapture Rate 78%

CY + 1 Recapture Rate Target 83%

CY + 2 Recapture Rate Target 88%

Other

Amount Identified $0.55

Amount Recaptured $7.77

CY Recapture Rate 1413% 

CY + 1 Recapture Rate Target 100% 

CY + 2 Recapture Rate Target 100% 

Total

Amount Identified $3.09

Amount Recaptured $9.85

Overpayments Recaptured outside of Payment Recapture Audits

Amount Identified $1,178.84

Amount Recaptured $1,041.58
256 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Table 18: Disposition of Funds Recaptured Through Payment Recapture Audit Programs

Program or 

Activity

Amount 

Recovered

Type of 

Payment

Agency 

Expenses to 

Administer 

the 

Program

Payment 

Recapture 

Auditor 

Fees

Financial 

Management 

Improvement 

Activities

Original 

Purpose

Office of 

Inspector 

General

Returned 

to 

Treasury

Other

[Note #7]

Rental 

Assistance $0.00 Grants $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Supplier Credit 

Recovery Audit 

Program $0.43 Contracts $0.00 $0.037 $0.029 $0.092 $0.006 $0.015 $0.246

APHIS Internal 

Program $0.057 Grants $0.00 $0.00 $0.00 $0.00 $0.00 $.057 $0.00

FSA/CCC 

Internal 

Program 0.00

Contracts, 

Benefits, 

Loans & 

Other $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

NIFA Internal 

Program 0.00 Grants $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

RD Internal 

Program $1.59

Grants 

and Loans $0.00 $0.00 $0.00 $0.00 $0.00 $1.59 $0.00

RMA- Federal 

Crop Insurance 

Corporation $7.77 Other $0.00 $0.00 $0.00 $7.77 $0.00 $0.00 $0.00
S ECT ION I I I OTHER INFORMATION 257

Program or 

Activity

Amount 

Recovered

Type of 

Payment

Agency 

Expenses to 

Administer 

the 

Program

Payment 

Recapture 

Auditor 

Fees

Financial 

Management 

Improvement 

Activities

Original 

Purpose

Office of 

Inspector 

General

Returned 

to 

Treasury

Other

[Note #7]

Programs Not 

Currently 

Conducting 

Recovery 

Audits $0.00 N/A $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Overpayments 

Recaptured 

Outside of 

Payment 

Recapture 

Audits $0.00 N/A $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

USDA Total $9.84 N/A $0.00 $0.04 $0.03 $7.86 $0.01 $1.66 $0.25 
258 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Table 19: Aging of Outstanding Overpayments Identified in the Payment Recapture Audits ($ In Millions) 

Program or Activity Type of Payment Amount 

Outstanding

(0 – 6 months)

Amount 

Outstanding

(6 months to 1 year)

Amount 

Outstanding

(over 1 year)

Amount 

determined to 

not be collectable 

Rental Assistance Grant $0.00 $0.00 $0.00 $0.013

Supplier Credit Recovery 

Audit Program Contract $0.00 $0.00 $0.00 $0.00

APHIS Internal Program Grant $0.00 $0.00 $0.00 $0.00

FSA/CCC Internal 

Program

Contract, Benefit, 

Loans & Other $0.00 $0.00 $0.00 $0.00

NIFA Internal Program N/A N/A N/A N/A N/A

RD Internal Program Loan $0.14 $0.18 $2.72 $0.00

RMA Federal Crop 

Insurance Corporation Other $1.05 $1.55 $7.56 $0.00

Programs Not Currently 

Conducting Recovery 

Audits N/A $0.00 $0.00 $0.00 $0.00

Overpayments 

Recaptured Outside of 

Payment Recapture 

Audits N/A $0.00 $0.00 $0.00 $0.00

TOTAL $1.19 $1.73 $10.28 $0.04 
S ECT ION I I I OTHER INFORMATION 259 

Note #1: The RD RHS Voucher Program (Section 542) is participating in both the Supplier 

Credit Recovery Audit Program and the RD Internal Program. 

Note #2: The CCC, FSA, and NIFA internal recovery audit plans were approved in the fourth 

quarter of FY 2016 and will start reporting recoveries in the first quarter of FY 2017. 

Note #3: The Food for Progress Program is participating in both the Supplier Credit Recovery 

Audit Program and the FSA/CCC Internal Program. 

Note #4: The Rental Assistance Program conducted program recovery auditing through a 

recovery audit contract. This contract ended in FY 2014. FY 2016 is the last year of reporting 

under this program since all recoveries identified have now been recovered or written off per 

government-wide debt management standards. Rural Development’s (RD) internal recovery 

audit program which was approved in FY 2016, covers the Rental Assistance Program. 

Note #5: OMB was notified of RD’s and FSIS’ determination in May 2016. FSIS determined 

that conducting recovery audits for their State Meat and Poultry Inspection Programs (SMPI) 

would not be cost effective because the cost benefit of conducting a recovery audit could 

possibly yield a negative return. FSIS currently performs comprehensive fiscal reviews of their 

state inspection programs, and they believe a recovery audit program would be duplicative of 

existing audit efforts. The RD internal control structure ensures operational effectiveness and 

efficiency, reliable financial reporting, and compliance with laws, regulations, and policies. RD 

employs controls and processes that prevent, detect, and recover improper payments, and the 

programs that have submitted a cost-effective waiver have identified minimal overpayments 

during the past 2 fiscal years. Any recaptured recoveries have been substantially minimal 

compared to the costs of designing and implementing additional assessments targeted at 

identifying improper payments. RD believes implementing a recovery audit program would be 

costly to reduce rates that are already low and would greatly impact the mission and program 

operations of the agency. 

Note #6: RMA Calendar Year (CY) Recapture Rate percentage is greater than 100 percent

because the amount collected includes final findings collected in the calendar year, but could 

have also been identified in previous CYs. 

Note #7: The Other amounts are funds that have been recovered but have not yet completed 

the disposition process. 
260 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Additional Comments

COMPLIANCE WITH IPERA REQUIREMENTS

The USDA Office of Inspector General (OIG) conducts a compliance review of IPERA 

requirements annually. OIG’s USDA IPERA Compliance Review for FY 2015, dated 

May 2016, found that USDA agencies did not fully comply with three of six IPERA 

requirements. Information on the findings, accomplishments, and planned actions are included 

in Section 1: Management’s Discussion and Analysis, Compliance with Laws and Regulations. 

Programs non-compliant with IPERA for one fiscal year must submit a plan to Congress 

describing the actions that the agency will take to become compliant. For programs noncompliant with IPERA for 2 consecutive fiscal years, OMB is to review the program and 

determine if additional funding would help the agency come into compliance. For programs 

that are non-compliant with IPERA for 3 consecutive fiscal years, the agency must submit to 

Congress a reauthorization proposal for each discretionary program, or proposed statutory 

changes necessary to bring a mandatory program into compliance. 

STATUS OF NON-COMPLIANT PROGRAMS 

It appears that USDA will be non-compliant with three of the six IPERA requirements for

FY 2016. OIG will conduct the FY 2016 USDA’s IPERA Compliance Review and will publish 

a report in FY 2017. 

PROGRAMS NON-COMPLIANT WITH IPERA:

The following programs are projected to be non-compliant with IPERA for one year: 

• Farm Services Agency (FSA) Loan Deficiency Program (LDP) did not meet their 

reduction target. 

• FSA Livestock Indemnity Program (LIP) did not meet their reduction target and reported 

an error rate over ten percent.

The following programs are projected to be non-compliant with IPERA for two years: 

• FSA Livestock Forage Disaster Program (LFP) did not meet their reduction target. 

• FSA Supplemental Revenue Assistance Payments (SURE) did not meet their reduction 

target and reported an error rate over ten percent.

• Food and Nutrition Service (FNS) Supplemental Nutrition Assistance Program (SNAP) 

did not report an error rate. 
S ECT ION I I I OTHER INFORMATION 261 

The following programs are projected to be non-compliant with IPERA for four or more years: 

• FNS National School Lunch Program did not meet their reduction target and reported an 

error rate over ten percent.

• FNS National School Breakfast Program did not meet their reduction target and reported 

an error rate over ten percent.

• FNS Special Supplemental Nutrition Program; Women, Infants, and Children (WIC) did 

not meet their reduction target.

• FNS Child and Adult Care Food Program (CACFP) did not report an error rate. 

Agency Reduction of Improper Payments with the Do Not Pay 

Initiative

USDA continued to expand its use of the Do Not Pay (DNP) portal in FY 2016 with Rural 

Development (RD) alone enrolling over 1,600 new users. USDA has incorporated the DNP

databases in the following ways. 

1. The death records maintained by the Commissioner of Social Security are checked 

extensively for FSA, CCC, and RMA awards outside of the DNP portal. Several 

additional programs use this database in pre-award activities in the DNP portal. All 

USDA payments made through the U.S. Department of the Treasury (Treasury) are 

checked against this database on a post-payment basis. Our very small number of 

improper payments identified in the post-payment review (see Table 20) demonstrates 

the effectiveness of our pre-award activities.

2. The General Services Administration’s Excluded Parties List System (EPLS), or the 

updated System for Award Management (SAM)) database is checked at pre-award for 

all contracts, grants, cooperative agreements, and insurance programs. All USDA 

payments made through Treasury are checked against this database on a post-payment 

basis. Our very small number of improper payments identified in the post-payment 

review (see Table 20) demonstrates the effectiveness of our pre-award activities. 

3. The Credit Alert System or Credit Alert Interactive Voice Response System of the 

U.S. Department of Housing and Urban Development (CAIVRS) is used by USDA loan 

programs at time of award. RD updated its system of records notice and signed a 

memorandum of understanding with Treasury to begin providing CAIVRS data to 

Treasury. 

4. RD is using the Debt Check Database of the Treasury (Debt Check) for pre-award.
262 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

5. USDA is using the List of Excluded Individuals/Entities (LEIE) of the Office of 

Inspector General of the U.S. Department of Health and Human Services for pre-award 

for some loans, grants, and contracts.

6. USDA is not currently using the Prisoner Update Processing System of the Social 

Security Administration (PUPS) but is evaluating programs that have the legal authority 

to use and benefit from this database. State officials in our food and nutrition programs 

are required to use prisoner data when making awards, and some use PUPS. 

USDA’s use of these databases is through Treasury’s DNP portal and directly from the 

database providers. USDA expanded its use of the DNP portal’s single search capabilities in

FY 2016 with the largest example being RD’s implementation of 1,600 field staff into the 

portal. However, most pre-award checks for contracts and grants are still performed directly 

with the SAM system rather than through the DNP portal. The primary reason for this is 

USDA’s extensive use of system interfaces in its business processes. So far, USDA has not 

been able to complete the computer matching agreements needed to convert these processes to 

the DNP portal. USDA’s partners are using death records, SAM, and CAIVRS directly from 

the source agencies because there is not yet a streamlined process for non-federal employees to 

use the portal without extensive fees or background checks. USDA’s guaranteed loan programs 

have its partner banks verify eligibility through an automated interface with the U.S. 

Department of Housing and Urban Development’s CAIVRS system. Currently, the DNP portal 

offers CAIVRS through online single search only. 

USDA uses one database not listed in IPERIA to prevent improper payments. The Federal 

Awardee Performance and Integrity Information System (FAPIIS) is checked before making 

some high-dollar awards.

Treasury’s post-payment review has allowed USDA to identify and correct issues with 

long-term contracts and awards. Improved internal controls are now in place to update payment 

records with our long-term business partners as ownership changes. Independently verifying 

SAM registration before making awards has allowed NRCS to dramatically reduce their 

improper payment rate and achieve compliance with IPERA requirements.

USDA has implemented four business rules to reduce the number of false positives in the 

post-payment review–This has greatly reduced the time needed to perform the post-payment 

review. USDA has participated in six data analytics projects with the DNP staff. USDA has 

received preliminary results and is analyzing them to determine if they can be used to reduce 

improper payments. 

RD established a memorandum of understanding to provide source data for CAIVRS to 

Treasury at the end of FY 2016. To date, USDA has not yet received notifications of needed 

corrections or identification of incorrect information. 
S ECT ION I I I OTHER INFORMATION 263 

Table 20: Results of the Do Not Pay Initiative in Preventing Improper Payments ($ In Millions) 

Review 

Item

Number 

(#) of 

payments 

reviewed 

for 

possible 

improper 

payments

Dollars ($)

of 

payments 

reviewed 

for possible 

improper 

payments

Number 

(#) of 

payments 

stopped 

Dollars ($)

of 

payments 

stopped

Number (#) 

of potential 

improper 

payments 

reviewed and 

determined 

accurate

Dollars ($) 

of potential 

improper 

payments 

reviewed 

and 

determined 

accurate

Reviews 

with the Do 

Not Pay 

databases 

26,463,515 61,356.54 0 0.00 3,382 8.65

Reviews 

with 

databases 

not listed in 

IPERIA as 

Do Not Pay 

databases

0 0.00 0 0.00 0 0.00

Data gathered October 1, 2015 through June 30, 2016
264 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Inspector General Act Amendments of 

1988: Management’s Report on Audit 

Follow Up

Background

The Inspector General Act Amendments of 1988 (P.L. 100-504), require that each agency head

submit semi-annual reports to Congress on the actions taken in response to Office of Inspector 

General (OIG) audit, evaluation, and inspection reports. Consistent with the Reports 

Consolidation Act of 2000 (P.L. 106-531), the U.S. Department of Agriculture’s (USDA) 

Office of the Chief Financial Officer (OCFO) consolidates and annualizes the required 

semi-annual Inspector General Act Amendments’ reporting elements for inclusion in the annual 

Agency Financial Report.

OIG audits USDA’s programs, systems, and operations. It then recommends improvements to 

management based on its findings. USDA management may agree or disagree with the audit’s 

findings or recommendations. An agreement is reached during the management-decision 

process. If management agrees with a recommendation, a written plan for corrective action 

with a target completion date is developed. The plan is then submitted to OIG for concurrence. 

If both OIG and management agree that the proposed corrective action will correct the 

weakness, a management decision is concluded for that recommendation. 

Audit follow-up ensures that prompt and responsive action is taken. USDA’s OCFO oversees 

audit follow-up for the Department. An audit remains open until all corrective actions for each 

recommendation are completed. As agencies complete planned corrective actions and submit 

closure documentation, OCFO reviews the submitted documentation for sufficiency and 

determines if final action needs to be completed.

Fiscal Year Results (as of July 31, 2016) 

USDA agencies closed 36 audits in fiscal year (FY) 2016. As of July 31, 2016, OIG and USDA 

agencies reached management decisions on 25 audits. As shown in the following exhibit, the 

Department’s inventory of open audits decreased in FY 2016 by 10 percent from 97 to 87. 
S ECT ION I I I OTHER INFORMATION 2 65 

Exhibit 20: Open Audit Inventory

 

Note: The FY 2015 ending balance was revised from 88 to 97 to include nine audits 

transmitted from the OIG after the reporting period. These adjustments are also reflected in the 

beginning balances for audits with disallowed costs (DC) shown in Exhibit 20 and Exhibit 22. 

Audit Follow-Up Process

The Inspector General Act Amendments of 1988 require an annual report to Congress 

providing the status of resolved audits that remain open. Resolved audits are those for which 

management decision has been reached for all recommendations. Reports on resolved audits 

must include the elements listed in the bullets below (see Exhibit 21 for definitions): 

• Beginning and ending balances for the number of audit reports and dollar value of 

disallowed costs (DC) and funds to be put to better use (FTBU); 

• The number of new management decisions reached;

• The disposition of audits with final action; 

• Resolved audits that remain open one year or more past the management decision date and 

require an additional reporting element; and 

• The date issued, dollar value, and an explanation of why final action has not been taken. 
266 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Exhibit 21: Audit Follow-Up Definitions

Term Definition

Disallowed Cost 

(DC)

An incurred cost questioned by the Office of Inspector General (OIG) 

that management has agreed should not be chargeable to the 

Government.

Final Action An action that management has agreed will address the audit findings 

and recommendations when completed.

Funds to Be Put 

to Better Use 

(FTBU)

An OIG recommendation that funds could be used more efficiently if 

management completes the recommendation, including:

 Reductions in outlays or other savings;

 Deobligation of funds from programs or operations, or the withdrawal 

of subsidy costs on loans, guarantees, or bonds; and

 Implementation of recommended improvements for grants or 

contracts, or unnecessary expenditures noted in pre-award reviews of 

contracts or grant agreements.

Management 

Decision

Agreement between management and OIG on corrective action needed 

to address audit findings and recommendations.

Beginning and Ending Inventory for Audits with Disallowed 

Costs and Funds to Be Put to Better Use 

Of the 36 audits that achieved final action during the fiscal year, 5 contained disallowed 

costs (DC). The number of DC audits remaining in the inventory at the end of the fiscal year 

is 22, with a monetary value of $101,042,763. See Exhibit 22 below. 

Exhibit 22: Inventory of Audits with Disallowed Costs 

Audits with Disallowed Costs (DC) # of Audits Amount ($)

Beginning of the Period (October 2015) 26 $110,639,113

Plus: New Management Decisions 1 $27,719

Total Audits Pending Collection of DC 27 $110,666,832

Adjustments (see Exhibit 23) N/A $5,927,033

Revised Subtotal N/A $104,739,799

Less: Final Actions (Recoveries) 5 $3,697,036

Audits with DC Requiring Final Action at the 

End of the Period (July 2016) 22 $101,042,763
S ECT ION I I I OTHER INFORMATION 267 

Exhibit 22 and Exhibit 24 include only those open audits with DC and FTBU, respectively. 

Additionally, some audits contain both DC and FTBU amounts. For these reasons, the number 

of audits shown as the ending balances in Exhibit 22 and Exhibit 24 does not equal the total 

resolved audit inventory balance in Exhibit 20. The Beginning balance in Exhibit 22 was 

adjusted to include three audits with DC that were transmitted from OIG after the July 31, 

2015 reporting period. 

As shown in Exhibit 22 above, for DC audits that achieved final action in FY 2016, OIG and 

management agreed to collect $9,624,069. Adjustments were made totaling $5,927,033 

(62 percent of the total) for the following reasons: 1) documentation; 2) Legal Decision; 

3) appeals; and 4) agency discovery. Management recovered the remaining $3,697,036. 

Exhibit 23: Distribution of Adjustments to Disallowed Cost

Category Amount ($)

Documentation $166,933

Legal Decision $2,029,691

Appeals $179,129

Agency Discovery $3,551,280

Total $5,927,033 

Final action occurred on 6 audits that involved FTBU amounts. The number of FTBU audits 

remaining in the inventory to date is 13, with a monetary value of $755,165,636 (see 

Exhibit 24).

Exhibit 24: Inventory of Audits with Funds to Be Put to Better Use (FTBU)

Audits with FTBU # of Audits Amount ($)

Beginning of the Period 16 $749,694,002

Plus: New Management Decisions 3 $41,449,570

Total Audits Pending 19 $791,143,572

Less: Final Actions 6 $35,977,936

Audits with FTBU Requiring Final Action at the End 

of the Period 13 $755,165,636

Disposition of FTBU:

FTBU Implemented $35,919,077

FTBU Not Implemented $58,859

Total FTBU Amounts for Final Action Audits $35,977,936

Exhibit 22 and Exhibit 24 include only those open audits with DC and FTBU, respectively. 

Additionally, some audits contain both DC and FTBU amounts. For these reasons, the number 
268 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

of audits shown as the ending balances in Exhibit 22 and Exhibit 24 do not equal the total 

resolved audit inventory balance in Exhibit 20. 

The number of audits open one or more years without final action in FY 2016 decreased from 

58 to 56 audits, or a 3 percent decrease. The 56 audits include 18 audits that reached one year 

past management decision date during FY 2016. USDA agencies continue to pursue 

compensating controls that address many of the underlying issues identified in these older 

audits. 

Exhibit 25: Decrease in the Number of Audits Open One or More Years Past the Management 

Decision Date (MDD)

Audits One Year or More Past MDD # of Audits

Beginning of the period 58

Less: Audits closed 20 

Subtotal FY 2016 audits one year or more past MDD 38 

Plus: Audits that reached one year past MDD during FY 2016 18 

Ending balance as of July 31, 2016 56

Agencies have completed all planned corrective actions on 12 audits that are pending collection 

of associated DC (see Exhibit 26 below). 

Exhibit 26: Distribution of Audits Open One Year or More Past the Management Decision Date 

(MDD)

Audits on Schedule Audits Behind Schedule Audits Under Collection

No. DC ($) FTBU 

($)

No. DC ($) FTBU ($) No. DC ($) FTBU ($)

1 $120,635 $0 42 $55,590,656 $644,805,979 12 $42,526,975 $65,669,524
S ECT ION I I I OTHER INFORMATION 269

Management’s Report on Audit Follow-Up

Audits without final action one year or more past MDD, and behind schedule are listed individually in Exhibit 27. The audits are 

categorized by agency, and by reason, final action has not occurred. More detailed information on audits on-schedule, and audits 

under collection, is available from OCFO. 

Exhibit 27: Audits Open One Year or More Past the MDD, and Behind Schedule

Agricultural Marketing Service (AMS)

Audits Date 

Issued

Revised 

Completion 

Date

Audit Title

Monetary Amount

DC ($) Pending by Reason FTBU 

($)

01601-

0002-32 7/15/2013 12/31/2016 National Organic Program—Organic Milk Operations $0 $0 Pending Administrative Action

50601-

0002-31 7/31/2013 09/30/2016 FSIS’ and AMS’ Field-Level Workforce Challenges $11,740,000 $0 Pending Administrative Action

AMS 

Subtotal (2) N/A N/A N/A $11,740,000 $0 N/A 
270 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Animal and Plant Health Inspection Service (APHIS)

Audits Date Issued Revised 

Completion Date Audit Title

Monetary Amount Pending by 

DC ($) Reason FTBU ($)

33601-0001-41 12/09/2014 08/31/2016 Oversight of Research 

Facilities N/A $420,299

Issuance of Policy 

Guidance and 

Legislation

50601-0008-TE 1/28/2005 09/30/2016

Controls over APHIS Issuance 

of Genetically Engineered 

Organisms Release Permits

$0 $0

Issuance of Policy 

Guidance and 

Legislation

50601-0016-TE 5/31/2011 12/30/2016

Controls over Genetically 

Engineered Animal and 

Insect Research 

$0 $0

Issuance of Policy 

Guidance and 

Legislation

APHIS Subtotal (3) N/A N/A N/A $0 $420,299 N/A 

Agricultural Research Service (ARS)

Audits Date Issued Revised 

Completion Date Audit Title

Monetary Amount Pending by 

DC ($) Reason FTBU ($)

50601-0006-TE 3/4/2004 12/31/2016 ARS Controls Over Plant 

Variety Protection and

Germplasm Storage

$0 $0 Issuance of Policy 

Guidance and 

Legislation

50601-0010-AT 3/8/2004 12/31/2016 ARS Follow Up Report on the 

Security of Biological Agents 

at U.S. Department of 

Agriculture Laboratories

$0 $0 Issuance of Policy 

Guidance and 

Legislation

ARS Subtotal (2) N/A N/A N/A $0 $0 N/A 
S ECT ION I I I OTHER INFORMATION 271

Commodity Credit Corporation (CCC)

Audits Date Issued Revised 

Completion Date Audit Title

Monetary Amount Pending by 

DC ($) Reason FTBU ($)

06401-0020-FM 11/9/2005 09/30/2017 CCC’s Financial Statements 

for FY 2005 and 2004 $0 $0

Pending 

Administrative 

Action

CCC Subtotal (1) N/A N/A N/A $0 $0 N/A 

Foreign Agricultural Service (FAS)

Audits Date Issued Revised 

Completion Date Audit Title

Monetary Amount Pending by 

DC ($) Reason FTBU ($)

07601-0001-22 03/31/2014 12/31/2016

Private Voluntary 

Organization Grant Fund 

Accountability

$242,676 $8,481

Issuance of Policy 

Guidance and 

Legislation

50601-0001-22 03/28/2013 4/30/2017

Effectiveness of FAS Recent 

Efforts to Implement

Measurable Strategies 

Aligned to the Department’s 

Trade Promotion and Policy 

Goals

$0 $0

Pending 

Administrative 

Action

50601-0002-16 02/06/2014 9/30/2017

Section 632(a) Transfer of 

Funds from USAID to USDA 

for Afghanistan

$0 $0

Issuance of Policy 

Guidance and 

Legislation

FAS Subtotal (3) N/A N/A N/A $242,676 $8,481 N/A 
272 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Food and Nutrition Service (FNS)

Audits Date Issued

Revised 

Completion 

Date

Audit Title

Monetary Amount

Pending by Reason DC ($) FTBU ($)

27002-0011-13 9/28/2012 10/31/2016

Analysis of FNS’ 

Supplemental Nutrition 

Assistance Program Fraud 

Prevention and Detection 

Efforts

$0 $0 Pending Administrative 

Action

27004-0001-22 09/25/2014 11/30/2016

State Agencies’ Food Costs 

For the Food and Nutrition 

Service’s Special 

Supplemental Nutrition 

Program For Women, 

Infants, and Children

$0 $0 Pending Administrative 

Action

27601-0001-23 1/3/2013 09/30/2016

National School Lunch 

Program-Food Service 

Management Company 

Contracts

$0 $0 Pending Administrative 

Action

27601-0001-31 07/31/2013 10/31/2017

Controls for Authorizing 

Supplemental Nutrition 

Assistance Program Retailers

$0 $6,700,000

Issuance of Policy 

Guidance and 

Legislation

27099-0049-TE 3/10/2008 11/30/2016

Disaster Food Stamp 

Program for Hurricanes 

Katrina and Rita in Louisiana, 

Mississippi, and Texas 

$0 $0

Issuance of Policy 

Guidance and 

Legislation

50601-0014-AT 8/16/2010 09/30/2016

Effectiveness and 

Enforcement of Suspension 

and Debarment Regulations

$0 $0 Pending Administrative 

Action

FNS Subtotal (6) N/A N/A N/A $0 $6,700,000 N/A 
S ECT ION I I I OTHER INFORMATION 273

Farm Service Agency (FSA)

Audits Date Issued

Revised 

Completion 

Date

Audit Title

Monetary Amount

Pending by Reason DC ($) FTBU ($)

03601-0001-22 7/31/2014 9/30/2016 Compliance Activities $0 $0 Issuance of Policy 

Guidance and Legislation

03601-0018-CH 8/10/2010 06/30/2016 Farm Loan Security $0 $0

Pending IT System 

Implementation and 

Enhancements

FSA Subtotal (2) N/A N/A N/A $0 $0 N/A

Food Safety and Inspection Service (FSIS)

Audits Date Issued

Revised 

Completion 

Date

Audit Title

Monetary Amount

Pending by Reason DC ($) FTBU ($)

24601-0001-41 5/9/2013 9/30/2016

Inspection and 

Enforcement Activities 

at Swine Slaughter 

Plants

$0 $0 Issuance of Policy 

Guidance and Legislation

24601-0004-31 7/27/2015 9/30/2016

FSIS Ground Turkey 

Inspection and Safety 

Protocols

$0 $0 Issuance of Policy, 

guidance and Legislation

50601-0006-HY 7/15/2009 10/31/2016

Assessment of USDA’s 

Controls to Ensure 

Compliance with Beef 

Export Requirements 

$0 $0

Pending IT System 

Implementation and 

Enhancements

FSIS Subtotal (3) N/A N/A N/A $0 $0 N/A
274 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Natural Resources Conservation Service (NRCS)

Audits Date Issued

Revised 

Completion 

Date

Audit Title

Monetary Amount Pending by 

DC ($) FTBU ($) Reason

10099-0001-31 9/27/2013 11/30/2016

Natural Resources Conservation 

Service’s Administration of 

Easement Programs in Wyoming

$0 $0

Pending 

Administrative 

Action

10601-0002-31 7/30/2014 09/30/2016 NRCS Conservation Easement 

Compliance $0 $0

Issuance of Policy 

Guidance and 

Legislation

NRCS Subtotal (2) N/A N/A N/A $0 $0 N/A

Office of the Chief Financial Officer (OCFO)

Audits Date Issued

Revised 

Completion 

Date

Audit Title

Monetary Amount Pending by 

DC ($) FTBU ($) Reason

50024-0005-11 4/15/2014 9/30/2016

U.S. Department of Agriculture 

Improper Payments Elimination 

and Recovery Act of 2010 

Compliance Review for Fiscal 

Year 2013

$0 $0

Pending 

Administrative 

Action

50099-0001-23 9/18/2014 12/30/2016

USDA’s Controls Over Economy 

Act Transfers and Greenbook 

Program Charges

$ 43,516,842 $0

Pending 

Administrative 

Action

OCFO Subtotal (2) N/A N/A N/A $ 43,516,842 $0 N/A 
S ECT ION I I I OTHER INFORMATION 275

Office of the Chief Information Officer (OCIO)

Audits Date Issued

Revised 

Completion 

Date

Audit Title

Monetary Amount

Pending by Reason DC ($) FTBU ($)

50501-0001-IT 8/15/2011 11/30/2016

OCIO USDA’s Management 

and Security Over Wireless 

Handheld Devices

$0 $0 Pending Administrative 

Action

50501-0002-12 7/17/2014 11/30/2016 

Fiscal Year 2011 Federal 

Information Security 

Management Act

$0 $0 Pending Administrative 

Action

50501-0002-IT 11/19/2010 11/30/2016

OCIO FY 2010 Federal 

Information Security 

Management Act

$0 $0

Pending IT System 

Implementation and 

Enhancements

50501-0015-FM 11/18/2009 1/01/2017

OCIO FY 2009 Federal 

Information Security 

Management Act

$0 $0 Issuance of Policy 

Guidance

88401-0001-12 8/2/2012 11/30/2016

OCIO’s FY’s 2010 and 2011 

Funding Received for Security 

Enhancements

$0 $0 Pending Administrative 

Action

50501-0003-12 11/15/2012 9/30/2017

USDA, Office of The Chief 

Information Officer, Fiscal Year 

2012 Federal Information 

Security Management Act

$0 $0 Issuance of Policy 

Guidance 

50501-0004-12 11/26/2014 11/30/2016

USDA, Office of The Chief 

Information Officer, Fiscal Year 

2013 federal Information 

Security Management Act

$0 $0 Pending Administrative 

Action 
276 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Audits Date Issued Revised Audit Title Monetary Amount Pending by Reason

50501-0005-12 9/26/2014 11/30/2016

Cigie Cloud Computing 

Initiative – Status of cloud – 

computing Environment 

Within The USDA

$0 $0

Pending IT System 

Implementation and 

Enhancements 

50501-0006-12 11/12/2014 11/30/2017

USDA, Office of The Chief 

Financial Officer, Fiscal Year 

2014 Federal Information 

Security Management Act

$0 $0

Pending IT System 

Implementation and 

Enhancements 

OCIO Subtotal (9) N/A N/A N/A $0 $0 N/A 
S ECT ION I I I OTHER INFORMATION 277

Rural Development (RD)

Audits Date Issued

Revised 

Completion 

Date

Audit Title

Monetary Amount Pending by Reason

DC ($) FTBU ($)

04601-0001-31 7/18/2014 12/31/2015

Rural Development: Single 

Family Housing Direct Loan 

Servicing and Payment Subsidy 

Recapture

$34,338 $0

Pending 

Administrative Action

04601-0018-CH 9/27/2012 12/31/2015

Project Cost and Inspection 

Procedures for the Rural Rental 

Housing Program

$0 $0

Issuance of Policy 

Guidance and 

Legislation

09703-0001-32 3/29/2013 12/31/2015

American Recovery and 

Reinvestment Act of 2009—

Broadband Initiatives 

Program—Pre-Approval 

Controls

$0 $6,378,419

Pending 

Administrative Action

09703-0002-32 8/22/2013 12/31/2015

American Recovery and 

Reinvestment Act of 2009—

Broadband Initiatives 

Program—Post-Award Controls

$0 $150,503,439

Pending 

Administrative Action

34601-0001-31 12/5/2011 9/30/2016

American Recovery and 

Reinvestment Act—Business 

and Industry Guaranteed 

Loans, Phase 2

$56,800 $0

Pending 

Administrative Action

RD Subtotal (5) $91,138 $156,881,858 
278 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Risk Management Agency (RMA)

Audits Date Issued

Revised 

Completio

n Date

Audit Title

Monetary Amount

Pending by Reason DC ($) FTBU ($)

05601-0001-31 9/03/2013 5/30/2016 Controls Over Prevented 

Planting $0 $480,795,341 Pending Administrative Action

05601-0001-22 4/30/2015 7/30/2016

Risk Management Agency 

National Program Operations 

Reviews

$0 $0 Pending 

Administrative Action 

RMA Subtotal (2) $0 $480,795,341 

Total Number 

Audits (42) Total $55,590,656 $644,805,979 
SECTION I I I OTHER INFORMATION 279 

Freeze the Footprint

The U.S. Department of Agriculture (USDA) successfully implemented the Office of 

Management and Budget (OMB) “Freeze the Footprint” policy initiative by committing to 

maintain its office and warehouse square footage baselines at the Fiscal Year (FY) 2012 levels 

through 2015. Beginning FY 2016, the policy shifted to “Reduce the Footprint” with an 

emphasis on disposal of excess properties held by the Federal Government, thus making better 

use of the Government’s real estate asset portfolio. 

Exhibit 28: Freeze the Footprint Baseline Comparison

Square Footage (SF) ($ In Millions)

Fiscal Year 2012 

Baseline 2015 Change(2012–2015) 

35.93 35.26 -1.86% 

Exhibit 29: Reporting of Operation and Maintenance Costs—Owned and Direct-Leased 

Buildings and Structures 

Operations and Maintenance (O&M) Costs ($ In Millions) 

Fiscal Year 2012 

Baseline 2015 Change(2012–2015) 

$615.87 $555.90 $-59.97

More information about Federal Real Property can be found in the Federal Real Property 

Profile Summary Report Library. 

USDA issued an Agriculture Property Management Regulation Advisory (AGPMR No. 15-05) 

providing policy guidance and procedures for the Reduce the Footprint OMB space initiative. 

Since FY 2015, Departments have been projecting their 5-year office and warehouse 

requirements. The Department has set forth processes and procedures to manage space needs at 

or below the FY 2012 baseline, represented in the figure above.

USDA continues to support footprint reductions by identifying opportunities for disposal, 

consolidation, and increased utilization of real property. The Department leads this initiative 

through the formation of the Real Property Strategic Sourcing Initiative. USDA has also 

created a Center of Excellence (COE) for Leasing to achieve cost-savings for the more than 

3,000 direct leases in the portfolio. USDA issued an updated AGPMR Advisory (No 16-01) 

“Space Utilization Rate Policy,” to clarify the existing 150-square foot per person office 

utilization rate policy. These continuing actions represent USDA’s commitment to strategically 

managing and utilizing its space to achieve the highest return for the taxpayer. 
280 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Civil Monetary Penalties

USDA maintains regulations regarding civil monetary policies at Title 7 of the Code of Federal Regulations § 3.9118. The Department 

is reviewing, updating, and making adjustments to the penalties; however, they will not be finalized and published in the Federal 

Register when the Agency Financial Report is published in November 2016. The table below briefly describes the penalty, under 

which authority, the dates of the previous and current adjustments, and anticipated current penalty amount. 

Exhibit 30: Civil Monetary Penalties

Penalty (Name of Penalty) Authority (Statute)

Date of Previous 

Adjustment

Date of Current 

Adjustment

Anticipated Current Penalty Level

($ Amount)

Improper recordkeeping; 

pesticides 

7 U.S.C. 136i-1(d) 4/7/2010 N/A $891

Violation of the unfair conduct 

rule

Perishable Agricultural 

Commodities Act, 

codified at 7 U.S.C. 

499b(5)

4/7/2010 N/A $4,848

Violation of the licensing 

requirements

Perishable Agricultural 

Commodities Act, 

codified at 7 U.S.C. 

499c(a)

4/7/2010 N/A $1,547 plus $387 a per day for as 

long as offense occurs or $387 for 

each non-willful offense 

Violative transaction Perishable Agricultural 

Commodities Act, 

codified at 7 U.S.C. 

499h(e)

4/7/2010 N/A $3,095

Violation Export Apple Act, 

7 U.S.C. 586

4/7/2010 N/A $141–$14,140

18 https://www.gpo.gov/fdsys/pkg/CFR-2011-title7-vol1/xml/CFR-2011-title7-vol1-sec3-91.xml
S ECT ION I I I OTHER INFORMATION 281

Penalty (Name of Penalty) Authority (Statute)

Date of Previous 

Adjustment

Date of Current 

Adjustment

Anticipated Current Penalty Level

($ Amount)

Violation Export Grape and Plum 

Act, codified at 7 U.S.C. 

596

4/7/2010 N/A $275–$27,500

Violation of an order issued by 

the Secretary

Agricultural 

Adjustment Act, 

reenacted with 

amendments by the 

Agricultural Marketing 

Agreement Act of 

1937, codified at 

7 U.S.C. 608c(14)(B)

4/7/2010 N/A $2,750

Failure to file certain reports Agricultural 

Adjustment Act, 

reenacted by the 

Agricultural Marketing 

Agreement Act of 

1937, codified at 

7 U.S.C. 610(c)

4/7/2010 N/A $275

Violation of a seed program Federal Seed Act, 

codified at 7 U.S.C. 

1596(b)

4/7/2010 N/A $94–$1,875

Failure to collect any 

assessment or fee for violation

Cotton Research and 

Promotion Act, 

codified at 7.U.S.C. 

2112(b)

4/7/2010 N/A $2,750

Failure to obey a cease and 

desist order, or for deceptive 

marketing

Plant Variety 

Protection Act, codified 

at 7 U.S.C. 2568(b)

4/7/2010 N/A $795–$15,909
282 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Penalty (Name of Penalty) Authority (Statute)

Date of Previous 

Adjustment

Date of Current 

Adjustment

Anticipated Current Penalty Level

($ Amount)

Failure to pay, collect, or remit 

any assessment or fee for a 

violation of a program

Potato Research and 

Promotion Act, 

codified at 7 U.S.C. 

2621(b)(1)

4/7/2010 N/A $1,212–$12,121

Failure to obey a cease and 

desist order

Potato Research and 

Promotion Act, 

codified at 7 U.S.C. 

2621(b)(3)

4/7/2010 N/A $1,212

Failure to pay, collect, or remit 

any assessment or fee or for a 

violation of a program

Egg Research and 

Consumer Information 

Act, codified at 7 U.S.C. 

2714(b)(1)

4/7/2010 N/A $1,402–$14,023

Failure to obey a cease and 

desist order

Egg Research and 

Consumer Information 

Act, codified at 7 U.S.C. 

2714(b)(3)

4/7/2010 N/A $1,402

Failure to remit any 

assessment or fee or for a 

violation of a program

Beef Research and 

Information Act, 

codified at 7 U.S.C. 

2908(a)(2)

4/7/2010 N/A $10,940

Failure to remit any 

assessment or for a violation 

of a program regarding wheat 

and wheat foods research

7 U.S.C. 3410(b) 4/7/2010 N/A $2,750

Failure to pay, collect, or remit 

any assessment or fee or for a 

violation of a program

Floral Research and 

Consumer Information 

Act, codified at 7 U.S.C. 

4314(b)(1)

4/7/2010 N/A $1,273–$12,732 
S ECT ION I I I OTHER INFORMATION 283

Penalty (Name of Penalty) Authority (Statute)

Date of Previous 

Adjustment

Date of Current 

Adjustment

Anticipated Current Penalty Level

($ Amount)

Failure to obey a cease and 

desist order

Floral Research and 

Consumer Information 

Act, codified at 7 U.S.C. 

4314(b)(3)

4/7/2010 N/A $1,273

Violation of an order Dairy Promotion 

Program, codified at 

7 U.S.C. 4510(b)

4/7/2010 N/A $2,355

Failure to pay, collect, or remit 

any assessment or fee or for a 

violation

Honey Research, 

Promotion, and 

Consumer Information 

Act, codified at 7 U.S.C.

4610(b)(1)

4/7/2010 N/A $725–$7,251

Failure to obey a cease and 

desist order

Honey Research, 

Promotion, and 

Consumer Information 

Act, codified at 7 U.S.C.

4610(b)(3)

4/7/2010 N/A $725

Violation of a program Pork Promotion, 

Research, and 

Consumer Information 

Act of 1985, codified at 

7 U.S.C.

4815(b)(1)(A)(i)

4/7/2010 N/A $2,188

Failure to obey a cease and 

desist order 

Pork Promotion, 

Research, and 

Consumer Information 

Act of 1985, codified at 

7 U.S.C. 4815(b)(3)(A)

4/7/2010 N/A $1,094
284 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Penalty (Name of Penalty) Authority (Statute)

Date of Previous 

Adjustment

Date of Current 

Adjustment

Anticipated Current Penalty Level

($ Amount)

Failure to pay, collect, or remit 

any assessment or fee or for a 

violation of a program

Watermelon Research 

and Promotion Act, 

codified at 7 U.S.C.

4910(b)(1)

4/7/2010 N/A $1,094–$10,940

Failure to obey a cease and 

desist order

Watermelon Research 

and Promotion Act, 

codified at 7 U.S.C.

4910(b)(3)

4/7/2010 N/A $1,094

Failure to pay, collect, or remit 

any assessment or fee or for a 

violation of a program 

Pecan Promotion and 

Research Act of 1990, 

codified at 7 U.S.C.

6009(c)(1)

4/7/2010 N/A $1,782–$17,816

Failure to obey a cease and 

desist order

Pecan Promotion and 

Research Act of 1990, 

codified at 7 U.S.C.

6009(e)

4/7/2010 N/A $1,782

Failure to pay, collect, or remit 

any assessment or fee or for a 

violation of a program

Mushroom Promotion, 

Research, and 

Consumer Information 

Act of 1990, codified at 

7 U.S.C. 6107(c)(1)

4/7/2010 N/A $865–$8,655

Failure to obey a cease and 

desist order

Mushroom Promotion, 

Research, and 

Consumer Information 

Act of 1990, codified at 

7 U.S.C. 6107(e)

4/7/2010 N/A $865
S ECT ION I I I OTHER INFORMATION 285

Penalty (Name of Penalty) Authority (Statute)

Date of Previous 

Adjustment

Date of Current 

Adjustment

Anticipated Current Penalty Level

($ Amount)

Failure to pay, collect, or remit 

any assessment or fee or for a 

violation

Lime Research, 

Promotion, and 

Consumer Information 

Act of 1990, codified at 

7 U.S.C. 6207(c)(1)

4/7/2010 N/A $865–$8,655

Failure to obey a cease and 

desist order

Lime Research, 

Promotion, and 

Consumer Information 

Act of 1990, codified at 

7 U.S.C. 6207(e)

4/7/2010 N/A $865

Failure to pay, collect, or remit 

any assessment or fee or for a 

violation of a program

Soybean Promotion, 

Research, and 

Consumer Information 

Act, codified at 7 U.S.C.

6307(c)(1)(A)

4/7/2010 N/A $1,782

Failure to obey a cease and 

desist order 

Soybean Promotion, 

Research, and 

Consumer Information 

Act, codified at 7 U.S.C.

6307(e)

4/7/2010 N/A $8,908

Failure to pay, collect, or remit 

any assessment or fee or for a 

violation of a program

Fluid Milk Promotion 

Act of 1990, codified at 

7 U.S.C. 6411(c)(1)(A) 

and 

7 U.S.C. 6411(c)(1)(B)

4/7/2010 N/A Unwillful violation: $865–$8,655; 

willful violation: $17,310–

$173,099

Failure to obey a cease and 

desist order

Fluid Milk Promotion 

Act of 1990, codified at 

7 U.S.C. 6411(e)

4/7/2010 N/A $8,908
286 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Penalty (Name of Penalty) Authority (Statute)

Date of Previous 

Adjustment

Date of Current 

Adjustment

Anticipated Current Penalty Level

($ Amount)

Knowingly labeling or selling a 

product as organic except in 

accordance with the Organic 

Foods Production Act of 1990

Organic Foods 

Production Act of 

1990, codified at 

7 U.S.C. 6519(a)

4/7/2010 N/A $17,310

Failure to pay, collect, or remit 

any assessment or fee or for a 

violation of a program

Fresh Cut Flowers and 

Fresh Cut Greens 

Promotion and 

Information Act of 

1993, codified at 

7 U.S.C. 6808(c)(1)(A)(i)

4/7/2010 N/A $816–$8,162

Failure to obey a cease and 

desist order

Fresh Cut Flowers and 

Fresh Cut Greens 

Promotion and 

Information Act of 

1993, codified at 

7 U.S.C. 6808(e)(1)

4/7/2010 N/A $8,162

Violation of a program Sheep Promotion, 

Research, and 

Information Act of 

1994, codified at 

7 U.S.C. 7107(c)(1)(A)

4/7/2010 N/A $1,591

Failure to obey a cease and 

desist order

Sheep Promotion, 

Research, and 

Information Act of 

1994, codified at 

7 U.S.C. 7107(e)

4/7/2010 N/A $795
S ECT ION I I I OTHER INFORMATION 287

Penalty (Name of Penalty) Authority (Statute)

Date of Previous 

Adjustment

Date of Current 

Adjustment

Anticipated Current Penalty Level

($ Amount)

Violation of an order or 

regulation issued under the 

Commodity Promotion, 

Research, and Information Act 

of 1996

Commodity Promotion, 

Research, and 

Information Act of 

1996, codified at 

7 U.S.C. 7419(c)(1)

4/7/2010 N/A $1,502–$15,024 for each violation

Failure to obey a cease and 

desist order

Commodity Promotion, 

Research, and 

Information Act of 

1996, codified at 

7 U.S.C. 7419(e)

4/7/2010 N/A $1,502–$15,024

Violation of an order or 

regulation issued under the 

Canola and Rapeseed 

Research, Promotion, and 

Consumer Information Act 

Canola and Rapeseed 

Research, Promotion, 

and Consumer 

Information Act, 

codified at 7 U.S.C.

7448(c)(1)(A)(i)

4/7/2010 N/A $1,502 for each violation

Failure to obey a cease and 

desist order

Canola and Rapeseed 

Research, Promotion, 

and Consumer 

Information Act, 

codified at 7 U.S.C.

7448(e)

4/7/2010 N/A $7,512 for each day the violation 

occurs

Violation of an order or 

regulation issued under the 

National Kiwifruit Research, 

Promotion, and Consumer 

Information Act 

National Kiwifruit 

Research, Promotion, 

and Consumer 

Information Act, 

codified at 7 U.S.C.

7468(c)(1)

4/7/2010 N/A $751–$7,512
288 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Penalty (Name of Penalty) Authority (Statute)

Date of Previous 

Adjustment

Date of Current 

Adjustment

Anticipated Current Penalty Level

($ Amount)

Failure to obey a cease and 

desist order

National Kiwifruit 

Research, Promotion, 

and Consumer 

Information Act, 

codified at 7 U.S.C.

7468(e)

4/7/2010 N/A $751 for each day the violation 

occurs

Violation of an order or 

regulation under the Popcorn 

Promotion, Research, and 

Consumer Information Act 

Popcorn Promotion, 

Research, and 

Consumer Information 

Act, codified at 7 U.S.C.

7487(a)

4/7/2010 N/A $1,502 for each violation

Certain violations Egg Products 

Inspection Act, codified 

at 21 U.S.C. 

1041(c)(1)(A)

4/7/2010 N/A $8,655 for each violation 

Violation of an order or 

regulation issued under the 

Hass Avocado Promotion, 

Research, and Information Act 

of 2000 

Hass Avocado 

Promotion, Research, 

and Information Act of 

2000, codified at 

7 U.S.C. 7807(c)(1)(A)(i)

4/7/2010 N/A $1,367–$13,669 for each violation

Failure to obey a cease and 

desist order

Hass Avocado 

Promotion, Research, 

and Information Act of 

2000, codified at 

7 U.S.C. 7807(e)(1)

4/7/2010 N/A $13,669 for each offense

Violation of certain provisions 

of the Livestock Mandatory 

Reporting Act of 1999 

Livestock Mandatory 

Reporting Act of 1999, 

codified at 7 U.S.C.

1636b(a)(1)

4/7/2010 N/A $14,140 for each violation
S ECT ION I I I OTHER INFORMATION 289

Penalty (Name of Penalty) Authority (Statute)

Date of Previous 

Adjustment

Date of Current 

Adjustment

Anticipated Current Penalty Level

($ Amount)

Failure to obey a cease and 

desist order

Livestock Mandatory 

Reporting Act of 1999, 

codified at 7 U.S.C.

1636b(g)(3)

4/7/2010 N/A $14,140 for each violation

Failure to obey an order of the 

Secretary issued pursuant to 

the Dairy Product Mandatory 

Reporting program 

Dairy Product 

Mandatory Reporting 

program, codified at 

7 U.S.C.

1637b(c)(4)(D)(iii)

4/7/2010 N/A $13,669

Willful violation of the Country 

of Origin Labeling program by 

a retailer or person engaged in 

the business of supplying a 

covered commodity to a 

retailer

7 U.S.C. 1638b(b)(2) 4/7/2010 N/A $1,098 for each violation

Violations of the Dairy 

Research Program 

Dairy Research 

Program, codified at 

7 U.S.C. 4535 and 

4510(b)

4/7/2010 N/A $2,355 for each violation

Violation of the imported seed 

provisions of the Federal Seed 

Act 

Federal Seed Act, 

codified at 7 U.S.C.

1596(b)

4/7/2010 N/A $94–$1,875

Violation of the Animal

Welfare Act 

Animal Welfare Act, 

codified at 7 U.S.C.

2149(b)

4/7/2010 N/A $10,982, and knowing failure to 

obey a cease and desist order has 

a civil penalty of $1,647
290 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Penalty (Name of Penalty) Authority (Statute)

Date of Previous 

Adjustment

Date of Current 

Adjustment

Anticipated Current Penalty Level

($ Amount)

Any person that causes harm 

to, or interferes with, an 

animal used for the purposes 

of official inspection by the 

Department

7 U.S.C. 2279e(a) 4/7/2010 N/A $13,669

Penalty for a violation of the 

Swine Health Protection Act 

Swine Health 

Protection Act, codified 

at 7 U.S.C. 3805(a)

4/7/2010 N/A $27,500

Any person that violates the 

Plant Protection Act (PPA), or 

that forges, counterfeits, or, 

without authority from the 

Secretary, uses, alters, 

defaces, or destroys any 

certificate, permit, or other 

document provided for in the 

PPA

Plant Protection Act, 

7 U.S.C. 7734(b)(1)

4/7/2010 N/A $68,344 in the case of an 

individual, $341,722 in the case of 

any other person for each 

violation, $549,095 for all

violations adjudicated in a single 

proceeding if the violations do not 

include a willful violation, 

$1,098,190 for all violations 

adjudicated in a single proceeding 

if the violations include a willful 

violation; or twice the gross gain 

or gross loss for any violation, 

forgery, counterfeiting, 

unauthorized use, defacing, or 

destruction of a certificate, 

permit, or other document 

provided for in the PPA that 

results in the person deriving 

pecuniary gain or causing 

pecuniary loss to another person. 
S ECT ION I I I OTHER INFORMATION 291

Penalty (Name of Penalty) Authority (Statute)

Date of Previous 

Adjustment

Date of Current 

Adjustment

Anticipated Current Penalty Level

($ Amount)

Any person [except as 

provided in 7 U.S.C. 8309(d)] 

that violates the Animal 

Health Protection Act (AHPA), 

or that forges, counterfeits, or, 

without authority from the 

Secretary, uses, alters, 

defaces, or destroys any 

certificate, permit, or other 

document provided under the 

AHPA

Animal Health 

Protection Act, 7 U.S.C.

8313(b)(1)

4/7/2010 N/A $65,592 in the case of an

individual, $327,962 in the case of 

any other person for each 

violation, $549,095 for all 

violations adjudicated in a single 

proceeding if the violations do not 

include a willful violation, 

$1,098,190 for all violations 

adjudicated in a single proceeding 

if the violations include a willful 

violation; or twice the gross gain 

or gross loss for any violation, 

forgery, counterfeiting, 

unauthorized use, defacing, or 

destruction of a certificate, 

permit, or other document 

provided under the AHPA that 

results in the person deriving 

pecuniary gain or causing 

pecuniary loss to another person.

Any person that violates 

certain regulations under the 

Agricultural Bioterrorism 

Protection Act of 2002 

regarding transfers of listed 

agents and toxins or 

possession and use of listed 

agents and toxins.

Bioterrorism 

Protection Act of 2002, 

codified at 15 U.S.C. 

8401(i)(1)

4/7/2010 N/A $327,962 in the case of an 

individual and $655,925 in the 

case of any other person.
292 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Penalty (Name of Penalty) Authority (Statute)

Date of Previous 

Adjustment

Date of Current 

Adjustment

Anticipated Current Penalty Level

($ Amount)

Violation of the Horse 

Protection Act 

Horse Protection Act, 

codified at 15 U.S.C. 

1825(b)(1)

4/7/2010 N/A $5,500

Failure to obey Horse 

Protection Act disqualification 

Horse Protection Act, 

codified at 15 U.S.C. 

1825(c)

4/7/2010 N/A $10,750

Knowingly violating, or, if in 

the business as an importer or 

exporter, violating, with 

respect to terrestrial plants, 

any provision of the 

Endangered Species Act of 

1973, any permit or certificate 

issued thereunder, or any 

regulation issued pursuant to 

section 9(a)(1)(A) through (F), 

(a)(2)(A) through (D), (c), (d) 

(other than regulations 

relating to recordkeeping or 

filing reports), (f), or (g) of the 

Endangered Species Act of 

1973 

Endangered Species 

Act of 1973, (16 U.S.C. 

1538(a)(1)(A) through 

(F), (a)(2)(A) through 

(D), (c), (d), (f), and (g)), 

as set forth at 16 U.S.C. 

1540(a)

4/7/2010 N/A $49,467

Knowingly violating, or, if in 

the business as an importer or 

exporter, violating, with 

respect to terrestrial plants, 

any other regulation under the 

Endangered Species Act of 

1973 

Endangered Species 

Act of 1973, as set 

forth at 16 U.S.C. 

1540(a)

4/7/2010 N/A $23,744
S ECT ION I I I OTHER INFORMATION 293

Penalty (Name of Penalty) Authority (Statute)

Date of Previous 

Adjustment

Date of Current 

Adjustment

Anticipated Current Penalty Level

($ Amount)

Violation, with respect to 

terrestrial plants, of the 

Endangered Species Act of 

1973, or any regulation, 

permit, or certificate issued 

thereunder 

Endangered Species 

Act of 1973, as set 

forth at 16 U.S.C. 

1540(a)

4/7/2010 N/A $1,772

Knowingly and willfully

violating 49 U.S.C. 80502 with 

respect to the transportation 

of animals by any rail carrier, 

express carrier, or common 

carrier (except by air or 

water), a receiver, trustee, or 

lessee of one of those carriers, 

or an owner or master of a 

vessel

49 U.S.C. 80502(d) 4/7/2010 N/A $159–$795

Violating a provision of the 

Food and Nutrition Act of 2008 

(Act), or a regulation under 

the Act, by a retail food store 

or wholesale food concern

Food and Nutrition Act 

of 2008 (Act), or a 

regulation under the 

Act, codified at 7 U.S.C.

2021(a) and (c)

4/7/2010 N/A $109,819

Trafficking in food coupons Food and Nutrition Act 

of 2008 (Act), codified 

at 7 U.S.C.

2021(b)(3)(B)

4/7/2010 N/A $39,574–$71,262

Sale of firearms, ammunitions, 

explosives, or controlled 

substances for coupons

Food and Nutrition Act 

of 2008 (Act),codified 

at 7 U.S.C.

2021(b)(3)(c)

4/7/2010 N/A $35,631–$71,262
294 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Penalty (Name of Penalty) Authority (Statute)

Date of Previous 

Adjustment

Date of Current 

Adjustment

Anticipated Current Penalty Level

($ Amount)

Any entity that submits a bid 

to supply infant formula to 

carry out the Special 

Supplemental Nutrition 

Program for Women, Infants, 

and Children and discloses the 

amount of the bid, rebate, or 

discount practices in advance 

of the bid opening, or for any 

entity that makes a statement 

prior to the opening of bids for 

the purpose of influencing a 

bid

42 U.S.C. 

1786(h)(8)(H)(i)

4/7/2010 N/A $167,728,000

Vendor convicted of trafficking 

in food instruments

42 U.S.C. 1786(o)(1)(A) 

and 42 U.S.C. 

1786(o)(4)(B)

4/7/2010 N/A $14,502–$58,009

Vendor convicted of selling 

firearms, ammunition, 

explosives, or controlled 

substances in exchange for 

food instruments

2 U.S.C. 1786(o)(1)(B) 

and 42 U.S.C. 

1786(o)(4)(B)

4/7/2010 N/A $14,502–$58,009

Failure to timely file certain 

reports 

21 U.S.C. 467d 4/7/2010 N/A $275 per day for each day the 

report is not filed

Failure to timely file certain 

reports 

21 U.S.C. 677 4/7/2010 N/A $275 per day for each day the 

report is not filed

Failure to timely file certain 

reports, codified at 21 U.S.C. 

678

21 U.S.C. 1051 4/7/2010 N/A $275 per day for each day the 

report is not filed
S ECT ION I I I OTHER INFORMATION 295

Penalty (Name of Penalty) Authority (Statute)

Date of Previous 

Adjustment

Date of Current 

Adjustment

Anticipated Current Penalty Level

($ Amount)

Willful disregard of the 

prohibition against the export 

of unprocessed timber 

originating from Federal lands

16 U.S.C. 620d(c)(1)(A) 4/7/2010 N/A $890,780

Violation in disregard of the 

Forest Resources Conservation 

and Shortage Relief Act or the 

regulations that implement 

such Act

16 U.S.C. 

620d(c)(2)(A)(i)

4/7/2010 N/A $133,617

Person that should have 

known that an action was a 

violation of the Forest 

Resources Conservation and 

Shortage Relief Act or the 

regulations that implement 

such Act

Forest Resources 

Conservation and 

Shortage Relief Act or 

the regulations that 

implement such Act, 

16 U.S.C. 

620d(c)(2)(A)(ii)

4/7/2010 N/A $89,078

Willful violation of the Forest 

Resources Conservation and 

Shortage Relief Act or the 

regulations that implement 

such Act

Forest Resources 

Conservation and 

Shortage Relief Act or 

the regulations that 

implement such Act, 

codified at 16 U.S.C. 

620d(c)(2)(A)(iii)

4/7/2010 N/A $890,780

Violation involving protections 

of caves

16 U.S.C. 4307(a)(2) 4/7/2010 N/A $19,787

Packer or swine contractor 

violation

7 U.S.C. 193(b) 4/7/2010 N/A $27,500
296 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Penalty (Name of Penalty) Authority (Statute)

Date of Previous 

Adjustment

Date of Current 

Adjustment

Anticipated Current Penalty Level

($ Amount)

Livestock market agency or 

dealer failure to register

Packers and Stockyards 

Act of 1921, 7 U.S.C.

203

4/7/2010 N/A $94–$1,875

Operating without filing, or in 

violation of, a stockyard rate 

schedule, or of a regulation or 

order of the Secretary made 

thereunder

Packers and Stockyards 

Act of 1921, 7 U.S.C.

207(g)

4/7/2010 N/A $94–$1,875

A stockyard owner, livestock 

market agency, and dealer 

violation

Packers and Stockyards 

Act of 1921, 7 U.S.C.

213(b)

4/7/2010 N/A $27,500

Stockyard owner, livestock 

market agency, and dealer 

compliance order

Packers and Stockyards 

Act of 1921, 7 U.S.C.

215(a)

4/7/2010 N/A $1,875

Failure to file required reports 15 U.S.C. 50 4/7/2010 N/A $275

Live poultry dealer violations Packers and Stockyards 

Act of 1921, 7 U.S.C.

228b-2(b)

4/7/2010 N/A $80,000

Refusal of inspection and 

weighing services violation

7 U.S.C. 86(c) 4/7/2010 N/A $268,750
S ECT ION I I I OTHER INFORMATION 297

Penalty (Name of Penalty) Authority (Statute)

Date of Previous 

Adjustment

Date of Current 

Adjustment

Anticipated Current Penalty Level

($ Amount)

Any person who willfully and 

intentionally provides any 

false or inaccurate information 

to the Federal Crop Insurance 

Corporation or to an approved 

insurance provider with 

respect to any insurance plan 

or policy that is offered under 

the authority of the Federal 

Crop Insurance Act

Federal Crop Insurance 

Act, codified at 7 U.S.C. 

1506(n)(1)(A)

4/7/2010 N/A $11,555

Any person who willfully and 

intentionally provides any 

false or inaccurate information 

to the Federal Crop Insurance 

Corporation or to an approved 

insurance provider with 

respect to any insurance plan 

or policy that is offered under 

the authority of the Federal 

Crop Insurance Act, or who 

fails to comply with a 

requirement of the Federal 

Crop Insurance Corporation

Federal Crop Insurance 

Act, codified at 7 U.S.C.

1515(h)(3)(A)

4/7/2010 N/A $11,555

Violation of section 536 of 

Title V of the Housing Act of 

1949

Section 536 of Title V 

of the Housing Act of 

1949, codified at 

42 U.S.C. 1490p(e)(2)

4/7/2010 N/A $189,361 for an individual and 

$1,893,610 in the case of an 

applicant other than an individual

Equity skimming Section 543(a) of the 

Housing Act of 1949, 

codified at 42 U.S.C. 

1490s(a)(2)

4/7/2010 N/A $34,172
298 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPORT

Penalty (Name of Penalty) Authority (Statute)

Date of Previous 

Adjustment

Date of Current 

Adjustment

Anticipated Current Penalty Level

($ Amount)

Violation of regulations or 

agreements made in 

accordance with Title V of the 

Housing Act of 1949, by 

submitting false information, 

submitting false certifications, 

failing to timely submit 

information, failing to 

maintain real property in good 

repair and condition, failing to 

provide acceptable 

management for a project, or 

failing to comply with 

applicable civil rights statutes 

and regulations 

Section 543b of the 

Housing Act of 1949, 

codified at 42 U.S.C. 

1490s(b)(3)(A)

4/7/2010 N/A $68,344

Failure to comply with certain 

provisions of the U.S. 

Warehouse Act

U.S. Warehouse Act, 

codified at 7 U.S.C. 254

4/7/2010 N/A $34,172

Willful failure or refusal to 

furnish information, or willful 

furnishing of false information 

under section 156 of the 

Federal Agricultural 

Improvement and Reform Act 

of 1996

Section 156 of the 

Federal Agricultural 

Improvement and 

Reform Act of 1996, 

codified at 7 U.S.C.

7272(g)(5).

4/7/2010 N/A $15,024

Willful failure or refusal to 

furnish information or willful 

furnishing of false data by a 

processor, refiner, or importer 

of sugar, syrup and molasses

Section 156 of the 

Federal Agriculture 

Improvement and 

Reform Act of 1996, 

codified at 7 U.S.C.

7272(g)(5)

4/7/2010 N/A $15,024
S ECT ION I I I OTHER INFORMATION 299

Penalty (Name of Penalty) Authority (Statute)

Date of Previous 

Adjustment

Date of Current 

Adjustment

Anticipated Current Penalty Level

($ Amount)

Filing a false acreage report 

that exceeds tolerance

Federal Agriculture 

Improvement and 

Reform Act of 1996, 

Section 156

4/7/2010 N/A $15,024

Knowingly violating any 

regulation of the Secretary of 

the Commodity Credit 

Corporation pertaining to 

flexible marketing allotments 

for sugar

Section 359h(b) of the 

Agricultural 

Adjustment Act of 

1938 codified at 

7 U.S.C. 1359hh(b)

4/7/2010 N/A $10,982

Knowing violation of 

regulations promulgated by 

the Secretary pertaining to 

cotton insect eradication

Section 104(d) of the 

Agricultural Act of 1949

codified at 7 U.S.C. 

1444a(d)

4/7/2010 N/A $13,750

Making, presenting, 

submitting, or causing to be 

made, presented or 

submitted, a false, fictitious, 

or fraudulent claim

Program Fraud Civil 

Remedies Act of 1986, 

codified at 31 U.S.C.

3802(a)(1)

4/7/2010 N/A $10,871

Making, presenting, 

submitting, or causing to be 

made, presented, or 

submitted, a false, fictitious, 

or fraudulent written 

statement

Program Fraud Civil 

Remedies Act of 1986, 

codified at 31 U.S.C. 

3802(a)(2) 4/7/2010 N/A $10,871
300 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPOR T

Abbreviations—Acronyms

A

A&O—Administrative and Operating

AARC—Alternative Agricultural Research 

and Commercialization Corporation

ACEP—Agricultural Conservation 

Easement Program

ACFO-FS—Associate Chief Financial Officer 

for Financial Systems 

ADA—Antideficiency Act

AR—Administrative Review

AFMSS—Automated Fluid Mineral 

Support System

AFR—Agency Financial Report

AGI—Adjusted Gross Income

AGPMR—Agriculture Property 

Management Regulation

AMS—Agricultural Marketing Service

APEC—Access, Participation, Eligibility, 

and Certification

APHIS—Animal and Plant Health Inspection 

Service

APR—Annual Performance Report

AQI—Agricultural Quarantine Inspection

AQM—Acquisition Management

ARRA—American Reinvestment and 

Recovery Act of 2009

ARS—Agricultural Research Service

ART—Administrative Reviews and Training

ATA—Actual Time Automation

B

BDO—Barter Delivery Obligation

BFDL—Black Farmers Discrimination 

Lawsuit

BLM—Bureau of Land Management

C

C&A—Certification and Accreditation

CACFP—Child and Adult Care Food

Program

CAP—Corrective Action Plan

CBO—Certificates of Beneficial Ownership 

CCC—Commodity Credit Corporation

CED—County Executive Director

CEP—Community Eligibility Provision

CFR—Code of Federal Regulations

CI—Condition Index

CIO—Chief Information Officer 

CIP—Continuous Improvement Plan

CM—Continuous Monitoring

CMDF—Construction Disaster Fund 

Supplemental

CN—Child Nutrition

CND—Child Nutrition Division
ABBREVIATIONS—ACRONYM S 301

CNPP—Center for Nutrition Policy and 

Promotion

CNSTAT—National Academies’ Committee 

on National Statistics

CO—Contracting Officer

CoC—Cushion of Credit

COF—County Office

COR—Contracting Officer’s Representative

CORE—Core Accounting System

CORP—County Office Review Program

CRE—Coordinated Review Effort

CRP—Conservation Reserve Program

CSAM—Cyber Security Assessment and 

Management

CSC—Centralized Servicing Center

CSS—Country Strategy Statement

CVV—Cash Value Voucher

CY—Current Year

D

DAFP—Deputy Administrator for Farm 

Programs

DC—Disallowed Costs

DCP—Direct and Counter-Cyclical 

Payments

DHS—U.S. Department of Homeland 

Security

DM&R—Deferred Maintenance & Repairs 

DNP—Do Not Pay

E

E&T—Employment and Training

EAAP—Economic Adjustment Assistance to 

Users of Upland Cotton Program

ECP—Emergency Conservation Program

eDRS—electronic Disqualified Recipient 

System

EFCRP—Emergency Forestry Conservation 

Reserve Program 

eFMS—Electronic Funds Management 

System

EO—Executive Order

EPD—Easement Programs Division

EQIP—Environmental Quality Incentives 

Program

ERS—Economic Research Service

EWPP—Emergency Watershed Protection 

Program 

F 

FAS—Foreign Agricultural Service

FCIC—Federal Crop Insurance Corporation

FDA—Food and Drug Administration

FDCH—Family Day Care Homes

FECA—Federal Employee Compensation 

Act

FFAS—Farm and Foreign Agricultural 

Services

FFB—Federal Financing Bank
302 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPOR T

FFIS—Foundation Financial Information 

System

FFMIA—Federal Financial Management 

Improvement Act

FFMS—Federal Financial Management 

System

FISMA—Federal Information Security 

Management Act

FMD—Financial Management Division

FMFIA—Federal Managers’ Financial 

Integrity Act

FMMI—Financial Management 

Modernization Initiative

FMS—Financial Management Services

FNS—Food and Nutrition Service

FOA—Funding Opportunity Announcement

FS—Forest Service

FSA—Farm Service Agency

FSFL—Farm Storage Facility Loan

FSH—Forest Service Handbook

FSIS—Food Safety and Inspection Service

FNCS—Food, Nutrition and Consumer 

Services

FSM—Forest Service Manual

FSMC—Food Service Management 

Company

FSRIA—Farm Security and Rural 

Investment Act

FSRIP— Farm Security and Rural 

Investment Act Programs 

FSSP—Federal Shared Service Provider

FTBU—Funds To Be Put to Better Use

FY—Fiscal Year

G

G&A—Grants and Agreements

GAO—Government Accountability Office

GIPSA—Grain Inspection, Packers and 

Stockyards Administration

GMS—Global Market Strategy

GSA—General Services Administration

H

HHFKA—Healthy, Hunger-Free Kids Act

HIMP—Hazard Analysis and Critical Control 

Point-based Inspection Models Project

HUD—U.S. Department of Housing and 

Urban Development

I

IP—Improper Payments

IPAC—Intragovernmental Payment and

Collection

IPERA—Improper Payments Elimination 

and Recovery Act of 2010

IPERIA—Improper Payments Elimination 

and Recovery Improvement Act of 2012

IPIA—Improper Payments Information Act 

of 2002

IRS—Internal Revenue Service

IT—Information Technology

ITSD—Information Technology Services 

Division
ABBREVIATIONS—ACRONYM S 303

L 

L&WCF—Land and Water Conservation 

Fund

LDP—Loan Deficiency Payment

LEA—Local Educational Agency

LFP—Livestock Forage Disaster Program

M 

MAL—Marketing Assistance Loan

MAR—Maximum Allowable 

Reimbursement

MD&A—Management’s Discussion and 

Analysis

MDD—Management Decision Date

MDP—Miscellaneous Disaster Programs

MILC—Milk Income Loss Contract

MFH—Multi-Family Housing

MFIS—Multi-Family Housing Information 

System

ME—Management Evaluation

MINC—Management Interactive Network 

Connection

MOU—Memorandum of Understanding

MRP—Marketing and Regulatory Programs

N 

NAL—National Agricultural Library

NAP—Noninsured Assistance Program

NAP—Noninsured Crop Disaster Assistance 

Program

NASS—National Agricultural Statistics 

Service

NCIC—National Crime Information Center

NEST—National Easement Staging Tool

NFAOC—National Financial and Accounting 

Operations Center 

NFS—National Forest System

NHQ—National Headquarters

NIFA—National Institute of Food and 

Agriculture

NIST—National Institute of Standards and 

Technology

NPS—National Payment System

NRCS—Natural Resources Conservation 

Service

NRE—Natural Resources and Environment

NRHP—National Register of Historic Places

NSLP—National School Lunch Program

NTE—Not-to-Exceed

O 

OCFO—Office of the Chief Financial Officer

OCIO—Office of the Chief Information 

Officer

OGC— Office of the General Counsel

OIG—Office of Inspector General

OMB—Office of Management and Budget

OPPM—Office of Procurement and 

Property Management
304 USDA FISCAL YEAR 2016 AGENCY FINANCIAL REPOR T

OPS—Office of Policy Support

P 

PAR—Performance and Accountability 

Report

PFS—Pegasys Financial Systems

PHA—Priority Heritage Assets

PHIS—Public Health Information System

PIP—Practice Incentive Payments

PMC—Plant Materials Centers

POA&Ms—Plan of Action Milestones

PP&E—Property, Plant, and Equipment 

PRRA—Payment Recapture/Recovery 

Auditing

PRV—Plant Replacement Value

PSU—Primary Sampling Unit

PVO—Private Voluntary Organizations

PY—Previous Year

R 

RA—Rental Assistance

RAP—Rental Assistance Program

RBEG—Recovery Act Rural Business 

Enterprise Grant

RBS—Rural Business and Cooperative 

Service

RC&D—Resource Conservation and 

Development

RD—Rural Development

REE—Research, Education, and Economics

RFA—Request for Application

RHIF—Rural Housing Insurance Fund 

RHS—Rural Housing Service 

RMA—Risk Management Agency

RME—Risk Management Education

RMF—Risk Management Framework

RO—Regional Office

RORA—Regional Office Review of 

Applications

RUS—Rural Utilities Service

S 

SA—State Agency

SAM—System for Award Management

SAP—Salmonella Action Plan (SAP)

SAP— Systems, Applications, and Products

SBP—School Breakfast Program

SBR—Statement of Budgetary Resources

SCRA—Supplier Credit Recovery Audit

SDA—Socially Disadvantaged Farmers

SED—State Executive Director

SER—Single Effective Rate

SFA—School Food Authority

SFH—Single Family Housing

SIP—Salmonella Initiative Program 

SITC—Smuggling, Interdiction and Trade 

Compliance

SMI—School Meal Initiative

SNAP—Supplemental Nutrition Assistance 

Program

SOP—Standard Operating Procedure

SOS—Schedule of Spending
ABBREVIATIONS—ACRONYM S 305

SP—Special Publication

SPA—Special Program Area

SSA—Security Stack Array

STO—State Office

SURE—Supplemental Revenue Assistance 

Payments

SY—School Year

T 

TAAF—Trade Adjustment Assistance for 

Farmers

TANF—Temporary Assistance to Needy 

Families

TB—Technical Bulletin

TEFAP—Report of The Emergency Food 

Assistance Program

TME—Target Management Evaluations

TPMC—Tucson Plant Materials Center

U 

ULO—Unliquidated Obligations

USAID—U.S. Agency for International 

Development

USDA—U.S. Department of Agriculture

USGCB—U.S. Government Configuration 

Baseline

USSGL—U.S. Standard General Ledger

UTN—Universal Telecommunications 

Network

W 

WebTA—Web-based Time and Attendance

WEP—Water and Environmental Program

WFM—Wildland Fire Management

WFSU—Wildland Fire Suppression 

Management

WIC—Special Supplemental Program for 

Women, Infants, and Children

WRP—Wetlands Reserve Program